UNITED
FUNDS, INC.
United Bond Fund
United Income Fund
United Accumulative Fund
United Science and Technology Fund
ANNUAL
REPORT
-------------------------------------------
For the fiscal year ended December 31, 1996
<PAGE>
UNITED BOND FUND
MANAGER'S LETTER
DECEMBER 31, 1996
---------------------------------------------------------------------------
Dear Shareholder:
This report relates to the operation of the United Bond Fund for the
fiscal year ended December 31, 1996. The following discussion, graphs and
tables provide you with information regarding the Fund's performance during
that period.
Fluctuating interest rates throughout much of 1996 had a significant
impact on the fixed income market. Although rates were generally only
slightly higher at the end of the year than they were at the beginning,
interest rate volatility had varying effects on different sectors of the
fixed income market. Various domestic political events during 1996 played
important roles in the interest rate volatility, including the presidential
election, welfare reform legislation and tax reform proposals. Interest
rates were also affected during the latter part of the year by foreign
investment in U.S. markets and a rise in the value of the U.S. dollar
relative to the currency of Japan, Germany and other industrialized
nations.
During 1996, we maintained investment strategies implemented during
the prior year designed to respond to prevailing interest rate volatility.
The Fund's portfolio included exposure to a variety of bonds that may be
sold back to the issuer prior to maturity at par value. Yields of these
bonds tend to be lower than bonds that do not have the _put_ feature, but
their prices typically react more favorably to changing interest rates. To
balance the effects of these lower yielding bonds, we maintained a material
position in higher yielding corporate bonds.
The strategies and techniques we applied during the year resulted in
the Fund outperforming the indexes charted on the following page. Those
indexes reflect the performance of securities that generally represent the
bond market (the Lehman Brothers Government/Corporate Bond Index or LBGCBI)
and the universe of funds with similar objectives (the Lipper Corporate
Debt Funds A-Rated Universe Average).
In 1997, we expect the volatility in the fixed income market to
continue. Declining federal budget deficits and a conservative fiscal
outlook at the federal level point towards increased national savings and a
continuing revaluation of financial assets. Internationally, free market
initiatives should provide increased economic opportunities worldwide for
market penetration. We anticipate moderate economic growth and relatively
low inflation during 1997. We expect to continue our present strategies in
light of the projected market volatility and to search for investments in
companies with strong credit experience.
Thank you very much for your continued support and confidence.
Respectfully,
James C. Cusser
Manager, United Bond Fund
<PAGE>
Comparison of Change in Value of $10,000 Investment in
United Bond Fund, Class A Shares,
The Lehman Brothers Government/Corporate Bond Index,
and The Lipper Corporate Debt Funds A-Rated Universe Average
Lehman Lipper
United Brothers Corporate
Bond Government/ Debt Funds
Fund Corporate A-Rated
Class A Bond Universe
Shares Index Average
------ ----------- ----------
12/31/86 Purchase 9,425 10,000 10,000
12/31/87 9,849 10,230 10,143
12/31/88 10,735 11,007 10,882
12/31/89 11,873 12,573 12,236
12/31/90 12,377 13,616 13,059
12/31/91 14,701 15,811 15,215
12/31/92 15,805 17,008 16,315
12/31/93 17,889 18,890 18,144
12/31/94 16,860 18,226 17,303
12/31/95 20,317 21,733 20,478
12/31/96 20,967 22,365 20,987
+++++ United Bond Fund, Class A Shares* -- $20,967
----- Lehman Bros Gov't/Corp Bond Index -- $22,365
===== Lipper Corporate Debt Funds A-Rated Universe Average -- $20,987
*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 and
assumes reinvestment of dividends and distributions.
Average Annual Total Return +
Class A++ Class Y
-----------------------------
Year Ended
12/31/96 -2.74% 3.35%
5 Years Ended
12/31/96 6.09% N/A
10 Years Ended
12/31/96 7.68% N/A
Life of Class Y +++ N/A 6.52%
+ Total return for the Class Y shares may be greater than that of the
Class A shares because the Fund's Class Y shares are not subject to a
sales load or 12b-1 fees.
++ 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.
+++ 6/19/95 (the date on which Fund Class Y shares were first acquired by
shareholders) through 12/31/96.
Past performance is not predictive of future performance. Indexes are
unmanaged.
<PAGE>
SHAREHOLDER SUMMARY
----------------------------------------------------------------------
UNITED BOND FUND
PORTFOLIO STRATEGY:
Corporate and government OBJECTIVE: Reasonable return with emphasis on
bonds the preservation of principal.
Maximum 10% Non-Debt
Securities STRATEGY: Invests in bonds issued by
companies in a variety of
industries and in government
securities. (May purchase
securities subject to repurchase
agreements. May invest in certain
options and futures.)
FOUNDED: 1964
SCHEDULED DIVIDEND FREQUENCY: MONTHLY
<PAGE>
PERFORMANCE SUMMARY -- Class A Shares
PER SHARE DATA
For the Fiscal Year Ended December 31, 1996
-------------------------------------------
DIVIDENDS PAID $0.39
=====
NET ASSET VALUE ON
12/31/96 $6.14
12/31/95 6.34
-----
CHANGE PER SHARE $(0.20)
=====
Past performance is not necessarily an indication of future results.
TOTAL RETURN HISTORY
Average Annual Total Return
---------------------------
With Without
Period Sales Load* Sales Load**
------ ----------- ------------
1-year period ended 12-31-96 -2.74% 3.20%
5-year period ended 12-31-96 6.09% 7.35%
10-year period ended 12-31-96 7.68% 8.32%
*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, 1996, United Bond Fund had net assets totaling $530,652,411
invested in a diversified portfolio of:
95.61% Bonds
4.39% Cash and Cash Equivalents
As a shareholder of United Bond Fund, for every $100 you had invested on
December 31, 1996, your Fund owned:
Bonds:
Corporate $66.55
U.S. Government 23.79
Other Government 5.27
Cash and Cash Equivalents 4.39
Not all holdings will be represented in the portfolio at all times.
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES
Amusement and Recreation Services - 1.97%
MGM Grand Hotel Finance Corp.,
11.75%, 5-1-99 ........................ $10,000 $ 10,437,500
Chemicals and Allied Products - 4.26%
Dow Capital BV,
9.0%, 5-15-2010 ....................... 5,000 5,729,700
Dow Chemical Company (The),
8.55%, 10-15-2009 ..................... 5,000 5,569,200
Procter & Gamble Company (The),
8.0%, 9-1-2024 ........................ 10,000 11,325,100
Total ................................. 22,624,000
Communication - 7.99%
Bell Telephone Company of Pennsylvania (The),
8.35%, 12-15-2030 ..................... 5,000 5,875,700
BellSouth Telecommunications, Inc.,
5.85%, 11-15-2045 ..................... 3,000 2,954,790
Cablevision Industries Corporation,
9.25%, 4-1-2008 ....................... 5,000 5,303,050
Centel Capital Corporation,
9.0%, 10-15-2019 ...................... 5,585 6,619,007
Continental Cablevision, Inc.,
8.5%, 9-15-2001 ....................... 5,000 5,327,350
Infinity Broadcasting Corporation,
10.375%, 3-15-2002 .................... 1,750 1,846,250
Jones Intercable, Inc.,
9.625%, 3-15-2002 ..................... 2,500 2,625,000
Tele-Communications, Inc.,
6.58%, 2-15-2005 ...................... 7,500 7,756,575
Turner Broadcasting System, Inc.,
8.375%, 7-1-2013 ...................... 4,000 4,083,240
Total ................................. 42,390,962
Depository Institutions - 9.79%
AmSouth Bancorporation,
6.75%, 11-1-2025 ...................... 6,000 5,912,520
Chevy Chase Savings Bank, F.S.B.,
9.25%, 12-1-2005 ...................... 1,500 1,530,000
Deutsche Bank Financial Inc.,
6.7%, 12-13-2006 ...................... 4,250 4,170,780
J.P. Morgan & Co. Incorporated,
7.54%, 1-15-2027 ...................... 4,250 4,153,483
Kansallis-Osake-Pankki,
10.0%, 5-1-2002 ....................... 6,000 6,809,400
NBD Bank, National Association,
8.25%, 11-1-2024 ...................... 6,000 6,757,140
NationsBank Corporation,
8.57%, 11-15-2024 ..................... 5,000 5,722,550
See Notes to Schedules of Investments on page 39.
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (CONTINUED)
Depository Institutions (Continued)
Riggs National Corporation,
8.5%, 2-1-2006 ........................ $ 5,000 $ 5,225,000
SouthTrust Bank of Alabama, N.A.:
5.58%, 2-6-2006 ....................... 4,500 4,350,060
7.69%, 5-15-2025 ...................... 5,000 5,282,150
Sovereign Bancorp, Inc.,
8.0%, 3-15-2003 ....................... 2,000 2,027,500
Total ................................. 51,940,583
Electric, Gas and Sanitary Services - 2.01%
Arkla, Inc.,
10.0%, 11-15-2019 ..................... 8,000 8,911,680
El Paso Electric Company,
7.25%, 2-1-99 ......................... 1,750 1,745,695
Total ................................. 10,657,375
Fabricated Metal Products - 0.58%
Mark IV Industries, Inc.,
8.75%, 4-1-2003 ....................... 3,000 3,090,000
Food and Kindred Products - 4.31%
Coca-Cola Enterprises Inc.:
0.0%, 6-20-2020 ....................... 60,000 11,680,200
6.7%, 10-15-2036 ...................... 5,000 5,046,000
Nabisco, Inc.,
6.8%, 9-1-2001 ........................ 6,000 6,133,200
Total ................................. 22,859,400
General Building Contractors - 0.78%
Del Webb Corporation,
10.875%, 3-31-2000 .................... 4,000 4,120,000
Health Services - 0.99%
Tenet Healthcare Corporation,
8.625%, 12-1-2003 ..................... 5,000 5,275,000
Hotels and Other Lodging Places - 1.77%
Marriott International, Inc.,
7.875%, 4-15-2005 ..................... 5,000 5,193,550
RHG Finance Corporation,
8.875%, 10-1-2005 ..................... 4,000 4,228,480
Total ................................. 9,422,030
Industrial Machinery and Equipment - 0.62%
Joy Technologies Inc.,
10.25%, 9-1-2003 ...................... 3,000 3,307,500
See Notes to Schedules of Investments on page 39.
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (CONTINUED)
Insurance Carriers - 1.42%
Penn Central Corporation (The),
10.625%, 4-15-2000 .................... $ 4,000 $ 4,423,120
Reliance Group Holdings, Inc.,
9.0%, 11-15-2000 ...................... 3,000 3,090,000
Total ................................. 7,513,120
Lumber and Wood Products - 0.40%
Doman Industries Limited,
8.75%, 3-15-2004 ...................... 2,250 2,103,750
Metal Mining - 0.93%
Noranda Inc.,
7.0%, 7-15-2005 ....................... 5,000 4,936,300
Nondepository Institutions - 15.06%
Associates Corporation of North America,
7.95%, 2-15-2010 ...................... 7,250 7,937,082
Banc One Credit Card Master Trust,
Series 1994-B, Class A,
7.55%, 12-15-99 ....................... 5,000 5,071,850
Chrysler Financial Corporation,
12.75%, 11-1-99 ....................... 9,000 10,419,930
Countrywide Mortgage Backed Securities,
Inc.,
6.5%, 4-25-2024 ....................... 10,000 9,752,300
DLJ Mortgage Acceptance Corp.,
6.5%, 4-25-2024 ....................... 4,802 4,566,403
Equicon Loan Trust,
7.3%, 2-18-2013 ....................... 4,571 4,509,447
General Electric Capital Corporation,
8.3%, 9-20-2009 ....................... 8,000 8,920,320
General Motors Acceptance Corporation,
8.875%, 6-1-2010 ...................... 10,000 11,572,200
Residential Asset Securities Corporation,
Mortgage Pass-Through Certificates,
1995-KS3 Class D,
8.0%, 10-25-2024 ...................... 4,000 4,031,640
Residential Funding Mortgage
Securities, Inc.,
8.0%, 8-25-2020 ....................... 8,224 8,244,742
WFS Financial 1996-B Owner Trust, Class A-2,
6.2%, 5-20-99 ......................... 4,884 4,898,600
Total ................................. 79,924,514
See Notes to Schedules of Investments on page 39.
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (CONTINUED)
Oil and Gas Extraction - 3.70%
Anadarko Petroleum Corporation,
7.25%, 3-15-2025 ...................... $ 5,000 $ 5,181,650
Oryx Energy Company:
10.0%, 4-1-2001 ....................... 3,500 3,841,915
8.375%, 7-15-2004 ..................... 3,500 3,631,355
Seagull Energy Corporation,
7.875%, 8-1-2003 ...................... 1,250 1,260,937
Union Texas Petroleum Holdings, Inc.,
8.25%, 11-15-99 ....................... 2,250 2,319,998
YPF Sociedad Anoima,
8.0%, 2-15-2004 ....................... 3,500 3,377,500
Total ................................. 19,613,355
Paper and Allied Products - 1.26%
Boise Cascade Office Products Corporation,
9.875%, 2-15-2001 ..................... 2,500 2,646,975
Canadian Pacific Forest Products Ltd.,
9.25%, 6-15-2002 ...................... 4,000 4,063,920
Total ................................. 6,710,895
Petroleum and Coal Products - 1.06%
Coastal Corporation (The),
10.375%, 10-1-2000 .................... 5,000 5,612,450
Printing and Publishing - 1.81%
News America Holdings Incorporated,
9.125%, 10-15-99 ...................... 5,000 5,335,200
Viacom International Inc.:
9.125%, 8-15-99 ....................... 1,500 1,533,750
10.25%, 9-15-2001 ..................... 2,500 2,725,000
Total ................................. 9,593,950
Stone, Clay and Glass Products - 1.57%
Owens-Corning Fiberglas Corporation,
8.875%, 6-1-2002 ...................... 5,000 5,421,950
USG Corporation:
9.25%, 9-15-2001 ...................... 2,000 2,130,000
8.5%, 8-1-2005 ........................ 750 783,750
Total ................................. 8,335,700
Transportation Equipment - 1.75%
General Motors Corporation,
8.8%, 3-1-2021 ........................ 3,250 3,704,383
McDonnell Douglas Corporation,
9.25%, 4-1-2002 ....................... 5,000 5,584,500
Total ................................. 9,288,883
See Notes to Schedules of Investments on page 39.
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (CONTINUED)
Wholesale Trade -- Durable Goods- 2.52%
Fisher Scientific International Inc.,
7.125%, 12-15-2005 .................... $ 3,500 $ 3,443,860
Motorola, Inc.,
8.4%, 8-15-2031 ....................... 8,500 9,956,815
Total ................................. 13,400,675
TOTAL CORPORATE DEBT SECURITIES - 66.55% $353,157,942
(Cost: $345,970,426)
OTHER GOVERNMENT SECURITIES
Canada - 4.19%
Hydro Quebec:
8.05%, 7-7-2024 ....................... 10,000 10,995,200
7.4%, 3-28-2025 ....................... 5,000 5,592,200
Province of Nova Scotia,
8.25%, 11-15-2019 ..................... 5,000 5,661,350
Total ................................. 22,248,750
Supranational - 1.08%
Inter-American Development Bank,
8.4%, 9-1-2009 ........................ 5,000 5,706,650
TOTAL OTHER GOVERNMENT SECURITIES - 5.27% $ 27,955,400
(Cost: $26,104,636)
UNITED STATES GOVERNMENT SECURITIES
Federal Home Loan Mortgage Corporation:
6.83%, 7-3-2002 ....................... 4,500 4,473,270
7.5%, 2-15-2007 ....................... 10,000 10,240,600
7.5%, 11-15-2017 ...................... 10,000 10,231,200
7.5%, 4-15-2019 ....................... 12,741 12,486,130
7.95%, 12-15-2020 ..................... 9,000 9,210,870
Federal National Mortgage Association:
7.09%, 4-1-2004 ....................... 4,500 4,459,230
7.0%, 7-25-2006 ....................... 10,000 10,100,000
7.5%, 9-1-2009 ........................ 4,242 4,300,130
7.0%, 8-25-2021 ....................... 10,000 9,828,100
Government National Mortgage Association:
7.5%, 7-15-2023 ....................... 6,504 6,545,750
7.5%, 12-15-2023 ...................... 5,559 5,594,786
8.0%, 9-15-2025 ....................... 9,726 10,051,343
7.75%, 10-15-2031 ..................... 1,998 2,023,848
See Notes to Schedules of Investments on page 39.
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1996
Principal
Amount in
Thousands Value
UNITED STATES GOVERNMENT SECURITIES (Continued)
Tennessee Valley Authority,
5.98%, 4-1-2036 ....................... $ 5,000 $ 5,078,200
United States Treasury:
5.5%, 2-28-99 ......................... 10,000 9,915,600
6.75%, 5-31-99 ........................ 4,000 4,068,120
0.0%, 5-15-2007 ....................... 15,000 7,658,850
TOTAL UNITED STATES GOVERNMENT
SECURITIES - 23.79% $126,266,027
(Cost: $125,180,107)
TOTAL SHORT-TERM SECURITIES - 3.45% $ 18,289,860
(Cost: $18,289,860)
TOTAL INVESTMENT SECURITIES - 99.06% $525,669,229
(Cost: $515,545,029)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.94% 4,983,182
NET ASSETS - 100.00% $530,652,411
See Notes to Schedules of Investments on page 39.
<PAGE>
UNITED INCOME FUND
MANAGER'S LETTER
---------------------------------------------------------------------------
DECEMBER 31, 1996
Dear Shareholder:
This report relates to the operation of the United Income Fund for the
fiscal year ended December 31, 1996. The following discussion, graphs and
tables provide you with information regarding the Fund's performance during
that period.
In 1996, the U.S. economy was characterized by modest and uneven
growth. While the major market indexes experienced significant advances in
1996, the gains were largely attributable to a limited number of well-
capitalized companies that are heavily weighted in the indexes. A
relatively small group of stocks in the technology sector enjoyed above-
average performance, while cyclical issues generally experienced poor
returns.
The Fund maintained a management style during the past fiscal year
consistent with prior years. During 1996, the Fund invested in companies
in the technology industry which tend to have better prospects for growth
in a slowing economy. Notably, the Fund stressed issues of selected
companies with innovative products for improving corporate communications
and networking.
The strategies and techniques we applied resulted in the direction of
the Fund's performance remaining fairly consistent with that of the indexes
charted on the following page. Those indexes reflect the performance of
securities that generally represent the stock market (the S&P 500 Index)
and the universe of funds with similar investment objectives (the Lipper
Equity Income Fund Universe Average).
We anticipate that economic growth in 1997 will be moderate, but
possibly stronger than that experienced during the past two years. As a
result, we expect to invest in cyclical stocks and continue to search for
attractive investment opportunities in companies with prospects for
sustained growth.
Thank you very much for your continued support and confidence.
Respectfully,
Russell E. Thompson
Manager, United Income Fund
<PAGE>
Comparison of Change in Value of $10,000 Investment in
United Income Fund, Class A Shares,
The S&P 500 Index,
and The Lipper Equity Income Fund Universe Average
Lipper
United Equity
Income Income
Fund S&P Fund
Class A 500 Universe
Shares Index Average
--------- --------- ---------
12/31/86 Purchase 9,425 10,000 10,000
12/31/87 10,100 10,525 9,796
12/31/88 12,103 12,273 11,146
12/31/89 15,430 16,163 13,432
12/31/90 14,590 15,661 12,590
12/31/91 18,913 20,432 15,906
12/31/92 21,175 21,990 17,398
12/31/93 24,574 24,205 19,794
12/31/94 24,130 24,525 19,293
12/31/95 31,275 33,741 25,041
12/31/96 37,647 41,489 29,690
----- United Income Fund, Class A Shares* -- $37,647
+++++ S&P 500 Index -- $41,489
===== Lipper Equity Income Fund Universe Average -- $29,690
*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 and
assumes reinvestment of dividends and distributions.
Annual Average Total Return +
Class A++ Class Y
-----------------------------
Year Ended
12/31/96 13.44% 20.53%
5 Years Ended
12/31/96 13.40% N/A
10 Years Ended
12/31/96 14.17% N/A
Life of Class Y +++ N/A 19.04%
+ Total return for the Class Y shares may be greater than that of the
Class A shares because the Fund's Class Y shares are not subject to a
sales load or 12b-1 fees.
++ 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.
+++ 6/19/95 (the date on which Fund Class Y shares were first acquired by
shareholders) through 12/31/96.
Past performance is not predictive of future performance. Indexes are
unmanaged.
<PAGE>
SHAREHOLDER SUMMARY
-----------------------------------------------------------------
UNITED INCOME FUND
PORTFOLIO STRATEGY:
Investment quality OBJECTIVE: Maintenance of current income,
dividend-paying subject to changing market
common stocks conditions.
Cash Reserves STRATEGY: Invests principally in common
stocks of companies which have the
potential for capital growth or
which may be expected to resist
market decline. (May purchase
securities subject to repurchase
agreements. May invest in certain
options and futures.)
The use of cash reserves (often
invested in money market
securities) for defensive purposes
is a strategy that may be utilized
by the Income Fund from time to
time.
Moving into cash reserve positions
at times thought to be near a major
stock market peak allows the Fund
the opportunity to capture profits
and attempts to cushion the impact
of market declines. The added
flexibility provided by our CASH
RESERVES STRATEGY has from time to
time been an important element in
our past success and, when deemed
appropriate, may be used in the
management of the portfolio in the
future.
FOUNDED: 1940
SCHEDULED DIVIDEND FREQUENCY: QUARTERLY
(MARCH, JUNE, SEPTEMBER, DECEMBER)
<PAGE>
PERFORMANCE SUMMARY -- Class A Shares
PER SHARE DATA
For the Fiscal Year Ended December 31, 1996
--------------------------------------
DIVIDENDS PAID $0.32
=====
CAPITAL GAINS DISTRIBUTION $1.59
=====
NET ASSET VALUE ON
12/31/96 $32.91 adjusted to:$34.50(A)
12/31/95 28.96
------
CHANGE PER SHARE $5.54
======
(A)This number includes the capital gains distribution of $1.59 paid in
December 1996 added to the actual net asset value on December 31, 1996.
Past performance is not necessarily an indication of future results.
TOTAL RETURN HISTORY
Average Annual Total Return
---------------------------
With Without
Period Sales Load* Sales Load**
------ ----------- ------------
1-year period ended 12-31-96 13.44% 20.36%
5-year period ended 12-31-96 13.40% 14.76%
10-year period ended 12-31-96 14.17% 14.85%
*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, 1996, United Income Fund had net assets totaling
$5,001,763,313 invested in a diversified portfolio of:
95.12% Common Stocks
2.44% U.S. Government Securities
2.00% Cash and Cash Equivalents
0.44% Corporate Debt Securities
As a shareholder of United Income Fund, for every $100 you had invested on
December 31, 1996, your Fund owned:
$59.12 Manufacturing Stocks
10.16 Wholesale and Retail Trade Stocks
8.59 Services Stocks
8.08 Finance, Insurance and Real Estate Stocks
5.90 Transportation, Communication, Electric, Gas
and Sanitary Services Stocks
2.44 United States Government Securities
2.00 Cash and Cash Equivalents
1.51 Contract Construction Stocks
1.32 Agriculture, Forestry and Fisheries Stocks
0.44 Corporate Debt Securities
0.44 Miscellaneous Investing Institutions Stocks
Not all holdings will be represented in the portfolio at all times.
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS
Apparel and Accessory Stores - 1.21%
Gap, Inc. (The) ........................ 2,000,000 $ 60,250,000
Apparel and Other Textile Products - 0.54%
Tommy Hilfiger Corporation* ............ 560,000 26,880,000
Building Materials and Garden Supplies - 0.77%
Home Depot, Inc. (The) ................. 765,000 38,345,625
Business Services - 4.80%
Computer Associates International, Inc. 562,500 27,984,375
Electronic Data Systems Corporation .... 1,081,000 46,753,250
Manpower Inc. .......................... 147,400 4,790,500
Microsoft Corporation* ................. 800,000 66,149,600
Oracle Systems Corporation* ............ 1,650,000 68,783,550
3Com Corporation* ...................... 350,000 25,659,200
Total ................................. 240,120,475
Chemicals and Allied Products - 16.57%
ABB AG (A) ............................. 25,000 31,102,892
Abbott Laboratories .................... 1,100,000 55,825,000
Air Products and Chemicals, Inc. ....... 1,150,000 79,493,750
Amgen Inc.* ............................ 400,000 21,774,800
Astra AB, Class A (A) .................. 600,000 29,445,172
BetzDearborn Inc. ...................... 320,000 18,720,000
Colgate-Palmolive Company .............. 600,000 55,350,000
Dow Chemical Company (The) ............. 575,000 45,065,625
du Pont (E.I.) de Nemours and Company .. 1,000,000 94,375,000
IMC Global, Inc. ....................... 600,000 23,475,000
Lilly (Eli) and Company ................ 300,000 21,900,000
Merck & Co., Inc. ...................... 700,000 55,475,000
PPG Industries, Inc. ................... 1,250,000 70,156,250
Pfizer Inc. ............................ 650,000 53,868,750
Praxair, Inc. .......................... 1,000,000 46,125,000
Procter & Gamble Company (The) ......... 600,000 64,500,000
Union Carbide Corporation .............. 875,000 35,765,625
Warner-Lambert Company ................. 350,000 26,250,000
Total ................................. 828,667,864
See Notes to Schedules of Investments on page 39.
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS (Continued)
Communication - 2.14%
AT&T Corporation ....................... 500,000 $ 21,750,000
MCI Communications Corporation ......... 1,875,000 61,288,125
SBC Communications Inc. ................ 460,000 23,805,000
Total ................................. 106,843,125
Depository Institutions - 4.67%
BankAmerica Corporation ................ 475,000 47,381,250
Chase Manhattan Corporation (The) ...... 525,000 46,856,250
Citicorp ............................... 550,000 56,650,000
First Bank System, Inc. ................ 500,000 34,125,000
Grupo Financiero Bancomer, S.A. de
C.V., B, CPO Shares (A)* .............. 2,000,000 800,305
Norwest Corporation .................... 1,100,000 47,850,000
Total ................................. 233,662,805
Electric, Gas and Sanitary Services - 0.39%
WMX Technologies, Inc. ................. 600,000 19,575,000
Electronic and Other Electric Equipment - 11.54%
AMP Incorporated ....................... 1,100,000 42,212,500
Analog Devices, Inc.* .................. 1,230,000 41,666,250
Duracell International Inc. ............ 1,000,000 69,875,000
Emerson Electric Co. ................... 400,000 38,700,000
General Electric Company ............... 1,200,000 118,650,000
Intel Corporation ...................... 1,530,000 200,333,610
Nokia Corporation, Series A (A) ........ 760,000 44,123,164
TRINOVA Corporation .................... 600,000 21,825,000
Total ................................. 577,385,524
Engineering and Management Services - 0.50%
Fluor Corporation ...................... 400,000 25,100,000
Food and Kindred Products - 1.94%
CPC International Inc. ................. 500,000 38,750,000
PepsiCo, Inc. .......................... 2,000,000 58,500,000
Total ................................. 97,250,000
Food Stores - 0.49%
Kroger Co. (The) ....................... 525,000 24,412,500
Forestry - 1.32%
Georgia-Pacific Corporation ............ 425,000 30,600,000
Weyerhaeuser Company ................... 750,000 35,531,250
Total ................................. 66,131,250
See Notes to Schedules of Investments on page 39.
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS (Continued)
Furniture and Home Furnishings Stores - 0.96%
Circuit City Stores, Inc. .............. 1,600,000 $ 48,200,000
General Merchandise Stores - 3.82%
Cifra, S.A. de C.V., Series C (A)* ..... 8,000,000 9,756,098
Dayton Hudson Corporation .............. 949,800 37,279,650
Kmart Corporation* ..................... 4,000,000 41,500,000
May Department Stores Company (The) .... 1,000,000 46,750,000
Penney (J.C.) Company, Inc. ............ 676,000 32,955,000
Wal-Mart Stores, Inc. .................. 1,000,000 22,875,000
Total ................................. 191,115,748
Health Services - 1.41%
Columbia/HCA Healthcare Corporation .... 1,192,500 48,594,375
Tenet Healthcare Corporation* .......... 1,000,000 21,875,000
Total ................................. 70,469,375
Heavy Construction, Excluding Building - 0.30%
Foster Wheeler Corporation ............. 400,000 14,850,000
Holding and Other Investment Offices - 0.44%
Grupo Financiero Banamex Accival,
S.A. de C.V., L (A)* .................. 749,775 1,424,877
Grupo Financiero Banamex Accival,
S.A. de C.V., B, CPO shares (A)*....... 9,800,000 20,690,549
Total ................................. 22,115,426
Hotels and Other Lodging Places - 0.91%
ITT Corporation* ....................... 1,050,204 45,552,598
Industrial Machinery and Equipment - 13.63%
Applied Materials, Inc.* ............... 1,730,000 62,171,010
Case Corporation ....................... 1,214,600 66,195,700
Caterpillar Inc. ....................... 1,400,000 105,350,000
cisco Systems, Inc.* ................... 1,730,000 110,178,510
Compaq Computer Corporation* ........... 350,000 25,987,500
Deere & Company ........................ 2,055,000 83,484,375
Eaton Corporation ...................... 500,000 34,875,000
Harnischfeger Industries, Inc. ......... 600,000 28,875,000
Hewlett-Packard Company ................ 850,000 42,712,500
Ingersoll-Rand Company ................. 400,000 17,800,000
Mannesmann AG (A) ...................... 65,000 28,180,046
Parker Hannifin Corporation ............ 600,000 23,250,000
United Technologies Corporation ........ 800,000 52,800,000
Total ................................. 681,859,641
See Notes to Schedules of Investments on page 39.
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS (Continued)
Instruments and Related Products - 1.58%
General Motors Corporation, Class H .... 176,100 $ 9,905,625
Guidant Corporation .................... 260,000 14,820,000
Medtronic, Inc. ........................ 800,000 54,400,000
Total ................................. 79,125,625
Insurance Carriers - 0.52%
Aetna Life & Casualty Company .......... 325,000 26,000,000
Miscellaneous Manufacturing Industries - 1.25%
Armstrong World Industries, Inc. ....... 900,000 62,550,000
Motion Pictures - 0.97%
Walt Disney Company (The) .............. 700,000 48,737,500
Nondepository Institutions - 2.89%
Federal Home Loan Mortgage Corporation . 700,000 77,087,500
Federal National Mortgage Association .. 1,805,800 67,266,050
Total ................................. 144,353,550
Paper and Allied Products - 1.88%
Champion International Corporation ..... 500,000 21,625,000
International Paper Company ............ 1,200,000 48,450,000
Union Camp Corporation ................. 500,000 23,875,000
Total ................................. 93,950,000
Petroleum and Coal Products - 2.04%
Mobil Corporation ...................... 400,000 48,900,000
Royal Dutch Petroleum Company .......... 300,000 51,225,000
Tosco Corporation ...................... 25,000 1,978,125
Total ................................. 102,103,125
Primary Metal Industries - 1.13%
Aluminum Company of America ............ 650,000 41,437,500
Nucor Corporation ...................... 300,000 15,300,000
Total ................................. 56,737,500
Railroad Transportation - 0.60%
Union Pacific Corporation .............. 500,000 30,062,500
Rubber and Miscellaneous Plastics Products - 1.03%
Goodyear Tire & Rubber Company (The) ... 1,000,000 51,375,000
Special Trade Contractors - 1.21%
Telefonaktiebolaget LM Ericsson,
Class B, ADR ......................... 2,000,000 60,374,000
See Notes to Schedules of Investments on page 39.
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS (Continued)
Transportation By Air - 2.77%
AMR Corporation* ....................... 400,000 $ 35,250,000
Southwest Airlines Co. ................. 1,600,000 35,400,000
USAir Group, Inc.* ..................... 2,900,000 67,787,500
Total ................................. 138,437,500
Transportation Equipment - 5.99%
AlliedSignal Inc. ...................... 700,000 46,900,000
Boeing Company (The) ................... 635,000 67,548,125
Chrysler Corporation ................... 2,200,000 72,600,000
Dana Corporation ....................... 760,000 24,795,000
Ford Motor Company ..................... 1,000,000 31,875,000
General Motors Corporation ............. 1,000,000 55,750,000
Total ................................. 299,468,125
Wholesale Trade -- Durable Goods - 0.89%
Motorola, Inc. ......................... 725,000 44,496,875
Wholesale Trade -- Nondurable Goods - 2.02%
Gillette Company (The) ................. 1,000,000 77,750,000
Safeway Inc.* .......................... 550,000 23,512,500
Total ................................. 101,262,500
TOTAL COMMON STOCKS - 95.12% $4,757,820,756
(Cost: $2,671,018,401)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Depository Institutions - 0.21%
Morgan Guaranty Trust Company of New York,
7.375%, 2-1-2002 ...................... $10,250 10,568,672
Nondepository Institutions - 0.23%
General Electric Capital Corporation,
8.3%, 9-20-2009 ....................... 10,000 11,150,400
TOTAL CORPORATE DEBT SECURITIES - 0.44% $ 21,719,072
(Cost: $19,957,223)
See Notes to Schedules of Investments on page 39.
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1996
Principal
Amount in
Thousands Value
UNITED STATES GOVERNMENT SECURITIES
United States Treasury:
6.75%, 4-30-2000 ...................... $37,000 $ 37,699,670
5.75%, 8-15-2003 ...................... 50,000 48,500,000
10.375%, 11-15-2012 ................... 8,500 10,946,385
9.0%, 11-15-2018 ...................... 20,000 25,096,800
TOTAL UNITED STATES GOVERNMENT
SECURITIES - 2.44% $ 122,242,855
(Cost: $114,802,668)
TOTAL SHORT-TERM SECURITIES - 2.99% $ 149,369,721
(Cost: $149,369,721)
TOTAL INVESTMENT SECURITIES - 100.99% $5,051,152,404
(Cost: $2,955,148,013)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (0.99%) (49,389,091)
NET ASSETS - 100.00% $5,001,763,313
See Notes to Schedules of Investments on page 39.
<PAGE>
UNITED ACCUMULATIVE FUND
MANAGER'S LETTER
DECEMBER 31, 1996
---------------------------------------------------------------------------
Dear Shareholder:
This report relates to the operation of the United Accumulative Fund
for the fiscal year ended December 31, 1996. The following discussion,
graphs and tables provide you with information regarding the Fund's
performance during that period.
The U.S. economy experienced moderate growth, low inflation and
declining unemployment during 1996. Corporate profits increased, although
at a slower rate than in the past few years, and interest rates rose
modestly. The equity market, although highly valued as 1996 began, gained
substantial additional ground. Large inflows of cash into mutual funds and
the continuing favorable political drift of the federal government
contributed to the gains. While the major market indexes experienced
significant advances in 1996, the gains were largely attributable to a
limited number of well-capitalized companies that are heavily weighted in
the indexes.
Based upon our belief that a majority of stocks were fully valued at
the beginning of the year, combined with rising interest rates and slower
growth in corporate profits, we pursued a fairly defensive investment
strategy throughout much of 1996. This involved maintaining cash positions
at different points during the year, awaiting more attractive investment
opportunities. During 1996, we decreased the Fund's holdings in the basic
services sector and increased its emphasis on investments in companies in
the financial services industries and in the public utilities and energy
sectors.
The strategies and techniques we applied resulted in the Fund
underperforming the indexes charted on the following page. Those indexes
reflect the performance of securities that generally represent the stock
market, (the S&P 500 Index) and the universe of funds with similar
investment objectives (the Lipper Growth Fund Universe Average). The
Fund's performance was negatively impacted, relative to the indexes, by its
underweighting in the securities that contributed most to the superior
gains experienced by the major market indexes.
For 1997, we anticipate continued moderate economic growth and low
inflation. The historically high profit margins experienced by
corporations in 1996, combined with relatively low price flexibility, have
the potential to result in lower returns in the equity market. In light of
anticipated economic conditions, we expect to continue a strategy of
pursuing attractive investment opportunities in the health care, energy,
technology and financial services industries.
Thank you very much for your continued support and confidence.
Respectfully,
Antonio Intagliata
Manager, United Accumulative Fund
<PAGE>
Comparison of Change in Value of $10,000 Investment in
United Accumulative Fund, Class A Shares,
The S&P 500 Index,
and The Lipper Growth Fund Universe Average
United Lipper
Accumulative Growth
Fund S&P Fund
Class A 500 Universe
Shares Index Average
------------ ----- --------
12/31/86 Purchase 9,425 10,000 10,000
12/31/87 9,852 10,525 10,117
12/31/88 11,532 12,273 11,525
12/31/89 14,711 16,163 14,424
12/31/90 13,215 15,661 13,635
12/31/91 16,344 20,432 18,506
12/31/92 18,665 21,990 19,944
12/31/93 20,356 24,205 22,095
12/31/94 20,365 24,525 21,604
12/31/95 27,332 33,741 28,186
12/31/96 30,661 41,489 33,559
===== United Accumulative Fund, Class A Shares* -- $30,661
----- S&P 500 Index -- $41,489
+++++ Lipper Growth Fund Universe Average -- $33,559
*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 and
assumes reinvestment of dividends and distributions.
Annual Average Total Return +
Class A++ Class Y
-----------------------------
Year Ended
12/31/96 5.73% 12.27%
5 Years Ended
12/31/96 12.07% N/A
10 Years Ended
12/31/96 11.86% N/A
Life of Class Y +++ N/A 16.72%
+ Total return for the Class Y shares may be greater than that of the
Class A shares because the Fund's Class Y shares are not subject to a
sales load or 12b-1 fees.
++ 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.
+++ 7/11/95 (the date on which Fund Class Y shares were first acquired by
shareholders) through 12/31/96.
Past performance is not predictive of future performance. Indexes are
unmanaged.
<PAGE>
SHAREHOLDER SUMMARY
-----------------------------------------------------------------
UNITED ACCUMULATIVE FUND
PORTFOLIO STRATEGY:
Appreciation-oriented OBJECTIVE: Capital growth, with a secondary
common stocks objective of current income.
Cash Reserves
STRATEGY: Invests mainly in common stocks or
securities convertible into common
stocks. (May purchase securities
subject to repurchase agreements.
May invest in certain options and
futures.)
The use of cash reserves (often
invested in money market
securities) for defensive purposes
is a strategy that may be utilized
by the Accumulative Fund from time
to time.
Moving into cash reserve positions
at times thought to be near a major
stock market peak allows the Fund
the opportunity to capture profits
and attempts to cushion the impact
of market declines. The added
flexibility provided by our CASH
RESERVES STRATEGY has from time to
time been an important element in
our past success and, when deemed
appropriate, may be used in the
management of the portfolio in the
future.
FOUNDED: 1940
SCHEDULED DIVIDEND FREQUENCY: SEMIANNUALLY
(JUNE AND DECEMBER)
<PAGE>
PERFORMANCE SUMMARY -- Class A Shares
PER SHARE DATA
For the Fiscal Year Ended December 31, 1996
-------------------------------------------
DIVIDENDS PAID $0.11
=====
CAPITAL GAINS DISTRIBUTION $0.85
=====
NET ASSET VALUE ON
12/31/96 $7.75 adjusted to:$8.60(A)
12/31/95 7.78
-----
CHANGE PER SHARE $0.82
=====
(A)This number includes the capital gains distribution of $0.85 paid in
December 1996 added to the actual net asset value on December 31, 1996.
Past performance is not necessarily an indication of future results.
TOTAL RETURN HISTORY
Average Annual Total Return
---------------------------
With Without
Period Sales Load* Sales Load**
------ ----------- ------------
1-year period ended 12-31-96 5.73% 12.18%
5-year period ended 12-31-96 12.07% 13.41%
10-year period ended 12-31-96 11.86% 12.52%
*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, 1996, United Accumulative Fund had net assets totaling
$1,287,866,792 invested in a diversified portfolio of:
96.09% Common Stocks
3.91% Cash and Cash Equivalents
As a shareholder of United Accumulative Fund, for every $100 you had
invested on December 31, 1996, your Fund owned:
$35.33 Finance, Insurance and Real Estate Stocks
29.51 Manufacturing Stocks
9.31 Wholesale and Retail Trade Stocks
9.28 Services Stocks
8.36 Transportation, Communication, Electric, Gas
and Sanitary Services Stocks
3.91 Cash and Cash Equivalents
3.71 Miscellaneous Investing Institutions Stocks
0.59 Mining Stocks
Not all holdings will be represented in the portfolio at all times.
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS
Building Materials and Garden Supplies - 1.17%
Home Depot, Inc. (The) ................. 300,000 $ 15,037,500
Business Services - 4.90%
Automatic Data Processing, Inc. ........ 350,000 15,006,250
Broderbund Software, Inc.* ............. 200,000 5,937,400
Cerner Corporation* .................... 900,000 13,837,500
Computer Associates International, Inc. 250,000 12,437,500
Intuit Inc.* ........................... 150,000 4,762,500
Physician Computer Network* ............ 400,000 3,400,000
Shared Medical Systems Corporation ..... 125,000 6,156,250
Summit Medical Systems, Inc.* .......... 206,000 1,532,022
Total ................................. 63,069,422
Chemicals and Allied Products - 13.27%
American Home Products Corporation ..... 700,000 41,037,500
Amgen Inc.* ............................ 250,000 13,609,250
Astra AB, Class A, ADR ................. 248,900 12,196,100
Lilly (Eli) and Company ................ 250,000 18,250,000
Liposome Company, Inc. (The)* .......... 500,000 9,593,500
Pfizer Inc. ............................ 200,000 16,575,000
Schering-Plough Corporation ............ 350,000 22,662,500
SmithKline Beecham plc, ADR ............ 350,000 23,800,000
Warner-Lambert Company ................. 175,000 13,125,000
Total ................................. 170,848,850
Communication - 2.46%
Intermedia Communications of Florida,
Inc.* ................................ 400,000 10,274,800
Nokia Corporation, Series A, ADS ....... 150,000 8,643,750
360 Communications Company* ............ 550,000 12,718,750
Total ................................. 31,637,300
Depository Institutions - 17.27%
Banc One Corporation ................... 300,000 12,900,000
Bank of New York Company, Inc. (The) ... 500,000 16,875,000
Barnett Banks, Inc. .................... 400,000 16,450,000
Chase Manhattan Corporation (The) ...... 400,000 35,700,000
Dime Bancorp, Inc.* .................... 700,000 10,325,000
First American Corporation ............. 200,000 11,550,000
First Bank System, Inc. ................ 200,000 13,650,000
Glendale Federal Bank, Federal
Savings Bank* ......................... 165,400 3,845,550
Hibernia Corporation, Class A ......... 500,000 6,625,000
Long Island Bancorp, Inc. .............. 339,600 11,886,000
Mercantile Bancorporation Inc. ......... 135,200 6,945,900
Norwest Corporation .................... 300,000 13,050,000
Roosevelt Financial Group, Inc. ........ 1,000,000 20,875,000
SouthTrust Corporation ................. 225,000 7,846,875
State Street Boston Corporation ........ 150,000 9,675,000
Wells Fargo & Company .................. 90,000 24,277,500
Total ................................. 222,476,825
See Notes to Schedules of Investments on page 39.
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS (Continued)
Electric, Gas and Sanitary Services - 3.69%
Columbia Gas System, Inc. (The) ........ 150,000 $ 9,543,750
PanEnergy Corporation .................. 500,000 22,500,000
Sonat Inc. ............................. 300,000 15,450,000
Total ................................. 47,493,750
Engineering and Management Services - 1.45%
Fluor Corporation ...................... 175,000 10,981,250
Neurex Corporation* .................... 450,000 7,677,900
Total ................................. 18,659,150
Food and Kindred Products - 2.55%
ConAgra, Inc. .......................... 300,000 14,925,000
Heinz (H. J.) Company .................. 500,000 17,875,000
Total ................................. 32,800,000
General Merchandise Stores - 4.02%
Federated Department Stores, Inc.* ..... 425,000 14,503,125
May Department Stores Company (The) .... 500,000 23,375,000
Sears, Roebuck and Co. ................. 300,000 13,837,500
Total ................................. 51,715,625
Health Services - 2.93%
Beverly Enterprises, Inc.* ............. 711,800 9,075,450
Columbia/HCA Healthcare Corporation .... 550,000 22,412,500
MedPartners, Inc.* ..................... 300,000 6,300,000
Total ................................. 37,787,950
Holding and Other Investment Offices - 3.71%
Conseco, Inc. .......................... 500,000 31,875,000
Duke Realty Investments, Inc. .......... 200,000 7,700,000
Equity Residential Properties .......... 200,000 8,250,000
Total ................................. 47,825,000
Instruments and Related Products - 7.60%
Baxter International Inc. .............. 900,000 36,900,000
General Signal Corporation ............. 300,000 12,825,000
Raytheon Company ....................... 500,000 24,062,500
St. Jude Medical, Inc.* ................ 250,000 10,656,250
Target Therapeutics, Inc.* ............. 320,600 13,445,002
Total ................................. 97,888,752
See Notes to Schedules of Investments on page 39.
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS (Continued)
Insurance Carriers - 14.02%
Allstate Corporation (The) ............. 700,000 $ 40,512,500
American International Group, Inc. ..... 286,500 31,013,625
Berkley (W. R.) Corporation ............ 325,000 16,595,150
Berkshire Hathaway Inc.* ............... 450 15,345,000
Chubb Corporation (The) ................ 100,000 5,375,000
NAC Re Corporation ..................... 350,000 11,856,250
ReliaStar Financial Corp. .............. 300,000 17,325,000
TIG Holdings, Inc. ..................... 595,000 20,155,625
Trenwick Group Inc. .................... 275,000 12,787,500
Western National Corporation .......... 500,000 9,625,000
Total ................................. 180,590,650
Nondepository Institutions - 2.89%
Federal National Mortgage Association .. 1,000,000 37,250,000
Oil and Gas Extraction - 0.59%
Enron Oil & Gas Company ................ 300,000 7,575,000
Petroleum and Coal Products - 4.53%
Coastal Corporation (The) .............. 300,000 14,662,500
Exxon Corporation ...................... 300,000 29,400,000
Valero Energy Corporation .............. 500,000 14,312,500
Total ................................. 58,375,000
Railroad Transportation - 1.24%
Illinois Central Corporation, Class A .. 500,000 16,000,000
Security and Commodity Brokers - 1.15%
Lehman Brothers Holdings Inc. .......... 250,000 7,843,750
Paine Webber Group Inc. ................ 250,000 7,031,250
Total ................................. 14,875,000
Transportation By Air - 0.97%
Southwest Airlines Co. ................. 562,000 12,434,250
Transportation Equipment - 1.56%
AlliedSignal Inc. ...................... 300,000 20,100,000
See Notes to Schedules of Investments on page 39.
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS (Continued)
Wholesale Trade -- Nondurable Goods - 4.12%
Johnson & Johnson ...................... 700,000 $ 34,825,000
Lockheed Martin Corporation ............ 200,000 18,300,000
Total ................................. 53,125,000
TOTAL COMMON STOCKS - 96.09% $1,237,565,024
(Cost: $1,165,068,670)
TOTAL SHORT-TERM SECURITIES - 4.64% $ 59,682,244
(Cost: $59,682,244)
TOTAL INVESTMENT SECURITIES - 100.73% $1,297,247,268
(Cost: $1,224,750,914)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (0.73%) (9,380,476)
NET ASSETS - 100.00% $1,287,866,792
See Notes to Schedules of Investments on page 39.
<PAGE>
UNITED SCIENCE AND TECHNOLOGY FUND
MANAGER'S LETTER
DECEMBER 31, 1996
---------------------------------------------------------------------------
Dear Shareholder:
This report relates to the operation of the United Science and
Technology Fund for the fiscal year ended December 31, 1996. The following
discussion, graphs and tables provide you with information regarding the
Fund's performance during that period.
1996 was characterized by moderate economic growth and historically
low core inflation. The equity market experienced enormous growth during
the year, as an estimated $200 billion was invested in initial public
offerings and monthly mutual fund cash inflows increased from an average of
$11 billion in 1995 to $19 billion in 1996. While the major market indexes
experienced significant advances in 1996, the gains were largely
attributable to a limited number of well-capitalized companies that are
heavily weighted in the indexes. Most stocks and mutual funds
underperfomed the major indexes.
During 1996, the Fund continued its strategy of long-term investment
in companies involved in core technology, healthcare and related systems.
However, disappointing earnings in a number of industries, including
hospital information systems, caused substantial stock price declines.
Throughout much of 1996, the Fund owned some of the issues that contributed
to the strong performances by the major indexes, but we sold a number of
those positions during the year, primarily in the fourth quarter, on the
mistaken projection that they would decline in price.
The strategies and techniques we applied resulted in the Fund
underperforming the indexes charted on the following page. Those indexes
reflect the performance of securities that generally represent the non-
financial institution portion of the stock market (the S&P 400 Index) and
the universe of funds with similar investment objectives (the Lipper
Science & Technology Fund Universe Average). The Fund's performance was
impacted negatively, primarily in the fourth quarter of the year, by its
underweighting in the securities that contributed most to the superior
gains experienced by the major market indexes and its investments in the
hospital information systems industry.
A declining federal budget deficit and legislative action consistent
with the apparent messages of last year's elections - less government,
fewer regulations and lower taxes - could have a positive effect on the
stock market during the coming year. In light of the anticipated
conditions and trends, we expect to focus on protecting profits achieved by
the Fund and continue searching for long-term investment opportunities in
the ever-developing science and technology sector.
Thank you very much for your continued support and confidence.
Respectfully,
Abel Garcia
Manager, United Science and Technology Fund
<PAGE>
Comparison of Change in Value of $10,000 Investment in
United Science and Technology Fund Class A Shares,
The S&P 400 Index,
and The Lipper Science & Technology Fund Universe Average
United Lipper
Science and Science &
Technology Technology
Fund S&P Fund
Class A 400 Universe
Shares Index Average
--------- --------- ----------
12/31/86 Purchase 9,425 10,000 10,000
12/31/87 10,596 10,876 10,246
12/31/88 11,555 12,613 11,167
12/31/89 14,721 16,323 13,642
12/31/90 14,204 16,179 13,241
12/31/91 22,621 21,157 19,260
12/31/92 21,710 22,365 21,962
12/31/93 23,558 24,387 27,284
12/31/94 25,862 25,319 30,751
12/31/95 40,182 34,080 42,396
12/31/96 43,538 41,924 50,551
===== United Science and Technology Fund, Class A Shares* -- $43,538
+++++ S&P 400 Index -- $41,924
----- Lipper Science & Technology Fund Universe Average -- $50,551
*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 and
assumes reinvestment of dividends and distributions.
Annual Average Total Return +
Class A++ Class Y
-----------------------------
Year Ended
12/31/96 2.12% N/A
5 Years Ended
12/31/96 12.65% N/A
10 Years Ended
12/31/96 15.85% N/A
Aggregate Total
Return for Life
of Class Y +++ N/A 3.25%
+ Total return for the Class Y shares may be greater than that of the
Class A shares because the Fund's Class Y shares are not subject to a
sales load or 12b-1 fees.
++ 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.
+++ 2/27/96 (the date on which Fund Class Y shares were first acquired by
shareholders) through 12/31/96.
Past performance is not predictive of future performance. Indexes are
unmanaged.
<PAGE>
SHAREHOLDER SUMMARY
------------------------------------------------------------------------
UNITED SCIENCE AND TECHNOLOGY FUND
PORTFOLIO STRATEGY:
Technology-related OBJECTIVE: Long-term capital growth.
stocks
Generally at least 80% STRATEGY: Invests in common
in science or technology stocks of companies whose
securities; may have more products, processes or services
than 20% in debt securities. are expected to benefit from
scientific or technological
discoveries or developments.
(May purchase securities subject to
repurchase agreements. May invest
in certain options and futures.)
Cash Reserves The use of cash reserves (often
invested in money market
securities) for defensive purposes
is a strategy that may be utilized
by the Science and Technology Fund
from time to time.
Moving into cash reserve positions
at times thought to be near a major
stock market peak allows the Fund
the opportunity to capture profits
and attempts to cushion the impact
of market declines. The added
flexibility provided by our CASH
RESERVES STRATEGY has from time to
time been an important element in
our past success and, when deemed
appropriate, may be used in the
management of the portfolio in the
future.
FOUNDED: 1950
SCHEDULED DIVIDEND FREQUENCY: SEMIANNUALLY
(JUNE AND DECEMBER)
<PAGE>
PERFORMANCE SUMMARY -- Class A Shares
PER SHARE DATA
For the Fiscal Year Ended December 31, 1996
--------------------------------------
CAPITAL GAINS DISTRIBUTION $1.47
=====
NET ASSET VALUE ON
12/31/96 $23.35 adjusted to:$24.82(A)
12/31/95 22.89
------
CHANGE PER SHARE $ 1.93
======
(A)This number includes the capital gains distribution of $1.47 paid in
December 1996 added to the actual net asset value on December 31, 1996.
Past performance is not necessarily an indication of future results.
TOTAL RETURN HISTORY
Average Annual Total Return
---------------------------
With Without
Period Sales Load* Sales Load**
------ ----------- ------------
1-year period ended 12-31-96 2.12% 8.35%
5-year period ended 12-31-96 12.65% 13.99%
10-year period ended 12-31-96 15.85% 16.53%
*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, 1996, United Science and Technology Fund had net assets
totaling $983,637,347 invested in a diversified portfolio of:
93.60% Common Stocks
5.83% Cash and Cash Equivalents
0.57% Preferred Stock
As a shareholder of United Science and Technology Fund, for every $100 you
had invested on December 31, 1996, your Fund owned:
$45.89 Services Stocks
35.66 Manufacturing Stocks
5.83 Cash and Cash Equivalents
5.48 Transportation, Communication, Electric, Gas
and Sanitary Services Stocks
3.54 Wholesale and Retail Trade Stocks
2.06 Finance, Insurance and Real Estate Stocks
0.97 Mining Stocks
0.57 Preferred Stocks
Not all holdings will be represented in the portfolio at all times.
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS
Business Services - 40.92%
Alternative Resources Corporation* ..... 350,000 $ 6,015,450
America Online, Inc.* .................. 590,000 19,617,500
Broderbund Software, Inc.* ............. 286,600 8,508,294
CKS Group, Inc.* ....................... 394,000 11,056,428
CUC International Inc.* ................ 900,000 21,375,000
Computer Associates International,
Inc. .................................. 337,500 16,790,625
DST Systems, Inc.* ..................... 200,000 6,275,000
Electronic Data Systems Corporation .... 325,000 14,056,250
First Data Corporation ................. 300,000 10,950,000
HBO & Company .......................... 702,000 41,681,250
HCIA Inc.* ............................. 385,000 13,354,495
HPR Inc.* .............................. 509,000 6,935,125
IMNET Systems, Inc.* ................... 200,000 4,800,000
Informix Corporation* .................. 600,000 12,262,200
Intuit Inc.* ........................... 288,100 9,147,175
i2 Technologies, Inc.* ................. 100,000 3,862,500
Macromedia, Inc.* ...................... 600,000 10,875,000
McAfee Associates, Inc.* ............... 235,000 10,295,820
Microsoft Corporation* ................. 200,000 16,537,400
Netscape Communications Corporation* ... 100,000 5,687,500
Objective Systems Integrators, Inc.* .... 114,800 2,719,268
Oracle Systems Corporation* ............ 500,000 20,843,500
Parametric Technology Corporation* ..... 800,000 41,149,600
PeopleSoft, Inc.* ...................... 100,000 4,793,700
Premisys Communications, Inc.* ......... 250,000 8,437,500
Pure Atria Corporation* ................ 386,700 9,498,125
Shared Medical Systems Corporation ..... 250,000 12,312,500
Summit Medical Systems, Inc.* .......... 200,000 1,487,400
Synopsys, Inc.* ........................ 400,000 18,400,000
TMP Worldwide Inc.* (#) ................. 250,000 3,234,250
3Com Corporation* ...................... 240,000 17,594,880
USCS International, Inc.* .............. 226,500 3,878,812
Xylan Corporation* ..................... 285,100 8,018,438
Total ................................. 402,450,985
Chemicals and Allied Products - 5.77%
Abbott Laboratories .................... 250,000 12,687,500
Amgen Inc.* ............................ 200,000 10,887,400
Lilly (Eli) and Company ................ 100,000 7,300,000
Pfizer Inc. ............................ 200,000 16,575,000
Roche Holdings AG (A) .................. 1,200 9,338,713
Total ................................. 56,788,613
See Notes to Schedules of Investments on page 39.
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS (Continued)
Communication - 5.48%
Intermedia Communications of Florida,
Inc.* ................................. 400,000 $ 10,274,800
MFS Communications Company, Inc.* ...... 400,000 21,750,000
Nokia Corporation, Series A, ADS ....... 300,000 17,287,500
360 Communications Company* ............ 200,000 4,625,000
Total ................................. 53,937,300
Depository Institutions - 2.06%
BankAmerica Corporation ................ 100,000 9,975,000
Citicorp ............................... 100,000 10,300,000
Total ................................. 20,275,000
Electronic and Other Electric Equipment - 16.49%
Ascend Communications, Inc.* ........... 1,000,000 62,125,000
Cascade Communications Corp.* .......... 930,600 51,415,650
General Electric Company ............... 140,000 13,842,500
PairGain Technologies, Inc.* ........... 400,000 12,174,800
Tellabs* ............................... 600,000 22,612,200
Total ................................. 162,170,150
Engineering and Management Services - 0.58%
Neurex Corporation* .................... 334,300 5,703,827
Food and Kindred Products - 0.45%
Hershey Foods Corporation .............. 100,000 4,375,000
Health Services - 4.39%
Columbia/HCA Healthcare Corporation .... 200,000 8,150,000
Idexx Laboratories, Inc.* .............. 300,000 10,837,500
PhyCor, Inc.* .......................... 400,000 11,300,000
Renal Treatment Centers, Inc.* ......... 250,000 6,375,000
Tenet Healthcare Corporation* .......... 300,000 6,562,500
Total ................................. 43,225,000
Industrial Machinery and Equipment - 6.36%
cisco Systems, Inc.* ................... 751,200 47,841,674
Compaq Computer Corporation* ........... 100,000 7,425,000
Digital Link Corporation* .............. 300,000 7,331,100
Total ................................. 62,597,774
Instruments and Related Products - 5.43%
Boston Scientific Corporation* ......... 250,000 15,000,000
Medtronic, Inc. ........................ 200,000 13,600,000
STERIS Corporation* .................... 300,000 13,068,600
Target Therapeutics, Inc.* ............. 279,400 11,717,198
Total ................................. 53,385,798
See Notes to Schedules of Investments on page 39.
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS (Continued)
Oil and Gas Extraction - 0.97%
Noble Affiliates, Inc. ................. 200,000 $ 9,575,000
Petroleum and Coal Products - 1.16%
Valero Energy Corporation .............. 400,000 11,450,000
Wholesale Trade -- Durable Goods - 2.37%
OmniCare, Inc. ......................... 725,000 23,290,625
Wholesale Trade -- Nondurable Goods - 1.17%
Cardinal Health, Inc. .................. 196,966 11,473,270
TOTAL COMMON STOCKS - 93.60% $920,698,342
(Cost: $499,887,006)
PREFERRED STOCK - 0.57%
Business Services
SAP Aktiengesellschaft (A) ............. 40,000 $ 5,589,860
(Cost: $5,901,364)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Commercial Paper
Communication - 0.41%
GTE Corporation,
5.48%, 1-16-97 ........................ $4,060 4,050,730
Depository Institutions - 0.34%
U.S. Bancorp,
Master Note............................ 3,340 3,340,000
Electric, Gas and Sanitary Services - 0.45%
Public Service Electric & Gas Co.,
5.57%, 2-4-97 ......................... 4,485 4,461,407
Food and Kindred Products - 1.91%
General Mills, Inc.,
Master Note ........................... 345 345,000
Hercules Inc.:
5.45%, 1-10-97 ........................ 3,215 3,210,620
5.52%, 1-28-97 ........................ 3,570 3,555,220
Quaker Oats Co.,
5.63%, 1-23-97 ........................ 6,495 6,472,654
Ralston Purina Co.,
5.52%, 2-7-97 ......................... 5,275 5,245,073
Total ................................. 18,828,567
See Notes to Schedules of Investments on page 39.
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1996
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Forestry - 0.42%
Weyerhaeuser Co.,
5.45%, 2-19-97 ........................ $ 4,140 $ 4,109,289
Metal Mining - 0.87%
BHP Finance (USA) Inc.:
5.35%, 1-28-97 ........................ 6,635 6,608,377
5.4%, 2-5-97 .......................... 1,975 1,964,631
Total ................................. 8,573,008
Textile Mill Products - 1.76%
Sara Lee Corporation,
Master Note ........................... 17,255 17,255,000
Transportation Equipment - 0.20%
Echlin, Inc.,
5.4%, 2-3-97 .......................... 1,965 1,955,273
Total Commercial Paper - 6.36% 62,573,274
Municipal Obligations - 0.51%
Indiana
City of Whiting, Indiana, Industrial Sewage
and Solid Waste Disposal Revenue Bonds
(Amoco Oil Company Project), Taxable
Series 1995,
5.55%, 1-13-97 ........................ 5,000 5,000,000
TOTAL SHORT-TERM SECURITIES - 6.87% $ 67,573,274
(Cost: $67,573,274)
TOTAL INVESTMENT SECURITIES - 101.04% $993,861,476
(Cost: $573,361,644)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (1.04%) (10,224,129)
NET ASSETS - 100.00% $983,637,347
See Notes to Schedules of Investments on page 39.
<PAGE>
UNITED FUNDS, INC.
DECEMBER 31, 1996
Notes to Schedules of Investments
*No income dividends were paid during the preceding 12 months.
(A) Listed on an exchange outside the United States.
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 FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES United
DECEMBER 31, 1996 United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
Assets ----------------------------------------
Investment securities --
at value (Notes 1
and 3) ............$525,669,229$5,051,152,404$1,297,247,268$ 993,861,476
Cash .............. 2,169 --- 31,233 7,418
Receivables:
Dividends and interest 7,703,706 7,753,902 1,382,273 254,895
Fund shares sold .. 487,408 6,915,601 449,714 7,463,455
Prepaid insurance
premium ........... 15,993 57,237 34,184 12,737
-----------------------------------------------------
Total assets .... 533,878,505 5,065,879,144 1,299,144,6721,001,599,981
Liabilities -----------------------------------------------------
Payable for investment
securities purchased --- 38,622,803 --- ---
Payable for Fund
shares redeemed ... 2,917,604 22,934,409 10,638,028 17,355,079
Due to custodian ... --- 3,711 --- ---
Accrued service fee (Note 2)192,300 1,706,300 419,800 344,550
Accrued transfer agency
and dividend disbursing
(Note 2) .......... 68,296 565,456 130,177 187,232
Accrued accounting
services fee (Note 2) 5,000 8,333 8,333 8,333
Other .............. 42,894 274,819 81,542 67,440
-----------------------------------------------------
Total liabilities 3,226,094 64,115,831 11,277,880 17,962,634
-----------------------------------------------------
Total net assets$530,652,411$5,001,763,313$1,287,866,792$ 983,637,347
Net Assets =====================================================
$1.00 par value capital stock
Capital stock .....$ 86,368,101$ 152,004,636$ 166,148,578$ 42,131,690
Additional paid-in
capital .......... 459,573,882 2,678,442,344 994,196,461 500,595,912
Accumulated undistributed
income (loss):
Accumulated undistributed
net investment
income .......... 802,660 2,937,972 1,310,231 ---
Accumulated undistributed net
realized gain (loss) on
investment
transactions ..... (26,216,432) 72,382,654 53,715,148 20,411,017
Net unrealized appreciation
of investments
at end of period . 10,124,200 2,095,995,707 72,496,374 420,498,728
------------------------------------------------------
Net assets applicable to
outstanding units
of capital .....$530,652,411$5,001,763,313$1,287,866,792$983,637,347
======================================================
Net asset value per share
(net assets divided by
shares outstanding)
Class A ............ $6.14 $32.91 $7.75 $23.35
Class Y ............ $6.14 $32.91 $7.75 $23.38
Capital shares
outstanding
Class A ............ 84,451,146 147,405,344 165,808,020 41,999,526
Class Y ............ 1,916,955 4,599,292 340,558 132,164
Capital shares authorized 400,000,000 600,000,000 600,000,000 200,000,000
See notes to financial statements.
<PAGE>
UNITED FUNDS, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended DECEMBER 31, 1996
United
United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
------------ --------------------------------------
Investment Income (Loss)
Income (Note 1B):
Dividends ......... $ --- $ 66,534,296 $ 19,372,299 $ 1,673,423
Interest .......... 38,151,761 19,406,967 7,360,999 4,409,509
----------- ------------ ------------------------
Total income .... 38,151,761 85,941,263 26,733,298 6,082,932
----------- ------------ ------------------------
Expenses (Note 2):
Investment
management fee ... 2,344,627 25,277,033 6,879,322 5,667,206
Transfer agency and
dividend disbursing
-- Class A ..... 802,643 5,752,718 1,304,462 1,677,814
Service fee -- Class A 749,534 6,498,915 1,606,204 1,405,418
Custodian fees .... 22,984 351,762 52,439 52,910
Accounting services fee 61,667 100,000 100,000 88,750
Audit fees ........ 42,966 31,245 58,740 24,290
Shareholder servicing
fee -- Class Y ... 11,532 188,544 4,123 3,330
Legal fees ........ 4,849 41,588 11,284 8,315
Other ............. 83,928 599,978 168,743 199,824
----------- ------------ ------------------------
Total expenses .. 4,124,730 38,841,783 10,185,317 9,127,857
----------- ------------ ------------------------
Net investment
income (loss) 34,027,031 47,099,480 16,547,981 (3,044,925)
----------- ------------ ------------------------
Realized and Unrealized
Gain (Loss) on Investments (Notes 1 and 3)
Realized net gain
on securities ..... 1,229,324 276,362,531 155,566,702 71,724,354
Realized net gain (loss) on foreign
currency transactions 261,674 (227,240) 5,662 11,558
----------- ------------ ------------------------
Realized net gain
on investments .. 1,490,998 276,135,291 155,572,364 71,735,912
Unrealized appreciation
(depreciation) in value
of investments during
the period......... (19,287,816) 518,056,427 (28,379,142) 2,339,175
----------- ------------ ------------------------
Net gain (loss) on
investments .... (17,796,818) 794,191,718 127,193,222 74,075,087
----------- ------------ ------------------------
Net increase
in net assets
resulting from
operations .... $16,230,213 $841,291,198 $143,741,203 $71,030,162
============ ============ ========================
See notes to financial statements.
<PAGE>
UNITED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Fiscal Year Ended DECEMBER 31, 1996 United
United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
----------------------------------------------------
Increase (Decrease) in Net Assets
Operations:
Net investment
income (loss) ... $ 34,027,031$ 47,099,480$ 16,547,981$
(3,044,925)
Realized net gain
on investments .. 1,490,998 276,135,291 155,572,364 71,735,912
Unrealized
appreciation
(depreciation) .. (19,287,816) 518,056,427 (28,379,142) 2,339,175
----------------------------------------------------
Net increase in net
assets resulting
from operations. 16,230,213 841,291,198 143,741,203 71,030,162
----------------------------------------------------
Dividends to shareholders
from (Note 1E):*
Net investment income
Class A ......... (33,563,721) (44,582,972) (16,526,936) ---
Class Y ......... (498,286) (1,535,780) (39,149) ---
Realized net gain on
investment transactions
Class A ......... --- (223,378,753) (126,903,435)(57,680,201)
Class Y ......... --- (6,868,127) (256,540) (174,464)
----------------------------------------------------
(34,062,007) (276,365,632) (143,726,060)(57,854,665)
----------------------------------------------------
Capital share
transactions (Note 5) (17,992,840) 353,417,280 81,068,885 149,679,267
----------------------------------------------------
Total increase (decrease)(35,824,634)918,342,846 81,084,028 162,854,764
Net Assets
Beginning of period 566,477,045 4,083,420,467 1,206,782,764 820,782,583
----------------------------------------------------
End of period $530,652,411$5,001,763,313$1,287,866,792$983,637,347
====================================================
Undistributed
net investment
income .......... $802,660 $2,937,972 $1,310,231 $---
======== ========== ========== ====
*See "Financial Highlights" on pages 44 - 51.
See notes to financial statements.
<PAGE>
UNITED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Fiscal Year Ended DECEMBER 31, 1995 United
United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
----------------------------------------------------
Increase in Net Assets
Operations:
Net investment
income ......... $ 35,631,421$ 48,335,097$ 15,451,348$ (430,999)
Realized net gain
on investments .. 4,111,327 137,562,148 161,864,113 26,780,950
Unrealized
appreciation .... 61,755,254 742,707,419 140,365,483 255,993,038
----------------------------------------------------
Net increase
in net assets resulting
from operations. 101,498,002 928,604,664 317,680,944 282,342,989
----------------------------------------------------
Dividends to shareholders
from (Note 1E):*
Net investment income
Class A ......... (35,740,983) (46,382,026) (14,998,659) ---
Class Y ......... (90,066) (676,269) (4,366) ---
Realized net gain on
investment transactions
Class A ........ --- (121,455,126) (127,689,006)(24,276,021)
Class Y ......... --- (3,204,607) (68,073) ---
----------------------------------------------------
(35,831,049) (171,718,028) (142,760,104)(24,276,021)
----------------------------------------------------
Capital share
transactions (Note 5) (17,026,228) 181,629,624 64,841,625 66,213,033
----------------------------------------------------
Total increase .... 48,640,725 938,516,260 239,762,465 324,280,001
Net Assets
Beginning of period 517,836,320 3,144,904,207 967,020,299 496,502,582
----------------------------------------------------
End of period $566,477,045$4,083,420,467$1,206,782,764$820,782,583
====================================================
Undistributed net
investment income $575,962 $2,184,484 $1,322,673 $---
======== ========== ========== ====
*See "Financial Highlights" on pages 44 - 51.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
UNITED BOND FUND
Class A Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
For the fiscal year ended December 31,
--------------------------------------
1996 1995 1994 1993 1992
----- ----- ----- ----- -----
Net asset value,
beginning of period $6.34 $5.62 $6.39 $6.31 $6.32
---- ---- ---- ---- ----
Income from investment
operations:
Net investment income 0.39 0.40 0.39 0.41 0.45
Net realized and
unrealized gain
(loss) on
investments ..... (0.20) 0.72 (0.75) 0.41 0.00
---- ---- ---- ---- ----
Total from investment
operations ....... 0.19 1.12 (0.36) 0.82 0.45
---- ---- ---- ---- ----
Less distributions:
Dividends from net
investment income (0.39) (0.40) (0.39) (0.41) (0.46)
Distribution from
capital gains ... (0.00) (0.00) (0.02) (0.33) (0.00)
---- ---- ---- ---- ----
Total distributions (0.39) (0.40) (0.41) (0.74) (0.46)
---- ---- ---- ---- ----
Net asset value,
end of period .... $6.14 $6.34 $5.62 $6.39 $6.31
===== ===== ===== ===== =====
Total return* ...... 3.20% 20.50% -5.76% 13.19% 7.50%
Net assets, end of
period (000
omitted) ......... $518,873$563,445$517,836$641,668$589,946
Ratio of expenses to
average net assets 0.77% 0.74% 0.72% 0.65% 0.64%
Ratio of net investment
income to average
net assets ....... 6.34% 6.54% 6.60% 6.14% 7.29%
Portfolio turnover
rate ............. 55.74% 66.38% 127.11%175.39% 115.17%
*Total return calculated without taking into account the sales load
deducted on an initial purchase.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
UNITED BOND FUND
Class Y Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
For the For the
fiscal year period from
ended 6/19/95* to
12/31/96 12/31/95
---------- -----------
Net asset value,
beginning of period $6.34 $6.11
---- ----
Income from investment
operations:
Net investment income 0.40 0.21
Net realized and
unrealized gain (loss)
on investments .. (0.20) 0.22
---- ----
Total from investment
operations ....... 0.20 0.43
---- ----
Less distributions:
Dividends from net
investment income (0.40) (0.20)
Distribution from
capital gains ... (0.00) (0.00)
---- ----
Total distributions (0.40) (0.20)
---- ----
Net asset value,
end of period .... $6.14 $6.34
==== ====
Total return ....... 3.35% 7.20%
Net assets, end of
period (000
omitted) ......... $11,779 $3,032
Ratio of expenses to
average net assets 0.62% 0.63%**
Ratio of net investment
income to average
net assets ....... 6.52% 6.41%**
Portfolio turnover
rate ............. 55.74% 66.38%**
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
UNITED INCOME FUND
Class A Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
For the fiscal year ended December 31,
-------------------------------------
1996 1995 1994 1993 1992
----- ----- ----- ----- -----
Net asset value,
beginning of period $28.96 $23.34 $24.77 $22.05 $20.44
----- ----- ----- ----- -----
Income from investment
operations:
Net investment income 0.33 0.36 0.36 0.40 0.46
Net realized and
unrealized gain
(loss) on
investments ..... 5.53 6.53 (0.80) 3.11 1.96
----- ----- ----- ----- -----
Total from investment
operations ....... 5.86 6.89 (0.44) 3.51 2.42
----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment income (0.32) (0.35) (0.36) (0.40) (0.46)
Distribution from
capital gains ... (1.59) (0.92) (0.63) (0.39) (0.35)
----- ----- ----- ----- -----
Total distributions (1.91) (1.27) (0.99) (0.79) (0.81)
----- ----- ----- ----- -----
Net asset value,
end of period .... $32.91 $28.96 $23.34 $24.77 $22.05
====== ====== ====== ====== ======
Total return* ...... 20.36% 29.60% -1.82% 16.05% 11.96%
Net assets, end of
period (000
omitted) ......... $4,850,419$3,975,717$3,144,904$3,060,073
$2,537,161
Ratio of expenses to
average net assets 0.86% 0.83% 0.74% 0.66% 0.65%
Ratio of net investment
income to average
net assets ....... 1.03% 1.31% 1.45% 1.70% 2.19%
Portfolio turnover
rate ............. 22.24% 17.59% 18.54% 21.70% 19.25%
Average commission
rate paid ........ $0.0496
*Total return calculated without taking into account the sales load
deducted on an initial purchase.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
UNITED INCOME FUND
Class Y Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
For the For the
fiscal year period from
ended 6/19/95* to
12/31/96 12/31/95
---------- -----------
Net asset value,
beginning of period $28.96 $27.73
----- -----
Income from investment
operations:
Net investment income 0.36 0.21
Net realized and
unrealized gain
on investments .. 5.54 2.14
----- -----
Total from investment
operations ....... 5.90 2.35
----- -----
Less distributions:
Dividends from net
investment income (0.36) (0.20)
Distribution from
capital gains ... (1.59) (0.92)
----- -----
Total distributions (1.95) (1.12)
----- -----
Net asset value,
end of period .... $32.91 $28.96
===== =====
Total return ....... 20.53% 8.45%
Net assets, end of
period (000
omitted) ......... $151,344 $107,703
Ratio of expenses to
average net assets 0.73% 0.74%**
Ratio of net investment
income to average
net assets ....... 1.17% 1.36%**
Portfolio turnover
rate ............. 22.24% 17.59%**
Average commission
rate paid ........ $0.0496
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
UNITED ACCUMULATIVE FUND
Class A Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
For the fiscal year ended December 31,
--------------------------------------
1996 1995 1994 1993 1992
----- ----- ----- ----- -----
Net asset value,
beginning of period $7.78 $6.58 $7.19 $7.50 $7.15
---- ---- ---- ---- ----
Income from investment
operations:
Net investment
income........... 0.11 0.11 0.13 0.11 0.16
Net realized and
unrealized gain
(loss) on
investments ..... 0.82 2.12 (0.13) 0.55 0.85
---- ---- ---- ---- ----
Total from investment
operations ....... 0.93 2.23 0.00 0.66 1.01
---- ---- ---- ---- ----
Less distributions:
Dividends from net
investment income (0.11) (0.11) (0.13) (0.11) (0.16)
Distribution from
capital gains ... (0.85) (0.92) (0.48) (0.84) (0.50)
Distribution in
excess of capital
gains............ (0.00) (0.00) (0.00) (0.02) (0.00)
---- ---- ---- ---- ----
Total distributions (0.96) (1.03) (0.61) (0.97) (0.66)
---- ---- ---- ---- ----
Net asset value,
end of period .... $7.75 $7.78 $6.58 $7.19 $7.50
==== ==== ==== ==== ====
Total return* ...... 12.18% 34.21% 0.04% 9.06% 14.20%
Net assets, end of
period (000
omitted) ......... $1,285,227$1,206,128$967,020$1,033,774
$992,924
Ratio of expenses to
average net assets 0.83% 0.80% 0.71% 0.65% 0.62%
Ratio of net investment
income to average
net assets ....... 1.34% 1.42% 1.76% 1.34% 2.13%
Portfolio turnover
rate ............. 240.37%229.03% 205.40%230.29% 194.41%
Average commission
rate paid ........ $0.0575
*Total return calculated without taking into account the sales load
deducted on an initial purchase.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
UNITED ACCUMULATIVE FUND
Class Y Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
For the For the
fiscal year period from
ended 7/11/95* to
12/31/96 12/31/95
---------- -----------
Net asset value,
beginning of period $7.78 $7.84
---- ----
Income from investment
operations:
Net investment income 0.12 0.05
Net realized and
unrealized gain
on investments .. 0.82 0.87
---- ----
Total from investment
operations ....... 0.94 0.92
---- ----
Less distributions:
Dividends from net
investment income (0.12) (0.06)
Distribution from
capital gains ... (0.85) (0.92)
---- ----
Total distributions (0.97) (0.98)
---- ----
Net asset value,
end of period .... $7.75 $7.78
==== ====
Total return ....... 12.27% 11.92%
Net assets, end of
period (000
omitted) ......... $2,640 $655
Ratio of expenses to
average net assets 0.74% 0.76%**
Ratio of net investment
income to average
net assets ....... 1.45% 1.24%**
Portfolio turnover
rate ............. 240.37% 229.03%**
Average commission
rate paid ........ $0.0575
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
UNITED SCIENCE AND TECHNOLOGY FUND
Class A Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
For the fiscal year ended December 31,
--------------------------------------
1996 1995 1994 1993 1992
----- ----- ----- ----- -----
Net asset value,
beginning of period $22.89 $15.21 $14.83 $14.64 $15.42
------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income (loss) ... (0.07) (0.01) 0.00 0.01 0.03
Net realized and
unrealized gain
(loss) on
investments ..... 2.00 8.40 1.40 1.21 (0.66)
------ ------ ------ ------ ------
Total from investment
operations ....... 1.93 8.39 1.40 1.22 (0.63)
------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income (0.00) (0.00) (0.00) (0.01) (0.03)
Distribution from
capital gains ... (1.47) (0.71) (1.02) (0.95) (0.12)
Distribution in
excess of capital
gains ........... (0.00) (0.00) (0.00) (0.07) (0.00)
------ ------ ------ ------ ------
Total distributions (1.47) (0.71) (1.02) (1.03) (0.15)
------ ------ ------ ------ ------
Net asset value,
end of period .... $23.35 $22.89 $15.21 $14.83 $14.64
====== ====== ====== ====== ======
Total return* ...... 8.35% 55.37% 9.78% 8.51% -4.03%
Net assets, end of
period (000
omitted) ......... $980,547$820,783$496,503$446,611$428,806
Ratio of expenses to
average net assets 0.98% 0.93% 0.96% 0.91% 0.87%
Ratio of net investment
income to average
net assets ....... -0.33% -0.07% 0.00% 0.06% 0.24%
Portfolio turnover
rate ............. 33.90% 32.89% 64.39% 68.38% 45.79%
Average commission
rate paid ........ $0.0538
*Total return calculated without taking into account the sales load
deducted on an initial purchase.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
UNITED SCIENCE AND TECHNOLOGY FUND
Class Y Shares
For a Share of Capital Stock Outstanding Throughout The Period:
For the
period from
2/27/96* to
12/31/96
----------
Net asset value,
beginning of period $24.05
-----
Income from investment
operations:
Net investment loss (0.02)
Net realized and
unrealized gain
on investments .. 0.82
-----
Total from investment
operations ....... 0.80
-----
Less distributions:
Dividends from net
investment income (0.00)
Distribution from
capital gains ... (1.47)
-----
Total distributions (1.47)
-----
Net asset value,
end of period .... $23.38
=====
Total return ....... 3.25%
Net assets, end of
period (000
omitted) ......... $3,090
Ratio of expenses to
average net assets 0.80%**
Ratio of net investment
income to average
net assets ....... -0.12%**
Portfolio turnover
rate ............. 33.90%**
Average commission
rate paid ........ $0.0538
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 -- Significant Accounting Policies
United Funds, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company. The Corporation issues four series of capital shares;
each series represents ownership of a separate mutual fund. The assets
belonging to each Fund are held separately by the Custodian. The capital
shares of each Fund represent a pro rata beneficial interest in the
principal, net income and realized and unrealized capital gains or losses
of its respective investments and other assets. The following is a summary
of significant accounting policies consistently followed by the Corporation
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. 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
Corporation'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
Corporation 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, net realized and unrealized gains and
losses from foreign currency translations arise from changes in
currency exchange rates. The Corporation 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 Corporation'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 Corporation 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 each 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. At December 31, 1996,
United Science and Technology Fund reclassified $3,033,367 between
additional paid-in-capital and undistributed net investment income.
Net investment income, net realized gains and net assets were not
affected by this change.
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 Corporation 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 .03% of net assets for United Bond Fund, .15% of net assets for United
Income Fund and United Accumulative Fund, and .20% for United Science and
Technology Fund; 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 $15.1 billion of combined net assets at December 31, 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 Corporation accrues and pays this fee daily.
Pursuant to assignment of the Investment Management Agreement between
the Corporation and Waddell & Reed, Inc. ("W&R"), Waddell & Reed Investment
Management Company ("WRIMCO"), a wholly-owned subsidiary of W&R, serves as
the Corporation's investment manager.
The Corporation 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 Corporation and pricing daily the value of shares of
the Corporation. For these services, each of the four Funds 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 Fund
------------------------- ------------------
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 Corporation also pays WARSCO a 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 Corporation
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 Corporation also
reimburses W&R and WARSCO for certain out-of-pocket costs.
As principal underwriter for the Corporation's shares, W&R received
direct and indirect gross sales commissions for Class A shares (which are
not an expense of the Corporation) of $26,543,939, out of which W&R paid
sales commissions of $15,146,943 and all expenses in connection with the
sale of the Corporation's shares, except for registration fees and related
expenses.
Under a Service Plan for Class A shares adopted by the Corporation
pursuant to Rule 12b-1 under the Investment Company Act of 1940, the
Corporation may pay monthly a fee to W&R in an amount not to exceed .25% of
the Corporation'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 Corporation paid Directors' fees of $275,573.
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
Investment securities transactions for the period ended December 31,
1996 are summarized as follows:
United
United United United Science and
Bond IncomeAccumulative Technology
Fund Fund Fund Fund
----------- ------------------------ ------------
Purchases of investment
securities, excluding
short-term and U.S.
Government securities $163,449,027$1,139,035,334$2,665,933,791$378,142,051
Purchases of U.S. Government
securities 125,145,374 --- --- ---
Purchases of short-term
securities 57,590,4362,081,228,4542,057,921,1431,209,331,008
Proceeds from maturities
and sales of investment
securities, excluding
short-term and U.S.
Government securities 168,342,799 969,708,8512,709,657,580 290,614,463
Proceeds from maturities and
sales of U.S. Government
securities 148,368,629 --- --- ---
Proceeds from maturities and sales
of short-term securities
247,302,2442,085,954,1942,068,622,3901,209,150,083
For Federal income tax purposes, cost of investments owned at December
31, 1996 and the related appreciation (depreciation) were as follows:
Aggregate
Cost AppreciationDepreciation Appreciation
-------------- -------------------------------------
- -
United Bond Fund $515,545,029 $12,031,129$(1,906,929) $10,124,200
United Income Fund $2,955,148,013$2,113,212,126$(17,207,735)$2,096,004,391
United Accumulative
Fund $1,224,938,232 $106,704,670$(34,395,634) $72,309,036
United Science and
Technology Fund $573,361,644 $451,107,803$(30,607,971) $420,499,832
NOTE 4 -- Federal Income Tax Matters
The Corporation's income and expenses attributed to each Fund and the
gains and losses on security transactions of each Fund have been attributed
to that Fund for Federal income tax purposes as well as for accounting
purposes. For Federal income tax purposes, United Income Fund, United
Accumulative Fund and United Science and Technology Fund realized capital
gain net income of $276,362,531, $155,754,021 and $71,640,888,
respectively, during the year ended December 31, 1996, a portion of which
was paid to shareholders during the period ended December 31, 1996.
Remaining capital gain net income will be distributed to each Fund's
shareholders. For Federal income tax purposes, United Bond Fund realized
capital gain net income of $1,229,324 during the year ended December 31,
1996, which was entirely offset by utilization of capital loss
carryforwards. Remaining prior year capital loss carryforwards of United
Bond Fund aggregated $26,199,056 as of December 31, 1996, and are available
to offset future capital gain net income as follows: $26,118,153 through
December 31, 2002 and $80,903 through December 31, 2003.
NOTE 5 -- Commencement of Multiclass Operations
On June 17, 1995, each Fund within the Corporation 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 with
respect to each Fund. 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 Corporation. United Income Fund and United Bond Fund
commenced multiclass operations on June 19, 1995 and United Accumulative
Fund commenced multiclass operations on July 11, 1995. United Science and
Technology 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.
Transactions in capital stock for the fiscal year ended December 31,
1996 are summarized below.
United
United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
----------- ------------ ------------------------
Shares issued from sale
of shares:
Class A ............ 6,465,124 16,133,571 8,009,525 27,427,545
Class Y ............ 1,782,344 1,298,483 379,703 139,882
Shares issued from
reinvestment of
dividends and/or capital
gains distribution:
Class A ............ 4,659,208 7,718,525 17,504,459 2,334,666
Class Y ............ 44,921 258,999 38,631 7,370
Shares redeemed:
Class A ........... (15,509,353) (13,716,661) (14,780,542)(23,624,041)
Class Y ........... (388,283) (677,004) (161,934) (15,088)
--------- ---------- -------- ---------
Increase (decrease) in
outstanding capital
shares:
Class A ............ (4,385,021) 10,135,435 10,733,442 6,138,170
Class Y ............ 1,438,982 880,478 256,400 132,164
--------- ---------- ---------- ---------
Total for Fund .... (2,946,039) 11,015,913 10,989,842 6,270,334
========= ========== ========== =========
Value issued from sale
of shares:
Class A ............ $39,560,061 $509,911,318 $64,177,016$676,558,274
Class Y ............ 10,740,902 40,986,800 3,050,529 3,450,514
Value issued from
reinvestment of
dividends and/or capital
gains distribution:
Class A ............ 28,366,563 250,527,856 133,871,990 55,192,015
Class Y ............ 272,967 8,403,907 295,689 174,465
Value redeemed:
Class A .......... (94,554,914) (435,082,498) (118,996,801)(585,325,217)
Class Y ........... (2,378,419) (21,330,103) (1,329,538) (370,784)
----------- ------------ -----------------------
Increase (decrease) in
outstanding capital:
Class A ............ (26,628,290) 325,356,676 79,052,205 146,425,072
Class Y ............ 8,635,450 28,060,604 2,016,680 3,254,195
----------- ------------ -----------------------
Total for Fund .... $(17,992,840) $353,417,280 $81,068,885$149,679,267
=========== ============ =======================
Transactions in capital stock for the fiscal year ended December 31,
1995 are summarized below.
United
United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
----------- ------------ ------------------------
Shares issued from sale
of shares:
Class A ............ 7,903,177 13,156,068 3,690,645 15,272,219
Class Y ............ 494,273 3,737,901 76,842 ---
Shares issued from
reinvestment of
dividends and/or capital
gains distribution:
Class A ............ 4,996,291 5,453,592 17,417,933 1,060,921
Class Y ............ 14,634 133,843 9,457 ---
Shares redeemed:
Class A ........... (16,233,171) (16,103,667) (12,973,028)(13,108,833)
Class Y ............ (30,934) (152,930) (2,141) ---
----------- ----------- ---------- ----------
Increase (decrease) in
outstanding capital
shares:
Class A ............ (3,333,703) 2,505,993 8,135,550 3,224,307
Class Y ............ 477,973 3,718,814 84,158 ---
----------- ----------- ---------- ----------
Total for Fund .... (2,855,730) 6,224,807 8,219,708 3,224,307
========= ========== ========= =========
Value issued from sale
of shares:
Class A ............ $47,524,601 $358,973,863 $28,187,349$315,997,134
Class Y ............ 3,026,041 104,695,114 600,969 ---
Value issued from
reinvestment of
dividends and/or capital
gains distribution:
Class A ............ 29,904,406 155,645,364 133,229,799 23,096,462
Class Y ............ 90,066 3,880,877 72,439 ---
Value redeemed:
Class A .......... (97,382,064) (437,078,074) (97,231,889)(272,880,563)
Class Y ............ (189,278) (4,487,520) (17,042) ---
----------- ------------ ----------- -----------
Increase (decrease) in
outstanding capital:
Class A ............ (19,953,057) 77,541,153 64,185,259 66,213,033
Class Y ............ 2,926,829 104,088,471 656,366 ---
----------- ----------- ---------- ----------
Total for fund .... $(17,026,228) $181,629,624 $64,841,625 $66,213,033
=========== ============ =========== ===========
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
United Funds, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of United Bond Fund, United Income
Fund, United Accumulative Fund, and United Science and Technology Fund
(collectively the "Funds") comprising United Funds, Inc., as of December
31, 1996, the related statements of operations and changes in net assets
for the year then ended, and the financial highlights for the year then
ended. These financial statements and the financial highlights are the
responsibility of the Funds' management. Our responsibility is to express
an opinion on these financial statements and the financial highlights based
on our audits. The financial statements and the financial highlights of
the Funds for each of the years in the four-year period ended December 31,
1995 were audited by other auditors whose report, dated February 8, 1996,
expressed an unqualified opinion on those statements and financial
highlights.
We conducted our audits in accordance with generally accepted auditing
standards. 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 at December 31, 1996 by correspondence with the custodian
and brokers or other alternative procedures. 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, such financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the
respective funds comprising United Funds, Inc. as of December 31, 1996, the
results of their operations, the changes in their net assets, and their
financial highlights for the year then ended in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
February 7, 1997
<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 1996 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
----------- ----- ---------------------------------------------------
United Bond Fund
Class A
01-12-96 $0.032 $0.0320 $0.0000 $0.0000 $0.0320 $0.0000
02-16-96 0.032 0.0320 0.0000 0.0000 0.0320 0.0000
03-15-96 0.032 0.0320 0.0000 0.0000 0.0320 0.0000
04-12-96 0.032 0.0320 0.0000 0.0000 0.0320 0.0000
05-17-96 0.032 0.0320 0.0000 0.0000 0.0320 0.0000
06-14-96 0.032 0.0320 0.0000 0.0000 0.0320 0.0000
07-12-96 0.032 0.0320 0.0000 0.0000 0.0320 0.0000
08-16-96 0.032 0.0320 0.0000 0.0000 0.0320 0.0000
09-13-96 0.032 0.0320 0.0000 0.0000 0.0320 0.0000
10-11-96 0.032 0.0320 0.0000 0.0000 0.0320 0.0000
11-15-96 0.032 0.0320 0.0000 0.0000 0.0320 0.0000
12-13-96 0.036 0.0360 0.0000 0.0000 0.0360 0.0000
------- ------- ------- ------- ------- -------
$0.388 $0.3880 $0.0000 $0.0000 $0.3880 $0.0000
======= ======= ======= ======= ======= =======
United Bond Fund
Class Y
01-12-96 $0.032 $0.0320 $0.0000 $0.0000 $0.0320 $0.0000
02-16-96 0.032 0.0320 0.0000 0.0000 0.0320 0.0000
03-15-96 0.033 0.0330 0.0000 0.0000 0.0330 0.0000
04-12-96 0.032 0.0320 0.0000 0.0000 0.0320 0.0000
05-17-96 0.033 0.0330 0.0000 0.0000 0.0330 0.0000
06-14-96 0.033 0.0330 0.0000 0.0000 0.0330 0.0000
07-12-96 0.033 0.0330 0.0000 0.0000 0.0330 0.0000
08-16-96 0.033 0.0330 0.0000 0.0000 0.0330 0.0000
09-13-96 0.033 0.0330 0.0000 0.0000 0.0330 0.0000
10-11-96 0.033 0.0330 0.0000 0.0000 0.0330 0.0000
11-15-96 0.033 0.0330 0.0000 0.0000 0.0330 0.0000
12-13-96 0.037 0.0370 0.0000 0.0000 0.0370 0.0000
------- ------- ------- ------- ------- -------
$0.397 $0.3970 $0.0000 $0.0000 $0.3970 $0.0000
======= ======= ======= ======= ======= =======
PER-SHARE AMOUNTS REPORTABLE AS:
----------------------------------------------------
For Individuals For Corporations
------------------- ----------------------------------
Record Ordinary Long-Term Non- Long-Term
Date Total IncomeCapital GainQualifyingQualifyingCapital Gain
----------- ----- ---------------------------------------------------
United Income Fund
Class A
03-15-96 $0.080 $0.0800 $0.0000 $0.0800 $0.0000 $0.0000
06-14-96 0.080 0.0800 0.0000 0.0800 0.0000 0.0000
09-13-96 0.080 0.0800 0.0000 0.0800 0.0000 0.0000
12-13-96 1.670 0.0800 1.5900 0.0800 0.0000 1.5900
------- ------- ------- ------- ------- -------
$1.910 $0.3200 $1.5900 $0.3200 $0.0000 $1.5900
======= ======= ======= ======= ======= =======
United Income Fund
Class Y
03-15-96 $0.085 $0.0850 $0.0000 $0.0850 $0.0000 $0.0000
06-14-96 0.094 0.0940 0.0000 0.0940 0.0000 0.0000
09-13-96 0.090 0.0900 0.0000 0.0900 0.0000 0.0000
12-13-96 1.684 0.0940 1.5900 0.0940 0.0000 1.5900
------- ------- ------- ------- ------- -------
$1.953 $0.3630 $1.5900 $0.3630 $0.0000 $1.5900
======= ======= ======= ======= ======= =======
United Accumulative Fund
Class A
06-14-96 $0.040 $0.0400 $0.0000 $0.0400 $0.0000 $0.0000
12-13-96 0.920 0.6072 0.3128 0.0700 0.5372 0.3128
------- ------- ------- ------- ------- -------
$0.960 $0.6472 $0.3128 $0.1100 $0.5372 $0.3128
======= ======= ======= ======= ======= =======
United Accumulative Fund
Class Y
06-14-96 $0.043 $0.0430 $0.0000 $0.0430 $0.0000 $0.0000
12-13-96 0.924 0.6112 0.3128 0.0740 0.5372 0.3128
------- ------- ------- ------- ------- -------
$0.967 $0.6542 $0.3128 $0.1170 $0.5372 $0.3128
======= ======= ======= ======= ======= =======
United Science and Technology Fund
Class A
06-14-96 $0.000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000
12-13-96 1.470 0.0000 1.4700 0.0000 0.0000 1.4700
------- ------- ------- ------- ------- -------
$1.470 $0.0000 $1.4700 $0.0000 $0.0000 $1.4700
======= ======= ======= ======= ======= =======
United Science and Technology Fund
Class Y
06-14-96 $0.000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000
12-13-96 1.470 0.0000 1.4700 0.0000 0.0000 1.4700
------- ------- ------- ------- ------- -------
$1.470 $0.0000 $1.4700 $0.0000 $0.0000 $1.4700
======= ======= ======= ======= ======= =======
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 advisor concerning the
tax treatment of dividends and distributions from the Fund.
<PAGE>
This report is submitted for the general information of the shareholders of
United Funds, Inc. It is not authorized for distribution to prospective
investors unless accompanied with or preceded by the United Funds, Inc.
current prospectus.
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
Linda Graves, Topeka, Kansas
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
William L. Rogers, Los Angeles, California
Frank J. Ross, Jr., 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
James C. Cusser, Vice President
Abel Garcia, Vice President
Robert L. Hechler, Vice President
Henry J. Herrmann, Vice President
John M. Holliday, Vice President
Theodore W. Howard, Vice President and Treasurer
Antonio Intagliata, Vice President
Sharon K. Pappas, Vice President and Secretary
Carl E. Sturgeon, Vice President
Russell E. Thompson, 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.
------------------------------------
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
(800) 366-5465
Our INTERNET address is:
http://www.waddell.com
NUR1000A(12-96)
printed on recycled paper
