United
High Income
Fund, Inc.
ANNUAL
REPORT
----------------------------------------
For the fiscal year ended March 31, 1996
<PAGE>
FUND MANAGER'S LETTER
- -----------------------------------------------------------------
MARCH 31, 1996
Dear Shareholder:
This report relates to the operation of United High Income Fund for the fiscal
year ended March 31, 1996. The following discussion, graphs and tables provide
you with information regarding the Fund's performance during that period.
During the past fiscal year, the economy experienced a slowing of growth
prompting the Federal Reserve Bank to lower short-term interest rates. The
lowering of interest rates resulted in sharp decreases in yields of U.S.
Treasury Securities and led to a rally in the high-yield bond market. Towards
the end of the fiscal year, strong employment figures prompted fears of renewed
excessive economic growth and action by the Federal Reserve Bank to raise
interest rates. Federal budget negotiations and election year politics also had
a distracting effect on the bond markets.
During the past fiscal year, the Fund emphasized cyclical securities such as
those issued by companies in the paper, chemical and auto parts industries. The
Fund has continued to stress relatively higher quality high-yield debt
securities. Economic trends during the latter part of the fiscal year permitted
the Fund to invest in some higher-yielding defensive issues.
The strategies and techniques we applied resulted in the performance of the Fund
remaining fairly consistent with the First Boston High Yield Index and the
Lipper High Current Yield Fund Universe Average, as charted on the following
page. The First Boston index reflects the performance of securities that
generally represent the high-yield bond market and the Lipper index reflects the
universe of funds with similar investment objectives.
Recent economic statistics suggest that the economy will experience moderate
growth during the early part of the next fiscal year. Concerns regarding the
upcoming Presidential election, stalled budget negotiations and rising inflation
have some market analysts predicting that the Federal Reserve Bank will tighten
credit and raise interest rates during the year. This view appears extreme. We
anticipate volatility in the bond market during the early part of the fiscal
year. Such volatility could provide an opportunity to add investments to the
Fund's portfolio at advantageous prices. We intend to take advantage of any
volatility to increase the maturity of the Fund's holdings in the belief that
lower interest rates are likely at some point in the reasonably near term.
Thank you very much for your continued support and confidence in our
organization.
Respectfully,
Louise D. Rieke
Manager, United High Income Fund
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
UNITED HIGH INCOME FUND, INC. CLASS A SHARES,
THE FIRST BOSTON HIGH YIELD INDEX,
AND THE LIPPER HIGH CURRENT YIELD FUND UNIVERSE AVERAGE
Lipper
United High
High First Current
Income Boston Yield
Fund High Fund
Class Yield Universe
A Shares Index Average
------------------ ----------
03/31/86 Purchase 9,425 10,000 10,000
03/31/87 10,861 11,273 11,225
03/31/88 10,633 11,963 11,389
03/31/89 11,579 13,090 12,367
03/31/90 9,775 12,583 11,557
03/31/91 10,026 14,330 12,231
03/31/92 13,206 18,805 15,742
03/31/93 15,150 21,692 18,201
03/31/94 16,468 23,859 20,118
03/31/95 17,031 25,004 20,447
03/31/96 19,443 28,639 23,465
+++++ First Boston High Yield Index - $28,639
- ---------- Lipper High Current Yield Fund Universe Average -- $23,465
===== United High Income Fund Class A Shares* -- $19,443
*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.
Annual Average Total Return+
Class A++ Class Y
-----------------------------
Year Ended
3/31/96 7.60% N/A
5 Years Ended
3/31/96 12.82% N/A
10 Years Ended
3/31/96 6.87% N/A
Aggregate Total
Return for Life
of Class Y +++ N/A 1.00%
+ 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.
+++ 1/4/96 (the date on which Fund Class Y shares were first acquired by
shareholders) through 3/31/96.
Past performance is not predictive of future performance. Indexes are
unmanaged.
<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
<PAGE>
PERFORMANCE SUMMARY -- Class A Shares
PER SHARE DATA
For the Fiscal Year Ended March 31, 1996
- ----------------------------------------
DIVIDENDS PAID $0.80
=====
NET ASSET VALUE ON
3/31/96 $9.09
3/31/95 8.70
-----
CHANGE PER SHARE $0.39
=====
Past performance is not necessarily indicative of future results.
TOTAL RETURN HISTORY
Average Annual Total Return
---------------------------
With Without
Period Sales Load* Sales Load**
- ------ ----------- ------------
1-year period ended 3-31-96 7.60% 14.16%
5-year period ended 3-31-96 12.82% 14.16%
10-year period ended 3-31-96 6.87% 7.50%
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 March 31, 1996, United High Income Fund, Inc. had net assets totaling
$974,065,228 invested in a diversified portfolio of:
87.79% Corporate Debt Securities
5.80% Cash and Cash Equivalents
4.76% Common and Preferred Stocks and Warrants
1.65% United States Government Security
As a shareholder of United High Income Fund, Inc., for every $100 you had
invested on March 31, 1996, your Fund owned:
$28.75 Manufacturing Bonds
23.19 Transportation, Communication, Electric
and Sanitary Services Bonds
18.06 Services Bonds
11.56 Wholesale and Retail Trade Bonds
5.80 Cash and Cash Equivalents
4.76 Common and Preferred Stocks and Warrants
2.67 Finance, Insurance and Real Estate Bonds
1.89 Contract Construction Bonds
1.65 United States Government Security
1.04 Mining Bonds
0.63 Miscellaneous Investing Institutions Bonds
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1996
Shares Value
COMMON AND PREFERRED STOCKS AND WARRANTS
Amusement and Recreation Services - 0.28%
Fitzgeralds Gaming Corporation,
Warrants (A)* ....................... 14,000 $ 140,000
Trump Hotels & Casino Resorts, Inc.* . 87,500 2,559,375
Total ............................... 2,699,375
Business Services - 0.09%
Chancellor Communications Corporation,
Class A* ............................ 40,000 892,480
Communication - 0.69%
American Radio Systems Corporation* .. 63,000 2,126,250
Heartland Wireless Communications,
Inc., Warrants (A)* ................. 12,000 54,000
Infinity Broadcasting Corporation,
Class A* ............................ 101,250 4,391,719
IntelCom Group Inc., Warrants (A)* ... 20,625 165,000
Total ............................... 6,736,969
Electric, Gas and Sanitary Services - 0.20%
Consolidated Hydro, Inc., Preferred* . 3,000 405,000
Consolidated Hydro, Inc., Warrants (A)* 5,400 5
EUA Contingent Interest Certificates* 9,500 10
El Paso Electric Company, Preferred* . 15,000 1,548,750
Total ............................... 1,953,765
General Building Contractors - 1.00%
NVR L.P., Warrants* .................. 11,871 12,607
Walter Industries, Inc.* ............. 710,990 9,776,112
Total ............................... 9,788,719
Health Services - 0.17%
Beverly Enterprises, Inc.* ........... 150,000 1,650,000
Holding and Other Investment Offices - 0.31%
LTC Properties, Inc. ................. 100,000 1,625,000
National Health Investors, Inc. ...... 41,630 1,352,975
Total ............................... 2,977,975
Industrial Machinery and Equipment - 0.17%
Bell & Howell Holdings Company* ...... 50,000 1,637,500
Lumber and Wood Products - 1.17%
Triangle Pacific Corp.* .............. 660,844 11,357,926
See Notes to Schedule of Investments on pages 18 and 19.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1996
Shares Value
COMMON AND PREFERRED STOCKS AND
WARRANTS (Continued)
Printing and Publishing - 0.68%
Advanstar Holdings, Inc. (B)* ........ 75,625 $ 1,285,625
Advanstar Holdings, Inc.,
Warrants (A)* ....................... 1,750 1,750
K-III Communications Corporation,
Preferred (A)* ...................... 35,000 3,438,750
World Color Press, Inc.* ............. 100,000 1,900,000
Total ............................... 6,626,125
TOTAL COMMON AND PREFERRED STOCKS
AND WARRANTS - 4.76% $ 46,320,834
(Cost: $56,778,239)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Amusement and Recreation Services - 3.69%
AMF Group Inc.:
0.0%, 3-15-2006 (A)(C) .............. $ 5,250 2,861,250
10.875%, 3-15-2006 (A) .............. 3,250 3,233,750
Argosy Gaming Company, Convertible,
12.0%, 6-1-2001 ..................... 3,000 2,692,500
California Hotel Finance Corporation,
11.0%, 12-1-2002 .................... 5,000 5,287,500
Harrah's Operating Company, Inc.,
10.875%, 4-15-2002 .................. 2,000 2,150,000
Players International, Inc.,
10.875%, 4-15-2005 .................. 4,000 4,050,000
Plitt Theatres, Inc.,
10.875%, 6-15-2004 .................. 4,000 4,080,000
Rio Hotel & Casino, Inc.,
10.625%, 7-15-2005 .................. 5,000 5,275,000
Trump Hotels & Casino Resorts
Holdings, L.P.,
15.5%, 6-15-2005 .................... 5,500 6,297,500
Total ............................... 35,927,500
Building Materials and Garden Supplies - 0.60%
Orchard Supply Hardware Stores Corporation,
9.375%, 2-15-2002 ................... 6,000 5,820,000
See Notes to Schedule of Investments on pages 18 and 19.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Business Services - 2.38%
Adams Outdoor Advertising Limited Partnership,
10.75%, 3-15-2006 (A) ............... $ 4,250 $ 4,345,625
Heritage Media Corporation,
8.75%, 2-15-2006 .................... 4,500 4,286,250
Lamar Advertising Company,
11.0%, 5-15-2003 .................... 2,000 2,110,000
Outdoor Systems, Inc.,
10.75%, 8-15-2003 ................... 7,000 7,070,000
Scotsman Group, Inc.,
9.5%, 12-15-2000 .................... 3,500 3,587,500
Shared Technologies Fairchild
Communications Corp.,
0.0%, 3-1-2006 (A)(C) ............... 2,500 1,775,000
Total ............................... 23,174,375
Chemicals and Allied Products - 2.52%
Chattem, Inc.,
12.75%, 6-15-2004 ................... 4,500 4,398,750
LaRoche Industries Inc.,
13.0%, 8-15-2004 .................... 2,000 2,140,000
Revlon Worldwide Corporation,
0.0%, 3-15-98 ....................... 7,000 5,460,000
UCC Investors Holding, Inc.:
10.5%, 5-1-2002 ..................... 9,000 9,405,000
0.0%, 5-1-2005 (C) .................. 4,000 3,160,000
Total ............................... 24,563,750
Communication - 20.71%
Adelphia Communications Corporation,
12.5%, 5-15-2002 .................... 6,500 6,841,250
Allbritton Communications Company,
9.75%, 11-30-2007 (A)_............... 4,500 4,241,250
American Radio Systems Corporation,
9.0%, 2-1-2006 ...................... 3,750 3,675,000
Arch Communications Group, Inc.,
0.0%, 3-15-2008 (C) ................. 9,500 5,438,750
Argyle Television Operations, Inc.,
9.75%, 11-1-2005 .................... 10,000 9,600,000
Brooks Fiber Properties, Inc.,
0.0%, 3-1-2006 (A)(C) ............... 5,500 3,190,000
Cablevision Industries Corporation,
9.25%, 4-1-2008 ..................... 5,000 5,400,000
Cablevision Systems Corporation,
10.75%, 4-1-2004 .................... 3,500 3,692,500
Centennial Cellular Corp.,
10.125%, 5-15-2005 .................. 3,000 3,030,000
Century Communications Corporation,
11.875%, 10-15-2003 ................. 6,500 6,955,000
See Notes to Schedule of Investments on pages 18 and 19.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Communication (Continued)
COMCAST CELLULAR CORPORATION,
0.0%, 3-5-2000 ...................... $ 6,300 $ 4,536,000
COMCAST CORPORATION,
9.5%, 1-15-2008 ..................... 8,000 8,100,000
Comcast UK Cable Partners Limited,
0.0%, 11-15-2007 (C) ................ 9,000 5,197,500
Continental Cablevision, Inc.:
10.625%, 6-15-2002 .................. 2,500 2,725,000
8.875%, 9-15-2005 ................... 8,500 9,180,000
8.3%, 5-15-2006 (A) ................. 5,500 5,678,750
11.0%, 6-1-2007 ..................... 3,800 4,332,000
Diamond Cable Communications Plc,
0.0%, 12-15-2005 (C) ................ 3,500 2,047,500
EZ Communications, Inc.,
9.75%, 12-1-2005 .................... 4,500 4,466,250
Granite Broadcasting Corporation:
10.375%, 5-15-2005 .................. 2,500 2,528,125
9.375%, 12-1-2005 (A) ............... 3,000 2,835,000
Heartland Wireless Communications, Inc.,
13.5%, 4-15-2003 .................... 2,000 2,220,000
Infinity Broadcasting Corporation,
10.375%, 3-15-2002 .................. 9,000 9,540,000
IntelCom Group Inc.,
0.0%, 9-15-2005 (C) ................. 6,250 4,000,000
InterCel, Inc., Units,
0.0%, 2-1-2006 (C)(D) ............... 50 3,025,000
International CableTel Incorporated,
0.0%, 2-1-2006 (A)(C) ............... 10,750 6,073,750
MFS Communications Company, Inc.:
0.0%, 1-15-2004 (C) ................. 6,750 5,130,000
0.0%, 1-15-2006 (C) ................. 7,500 4,650,000
Marcus Cable Operating Company,
0.0%, 8-1-2004 (C) .................. 10,000 7,250,000
Metrocall, Inc.,
10.375%, 10-1-2007 .................. 5,500 5,610,000
NEXTEL Communications, Inc.,
0.0%, 8-15-2004 (C) ................. 5,000 2,925,000
Rifkin Acquisition Partners, L.L.L.P.,
11.125%, 1-15-2006 (A) .............. 4,000 4,060,000
Rogers Cantel Mobile Communications Inc.,
10.75%, 11-1-2001 ................... 2,500 2,612,500
Rogers Communications Inc.,
9.125%, 1-15-2006 ................... 7,500 7,256,250
Sullivan Broadcasting Company, Inc.,
10.25%, 12-15-2005 .................. 1,000 990,000
Turner Broadcasting System, Inc.,
8.375%, 7-1-2013 .................... 10,000 9,980,000
See Notes to Schedule of Investments on pages 18 and 19.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Communication (Continued)
USA Mobile Communications, Inc. II,
9.5%, 2-1-2004 ...................... $ 2,000 $ 1,940,000
United International Holdings, Inc.,
0.0%, 11-15-99 ...................... 5,000 3,231,250
Viacom International, Inc.:
10.25%, 9-15-2001 ................... 3,000 3,322,500
8.0%, 7-7-2006 ...................... 15,000 14,212,500
Total ............................... 201,718,625
Eating and Drinking Places - 0.70%
Foodmaker, Inc.,
9.25%, 3-1-99 ....................... 7,000 6,825,000
Electric, Gas and Sanitary Services - 0.52%
El Paso Electric Company,
9.4%, 5-1-2011 ...................... 5,000 5,062,500
Electronic and Other Electric Equipment - 2.36%
A+ Network, Inc.,
11.875%, 11-1-2005 .................. 5,000 5,100,000
Communications & Power Industries,
Inc.,
12.0%, 8-1-2005 ..................... 4,000 4,150,000
Exide Corporation:
10.75%, 12-15-2002 .................. 1,500 1,541,250
0.0%, 12-15-2004 (C) ................ 4,000 3,200,000
10.0%, 4-15-2005 .................... 5,000 5,087,500
Harmon Industries, Inc.,
12.0%, 8-1-2002 ..................... 3,500 3,867,500
Total ............................... 22,946,250
Fabricated Metal Products - 1.74%
American Safety Razor Company,
9.875%, 8-1-2005 .................... 1,000 1,026,250
Nortek, Inc.,
9.875%, 3-1-2004 .................... 7,000 6,580,000
Silgan Corporation,
0.0%, 12-15-2002 (C) ................ 9,500 9,310,000
Total ............................... 16,916,250
See Notes to Schedule of Investments on pages 18 and 19.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Food and Kindred Products - 1.79%
Dr Pepper Holdings, Inc.,
0.0%, 2-15-2003 (C) ................. $ 3,500 $ 2,975,000
Pilgrim's Pride Corporation,
10.875%, 8-1-2003 ................... 3,500 3,342,500
Specialty Foods Corporation:
10.25%, 8-15-2001 ................... 4,000 3,620,000
11.125%, 10-1-2002 .................. 2,000 1,870,000
11.25%, 8-15-2003 ................... 7,000 5,670,000
Total ............................... 17,477,500
Food Stores - 6.47%
Big V Supermarkets, Inc.,
11.0%, 2-15-2004 .................... 5,000 4,425,000
Bruno's Inc.,
10.5%, 8-1-2005 ..................... 8,500 8,160,000
Dominick's Finer Foods, Inc.,
10.875%, 5-1-2005 ................... 5,000 5,262,500
Jitney-Jungle Stores of America, Inc.,
12.0%, 3-1-2006 ..................... 3,000 2,970,000
Kroger Co. (The):
9.75%, 2-15-2004 .................... 10,000 10,700,000
9.25%, 1-1-2005 ..................... 3,000 3,210,000
P & C Food Markets, Inc.,
11.5%, 10-15-2001 ................... 5,000 5,100,000
Penn Traffic Company:
8.625%, 12-15-2003 .................. 6,500 5,915,000
10.375%, 10-1-2004 .................. 8,500 8,372,500
Safeway Inc.,
10.0%, 12-1-2001 .................... 8,000 8,880,000
Total ............................... 62,995,000
Furniture and Fixtures - 1.26%
Knoll Group, Inc. (The),
10.875%, 3-15-2006 (A) .............. 4,500 4,590,000
Lear Seating Corp.,
8.25%, 2-1-2002 ..................... 8,000 7,680,000
Total ............................... 12,270,000
General Building Contractors - 1.89%
Beazer Homes USA, Inc.,
9.0%, 3-1-2004 ...................... 4,000 3,840,000
Del Webb Corporation:
9.75%, 3-1-2003 ..................... 5,500 5,568,750
9.0%, 2-15-2006 ..................... 2,000 1,920,000
NVR L.P.,
11.0%, 4-15-2003 .................... 3,500 3,535,000
U.S. Home Corporation,
9.75%, 6-15-2003 .................... 3,500 3,570,000
Total ............................... 18,433,750
See Notes to Schedule of Investments on pages 18 and 19.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Health Services - 5.38%
ARV Assisted Living, Inc., Convertible,
6.75%, 4-1-2006 (A) ................. $ 5,000 $ 5,150,000
Abbey Healthcare Group Incorporated,
9.5%, 11-1-2002 ..................... 2,000 2,112,500
Assisted Living Concepts, Inc., Convertible,
7.0%, 7-31-2005 (A) ................. 1,000 1,290,000
Multicare Companies, Inc. (The),
12.5%, 7-1-2002 ..................... 5,398 6,018,770
Quorum Health Group, Inc.:
11.875%, 12-15-2002 ................. 7,000 7,752,500
8.75%, 11-1-2005 .................... 4,500 4,522,500
Regency Health Services, Inc.,
9.875%, 10-15-2002 .................. 4,000 4,060,000
Tenet Healthcare Corporation:
9.625%, 9-1-2002 .................... 14,000 15,015,000
10.125%, 3-1-2005 ................... 6,000 6,420,000
Total ............................... 52,341,270
Holding and Other Investment Offices - 3.74%
Jordan Industries, Inc.,
10.375%, 8-1-2003 ................... 10,500 9,712,500
LTC Properties, Inc., Convertible:
8.5%, 1-1-2000 ...................... 3,000 3,015,000
8.5%, 1-1-2001 ...................... 3,000 3,120,000
MacAndrews & Forbes Group, Incorporated:
12.25%, 7-1-96 ...................... 10,750 10,642,500
13.0%, 3-1-99 ....................... 9,750 9,945,000
Total ............................... 36,435,000
Hotels and Other Lodging Places - 4.06%
GNF, CORP.,
10.625%, 4-1-2003 ................... 7,000 6,982,500
HMC Acquisition Properties, Inc.,
9.0%, 12-15-2007 (A) ................ 6,000 5,670,000
LaQuinta Motor Inns, Inc.,
9.25%, 5-15-2003 .................... 7,500 7,837,500
Premier Parks Inc.,
12.0%, 8-15-2003 .................... 1,500 1,597,500
Prime Hospitality Corp.,
9.25%, 1-15-2006 .................... 4,000 3,890,000
Showboat, Inc.,
9.25%, 5-1-2008 ..................... 9,000 9,180,000
Station Casinos, Inc.,
10.125%, 3-15-2006 .................. 4,500 4,432,500
Total ............................... 39,590,000
See Notes to Schedule of Investments on pages 18 and 19.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Industrial Machinery and Equipment - 3.64%
American Standard Inc.:
9.875%, 6-1-2001 .................... $ 2,000 $ 2,100,000
0.0%, 6-1-2005 (C) .................. 12,250 10,443,125
9.25%, 12-1-2016 .................... 8,000 8,180,000
Bell & Howell Company:
10.75%, 10-1-2002 ................... 5,000 5,300,000
0.00%, 3-1-2005 (C) ................. 8,200 5,330,000
Fairfield Manufacturing Company, Inc.,
11.375%, 7-1-2001 ................... 4,000 4,070,000
Total ............................... 35,423,125
Instruments and Related Products - 1.44%
IVAC Corporation,
9.25%, 12-1-2002 .................... 2,500 2,600,000
Mark IV Industries, Inc.,
8.75%, 4-1-2003 ..................... 11,000 11,440,000
Total ............................... 14,040,000
Insurance Carriers - 1.30%
American Annuity Group, Inc.:
9.5%, 8-15-2001 ..................... 5,500 5,720,000
11.125%, 2-1-2003 ................... 6,500 6,987,500
Total ............................... 12,707,500
Lumber and Wood Products - 0.70%
Triangle Pacific Corp.,
10.5%, 8-1-2003 ..................... 6,500 6,825,000
Miscellaneous Retail - 0.89%
Eckerd Corporation,
9.25%, 2-15-2004 .................... 5,500 5,720,000
PETROLEUM HEAT AND POWER CO., INC.,
9.375%, 2-1-2006 .................... 3,000 2,970,000
Total ............................... 8,690,000
Nondepository Institutions - 1.37%
First Nationwide Holdings Inc.,
9.125% 1-15-2003 (A) ................ 3,750 3,712,500
GP Group, Inc.,
8.75%, 12-15-98 ..................... 9,500 9,595,000
Total ............................... 13,307,500
See Notes to Schedule of Investments on pages 18 and 19.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Oil and Gas Extraction - 1.04%
Falcon Drilling, Inc.,
9.75%, 1-15-2001 .................... $ 3,500 $ 3,622,500
Noble Drilling Corporation,
9.25%, 10-1-2003 .................... 4,000 4,040,000
Vintage Petroleum, Inc.,
9.0%, 12-15-2005 .................... 2,500 2,437,500
Total ............................... 10,100,000
Paper and Allied Products - 2.97%
Asia Pulp & Paper Company Ltd,
11.75%, 10-1-2005 ................... 4,500 4,370,625
Container Corporation of America,
11.25%, 5-1-2004 .................... 3,500 3,613,750
Fort Howard Corporation:
9.25%, 3-15-2001 .................... 8,000 8,060,000
9.0%, 2-1-2006 ...................... 2,000 1,940,000
Mail-Well Corporation,
10.5%, 2-15-2004 .................... 3,500 3,403,750
S. D. Warren Company,
12.0%, 12-15-2004 ................... 3,000 3,165,000
Sweetheart Cup Company, Inc.,
10.5%, 9-1-2003 ..................... 4,250 4,335,000
Total ............................... 28,888,125
Personal Services - 0.44%
Coinmach Corporation,
11.75%, 11-15-2005 (A) .............. 4,220 4,241,100
Petroleum and Coal Products - 0.38%
Clark USA, Inc.,
10.875%, 12-1-2005 (A) .............. 3,500 3,657,500
Primary Metal Industries - 1.71%
Essex Group, Inc.,
10.0%, 5-1-2003 ..................... 4,000 4,040,000
Inland Steel Industries, Inc.,
12.75%, 12-15-2002 .................. 6,000 6,690,000
Russel Metals Inc.,
10.25%, 6-15-2000 ................... 4,500 4,455,000
Ucar Global Enterprises Inc.,
12.0%, 1-15-2005 .................... 1,310 1,506,500
Total ............................... 16,691,500
See Notes to Schedule of Investments on pages 18 and 19.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Printing and Publishing - 1.65%
American Media Operations, Inc.,
11.625%, 11-15-2004 ................. $ 4,000 $ 4,060,000
Big Flower Press, Inc.,
10.75%, 8-1-2003 .................... 4,333 4,441,325
Hollinger International Publishing Inc.,
9.25%, 2-1-2006 ..................... 2,000 1,940,000
K-III Communications Corporation,
8.5%, 2-1-2006 (A) .................. 6,000 5,700,000
Total ............................... 16,141,325
Railroad Transportation - 1.04%
Southern Pacific Rail Corporation,
9.375%, 8-15-2005 ................... 9,700 10,136,500
Rubber and Miscellaneous Plastics Products - 0.55%
RBX Corporation,
11.25%, 10-15-2005 (A) .............. 5,500 5,362,500
Stone, Clay and Glass Products - 2.69%
Owens-Illinois, Inc.:
10.25%, 4-1-99 ...................... 5,000 5,125,000
10.0%, 8-1-2002 ..................... 5,000 5,175,000
11.0%, 12-1-2003 .................... 7,500 8,221,875
9.75%, 8-15-2004 .................... 7,500 7,668,750
Total ............................... 26,190,625
Textile Mill Products - 2.04%
CMI Industries, Inc.,
9.5%, 10-1-2003 ..................... 4,500 3,555,000
CONSOLTEX GROUP INC.,
11.0%, 10-1-2003 .................... 7,000 6,387,500
Interface, Inc.,
9.5%, 11-15-2005 .................... 2,000 1,970,000
Linter Textiles Corporation Limited,
13.75%, 10-1-2000 (E) ............... 17,200 86,000
WestPoint Stevens Inc.,
9.375%, 12-15-2005 .................. 8,000 7,900,000
Total ............................... 19,898,500
See Notes to Schedule of Investments on pages 18 and 19.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Transportation by Air - 0.92%
NWA, Inc.,
8.625%, 8-1-96 ...................... $ 9,000 $ 9,000,000
Transportation Equipment - 0.53%
Walbro Corporation,
9.875%, 7-15-2005 ................... 2,000 2,040,000
Westinghouse Air Brake Company,
9.375%, 6-15-2005 ................... 3,000 3,120,000
Total ............................... 5,160,000
Wholesale Trade - Durable Goods - 1.35%
Alvey Systems, Inc.,
11.375%, 1-31-2003 (A) .............. 2,500 2,600,000
General Medical Corporation:
10.875%, 8-15-2003 .................. 7,000 7,000,000
12.125%, 8-15-2005 .................. 3,577 3,593,568
Total ............................... 13,193,568
Wholesale Trade - Nondurable Goods - 1.33%
Corporate Express, Inc.,
9.125%, 3-15-2004 ................... 4,000 4,090,000
Hines Horticulture, Inc.,
11.75%, 10-15-2005 .................. 2,000 2,120,000
United Stationers Supply Co.,
12.75%, 5-1-2005 .................... 6,000 6,780,000
Total ............................... 12,990,000
TOTAL CORPORATE DEBT SECURITIES - 87.79% $855,141,138
(Cost: $855,730,098)
UNITED STATES GOVERNMENT SECURITY - 1.65%
United States Treasury,
7.5%, 11-15-2016 .................... 15,000 $ 16,068,750
(Cost: $15,115,389)
TOTAL SHORT-TERM SECURITIES - 4.58% $ 44,626,856
(Cost: $44,626,856)
TOTAL INVESTMENT SECURITIES - 98.78% $962,157,578
(Cost: $972,250,582)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 1.22% 11,907,650
NET ASSETS - 100.00% $974,065,228
See Notes to Schedule of Investments on pages 18 and 19.
<PAGE>
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1996
Notes to Schedule of Investments
No income dividends were paid during the preceding 12 months.
(A) As of March 31, 1996, the following restricted securities were owned:
Shares/
Principal
Acquisition Amount Market
Security Date in 000's Cost Value
-------- ----------- --------------------------------
Advanstar
Holdings,
Inc., Warrants 3/30/92 1,750$ 0 $ 1,750
Consolidated Hydro, Inc.,
Warrants 6/15/93 5,400 127,817 5
Fitzgeralds Gaming
Corporation,
Warrants 3/8/94 to
9/15/95 14,000 506,065 140,000
Heartland Wireless
Communications,
Inc., Warrants 4/20/95 12,000 74,000 54,000
IntelCom Group Inc.,
Warrants 12/8/95 20,625 80,225 165,000
K-III Communications
Corporation,
Preferred 1/19/96 35,000 3,500,000 3,438,750
AMF Group Inc.:
0.0%, 3-15-2006 3/7/96 $ 5,250 2,902,935 2,861,250
10.875%, 3-15-2006 3/7/96 3,250 3,250,000 3,233,750
ARV Assisted Living, Inc.,
Convertible,
6.75%, 4-1-2006 3/28/96 5,000 5,000,000 5,150,000
Adams Outdoor Advertising
Limited Partnership,
10.75%, 3-15-2006 3/5/96 4,250 4,250,000 4,345,625
Allbritton Communications Company,
9.75%, 11-30-2007 2/1/96 4,500 4,477,500 4,241,250
Alvey Systems, Inc.,
11.375%, 1-31-20031/19/96 2,500 2,500,000 2,600,000
Assisted Living Concepts,
Inc., Convertible,
7.0%, 7-31-2005 8/2/95 1,000 1,000,000 1,290,000
Brooks Fiber Properties, Inc.,
0.0%, 3-1-2006 2/16/96 5,500 3,293,580 3,190,000
Clark USA, Inc.,
10.875%, 12-1-200511/22/95 3,500 3,500,000 3,657,500
Coinmach Corporation,
11.75%, 11-15-2005 11/30/95 4,220 4,267,475 4,241,100
Continental Cablevision, Inc.,
8.3%, 5-15-2006 12/8/95 5,500 5,482,345 5,678,750
First Nationwide Holdings Inc.,
9.125%, 1-15-2003 1/23/96 2,000 2,000,000 1,980,000
1/31/96 1,750 1,795,938 1,732,500
Granite Broadcasting Corporation,
9.375%, 12-1-2005 2/13/96 3,000 2,985,000 2,835,000
HMC Acquisition Properties, Inc.,
9.0%, 12-15-2007 12/15/95 6,000 6,000,000 5,670,000
International CableTel Incorporated,
0.0%, 2-1-2006 1/25/96 10,750 6,144,163 6,073,750
K-III Communications Corporation,
8.5%, 2-1-2006 1/19/96 6,000 5,974,680 5,700,000
Knoll Group, Inc. (The),
10.875%, 3-15-2006 2/22/96 4,500 4,500,000 4,590,000
RBX Corporation,
11.25%, 10-15-2005 10/6/95 5,500 5,535,000 5,362,500
Rifkin Acquisition Partners, L.L.L.P.,
11.125%, 1-15-2006 1/26/96 3,000 3,000,000 3,045,000
2/6/96 1,000 1,032,500 1,015,000
Shared Technologies Fairchild
Communications Corp.,
0.0%, 3-1-2006 3/8/96 2,500 1,756,925 1,775,000
----------------------
$84,936,148$84,067,480
======================
The total market value of restricted securities represents approximately
8.63% of the total net assets at March 31, 1996.
(B) Affiliate as defined by the Investment Company Act of 1940 by reason of
ownership by the Fund of 5% or more of its outstanding voting securities.
(C) The security does not bear interest for an initial period of time and
subsequently becomes interest bearing.
(D) Each unit consists of 10 Senior Discount notes due 2-1-2006 and 32
Warrants.
(E) Non-income producing as the issuer has either missed its most recent
interest
payment or declared bankruptcy.
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
MARCH 31, 1996
Assets
Investment securities -- at value
(Notes 1 and 3) ............................... $ 962,157,578
Cash ........................................... 38,046
Receivables:
Dividends and interest ........................ 19,460,208
Investment securities sold .................... 1,578,750
Fund shares sold .............................. 396,823
Prepaid insurance premium ...................... 55,759
--------------
Total assets ................................ 983,687,164
--------------
Liabilities
Payable for investment securities purchased .... 5,000,000
Payable for Fund shares redeemed ............... 4,172,120
Accrued service fee ............................ 271,558
Accrued transfer agency and dividend
disbursing .................................... 85,051
Accrued accounting services fee ................ 7,083
Other .......................................... 86,124
--------------
Total liabilities ........................... 9,621,936
--------------
Total net assets ........................... $ 974,065,228
==============
Net Assets
$1.00 par value capital stock
Capital stock ................................. $ 107,103,444
Additional paid-in capital .................... 1,307,228,075
Accumulated undistributed income (loss):
Accumulated undistributed net investment income 767,157
Accumulated undistributed net realized
loss on investment transactions ............. (430,940,444)
Net unrealized depreciation in value of
investments at end of period ................ (10,093,004)
--------------
Net assets applicable to outstanding
units of capital ........................... $ 974,065,228
==============
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $9.09
Class Y .......................................... $9.10
Capital shares outstanding
Class A .......................................... 106,867,154
Class Y .......................................... 236,290
Capital shares authorized .......................... 500,000,000
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended MARCH 31, 1996
Investment Income
Income:
Interest ........................................ $ 92,926,899
Dividends ....................................... 285,339
------------
Total income .................................. 93,212,238
------------
Expenses (Note 2):
Investment management fee ....................... 5,455,292
Service fee - Class A ........................... 1,122,736
Transfer agency and dividend disbursing - Class A 1,101,546
Legal fees ...................................... 210,046
Accounting services fee ......................... 85,000
Audit fees ...................................... 47,137
Custodian fees .................................. 34,303
Shareholder servicing - Class Y ................. 351
Other ........................................... 188,040
------------
Total expenses ................................ 8,244,451
------------
Net investment income ........................ 84,967,787
------------
Realized and Unrealized Gain (Loss) on Investments
Realized net loss on investments ................. (16,543,528)
Unrealized appreciation in value of
investments during the period.................... 60,496,492
------------
Net gain on investments ......................... 43,952,964
------------
Net increase in net assets resulting
from operations .............................. $128,920,751
============
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended
March 31,
-----------------------------
1996 1995
-------------- --------------
Increase (Decrease) in Net Assets
Operations:
Net investment income .......... $ 84,967,787 $ 85,909,957
Realized net loss on
investments ................... (16,543,528) (38,935,982)
Unrealized appreciation
(depreciation) ............... 60,496,492 (16,709,489)
------------ --------------
Net increase in net assets
resulting from operations ... 128,920,751 30,264,486
------------ --------------
Dividends to shareholders from
net investment income:*
Class A ...................... (85,921,769) (84,555,022)
Class Y ...................... (18,564) ---
------------ --------------
(85,940,333) (84,555,022)
------------ --------------
Capital share transactions:
Proceeds from sale of shares:
Class A (7,953,459 and 7,942,722
shares, respectively) ....... 71,825,120 69,649,781
Class Y (236,584 and 0
shares, respectively) ....... 2,181,529 ---
Proceeds from reinvestment
of dividends:
Class A (7,892,778 and
7,920,844 shares, respectively) 71,060,893 69,202,582
Class Y (2,040 and 0
shares, respectively) ....... 18,564 ---
Payments for shares redeemed:
Class A (16,328,917 and 17,970,581
shares, respectively) ....... (147,555,964) (157,604,402)
Class Y (2,334 and 0
shares, respectively) ....... (21,268) ---
------------ --------------
Net decrease in net assets
resulting from capital share
transactions ................ (2,491,126) (18,752,039)
------------ --------------
Total increase (decrease) ... 40,489,292 (73,042,575)
Net Assets
Beginning of period ............. 933,575,936 1,006,618,511
------------ --------------
End of period, including
undistributed net investment
income of $767,157 and
$1,739,703, respectively ....... $974,065,228 $ 933,575,936
============ ==============
*See "Financial Highlights" on pages 23 - 24.
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 fiscal year ended March 31,
-----------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
Net asset value,
beginning of period $8.70 $9.20 $9.21 $8.82 $7.51
----- ----- ----- ----- ------
Income from investment
operations:
Net investment
income .......... .79 .80 .80 .83 .95
Net realized and
unrealized gain
(loss) on
investments ..... .40 (0.51) (0.01) .40 1.29
----- ----- ----- ----- ------
Total from investment
operations ....... 1.19 .29 .79 1.23 2.24
----- ----- ----- ----- ------
Less dividends
declared from net
investment income . (0.80) (0.79) (0.80) (0.84) (0.93)
----- ----- ----- ----- ------
Net asset value,
end of period .... $9.09 $8.70 $9.20 $9.21 $8.82
===== ===== ===== ===== =====
Total return* ...... 14.16% 3.41% 8.69% 14.72% 31.72%
Net assets, end
of period (000
omitted) ......... $971,916$933,576$1,006,619$986,867$910,917
Ratio of expenses to
average net assets 0.85% 0.84% 0.78% 0.75% 0.79%
Ratio of net investment
income to average
net assets ....... 8.74% 9.07% 8.51% 9.28% 11.56%
Portfolio turnover
rate ............. 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.
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
Class Y Shares
For a Share of Capital Stock Outstanding
Throughout the Period:
For the
period
from 1/4/96
through
3/31/96
--------
Net asset value,
beginning of period $9.19
-----
Income from investment
operations:
Net investment
income .......... .20
Net realized and
unrealized loss
on investments... (0.10)
-----
Total from investment
operations ........ .10
-----
Less dividends
declared from net
investment income . (0.19)
-----
Net asset value,
end of period ..... $9.10
=====
Total return ....... 1.00%
Net assets, end of
period (000
omitted) ......... $2,149
Ratio of expenses
to average net
assets ............ 0.80%*
Ratio of net
investment income
to average net
assets ............ 8.55%*
Portfolio
turnover rate ..... 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
MARCH 31, 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 major 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) 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 $14.0 billion of
combined net assets at March 31, 1996) at annual rates of .51% of the first $750
million of combined net assets, .49% on that amount between $750 million and
$1.5 billion, .47% between $1.5 billion and $2.25 billion, .45% between $2.25
billion and $3 billion, .43% between $3 billion and $3.75 billion, .40% between
$3.75 billion and $7.5 billion, .38% between $7.5 billion and $12 billion, and
.36% of that amount over $12 billion. The 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 $1.0208 for each
shareholder account which was in existence at any time during the prior month
plus $0.30 for each account on which a dividend or distribution of cash or
shares had a record date in that month. With respect to Class Y shares, the Fund
pays WARSCO a monthly fee at an annual rate of .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 $1,968,791, out of which W&R paid sales commissions of $1,111,988
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 $38,464.
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 $395,244,940 while proceeds from
maturities and sales aggregated $366,248,277. Purchases of short-term
securities aggregated $928,424,779 while proceeds from maturities and sales of
short-term securities aggregated $954,960,240. There were no purchases or sales
of U.S. Government securities during the period.
For Federal income tax purposes, cost of investments owned at March 31,
1996 was $971,483,808, resulting in net unrealized depreciation of $9,326,230,
of which $36,890,512 related to appreciated securities and $46,216,742 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
carryovers 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 -- Commencement of 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. The Fund commenced multiclass operations on January 4,
1996.
Income, non-class specific expenses and realized and unrealized gains and
losses are allocated daily to each class of shares based on the value of
relative net assets as of the beginning of each day adjusted for the prior day's
capital share activity.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
United 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 March 31, 1996, the results of its operations for the year 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 March
31, 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
May 10, 1996
<PAGE>
INCOME TAX INFORMATION
The amounts of the dividends below, multiplied by the number of shares owned by
you on the record dates, will give you the total amounts to be reported in your
Federal income tax return for the years in which the dividends were received or
reinvested.
PER-SHARE AMOUNTS REPORTABLE AS:
-----------------------------------------------
For Individuals For Corporations
----------------- -----------------------------
Record Ordinary Long-Term Non- Long-Term
Date Total IncomeCapital GainQualifyingQualifyingCapital Gain
- --------- ----- ---------------------------------------------------
Class A
04-13-95 $0.064 $0.0640 $--- $0.0002 $0.0638 $---
05-12-95 0.064 0.0640 --- 0.0002 0.0638 ---
06-16-95 0.064 0.0640 --- 0.0002 0.0638 ---
07-14-95 0.064 0.0640 --- 0.0002 0.0638 ---
08-11-95 0.064 0.0640 --- 0.0002 0.0638 ---
09-15-95 0.064 0.0640 --- 0.0002 0.0638 ---
10-13-95 0.064 0.0640 --- 0.0002 0.0638 ---
11-17-95 0.064 0.0640 --- 0.0002 0.0638 ---
12-15-95 0.097 0.0970 --- 0.0003 0.0967 ---
01-12-96 0.064 0.0640 --- 0.0002 0.0638 ---
02-16-96 0.064 0.0640 --- 0.0002 0.0638 ---
03-15-96 0.064 0.0640 --- 0.0002 0.0638 ---
------- ------- ------- ------- ------- -------
Total $0.801 $0.8010 $--- $0.0025 $0.7985 $---
======= ======= ======= ======= ======= =======
Class Y
01-12-96 $0.064 $0.0640 $--- $0.0002 $0.0638 $---
02-16-96 0.064 0.0640 --- 0.0002 0.0638 ---
03-15-96 0.064 0.0640 --- 0.0002 0.0638 ---
------- ------- ------- ------- ------- -------
Total $0.192 $0.1920 $--- $0.0006 $0.1914 $---
======= ======= ======= ======= ======= =======
CORPORATION DEDUCTIONS -- Under Federal tax law, the amounts reportable as
Qualifying Dividends are eligible for the dividends received deduction in the
year received as provided by Section 243 of the Internal Revenue Code.
The tax status of dividends paid will be reported to you on Form 1099-DIV after
the close of the applicable calendar year.
Shareholders are advised to consult with their tax adviser concerning the tax
treatment of dividends and distributions from the Fund.
<PAGE>
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, Los Angeles, California
Doyle Patterson, Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Keith A. Tucker, Overland Park, Kansas
Frederick Vogel III, Milwaukee, Wisconsin
Paul S. Wise, Carefree, Arizona
OFFICERS
Keith A. Tucker, President
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
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.
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.
<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
(913) 236-1303
Our INTERNET address is:
http://www.waddell.com
NUR1009A(3-96)
printed on recycled paper
