United
High Income
Fund, Inc.
SEMIANNUAL
REPORT
----------------------------------------
For the six months ended September 30, 1996
<PAGE>
This report is submitted for the general information of the shareholders of
United High Income Fund, Inc. It is not authorized for distribution to
prospective investors in the Fund unless accompanied with or preceded by the
United High Income Fund, Inc. current prospectus.
<PAGE>
PRESIDENT'S LETTER
SEPTEMBER 30, 1996
Dear Shareholder:
As President of your Fund, I would like to thank you for your continued
confidence in our products and services. Our goal to provide the best service
possible to our shareholders has not changed since we opened our doors nearly 60
years ago. Waddell & Reed's team of professionals, including the Fund's
manager, our customer service representatives and your personal account
representative continue to strive to meet your financial needs.
Waddell & Reed plays a special role in the investment industry. We take
pride in being one of the few financial services firms committed to locally
based account representatives who provide the personal service you need. When
you're ready to evaluate your financial plan to keep up with life's changes, or
to find an answer to a financial question that you may have, your representative
is ready to assist you--when you need it. He or she is available to help you
plan for your retirement, fund a child's education or make plans for other long-
term financial goals.
All of us are committed to helping you meet the financial goals that are
important to you. This is accomplished by our offering investment products to
meet a variety of personal financial objectives, along with the personal service
to make the investment process more convenient and accessible.
We want to continue to meet your financial needs for many years to come.
Should you have any questions about your account or other financial issues that
are important to you, contact your personal account representative or your local
Waddell & Reed office. They're ready to help you make the most of your
financial future.
Respectfully,
Keith A. Tucker
President
<PAGE>
SHAREHOLDER SUMMARY
- --------------------------------------------------------------
UNITED HIGH INCOME FUND, INC.
PORTFOLIO STRATEGY:
Invests generally in OBJECTIVE: High level of current
High-Risk, High-Yield income, by investing
Fixed Income Securities primarily in a
diversified portfolio of
Maximum 20% Common Stock high-yield, high-risk fixed income
securities, with a secondary objective
of capital growth when consistent with
the primary objective.
STRATEGY: Invests generally in debt securities in
lower rating categories as classified by
recognized rating agencies; may also
invest up to 20% in common stocks. (May
purchase securities subject to
repurchase agreements. May invest in
certain options and futures.)
FOUNDED: 1979
SCHEDULED DIVIDEND FREQUENCY: MONTHLY
PERFORMANCE SUMMARY -- Class A Shares
PER SHARE DATA
For the Six Months Ended September 30, 1996
- ----------------------------------------
DIVIDENDS PAID $0.39
=====
NET ASSET VALUE ON
9/30/96 $9.24
3/31/96 9.09
-----
CHANGE PER SHARE $0.15
=====
Past performance is not necessarily indicative of future results.
TOTAL RETURN HISTORY
Average Annual Total Return
---------------------------
With Without
Period Sales Load* Sales Load**
- ------ ----------- ------------
1-year period ended 9-30-96 5.47% 11.91%
5-year period ended 9-30-96 10.93% 12.25%
10-year period ended 9-30-96 7.03% 7.67%
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 September 30, 1996, United High Income Fund, Inc. had net assets totaling
$981,463,874 invested in a diversified portfolio of:
87.89% Corporate Debt Securities
7.47% Cash and Cash Equivalents
4.64% Common and Preferred Stocks and Warrants
As a shareholder of United High Income Fund, Inc., for every $100 you had
invested on September 30, 1996, your Fund owned:
$27.47 Manufacturing Bonds
22.01 Transportation, Communication, Electric
and Sanitary Services Bonds
21.08 Services Bonds
10.64 Wholesale and Retail Trade Bonds
7.47 Cash and Cash Equivalents
4.64 Common and Preferred Stocks and Warrants
3.06 Finance, Insurance and Real Estate Bonds
1.48 Miscellaneous Investing Institutions Bonds
1.19 Mining Bonds
0.75 Contract Construction Bonds
0.21 Agriculture, Forestry and Fisheries Bonds
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1996
Shares Value
COMMON AND PREFERRED STOCKS AND WARRANTS
Amusement and Recreation Services - 0.22%
Fitzgeralds Gaming Corporation,
Warrants (A)* ....................... 17,500 $ 175,000
Trump Hotels & Casino Resorts, Inc.* . 87,500 2,034,375
Total ............................... 2,209,375
Business Services - 0.16%
Bell & Howell Company* ............... 50,000 1,587,500
Communication - 0.89%
Heartland Wireless Communications,
Inc., Warrants (A)* ................. 12,000 90,000
Infinity Broadcasting Corporation,
Class A* ............................ 118,875 3,744,562
Jacor Communications, Inc.* .......... 50,000 1,712,500
Providence Journal Company
(The), Class A* ..................... 70,000 2,056,250
Young Broadcasting Inc., Class A* .... 35,000 1,155,000
Total ............................... 8,758,312
Electric, Gas and Sanitary Services - 0.23%
Consolidated Hydro, Inc., Preferred* . 3,000 190,950
Consolidated Hydro, Inc., Warrants (A)* 5,400 5
EUA Contingent Interest Certificates* 9,500 10
El Paso Electric Company, Preferred* . 15,000 1,725,000
IntelCom Group Inc., Warrants (A)* ... 20,625 299,063
Total ............................... 2,215,028
General Building Contractors - 0.93%
Walter Industries, Inc.* ............. 710,990 9,109,204
Health Services - 0.17%
Beverly Enterprises, Inc.* ........... 150,000 1,631,250
Holding and Other Investment Offices - 0.14%
National Health Investors, Inc. ...... 41,630 1,389,401
Lumber and Wood Products - 1.34%
Triangle Pacific Corp.* .............. 660,844 13,175,247
See Notes to Schedule of Investments on pages 17 - 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1996
Shares Value
COMMON AND PREFERRED STOCKS AND
WARRANTS (Continued)
Printing and Publishing - 0.56%
K-III Communications Corporation,
Preferred .......................... 35,000 3,269,000
World Color Press, Inc.* ............. 100,000 2,225,000
Total ............................... 5,494,000
TOTAL COMMON AND PREFERRED STOCKS
AND WARRANTS - 4.64% $ 45,569,317
(Cost: $48,612,988)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Agricultural Services - 0.21%
Hines Horticulture, Inc.,
11.75%, 10-15-2005 .................. 2,000 2,057,500
Amusement and Recreation Services - 4.88%
American Skiing Company,
12.0%, 7-15-2006 (A) ................ 4,500 4,466,250
Argosy Gaming Company:
12.0%, 6-1-2001 (Convertible) ....... 3,000 2,700,000
13.25%, 6-1-2004 (A) ................ 4,000 3,980,000
California Hotel Finance Corporation,
11.0%, 12-1-2002 .................... 5,000 5,250,000
Casino America, Inc.,
12.5%, 8-1-2003 ..................... 7,500 7,846,875
Harrah's Operating Company, Inc.,
10.875%, 4-15-2002 .................. 2,000 2,130,000
Players International, Inc.,
10.875%, 4-15-2005 .................. 4,000 3,980,000
Rio Hotel & Casino, Inc.,
10.625%, 7-15-2005 .................. 5,000 5,250,000
Trump Atlantic City Associates,
11.25%, 5-1-2006 .................... 6,000 5,910,000
Trump Hotels & Casino Resorts
Holdings, L.P.,
15.5%, 6-15-2005 .................... 5,500 6,380,000
Total ............................... 47,893,125
Auto Repair, Services and Parking - 0.52%
Delco Remy International, Inc.,
10.625%, 8-1-2006 (A) ............... 3,000 3,075,000
See Notes to Schedule of Investments on pages 17 - 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Auto Repair, Services and Parking (Continued)
Speedy Muffler King Inc.,
10.875%, 10-1-2006 .................. $ 2,000 $ 2,060,000
Total ............................... 5,135,000
Building Materials and Garden Supplies - 0.49%
Orchard Supply Hardware Stores Corporation,
9.375%, 2-15-2002 ................... 4,500 4,758,750
Business Services - 3.30%
Adams Outdoor Advertising Limited Partnership,
10.75%, 3-15-2006 .................. 4,250 4,414,688
Bell & Howell Company:
10.75%, 10-1-2002 ................... 5,000 5,275,000
0.0%, 3-1-2005 (B) .................. 8,200 5,842,500
Heritage Media Corporation,
8.75%, 2-15-2006 .................... 4,500 4,252,500
Lamar Advertising Company,
11.0%, 5-15-2003 .................... 2,000 2,095,000
Multicare Companies, Inc. (The),
12.5%, 7-1-2002 ..................... 5,398 5,978,285
Scotsman Group, Inc.,
9.5%, 12-15-2000 .................... 4,500 4,511,250
Total ............................... 32,369,223
Chemicals and Allied Products - 2.46%
Revlon Worldwide Corporation,
0.0%, 3-15-98 ....................... 12,750 11,188,125
UCC Investors Holding, Inc.:
10.5%, 5-1-2002 ..................... 9,000 9,495,000
0.0%, 5-1-2005 (B) .................. 4,000 3,500,000
Total ............................... 24,183,125
Communication - 20.69%
Adelphia Communications Corporation:
12.5%, 5-15-2002 .................... 9,000 9,495,000
9.5%, 2-15-2004 ..................... 3,000 2,670,652
Allbritton Communications Company,
9.75%, 11-30-2007 ................... 4,500 4,353,750
American Radio Systems Corporation,
9.0%, 2-1-2006 ...................... 3,750 3,637,500
Arch Communications Group, Inc.,
0.0%, 3-15-2008 (B) ................. 6,000 3,360,000
Argyle Television Operations, Inc.,
9.75%, 11-1-2005 .................... 10,000 10,000,000
See Notes to Schedule of Investments on pages 17 - 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Communication (Continued)
Brooks Fiber Properties, Inc.,
0.0%, 3-1-2006 (B) .................. $ 5,500 $ 3,382,500
Cablevision Industries Corporation,
9.25%, 4-1-2008 ..................... 5,000 5,139,000
Cablevision Systems Corporation,
10.75%, 4-1-2004 .................... 3,500 3,596,250
Centennial Cellular Corp.,
10.125%, 5-15-2005 .................. 3,000 2,917,500
Century Communications Corporation,
11.875%, 10-15-2003 ................. 6,500 6,955,000
COMCAST CELLULAR CORPORATION,
0.0%, 3-5-2000 ...................... 6,300 4,425,750
Comcast Corporation,
9.5%, 1-15-2008 ..................... 8,000 8,150,000
Comcast UK Cable Partners Limited,
0.0%, 11-15-2007 (B) ................ 9,000 5,703,750
Diamond Cable Communications Plc,
0.0%, 12-15-2005 (B) ................ 3,500 2,257,500
Granite Broadcasting Corporation:
10.375%, 5-15-2005 .................. 2,500 2,525,000
9.375%, 12-1-2005 ................... 3,000 2,880,000
Heartland Wireless Communications, Inc.,
13.0%, 4-15-2003 .................... 2,000 2,135,000
Infinity Broadcasting Corporation,
10.375%, 3-15-2002 .................. 9,000 9,495,000
InterCel, Inc., Units,
0.0%, 2-1-2006 (B)(C) ............... 50 2,912,500
Intermedia Communications of Florida, Inc.,
0.0%, 5-15-2006 (B).................. 6,000 3,750,000
Jacor Communications, Inc.,
10.125%, 6-15-2006 .................. 2,000 2,060,000
MFS Communications Company, Inc.:
0.0%, 1-15-2004 (B) ................. 6,750 5,670,000
0.0%, 1-15-2006 (B) ................. 7,500 5,250,000
Marcus Cable Operating Company,
0.0%, 8-1-2004 (B) .................. 10,000 7,800,000
Metrocall, Inc.,
10.375%, 10-1-2007 .................. 4,500 3,735,000
Microcell Telecommunications Inc., Units,
0.0%, 6-1-2006 (A)(B)(D) ............ 14,500 8,120,000
Muzak Limited Partnership,
10.0%, 10-1-2003 .................... 1,000 1,012,500
NEXTEL Communications, Inc.,
0.0%, 8-15-2004 (B) ................. 5,000 3,225,000
See Notes to Schedule of Investments on pages 17 - 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Communication (Continued)
RSL Communications, Ltd., Units,
12.25%, 11-15-2006 (A)(E)............ $ 3,500 $ 3,500,000
Rifkin Acquisition Partners, L.L.L.P.,
11.125%, 1-15-2006 .................. 4,000 4,120,000
Rogers Cantel Inc.,
9.375%, 6-1-2008 .................... 4,000 3,950,000
Rogers Communications Inc.,
9.125%, 1-15-2006 ................... 7,500 7,087,500
SFX Broadcasting, Inc.,
10.75%, 5-15-2006 ................... 3,500 3,640,000
Shared Technologies Fairchild
Communications Corp.,
0.0%, 3-1-2006 (B) .................. 2,500 1,968,750
Sprint Spectrum L.P.,
0.0%, 8-15-2006 (B) ................. 9,200 5,382,000
Sullivan Broadcasting Company, Inc.,
10.25%, 12-15-2005 .................. 1,000 995,000
Teleport Communications Group Inc.:
9.875%, 7-1-2006 .................... 2,000 2,050,000
0.0%, 7-1-2007 (B) .................. 5,000 3,200,000
USA Mobile Communications, Inc. II,
9.5%, 2-1-2004 ...................... 2,000 1,920,000
United International Holdings, Inc.,
0.0%, 11-15-99 ...................... 5,000 3,475,000
Vanguard Cellular Systems, Inc.,
9.375%, 4-15-2006 ................... 4,500 4,455,000
Viacom International, Inc.:
10.25%, 9-15-2001 ................... 3,000 3,202,500
8.0%, 7-7-2006 ...................... 15,000 14,006,250
Videotron Plc,
0.0%, 8-15-2005 (B) ................. 5,250 3,478,125
Total ............................... 203,044,277
Depository Institutions - 0.37%
First Nationwide Escrow Corp.,
10.625%, 10-1-2003 (A)............... 3,500 3,661,875
Eating and Drinking Places - 0.36%
Foodmaker, Inc.,
9.25%, 3-1-99 ....................... 3,500 3,500,000
Electric, Gas and Sanitary Services - 0.95%
El Paso Electric Company,
9.4%, 5-1-2011 ...................... 5,000 5,150,000
See Notes to Schedule of Investments on pages 17 - 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Electric, Gas and Sanitary Services (Continued)
IntelCom Group Inc.,
0.0%, 9-15-2005 (B).................. $ 6,250 $ 4,187,500
Total ............................... 9,337,500
Electronic and Other Electric Equipment - 2.50%
A+ Network, Inc.,
11.875%, 11-1-2005 .................. 4,500 4,376,250
Advanced Micro Devices, Inc.,
11.0%, 8-1-2003 ..................... 4,500 4,646,250
Communications & Power Industries, Inc.,
12.0%, 8-1-2005 ..................... 4,000 4,345,000
Exide Corporation:
0.0%, 12-15-2004 (B) ................ 2,500 2,250,000
10.0%, 4-15-2005 .................... 5,000 5,125,000
Harmon Industries, Inc.,
12.0%, 8-1-2002 ..................... 3,500 3,832,500
Total ............................... 24,575,000
Engineering and Management Services - 0.42%
Essex Group, Inc.,
10.0%, 5-1-2003 ..................... 4,000 4,100,000
Fabricated Metal Products - 0.80%
American Safety Razor Company,
9.875%, 8-1-2005 .................... 1,000 1,022,500
Nortek, Inc.,
9.875%, 3-1-2004 .................... 7,000 6,790,000
Total ............................... 7,812,500
Food and Kindred Products - 1.24%
Dr Pepper Bottling Holdings, Inc.,
0.0%, 2-15-2003 (B) ................. 3,500 3,220,000
Pilgrim's Pride Corporation,
10.875%, 8-1-2003 ................... 3,500 3,447,500
Specialty Foods Corporation:
10.25%, 8-15-2001 ................... 4,000 3,680,000
11.125%, 10-1-2002 .................. 2,000 1,860,000
Total ............................... 12,207,500
Food Stores - 6.26%
Big V Supermarkets, Inc.,
11.0%, 2-15-2004 .................... 5,000 4,800,000
Bruno's Inc.,
10.5%, 8-1-2005 ..................... 8,500 8,712,500
See Notes to Schedule of Investments on pages 17 - 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Food Stores (Continued)
Dominick's Finer Foods, Inc.,
10.875%, 5-1-2005 ................... $ 5,000 $ 5,412,500
Eagle Food Centers, Inc.,
8.625%, 4-15-2000 ................... 4,000 3,760,000
Jitney-Jungle Stores of America, Inc.,
12.0%, 3-1-2006 ..................... 3,000 3,187,500
Kroger Co. (The):
9.75%, 2-15-2004 .................... 10,000 10,500,000
9.25%, 1-1-2005 ..................... 3,000 3,135,000
Penn Traffic Company:
10.375%, 10-1-2004 .................. 6,000 5,130,000
10.65%, 11-1-2004 ................... 6,500 5,460,000
Ralphs Grocery Company,
10.45%, 6-15-2004 ................... 6,500 6,589,375
Smith's Food & Drug Centers, Inc.,
11.25%, 5-15-2007 ................... 4,500 4,781,250
Total ............................... 61,468,125
Furniture and Fixtures - 0.80%
Lear Seating Corp.,
8.25%, 2-1-2002 ..................... 8,000 7,880,000
General Building Contractors - 0.75%
Beazer Homes USA, Inc.,
9.0%, 3-1-2004 ...................... 4,000 3,760,000
NVR L.P.,
11.0%, 4-15-2003 .................... 3,500 3,622,500
Total ............................... 7,382,500
General Merchandise Stores - 0.48%
Kmart Funding Corporation,
8.8%, 7-1-2010 ...................... 5,460 4,709,250
Health Services - 6.04%
ARV Assisted Living, Inc., Convertible,
6.75%, 4-1-2006 (A) ................. 5,000 4,868,750
Abbey Healthcare Group Incorporated,
9.5%, 11-1-2002 ..................... 2,000 2,060,000
General Medical Corporation:
10.875%, 8-15-2003 .................. 7,000 7,175,000
12.125%, 8-15-2005 .................. 3,793 3,772,027
Paracelsus Healthcare Corporation,
10.0%, 8-15-2006 .................... 5,250 5,433,750
See Notes to Schedule of Investments on pages 17 - 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Health Services (Continued)
Quorum Health Group, Inc.:
11.875%, 12-15-2002 ................. $ 7,000 $ 7,717,500
8.75%, 11-1-2005 .................... 4,500 4,511,250
Regency Health Services, Inc.,
9.875%, 10-15-2002 .................. 4,000 4,020,000
Sterling House Corporation, Convertible,
6.75%, 6-30-2006 (A)................. 2,000 1,822,500
Tenet Healthcare Corporation:
9.625%, 9-1-2002 .................... 10,500 11,392,500
10.125%, 3-1-2005 ................... 6,000 6,510,000
Total ............................... 59,283,277
Holding and Other Investment Offices - 1.48%
Grupo Industrial Durango, S.A. de C.V.,
12.625%, 8-1-2003 ................... 8,000 8,470,000
LTC Properties, Inc., Convertible:
8.5%, 1-1-2000 ...................... 3,000 3,022,500
8.5%, 1-1-2001 ...................... 3,000 3,075,000
Total ............................... 14,567,500
Hotels and Other Lodging Places - 4.67%
GNF, CORP.,
10.625%, 4-1-2003 ................... 5,000 5,475,000
HMC Acquisition Properties, Inc.,
9.0%, 12-15-2007 .................... 6,000 5,767,500
LaQuinta Motor Inns, Inc.,
9.25%, 5-15-2003 .................... 7,500 7,650,000
Premier Parks Inc.,
12.0%, 8-15-2003 .................... 1,500 1,618,125
Prime Hospitality Corp.,
9.25%, 1-15-2006 .................... 4,000 4,020,000
Red Roof Inns, Inc.,
9.625%, 12-15-2003 .................. 5,500 5,362,500
Showboat, Inc.,
9.25%, 5-1-2008 ..................... 9,000 8,977,500
Station Casinos, Inc.,
10.125%, 3-15-2006 .................. 4,500 4,421,250
Wyndham Hotel Corporation,
10.5%, 5-15-2006 .................... 2,500 2,565,625
Total ............................... 45,857,500
See Notes to Schedule of Investments on pages 17 - 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Industrial Machinery and Equipment - 2.74%
American Standard Inc.:
9.875%, 6-1-2001 .................... $ 2,000 $ 2,100,000
0.0%, 6-1-2005 (B) .................. 12,250 11,239,375
9.25%, 12-1-2016 .................... 2,000 2,040,000
Collins & Aikman Products Co.,
11.5%, 4-15-2006 .................... 7,000 7,367,500
Fairfield Manufacturing Company, Inc.,
11.375%, 7-1-2001 ................... 4,000 4,100,000
Total ............................... 26,846,875
Instruments and Related Products - 2.44%
Dade International Inc.,
11.125%, 5-1-2006 (A) ............... 2,500 2,675,000
IVAC Corporation,
9.25%, 12-1-2002 .................... 2,500 2,531,250
Mark IV Industries, Inc.,
8.75%, 4-1-2003 ..................... 11,000 11,220,000
Maxxim Medical, Inc.,
10.5%, 8-1-2006 (A).................. 7,250 7,521,875
Total ............................... 23,948,125
Insurance Carriers - 0.95%
Aetna Industries, Inc.,
11.875%, 10-1-2006 (A) .............. 3,500 3,570,000
American Annuity Group, Inc.,
9.5%, 8-15-2001 ..................... 5,500 5,788,750
Total ............................... 9,358,750
Lumber and Wood Products - 0.69%
Triangle Pacific Corp.,
10.5%, 8-1-2003 ..................... 6,500 6,760,000
Metal Mining - 0.15%
UCAR Global Enterprises Inc.,
12.0%, 1-15-2005 .................... 1,310 1,495,037
Miscellaneous Manufacturing Industries - 1.46%
E & S Holdings,
10.375%, 10-1-2006 (A) .............. 3,250 3,331,250
MacAndrews & Forbes Group, Incorporated,
13.0%, 3-1-99 ....................... 9,750 9,969,375
Shop Vac Corporation,
10.625%, 9-1-2003 (A) ............... 1,000 1,030,000
Total ............................... 14,330,625
See Notes to Schedule of Investments on pages 17 - 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Miscellaneous Retail - 1.49%
Eckerd Corporation,
9.25%, 2-15-2004 .................... $ 5,500 $ 5,568,750
Michaels Stores, Inc.,
10.875%, 6-15-2006 .................. 6,000 6,120,000
PETROLEUM HEAT AND POWER CO., INC.,
9.375%, 2-1-2006 .................... 3,000 2,932,500
Total ............................... 14,621,250
Motion Pictures - 0.41%
Plitt Theatres, Inc.,
10.875%, 6-15-2004 .................. 4,000 4,050,000
Nondepository Institutions - 1.74%
First Nationwide Holdings Inc.:
9.125%, 1-15-2003 ................... 3,750 3,684,375
12.5%, 4-15-2003 .................... 3,500 3,788,750
GP Group, Inc.,
8.75%, 12-15-98 ..................... 9,500 9,571,250
Total ............................... 17,044,375
Oil and Gas Extraction - 1.04%
Falcon Drilling, Inc.,
9.75%, 1-15-2001 .................... 3,500 3,543,750
Noble Drilling Corporation,
9.25%, 10-1-2003 .................... 4,000 4,140,000
Vintage Petroleum, Inc.,
9.0%, 12-15-2005 .................... 2,500 2,481,250
Total ............................... 10,165,000
Paper and Allied Products - 2.69%
Asia Pulp & Paper Company Ltd,
11.75%, 10-1-2005 ................... 4,500 4,657,500
Container Corporation of America,
11.25%, 5-1-2004 .................... 3,500 3,718,750
Fort Howard Corporation:
9.25%, 3-15-2001 .................... 5,000 5,100,000
9.0%, 2-1-2006 ...................... 2,000 1,970,000
Four M Corporation,
12.0%, 6-1-2006 (A) ................. 3,000 3,180,000
Mail-Well Corporation,
10.5%, 2-15-2004 .................... 3,500 3,430,000
Sweetheart Cup Company, Inc.,
10.5%, 9-1-2003 ..................... 4,250 4,335,000
Total ............................... 26,391,250
See Notes to Schedule of Investments on pages 17 - 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Personal Services - 0.84%
Coinmach Corporation,
11.75%, 11-15-2005 ................. $ 4,220 $ 4,494,300
Prime Succession Acquisition Corp.,
10.75%, 8-15-2004 (A) ............... 3,500 3,736,250
Total ............................... 8,230,550
Primary Metal Industries - 0.63%
Commonwealth Aluminum Corporation,
10.75%, 10-1-2006 (A) ............... 3,000 3,075,000
Oregon Steel Mills, Inc.,
11.0%, 6-15-2003 .................... 3,000 3,153,750
Total ............................... 6,228,750
Printing and Publishing - 2.68%
American Media Operations, Inc.,
11.625%, 11-15-2004 ................. 4,000 4,210,000
Big Flower Press, Inc.,
10.75%, 8-1-2003 .................... 4,333 4,430,492
Hollinger International Publishing Inc.,
9.25%, 2-1-2006 ..................... 2,000 1,930,000
Jordan Industries, Inc.,
10.375%, 8-1-2003 ................... 11,500 11,097,500
K-III Communications Corporation,
8.5%, 2-1-2006 ...................... 5,000 4,650,000
Total ............................... 26,317,992
Rubber and Miscellaneous Plastics Products - 0.53%
RBX Corporation,
11.25%, 10-15-2005 .................. 5,500 5,170,000
Stone, Clay and Glass Products - 2.15%
Owens-Illinois, Inc.:
10.0%, 8-1-2002 ..................... 5,000 5,200,000
11.0%, 12-1-2003 .................... 7,500 8,203,125
9.75%, 8-15-2004 .................... 7,500 7,650,000
Total ............................... 21,053,125
Textile Mill Products - 2.09%
Avondale Mills, Inc.,
10.25%, 5-1-2006 (A) ................ 3,500 3,570,000
CONSOLTEX GROUP INC.,
11.0%, 10-1-2003 .................... 7,000 6,912,500
Interface, Inc.,
9.5%, 11-15-2005 .................... 2,000 1,985,000
See Notes to Schedule of Investments on pages 17 - 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Textile Mill Products (Continued)
WestPoint Stevens Inc.,
9.375%, 12-15-2005 .................. $ 8,000 $ 8,020,000
Total ............................... 20,487,500
Transportation Equipment - 1.57%
Greenwich Air Services, Inc.,
10.5%, 6-1-2006 ..................... 7,000 7,192,500
Silgan Corporation,
13.25%, 12-15-2002 .................. 3,155 3,202,325
Walbro Corporation,
9.875%, 7-15-2005 ................... 2,000 2,040,000
Westinghouse Air Brake Company,
9.375%, 6-15-2005 ................... 3,000 2,977,500
Total ............................... 15,412,325
Transportation Services - 0.21%
Core-Mark International, Inc.,
11.375%, 9-15-2003 (A) .............. 2,000 2,050,000
Trucking and Warehousing - 0.16%
Iron Mountain Incorporated,
10.125%, 10-1-2006 .................. 1,500 1,537,500
Wholesale Trade - Durable Goods - 0.27%
Alvey Systems, Inc.,
11.375%, 1-31-2003 ................. 2,500 2,618,750
Wholesale Trade - Nondurable Goods - 1.29%
Corporate Express, Inc.,
9.125%, 3-15-2004 ................... 4,000 3,995,000
LaRoche Industries Inc.,
13.0%, 8-15-2004 .................... 2,000 2,190,000
United Stationers Supply Co.,
12.75%, 5-1-2005 .................... 6,000 6,487,500
Total ............................... 12,672,500
TOTAL CORPORATE DEBT SECURITIES - 87.89% $862,573,806
(Cost: $840,977,588)
TOTAL SHORT-TERM SECURITIES - 5.06% $ 49,640,032
(Cost: $49,640,032)
TOTAL INVESTMENT SECURITIES - 97.59% $957,783,155
(Cost: $939,230,608)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 2.41% 23,680,719
NET ASSETS - 100.00% $981,463,874
See Notes to Schedule of Investments on pages 17 - 18.
<PAGE>
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1996
Notes to Schedule of Investments
No income dividends were paid during the preceding 12 months.
(A) As of September 30, 1996, the following restricted securities were owned:
Shares/
Principal
Acquisition Amount Market
Security Date in 000's Cost Value
-------- ----------- --------------------------------
Consolidated Hydro, Inc.,
Warrants 6/15/93 5,400 $127,817 $5
Fitzgeralds Gaming
Corporation,
Warrants 3/8/94 to
12/15/95 17,500 541,065 175,000
Heartland Wireless
Communications,
Inc., Warrants 4/20/95 12,000 74,000 90,000
IntelCom Group Inc.,
Warrants 12/8/95 20,625 80,225 299,063
ARV Assisted Living, Inc.,
Convertible,
6.75%, 4-1-2006 3/28/96 $ 5,000 5,000,000 4,868,750
Aetna Industries, Inc.,
11.875%, 10-1-2006 8/8/96 3,500 3,500,000 3,570,000
American Skiing Company,
12.0%, 7-15-2006 6/25/96 4,500 4,372,425 4,466,250
Argosy Gaming Company,
13.25%, 6-1-2004 5/31/96 4,000 4,000,000 3,980,000
Avondale Mills, Inc.,
10.25%, 5-1-2006 4/23/96 3,500 3,446,450 3,570,000
Commonwealth Aluminum Corporation,
10.75%, 10-1-2006 9/19/96 2,000 2,025,000 2,050,000
9/20/96 1,000 1,013,750 1,025,000
Core-Mark International, Inc.,
11.375%, 9-15-20039/24/96 2,000 2,000,000 2,050,000
Dade International Inc.,
11.125%, 5-1-2006 4/30/96 2,500 2,500,000 2,675,000
Delco Remy International, Inc.,
10.625%, 8-1-2006 7/26/96 3,000 3,000,000 3,075,000
E & S Holdings,
10.375%, 10-1-20069/24/96 2,000 2,000,000 2,050,000
9/25/96 1,250 1,271,875 1,281,250
First Nationwide Escrow Corp.,
10.625%, 10-1-20039/13/96 3,500 3,500,000 3,661,875
Four M Corporation,
12.0%, 6-1-2006 5/23/96 3,000 3,000,000 3,180,000
Maxxim Medical, Inc.,
10.5%, 8-1-20067/18/96 to 7,250 7,305,938 7,521,875
9/11/96
Microcell Telecommunications Inc., Units,
0.0%, 6-1-2006 6/13/96 14,500 6,938,250 8,120,000
Prime Succession Acquisition Corp.,
10.75%, 8-15-2004 8/13/96 3,500 3,500,000 3,736,250
RSL Communications Ltd., Units,
12.25%, 11-15-20069/30/96 3,500 3,500,000 3,500,000
Shop Vac Corporation,
10.625%, 9-1-2003 9/25/96 1,000 1,000,000 1,030,000
Sterling House Corporation, Convertible,
6.75%, 6-30-2006 5/17/96 2,000 2,000,000 1,822,500
----------------------
$65,696,795$67,797,818
======================
The total market value of restricted securities represents approximately
6.91% of the total net assets at September 30, 1996.
(B) The security does not bear interest for an initial period of time and
subsequently becomes interest bearing.
(C) Each Unit consists of 10 senior discount notes due 2-1-2006 and 32
warrants.
(D) Each Unit consists of $1,000 principal amount at maturity of senior
discount notes due 2006, four initial warrants to purchase Class B non-
voting shares of Microcell and four conditional warrants to purchase Class
B shares.
(E) Each Unit consists of one 12.25% senior note due 2006 and one warrant to
purchase Class A common stock.
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 HIGH INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
Assets
Investment securities -- at value
(Notes 1 and 3) ............................... $957,783,155
Cash ........................................... 4,641
Receivables:
Dividends and interest ........................ 19,930,802
Investment securities sold .................... 17,622,675
Fund shares sold .............................. 654,622
Prepaid insurance premium ...................... 59,191
--------------
Total assets ................................ 996,055,086
--------------
Liabilities
Payable for investment securities purchased .... 10,195,000
Payable for Fund shares redeemed ............... 4,014,842
Accrued service fee ............................ 262,000
Accrued transfer agency and dividend
disbursing .................................... 95,949
Accrued accounting services fee ................ 7,083
Other .......................................... 16,338
--------------
Total liabilities ........................... 14,591,212
--------------
Total net assets ........................... $981,463,874
==============
Net Assets
$1.00 par value capital stock
Capital stock ................................. $ 106,172,586
Additional paid-in capital .................... 1,299,607,193
Accumulated undistributed income (loss):
Accumulated undistributed net investment income 1,677,669
Accumulated undistributed net realized
loss on investment transactions ............. (444,546,121)
Net unrealized appreciation in value of
investments at end of period ................ 18,552,547
--------------
Net assets applicable to outstanding
units of capital ........................... $981,463,874
==============
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $9.24
Class Y .......................................... $9.24
Capital shares outstanding
Class A .......................................... 105,930,216
Class Y .......................................... 242,370
Capital shares authorized .......................... 500,000,000
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended SEPTEMBER 30, 1996
Investment Income
Income:
Interest ........................................ $46,251,099
Dividends ....................................... 280,260
------------
Total income .................................. 46,531,359
------------
Expenses (Note 2):
Investment management fee ....................... 2,691,626
Service fee - Class A ........................... 650,318
Transfer agency and dividend disbursing - Class A 640,582
Legal fees ...................................... 267,018
Accounting services fee ......................... 42,500
Custodian fees .................................. 21,547
Audit fees ...................................... 16,040
Shareholder servicing - Class Y ................. 1,709
Other ........................................... 107,733
------------
Total expenses ................................ 4,439,073
------------
Net investment income ........................ 42,092,286
------------
Realized and Unrealized Gain (Loss) on Investments
Realized net loss on securities .................. (13,605,677)
Realized net loss on foreign
currency transactions ........................... (17,025)
------------
Realized net loss on investments ................ (13,622,702)
Unrealized appreciation in value of
investments during the period.................... 28,645,551
------------
Net gain on investments ....................... 15,022,849
------------
Net increase in net assets resulting
from operations ............................ $57,115,135
============
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the For the
six months fiscal year
ended ended
September 30, March 31,
1996 1996
-------------- -------------
Increase in Net Assets
Operations:
Net investment income .......... $42,092,286 $ 84,967,787
Realized net loss on
investments ................... (13,622,702) (16,543,528)
Unrealized appreciation ........ 28,645,551 60,496,492
------------ --------------
Net increase in net assets
resulting from operations ... 57,115,135 128,920,751
------------ --------------
Dividends to shareholders from
net investment income:*
Class A ........................ (41,071,068) (85,921,769)
Class Y ........................ (93,681) (18,564)
------------ --------------
(41,164,749) (85,940,333)
------------ --------------
Capital share transactions:
Proceeds from sale of shares:
Class A (3,826,740 and 7,953,459
shares, respectively) ....... 34,723,139 71,825,120
Class Y (7,846 and 236,584
shares, respectively) ....... 71,271 2,181,529
Proceeds from reinvestment
of dividends:
Class A (3,776,579 and
7,892,778 shares, respectively) 34,132,844 71,060,893
Class Y (10,365 and 2,040
shares, respectively) ....... 93,681 18,564
Payments for shares redeemed:
Class A (8,540,257 and 16,328,917
shares, respectively) ....... (77,462,493) (147,555,964)
Class Y (12,131 and 2,334
shares, respectively) ....... (110,182) (21,268)
------------ --------------
Net decrease in net assets
resulting from capital share
transactions ................ (8,551,740) (2,491,126)
------------ --------------
Total increase .............. 7,398,646 40,489,292
Net Assets
Beginning of period ............. 974,065,228 933,575,936
------------ --------------
End of period, including
undistributed net investment
income of $1,677,669 and
$767,157, respectively ......... $981,463,874 $974,065,228
============ ==============
*See "Financial Highlights" on pages 22 - 23.
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
Class A Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the
six months For the fiscal year ended March 31,
ended -----------------------------------
9-30-96 1996 1995 1994 1993 1992
------- ------ ------ ------ ------ ------
Net asset value,
beginning of period $9.09 $8.70 $9.20 $9.21 $8.82 $7.51
----- ----- ----- ----- ----- ------
Income from investment
operations:
Net investment
income .......... 0.40 0.79 0.80 0.80 0.83 0.95
Net realized and
unrealized gain
(loss) on
investments ..... 0.14 0.40 (0.51) (0.01) 0.40 1.29
----- ----- ----- ----- ----- ------
Total from investment
operations ....... 0.54 1.19 0.29 0.79 1.23 2.24
----- ----- ----- ----- ----- ------
Less dividends
declared from net
investment income . (0.39) (0.80) (0.79) (0.80) (0.84) (0.93)
----- ----- ----- ----- ----- ------
Net asset value,
end of period .... $9.24 $9.09 $8.70 $9.20 $9.21 $8.82
===== ===== ===== ===== ===== =====
Total return* ...... 6.09% 14.16% 3.41% 8.69% 14.72% 31.72%
Net assets, end
of period (000
omitted) .........$979,223$971,916$933,576$1,006,619$986,867$910,917
Ratio of expenses to
average net assets 0.92%** 0.85% 0.84% 0.78% 0.75% 0.79%
Ratio of net investment
income to average
net assets ....... 8.69%** 8.74% 9.07% 8.51% 9.28% 11.56%
Portfolio turnover
rate ............. 26.35% 41.67% 18.94% 54.80% 58.68% 62.12%
*Total return calculated without taking into account the sales load deducted
on an initial purchase.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
Class Y Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the For the
six Period
months from 1/4/96
ended through
9/30/96 3/31/96*
-------- --------
Net asset value,
beginning of period $9.10 $9.19
----- -----
Income from investment
operations:
Net investment
income .......... 0.40 0.20
Net realized and
unrealized gain (loss)
on investments... 0.13 (0.10)
----- -----
Total from investment
operations ........ 0.53 0.10
----- -----
Less dividends
declared from net
investment income . (0.39) (0.19)
----- -----
Net asset value,
end of period ..... $9.24 $9.10
===== =====
Total return ....... 6.16% 1.00%
Net assets, end of
period (000
omitted) ......... $2,241 $2,149
Ratio of expenses
to average net
assets ............ 0.80%** 0.80%**
Ratio of net
investment income
to average net
assets ............ 8.81%** 8.55%**
Portfolio
turnover rate ..... 26.35% 41.67%**
*On July 31, 1995, the Fund began offering Class Y shares to the public.
Fund shares outstanding prior to that date were designated Class A
shares.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 -- Significant Accounting Policies
United High Income Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. Its investment objective is to provide a high level of current income,
by investing primarily in a diversified portfolio of high-yield, high-risk fixed
income securities, with a secondary objective of capital growth when consistent
with the primary objective. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally accepted
accounting principles.
A. Security valuation -- Each stock and convertible bond is valued at the
latest sale price thereof on the last business day of the fiscal period as
reported by the principal securities exchange on which the issue is traded
or, if no sale is reported for a stock, the average of the latest bid and
asked prices. Bonds, other than convertible bonds, are valued using a
pricing system provided by a pricing service or dealer in bonds.
Convertible bonds are valued using this pricing system only on days when
there is no sale reported. Stocks which are traded over-the-counter are
priced using Nasdaq (National Association of Securities Dealers Automated
Quotations System) which provides information on bid and asked or closing
prices quoted by major dealers in such stocks. Restricted securities and
securities for which market quotations are not readily available are valued
at fair value as determined in good faith under procedures established by
and under the general supervision of the Fund's Board of Directors. Short-
term debt securities are valued at amortized cost, which approximates
market.
B. Security transactions and related investment income -- Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Securities gains and losses are calculated on the
identified cost basis. Original issue discount (as defined in the Internal
Revenue Code), premiums on the purchase of bonds and post-1984 market
discount are amortized for both financial and tax reporting purposes over
the remaining lives of the bonds. Dividend income is recorded on the ex-
dividend date. Interest income is recorded on the accrual basis. See Note
3 -- Investment Security Transactions.
C. Federal income taxes -- It is the Fund's policy to distribute all of its
taxable income and capital gains to its shareholders and otherwise qualify
as a regulated investment company under the Internal Revenue Code. In
addition, the Fund intends to pay distributions as required to avoid
imposition of excise tax. Accordingly, provision has not been made for
Federal income taxes. See Note 4 -- Federal Income Tax Matters.
D. Dividends and distributions -- Dividends and distributions to shareholders
are recorded by the Fund on the record date. Net investment income
distributions and capital gains distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are due to differing treatments
for items such as deferral of wash sales and post-October losses, foreign
currency transactions, net operating losses and expiring capital loss
carryforwards.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
NOTE 2 -- Investment Management and Payments to Affiliated Persons
The Fund pays a fee for investment management services. The fee is
computed daily based on the net asset value at the close of business. The fee
consists of two elements: (i) a "Specific" fee computed on net asset value as
of the close of business each day at the annual rate of .15% of net assets and
(ii) a "Group" fee computed each day on the combined net asset values of all of
the funds in the United Group of mutual funds (approximately $14.7 billion of
combined net assets at September 30, 1996) at annual rates of .51% of the first
$750 million of combined net assets, .49% on that amount between $750 million
and $1.5 billion, .47% between $1.5 billion and $2.25 billion, .45% between
$2.25 billion and $3 billion, .43% between $3 billion and $3.75 billion, .40%
between $3.75 billion and $7.5 billion, .38% between $7.5 billion and $12
billion, and .36% of that amount over $12 billion. The Fund accrues and pays
this fee daily.
Pursuant to assignment of the Investment Management Agreement between the
Fund and Waddell & Reed, Inc. ("W&R"), Waddell & Reed Investment Management
Company ("WRIMCO"), a wholly-owned subsidiary of W&R, serves as the Fund's
investment manager.
The Fund has an Accounting Services Agreement with Waddell & Reed Services
Company ("WARSCO"), a wholly-owned subsidiary of W&R. Under the agreement,
WARSCO acts as the agent in providing accounting services and assistance to the
Fund and pricing daily the value of shares of the Fund. For these services, the
Fund pays WARSCO a monthly fee of one-twelfth of the annual fee shown in the
following table.
Accounting Services Fee
Average
Net Asset Level Annual Fee
(all dollars in millions) Rate for Each Level
------------------------- -------------------
From $ 0 to $ 10 $ 0
From $ 10 to $ 25 $ 10,000
From $ 25 to $ 50 $ 20,000
From $ 50 to $ 100 $ 30,000
From $ 100 to $ 200 $ 40,000
From $ 200 to $ 350 $ 50,000
From $ 350 to $ 550 $ 60,000
From $ 550 to $ 750 $ 70,000
From $ 750 to $1,000 $ 85,000
$1,000 and Over $100,000
For Class A shares, the Fund also pays WARSCO a monthly per account charge
for transfer agency and dividend disbursement services of $1.3125 for each
shareholder account which was in existence at any time during the prior month
($1.0208 per account prior to April 1, 1996), plus $0.30 for each account on
which a dividend or distribution of cash or shares had a record date in that
month. With respect to Class Y shares, the Fund pays WARSCO a monthly fee at an
annual rate of .15% of the average daily net assets of the class for the
preceding month. The Fund also reimburses W&R and WARSCO for certain out-of-
pocket costs.
As principal underwriter for the Fund's shares, W&R received direct and
indirect gross sales commissions for Class A shares (which are not an expense of
the Fund) of $944,299, out of which W&R paid sales commissions of $534,633 and
all expenses in connection with the sale of Fund shares, except for registration
fees and related expenses.
Under a Service Plan for Class A shares adopted by the Fund pursuant to
Rule 12b-1 under the Investment Company Act of 1940, the Fund may pay monthly a
fee to W&R in an amount not to exceed .25% of the Fund's average annual net
assets. The fee is to be paid to reimburse W&R for amounts it expends in
connection with the provision of personal services to Fund shareholders and/or
maintenance of shareholder accounts.
The Fund paid Directors' fees of $17,630.
W&R is an indirect subsidiary of Torchmark Corporation, a holding company,
and United Investors Management Company, a holding company, and a direct
subsidiary of Waddell & Reed Financial Services, Inc., a holding company.
NOTE 3 -- Investment Security Transactions
Purchases of investment securities, other than U.S. Government obligations
and short-term securities, aggregated $237,540,119 while proceeds from
maturities and sales aggregated $268,404,158. Purchases of short-term
securities aggregated $434,549,070 while proceeds from maturities and sales of
short-term securities aggregated $430,992,778. There were no purchases or sales
of U.S. Government securities during the period.
For Federal income tax purposes, cost of investments owned at September 30,
1996 was $938,463,834, resulting in net unrealized appreciation of $19,319,321,
of which $37,219,230 related to appreciated securities and $17,899,909 related
to depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized net capital losses of
$20,841,730 during its fiscal year ended March 31, 1996. Capital loss
carryforwards aggregated $431,707,217 at March 31, 1996 and are available to
offset future realized capital gain net income for Federal income tax purposes
through March 31, 1997; $346,084,313 of this amount is available through March
31, 1998; $324,499,056 is available through March 31, 1999; $152,828,886 is
available through March 31, 2000; $38,804,483 is available through March 31,
2003; and $20,841,730 is available through March 31, 2004.
NOTE 5 -- Multiclass Operations
On July 31, 1995, the Fund was authorized to offer investors a choice of
two classes of shares, Class A and Class Y, each of which has equal rights as to
assets and voting privileges. Class Y shares are not subject to a sales charge
on purchases; they are not subject to a Rule 12b-1 Service Plan and have a
separate transfer agency and dividend disbursement services fee structure. A
comprehensive discussion of the terms under which shares of either class are
offered is contained in the prospectus and the Statement of Additional
Information for the Fund.
Income, non-class specific expenses and realized and unrealized gains and
losses are allocated daily to each class of shares based on the value of
relative net assets as of the beginning of each day adjusted for the prior day's
capital share activity.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
United High Income Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of United High Income Fund, Inc. (the
"Fund") at September 30, 1996, the results of its operations for the six months
then ended and the changes in its net assets and the financial highlights for
each of the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 1996 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Kansas City, Missouri
November 8, 1996
<PAGE>
DIRECTORS
Ronald K. Richey, Birmingham, Alabama, Chairman of the Board
Henry L. Bellmon, Red Rock, Oklahoma
Dodds I. Buchanan, Boulder, Colorado
Jay B. Dillingham, Kansas City, Missouri
Linda Graves, Topeka, Kansas
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
Doyle Patterson, Kansas City, Missouri
William L. Rogers, Los Angeles, California
Frank J. Ross, Jr., Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Keith A. Tucker, Overland Park, Kansas
Frederick Vogel III, Milwaukee, Wisconsin
Paul S. Wise, Carefree, Arizona
OFFICERS
Keith A. Tucker, President
Robert L. Hechler, Vice President
Henry J. Herrmann, Vice President
John M. Holliday, Vice President
Theodore W. Howard, Vice President and Treasurer
Sharon K. Pappas, Vice President and Secretary
Louise D. Rieke, Vice President
Carl E. Sturgeon, Vice President
To all IRA Planholders:
As required by law, income tax will automatically be withheld from any
distribution or withdrawal from an IRA unless you make a written election not to
have taxes withheld. The election may be made by submitting forms provided by
Waddell & Reed, Inc. which can be obtained from your Waddell & Reed
representative or by submitting Internal Revenue Service form W-4P. Once made,
an election can be revoked by providing written notice to Waddell & Reed, Inc.
If you elect not to have tax withheld you may be required to make payments of
estimated tax. Penalties may be imposed by the IRS if withholding and estimated
tax payments are not adequate.
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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
(913) 236-1303
Our INTERNET address is:
http://www.waddell.com
NUR1009SA(9-96)
printed on recycled paper
