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, 1998
<PAGE>
UNITED BOND FUND
MANAGER'S LETTER
DECEMBER 31, 1998
- ---------------------------------------------------------------------------
Dear Shareholder:
This report relates to the operation of the United Bond Fund for the fiscal year
ended December 31, 1998. The following discussion, graphs and tables provide
you with information regarding the Fund's performance during that period.
1998 was characterized by tremendous volatility in the bond market, not only in
bond yields, but also in spreads (the yield difference between a debt instrument
and benchmark Treasuries) and in various measures of liquidity (the ability to
trade bonds). Interest rates declined, but generally just enough to offset the
widening in spreads between Treasury bonds and other bonds. Perhaps the major
factor contributing to this volatility was the international financial meltdown,
with Russia defaulting on its debt obligations and the near-collapse of the Far
East's financial system. Despite Main Street's growing economic optimism, some
major Western banks needed help from central bankers and the near-failure of
some large hedge funds nearly precipitated a credit crisis on Wall Street. The
difference in mood between the financial markets and the American consumer was
wide throughout the year.
We positioned the Fund to be more sensitive to declining interest rates in an
effort to offset the decline in value of the Fund's non-U.S. government debt
holdings. Over the course of the year, we extended the duration of the Fund's
portfolio as we pared exposure to non-U.S. government debt. We also reduced our
exposure to non-investment grade debt. We maintained exposure to putable bonds
(bonds that give the owner the right to sell them back to the issuing
corporation at a stated time prior to maturity). Although, like most corporate
debt, the putables suffered a cheapening vis-a-vis Treasury bonds, their
embedded put option effectively extended their duration in a falling interest
rate market and were able to compensate for any spread widening.
The strategies and techniques we applied during the year resulted in the Fund's
performance remaining fairly consistent with the indexes charted on the
following page. Those indexes reflect the performance of securities that
generally represent the bond market (the Salomon Brothers Broad Investment Grade
Index) and the universe of funds with similar objectives (the Lipper Corporate
Debt Funds A-Rated Universe Average). The Fund underperformed the Salomon
Brothers Index due to a heavy weighting in corporate and mortgage-backed bonds.
We expect the volatility of this past year to continue, but with one additional
variable: the Euro currency. The introduction of a unified currency ought to
improve the various European economies. It will, however, draw some of the
world's financial capital out of the U.S. and Japan and into Europe. It remains
to be seen whether growing European economies, which should increase demand for
U.S. exports, will overcome the deleterious effect of a flight of capital from
the U.S. markets. We expect a further slight decline in U.S. interest rates due
to anticipated low inflation and a slight slowing in the domestic economy.
Since we feel the U.S. economy will probably avoid a recession, we will maintain
our current exposure to corporate bonds. However, unless the existing
international issues clear up quickly, we doubt if we will be tempted by the
high yields in the emerging markets of Asia and Latin America.
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,
Salomon Brothers Broad Investment Grade Index
and The Lipper Corporate Debt Funds A-Rated Universe Average
Lipper
United Salomon Corporate
Bond Brothers Debt Funds
Fund Broad A-Rated
Class A Investment Universe
Shares Grade Index Average
------ ----------- ----------
12/31/88Purchase 9,425 10,000 10,000
12/31/89 10,425 11,445 11,244
12/31/90 10,867 12,485 12,000
12/31/91 12,908 14,478 13,982
12/31/92 13,876 15,578 14,992
12/31/93 15,707 17,118 16,673
12/31/94 14,803 16,631 15,900
12/31/95 17,838 19,717 18,817
12/31/96 18,409 20,430 19,285
12/31/97 20,208 22,395 21,040
12/31/98 21,677 24,347 22,607
+++++ United Bond Fund, Class A Shares* -- $21,677
..... Salomon Brothers Broad Investment Grade Index -- $24,347
===== Lipper Corporate Debt Funds A-Rated Universe Average -- $22,607
*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
12/31/98 1.10% 7.54%
5 Years Ended
12/31/98 5.40% N/A
10 Years Ended
12/31/98 8.04% N/A
Life of Class Y +++ N/A 7.92%
+ 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 12/31/98.
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.
FOUNDED: 1964
SCHEDULED DIVIDEND FREQUENCY: MONTHLY
<PAGE>
PERFORMANCE SUMMARY -- Class A Shares
PER SHARE DATA
For the Fiscal Year Ended December 31, 1998
- --------------------------------------
DIVIDENDS PAID $0.38
=====
NET ASSET VALUE ON
12/31/98 $6.39
12/31/97 6.32
-----
CHANGE PER SHARE $0.07
=====
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 12-31-98 1.10% 7.27%
5-year period ended 12-31-98 5.40% 6.65%
10-year period ended 12-31-98 8.04% 8.69%
*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, 1998, United Bond Fund had net assets totaling $557,147,613
invested in a diversified portfolio of:
96.90% Bonds
3.10% Cash and Cash Equivalents
As a shareholder of United Bond Fund, for every $100 you had invested on
December 31, 1998, your Fund owned:
Bonds:
Corporate $58.49
U.S. Government 31.23
Other Government 7.18
Cash and Cash Equivalents 3.10
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1998
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES
Chemicals and Allied Products - 4.44%
Dow Capital B.V.,
9.0%, 5-15-2010 ....................... $ 5,000 $ 6,175,300
Dow Chemical Company (The),
8.55%, 10-15-2009 ..................... 5,000 5,979,100
Procter & Gamble Company (The),
8.0%, 9-1-2024 ........................ 10,000 12,568,600
Total ................................. 24,723,000
Communication - 3.73%
Bell Telephone Company of Pennsylvania (The),
8.35%, 12-15-2030 ..................... 5,000 6,509,250
BellSouth Telecommunications, Inc.,
5.85%, 11-15-2045 ..................... 3,000 3,044,550
Jones Intercable, Inc.,
9.625%, 3-15-2002 ..................... 2,500 2,693,750
Tele-Communications, Inc.,
6.58%, 2-15-2005 ...................... 7,500 8,519,475
Total ................................. 20,767,025
Depository Institutions - 12.60%
AmSouth Bancorporation,
6.75%, 11-1-2025 ...................... 6,000 6,280,020
Chevy Chase Savings Bank, F.S.B.,
9.25%, 12-1-2005 ...................... 1,500 1,500,000
Citicorp,
9.5%, 2-1-2002 ........................ 4,500 4,994,145
First Union Corporation:
6.824%, 8-1-2026 ...................... 7,500 8,308,200
6.55%, 10-15-2035 ..................... 4,500 4,740,255
Kansallis-Osake-Pankki,
10.0%, 5-1-2002 ....................... 6,000 6,745,200
NBD Bank, National Association,
8.25%, 11-1-2024 ...................... 6,000 7,355,400
NationsBank Corporation,
8.57%, 11-15-2024 ..................... 5,000 6,226,450
Riggs National Corporation,
8.5%, 2-1-2006 ........................ 6,000 6,245,040
See Notes to Schedules of Investments on page 42.
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1998
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Depository Institutions (Continued)
SouthTrust Bank of Alabama, National Association:
5.58%, 2-6-2006 ....................... $ 5,500 $ 5,468,155
7.69%, 5-15-2025 ...................... 5,000 5,893,250
Sovereign Bancorp, Inc.,
8.0%, 3-15-2003 ....................... 2,000 2,006,000
Wachovia Corporation,
6.605%, 10-1-2025 ..................... 4,250 4,431,645
Total ................................. 70,193,760
Electric, Gas and Sanitary Services - 8.43%
Cajun Electric Power Cooperative, Inc.,
8.92%, 3-15-2019 ...................... 6,500 6,892,860
California Infrastructure and Economic Development
Bank, Special Purpose Trust:
PG&E-1,
6.42%, 9-25-2008 ...................... 5,000 5,152,100
SCE-1,
6.38%, 9-25-2008 ...................... 5,000 5,188,500
Cleveland Electric Illuminating Co. (The),
9.5%, 5-15-2005 ....................... 4,000 4,368,040
El Paso Electric Company,
7.25%, 2-1-99 ......................... 2,250 2,251,823
Entergy Arkansas, Inc.,
7.5%, 8-1-2007 ........................ 3,750 3,891,600
Niagara Mohawk Power Corporation:
9.5%, 6-1-2000 ........................ 1,500 1,573,365
7.375%, 7-1-2003 ...................... 3,000 3,079,290
Pacific Gas & Electric Co.,
6.875%, 12-1-99........................ 4,750 4,755,747
Pennsylvania Power & Light Co.,
9.25%, 10-1-2019 ...................... 4,000 4,277,960
Southern Company Capital Trust I,
8.19%, 2-1-2037........................ 5,000 5,528,850
Total ................................. 46,960,135
Fabricated Metal Products - 0.51%
Mark IV Industries, Inc.,
7.5%, 9-1-2007 ........................ 3,000 2,857,500
Food and Kindred Products - 3.77%
Anheuser-Busch Companies, Inc.,
7.0%, 9-1-2005 ........................ 3,000 3,169,350
Coca-Cola Enterprises Inc.:
0.0%, 6-20-2020 ....................... 45,000 12,040,650
6.7%, 10-15-2036 ...................... 5,500 5,823,675
Total ................................. 21,033,675
See Notes to Schedules of Investments on page 42.
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1998
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Food Stores - 0.39%
Kroger Co. (The),
7.65%, 4-15-2007 ...................... $ 2,000 $ 2,192,060
General Merchandise Stores - 0.70%
Fred Meyer, Inc.,
7.15%, 3-1-2003 ....................... 3,750 3,901,425
Health Services - 1.58%
Tenet Healthcare Corporation:
7.875%, 1-15-2003 ..................... 3,500 3,570,000
8.625%, 12-1-2003 ..................... 5,000 5,237,500
Total ................................. 8,807,500
Holding and Other Investment Offices - 0.52%
Bay Apartment Communities, Inc.,
6.5%, 1-15-2005 ....................... 3,000 2,916,240
Instruments and Related Products - 0.69%
Raytheon Co.,
6.45%, 8-15-2002 ...................... 3,750 3,846,075
Insurance Carriers - 0.56%
Reliance Group Holdings, Inc.,
9.0%, 11-15-2000 ...................... 3,000 3,124,650
Nondepository Institutions - 9.69%
Asset Securitization Corporation,
7.49%, 4-14-2029 ...................... 6,000 6,474,120
CHYPS CBO 1997-1 Ltd.,
6.72%, 1-15-2010 (A) .................. 8,500 8,539,865
Chrysler Financial Corporation,
12.75%, 11-1-99 ....................... 9,000 9,545,760
Equicon Loan Trust,
7.3%, 2-18-2013 ....................... 4,571 4,661,763
General Motors Acceptance Corporation,
8.875%, 6-1-2010 ...................... 5,500 6,883,580
See Notes to Schedules of Investments on page 42.
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1998
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Nondepository Institutions (Continued)
IMC Home Equity Loan Trust,
6.9%, 1-20-2022 ....................... $ 4,500 $ 4,536,540
National Rural Utilities Cooperative Finance Corp.,
6.1%, 12-22-2000 ...................... 4,000 4,059,600
Residential Asset Securities Corporation,
Mortgage Pass-Through Certificates,
8.0%, 10-25-2024 ...................... 4,000 4,076,880
Westinghouse Electric Corporation,
8.875%, 6-14-2014 ..................... 4,500 5,221,980
Total ................................. 54,000,088
Oil and Gas Extraction - 2.77%
Anadarko Petroleum Corporation,
7.25%, 3-15-2025 ...................... 5,000 5,183,950
Mitchell Energy & Development Corp.,
9.25%, 1-15-2002 ...................... 165 175,621
Oryx Energy Company,
10.0%, 4-1-2001 ....................... 3,500 3,769,220
Pemex Finance Ltd.,
5.72%, 11-15-2003 (A) ................. 2,500 2,496,625
YPF Sociedad Anoima,
8.0%, 2-15-2004 ....................... 4,000 3,800,000
Total ................................. 15,425,416
Paper and Allied Products - 1.21%
Boise Cascade Office Products Corporation,
9.875%, 2-15-2001 ..................... 2,500 2,509,400
Canadian Pacific Forest Products Ltd.,
9.25%, 6-15-2002 ...................... 4,000 4,257,440
Total ................................. 6,766,840
Printing and Publishing - 1.34%
News America Holdings Incorporated,
7.45%, 6-1-2000 ....................... 2,500 2,557,225
Quebecor Printing Capital Corporation,
6.5%, 8-1-2027 ........................ 5,000 4,912,300
Total ................................. 7,469,525
Railroad Transportation - 0.96%
CSX Corporation,
6.95%, 5-1-2027 ....................... 5,000 5,328,150
Security and Commodity Brokers - 0.90%
Salomon Inc.,
3.65%, 2-14-2002 ...................... 5,000 4,998,300
See Notes to Schedules of Investments on page 42.
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1998
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Stone, Clay and Glass Products - 0.97%
Owens-Illinois, Inc.,
7.15%, 5-15-2005....................... $ 3,250 $ 3,257,183
USG Corporation,
9.25%, 9-15-2001 ...................... 2,000 2,135,700
Total ................................. 5,392,883
Transportation Equipment - 0.47%
Coltec Industries Inc.,
7.5%, 4-15-2008 ....................... 2,500 2,646,875
United States Postal Service - 0.32%
Postal Square Limited Partnership,
6.5%, 6-15-2022 ....................... 1,717 1,764,015
Wholesale Trade -- Durable Goods - 1.94%
Motorola, Inc.,
8.4%, 8-15-2031 ....................... 8,500 10,783,865
TOTAL CORPORATE DEBT SECURITIES - 58.49% $325,899,002
(Cost: $310,097,960)
OTHER GOVERNMENT SECURITIES
Canada - 6.07%
Hydro Quebec:
8.05%, 7-7-2024 ....................... 10,000 12,000,500
7.4%, 3-28-2025 ....................... 5,000 6,210,200
Province de Quebec:
5.67%, 2-27-2026 ...................... 9,200 10,071,148
6.29%, 3-6-2026 ....................... 5,000 5,535,050
Total ................................. 33,816,898
Supranational - 1.11%
Inter-American Development Bank,
8.4%, 9-1-2009 ........................ 5,000 6,156,850
TOTAL OTHER GOVERNMENT SECURITIES - 7.18% $ 39,973,748
(Cost: $34,860,104)
See Notes to Schedules of Investments on page 42.
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1998
Principal
Amount in
Thousands Value
UNITED STATES GOVERNMENT SECURITIES
Federal Home Loan Mortgage Corporation:
7.5%, 2-15-2007 ....................... $ 8,935 $ 9,065,877
7.5%, 11-15-2017 ...................... 392 390,701
6.5%, 9-25-2018 ....................... 2,000 2,068,740
7.0%, 1-15-2019 ....................... 2,000 2,042,500
7.5%, 4-15-2019 ....................... 14,796 15,008,580
7.95%, 12-15-2020 ..................... 4,596 4,630,689
6.25%, 1-15-2021 ...................... 12,000 12,105,000
Federal National Mortgage Association:
5.98%, 6-18-2003 ...................... 1,500 1,523,205
5.875%, 7-16-2003 ..................... 5,000 5,065,600
5.89%, 7-17-2003 ...................... 3,500 3,547,040
7.0%, 7-25-2006 ....................... 10,000 10,121,800
0.0%, 2-12-2018 ....................... 9,500 3,070,400
0.0%, 10-9-2019 ....................... 21,500 6,416,460
7.0%, 9-25-2020 ....................... 2,000 2,034,360
6.5%, 8-25-2021 ....................... 2,500 2,515,225
7.0%, 8-25-2021 ....................... 10,000 10,137,500
Government National Mortgage Association:
7.5%, 7-15-2023 ....................... 3,649 3,765,515
7.5%, 12-15-2023 ...................... 4,020 4,147,610
8.0%, 9-15-2025 ....................... 5,951 6,233,242
7.0%, 7-20-2027 ....................... 314 319,289
7.0%, 9-20-2027 ....................... 4,915 5,004,125
7.75%, 10-15-2031 ..................... 1,975 2,061,126
Tennessee Valley Authority,
5.88%, 4-1-2036 ....................... 3,750 3,979,275
United States Department of Veterans Affairs,
Guaranteed Remic Pass-Through Certificates,
Vendee Mortgage Trust:
1998-1 Class 2-B,
7.0%, 5-15-2005 ....................... 750 768,045
1997-2 Class C,
7.5%, 8-15-2017 ....................... 4,000 4,075,000
United States Treasury:
5.75%, 10-31-2000 ..................... 9,000 9,171,540
5.25%, 1-31-2001 ...................... 5,000 5,061,700
6.5%, 8-15-2005 ....................... 5,750 6,319,595
6.5%, 10-15-2006 ...................... 28,000 31,058,160
0.0%, 2-15-2019 ....................... 7,000 2,293,550
TOTAL UNITED STATES GOVERNMENT
SECURITIES - 31.23% $174,001,449
(Cost: $171,444,232)
TOTAL SHORT-TERM SECURITIES - 2.16% $ 12,055,774
(Cost: $12,055,774)
See Notes to Schedules of Investments on page 42.
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1998
Value
TOTAL INVESTMENT SECURITIES - 99.06% $551,929,973
(Cost: $528,458,070)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.94% 5,217,640
NET ASSETS - 100.00% $557,147,613
See Notes to Schedules of Investments on page 42.
<PAGE>
UNITED INCOME FUND
MANAGERS' LETTER
- ---------------------------------------------------------------------------
DECEMBER 31, 1998
Dear Shareholder:
This report relates to the operation of the United Income Fund for the fiscal
year ended December 31, 1998. The following discussion, graphs and tables
provide you with information regarding the Fund's performance during that
period.
The U.S. stock market performed admirably in the first half of 1998. Beginning
in mid-July, however, growing concerns regarding Japanese banking difficulties
and the imminent financial collapse in Russia sent the U.S. market into a
rapidly accelerating decline. This dramatic downturn of nearly 2,000 points on
the Dow Jones Industrial Average ended in early October. Three interest rate
cuts by the Federal Reserve, in conjunction with several cuts by other central
banks throughout the developed economies, sent a clear signal that the central
banks would provide sufficient liquidity to prevent the global economic slump
from worsening. The U.S. stock market responded with a dramatic rally in the
fourth quarter of 1998. By the end of 1998, the U.S. economy enjoyed record
stock market valuations, moderate economic growth, high employment, low
inflation, modest interest rates and record levels of personal consumption.
Prior to the poor stock market performance in the third quarter of 1998, we
moved the Fund to a much more conservative position by meaningfully increasing
cash reserves and lowering exposure to the most widely-owned stocks in the S&P
500. In the fourth quarter, we moved a large portion of our reserves from cash
into U.S. Treasury bonds. We also increased our position in electric utilities,
financial services, defense and telecommunication stocks. We continue to invest
primarily in large U.S. companies that enjoy dominant global market share in
their industries. We continue to seek new positions in stocks that represent
good investment value.
The strategies and techniques we applied resulted in the Fund significantly
outperforming the mutual fund index and underperforming the stock index charted
on the following page. Those indexes reflect the performance of the universe of
funds with similar investment objectives (the Lipper Equity Income Fund Universe
Average) and of securities that generally represent the stock market (the S&P
500 Index). The Fund's underperformance relative to the S&P 500 can be
attributed primarily to its more defensive posture during the fourth quarter of
1998.
We think valuations of large capitalization U.S. stocks have generally reached
levels that are difficult to sustain given current projected earnings growth
rates. The Fund is positioned for expected slower growth in the U.S. economy
and for what we believe could be a more difficult stock market than experienced
over the past few years. We expect to maintain a well-diversified portfolio
with meaningful dividend yield and a strong emphasis on high quality stocks.
Thank you very much for your continued support and confidence.
Respectfully,
Russell E. Thompson
James D. Wineland
Managers, 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
--------- --------- ---------
12/31/88 Purchase 9,425 10,000 10,000
12/31/89 12,016 13,169 12,051
12/31/90 11,361 12,760 11,296
12/31/91 14,728 16,648 14,270
12/31/92 16,490 17,917 15,609
12/31/93 19,137 19,722 17,758
12/31/94 18,791 19,982 17,310
12/31/95 24,355 27,492 22,466
12/31/96 29,317 33,804 26,637
12/31/97 37,337 45,058 33,962
12/31/98 46,307 57,989 37,696
- ----- United Income Fund, Class A Shares* -- $46,307
+++++ S&P 500 Index -- $57,989
===== Lipper Equity Income Fund Universe Average -- $37,696
*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
12/31/98 16.90% 24.27%
5 Years Ended
12/31/98 17.93% N/A
10 Years Ended
12/31/98 16.56% N/A
Life of Class Y +++ N/A 22.83%
+ 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 12/31/98.
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 market conditions,
common stocks with a secondary objective of
capital growth.
Cash reserves STRATEGY: Invests principally in common stocks of
companies which have a record of paying
regular dividends or have the potential
for capital growth or which may be
expected to resist market decline.
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. For more information
about the Fund's cash reserves
flexibility, please consult the
Prospectus.
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, 1998
(Restated to reflect the 400% stock
dividend effected June 26, 1998.)
- --------------------------------------
DIVIDENDS PAID $0.19
=====
CAPITAL GAINS DISTRIBUTION $1.74
=====
NET ASSET VALUE ON
12/31/98 $7.52 adjusted to: $9.26 (A)
12/31/97 7.59
-----
CHANGE PER SHARE $1.67
=====
(A)This number includes the capital gains distribution of $1.74 paid in December
1998 added to the actual net asset value on December 31, 1998.
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 12-31-98 16.90% 24.02%
5-year period ended 12-31-98 17.93% 19.33%
10-year period ended 12-31-98 16.56% 17.26%
*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, 1998, United Income Fund had net assets totaling $7,767,300,564
invested in a diversified portfolio of:
78.08% Common Stocks
15.79% U.S. Government Securities
5.83% Cash and Cash Equivalents
0.30% Corporate Debt Securities
As a shareholder of United Income Fund, for every $100 you had invested on
December 31, 1998, your Fund owned:
$40.93 Manufacturing Stocks
15.79 United States Government Securities
11.02 Finance, Insurance and Real Estate Stocks
10.70 Transportation, Communication, Electric, Gas
and Sanitary Services Stocks
8.94 Wholesale and Retail Trade Stocks
5.83 Cash and Cash Equivalents
5.24 Services Stocks
1.25 Mining Stocks
0.30 Corporate Debt Securities
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1998
Shares Value
COMMON STOCKS
Apparel and Accessory Stores - 0.76%
Gap, Inc. (The) ........................ 1,050,000$ 59,062,500
Building Materials and Garden Supplies - 1.10%
Home Depot, Inc. (The) ................. 1,394,200 85,307,612
Business Services - 2.48%
BMC Software, Inc.* .................... 1,569,900 70,007,728
Microsoft Corporation* ................. 886,400 122,794,100
Total ................................. 192,801,828
Chemicals and Allied Products - 14.12%
Air Products and Chemicals, Inc. ....... 1,429,200 57,168,000
Bristol-Myers Squibb Company ........... 350,000 46,834,375
Colgate-Palmolive Company .............. 787,800 73,166,925
du Pont (E.I.) de Nemours and Company .. 1,503,700 79,790,081
Gillette Company (The) ................. 1,569,900 75,845,794
Lilly (Eli) and Company ................ 1,250,000 111,093,750
Merck & Co., Inc. ...................... 325,000 47,998,437
Monsanto Company ....................... 2,100,000 99,750,000
Novartis, AG (B) ........................ 37,500 73,716,782
PPG Industries, Inc. ................... 705,300 41,083,725
Pfizer Inc. ............................ 925,000 116,029,688
Procter & Gamble Company (The) ......... 780,300 71,251,144
Warner-Lambert Company ................. 2,700,000 203,006,250
Total ................................. 1,096,734,951
Communication - 6.04%
AT&T Corporation ....................... 243,600 18,330,900
AirTouch Communications* ............... 900,000 64,912,500
Clear Channel Communications, Inc.* .... 1,525,500 83,139,750
Cox Communications, Inc., Class A* ..... 2,138,000 147,789,250
MCI WORLDCOM, Inc.* .................... 1,037,000 74,437,156
SBC Communications Inc. ................ 1,500,000 80,437,500
Total ................................. 469,047,056
See Notes to Schedules of Investments on page 42.
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1998
Shares Value
COMMON STOCKS (Continued)
Depository Institutions - 2.91%
BankAmerica Corporation ................ 575,418 $ 34,597,007
Chase Manhattan Corporation (The) ...... 1,050,000 71,465,625
U. S. Bancorp. ......................... 2,091,000 74,230,500
Wells Fargo & Company .................. 1,139,400 45,504,788
Total ................................. 225,797,920
Electric, Gas and Sanitary Services - 3.63%
Consolidated Edison, Inc. .............. 848,700 44,875,013
Duke Energy Corp. ...................... 1,275,000 81,679,687
Texas Utilities Company ................ 3,325,000 155,235,938
Total ................................. 281,790,638
Electronic and Other Electric Equipment - 8.92%
Analog Devices, Inc.* .................. 1,575,000 49,415,625
General Electric Company ............... 1,970,200 201,083,538
General Instrument Corporation* ........ 2,210,000 75,001,875
Intel Corporation ...................... 1,200,000 142,237,500
Maytag Corporation ..................... 1,000,300 62,268,675
Nokia Corporation, Series A (B) ........ 760,000 93,091,254
Telefonaktiebolaget LM Ericsson, ADR,
Class B ............................... 2,925,000 69,925,781
Total ................................. 693,024,248
Fabricated Metal Products - 0.53%
Newell Co. ............................. 1,000,000 41,250,000
Food and Kindred Products - 1.90%
Bestfoods .............................. 1,400,000 74,550,000
Coca-Cola Company (The) ................ 685,500 45,842,812
Panamerican Beverages Inc., Class A .... 1,250,000 27,265,625
Total ................................. 147,658,437
Food Stores - 1.34%
Kroger Co. (The)* ...................... 1,725,000 104,362,500
Furniture and Fixtures - 0.32%
Lear Corporation* ...................... 653,000 25,140,500
See Notes to Schedules of Investments on page 42.
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1998
Shares Value
COMMON STOCKS (Continued)
General Merchandise Stores - 2.96%
Dayton Hudson Corporation .............. 1,131,800 $ 61,400,150
Wal-Mart Stores, Inc. .................. 2,074,700 168,958,381
Total ................................. 230,358,531
Health Services - 1.54%
Tenet Healthcare Corporation* .......... 4,550,000 119,437,500
Industrial Machinery and Equipment - 3.52%
Case Corporation ....................... 1,214,600 26,493,463
Cisco Systems, Inc.* ................... 1,001,700 93,001,584
Deere & Company ........................ 1,299,700 43,052,562
International Business Machines
Corporation ........................... 600,000 110,850,000
Total ................................. 273,397,609
Instruments and Related Products - 3.32%
General Motors Corporation, Class H* ... 759,700 30,150,594
Guidant Corporation .................... 1,200,000 132,300,000
Medtronic, Inc. ........................ 972,000 72,171,000
Raytheon Company, Class A .............. 454,381 23,485,818
Total ................................. 258,107,412
Insurance Carriers - 2.23%
American International Group, Inc. .... 916,950 88,600,294
Chubb Corporation (The) ................ 135,600 8,797,050
Citigroup Inc. ......................... 1,525,000 75,487,500
Total ................................. 172,884,844
Miscellaneous Manufacturing Industries - 0.48%
Tyco International Ltd. ................ 491,500 37,077,531
Miscellaneous Retail - 0.71%
Costco Companies, Inc.* ................ 765,000 55,342,969
Motion Pictures - 1.22%
Time Warner Incorporated ............... 1,000,000 62,062,500
Walt Disney Company (The) .............. 1,089,600 32,688,000
Total ................................. 94,750,500
See Notes to Schedules of Investments on page 42.
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1998
Shares Value
COMMON STOCKS (Continued)
Nondepository Institutions - 5.88%
Associates First Capital Corporation,
Class A ............................... 1,524,170 $ 64,586,704
Fannie Mae ............................. 2,858,400 211,521,600
Freddie Mac ............................ 2,800,000 180,425,000
Total ................................. 456,533,304
Oil and Gas Extraction - 1.25%
Burlington Resources Incorporated ...... 2,699,500 96,675,844
Paper and Allied Products - 0.72%
International Paper Company ............ 600,000 26,887,500
Willamette Industries, Inc. ............ 860,000 28,810,000
Total ................................. 55,697,500
Petroleum and Coal Products - 2.59%
Chevron Corporation .................... 450,000 37,321,875
Exxon Corporation ...................... 500,000 36,562,500
Mobil Corporation ...................... 800,000 69,700,000
Royal Dutch Petroleum Company .......... 1,200,000 57,450,000
Total ................................. 201,034,375
Primary Metal Industries - 0.62%
Aluminum Company of America ............ 650,000 48,465,625
Railroad Transportation - 0.42%
Burlington Northern Santa Fe Corporation 975,000 32,906,250
Rubber and Miscellaneous Plastics Products - 0.27%
Goodyear Tire & Rubber Company (The) ... 414,100 20,886,169
Transportation By Air - 0.61%
AMR Corporation* ....................... 800,000 47,500,000
Transportation Equipment - 3.62%
DaimlerChrysler AG ..................... 713,907 68,579,691
Dana Corporation ....................... 760,000 31,065,000
Ford Motor Company ..................... 1,000,000 58,687,500
Lockheed Martin Corporation ............ 1,450,000 122,887,500
Total ................................. 281,219,691
Wholesale Trade - Durable Goods - 0.50%
Johnson & Johnson ...................... 465,000 39,001,875
Wholesale Trade - Nondurable Goods - 1.57%
Safeway Inc.* .......................... 2,000,000 121,875,000
TOTAL COMMON STOCKS - 78.08% $6,065,130,719
(Cost: $3,162,992,028)
See Notes to Schedules of Investments on page 42.
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1998
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES
Depository Institutions - 0.14%
Morgan Guaranty Trust Company of New York,
7.375%, 2-1-2002 ...................... $ 10,250 $ 10,783,512
Nondepository Institutions - 0.16%
General Electric Capital Corporation,
8.3%, 9-20-2009 ....................... 10,000 12,250,400
TOTAL CORPORATE DEBT SECURITIES - 0.30% $ 23,033,912
(Cost: $20,027,550)
UNITED STATES GOVERNMENT SECURITIES
Federal National Mortgage Association,
5.9%, 7-9-2003 ........................ 100,000 101,375,000
United States Treasury:
6.75%, 4-30-2000 ...................... 37,000 37,971,250
5.75%, 8-15-2003 ...................... 50,000 52,211,000
6.5%, 10-15-2006 ...................... 50,000 55,461,000
5.625%, 5-15-2008 ..................... 50,000 53,351,500
10.375%, 11-15-2012 ................... 8,500 11,727,365
7.5%, 11-15-2016 ...................... 80,000 99,375,200
9.0%, 11-15-2018 ...................... 20,000 28,737,400
8.75%, 8-15-2020 ...................... 75,000 106,734,000
5.5%, 8-15-2028 ....................... 600,000 628,032,000
5.25%, 11-15-2028 ..................... 50,000 51,187,500
TOTAL UNITED STATES GOVERNMENT
SECURITIES - 15.79% $1,226,163,215
(Cost: $1,208,126,220)
SHORT-TERM SECURITIES
Commercial Paper
Auto Repair, Services and Parking - 0.12%
PHH Corp.,
6.3%, 1-15-99 ......................... 9,080 9,057,754
Chemicals and Allied Products - 0.95%
du Pont (E.I.) de Nemours and Company,
5.21%, 1-8-99 ......................... 50,000 49,949,348
Pfizer Inc.,
5.35%, 1-20-99 ........................ 24,000 23,932,233
Total ................................. 73,881,581
See Notes to Schedules of Investments on page 42.
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1998
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Communication - 0.26%
GTE Corp.:
5.38%, 1-25-99 ........................ $ 4,300 $ 4,284,577
5.5%, 2-4-99 .......................... 16,000 15,916,889
Total ................................. 20,201,466
Electric, Gas and Sanitary Services - 1.38%
Commonwealth Edison Co.,
6.22%, 1-14-99 ........................ 21,289 21,241,183
PacifiCorp:
5.07%, 1-19-99 ........................ 8,000 7,979,720
5.13%, 1-27-99 ........................ 3,900 3,885,551
Potomac Electric Power Co.,
5.5%, 1-25-99 ......................... 10,000 9,963,333
Public Service Co. of Colorado,
6.0%, 1-15-99 ......................... 8,000 7,981,333
Public Service Electric & Gas Co.:
5.87%, 1-22-99 ........................ 20,000 19,931,517
5.78%, 1-29-99 ........................ 10,000 9,955,045
Questar Corp.:
5.4%, 1-6-99 .......................... 10,000 9,992,500
5.2%, 1-12-99 ......................... 10,000 9,984,111
Western Resources, Inc.,
5.75%, 1-15-99 ........................ 6,090 6,076,382
Total ................................. 106,990,675
Electronic and Other Electric Equipment - 0.19%
Lucent Technologies Inc.,
5.25%, 1-14-99 ........................ 10,000 9,981,042
Sony Capital Corp.,
5.9%, 1-8-99 .......................... 5,000 4,994,264
Total ................................. 14,975,306
See Notes to Schedules of Investments on page 42.
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1998
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES(Continued)
Commercial Paper (Continued)
Engineering and Management Services - 0.16%
Halliburton Company,
5.29%, 2-26-99 ........................ $ 13,000 $ 12,893,024
Fabricated Metal Products - 0.03%
Danaher Corporation,
5.6288%, Master Note .................. 2,334 2,334,000
Food and Kindred Products - 0.01%
General Mills, Inc.,
5.4838%, Master Note .................. 663 663,000
Insurance Carriers - 0.43%
Transamerica Finance Corp.,
5.15%, 1-19-99 ........................ 24,000 23,938,200
USAA Capital Corp.,
5.1%, 1-19-99 ......................... 9,775 9,750,074
Total ................................. 33,688,274
Nondepository Institutions _ 1.13%
American Express Company,
5.8%, 1-8-99 .......................... 41,000 40,953,761
Associates Corporation of North America,
5.35%, 1-20-99 ........................ 7,000 6,980,235
General Electric Capital Corporation,
5.46%, 2-3-99 ......................... 25,000 24,874,875
Textron Inc.:
6.1%, 1-6-99 .......................... 2,400 2,397,967
5.82%, 1-8-99 ......................... 13,000 12,985,288
Total ................................. 88,192,126
Paper and Allied Products - 0.83%
Sonoco Products Co.,
5.16%, 1-19-99 ........................ 29,350 29,274,277
Westvaco Corp.:
5.26%, 1-21-99 ........................ 11,370 11,336,774
5.5%, 1-21-99 ......................... 3,870 3,858,175
5.5%, 1-26-99 ......................... 20,000 19,923,611
Total ................................. 64,392,837
Petroleum and Coal Products - 0.44%
Kerr-McGee Credit Corp.:
6.05%, 1-19-99 ........................ 24,000 23,927,400
6.0%, 1-29-99 ......................... 10,000 9,953,333
Total ................................. 33,880,733
See Notes to Schedules of Investments on page 42.
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1998
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES(Continued)
Commercial Paper (Continued)
Tobacco Products _ 0.19%
B.A.T. Capital Corp.,
5.57%, 1-22-99 ........................ $ 15,000 $ 14,951,263
Wholesale Trade -- Nondurable Goods - 0.12%
Enron Corp.,
5.73%, 1-13-99 ........................ 9,000 8,982,810
Total Commercial Paper - 6.24% 485,084,849
Municipal Obligations
California - 0.39%
California Pollution Control Financing Authority,
Environmental Improvement Revenue Bonds
(Shell Martinez Refining Company Project),
Series 1996 (Taxable), (Shell Oil Company):
5.13%, 1-19-99 ........................ 20,000 20,000,000
5.25%, 2-8-99 ......................... 10,000 10,000,000
Total ................................. 30,000,000
Indiana - 0.10%
City of Whiting, Indiana, Industrial Sewage
and Solid Waste Disposal Revenue Bonds, Taxable
Series 1995 (Amoco Oil Company Project),
5.23%, 3-8-99 ......................... 8,000 8,000,000
Total Municipal Obligations - 0.49% 38,000,000
TOTAL SHORT-TERM SECURITIES - 6.73% $ 523,084,849
(Cost: $523,084,849)
TOTAL INVESTMENT SECURITIES - 100.90% $7,837,412,695
(Cost: $4,914,230,647)
LIABILITIES, NET OF CASH AND OTHER ASSETS _ (0.90)% (70,112,131)
NET ASSETS - 100.00% $7,767,300,564
See Notes to Schedules of Investments on page 42.
<PAGE>
UNITED ACCUMULATIVE FUND
MANAGER'S LETTER
DECEMBER 31, 1998
- ---------------------------------------------------------------------------
Dear Shareholder:
This report relates to the operation of the United Accumulative Fund for the
fiscal year ended December 31, 1998. The following discussion, graphs and
tables provide you with information regarding the Fund's performance during that
period.
The Asian contagion of 1997 continued to affect world markets in 1998.
Southeast Asian currencies continued to decline relative to the U.S. dollar,
fueling speculation of currency devaluation in China, Brazil and Hong Kong.
While these currencies hung on through the end of the year, Russia devalued the
ruble, shaking the emerging as well as developed markets. Worried about
possible consequences from worldwide excess capacity, the Federal Reserve began
lowering short-term interest rates in October. The promise of an easy monetary
policy produced an explosive, but narrow, stock market rally in the final months
of the year. Technology reigned supreme, showing extraordinary gains in nearly
all sectors, including communications, computers, software, semiconductors and,
most of all, Internet-related stocks. Left out in the cold were oil drillers,
oil equipment, machinery, gaming and real estate.
1998 was a difficult year to implement an investment strategy. It was a year of
frequent mood changes for investors, uncertain economic forecasts, strong
currency fluctuations and volatile stock prices. During most of the year, our
investment strategy was quite conservative. We maintained a relatively large
cash position, sizable holdings in electric utility and telephone stocks, and a
meaningful exposure to Treasury bonds. This strategy provided strong
performance relative to the S&P 500 Index for most of the year, but caused us to
miss out on much of the stock market rally in November and December. The
narrowness of the market and the weakness of many sectors made us feel that the
market was still vulnerable to a correction. We did eventually increase our
exposure to the large, seasoned technology stocks, while staying away from the
unproven, most speculative issues. We maintained our position in Treasuries,
decreased our cash position and decreased our defensive holdings.
The strategies and techniques we applied resulted in the Fund slightly
outperforming the Lipper Growth Fund Universe Average for the year and
underperforming the S&P 500 Index, both charted on the following page. The
Lipper Index reflects the universe of funds with similar investment objectives
and the S&P 500 Index reflects the performance of securities that generally
represent the stock market. The Fund underperformed the S&P 500 Index due
mainly to our relative underexposure to technology stocks.
The pace of growth in the U.S. economy is expected to slow in 1999. Corporate
profits are expected to be down. Interest rates should continue to decline.
Deflation is the risk rather than inflation. The equity market is at
historically high valuations and a market correction is possible. As things
change with the passage of time, we will adjust our asset mix to take advantage
of perceived opportunities.
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
------------ ----- --------
12/31/88 Purchase 9,425 10,000 10,000
12/31/89 12,023 13,169 12,515
12/31/90 10,800 12,760 11,830
12/31/91 13,358 16,648 16,057
12/31/92 15,254 17,917 17,305
12/31/93 16,636 19,722 19,171
12/31/94 16,644 19,982 18,745
12/31/95 22,338 27,492 24,456
12/31/96 25,058 33,804 29,118
12/31/97 32,471 45,058 36,379
12/31/98 39,816 57,989 44,479
===== United Accumulative Fund, Class A Shares* -- $39,816
- ----- S&P 500 Index -- $57,989
+++++ Lipper Growth Fund Universe Average -- $44,479
*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
12/31/98 15.57% 22.79%
5 Years Ended
12/31/98 17.67% N/A
10 Years Ended
12/31/98 14.82% N/A
Life of Class Y +++ N/A 22.08%
+ 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 12/31/98.
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.
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. For more information
about the Fund's cash reserves
flexibility, please consult the
Prospectus.
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, 1998
- --------------------------------------
DIVIDENDS PAID $0.11
=====
CAPITAL GAINS DISTRIBUTION $1.08
=====
NET ASSET VALUE ON
12/31/98 $8.28 adjusted to: $9.36 (A)
12/31/97 7.77
-----
CHANGE PER SHARE $1.59
=====
(A)This number includes the capital gains distribution of $1.08 paid in December
1998 added to the actual net asset value on December 31, 1998.
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 12-31-98 15.57% 22.62%
5-year period ended 12-31-98 17.67% 19.07%
10-year period ended 12-31-98 14.82% 15.50%
*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, 1998, United Accumulative Fund had net assets totaling
$1,868,037,420 invested in a diversified portfolio of:
85.67% Common Stocks
10.77% United States Government Security
3.56% Cash and Cash Equivalents
As a shareholder of United Accumulative Fund, for every $100 you had invested on
December 31, 1998, your Fund owned:
$29.15 Manufacturing Stocks
22.74 Finance, Insurance and Real Estate Stocks
18.10 Transportation, Communication, Electric, Gas
and Sanitary Services Stocks
12.50 Services Stocks
10.77 United States Government Security
3.56 Cash and Cash Equivalents
3.18 Wholesale and Retail Trade Stocks
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1998
Shares Value
COMMON STOCKS
Business Services - 8.05%
America Online, Inc.* .................. 100,000 $ 16,000,000
American Management Systems, Incorporated* 500,000 20,031,250
HNC Software Inc.* ..................... 250,000 10,109,375
Inktomi Corporation* ................... 125,000 16,246,094
Microsoft Corporation* ................. 400,000 55,412,500
Sun Microsystems, Inc.* ................ 200,000 17,112,500
Veritas Software Corp.* ................ 150,000 8,981,250
Xoom.com, Inc.* ........................ 200,000 6,537,500
Total ................................. 150,430,469
Chemicals and Allied Products - 9.91%
Bristol-Myers Squibb Company ........... 500,000 66,906,250
Pharmacia & Upjohn, Inc. ............... 300,000 16,987,500
Schering-Plough Corporation ............ 1,000,000 55,250,000
SmithKline Beecham plc, ADR ............ 500,000 34,750,000
Warner-Lambert Company ................. 150,000 11,278,125
Total ................................. 185,171,875
Communication - 13.30%
Bell Atlantic Corporation .............. 500,000 26,500,000
Clear Channel Communications, Inc.* .... 350,000 19,075,000
Cox Communications, Inc., Class A* ..... 350,000 24,193,750
Heftel Broadcasting Corporation, Class A* 300,000 14,812,500
Infinity Broadcasting Corporation,
Class A*............................... 550,000 15,056,250
SBC Communications Inc. ................ 1,196,000 64,135,500
U S WEST Communications, Inc. .......... 1,100,000 71,087,500
Western Wireless Corporation, Class A* . 615,000 13,510,781
Total ................................. 248,371,281
Depository Institutions - 11.65%
Chase Manhattan Corporation (The) ...... 300,000 20,418,750
First Tennessee National Corporation ... 550,000 20,917,187
First Union Corporation ................ 500,000 30,406,250
Fleet Financial Group, Inc. ............ 500,000 22,343,750
MBNA Corp. ............................. 1,000,000 24,937,500
Mellon Bank Corporation ................ 300,000 20,625,000
PNC Bank Corp. ......................... 500,000 27,062,500
SunTrust Banks, Inc. ................... 300,000 22,950,000
Wells Fargo & Company .................. 700,000 27,956,250
Total ................................. 217,617,187
Electric, Gas and Sanitary Services - 3.21%
Allied Waste Industries, Inc., New* .... 1,500,000 35,437,500
Republic Services, Inc. Class A* ....... 900,000 16,593,750
Superior Services, Inc.* ............... 400,000 8,025,000
Total ................................. 60,056,250
See Notes to Schedules of Investments on page 42.
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1998
Shares Value
COMMON STOCKS (Continued)
Electronic and Other Electric Equipment - 6.96%
Analog Devices, Inc.* .................. 700,000 $ 21,962,500
Ascend Communications, Inc.* ........... 700,000 46,046,875
Intel Corporation ...................... 350,000 41,485,938
Linear Technology Corporation .......... 125,000 11,191,406
Microchip Technology Incorporated* ..... 250,000 9,234,375
Total ................................. 129,921,094
Engineering & Management Services - 0.60%
Incyte Pharmaceuticals, Inc.* .......... 300,000 11,193,750
Food and Kindred Products - 1.76%
Anheuser-Busch Companies, Inc. ......... 500,000 32,812,500
Health Services - 2.52%
Columbia/HCA Healthcare Corporation .... 1,000,000 24,750,000
Tenet Healthcare Corporation* .......... 850,000 22,312,500
Total ................................. 47,062,500
Industrial Machinery and Equipment - 1.49%
Cisco Systems, Inc.* ................... 300,000 27,853,125
Instruments and Related Products - 6.17%
Baxter International Inc. .............. 700,000 45,018,750
Becton Dickinson and Company ........... 975,000 41,620,313
Bionx Implants, Inc.* .................. 235,000 1,975,469
Raytheon Company, Class B .............. 500,000 26,625,000
Total ................................. 115,239,532
Insurance Carriers - 5.51%
ACE Limited ............................ 550,000 18,940,625
American International Group, Inc. ..... 200,000 19,325,000
Chartwell Re Corporation ............... 500,000 11,875,000
Everest Reinsurance Holdings, Inc. ..... 321,500 12,518,406
Liberty Corporation (The) .............. 350,000 17,237,500
ReliaStar Financial Corp. .............. 500,000 23,062,500
Total ................................. 102,959,031
Motion Pictures - 1.33%
Time Warner Incorporated ............... 400,000 24,825,000
Nondepository Institutions - 5.58%
CIT Group, Inc. (The), Class A ......... 1,100,000 34,993,750
Fannie Mae ............................. 500,000 37,000,000
Freddie Mac ............................ 500,000 32,218,750
Total ................................. 104,212,500
Paper and Allied Products - 1.08%
Champion International Corporation ..... 500,000 20,250,000
See Notes to Schedules of Investments on page 42.
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1998
Shares Value
COMMON STOCKS (Continued)
Printing and Publishing - 0.52%
Gannett Co., Inc. ...................... 150,000 $ 9,675,000
Railroad Transportation - 0.99%
Burlington Northern Santa Fe Corporation 550,000 18,562,500
Transportation by Air - 0.60%
Southwest Airlines Co. ................. 500,000 11,218,750
Transportation Equipment - 1.26%
General Dynamics Corporation ........... 400,000 23,450,000
Wholesale Trade - Durable Goods - 2.20%
Johnson & Johnson ...................... 200,000 16,775,000
OmniCare, Inc. ......................... 700,000 24,325,000
Total ................................. 41,100,000
Wholesale Trade - Nondurable Goods - 0.98%
Safeway Inc.* .......................... 300,000 18,281,250
TOTAL COMMON STOCKS - 85.67% $1,600,263,594
(Cost: $1,411,940,630)
Principal
Amount in
Thousands
UNITED STATES GOVERNMENT SECURITY - 10.77%
United States Treasury,
6.25%, 8-15-2023 ...................... $180,000 $201,178,800
(Cost: $196,224,695)
SHORT-TERM SECURITIES
Commercial Paper
Chemicals and Allied Products - 0.65%
du Pont (E.I.) de Nemours and Company,
5.55%, 1-12-99 ........................ 12,200 12,179,311
Communication - 0.56%
Bell Atlantic Network Funding Corp.,
5.9%, 1-5-99 .......................... 10,455 10,448,146
Electric, Gas and Sanitary Services - 0.62%
Allegheny Energy Inc.,
5.58%, 1-19-99 ........................ 8,100 8,077,401
Commonwealth Edison Co.,
5.94%, 1-20-99 ........................ 3,500 3,489,027
Total ................................. 11,566,428
See Notes to Schedules of Investments on page 42.
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1998
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES(Continued)
Commercial Paper (Continued)
Electronic and Other Electric Equipment - 0.75%
Lucent Technologies Inc.,
5.28%, 1-15-99 ........................ $ 14,000 $ 13,971,253
Fabricated Metal Products - 0.15%
Danaher Corporation,
5.6288%, Master Note .................. 2,792 2,792,000
Food and Kindred Products - 0.95%
ConAgra, Inc.,
5.52%, 1-6-99 ......................... 5,000 4,996,167
McCormick & Co. Inc.,
5.14%, 1-4-99 ......................... 12,900 12,894,474
Total ................................. 17,890,641
Textile Mill Products - 0.03%
Sara Lee Corporation,
5.4788%, Master Note .................. 545 545,000
Transportation Equipment - 0.16%
Dana Corporation,
6.3%, 1-7-99 .......................... 2,950 2,946,903
TOTAL SHORT-TERM SECURITIES - 3.87% $ 72,339,682
(Cost: $72,339,682)
TOTAL INVESTMENT SECURITIES - 100.31% $1,873,782,076
(Cost: $1,680,505,007)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (0.31%) (5,744,656)
NET ASSETS - 100.00% $1,868,037,420
See Notes to Schedules of Investments on page 42.
<PAGE>
UNITED SCIENCE AND TECHNOLOGY FUND
MANAGER'S LETTER
DECEMBER 31, 1998
- ---------------------------------------------------------------------------
Dear Shareholder:
This report relates to the operation of the United Science and Technology Fund
for the fiscal year ended December 31, 1998. The following discussion, graphs
and tables provide you with information regarding the Fund's performance during
that period.
Economic growth and inflation in 1998 were nearly identical to 1997's healthy
rates. President Clinton was impeached by the House. The Asian contagion
continued this year, negatively affecting economies in Asian countries. Brazil
had trouble meeting its debt obligations and Russia had a complete meltdown.
Global economic problems hurt the third quarter performance of the stock market,
but failed to prevent a remarkable recovery in the fourth quarter. Stocks
outperformed bonds, with large capitalized stocks again performing better than
small and medium capitalized issues.
The Fund continued to benefit from a substantial emphasis on Internet-related
stocks. The process of purchasing these stocks began in 1997, when personal
computer prices began their long decline and made the Internet accessible for
more people. 1998 was the first big year of increased shopping over the
Internet, with many consumers bypassing the traditional department store.
Advances in Internet-related stocks, and technology stocks in general, were so
large that the Fund reduced positions in some holdings because they were
becoming too large a portion of total assets. The Fund also maintained large
positions in the drug industry, and in hospital supply and distribution and
medical devices companies.
The strategies and techniques we applied resulted in the Fund significantly
outperforming 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 aided by large advances of
Internet stocks, fewer earnings disappointments in the areas of technology and
health care, and little, if any, Asian or Latin American exposure.
Looking forward, the market risk we see is companies' inability to grow profits.
With little inflation and low interest rates, however, market valuations likely
will remain high. Accordingly, those companies that do enjoy rapidly growing
profits should receive considerable investor support. In light of these
anticipated conditions, we intend to keep diversifying into high quality,
rapidly growing U.S. companies.
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
--------- --------- ----------
12/31/88 Purchase 9,425 10,000 10,000
12/31/89 12,007 12,941 12,217
12/31/90 11,586 12,827 11,858
12/31/91 18,451 16,774 17,248
12/31/92 17,708 17,732 19,668
12/31/93 19,215 19,334 24,434
12/31/94 21,095 20,073 27,539
12/31/95 32,775 27,020 37,967
12/31/96 35,512 33,238 45,270
12/31/97 38,077 43,630 50,225
12/31/98 60,663 58,400 76,541
===== United Science and Technology Fund, Class A Shares* -- $60,663
+++++ S&P 400 Index -- $58,400
- ----- Lipper Science & Technology Fund Universe Average -- $76,541
*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
12/31/98 50.15% 59.71%
5 Years Ended
12/31/98 24.37% N/A
10 Years Ended
12/31/98 19.75% N/A
Life of Class Y +++ N/A 22.26%
+ 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 12/31/98.
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.
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. For
more information about the Fund's cash
reserves flexibility, please consult the
Prospectus.
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, 1998
(Restated to reflect the 200% stock
dividend effected June 26, 1998.)
- --------------------------------------
CAPITAL GAINS DISTRIBUTION $ 0.70
======
NET ASSET VALUE ON
12/31/98 $9.91 adjusted to: $10.61 (A)
12/31/97 6.71
------
CHANGE PER SHARE $ 3.90
======
(A)This number includes the capital gains distribution of $0.70 paid in December
1998 added to the actual net asset value on December 31, 1998.
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 12-31-98 50.15% 59.31%
5-year period ended 12-31-98 24.37% 25.85%
10-year period ended 12-31-98 19.75% 20.47%
*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, 1998, United Science and Technology Fund had net assets totaling
$1,674,483,297 invested in a diversified portfolio of:
92.41% Common Stocks
7.59% Cash and Cash Equivalents
As a shareholder of United Science and Technology Fund, for every $100 you had
invested on December 31, 1998, your Fund owned:
$50.40 Services Stocks
27.67 Manufacturing Stocks
7.59 Cash and Cash Equivalents
7.57 Wholesale and Retail Trade Stocks
6.77 Transportation, Communication, Electric, Gas
and Sanitary Services Stocks
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1998
Shares Value
COMMON STOCKS
Building Materials and Garden Supplies - 0.92%
Fastenal Company ....................... 350,000 $ 15,389,062
Business Services - 42.47%
Amazon.com, Inc.* ...................... 65,000 20,879,219
America Online, Inc.* .................. 1,000,000 160,000,000
American Management Systems, Incorporated* 400,000 16,025,000
BMC Software, Inc.* .................... 800,000 35,675,000
Cerner Corporation* .................... 500,000 13,406,250
Citrix Systems, Inc.* .................. 300,000 29,109,375
Concord EFS, Inc.* ..................... 700,000 29,531,250
eBay Inc.* ............................. 81,500 19,672,063
HNC Software Inc.* ..................... 535,000 21,634,062
i2 Technologies, Inc.* ................. 110,000 3,337,813
Inktomi Corporation* ................... 220,000 28,593,125
Intuit Inc.* ........................... 508,800 36,888,000
Microsoft Corporation* ................. 300,000 41,559,375
Networks Associates, Inc.* ............. 450,000 29,854,687
Parametric Technology Corporation* ..... 700,000 11,375,000
Shared Medical Systems Corporation ..... 300,000 14,962,500
TMP Worldwide Inc.* .................... 500,000 21,281,250
Transaction Systems Architects, Inc.,
Class A* .............................. 500,000 25,156,250
Veritas Software Corp.* ................ 370,000 22,153,750
Wind River Systems, Inc.* .............. 500,000 23,468,750
Yahoo! Inc.* ........................... 450,000 106,607,812
Total ................................. 711,170,531
Chemicals and Allied Products - 10.28%
Abbott Laboratories .................... 600,000 29,400,000
Bristol-Myers Squibb Company ........... 100,000 13,381,250
Pfizer Inc. ............................ 350,000 43,903,125
Roche Holdings AG (B) .................. 1,200 14,642,883
Schering-Plough Corporation ............ 600,000 33,150,000
Warner-Lambert Company ................. 500,000 37,593,750
Total ................................. 172,071,008
See Notes to Schedules of Investments on page 42.
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1998
Shares Value
COMMON STOCKS (Continued)
Communication - 6.77%
AirTouch Communications* ............... 200,000 $ 14,425,000
Clear Channel Communications, Inc.* .... 547,300 29,827,850
COLT Telecom Group plc, ADR* ........... 400,000 24,025,000
Cox Communications, Inc., Class A* ..... 405,200 28,009,450
Global TeleSystems Group, Inc.* ........ 117,000 6,515,438
Intermedia Communications of Florida, Inc.* 605,000 10,474,062
Total ................................. 113,276,800
Electronic and Other Electric Equipment - 9.58%
Advanced Fibre Communications, Inc.* ... 750,000 8,203,125
Analog Devices, Inc.* .................. 500,000 15,687,500
Ascend Communications, Inc.* ........... 100,000 6,578,125
Broadcom Corporation, Class A* ......... 203,400 24,535,125
Gemstar International Group Limited* ... 300,000 17,165,625
General Electric Company ............... 350,000 35,721,875
Intel Corporation ...................... 200,000 23,706,250
Micron Technology, Inc.* ............... 300,000 15,168,750
Tellabs* ............................... 200,000 13,712,500
Total ................................. 160,478,875
Engineering and Management Services - 5.95%
Abacus Direct Corporation* ............. 356,000 16,298,125
Incyte Pharmaceuticals, Inc.* .......... 772,500 28,823,906
Paychex, Inc. .......................... 540,000 27,793,125
Quintiles Transnational Corp.* ......... 500,000 26,671,875
Total ................................. 99,587,031
General Merchandise Stores - 0.97%
Wal-Mart Stores, Inc. .................. 200,000 16,287,500
Health Services - 0.32%
Concentra Managed Care, Inc.* .......... 501,000 5,307,469
Industrial Machinery and Equipment - 3.57%
Cisco Systems, Inc.* ................... 644,550 59,842,439
See Notes to Schedules of Investments on page 42.
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1998
Shares Value
COMMON STOCKS (Continued)
Instruments and Related Products - 2.78%
Medtronic, Inc. ........................ 355,000 $ 26,358,750
STERIS Corporation* .................... 710,000 20,190,625
Total ................................. 46,549,375
Miscellaneous Manufacturing Industries - 1.35%
Tyco International Ltd. ................ 300,000 22,631,250
Motion Pictures - 1.66%
Time Warner Incorporated ............... 448,000 27,804,000
Printing and Publishing - 0.11%
IDG Books Worldwide, Inc., Class A* .... 109,000 1,859,813
Wholesale Trade -- Durable Goods - 3.87%
Johnson & Johnson ...................... 400,000 33,550,000
OmniCare, Inc. ......................... 900,000 31,275,000
Total ................................. 64,825,000
Wholesale Trade -- Nondurable Goods - 1.81%
Cardinal Health, Inc. .................. 400,000 30,350,000
TOTAL COMMON STOCKS - 92.41% $1,547,430,153
(Cost: $750,367,437)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Commercial Paper
Chemicals and Allied Products - 0.65%
Pfizer Inc.,
5.35%, 1-20-99 ........................ $11,000 $10,968,940
Electric, Gas and Sanitary Services - 1.87%
Commonwealth Edison Co.,
5.94%, 1-20-99 ........................ 3,000 2,990,595
PacifiCorp,
5.13%, 1-27-99 ........................ 16,100 16,040,350
Puget Sound Energy Inc.,
6.25%, 1-7-99 ......................... 3,750 3,746,094
Questar Corp.:
6.0% , 1-6-99 ......................... 3,000 2,997,500
5.35%, 1-15-99 ........................ 5,472 5,460,615
Total ................................. 31,235,154
See Notes to Schedules of Investments on page 42.
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1998
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Electronic and Other Electric Equipment - 1.05%
Lucent Technologies Inc.,
5.28%, 1-15-99 ........................ $8,600 $ 8,582,341
Sony Capital Corp.,
5.82%, 1-14-99 ........................ 9,000 8,981,085
Total ................................. 17,563,426
Fabricated Metal Products - 0.17%
Danaher Corporation,
5.6288%, Master Note .................. 2,871 2,871,000
Food and Kindred Products - 1.49%
ConAgra, Inc.,
6.5%, 1-6-99 .......................... 24,000 23,978,334
General Mills, Inc.,
5.4838%, Master Note .................. 1,046 1,046,000
Total ................................. 25,024,334
Personal Services - 0.30%
Block Financial Corp.,
5.2%, 1-28-99 ......................... 5,000 4,980,500
Primary Metal Industries - 1.23%
Aluminum Company of America,
5.55%, 1-15-99 ........................ 20,600 20,555,538
Textile Mill Products - 0.25%
Sara Lee Corporation,
5.4788%, Master Note .................. 4,152 4,152,000
Wholesale Trade -- Nondurable Goods - 0.36%
McKesson Corp.,
6.05%, 1-5-99 ......................... 6,000 5,995,967
TOTAL SHORT-TERM SECURITIES - 7.37% $ 123,346,859
(Cost: $123,346,859)
TOTAL INVESTMENT SECURITIES - 99.78% $1,670,777,012
(Cost: $873,714,296)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.22% 3,706,285
NET ASSETS - 100.00% $1,674,483,297
See Notes to Schedules of Investments on page 42.
<PAGE>
UNITED FUNDS, INC.
DECEMBER 31, 1998
Notes to Schedules of Investments
*No dividends were paid during the preceding 12 months.
(A) Security was purchased pursuant to Rule 144a under the Securities Act of
1933 and may be resold in transactions exempt from registration, normally
to qualified institutional buyers. At December 31, 1998, the value of
these securities amounted to $11,036,490 or 1.98% of net assets for United
Bond Fund.
(B) 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
DECEMBER 31, 1998 United
(In Thousands, Except United United United Science and
for Per Share Amounts) Bond Income Accumulative Technology
Fund Fund Fund Fund
Assets ----------------------------------------
------------
Investment securities --
at value (Notes 1 and 3)$551,930 $7,837,413 $1,873,782 $1,670,777
Cash .............. 3 --- --- ---
Receivables:
Investment securities sold --- --- --- 10,068
Dividends and interest 7,972 26,976 6,446
467
Fund shares sold .. 593 8,560 1,103 2,152
Prepaid insurance
premium ........... 16 62 35 14
-------- ---------- ---------- ----------
Total assets .... 560,514 7,873,011 1,881,366 1,683,478
Liabilities -------- ---------- ---------- ----------
Payable for investment
securities purchased --- 9,210 ---
1,596
Payable to Fund
shareholders ...... 3,109 92,752 12,620 6,689
Accrued service fee (Note 2) 101 1,277 319 257
Accrued distribution fee (Note 2)29 399 101 75
Accrued transfer agency
and dividend disbursing
(Note 2) .......... 77 841 187 281
Accrued management
fee (Note 2) ...... 6 115 28 27
Due to custodian ... --- 887 1 7
Accrued accounting
services fee (Note 2) 6 8 8
8
Other .............. 38 221 65
55
-------- ---------- ---------- ----------
Total liabilities 3,366 105,710 13,329 8,995
-------- ---------- ---------- ----------
Total net assets $557,148 $7,767,301 $1,868,037 $1,674,483
Net Assets ======== ========== ========== ==========
$1.00 par value capital stock
Capital stock ..... $ 87,203 $1,033,327 $ 225,603 $ 168,997
Additional paid-in
capital .......... 464,761 3,772,498 1,381,797 663,648
Accumulated undistributed
income (loss):
Accumulated undistributed
net investment
income .......... 203 9,932 2,219 ---
Accumulated undistributed net
realized gain (loss) on
investment
transactions ..... (18,491) 28,354 65,119 44,769
Net unrealized appreciation
of investments .. 23,472 2,923,190 193,299 797,069
-------- ---------- ---------- ----------
Net assets applicable to
outstanding units
of capital ..... $557,148 $7,767,301 $1,868,037 $1,674,483
======== ========== ========== ==========
Capital shares
outstanding
Class A ............ 86,215 980,284 225,154 168,405
Class Y ............ 988 53,043 449 592
Capital shares authorized 600,000 2,000,000 600,000 400,000
Net asset value per share
(net assets divided by
shares outstanding)
Class A ............ $6.39 $7.52 $8.28 $9.91
Class Y ............ $6.39 $7.52 $8.28 $9.98
See notes to financial statements.
<PAGE>
UNITED FUNDS, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended DECEMBER 31, 1998
(In Thousands) United
United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
------------ --------------------------------------
Investment Income
Income (Note 1B):
Dividends ......... $ --- $ 68,033 $ 19,049 $ 3,569
Interest and
amortization .... 36,240 78,631 15,895 5,102
------- ---------- -------- --------
Total income .... 36,240 146,664 34,944 8,671
------- ---------- -------- --------
Expenses (Note 2):
Investment
management fee ... 2,285 39,808 9,491 7,558
Transfer agency and
dividend disbursing
-- Class A ..... 807 7,410 1,644 2,411
Service fees -- Class A 1,167 14,668 3,667 2,897
Custodian fees .... 16 484 140 80
Accounting services fee 62 100 100 100
Audit fees ........ 15 31 18 18
Shareholder servicing
fee -- Class Y ... 9 565 6 7
Legal fees ........ 4 56 13 10
Distribution
fees -- Class A . 50 650 161 139
Other ............. 80 664 185 188
------- ---------- -------- --------
Total expenses .. 4,495 64,436 15,425 13,408
------- ---------- -------- --------
Net investment
income (loss) 31,745 82,228 19,519 (4,737)
------- ---------- -------- --------
Realized and Unrealized
Gain (Loss) on Investments (Notes 1 and 3)
Realized net gain
on securities ..... 4,756 1,363,308 259,949 139,112
Realized net gain (loss) on foreign
currency transactions --- (301) (58) 113
------- ---------- -------- --------
Realized net gain
on investments .. 4,756 1,363,007 259,891 139,225
Unrealized appreciation
in value of investments
during the period.. 1,500 102,526 75,732 492,528
------- ---------- -------- --------
Net gain on
investments .... 6,256 1,465,533 335,623 631,753
------- ---------- -------- --------
Net increase
in net assets
resulting from
operations .... $38,001 $1,547,761 $355,142 $627,016
======= ========== ======== ========
See notes to financial statements.
<PAGE>
UNITED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Fiscal Year Ended December 31, 1998 United
(In Thousands) United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
----------------------------------------------------
Increase in Net Assets
Operations:
Net investment
income (loss) ... $ 31,745 $ 82,228 $ 19,519 $ (4,737)
Realized net gain
on investments .. 4,756 1,363,007 259,891 139,225
Unrealized
appreciation .... 1,500 102,526 75,732 492,528
-------- ---------- ---------- ----------
Net increase in net
assets resulting
from operations. 38,001 1,547,761 355,142 627,016
-------- ---------- ---------- ----------
Distributions to shareholders
from (Note 1E):*
Net investment income:
Class A ......... (31,553) (69,402) (20,979) ---
Class Y ......... (359) (4,557) (50) ---
Realized net gains on
investment transactions:
Class A ......... --- (1,392,072) (214,379) (108,718)
Class Y ......... --- (76,922) (421) (380)
-------- ---------- ---------- ----------
(31,912) (1,542,953) (235,829) (109,098)
-------- ---------- ---------- ----------
Capital share
transactions (Note 5) 22,363 1,267,504 149,682 89,771
-------- ---------- ---------- ----------
Total increase .... 28,452 1,272,312 268,995 607,689
Net Assets
Beginning of period 528,696 6,494,989 1,599,042 1,066,794
-------- ---------- ---------- ----------
End of period $557,148 $7,767,301 $1,868,037 $1,674,483
======== ========== ========== ==========
Undistributed
net investment
income .......... $203 $9,932 $2,219 $---
==== ====== ====== =======
*See "Financial Highlights" on pages 45 - 52.
See notes to financial statements.
<PAGE>
UNITED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Fiscal Year Ended December 31, 1997 United
(In Thousands) United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
----------------------------------------------------
Increase (Decrease) in Net Assets
Operations:
Net investment
income (loss) ... $ 32,845 $ 44,421 $ 17,081 $ (1,789)
Realized net gain
on investments .. 2,969 621,547 312,063 193,673
Unrealized
appreciation
(depreciation) .. 11,848 724,669 45,070 (115,958)
-------- ---------- ---------- ----------
Net increase in net
assets resulting
from operations. 47,662 1,390,637 374,214 75,926
-------- ---------- ---------- ----------
Distributions to shareholders
from (Note 1E):*
Net investment income:
Class A ......... (32,939) (43,071) (14,625) ---
Class Y ......... (339) (2,161) (34) ---
Realized net gains on
investment transactions:
Class A ......... --- (534,501) (344,992) (194,628)
Class Y ......... --- (25,551) (761) (789)
-------- ---------- ---------- ----------
(33,278) (605,284) (360,412) (195,417)
-------- ---------- ---------- ----------
Capital share
transactions (Note 5) (16,341) 707,873 297,373 202,648
-------- ---------- ---------- ----------
Total increase (decrease) (1,957) 1,493,226 311,175 83,157
Net Assets
Beginning of period 530,653 5,001,763 1,287,867 983,637
-------- ---------- ---------- ----------
End of period $528,696 $6,494,989 $1,599,042 $1,066,794
======== ========== ========== ==========
Undistributed
net investment
income .......... $370 $1,964 $3,787 $---
==== ====== ====== ====
*See "Financial Highlights" on pages 45 - 52.
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,
--------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
Net asset value,
beginning of period $6.32 $6.14 $6.34 $5.62 $6.39
----- ----- ----- ----- -----
Income from investment
operations:
Net investment income 0.38 0.39 0.39 0.40 0.39
Net realized and
unrealized gain
(loss) on
investments ..... 0.07 0.19 (0.20) 0.72 (0.75)
---- ---- ---- ---- ----
Total from investment
operations ....... 0.45 0.58 0.19 1.12 (0.36)
---- ---- ---- ---- ----
Less distributions:
From net investment
income .......... (0.38) (0.40) (0.39) (0.40) (0.39)
From capital gains (0.00) (0.00) (0.00) (0.00) (0.02)
---- ---- ---- ---- ----
Total distributions (0.38) (0.40) (0.39) (0.40) (0.41)
---- ---- ---- ---- ----
Net asset value,
end of period .... $6.39 $6.32 $6.14 $6.34 $5.62
===== ===== ===== ===== =====
Total return* ...... 7.27% 9.77% 3.20% 20.50% -5.76%
Net assets, end of
period (in
millions) ........ $551 $524 $519 $563 $518
Ratio of expenses to
average net assets 0.84% 0.77% 0.77% 0.74% 0.72%
Ratio of net investment
income to average
net assets ....... 5.88% 6.34% 6.34% 6.54% 6.60%
Portfolio turnover
rate ............. 33.87% 35.08% 55.74% 66.38% 127.11%
*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 fiscal year For the
ended December 31, period from
-------------------- 6/19/95* to
1998 1997 1996 12/31/95
----- ----- ----- ----------
Net asset value,
beginning of period $6.32 $6.14 $6.34 $6.11
---- ---- ---- ----
Income from investment
operations:
Net investment income 0.39 0.42 0.40 0.21
Net realized and
unrealized gain (loss)
on investments .. 0.07 0.17 (0.20) 0.22
---- ---- ---- ----
Total from investment
operations ....... 0.46 0.59 0.20 0.43
---- ---- ---- ----
Less distributions:
From net investment
income........... (0.39) (0.41) (0.40) (0.20)
From capital gains (0.00) (0.00) (0.00) (0.00)
---- ---- ---- ----
Total distributions (0.39) (0.41) (0.40) (0.20)
---- ---- ---- ----
Net asset value,
end of period .... $6.39 $6.32 $6.14 $6.34
===== ===== ===== =====
Total return ....... 7.54% 9.91% 3.35% 7.20%
Net assets, end of
period (in
millions) ........ $6 $5 $12 $3
Ratio of expenses to
average net assets 0.61% 0.64% 0.62% 0.63%**
Ratio of net investment
income to average
net assets ....... 6.10% 6.48% 6.52% 6.41%**
Portfolio turnover
rate ............. 33.87% 35.08% 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,
--------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
Net asset value,
beginning of period $7.59 $6.58 $5.79 $4.67 $4.95
----- ----- ----- ----- -----
Income from investment
operations:
Net investment income 0.20 0.06 0.07 0.07 0.08
Net realized and
unrealized gain
(loss) on
investments ..... 1.66 1.73 1.10 1.30 (0.16)
----- ----- ----- ----- -----
Total from investment
operations ....... 1.86 1.79 1.17 1.37 (0.08)
----- ----- ----- ----- -----
Less distributions:
From net investment
income .......... (0.19) (0.06) (0.06) (0.07) (0.07)
From capital gains (1.74) (0.72) (0.32) (0.18) (0.13)
----- ----- ----- ----- -----
Total distributions (1.93) (0.78) (0.38) (0.25) (0.20)
----- ----- ----- ----- -----
Net asset value,
end of period .... $7.52 $7.59 $6.58 $5.79 $4.67
===== ===== ===== ===== =====
Total return** ..... 24.02% 27.34% 20.36% 29.60% -1.82%
Net assets, end of
period (in
millions) ........ $7,368 $6,196 $4,851 $3,976 $3,145
Ratio of expenses to
average net assets 0.89% 0.84% 0.86% 0.83% 0.74%
Ratio of net investment
income to average
net assets ....... 1.11% 0.74% 1.03% 1.31% 1.45%
Portfolio turnover
rate ............. 49.29% 33.59% 22.24% 17.59% 18.54%
*Per-share and share amounts have been adjusted retroactively to
reflect the 400% stock dividend effected June 26, 1998.
**Total return calculated without taking into account the sales load
deducted on an initial purchase.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
UNITED INCOME FUND
Class Y Shares
For a Share of Capital Stock Outstanding Throughout Each Period:*
For the fiscal year For the
ended December 31, period from
-------------------- 6/19/95** to
1998 1997 1996 12/31/95
----- ----- ----- -----------
Net asset value,
beginning of period $7.59 $6.58 $5.79 $5.55
----- ----- ----- -----
Income from investment
operations:
Net investment income 0.24 0.07 0.07 0.04
Net realized and
unrealized gain
on investments .. 1.66 1.73 1.11 0.42
----- ----- ----- -----
Total from investment
operations ....... 1.90 1.80 1.18 0.46
----- ----- ----- -----
Less distributions:
From net investment
income........... (0.23) (0.07) (0.07) (0.04)
From capital gains (1.74) (0.72) (0.32) (0.18)
----- ----- ----- -----
Total distributions (1.97) (0.79) (0.39) (0.22)
----- ----- ----- -----
Net asset value,
end of period .... $7.52 $7.59 $6.58 $5.79
===== ===== ===== =====
Total return ....... 24.27% 27.49% 20.53% 8.45%
Net assets, end of
period (in
millions) ........ $399 $299 $151 $107
Ratio of expenses to
average net assets 0.71% 0.72% 0.73% 0.74%***
Ratio of net investment
income to average
net assets ....... 1.29% 0.85% 1.17% 1.36%***
Portfolio turnover
rate ............. 49.29% 33.59% 22.24% 17.59%***
*Per-share and share amounts have been adjusted retroactively to
reflect the 400% stock dividend effected June 26, 1998.
**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,
--------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
Net asset value,
beginning of period $7.77 $7.75 $7.78 $6.58 $7.19
---- ---- ---- ---- ----
Income from investment
operations:
Net investment
income........... 0.10 0.10 0.11 0.11 0.13
Net realized and
unrealized gain
(loss) on
investments ..... 1.60 2.14 0.82 2.12 (0.13)
---- ---- ---- ---- ----
Total from investment
operations ....... 1.70 2.24 0.93 2.23 0.00
---- ---- ---- ---- ----
Less distributions:
From net investment
income .......... (0.11) (0.09) (0.11) (0.11) (0.13)
From capital gains (1.08) (2.13) (0.85) (0.92) (0.48)
---- ---- ---- ---- ----
Total distributions (1.19) (2.22) (0.96) (1.03) (0.61)
---- ---- ---- ---- ----
Net asset value,
end of period .... $8.28 $7.77 $7.75 $7.78 $6.58
==== ==== ==== ==== ====
Total return* ...... 22.62% 29.58% 12.18% 34.21% 0.04%
Net assets, end of
period (in
millions) ........ $1,864 $1,595 $1,285 $1,206 $967
Ratio of expenses to
average net assets 0.88% 0.82% 0.83% 0.80% 0.71%
Ratio of net investment
income to average
net assets ....... 1.12% 1.16% 1.34% 1.42% 1.76%
Portfolio turnover
rate ............. 373.78%313.99% 240.37%229.03% 205.40%
*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 fiscal
year ended For the
December 31, period from
-------------- 7/11/95* to
1998 1997 1996 12/31/95
----- ----- ----- -----------
Net asset value,
beginning of period $7.77 $7.75 $7.78 $7.84
---- ---- ---- ----
Income from investment
operations:
Net investment income 0.12 0.11 0.12 0.05
Net realized and
unrealized gain
on investments .. 1.59 2.14 0.82 0.87
---- ---- ---- ----
Total from investment
operations ....... 1.71 2.25 0.94 0.92
---- ---- ---- ----
Less distributions:
From net investment
income........... (0.12) (0.10) (0.12) (0.06)
From capital gains (1.08) (2.13) (0.85) (0.92)
---- ---- ---- ----
Total distributions (1.20) (2.23) (0.97) (0.98)
---- ---- ---- ----
Net asset value,
end of period .... $8.28 $7.77 $7.75 $7.78
==== ==== ==== ====
Total return ....... 22.79% 29.67% 12.27% 11.92%
Net assets, end of
period (in
millions) ........ $4 $4 $3 $1
Ratio of expenses to
average net assets 0.75% 0.75% 0.74% 0.76%**
Ratio of net investment
income to average
net assets ....... 1.21% 1.22% 1.45% 1.24%**
Portfolio turnover
rate ............. 373.78%313.99% 240.37% 229.03%**
*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,
------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
Net asset value,
beginning of period $6.71 $7.78 $7.63 $5.07 $4.94
---- ----- ----- ----- -----
Income from investment
operations:
Net investment loss (0.03) (0.01) (0.02) (0.00) 0.00
Net realized and
unrealized gain on
investments ..... 3.93 0.46 0.66 2.80 0.47
---- ----- ----- ----- -----
Total from investment
operations ....... 3.90 0.45 0.64 2.80 0.47
---- ----- ----- ----- -----
Less distributions:
From net investment
income .......... (0.00) (0.00) (0.00) (0.00) (0.00)
From capital gains (0.70) (1.52) (0.49) (0.24) (0.34)
---- ----- ----- ----- -----
Total distributions (0.70) (1.52) (0.49) (0.24) (0.34)
---- ----- ----- ----- -----
Net asset value,
end of period .... $9.91 $6.71 $7.78 $7.63 $5.07
===== ====== ====== ====== ======
Total return** ..... 59.31% 7.22% 8.35% 55.37% 9.78%
Net assets, end of
period (in
millions) ........ $1,668 $1,063 $981 $821 $497
Ratio of expenses to
average net assets 1.05% 1.02% 0.98% 0.93% 0.96%
Ratio of net investment
loss to average
net assets ....... -0.37% -0.18% -0.33% -0.07% 0.00%
Portfolio turnover
rate ............. 55.70% 87.68% 33.90% 32.89% 64.39%
*Per-share and share amounts have been adjusted retroactively to
reflect the 200% stock dividend effected June 26, 1998.
**Total return calculated without taking into account the sales load deducted
on an initial purchase.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
UNITED SCIENCE AND TECHNOLOGY FUND
Class Y Shares
For a Share of Capital Stock Outstanding Throughout Each Period:*
For the
fiscal year
year ended For the
December 31, period from
------------- 2/27/96** to
1998 1997 12/31/96
----- ----- ----------
Net asset value,
beginning of period $6.74 $7.79 $8.02
---- ----- -----
Income from investment
operations:
Net investment
loss ............ (0.01) (0.00) (0.01)
Net realized and
unrealized gain
on investments .. 3.95 0.47 0.27
---- ----- -----
Total from investment
operations ....... 3.94 0.47 0.26
---- ----- -----
Less distributions:
From net investment
income .......... (0.00) (0.00) (0.00)
From capital gains (0.70) (1.52) (0.49)
---- ----- -----
Total distributions (0.70) (1.52) (0.49)
---- ----- -----
Net asset value,
end of period .... $9.98 $6.74 $7.79
==== ===== =====
Total return ....... 59.71% 7.43% 3.25%
Net assets, end of
period (in
millions) ........ $6 $4 $3
Ratio of expenses to
average net assets 0.79% 0.85% 0.80%***
Ratio of net investment
loss to average
net assets ....... -0.12% -0.01% -0.12%***
Portfolio turnover
rate ............. 55.70% 87.68% 33.90%***
*Per-share and share amounts have been adjusted retroactively
to reflect the 200% stock dividend effected June 26, 1998.
**Commencement of operations.
***Annualized.
See notes to financial statements.
<PAGE>
UNITED FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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 the Nasdaq Stock Market, which provides information on bid and
asked 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.
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 business day following 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 carryovers. At December 31, 1998, United Science and
Technology Fund reclassified $4,624,009 between additional paid-in-capital,
accumulated undistributed net realized gain and undistributed net
investment income. In addition, for each of the Funds, the following
amounts were reclassified between accumulated undistributed net investment
income and accumulated undistributed net realized gain on investment
transactions.
Increase Increase
(Decrease) (Decrease)
Accumulated Accumulated
Undistributed Undistributed
Net Investment Net Realized
Income Gain
------ ------
United Income Fund $(300,519) $300,519
United Accumulative Fund (58,028) 58,028
United Science and Technology Fund 112,640 (112,640)
Net investment income, net realized gains and net assets were not affected
by these changes.
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 $21.0 billion of
combined net assets at December 31, 1998) 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,
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 gross
sales commissions for Class A shares (which are not an expense of the
Corporation) of $33,372,169, out of which W&R paid sales commissions of
$19,385,192 and all expenses in connection with the sale of the Corporation's
shares, except for registration fees and related expenses.
Under a Distribution and Service Plan for Class A shares adopted by the
Fund pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund
may pay monthly a distribution and/or service fee to W&R in an amount not to
exceed .25% of the Fund's average annual net assets. The fee is to be paid to
reimburse W&R for amounts it expends in connection with the distribution of the
Class A shares and/or provision of personal services to Fund shareholders and/or
maintenance of shareholder accounts.
The Corporation paid Directors' fees of $372,189, which are included in
other expenses.
W&R is a subsidiary of Waddell & Reed Financial, Inc., a holding company,
and a direct subsidiary of Waddell & Reed Financial Services, Inc., a holding
company.
NOTE 3 -- Investment Securities Transactions
Investment securities transactions for the period ended December 31, 1998
are summarized as follows:
United
United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
----------- ------------ ------------ ------------
Purchases of investment
securities, excluding
short-term and U.S.
Government securities $111,813,798 $ 2,027,470,290 $5,663,150,713 $ 659,898,308
Purchases of U.S. Government
securities 92,333,863 1,093,907,031 196,340,625 ---
Purchases of short-term
securities 561,391,715 15,634,742,929 4,468,673,592 1,958,075,482
Proceeds from maturities
and sales of investment
securities, excluding
short-term and U.S.
Government securities 135,016,902 3,371,976,186 5,744,483,524 729,609,800
Proceeds from maturities and
sales of U.S. Government
securities 41,247,329 --- --- ---
Proceeds from maturities and sales of
short-term securities 568,252,086 15,559,056,251 4,674,703,528 1,927,543,817
For Federal income tax purposes, cost of investments owned at December 31,
1998 and the related appreciation were as follows:
Aggregate
Cost Appreciation Depreciation Appreciation
-------------- ------------ ------------ --------------
United Bond Fund $ 528,458,070 $ 24,668,693 $ (1,196,790) $ 23,471,903
United Income Fund 4,914,230,647 3,004,918,498 (81,736,450) 2,923,182,048
United Accumulative
Fund 1,681,126,770 207,356,879 (14,692,573) 192,664,306
United Science and
Technology Fund 873,714,811 822,026,657 (24,964,456) 797,062,201
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
$1,363,307,370, $260,569,759 and $139,112,131, respectively, during the year
ended December 31, 1998, a portion of which was paid to shareholders during the
period ended December 31, 1998. 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 $4,755,689 during the year
ended December 31, 1998, which was entirely offset by utilization of capital
loss carryovers. Remaining prior year capital loss carryovers of United Bond
Fund aggregated $18,474,016 as of December 31, 1998, and are available to offset
future capital gain net income as follows: $18,393,113 through December 31,
2002 and $80,903 through December 31, 2003.
NOTE 5 -- Multiclass Operations
On June 17, 1995, each Fund within the Corporation was authorized to offer
investors 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 Distribution and 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, 1998
are summarized below. Dollar amounts are in thousands.
United
United United United Science and
Bond Income Accumulative Technology
Fund Fund* Fund Fund*
----------- ------------ ------------------------
Shares issued from sale
of shares:
Class A ............ 31,835,303 100,626,223 15,967,129 77,529,963
Class Y ............ 216,958 10,384,489 103,049 130,439
Shares issued from
reinvestment of dividends
and/or capital gains distribution:
Class A ............ 4,341,736 185,178,374 27,472,978 11,704,260
Class Y ............ 56,607 11,152,791 59,740 42,644
Shares redeemed:
Class A ............ (32,844,203) (121,882,974) (23,654,895)(79,203,331)
Class Y ............ (95,711) (7,947,287) (175,077) (223,072)
---------- ----------- ---------- ----------
Increase (decrease) in
outstanding capital
shares:
Class A ............ 3,332,836 163,921,623 19,785,212 10,030,892
Class Y ............ 177,854 13,589,993 (12,288) (49,989)
---------- ----------- ---------- ----------
Total for Fund .... 3,510,690 177,511,616 19,772,924 9,980,903
========== =========== ========== ==========
Value issued from sale
of shares:
Class A ............ $202,677 $ 849,389 $136,894 $618,721
Class Y ............ 1,379 85,082 876 1,031
Value issued from
reinvestment of dividends:
Class A ............ 27,530 1,351,806 216,773 103,357
Class Y ............ 359 81,473 472 379
Value redeemed:
Class A ............ (208,970) (1,035,016) (203,897) (631,968)
Class Y ............ (612) (65,230) (1,436) (1,749)
--------- ---------- -------- --------
Increase (decrease) in
outstanding capital:
Class A ............ 21,237 1,166,179 149,770 90,110
Class Y ............ 1,126 101,325 (88) (339)
--------- ---------- -------- --------
Total for Fund .... $ 22,363 $1,267,504 $149,682 $ 89,771
======== ========== ======== ========
* Share transactions prior to June 27, 1998 have been adjusted to effect
the stock dividend of June 26, 1998.
Transactions in capital stock for the fiscal year ended December 31, 1997
are summarized below. Dollar amounts are in thousands.
United
United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
----------- ------------ ------------------------
Shares issued from sale
of shares:
Class A ............ 6,890,848 113,047,110 8,676,214 97,386,177
Class Y ............ 195,545 16,641,495 51,857 213,843
Shares issued from
reinvestment of
dividends and/or capital
gains distribution:
Class A ............ 4,598,290 72,625,180 44,000,209 29,785,929
Class Y ............ 48,642 3,707,595 104,354 125,574
Shares redeemed:
Class A ............ (13,058,549) (106,336,825) (13,115,628)(94,796,529)
Class Y ............ (1,350,485) (3,892,205) (35,296) (93,594)
---------- ---------- ---------- ----------
Increase (decrease) in
outstanding capital
shares:
Class A ............ (1,569,411) 79,335,465 39,560,795 32,375,577
Class Y ............ (1,106,298) 16,456,885 120,915 245,823
---------- ---------- ---------- ----------
Total for Fund .... (2,675,709) 95,792,350 39,681,710 32,621,400
========== ========== ========== ==========
Value issued from sale
of shares:
Class A ............ $42,624 $862,082 $ 77,296 $749,063
Class Y ............ 1,204 120,864 450 1,701
Value issued from
reinvestment of
dividends and/or capital
gains distribution:
Class A ............ 28,302 542,416 335,423 186,554
Class Y ............ 299 27,712 796 790
Value redeemed:
Class A ............ (80,507) (814,233) (116,279) (734,712)
Class Y ............ (8,263) (30,968) (313) (748)
-------- -------- -------- --------
Increase (decrease) in
outstanding capital:
Class A ............ (9,581) 590,265 296,440 200,905
Class Y ............ (6,760) 117,608 933 1,743
-------- -------- -------- --------
Total for Fund .... $(16,341) $707,873 $297,373 $202,648
======== ======== ======== ========
* Share transactions have been adjusted to effect the stock dividend of
June 26, 1998.
Note 6 -- Stock Dividend
The Corporation's Board of Directors approved on February 11, 1998 a stock
dividend of 400% on United Income Fund and 200% on United Science and Technology
Fund effected on June 26, 1998. Authorized shares of United Income Fund were
accordingly increased by 1,400,000,000 and United Bond Fund and United
Accumulative Fund each reallocated 100,000,000 shares to United Science and
Technology Fund.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
United Funds, Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules 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, 1998, and the related
statements of operations for the fiscal year then ended, the statements of
changes in net assets for each of the two fiscal years in the period then ended,
and the financial highlights for each of the five fiscal years in the period
then ended. These financial statements and the financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with 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 as of
December 31, 1998, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of each
of the respective Funds comprising United Funds, Inc. as of December 31, 1998,
the results of their operations for the fiscal year then ended, the changes in
their net assets for each of the two fiscal years in the period then ended and
the financial highlights for each of the five fiscal years in the period then
ended, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
February 5, 1999
<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 1998 Federal income tax return.
PER-SHARE AMOUNTS REPORTABLE AS:
--------------------------------------------------------------------
For Individuals For Corporations
-------------------------------------------------------------
Record Ordinary Long-Term Non- Long-Term
Date Total Income Capital Gain Qualifying Qualifying Capital Gain
- ----------- ----- -------- ------------ ---------- ---------- ------------
United Bond Fund
Class A
01-16-98 $0.032 $0.0320 $0.0000 $0.0000 $0.0320 $0.0000
02-13-98 0.032 0.0320 0.0000 0.0000 0.0320 0.0000
03-13-98 0.032 0.0320 0.0000 0.0000 0.0320 0.0000
04-17-98 0.032 0.0320 0.0000 0.0000 0.0320 0.0000
05-15-98 0.032 0.0320 0.0000 0.0000 0.0320 0.0000
06-12-98 0.032 0.0320 0.0000 0.0000 0.0320 0.0000
07-17-98 0.031 0.0310 0.0000 0.0000 0.0310 0.0000
08-14-98 0.031 0.0310 0.0000 0.0000 0.0310 0.0000
09-11-98 0.031 0.0310 0.0000 0.0000 0.0310 0.0000
10-16-98 0.031 0.0310 0.0000 0.0000 0.0310 0.0000
11-13-98 0.030 0.0300 0.0000 0.0000 0.0300 0.0000
12-16-98 0.030 0.0300 0.0000 0.0000 0.0300 0.0000
------ ------- ------- ------- ------- -------
$0.376 $0.3760 $0.0000 $0.0000 $0.3760 $0.0000
====== ======= ======= ======= ======= =======
United Bond Fund
Class Y
01-16-98 $0.033 $0.0330 $0.0000 $0.0000 $0.0330 $0.0000
02-13-98 0.032 0.0320 0.0000 0.0000 0.0320 0.0000
03-13-98 0.033 0.0330 0.0000 0.0000 0.0330 0.0000
04-17-98 0.032 0.0320 0.0000 0.0000 0.0320 0.0000
05-15-98 0.033 0.0330 0.0000 0.0000 0.0330 0.0000
06-12-98 0.033 0.0330 0.0000 0.0000 0.0330 0.0000
07-17-98 0.035 0.0350 0.0000 0.0000 0.0350 0.0000
08-14-98 0.032 0.0320 0.0000 0.0000 0.0320 0.0000
09-11-98 0.032 0.0320 0.0000 0.0000 0.0320 0.0000
10-16-98 0.032 0.0320 0.0000 0.0000 0.0320 0.0000
11-13-98 0.031 0.0310 0.0000 0.0000 0.0310 0.0000
12-16-98 0.034 0.0340 0.0000 0.0000 0.0340 0.0000
------ ------- ------- ------- ------- -------
$0.392 $0.3920 $0.0000 $0.0000 $0.3920 $0.0000
====== ======= ======= ======= ======= =======
United Income Fund
Class A
03-13-98 $0.070 $0.0700 $0.0000 $0.0558 $0.0142 $0.0000
06-12-98 0.060 0.0600 0.0000 0.0453 0.0147 0.0000
09-11-98 0.030 0.0300 0.0000 0.0226 0.0074 0.0000
12-16-98 1.770 0.0300 1.7400 0.0226 0.0074 1.7400
------ ------- ------- ------- ------- -------
$1.930 $0.1900 $1.7400 $0.1463 $0.0437 $1.7400
====== ======= ======= ======= ======= =======
United Income Fund
Class Y
03-13-98 $0.089 $0.0890 $ --- $0.0710 $0.0180 0.0000
06-12-98 0.076 0.0760 --- 0.0573 0.0187 0.0000
09-11-98 0.034 0.0340 --- 0.0256 0.0084 0.0000
12-16-98 1.776 0.0360 1.7400 0.0272 0.0088 1.7400
------ ------- ------- ------- ------- -------
$1.975 $0.2350 $1.7400 $0.1811 $0.0539 $1.7400
====== ======= ======= ======= ======= =======
United Accumulative Fund
Class A
06-12-98 $0.030 $0.0300 $0.0000 $0.0268 $0.0032 $0.0000
12-16-98 1.155 0.9150 0.2400 0.0541 0.8609 0.2400
------ ------- ------- ------- ------- -------
$1.185 $0.9450 $0.2400 $0.0809 $0.8641 $0.2400
====== ======= ======= ======= ======= =======
United Accumulative Fund
Class Y
06-12-98 $0.033 $0.0330 $0.0000 $0.0295 $0.0035 $0.0000
12-16-98 1.164 0.9240 0.2400 0.0606 0.8634 0.2400
------ ------- ------- ------- ------- -------
$1.197 $0.9570 $0.2400 $0.0901 $0.8669 $0.2400
====== ======= ======= ======= ======= =======
United Science and Technology Fund
Class A
06-12-98 $ 0.000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000
12-16-98 0.695 0.0000 0.6950 0.0000 0.0000 0.6950
------ ------- ------- ------- ------- -------
$0.695 $0.0000 $0.6950 $0.0000 $0.0000 $0.6950
====== ======= ======= ======= ======= =======
United Science and Technology Fund
Class Y
06-12-98 $0.000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000
12-16-98 0.695 0.0000 0.6950 0.0000 0.0000 0.6950
------ ------- ------- ------- ------- -------
$0.695 $0.0000 $0.6950 $0.0000 $0.0000 $0.6950
====== ======= ======= ======= ======= =======
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.
Lower sales charges are available by combining net asset value (_NAV_) of
existing Class A shares of a Fund with additional purchases of Class A shares of
any fund in the United Group, except that only the Class A shares of United Cash
Management, Inc. that were acquired by exchange of another United Group fund's
Class A shares on which a sales charge was paid, plus the shares paid as
dividends on those acquired shares, may be combined.
Any person who was a holder of an uncompleted Plan on May 30, 1996, with a
face amount of less than $12,000, may purchase Class A shares of the Fund
corresponding to such Plan at NAV, up to the amount representing the unpaid
balance of the Plan, if the purchase order is so designated.
To all traditional IRA Planholders:
As required by law, income tax will automatically be withheld from any
distribution or withdrawal from a traditional IRA unless you make a written
election not to have taxes withheld. The election may be made by submitting
forms provided by Waddell & Reed, Inc. which can be obtained from your Waddell &
Reed representative or by submitting Internal Revenue Service Form W-4P. Once
made, an election can be revoked by providing written notice to Waddell & Reed,
Inc. If you elect not to have tax withheld you may be required to make payments
of estimated tax. Penalties may be imposed by the IRS if withholding and
estimated tax payments are not adequate.
<PAGE>
DIRECTORS
Keith A. Tucker, Overland Park, Kansas, Chairman of the Board
James M. Concannon, Topeka, Kansas
John A. Dillingham, Kansas City, Missouri
David P. Gardner, Menlo Park, California
Linda K. Graves, Topeka, Kansas
Joseph Harroz, Jr., Norman, Oklahoma
John F. Hayes, Hutchinson, Kansas
Robert L. Hechler, Overland Park, Kansas
Henry J. Herrmann, Overland Park, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
Ronald C. Reimer, Mission Hills, Kansas
Frank J. Ross, Jr., Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Frederick Vogel III, Milwaukee, Wisconsin
OFFICERS
Robert L. Hechler, President
James C. Cusser, Vice President
Abel Garcia, Vice President
Henry J. Herrmann, Vice President
John M. Holliday, Vice President
Theodore W. Howard, Vice President and Treasurer
Antonio Intagliata, Vice President
Helge K. Lee, Vice President and Secretary
Russell E. Thompson, Vice President
James D. Wineland, 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(12-98)
printed on recycled paper
