United
High Income
Fund, Inc.
ANNUAL
REPORT
----------------------------------------
For the fiscal year ended March 31, 1997
<PAGE>
FUND MANAGER'S LETTER
- -----------------------------------------------------------------
MARCH 31, 1997
Dear Shareholder:
This report relates to the operation of United High Income Fund for the fiscal
year ended March 31, 1997. The following discussion, graphs and tables provide
you with information regarding the Fund's performance during that period.
The past fiscal year has been characterized by stronger than expected economic
growth, especially during the second half of the year. While inflation in the
consumer sector has remained subdued, fears of wage inflation resulting from
strong employment figures during the last fiscal quarter caused the Federal
Reserve to raise short-term interest rates in March. Large inflows of money
into high yield bond mutual funds and increased purchases of high yield bonds by
institutional investors fueled a record issuance of new high yield bonds. At
the peak of the market, during the last quarter of the fiscal year, the spreads
between high yield bonds and U.S. Treasury bonds were at all-time lows. More
normal spreads returned after the Federal Reserve raised the short-term rates in
March.
During the past fiscal year, we lengthened the average maturity and duration of
the Fund's portfolio and focused on reducing exposure to holdings in the "BB"
rating sector. The Fund's yield and total return improved as we reinvested the
proceeds at higher rates in the "B" sector. We maintained a relatively low cash
position during most of the fiscal year to permit the Fund to participate in a
rally in the high yield sector. During the last quarter, we increased the
Fund's cash position to protect against an increasingly volatile market.
The strategies and techniques we applied resulted in the performance of the Fund
remaining fairly consistent with the Salomon Brothers High Yield Composite Index
and the Lipper High Current Yield Fund Universe Average, as charted on the
following page. The Salomon Brothers 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. We
have chosen to use the Salomon Brothers Index beginning with this year's Annual
Report, instead of the First Boston High Yield Index that had been presented in
prior years. We believe that the Salomon Brothers Index provides a more
accurate basis for comparing the Fund's performance to the performance of the
types of fixed income securities in which the Fund invests. Both indexes are
presented on the following page in this year's Annual Report for comparison
purposes.
The Federal Reserve has intimated that it may combat inflationary pressures by
again increasing short-term interest rates. Apprehension of such action may
lead to volatility in bond prices, prompting market timers to continue taking
money out of the market and potentially curbing the number of new high yield
issues as costs to issuers increase. We expect the emphasis on credit quality
to increase and a trend towards higher rates as the next fiscal year begins. We
intend to balance defensive measures (an increased cash position, "BB" sector
investments and emphasis on shorter durations) with investments that promise to
improve the yield and total return potential when interest rates begin to
decline.
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,
SALOMON BROTHERS HIGH YIELD COMPOSITE INDEX
AND THE LIPPER HIGH CURRENT YIELD FUND UNIVERSE AVERAGE
Lipper
United Salomon High
High First Brothers Current
Income Boston High Yield
Fund High Yield Fund
Class Yield Composite Universe
A Shares Index Index Average
-----------------------------------------
03/31/87 9,425 10,000 10,000 10,000
03/31/88 9,227 10,613 10,496 10,146
03/31/89 10,048 11,612 11,552 11,018
03/31/90 8,483 11,162 11,073 10,296
03/31/91 8,700 12,713 12,623 10,897
03/31/92 11,460 16,682 16,250 14,025
03/31/93 13,147 19,244 19,040 16,216
03/31/94 14,291 21,165 20,607 17,923
03/31/95 14,779 22,182 21,944 18,217
03/31/96 16,873 25,406 25,527 20,905
03/31/97 18,720 28,369 28,361 23,302
===== United High Income Fund Class A Shares* -- $18,720
+++++ First Boston High Yield Index - $28,369
******** Salomon Brothers High Yield Composite Index - $28,361
- ------------- Lipper High Current Yield Fund Universe Average -- $23,302
*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
3/31/97 4.56% 11.08%
5 Years Ended
3/31/97 9.01% N/A
10 Years Ended
3/31/97 6.47% N/A
Life of Class Y +++ N/A 9.73%
+ 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 3/31/97.
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, 1997
- ----------------------------------------
DIVIDENDS PAID $0.80
=====
NET ASSET VALUE ON
3/31/97 $9.25
3/31/96 9.09
-----
CHANGE PER SHARE $0.16
=====
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 3-31-97 4.56% 10.94%
5-year period ended 3-31-97 9.01% 10.31%
10-year period ended 3-31-97 6.47% 7.10%
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, 1997, United High Income Fund, Inc. had net assets totaling
$986,386,881 invested in a diversified portfolio of:
84.70% Corporate Debt Securities
8.56% Cash and Cash Equivalents
6.48% Common and Preferred Stocks and Warrants
0.26% Foreign Government Bonds
As a shareholder of United High Income Fund, Inc., for every $100 you had
invested on March 31, 1997, your Fund owned:
$30.01 Manufacturing Bonds
18.33 Transportation, Communication, Electric
and Sanitary Services Bonds
18.25 Services Bonds
11.23 Wholesale and Retail Trade Bonds
8.56 Cash and Cash Equivalents
6.48 Common and Preferred Stocks and Warrants
2.26 Finance, Insurance and Real Estate Bonds
2.10 Mining Bonds
1.56 Miscellaneous Investing Institutions Bonds
0.58 Agriculture, Forestry and Fisheries Bonds
0.38 Contract Construction Bonds
0.26 Foreign Government Bonds
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1997
Shares Value
COMMON AND PREFERRED STOCKS AND WARRANTS
Communication - 1.20%
Heartland Wireless Communications,
Inc., Warrants (A)* ................. 12,000 $ 12,000
Intermedia Communications of
Florida, Inc., Preferred (A)* ....... 50,000 4,787,500
Jacor Communications, Inc.* .......... 50,000 1,390,600
Microcell Telecommunications
Inc., Conditional Warrants (A)* ..... 58,000 36,250
Microcell Telecommunications
Inc., Warrants (A)* ................. 58,000 725,000
Sinclair Capital, Preferred (A)* ..... 35,000 3,430,000
Young Broadcasting Inc., Class A* .... 63,000 1,512,000
Total ............................... 11,893,350
Depository Institutions - 0.37%
California Federal Preferred Capital
Corporation, Preferred .............. 150,000 3,637,500
Electric, Gas and Sanitary Services - 0.21%
Consolidated Hydro, Inc., Preferred (A)* 3,000 190,950
Consolidated Hydro, Inc., Warrants (A)* 5,400 5
EUA Power Corporation, Contingent
Interest Certificates* .............. 9,500 10
El Paso Electric Company, Preferred* . 16,727 1,848,333
IntelCom Group Inc., Warrants (A)* ... 20,625 87,656
Total ............................... 2,126,954
General Building Contractors - 0.97%
Walter Industries, Inc.* ............. 710,990 9,553,573
Health Services - 0.22%
Beverly Enterprises, Inc.* ........... 150,000 2,137,500
Holding and Other Investment Offices - 0.16%
National Health Investors, Inc. ...... 41,630 1,545,514
Hotels and Other Lodging Places - 0.10%
Fitzgeralds Gaming Corporation,
Warrants (A)* ....................... 17,500 175,000
Trump Hotels & Casino Resorts, Inc.* . 87,500 787,500
Total ............................... 962,500
Industrial Machinery and Equipment - 0.11%
Bell & Howell Company* ............... 50,000 1,043,750
Lumber and Wood Products - 1.83%
Triangle Pacific Corp.* .............. 660,844 18,090,605
See Notes to Schedule of Investments on pages - .
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1997
Shares Value
COMMON AND PREFERRED STOCKS AND
WARRANTS (Continued)
Printing and Publishing - 1.31%
K-III Communications Corporation,
Preferred .......................... 35,000 $ 3,482,500
Knight-Ridder, Inc. .................. 95,000 3,788,125
Tribune Company ...................... 90,000 3,645,000
World Color Press, Inc.* ............. 100,000 2,037,500
Total ............................... 12,953,125
TOTAL COMMON AND PREFERRED STOCKS
AND WARRANTS - 6.48% $ 63,944,371
(Cost: $67,907,430)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Agricultural Production - Crops - 0.22%
Hines Horticulture, Inc.,
11.75%, 10-15-2005 .................. $ 2,000 2,205,000
Agricultural Production - Livestock - 0.36%
Pilgrim's Pride Corporation,
10.875%, 8-1-2003 ................... 3,500 3,570,000
Amusement and Recreation Services - 3.09%
American Skiing Company,
12.0%, 7-15-2006 .................... 4,500 4,590,000
California Hotel Finance Corporation,
11.0%, 12-1-2002 .................... 5,000 5,150,000
Harrah's Operating Company, Inc.,
10.875%, 4-15-2002 .................. 2,000 2,105,000
Premier Parks Inc.,
12.0%, 8-15-2003 .................... 1,500 1,672,500
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 5,460,000
Trump Hotels & Casino Resorts
Holdings, L.P.,
15.5%, 6-15-2005 .................... 5,500 6,215,000
Total ............................... 30,442,500
See Notes to Schedule of Investments on pages - .
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Apparel and Other Textile Products - 1.90%
Consoltex Group Inc.,
11.0%, 10-1-2003 .................... $ 7,000 $ 7,140,000
GFSI, Inc.,
9.625%, 3-1-2007 (A) ................ 1,000 1,007,500
Pillowtex Corporation,
10.0%, 11-15-2006 ................... 2,500 2,587,500
WestPoint Stevens Inc.,
9.375%, 12-15-2005 .................. 8,000 8,000,000
Total ............................... 18,735,000
Auto Repair, Services and Parking - 0.30%
Safelite Glass Corp.,
9.875%, 12-15-2006 (A) .............. 3,000 3,000,000
Building Materials and Garden Supplies - 0.15%
Central Tractor Farm & Country, Inc.,
10.625%, 4-1-2007 ................... 1,500 1,500,000
Business Services - 3.09%
Adams Outdoor Advertising Limited Partnership,
10.75%, 3-15-2006 .................. 4,250 4,462,500
Alvey Systems, Inc.,
11.375%, 1-31-2003 ................. 2,500 2,600,000
Coinmach Corporation,
11.75%, 11-15-2005 ................. 4,220 4,642,000
Heritage Media Corporation,
8.75%, 2-15-2006 .................... 4,500 4,680,000
Lamar Advertising Company,
9.625%, 12-1-2006 ................... 3,000 3,022,500
Scotsman Group, Inc.,
9.5%, 12-15-2000 .................... 4,500 4,522,500
Shared Technologies Fairchild
Communications Corp.,
0.0%, 3-1-2006 (B) .................. 2,500 2,056,250
Universal Outdoor, Inc.,
9.75%, 10-15-2006 ................... 4,500 4,455,000
Total ............................... 30,440,750
Chemicals and Allied Products - 2.40%
Dade International Inc.,
11.125%, 5-1-2006 ................... 2,500 2,837,500
Freedom Chemical Company,
10.625%, 10-15-2006 ................. 3,750 3,900,000
Spinnaker Industries, Inc.,
10.75%, 10-15-2006 .................. 3,500 3,526,250
See Notes to Schedule of Investments on pages - .
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Chemicals and Allied Products (Continued)
UCC Investors Holding, Inc.:
10.5%, 5-1-2002 ..................... $ 9,000 $ 9,810,000
0.0%, 5-1-2005 (B) .................. 4,000 3,600,000
Total ............................... 23,673,750
Communication - 17.08%
Adelphia Communications Corporation,
10.25%, 7-15-2000 ................... 2,250 2,182,500
Allbritton Communications Company,
9.75%, 11-30-2007 ................... 4,500 4,185,000
American Radio Systems Corporation,
9.0%, 2-1-2006 ...................... 3,250 3,136,250
Argyle Television Operations, Inc.,
9.75%, 11-1-2005 .................... 10,000 10,400,000
Brooks Fiber Properties, Inc.:
0.0%, 3-1-2006 (B) .................. 9,000 5,580,000
0.0%, 11-1-2006 (B) ................. 1,000 595,000
Cablevision Systems Corporation,
10.75%, 4-1-2004 .................... 3,500 3,596,250
Centennial Cellular Corp.,
10.125%, 5-15-2005 .................. 3,000 3,015,000
Century Communications Corporation,
11.875%, 10-15-2003 ................. 6,500 6,825,000
COMCAST CELLULAR CORPORATION,
0.0%, 3-5-2000 ...................... 6,300 4,638,375
Comcast Corporation,
9.5%, 1-15-2008 ..................... 5,250 5,263,125
Comcast UK Cable Partners Limited,
0.0%, 11-15-2007 (B) ................ 9,000 5,850,000
Diamond Cable Communications Plc:
0.0%, 12-15-2005 (B) ................ 3,500 2,240,000
0.0%, 2-15-2007 (A)(B) .............. 6,000 3,240,000
Esat Holdings Limited, Units,
0.0%, 2-1-2007 (A)(B)(C) ............ 3,000 1,687,500
Globalstar, L.P., Units,
11.375%, 2-15-2004 (A)(D) ........... 1,500 1,455,000
IntelCom Group Inc.,
0.0%, 9-15-2005 (B).................. 6,250 4,187,500
Intermedia Communications of Florida, Inc.,
0.0%, 5-15-2006 (B).................. 6,000 3,810,000
Jacor Communications, Inc.,
10.125%, 6-15-2006 .................. 2,000 2,030,000
Lenfest Communications, Inc.,
8.375%, 11-1-2005 ................... 2,400 2,184,000
See Notes to Schedule of Investments on pages - .
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Communication (Continued)
MFS Communications Company, Inc.:
0.0%, 1-15-2004 (B) ................. $ 6,750 $ 6,075,000
0.0%, 1-15-2006 (B) ................. 7,500 5,662,500
Marcus Cable Operating Company,
0.0%, 8-1-2004 (B) .................. 10,000 7,950,000
Metrocall, Inc.,
10.375%, 10-1-2007 .................. 4,250 3,400,000
Microcell Telecommunications Inc., Units,
0.0%, 6-1-2006 (B) .................. 14,500 7,105,000
Multicanal S.A.:
9.25%, 2-1-2002 (A) ................. 3,500 3,491,250
10.5%, 2-1-2007 (A) ................. 2,000 2,000,000
NEXTEL Communications, Inc.,
0.0%, 8-15-2004 (B) ................. 2,500 1,700,000
RSL Communications, Ltd., Units,
12.25%, 11-15-2006 (A)(E)............ 3,500 3,508,750
Rifkin Acquisition Partners, L.L.L.P.,
11.125%, 1-15-2006 .................. 4,000 4,000,000
Rogers Cantel Inc.,
9.375%, 6-1-2008 .................... 4,000 4,040,000
Rogers Communications Inc.,
9.125%, 1-15-2006 ................... 7,500 7,237,500
SFX Broadcasting, Inc.,
10.75%, 5-15-2006 ................... 3,500 3,657,500
Sprint Spectrum L.P.,
0.0%, 8-15-2006 (B) ................. 9,200 6,072,000
Sullivan Broadcasting Company, Inc.,
10.25%, 12-15-2005 .................. 1,000 1,005,000
TV Azteca S.A. de C.V.:
10.125%, 2-15-2004 (A) .............. 1,250 1,228,125
10.5%, 2-15-2007 (A) ................ 1,250 1,228,125
Teleport Communications Group Inc.:
9.875%, 7-1-2006 .................... 2,000 2,070,000
0.0%, 7-1-2007 (B) .................. 9,000 6,030,000
USA Mobile Communications, Inc. II,
9.5%, 2-1-2004 ...................... 2,000 1,720,000
Vanguard Cellular Systems, Inc.,
9.375%, 4-15-2006 ................... 4,500 4,432,500
Videotron Plc,
0.0%, 8-15-2005 (B) ................. 4,250 3,357,500
WinStar Communications, Inc.,
0.0%, 10-15-2005 (A)(B) ............. 3,500 3,486,875
Wireless One, Inc., Units,
0.0%, 8-1-2006 (B)(F) ............... 7,250 1,957,500
Total ............................... 168,515,625
See Notes to Schedule of Investments on pages - .
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Depository Institutions - 0.97%
First Nationwide Holdings Inc.:
9.125%, 1-15-2003 ................... $ 5,750 $ 5,750,000
12.5%, 4-15-2003 .................... 3,500 3,815,000
Total ............................... 9,565,000
Eating and Drinking Places - 0.36%
Foodmaker, Inc.,
9.25%, 3-1-99 ....................... 3,500 3,535,000
Electric, Gas and Sanitary Services - 1.09%
Allied Waste North America, Inc.,
10.25%, 12-1-2006 (A) ............... 5,250 5,355,000
El Paso Electric Company,
9.4%, 5-1-2011 ...................... 5,000 5,359,900
Total ............................... 10,714,900
Electronic and Other Electric Equipment - 2.03%
Advanced Micro Devices, Inc.,
11.0%, 8-1-2003 ..................... 4,500 4,860,000
Communications & Power Industries, Inc.,
12.0%, 8-1-2005 ..................... 4,000 4,400,000
Electronic Retailing Systems
International, Inc., Units,
0.0%, 2-1-2004 (A)(B)(G) ............ 6,500 4,444,375
Harman International Industries, Incorporated,
12.0%, 8-1-2002 ..................... 3,500 3,745,000
Motors and Gears, Inc.,
10.75%, 11-15-2006 (A) .............. 2,500 2,562,500
Total ............................... 20,011,875
Engineering and Management Services - 0.57%
DynCorp,
9.5%, 3-1-2007 (A) .................. 2,000 1,960,000
United International Holdings, Inc.,
0.0%, 11-15-99 ...................... 5,000 3,650,000
Total ............................... 5,610,000
See Notes to Schedule of Investments on pages - .
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Fabricated Metal Products - 2.48%
American Safety Razor Company,
9.875%, 8-1-2005 .................... $ 1,000 $ 1,030,000
Mark IV Industries, Inc.,
8.75%, 4-1-2003 ..................... 11,000 10,945,000
Nortek, Inc.:
9.875%, 3-1-2004 .................... 7,000 6,895,000
9.25%, 3-15-2007 (A) ................ 2,000 1,970,000
U.S. Can Corporation,
10.125%, 10-15-2006 ................. 3,500 3,640,000
Total ............................... 24,480,000
Food and Kindred Products - 0.68%
Coca-Cola FEMSA, S.A. de C.V.,
8.95%, 11-1-2006 .................... 3,500 3,438,750
Dr Pepper Bottling Holdings, Inc.,
0.0%, 2-15-2003 (B) ................. 3,500 3,290,000
Total ............................... 6,728,750
Food Stores - 4.35%
Big V Supermarkets, Inc.,
11.0%, 2-15-2004 .................... 5,000 4,887,500
Bruno's Inc.,
10.5%, 8-1-2005 ..................... 8,500 8,627,500
Dominick's Finer Foods, Inc.,
10.875%, 5-1-2005 ................... 5,000 5,375,000
Eagle Food Centers, Inc.,
8.625%, 4-15-2000 ................... 4,000 3,920,000
Jitney-Jungle Stores of America, Inc.,
12.0%, 3-1-2006 ..................... 4,000 4,220,000
Kroger Co. (The),
9.25%, 1-1-2005 ..................... 3,000 3,187,500
Ralphs Grocery Company,
11.0%, 6-15-2005 .................... 7,500 7,725,000
Smith's Food & Drug Centers, Inc.,
11.25%, 5-15-2007 ................... 4,500 4,927,500
Total ............................... 42,870,000
Furniture and Fixtures - 0.78%
Lear Seating Corp.,
8.25%, 2-1-2002 ..................... 8,000 7,720,000
General Building Contractors - 0.38%
NVR L.P.,
11.0%, 4-15-2003 .................... 3,500 3,718,750
See Notes to Schedule of Investments on pages - .
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Health Services - 5.13%
Abbey Healthcare Group Incorporated,
9.5%, 11-1-2002 ..................... $ 2,000 $ 2,080,000
Multicare Companies, Inc. (The),
12.5%, 7-1-2002 ..................... 5,398 5,910,810
Quorum Health Group, Inc.:
11.875%, 12-15-2002 ................. 7,000 7,630,000
8.75%, 11-1-2005 .................... 4,500 4,545,000
Regency Health Services, Inc.,
9.875%, 10-15-2002 .................. 3,000 3,030,000
Sterling House Corporation, Convertible,
6.75%, 6-30-2006 (A)................. 2,000 1,417,500
Tenet Healthcare Corporation:
9.625%, 9-1-2002 .................... 7,500 7,875,000
8.0%, 1-15-2005 ..................... 4,500 4,376,250
10.125%, 3-1-2005 ................... 6,000 6,420,000
8.625%, 1-15-2007 ................... 7,500 7,312,500
Total ............................... 50,597,060
Holding and Other Investment Offices - 1.56%
Grupo Industrial Durango, S.A. de C.V.,
12.625%, 8-1-2003 ................... 8,000 8,680,000
LTC Properties, Inc., Convertible:
8.5%, 1-1-2000 ...................... 3,000 3,375,000
8.5%, 1-1-2001 ...................... 3,000 3,315,000
Total ............................... 15,370,000
Hotels and Other Lodging Places - 4.20%
Boyd Gaming Corporation,
9.25%, 10-1-2003 .................... 3,500 3,220,000
Casino America, Inc.,
12.5%, 8-1-2003 ..................... 8,250 7,920,000
HMC Acquisition Properties, Inc.,
9.0%, 12-15-2007 .................... 6,000 5,970,000
Prime Hospitality Corp.:
9.25%, 1-15-2006 .................... 4,000 4,070,000
9.75%, 4-1-2007 (A) ................. 2,500 2,506,250
Showboat, Inc.,
9.25%, 5-1-2008 ..................... 9,000 8,910,000
Station Casinos, Inc.,
10.125%, 3-15-2006 .................. 4,500 4,320,000
Sun International Hotels Limited,
9.0%, 3-15-2007 (A) ................. 2,000 1,890,000
Wyndham Hotel Corporation,
10.5%, 5-15-2006 .................... 2,500 2,662,500
Total ............................... 41,468,750
See Notes to Schedule of Investments on pages - .
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Industrial Machinery and Equipment - 3.31%
American Standard Inc.:
9.875%, 6-1-2001 .................... $ 2,000 $ 2,080,000
0.0%, 6-1-2005 (B) .................. 12,250 11,637,500
9.25%, 12-1-2016 .................... 2,000 2,050,000
Bell & Howell Company:
10.75%, 10-1-2002 ................... 5,000 5,200,000
0.0%, 3-1-2005 (B) .................. 8,200 6,314,000
Clark Material Handling Company,
10.75%, 11-15-2006 .................. 3,250 3,396,250
Walbro Corporation,
9.875%, 7-15-2005 ................... 2,000 1,980,000
Total ............................... 32,657,750
Instruments and Related Products - 1.32%
Cole National Group, Inc.,
9.875%, 12-31-2006................... 2,500 2,525,000
InterCel, Inc., Units,
0.0%, 2-1-2006 (B)(H) ............... 50 3,087,500
Maxxim Medical, Inc.,
10.5%, 8-1-2006 ..................... 7,250 7,395,000
Total ............................... 13,007,500
Lumber and Wood Products - 0.70%
Triangle Pacific Corp.,
10.5%, 8-1-2003 ..................... 6,500 6,938,750
Miscellaneous Manufacturing Industries - 0.26%
Pen-Tab Industries, Inc.,
10.875%, 2-1-2007 (A) ............... 2,500 2,537,500
Miscellaneous Retail - 1.61%
Eye Care Centers of America, Inc.,
12.0%, 10-1-2003 .................... 3,500 3,806,250
Michaels Stores, Inc.,
10.875%, 6-15-2006 .................. 6,000 6,180,000
Petroleum Heat and Power Co., Inc.,
9.375%, 2-1-2006 .................... 3,000 2,895,000
TravelCenters of America, Inc.,
10.25%, 4-1-2007 (A) ................ 3,000 2,992,500
Total ............................... 15,873,750
See Notes to Schedule of Investments on pages - .
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Motion Pictures - 1.20%
MacAndrews & Forbes Group, Incorporated,
13.0%, 3-1-99 ....................... $ 7,799 $ 7,808,749
Plitt Theatres, Inc.,
10.875%, 6-15-2004 .................. 4,000 4,000,000
Total ............................... 11,808,749
Nondepository Institutions - 0.98%
GPA Delaware, Inc.,
8.75%, 12-15-98 ..................... 9,500 9,642,500
Oil and Gas Extraction - 2.10%
Falcon Drilling, Inc.,
9.75%, 1-15-2001 .................... 3,500 3,622,500
Kelley Oil & Gas Corporation,
10.375%, 10-15-2006 ................. 3,500 3,605,000
Lomak Petroleum, Inc.,
8.75%, 1-15-2007 .................... 3,500 3,395,000
Noble Drilling Corporation,
9.25%, 10-1-2003 .................... 4,000 4,200,000
Perez Companc S.A.,
9.0%, 1-30-2004 (A) ................. 2,500 2,478,125
Vintage Petroleum, Inc.:
9.0%, 12-15-2005 .................... 2,500 2,475,000
8.625%, 2-1-2009 .................... 1,000 950,000
Total ............................... 20,725,625
Paper and Allied Products - 3.03%
Asia Pulp & Paper Company Ltd,
11.75%, 10-1-2005 ................... 4,500 4,792,500
Container Corporation of America,
11.25%, 5-1-2004 .................... 3,500 3,780,000
Fort Howard Corporation:
9.25%, 3-15-2001 .................... 5,000 5,175,000
9.0%, 2-1-2006 ...................... 2,000 2,020,000
Four M Corporation,
12.0%, 6-1-2006 ..................... 3,000 3,060,000
Mail-Well Corporation,
10.5%, 2-15-2004 .................... 3,500 3,657,500
Radnor Holdings Corporation,
10.0%, 12-1-2003 (A) ................ 3,000 3,067,500
Sweetheart Cup Company, Inc.,
10.5%, 9-1-2003 ..................... 4,250 4,335,000
Total ............................... 29,887,500
See Notes to Schedule of Investments on pages - .
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Personal Services - 0.38%
Prime Succession Acquisition Corp.,
10.75%, 8-15-2004 ................... $ 3,500 $ 3,771,250
Primary Metal Industries - 0.74%
Commonwealth Aluminum Corporation,
10.75%, 10-1-2006 ................... 3,000 3,090,000
Essex Group, Inc.,
10.0%, 5-1-2003 ..................... 4,000 4,160,000
Total ............................... 7,250,000
Printing and Publishing - 3.95%
American Media Operations, Inc.,
11.625%, 11-15-2004 ................. 4,000 4,320,000
Big Flower Press, Inc.,
10.75%, 8-1-2003 .................... 4,333 4,533,401
Jordan Industries, Inc.,
10.375%, 8-1-2003 ................... 11,500 11,327,500
K-III Communications Corporation,
8.5%, 2-1-2006 ...................... 5,000 4,850,000
Viacom International, Inc.,
8.0%, 7-7-2006 ...................... 15,000 13,950,000
Total ............................... 38,980,901
Real Estate - 0.31%
Delco Remy International, Inc.,
10.625%, 8-1-2006 (A) ............... 3,000 3,075,000
Rubber and Miscellaneous Plastics Products - 0.71%
LDM Technologies, Inc.,
10.75%, 1-15-2007 (A) ............... 2,500 2,487,500
RBX Corporation,
11.25%, 10-15-2005 .................. 5,500 4,565,000
Total ............................... 7,052,500
Social Services - 0.29%
KinderCare Learning Center, Inc.,
9.5%, 2-15-2009 (A) ................. 3,000 2,865,000
Stone, Clay and Glass Products - 2.17%
Owens-Illinois, Inc.:
10.0%, 8-1-2002 ..................... 5,000 5,212,500
11.0%, 12-1-2003 .................... 7,500 8,268,750
9.75%, 8-15-2004 .................... 7,500 7,875,000
Total ............................... 21,356,250
See Notes to Schedule of Investments on pages - .
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Textile Mill Products - 2.06%
Avondale Mills, Inc.,
10.25%, 5-1-2006 .................... $ 3,500 $ 3,648,750
Collins & Aikman Products Co.,
11.5%, 4-15-2006 .................... 11,000 12,155,000
Glenoit Corporation,
11.0%, 4-15-2007 (A) ................ 2,500 2,490,625
Interface, Inc.,
9.5%, 11-15-2005 .................... 2,000 1,990,000
Total ............................... 20,284,375
Transportation Equipment - 1.49%
Aetna Industries, Inc.,
11.875%, 10-1-2006 .................. 3,500 3,710,000
Greenwich Air Services, Inc.,
10.5%, 6-1-2006 ..................... 7,000 8,050,000
Westinghouse Air Brake Company,
9.375%, 6-15-2005 ................... 3,000 2,970,000
Total ............................... 14,730,000
Trucking and Warehousing - 0.16%
Iron Mountain Incorporated,
10.125%, 10-1-2006 .................. 1,500 1,537,500
Wholesale Trade - Durable Goods - 3.15%
E & S Holdings,
10.375%, 10-1-2006 .................. 3,250 3,315,000
Exide Corporation:
0.0%, 12-15-2004 (B) ................ 7,000 6,545,000
10.0%, 4-15-2005 .................... 9,000 9,000,000
General Medical Corporation:
10.875%, 8-15-2003 .................. 7,000 7,796,250
12.125%, 8-15-2005 .................. 4,022 4,403,628
Total ............................... 31,059,878
See Notes to Schedule of Investments on pages - .
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Wholesale Trade - Nondurable Goods - 1.61%
Core-Mark International, Inc.,
11.375%, 9-15-2003 .................. $ 2,000 $ 2,055,000
Corporate Express, Inc.,
9.125%, 3-15-2004 ................... 5,000 4,918,750
LaRoche Industries Inc.,
13.0%, 8-15-2004 .................... 2,000 2,160,000
United Stationers Supply Co.,
12.75%, 5-1-2005 .................... 6,000 6,780,000
Total ............................... 15,913,750
TOTAL CORPORATE DEBT SECURITIES - 84.70% $835,428,738
(Cost: $817,652,189)
FOREIGN GOVERNMENT BOND - 0.26%
Argentina
The Republic of Argentina,
11.375%, 1-30-2017 .................. 2,500 2,618,750
(Cost: $2,484,550)
SHORT-TERM SECURITIES
Auto Repair, Services and Parking - 0.70%
Hertz Corp.,
5.28%, 4-7-97 ......................... 6,885 6,878,941
Communication - 1.05%
Dominion Resources Inc.,
5.55%, 5-6-97 ......................... 10,450 10,393,614
Electric, Gas and Sanitary Services - 0.29%
Pacificorp,
5.33%, 4-8-97 ......................... 2,880 2,877,015
Food and Kindred Products - 2.40%
ConAgra, Inc.,
5.65%, 4-25-97 ........................ 4,745 4,727,127
General Mills, Inc.,
Master Note ........................... 3 3,000
RJR Nabisco Inc.:
5.7%, 4-4-97 .......................... 3,000 2,998,575
5.75%, 4-21-97 ......................., 4,000 3,987,222
Quaker Oats Co.,
5.55%, 4-17-97 ........................ 11,987 11,957,432
Total.................................. 23,673,356
Food Stores - 0.32%
Albertson's Inc.,
5.53%, 5-5-97 ......................... 3,120 3,103,705
See Notes to Schedule of Investments on pages - .
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Instruments and Related Products - 0.84%
Baxter International Inc.,
5.82%, 4-17-97 ........................ $8,350 $ 8,328,401
Nondepository Institutions - 0.50%
Island Finance Puerto Rico Inc.,
5.55%, 4-10-97 ........................ 4,965 4,958,111
Textile Mill Products - 0.04%
Sara Lee Corporation,
Master Note ........................... 360 360,000
Tobacco Products - 0.50%
B.A.T. Capital Corp.,
5.87%, 4-4-97 ......................... 4,885 4,882,611
Transportation Equipment - 0.50%
Echlin, Inc.,
5.38%, 4-25-97 ........................ 4,955 4,937,228
TOTAL SHORT-TERM SECURITIES - 7.14% $ 70,392,982
(Cost: $70,392,982)
TOTAL INVESTMENT SECURITIES - 98.58% $972,384,841
(Cost: $958,437,151)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 1.42% 14,002,040
NET ASSETS - 100.00% $986,386,881
See Notes to Schedule of Investments on pages - .
<PAGE>
UNITED HIGH INCOME FUND, INC.
MARCH 31, 1997
Notes to Schedule of Investments
No income dividends were paid during the preceding 12 months.
(A) As of March 31, 1997, the following restricted securities were owned:
Shares/
Principal
Acquisition Amount Market
Security Date in 000's Cost Value
-------- ----------- --------------------------------
Consolidated Hydro, Inc.,
Preferred 6/15/96 3,000 1,412,143 $ 190,950
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 12,000
IntelCom Group Inc.,
Warrants 12/8/95 20,625 80,225 87,656
Intermedia Communications of
Florida, Inc., Preferred 3/4/97 50,000 5,000,000 4,787,500
Microcell Telecommunications
Inc., Conditional Warrants 6/13/96 58,000 0 36,250
Microcell Telecommunications
Inc., Warrants 6/13/96 58,000 710,466 725,000
Sinclair Capital,
Preferred 3/5/97 35,000 3,500,000 3,430,000
Allied Waste North America, Inc.,
10.25%, 12-1-2006 11/25/96 $3,750 3,750,000 3,825,000
12/11/96 1,500 1,561,875 1,530,000
Delco Remy International, Inc.,
10.625%, 8-1-2006 7/26/96 3,000 3,000,000 3,075,000
Diamond Cable Communications Plc,
0.0%, 2-15-2007 2/21/97 6,000 3,566,880 3,240,000
DynCorp,
9.5%, 3-1-2007 3/11/97 2,000 1,989,680 1,960,000
Electronic Retailing Systems
International, Inc., Units,
0.0%, 2-1-2004 1/21/97 6,500 4,412,395 4,444,375
Esat Holdings Limited, Units,
0.0%, 2-1-2007 1/20/97 3,000 1,632,330 1,687,500
GFSI, Inc.,
9.625%, 3-1-2007 2/20/97 1,000 1,000,000 1,007,500
Glenoit Corporation,
11.0%, 4-15-2007 3/26/97 2,500 2,495,225 2,490,625
Globalstar, L.P., Units,
11.375%, 2-15-20042/13/97 1,500 1,500,000 1,455,000
KinderCare Learning Center, Inc.,
9.5%, 2-15-2009 2/10/97 3,000 3,000,000 2,865,000
LDM Technologies, Inc.,
10.75%, 1-15-2007 1/23/97 2,500 2,587,500 2,487,500
Motors and Gears, Inc.,
10.75%, 11-15-2006 11/1/96 2,500 2,500,000 2,562,500
Multicanal S.A.:
9.25%, 2-1-2002 1/27/97 3,500 3,493,070 3,491,250
10.5%, 2-1-2007 1/27/97 2,000 1,995,080 2,000,000
Nortek, Inc.:
9.25%, 3-15-2007 3/12/97 2,000 1,988,440 1,970,000
Pen-Tab Industries, Inc.,
10.875%, 2-1-2007 1/30/97 2,500 2,500,000 2,537,500
Perez Companc S.A.,
9.0%, 1-30-2004 1/23/97 2,500 2,500,000 2,478,125
Prime Hospitality Corp.:
9.75%, 4-1-2007 3/21/97 2,500 2,500,000 2,506,250
RSL Communications Ltd., Units,
12.25%, 11-15-20069/30/96 3,500 3,500,000 3,508,750
Radnor Holdings Corporation,
10.0%, 12-1-2003 12/2/96 3,000 3,000,000 3,067,500
Safelite Glass Corp.,
9.875%, 12-15-200612/13/96 1,500 1,500,000 1,500,000
1/6/97 1,500 1,543,125 1,500,000
Sterling House Corporation, Convertible,
6.75%, 6-30-2006 5/17/96 2,000 2,000,000 1,417,500
Sun International Hotels Limited,
9.0%, 3-15-2007 3/5/97 2,000 1,990,840 1,890,000
TV Azteca S.A. de C.V.:
10.125%, 2-15-20041/31/97 1,250 1,248,375 1,228,125
10.5%, 2-15-2007 1/31/97 1,250 1,250,000 1,228,125
TravelCenters of America, Inc.,
10.25%, 4-1-2007 3/24/97 3,000 3,000,000 2,992,500
WinStar Communications, Inc.,
0.0%, 10-15-2005 3/13/97 3,500 3,500,000 3,486,875
----------------------
$81,950,531$78,876,861
======================
The total market value of restricted securities represents approximately
8.00% of the total net assets at March 31, 1997.
(B) The security does not bear interest for an initial period of time and
subsequently becomes interest bearing.
(C) Each Unit consists of $1,000 principal amount of 12.5% senior deferred
coupon notes due 2007 and one warrant to purchase 0.0447477 ordinary
shares.
(D) Each Unit consists of $1,000 principal amount of 11.375% senior notes due
2004 and a warrant to purchase 2.0645 shares of common stock.
(E) Each Unit consists of $1,000 principal amount of 12.25% senior notes
due 2006 and one warrant to purchase 1.815 shares of Class A common
stock.
(F) Each Unit consists of $1,000 principal amount of 13.5% senior discount
notes due 2006 and a warrant to purchase 2.274 shares of common stock.
(G) Each Unit consists of $1,000 principal amount of 13.25% senior discount
notes due 2004 and a warrant to purchase 17.23 shares of common stock.
(H) Each Unit consists of 10 senior discount notes due 2-1-2006 and
32 warrants. Each warrant entitles the holder to purchase one share of
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
MARCH 31, 1997
Assets
Investment securities -- at value
(Notes 1 and 3) ............................... $ 972,384,841
Cash ........................................... 41,780
Receivables:
Dividends and interest ........................ 19,490,160
Fund shares sold .............................. 808,524
Prepaid insurance premium ...................... 55,669
--------------
Total assets ................................ 992,780,974
--------------
Liabilities
Payable for Fund shares redeemed ............... 3,488,960
Payable for investment securities purchased .... 2,495,225
Accrued service fee (Note 2) ................... 264,415
Accrued transfer agency and dividend
disbursing (Note 2) ........................... 95,055
Accrued management fee (Note 2) ................ 14,955
Accrued accounting services fee (Note 2) ....... 8,333
Other .......................................... 27,150
--------------
Total liabilities ........................... 6,394,093
--------------
Total net assets ........................... $ 986,386,881
==============
Net Assets
$1.00 par value capital stock
Capital stock ................................. $ 106,604,126
Additional paid-in capital .................... 1,217,516,557
Accumulated undistributed income (loss):
Accumulated undistributed net investment income 1,312,631
Accumulated undistributed net realized
loss on investment transactions ............. (352,994,123)
Net unrealized appreciation in value of
investments ................................. 13,947,690
--------------
Net assets applicable to outstanding
units of capital ........................... $ 986,386,881
==============
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $9.25
Class Y .......................................... $9.25
Capital shares outstanding
Class A .......................................... 106,267,624
Class Y .......................................... 336,502
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, 1997
Investment Income
Income (Note 1B):
Interest and amortization ....................... $ 93,175,460
Dividends ....................................... 794,519
------------
Total income .................................. 93,969,979
------------
Expenses (Note 2):
Investment management fee ....................... 5,445,319
Service fee - Class A ........................... 1,376,047
Transfer agency and dividend disbursing - Class A 1,250,442
Legal fees ...................................... 281,437
Accounting services fee ......................... 88,750
Custodian fees .................................. 36,650
Audit fees ...................................... 30,624
Shareholder servicing - Class Y ................. 3,782
Other ........................................... 187,116
------------
Total expenses ................................ 8,700,167
------------
Net investment income ........................ 85,269,812
------------
Realized and Unrealized Gain (Loss) on
Investments (Notes 1 and 3)
Realized net loss on securities .................. (7,676,583)
Realized net loss on foreign
currency transactions ........................... (17,025)
------------
Realized net loss on investments ................ (7,693,608)
Unrealized appreciation in value of
investments during the period ................... 24,040,694
------------
Net gain on investments ....................... 16,347,086
------------
Net increase in net assets resulting
from operations ............................ $101,616,898
============
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended
March 31,
-----------------------------
1997 1996
-------------- --------------
Increase in Net Assets
Operations:
Net investment income .......... $ 85,269,812 $ 84,967,787
Realized net loss on
investments ................... (7,693,608) (16,543,528)
Unrealized appreciation ........ 24,040,694 60,496,492
------------ --------------
Net increase in net assets
resulting from operations ... 101,616,898 128,920,751
------------ --------------
Dividends to shareholders from
net investment income (Note 1D):*
Class A ........................ (84,491,972) (85,921,769)
Class Y ........................ (215,341) (18,564)
------------ --------------
(84,707,313) (85,940,333)
------------ --------------
Capital share transactions:
Proceeds from sale of shares:
Class A (7,938,016 and 7,953,459
shares, respectively) ....... 73,281,406 71,825,120
Class Y (110,412 and 236,584
shares, respectively) ....... 1,032,687 2,181,529
Proceeds from reinvestment
of dividends:
Class A (7,657,636 and
7,892,778 shares, respectively) 70,375,216 71,060,893
Class Y (23,378 and 2,040
shares, respectively) ....... 215,342 18,564
Payments for shares redeemed:
Class A (16,195,182 and 16,328,917
shares, respectively) ....... (149,178,639) (147,555,964)
Class Y (33,578 and 2,334
shares, respectively) ....... (313,944) (21,268)
------------ --------------
Net decrease in net assets
resulting from capital share
transactions ................ (4,587,932) (2,491,126)
------------ --------------
Total increase .............. 12,321,653 40,489,292
Net Assets
Beginning of period ............. 974,065,228 933,575,936
------------ --------------
End of period, including
undistributed net investment
income of $1,312,631 and
$767,157, respectively ......... $986,386,881 $974,065,228
============ ==============
*See "Financial Highlights" on pages - .
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,
-----------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
Net asset value,
beginning of period $9.09 $8.70 $9.20 $9.21 $8.82
----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... 0.80 0.79 0.80 0.80 0.83
Net realized and
unrealized gain
(loss) on
investments ..... 0.16 0.40 (0.51) (0.01) 0.40
----- ----- ----- ----- -----
Total from investment
operations ....... 0.96 1.19 0.29 0.79 1.23
----- ----- ----- ----- -----
Less dividends
declared from net
investment income . (0.80) (0.80) (0.79) (0.80) (0.84)
----- ----- ----- ----- -----
Net asset value,
end of period .... $9.25 $9.09 $8.70 $9.20 $9.21
===== ===== ===== ===== =====
Total return* ...... 10.94% 14.16% 3.41% 8.69% 14.72%
Net assets, end
of period (000
omitted) ......... $983,273$971,916$933,576$1,006,619$986,867
Ratio of expenses to
average net assets 0.89% 0.85% 0.84% 0.78% 0.75%
Ratio of net investment
income to average
net assets ....... 8.68% 8.74% 9.07% 8.51% 9.28%
Portfolio turnover
rate ............. 53.17% 41.67% 18.94% 54.80% 58.68%
*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 Each Period:
For the For the
fiscal period
year from 1/4/96*
ended through
3/31/97 3/31/96
-------- --------
Net asset value,
beginning of period $9.10 $9.19
----- -----
Income from investment
operations:
Net investment
income .......... 0.81 0.20
Net realized and
unrealized gain (loss)
on investments... 0.15 (0.10)
----- -----
Total from investment
operations ........ 0.96 0.10
----- -----
Less dividends
declared from net
investment income . (0.81) (0.19)
----- -----
Net asset value,
end of period ..... $9.25 $9.10
===== =====
Total return ....... 11.07% 1.00%
Net assets, end of
period (000
omitted) ......... $3,114 $2,149
Ratio of expenses
to average net
assets ............ 0.77% 0.80%**
Ratio of net
investment income
to average net
assets ............ 8.78% 8.55%**
Portfolio
turnover rate ..... 53.17% 41.67%**
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
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
Quotation 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 and post-1984 market discount on the purchase of
bonds 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 Subchapter M of the Internal
Revenue Code. In addition, the Fund intends to pay distributions as
required to avoid imposition of excise tax. Accordingly, provision has not
been made for Federal income taxes. See Note 4 -- Federal Income Tax
Matters.
D. Dividends and distributions -- Dividends and distributions to shareholders
are recorded by the Fund on the record date. Net investment income
dividends and capital gains distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are due to differing treatments for items
such as deferral of wash sales and post-October losses, foreign currency
transactions, net operating losses and expiring capital loss carryforwards.
At March 31, 1997, the Fund reclassified $85,622,904 between additional
paid-in-capital and accumulated undistributed net realized gain on
investment transactions. Also reclassified at March 31, 1997, was $1,463
between accumulated undistributed net investment income and accumulated
undistributed net realized loss on investment transactions. Net investment
income, net realized loss and net assets were not affected by this change.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
NOTE 2 -- Investment Management and Payments to Affiliated Persons
The 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 $15.0 billion of
combined net assets at March 31, 1997) 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 gross sales
commissions for Class A shares (which are not an expense of the Fund) of
$2,037,706, out of which W&R paid sales commissions of $1,160,906 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 $38,571, which are included in other
expenses.
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 $484,993,911 while proceeds from
maturities and sales aggregated $515,654,568. Purchases of short-term
securities aggregated $902,532,071 while proceeds from maturities and sales of
short-term securities aggregated $879,861,405. Proceeds from the maturities and
sales of U.S. Government securities aggregated $15,464,063. There were no
purchases of U.S. Government securities during the period.
For Federal income tax purposes, cost of investments owned at March 31,
1997 was $957,670,377, resulting in net unrealized appreciation of $14,714,464,
of which $31,477,843 related to appreciated securities and $16,763,379 related
to depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized net capital losses of
$7,420,773 during its fiscal year ended March 31, 1996. Capital loss
carryforwards aggregated $353,505,086 at March 31, 1997 and are available to
offset future realized capital gain net income for Federal income tax purposes
as follows: $21,585,257 through March 31, 1998; $171,670,170 through March 31,
1999; $114,024,403 through March 31, 2000; $17,962,753 through March 31, 2003;
$20,841,730 through March 31, 2004; and $7,420,773 through March 31, 2005.
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>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
United High Income Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of United High Income Fund, Inc.
(the ``Fund'') as of March 31, 1997, the related statements of operations
and changes in net assets for the year then ended, and the financial
highlights for the year then ended. These financial statements and the
financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial statements
and the financial highlights based on our audit. The financial
statements and the financial highlights of the Fund for each of the
periods presented in the four-year period ended March 31, 1996 were
audited by other auditors whose report, dated May 10, 1996, expressed an
unqualified opinion on those statements and financial highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
the financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned at March 31, 1997 by correspondence with
the custodian and broker. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of the
United High Income Fund, Inc. as of March 31, 1997, the results of its
operations, the changes in its net assets, and the financial highlights
for the year then ended in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Kansas City, Missouri
May 9, 1997
<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
04-12-96 $0.064 $0.0640 $--- $0.0005 $0.0635 $---
05-17-96 0.064 .0640 --- .0005 .0635 ---
06-14-96 0.065 .0650 --- .0005 .0645 ---
07-12-96 0.065 .0650 --- .0005 .0645 ---
08-16-96 0.065 .0650 --- .0005 .0645 ---
09-13-96 0.065 .0650 --- .0005 .0645 ---
10-11-96 0.066 .0660 --- .0006 .0654 ---
11-15-96 0.066 .0660 --- .0006 .0654 ---
12-13-96 0.079 .0790 --- .0007 .0783 ---
01-17-97 0.066 .0660 --- .0008 .0652 ---
02-14-97 0.066 .0660 --- .0008 .0652 ---
03-14-97 0.066 .0660 --- .0008 .0652 ---
------- ------- ------- ------- ------- -------
Total $0.797 $0.7970 $--- $0.0073 $0.7897 $---
======= ======= ======= ======= ======= =======
Class Y
04-12-96 $0.065 $0.0650 $--- $0.0005 $0.0645 $---
05-17-96 0.065 .0650 --- .0005 .0645 ---
06-14-96 0.066 .0660 --- .0006 .0654 ---
07-12-96 0.066 .0660 --- .0006 .0654 ---
08-16-96 0.066 .0660 --- .0006 .0654 ---
09-13-96 0.066 .0660 --- .0006 .0654 ---
10-11-96 0.067 .0670 --- .0006 .0664 ---
11-15-96 0.067 .0670 --- .0006 .0664 ---
12-13-96 0.080 .0800 --- .0007 .0793 ---
01-17-97 0.067 .0670 --- .0008 .0662 ---
02-14-97 0.066 .0660 --- .0008 .0652 ---
03-14-97 0.067 .0670 --- .0008 .0662 ---
------- ------- ------- ------- ------- -------
Total $0.808 $0.8080 $--- $0.0077 $0.8003 $---
======= ======= ======= ======= ======= =======
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
Linda Graves, Topeka, Kansas
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
William L. Rogers, Los Angeles, California
Frank J. Ross, Jr., Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Keith A. Tucker, Overland Park, Kansas
Frederick Vogel III, Milwaukee, Wisconsin
Paul S. Wise, Carefree, Arizona
OFFICERS
Keith A. Tucker, President
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
(800) 366-5465
Our INTERNET address is:
http://www.waddell.com
NUR1009A(3-97)
printed on recycled paper
