United
High Income
Fund, Inc.
SEMIANNUAL
REPORT
-------------------------------------------
For the six months ended September 30, 1997
<PAGE>
This report is submitted for the general information of the shareholders of
United High Income Fund, Inc. It is not authorized for distribution to
prospective investors in the Fund unless accompanied with or preceded by the
United High Income Fund, Inc. current prospectus.
<PAGE>
PRESIDENT'S LETTER
SEPTEMBER 30, 1997
Dear Shareholder:
As Waddell & Reed celebrates its 60th anniversary in the financial services
industry, I would like to thank you for your continued confidence in our
products and services. Since we opened our doors in 1937, our goal has been and
continues to be to provide the best service possible to our shareholders. This
commitment is reflected in every area of our organization: starting with your
financial advisor and continuing with our investment management and customer
service people of our affiliated companies.
Your confidence in the success of the products and services offered by Waddell &
Reed and its affiliates is reflected in the growth the Funds have experienced
over our 60 years. Total mutual fund assets under management reached the $1
billion mark in 1961, and over the $5 billion mark in 1985. As of September
30, 1997, mutual fund assets under management totaled more than $20.6 billion.
We look forward to helping you meet the financial goals that are important to
you, now and for many years to come. Should you have any questions about your
account or other financial issues that are important to you, contact your
financial advisor or your local Waddell & Reed office. They're ready to help
you make the most of your financial future.
Respectfully,
Keith A. Tucker
President
<PAGE>
SHAREHOLDER SUMMARY
- --------------------------------------------------------------
UNITED HIGH INCOME FUND, INC.
PORTFOLIO STRATEGY:
Invests generally in OBJECTIVE: High level of current
High-Risk, High-Yield income, by investing
Fixed Income Securities primarily in a
diversified portfolio of
Maximum 20% Common Stock high-yield, high-risk, fixed income
securities, with a secondary objective
of capital growth when consistent with
the primary objective.
STRATEGY: Invests generally in debt securities in
lower rating categories as classified by
recognized rating agencies; may also
invest up to 20% in common stocks. (May
purchase securities subject to
repurchase agreements. May invest in
certain options and futures.)
FOUNDED: 1979
SCHEDULED DIVIDEND FREQUENCY: MONTHLY
PERFORMANCE SUMMARY -- Class A Shares
PER SHARE DATA
For the Six Months Ended September 30, 1997
- -------------------------------------------
DIVIDENDS PAID $0.40
=====
NET ASSET VALUE ON
9/30/97 $9.86
3/31/97 9.25
-----
CHANGE PER SHARE $0.61
=====
Past performance is not necessarily indicative of future results.
TOTAL RETURN HISTORY
Average Annual Total Return
---------------------------
With Without
Period Sales Load* Sales Load**
- ------ ----------- ------------
1-year period ended 9-30-97 9.50% 16.18%
5-year period ended 9-30-97 9.76% 11.07%
10-year period ended 9-30-97 7.98% 8.62%
*Performance data quoted represents past performance and is based on deduction
of 5.75% sales load on the initial purchase in each of the three periods.
**Performance data quoted in this column represents past performance without
taking into account the sales load deducted on an initial purchase.
Investment return and principal value will fluctuate and an investor's shares,
when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On September 30, 1997, United High Income Fund, Inc. had net assets totaling
$1,069,141,343 invested in a diversified portfolio of:
86.96% Corporate Debt Securities
7.59% Common and Preferred Stocks and Warrants
5.45% Cash and Cash Equivalents
As a shareholder of United High Income Fund, Inc., for every $100 you had
invested on September 30, 1997, your Fund owned:
$28.40 Manufacturing Bonds
23.59 Transportation, Communication, Electric
and Sanitary Services Bonds
17.19 Services Bonds
10.11 Wholesale and Retail Trade Bonds
7.59 Common and Preferred Stocks and Warrants
5.45 Cash and Cash Equivalents
2.56 Finance, Insurance and Real Estate Bonds
2.26 Mining Bonds
1.55 Miscellaneous Investing Institutions Bonds
0.74 Agriculture, Forestry and Fisheries Bonds
0.56 Contract Construction Bonds
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1997
Shares Value
COMMON AND PREFERRED STOCKS AND WARRANTS
Agricultural Production - Livestock - 0.14%
Pilgrim's Pride Corporation .......... 100,000 $ 1,487,500
Communication - 1.68%
Adelphia Communications Corporation,
13% Preferred (A) ................... 5,000 555,000
Esat Holdings Limited,
Warrants (A)* ....................... 3,000 60,000
Globalstar Telecommunications Limited,
Warrants* (A) ....................... 1,500 180,000
Heartland Wireless Communications,
Inc., Warrants (A)* ................. 12,000 120
IXC Communications, Inc.,
12.5% Preferred (A) ................. 3,500 4,060,000
Intermedia Communications of
Florida, Inc., 13.5% Preferred* ..... 5,391 6,469,207
Iridium LLC, Warrants (A)* ........... 6,500 975,000
Jacor Communications, Inc.* .......... 50,000 2,207,800
Microcell Telecommunications
Inc., Conditional Warrants (A)* ..... 58,000 580
Microcell Telecommunications
Inc., Warrants (A)* ................. 58,000 1,305,000
Young Broadcasting Inc., Class A* .... 63,000 2,153,781
Total ............................... 17,966,488
Depository Institutions - 0.37%
California Federal Preferred Capital
Corporation, 9.125% Preferred ....... 150,000 3,937,500
Electric, Gas and Sanitary Services - 0.22%
Consolidated Hydro, Inc.,
13.5% Preferred* .................... 3,000 6,750
Consolidated Hydro, Inc., Warrants (A)* 5,400 5
EUA Power Corporation, Contingent
Interest Certificates* .............. 9,500 10
El Paso Electric Company,
11.4% Preferred ..................... 17,693 1,963,923
IntelCom Group Inc., Warrants (A)* ... 20,625 350,625
Total ............................... 2,321,313
Electronic & Other Electric Equipment - 0.04%
Electronic Retailing Systems
International, Inc., Warrants* ...... 6,500 390,000
Furniture and Fixtures - 0.61%
Lear Corporation* .................... 132,700 6,535,475
General Building Contractors - 1.33%
Walter Industries, Inc.* ............. 710,990 14,152,967
Holding and Other Investment Offices - 0.15%
National Health Investors, Inc. ...... 41,630 1,618,366
See Notes to Schedule of Investments on pages 20 - 22.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1997
Shares Value
COMMON AND PREFERRED STOCKS AND
WARRANTS (Continued)
Hotels and Other Lodging Places - 0.10%
Fitzgeralds Gaming Corporation,
Warrants (A)* ....................... 17,500 $ 175,000
Trump Hotels & Casino Resorts, Inc.* . 87,500 902,300
Total ............................... 1,077,300
Industrial Machinery and Equipment - 0.15%
Bell & Howell Company* ............... 50,000 1,621,850
Instruments and Related Products - 0.01%
Powertel, Inc., Warrants* ............ 16,000 144,000
Lumber and Wood Products - 2.16%
Triangle Pacific Corp.* .............. 660,844 23,087,907
Printing and Publishing - 0.63%
K-III Communications Corporation,
$10 Preferred ...................... 35,000 3,736,250
World Color Press, Inc.* ............. 100,000 3,018,700
Total ............................... 6,754,950
TOTAL COMMON AND PREFERRED STOCKS
AND WARRANTS - 7.59% $ 81,095,616
(Cost: $67,267,436)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Agricultural Production - Crops - 0.39%
Hines Horticulture, Inc.,
11.75%, 10-15-2005 .................. $ 3,925 4,199,750
Agricultural Production - Livestock - 0.35%
Pilgrim's Pride Corporation,
10.875%, 8-1-2003 ................... 3,500 3,710,000
Amusement and Recreation Services - 2.27%
American Skiing Company,
12.0%, 7-15-2006 .................... 4,500 5,051,250
California Hotel Finance Corporation,
11.0%, 12-1-2002 .................... 5,000 5,250,000
Premier Parks Inc.,
12.0%, 8-15-2003 .................... 1,500 1,680,000
Trump Atlantic City Associates,
11.25%, 5-1-2006 .................... 6,000 5,820,000
See Notes to Schedule of Investments on pages 20 - 22.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Amusement and Recreation Services (Continued)
Trump Hotels & Casino Resorts
Holdings, L.P.,
15.5%, 6-15-2005 .................... $ 5,500 $ 6,421,250
Total ............................... 24,222,500
Apparel and Accessory Stores - 0.33%
Wilsons The Leather Experts Inc.,
11.25%, 8-15-2004 (A) ............... 3,500 3,535,000
Apparel and Other Textile Products - 1.72%
Consoltex Group Inc.,
11.0%, 10-1-2003 .................... 7,000 7,306,250
Pillowtex Corporation,
10.0%, 11-15-2006 ................... 2,500 2,637,500
WestPoint Stevens Inc.,
9.375%, 12-15-2005 .................. 8,000 8,400,000
Total ............................... 18,343,750
Auto Repair, Services and Parking - 0.30%
Safelite Glass Corp.,
9.875%, 12-15-2006 (A) .............. 3,000 3,195,000
Automotive Dealers & Service Stations - 0.66%
Chief Auto Parts Inc.,
10.5%, 5-15-2005 .................... 7,000 7,052,500
Building Materials and Garden Supplies - 0.54%
Central Tractor Farm & Country, Inc.,
10.625%, 4-1-2007 ................... 2,500 2,650,000
Reliant Building Products, Inc.,
10.875%, 5-1-2004 (A) ............... 3,000 3,112,500
Total ............................... 5,762,500
Business Services - 2.47%
Adams Outdoor Advertising Limited Partnership,
10.75%, 3-15-2006 ................... 4,250 4,664,375
Coinmach Corporation,
11.75%, 11-15-2005 .................. 4,220 4,684,200
Federal Data Corporation,
10.125%, 8-1-2005 (A) ............... 2,500 2,575,000
Lamar Advertising Company,
9.625%, 12-1-2006 ................... 3,000 3,172,500
Shared Technologies Fairchild
Communications Corp.,
0.0%, 3-1-2006 (B) .................. 6,500 6,532,500
See Notes to Schedule of Investments on pages 20 - 22.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Business Services (Continued)
Universal Outdoor, Inc.,
9.75%, 10-15-2006 ................... $ 4,500 $ 4,815,000
Total ............................... 26,443,575
Chemicals and Allied Products - 2.90%
Dade International Inc.,
11.125%, 5-1-2006 ................... 2,500 2,815,625
Freedom Chemical Company,
10.625%, 10-15-2006 ................. 6,250 6,625,000
Sovereign Specialty Chemicals, Inc.,
9.5%, 8-1-2007 (A) .................. 1,000 1,020,000
Spinnaker Industries, Inc.,
10.75%, 10-15-2006 .................. 6,000 6,180,000
UCC Investors Holding, Inc.:
10.5%, 5-1-2002 ..................... 9,000 10,170,000
0.0%, 5-1-2005 (B) .................. 4,410 4,222,575
Total ............................... 31,033,200
Coal Mining - 0.19%
Anker Coal Group, Inc.,
9.75%, 10-1-2007 (A) ................ 1,950 1,989,000
Communication - 19.91%
ACME Television, LLC,
0.0%, 9-30-2004 (A) ................. 7,400 5,439,000
Adelphia Communications Corporation:
10.25%, 7-15-2000 ................... 2,250 2,362,500
12.5%, 5-15-2002 .................... 1,500 1,591,875
9.25%, 10-1-2002 (A) ................ 7,000 7,052,500
10.5%, 7-15-2004 (A) ................ 4,000 4,240,000
Allbritton Communications Company,
9.75%, 11-30-2007 ................... 4,500 4,500,000
American Radio Systems Corporation,
9.0%, 2-1-2006 ...................... 3,250 3,445,000
Argyle Television Operations, Inc.,
9.75%, 11-1-2005 .................... 10,000 10,850,000
Brooks Fiber Properties, Inc.,
0.0%, 3-1-2006 (B) .................. 10,000 8,000,000
Centennial Cellular Corp.,
10.125%, 5-15-2005 .................. 3,000 3,217,500
Comcast Corporation,
9.5%, 1-15-2008 ..................... 5,250 5,643,750
Comcast UK Cable Partners Limited,
0.0%, 11-15-2007 (B) ................ 9,000 7,065,000
See Notes to Schedule of Investments on pages 20 - 22.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Communication (Continued)
Diamond Cable Communications Plc,
0.0%, 12-15-2005 (B) ................ $13,500 $ 10,108,125
Esat Holdings Limited,
0.0%, 2-1-2007 (A)(B) ............... 3,000 1,897,500
Globalstar, L.P.,
11.375%, 2-15-2004 .................. 1,500 1,563,750
Hyperion Telecommunications, Inc.,
12.25%, 9-1-2004 (A) ................ 2,000 2,190,000
IntelCom Group Inc.,
0.0%, 9-15-2005 (B).................. 6,250 4,968,750
Intermedia Communications of Florida, Inc.,
0.0%, 5-15-2006 (B).................. 6,000 4,710,000
Iridium LLC,
13.0%, 7-15-2005 (A) ................ 6,500 6,808,750
Jacor Communications, Inc.,
10.125%, 6-15-2006 .................. 2,000 2,170,000
Lenfest Communications, Inc.,
8.375%, 11-1-2005 ................... 2,400 2,412,000
Marcus Cable Co.,
0.0%, 12-15-2005 .................... 5,500 4,565,000
Marcus Cable Operating Company, L.P.,
0.0%, 8-1-2004 (B) .................. 10,000 9,012,500
Microcell Telecommunications Inc.,
0.0%, 6-1-2006 (B) .................. 16,000 10,960,000
Multicanal S.A.,
10.5%, 2-1-2007 ..................... 2,000 2,135,000
Nextel Communications, Inc.:
0.0%, 8-15-2004 (B) ................. 7,500 6,487,500
0.0%, 9-15-2007 (A)(B) .............. 2,500 1,562,500
Primus Telecommunications Group,
Incorporated, Units,
11.75%, 8-1-2004 (C) ................ 5,000 5,325,000
Rifkin Acquisition Partners, L.L.L.P.,
11.125%, 1-15-2006 .................. 4,000 4,340,000
Rogers Cantel Inc.,
9.375%, 6-1-2008 .................... 4,000 4,280,000
Rogers Communications Inc.:
9.125%, 1-15-2006 ................... 7,500 7,668,750
8.875%, 7-15-2007 ................... 3,500 3,526,250
SFX Broadcasting, Inc.,
10.75%, 5-15-2006 ................... 3,500 3,815,000
Salem Communications Corporation,
9.5%, 10-1-2007 (A) ................. 3,425 3,484,937
Sinclair Broadcasting Group,
9.0%, 7-15-2007 (A) ................. 4,000 4,000,000
See Notes to Schedule of Investments on pages 20 - 22.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Communication (Continued)
Sprint Spectrum L.P.,
0.0%, 8-15-2006 (B) ................. $ 4,700 $ 3,572,000
Sullivan Broadcasting Company, Inc.,
10.25%, 12-15-2005 .................. 1,000 1,047,500
Teleport Communications Group Inc.:
9.875%, 7-1-2006 .................... 2,000 2,175,000
0.0%, 7-1-2007 (B) .................. 9,000 6,975,000
USA Mobile Communications, Inc. II,
9.5%, 2-1-2004 ...................... 2,000 1,955,000
Vanguard Cellular Systems, Inc.,
9.375%, 4-15-2006 ................... 4,500 4,657,500
Videotron Plc,
0.0%, 8-15-2005 (B) ................. 4,250 3,665,625
WinStar Communications, Inc.,
0.0%, 10-15-2005 (A)(B) ............. 3,500 3,653,125
Wireless One, Inc., Units,
0.0%, 8-1-2006 (D) .................. 7,250 1,558,750
WorldCom, Inc.:
9.375%, 1-15-2004 ................... 5,883 6,256,982
8.875%, 1-15-2006 ................... 5,534 5,935,104
Total ............................... 212,850,023
Depository Institutions - 0.93%
First Nationwide Holdings Inc.:
9.125%, 1-15-2003 ................... 5,750 5,980,000
12.5%, 4-15-2003 .................... 3,500 3,937,500
Total ............................... 9,917,500
Eating and Drinking Places - 0.57%
Foodmaker, Inc.,
9.25%, 3-1-99 ....................... 2,500 2,556,250
SC International Services, Inc.,
9.25%, 9-1-2007 (A) ................. 3,475 3,535,813
Total ............................... 6,092,063
Electric, Gas and Sanitary Services - 1.58%
Allied Waste Industries, Inc.,
0.0%, 6-1-2007 (A) .................. 5,000 3,387,500
Allied Waste North America, Inc.,
10.25%, 12-1-2006 ................... 7,250 7,938,750
El Paso Electric Company,
9.4%, 5-1-2011 ...................... 5,000 5,540,250
Total ............................... 16,866,500
See Notes to Schedule of Investments on pages 20 - 22.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Electronic and Other Electric Equipment - 2.08%
Communications & Power Industries, Inc.,
12.0%, 8-1-2005 ..................... $ 4,000 $ 4,460,000
Communications Instruments, Inc.,
10.0%, 9-15-2004 (A) ................ 2,500 2,550,000
DII Group, Inc. (The),
8.5%, 9-15-2007 (A) ................. 2,000 2,010,000
Electronic Retailing Systems
International, Inc.,
0.0%, 2-1-2004 (B) .................. 6,500 4,355,000
Motors and Gears, Inc.,
10.75%, 11-15-2006 .................. 2,500 2,675,000
Telex Communications, Inc.,
10.5%, 5-1-2007 (A) ................. 2,500 2,562,500
Viasystems, Inc.,
9.75%, 6-1-2007 (A) ................. 3,500 3,640,000
Total ............................... 22,252,500
Engineering and Management Services - 0.38%
United International Holdings, Inc.,
0.0%, 11-15-99 ...................... 5,000 4,075,000
Fabricated Metal Products - 3.03%
American Safety Razor Company,
9.875%, 8-1-2005 .................... 1,000 1,076,250
Mark IV Industries, Inc.,
8.75%, 4-1-2003 ..................... 11,000 11,440,000
Neenah Corporation:
11.125%, 5-1-2007 (A) ............... 5,500 5,953,750
Nortek, Inc.,
9.875%, 3-1-2004 .................... 7,000 7,157,500
Safety Components International, Inc.,
10.125%, 7-15-2007 (A) .............. 3,000 3,060,000
U.S. Can Corporation,
10.125%, 10-15-2006 ................. 3,500 3,714,375
Total ............................... 32,401,875
Food and Kindred Products - 1.44%
B & G Foods, Inc.,
9.625%, 8-1-2007 (A) ................ 4,500 4,522,500
Coca-Cola FEMSA, S.A. de C.V.,
8.95%, 11-1-2006 .................... 3,500 3,694,250
Dr Pepper Bottling Holdings, Inc.,
0.0%, 2-15-2003 (B) ................. 3,500 3,548,125
Southern Foods Group, L.P.,
9.875%, 9-1-2007 (A) ................ 3,450 3,579,375
Total ............................... 15,344,250
See Notes to Schedule of Investments on pages 20 - 22.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Food Stores - 2.49%
Big V Supermarkets, Inc.,
11.0%, 2-15-2004 .................... $ 5,000 $ 5,200,000
Dominick's Finer Foods, Inc.,
10.875%, 5-1-2005 ................... 4,000 4,560,000
Eagle Food Centers, Inc.,
8.625%, 4-15-2000 ................... 4,000 3,960,000
Pueblo Xtra International, Inc.,
9.5%, 8-1-2003 ...................... 4,750 4,690,625
Ralphs Grocery Company,
11.0%, 6-15-2005 .................... 7,500 8,250,000
Total ............................... 26,660,625
Furniture and Fixtures - 0.76%
Lear Seating Corporation,
8.25%, 2-1-2002 ..................... 8,000 8,110,000
General Building Contractors - 0.56%
NVR L.P.,
11.0%, 4-15-2003 .................... 5,500 6,022,500
Health Services - 5.31%
Genesis ElderCare Acquisition Corp.,
9.0%, 8-1-2007 (A) .................. 5,000 4,975,000
Magellan Health Services, Inc.,
11.25%, 4-15-2004 ................... 4,500 5,023,125
Multicare Companies, Inc. (The),
12.5%, 7-1-2002 ..................... 5,398 5,789,355
Quorum Health Group, Inc.,
8.75%, 11-1-2005 .................... 8,000 8,340,000
Regency Health Services, Inc.,
9.875%, 10-15-2002 .................. 5,000 5,475,000
Tenet Healthcare Corporation:
9.625%, 9-1-2002 .................... 7,500 8,203,125
8.0%, 1-15-2005 ..................... 4,500 4,590,000
10.125%, 3-1-2005 ................... 6,000 6,570,000
8.625%, 1-15-2007 ................... 7,500 7,762,500
Total ............................... 56,728,105
Holding and Other Investment Offices - 1.55%
Grupo Industrial Durango, S.A. de C.V.,
12.625%, 8-1-2003 ................... 8,000 9,110,000
LTC Properties, Inc., Convertible:
8.5%, 1-1-2000 ...................... 3,000 3,787,500
8.5%, 1-1-2001 ...................... 3,000 3,663,750
Total ............................... 16,561,250
See Notes to Schedule of Investments on pages 20 - 22.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Hotels and Other Lodging Places - 3.73%
Boyd Gaming Corporation,
9.25%, 10-1-2003 .................... $ 1,500 $ 1,567,500
CapStar Hotel Company,
8.75%, 8-15-2007 (A) ................ 2,500 2,528,125
Casino America, Inc.,
12.5%, 8-1-2003 ..................... 8,250 8,827,500
HMC Acquisition Properties, Inc.,
9.0%, 12-15-2007 .................... 6,000 6,180,000
Prime Hospitality Corp.:
9.25%, 1-15-2006 .................... 4,000 4,200,000
9.75%, 4-1-2007 ..................... 2,500 2,643,750
Showboat, Inc.,
9.25%, 5-1-2008 ..................... 9,000 9,337,500
Station Casinos, Inc.,
10.125%, 3-15-2006 .................. 4,500 4,578,750
Total ............................... 39,863,125
Industrial Machinery and Equipment - 3.05%
American Standard Inc.:
9.875%, 6-1-2001 .................... 2,000 2,085,000
0.0%, 6-1-2005 (B) .................. 12,250 12,188,750
9.25%, 12-1-2016 .................... 2,000 2,090,000
Axiohm Transaction Solutions, Inc.,
9.75%, 10-1-2007 (A) ................ 2,000 2,030,000
Bell & Howell Company,
10.75%, 10-1-2002 ................... 5,000 5,200,000
Falcon Building Products, Inc.,
0.0%, 6-15-2007 ..................... 11,000 6,957,500
Walbro Corporation,
9.875%, 7-15-2005 ................... 2,000 2,060,000
Total ............................... 32,611,250
Instruments and Related Products - 1.86%
Cole National Group, Inc.,
9.875%, 12-31-2006................... 4,500 4,815,000
InterCel, Inc.,
0.0%, 2-1-2006 (B) .................. 5,000 3,450,000
Maxxim Medical, Inc.,
10.5%, 8-1-2006 ..................... 9,250 10,082,500
Powertel, Inc.,
11.125%, 6-1-2007 ................... 1,500 1,563,750
Total ............................... 19,911,250
Lumber and Wood Products - 0.65%
Triangle Pacific Corp.,
10.5%, 8-1-2003 ..................... 6,500 6,922,500
See Notes to Schedule of Investments on pages 20 - 22.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Miscellaneous Manufacturing Industries - 1.12%
Hedstrom Corporation,
10.0%, 6-1-2007 (A) ................. $ 3,500 $ 3,578,750
Pen-Tab Industries, Inc.,
10.875%, 2-1-2007 ................... 2,500 2,534,375
Riddell Sports, Inc.,
10.5%, 7-15-2007 .................... 2,500 2,625,000
Syratech Corporation,
11.0%, 4-15-2007 .................... 3,000 3,251,250
Total ............................... 11,989,375
Miscellaneous Retail - 1.54%
Eye Care Centers of America, Inc.,
12.0%, 10-1-2003 .................... 3,500 3,828,125
Michaels Stores, Inc.,
10.875%, 6-15-2006 .................. 6,000 6,615,000
Petroleum Heat and Power Co., Inc.,
9.375%, 2-1-2006 .................... 3,000 2,880,000
TravelCenters of America, Inc.,
10.25%, 4-1-2007 .................... 3,000 3,150,000
Total ............................... 16,473,125
Motion Pictures - 2.10%
All American Communications, Inc.,
10.875%, 10-15-2001 ................. 3,500 3,788,750
Hollywood Theaters, Inc.,
10.625%, 8-1-2007 (A) ............... 3,000 3,187,500
MacAndrews & Forbes Group, Incorporated,
13.0%, 3-1-99 ....................... 7,799 7,837,995
Plitt Theatres, Inc.,
10.875%, 6-15-2004 .................. 4,000 4,240,000
Regal Cinemas, Inc.,
8.5%, 10-1-2007 (A) ................. 3,425 3,446,406
Total ............................... 22,500,651
Nondepository Institutions - 1.33%
Delta Financial Corporation,
9.5%, 8-1-2004 ...................... 4,500 4,511,250
GPA Delaware, Inc.,
8.75%, 12-15-98 ..................... 9,500 9,701,875
Total ............................... 14,213,125
Oil and Gas Extraction - 2.07%
Coho Energy, Inc.,
8.875%, 10-15-2007 .................. 7,000 6,973,750
Falcon Drilling, Inc.,
9.75%, 1-15-2001 .................... 5,500 5,788,750
See Notes to Schedule of Investments on pages 20 - 22.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Oil and Gas Extraction (Continued)
Kelley Oil & Gas Corporation,
10.375%, 10-15-2006 ................. $ 3,500 $ 3,631,250
Pride Petroleum Services, Inc.,
9.375%, 5-1-2007 .................... 2,000 2,140,000
Vintage Petroleum, Inc.:
9.0%, 12-15-2005 .................... 2,500 2,593,750
8.625%, 2-1-2009 .................... 1,000 1,015,000
Total ............................... 22,142,500
Paper and Allied Products - 1.86%
Container Corporation of America,
11.25%, 5-1-2004 .................... 3,500 3,867,500
Fort Howard Corporation,
9.0%, 2-1-2006 ...................... 5,000 5,412,500
Four M Corporation,
12.0%, 6-1-2006 ..................... 3,000 3,217,500
Huntsman Packaging Corporation,
9.125%, 10-1-2007 (A) ............... 1,500 1,530,000
Mail-Well Corporation,
10.5%, 2-15-2004 .................... 3,500 3,771,250
Radnor Holdings Corporation,
10.0%, 12-1-2003 .................... 2,000 2,067,500
Total ............................... 19,866,250
Personal Services - 0.36%
Prime Succession Acquisition Corp.,
10.75%, 8-15-2004 ................... 3,500 3,893,750
Primary Metal Industries - 1.20%
Commonwealth Aluminum Corporation,
10.75%, 10-1-2006 ................... 3,000 3,255,000
Essex Group, Inc.,
10.0%, 5-1-2003 ..................... 4,000 4,220,000
Weirton Steel Corporation:
11.375%, 7-1-2004 ................... 3,950 4,285,750
10.75%, 6-1-2005 .................... 1,000 1,065,000
Total ............................... 12,825,750
Printing and Publishing - 2.57%
American Media Operations, Inc.,
11.625%, 11-15-2004 ................. 4,000 4,380,000
ITT Publimedia B.V.,
9.375%, 9-15-2007 (A) ............... 2,925 3,056,625
K-III Communications Corporation,
8.5%, 2-1-2006 ...................... 5,000 5,100,000
See Notes to Schedule of Investments on pages 20 - 22.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Printing and Publishing (Continued)
Viacom International, Inc.,
8.0%, 7-7-2006 ...................... $15,000 $ 14,962,500
Total ............................... 27,499,125
Railroad Transportation - 0.32%
TFM, S.A. de C.V.:
10.25%, 6-15-2007 (A) ............... 1,000 1,062,500
0.0%, 6-15-2009 (A) ................. 3,500 2,331,875
Total ............................... 3,394,375
Real Estate - 0.30%
Delco Remy International, Inc.,
10.625%, 8-1-2006 (A) ............... 3,000 3,210,000
Rubber and Miscellaneous Plastics Products - 0.85%
Burke Industries, Inc.,
10.0%, 8-15-2007 (A) ................ 1,500 1,537,500
LDM Technologies, Inc.,
10.75%, 1-15-2007 ................... 2,500 2,693,750
RBX Corporation,
11.25%, 10-15-2005 .................. 5,500 4,840,000
Total ............................... 9,071,250
Social Services _ 0.27%
KinderCare Learning Centers, Inc.,
9.5%, 2-15-2009 ..................... 3,000 2,932,500
Textile Mill Products - 2.51%
Avondale Mills, Inc.,
10.25%, 5-1-2006 .................... 3,500 3,736,250
Collins & Aikman Products Co.,
11.5%, 4-15-2006 .................... 11,000 12,567,500
Delta Mills, Inc.,
9.625%, 9-1-2007 (A) ................ 5,725 5,767,938
Glenoit Corporation,
11.0%, 4-15-2007 (A) ................ 2,500 2,687,500
Interface, Inc.,
9.5%, 11-15-2005 .................... 2,000 2,115,000
Total ............................... 26,874,188
Transportation Equipment - 0.80%
Aetna Industries, Inc.,
11.875%, 10-1-2006 .................. 5,000 5,487,500
Westinghouse Air Brake Company,
9.375%, 6-15-2005 ................... 3,000 3,112,500
Total ............................... 8,600,000
See Notes to Schedule of Investments on pages 20 - 22.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Transportation Services - 0.59%
Transportacion Maritima Mexicana,
S.A. de C.V.,
10.0%, 11-15-2006 ................... $ 6,100 $ 6,321,125
Trucking and Warehousing - 0.74%
Iron Mountain Incorporated,
10.125%, 10-1-2006 .................. 1,500 1,620,000
Pierce Leahy Corp.,
9.125%, 7-15-2007 ................... 6,000 6,255,000
Total ............................... 7,875,000
Water Transportation - 0.45%
Equimar Shipholdings Ltd.,
9.875%, 7-1-2007 (A) ................ 5,000 4,825,000
Wholesale Trade - Durable Goods - 1.77%
Alvey Systems, Inc.,
11.375%, 1-31-2003 .................. 2,500 2,625,000
Exide Corporation,
10.0%, 4-15-2005 .................... 11,500 12,190,000
Graham-Field Health Products, Inc.,
9.75%, 8-15-2007 (A) ................ 4,000 4,160,000
Total ............................... 18,975,000
Wholesale Trade - Nondurable Goods - 2.21%
Core-Mark International, Inc.,
11.375%, 9-15-2003 .................. 3,500 3,675,000
Corporate Express, Inc.,
9.125%, 3-15-2004 ................... 5,000 5,125,000
Fleming Companies, Inc.,
10.5%, 12-1-2004 (A) ................ 3,500 3,622,500
LaRoche Industries Inc.,
9.5%, 9-15-2007 (A) ................. 4,425 4,469,250
United Stationers Supply Co.,
12.75%, 5-1-2005 .................... 6,000 6,727,500
Total ............................... 23,619,250
TOTAL CORPORATE DEBT SECURITIES - 86.96% $ 929,778,430
(Cost: $879,511,824)
TOTAL SHORT-TERM SECURITIES - 5.21% $ 55,688,317
(Cost: $55,688,317)
TOTAL INVESTMENT SECURITIES - 99.76% $1,066,562,363
(Cost: $1,002,467,577)
See Notes to Schedule of Investments on pages 20 - 22.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1997
Value
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.24% $ 2,578,980
NET ASSETS - 100.00% $1,069,141,343
See Notes to Schedule of Investments on pages 20 - 22.
<PAGE>
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1997
Notes to Schedule of Investments
*No income dividends were paid during the preceding 12 months.
(A) As of September 30, 1997, the following restricted securities were owned:
Shares/
Principal
Acquisition Amount Market
Security Date in 000's Cost Value
-------- ----------- --------------------------------
Adelphia Communications Corporation
13% Preferred 7/1/97 5,000$ 500,000 $ 555,000
Consolidated Hydro, Inc.,
Warrants 6/15/93 5,400 127,817 5
Esat Holdings Limited,
Warrants 1/20/97 3,000 90,757 60,000
Fitzgeralds Gaming
Corporation,
Warrants 3/8/94 to
12/15/95 17,500 541,065 175,000
Globalstar Telecommunications
Limited, Warrants 2/13/97 1,500 88,500 180,000
Heartland Wireless
Communications,
Inc., Warrants 4/20/95 12,000 74,000 120
IXC Communications, Inc.,
12.5% Preferred 8/15/97 3,500 3,500,000 4,060,000
IntelCom Group Inc.,
Warrants 12/8/95 20,625 80,225 350,625
Iridium LLC, Warrants7/11/97 3,500 198,086 525,000
7/15/97 3,000 170,483 450,000
Microcell Telecommunications
Inc., Conditional
Warrants 6/13/96 58,000 0 580
Microcell Telecommunications
Inc., Warrants 6/13/96 58,000 710,466 1,305,000
ACME Television, LLC
0.0%, 9-20-2004 9/24/97 $7,400 5,385,942 5,439,000
Adelphia Communications Corporation:
9.25%, 10-1-2002 9/22/97 7,000 7,000,000 7,052,500
10.5%, 7-15-2004 7/1/97 4,000 4,000,000 4,240,000
Allied Waste Industries, Inc.:
0.0%, 6-1-2007 5/20/97 2,000 1,210,000 1,355,000
5/23/97 2,000 1,210,000 1,355,000
7/31/97 1,000 660,000 677,500
Anker Coal Group, Inc.,
9.75%, 10-1-2007 9/22/97 1,950 1,950,000 1,989,000
Axiohm Transaction Solutions, Inc.,
9.75%, 10-1-2007 9/25/97 2,000 2,000,000 2,030,000
B & G Foods, Inc.,
9.625%, 8-1-2007 8/6/97 2,000 2,000,000 2,010,000
8/11/97 1,000 1,000,000 1,005,000
8/18/97 1,500 1,498,125 1,507,500
Burke Industries, Inc.,
10.0%, 8-15-2007 8/14/97 1,500 1,500,000 1,537,500
CapStar Hotel Company,
8.75%, 8-15-2007 8/14/97 2,500 2,496,650 2,528,125
Communications Instruments, Inc.,
10.0%, 9-15-2004 9/12/97 2,500 2,500,000 2,550,000
DII Group, Inc. (The),
8.5%, 9-15-2007 9/16/97 2,000 2,000,000 2,010,000
Delco Remy International, Inc.,
10.625%, 8-1-2006 7/26/96 3,000 3,000,000 3,210,000
Delta Mills, Inc.,
9.625%, 9-1-2007 8/20/97 4,225 4,241,250 4,256,688
8/21/97 1,500 1,507,500 1,511,250
Equimar Shipholdings Ltd.,
9.875%, 7-1-2007 6/20/97 5,000 5,000,000 4,825,000
Esat Holdings Limited,
0.0%, 2-1-2007 1/20/97 3,000 1,641,642 1,897,500
Falcon Building Products, Inc.,
0.0%, 6-15-2007 6/5/97 4,000 2,399,280 2,530,000
8/14/97 3,500 2,183,125 2,213,750
9/17/97 3,500 2,205,000 2,213,750
Federal Data Corporation,
10.125%, 8-1-2005 7/18/97 2,500 2,500,000 2,575,000
Fleming Companies, Inc.,
10.5%, 12-1-2004 7/18/97 3,500 3,479,665 3,622,500
Genesis ElderCare Acquisition Corp.,
9.0%, 8-1-2007 8/4/97 3,500 3,480,575 3,482,500
9/10/97 1,500 1,481,250 1,492,500
Glenoit Corporation,
11.0%, 4-15-2007 3/26/97 2,500 2,495,225 2,687,500
Graham-Field Health Products, Inc.,
9.75%, 8-15-2007 7/31/97 4,000 4,000,000 4,160,000
Hedstrom Corporation,
10.0%, 6-1-2007 6/9/97 3,500 3,500,000 3,578,750
Hollywood Theaters, Inc.,
10.625%, 8-1-2007 7/31/97 3,000 3,055,000 3,187,500
Huntsman Packaging Corporation,
9.125%, 10-1-2007 9/29/97 1,500 1,530,000 1,530,000
Hyperion Telecommunications, Inc.,
12.25%, 9-1-2004 8/21/97 2,000 2,000,000 2,190,000
ITT Publimedia B.V.,
9.375%, 9-15-2007 9/19/97 2,925 2,925,000 3,056,625
Iridium LLC,
13.0%, 7-15-2005 7/11/97 3,500 3,217,194 3,666,250
7/15/97 3,000 2,768,885 3,142,500
LaRoche Industries Inc.,
9.5%, 9-15-2007 9/18/97 4,425 4,405,176 4,469,250
Neenah Corporation,
11.125%, 5-1-2007 4/23/97 2,500 2,500,000 2,706,250
6/26/97 2,000 2,115,000 2,165,000
8/15/97 1,000 1,070,000 1,082,500
Nextel Communications, Inc.,
0.0%, 9-15-2007 9/10/97 2,500 1,488,925 1,562,500
Regal Cinemas, Inc.,
8.5%, 10-1-2007 9/19/97 3,425 3,410,829 3,446,406
Reliant Building Products, Inc.,
10.875%, 5-1-2004 5/5/97 3,000 3,000,000 3,112,500
SC International Services, Inc.,
9.25%, 9-1-2007 8/21/97 3,475 3,470,413 3,535,813
Safelite Glass Corp.,
9.875%, 12-15-200612/13/96 1,500 1,500,000 1,597,500
1/6/97 1,500 1,543,125 1,597,500
Safety Components International, Inc.,
10.125%, 7-15-20077/21/97 2,500 2,500,000 2,550,000
9/19/97 500 512,500 510,000
Salem Communications Corporation,
9.5%, 10-1-2007 9/17/97 3,425 3,425,000 3,484,937
Sinclair Broadcasting Group,
9.0%, 7-15-2007 6/25/97 4,000 3,897,200 4,000,000
Southern Foods Group, L.P.,
9.875%, 9-1-2007 8/27/97 3,450 3,450,000 3,579,375
Sovereign Specialty Chemicals, Inc.,
9.5%, 8-1-2007 7/31/97 1,000 1,000,000 1,020,000
TFM, S.A. de C.V.:
10.25%, 6-15-2007 6/11/97 1,000 1,000,000 1,062,500
0.0%, 6-15-2009 6/11/97 3,500 1,975,072 2,331,875
Telex Communications, Inc.,
10.5%, 5-1-2007 4/29/97 2,500 2,500,000 2,562,500
Viasystems, Inc.,
9.75%, 6-1-2007 6/2/97 3,500 3,500,000 3,640,000
Wilsons The Leather Experts Inc.,
11.25%, 8-15-2004 8/14/97 3,500 3,500,000 3,535,000
WinStar Communications, Inc.,
0.0%, 10-15-2005 3/13/97 3,500 3,500,000 3,653,125
----------------------
$156,345,947$163,181,549
======================
The total market value of restricted securities represents 15.26% of the
total net assets at September 30, 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 11.75% senior notes and 1
warrant to purchase 1.74513 shares of common stock.
(D) 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.
See Note 1 to financial statements for security valuation and other significant
accounting policies concerning investments.
See Note 3 to financial statements for cost and unrealized appreciation and
depreciation of investments owned for Federal income tax purposes.
<PAGE>
UNITED HIGH INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997
Assets
Investment securities -- at value
(Notes 1 and 3) ............................... $1,066,562,363
Cash ........................................... 2,154,505
Receivables:
Dividends and interest ........................ 20,362,390
Fund shares sold .............................. 832,849
Prepaid insurance premium ...................... 64,395
--------------
Total assets ................................ 1,089,976,502
--------------
Liabilities
Payable to Fund shareholders ................... 3,983,758
Payable for investment securities purchased .... 16,195,955
Accrued service fee (Note 2) ................... 283,928
Accrued transfer agency and dividend
disbursing (Note 2) ........................... 135,339
Accrued management fee (Note 2) ................ 16,002
Accrued accounting services fee (Note 2) ....... 8,333
Other .......................................... 211,844
--------------
Total liabilities ........................... 20,835,159
--------------
Total net assets ........................... $1,069,141,343
==============
Net Assets
$1.00 par value capital stock
Capital stock ................................. $ 108,382,821
Additional paid-in capital .................... 1,232,548,502
Accumulated undistributed income (loss):
Accumulated undistributed net investment income 2,594,817
Accumulated undistributed net realized
loss on investment transactions ............. (338,479,583)
Net unrealized appreciation in value of
investments ................................. 64,094,786
--------------
Net assets applicable to outstanding
units of capital ........................... $1,069,141,343
==============
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $9.86
Class Y .......................................... $9.87
Capital shares outstanding
Class A .......................................... 108,079,706
Class Y .......................................... 303,115
Capital shares authorized .......................... 500,000,000
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended SEPTEMBER 30, 1997
Investment Income
Income (Note 1B):
Interest and amortization ....................... $ 47,131,941
Dividends ....................................... 975,424
------------
Total income .................................. 48,107,365
------------
Expenses (Note 2):
Investment management fee ....................... 2,829,623
Transfer agency and dividend disbursing - Class A 656,917
Service fee - Class A ........................... 640,474
Accounting services fee ......................... 48,750
Audit fees ...................................... 12,637
Legal fees ...................................... 11,591
Custodian fees .................................. 11,462
Shareholder servicing - Class Y ................. 3,843
Other ........................................... 117,893
------------
Total expenses ................................ 4,333,190
------------
Net investment income ........................ 43,774,175
------------
Realized and Unrealized Gain on
Investments (Notes 1 and 3)
Realized net gain on investments ................. 14,514,540
Unrealized appreciation in value of
investments during the period ................... 50,147,096
------------
Net gain on investments ....................... 64,661,636
------------
Net increase in net assets resulting
from operations ............................ $108,435,811
============
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the For the
six months fiscal year
ended ended
September 30, March 31,
1997 1997
-------------- -------------
Increase in Net Assets
Operations:
Net investment income .......... $ 43,774,175 $ 85,269,812
Realized net gain (loss) on
investments ................... 14,514,540 (7,693,608)
Unrealized appreciation ........ 50,147,096 24,040,694
-------------- ------------
Net increase in net assets
resulting from operations ... 108,435,811 101,616,898
-------------- ------------
Dividends to shareholders from
net investment income (Note 1D):*
Class A ........................ (42,358,934) (84,491,972)
Class Y ........................ (133,055) (215,341)
-------------- ------------
(42,491,989) (84,707,313)
-------------- ------------
Capital share transactions:
Proceeds from sale of shares:
Class A (5,493,540 and 7,938,016
shares, respectively) ....... 52,402,602 73,281,406
Class Y (19,686 and 110,412
shares, respectively) ....... 188,085 1,032,687
Proceeds from reinvestment
of dividends:
Class A (3,731,563 and
7,657,636 shares, respectively) 35,514,641 70,375,216
Class Y (13,985 and 23,378
shares, respectively) ....... 133,055 215,342
Payments for shares redeemed:
Class A (7,413,021 and 16,195,182
shares, respectively) ....... (70,781,378) (149,178,639)
Class Y (67,058 and 33,578
shares, respectively) ....... (646,365) (313,944)
-------------- ------------
Net increase (decrease) in net assets
resulting from capital share
transactions ................ 16,810,640 (4,587,932)
-------------- ------------
Total increase .............. 82,754,462 12,321,653
Net Assets
Beginning of period ............. 986,386,881 974,065,228
-------------- ------------
End of period, including
undistributed net investment
income of $2,594,817 and
$1,312,631, respectively ....... $1,069,141,343 $986,386,881
============== ============
*See "Financial Highlights" on pages 26 - 27.
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
Class A Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the
six months For the fiscal year ended March 31,
ended -----------------------------------
9-30-97 1997 1996 1995 1994 1993
------- ------ ------ ------ ------ ------
Net asset value,
beginning of period $9.25 $9.09 $8.70 $9.20 $9.21 $8.82
----- ----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... 0.41 0.80 0.79 0.80 0.80 0.83
Net realized and
unrealized gain
(loss) on
investments ..... 0.60 0.16 0.40 (0.51) (0.01) 0.40
----- ----- ----- ----- ----- -----
Total from investment
operations ....... 1.01 0.96 1.19 0.29 0.79 1.23
----- ----- ----- ----- ----- -----
Less dividends
from net
investment income . (0.40) (0.80) (0.80) (0.79) (0.80) (0.84)
----- ----- ----- ----- ----- -----
Net asset value,
end of period .... $9.86 $9.25 $9.09 $8.70 $9.20 $9.21
===== ===== ===== ===== ===== =====
Total return* ...... 11.10% 10.94% 14.16% 3.41% 8.69% 14.72%
Net assets, end
of period (000
omitted) .........$1,066,151$983,273$971,916$933,576$1,006,619$986,867
Ratio of expenses to
average net assets 0.84%** 0.89% 0.85% 0.84% 0.78% 0.75%
Ratio of net investment
income to average
net assets ....... 8.49%** 8.68% 8.74% 9.07% 8.51% 9.28%
Portfolio turnover
rate ............. 33.53% 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.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
Class Y Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the For the For the
six fiscal period
months year from 1/4/96*
ended ended through
9/30/97 3/31/97 3/31/96
-------- -------- --------
Net asset value,
beginning of period $9.25 $9.10 $9.19
----- ----- -----
Income from investment
operations:
Net investment
income .......... 0.41 0.81 0.20
Net realized and
unrealized gain (loss)
on investments... 0.61 0.15 (0.10)
----- ----- -----
Total from investment
operations ........ 1.02 0.96 0.10
----- ----- -----
Less dividends
from net
investment income . (0.40) (0.81) (0.19)
----- ----- -----
Net asset value,
end of period ..... $9.87 $9.25 $9.10
===== ===== =====
Total return ....... 11.26% 11.07% 1.00%
Net assets, end of
period (000
omitted) ......... $2,990 $3,114 $2,149
Ratio of expenses
to average net
assets ............ 0.75%** 0.77% 0.80%**
Ratio of net
investment income
to average net
assets ............ 8.57%** 8.78% 8.55%**
Portfolio
turnover rate ..... 33.53% 53.17% 41.67%**
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 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
Quotations system) which provides information on bid and asked or closing
prices quoted by major dealers in such stocks. Restricted securities and
securities for which market quotations are not readily available are valued
at fair value as determined in good faith under procedures established by
and under the general supervision of the Fund's Board of Directors. Short-
term debt securities are valued at amortized cost, which approximates
market.
B. Security transactions and related investment income -- Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Securities gains and losses are calculated on the
identified cost basis. Original issue discount (as defined in the Internal
Revenue Code), premiums 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.
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 $18.0 billion of
combined net assets at September 30, 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,
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
$1,312,020, out of which W&R paid sales commissions of $758,934 and all expenses
in connection with the sale of Fund shares, except for registration fees and
related expenses.
Under a Distribution and Service Plan for Class A shares adopted by the
Fund pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund
may pay monthly a distribution and/or service fee to W&R in an amount not to
exceed .25% of the Fund's average annual net assets. The fee is to be paid to
reimburse W&R for amounts it expends in connection with the distribution of the
Class A shares and/or provision of personal services to Fund shareholders and/or
maintenance of shareholder accounts.
The Fund paid Directors' fees of $18,053, 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 securites, aggregated $352,361,666 while proceeds from maturities
and sales aggregated $316,141,925. Purchases of short-term securities
aggregated $607,274,035 while proceeds from maturities and sales of short-term
securities aggregated $624,212,040. There were no purchases or sales of U.S.
Government securities during the period.
For Federal income tax purposes, cost of investments owned at September 30,
1997 was $1,001,700,803, resulting in net unrealized appreciation of
$64,861,560, of which $70,925,931 related to appreciated securities and
$6,064,371 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, 1997. 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
September 30, 1997, the related statements of operations for the six-month
period then ended and changes in net assets for the six-month period then ended
and the year ended March 31, 1997, and the financial highlights for the periods
presented. 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
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at
September 30, 1997 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of United High Income
Fund, Inc. as of September 30, 1997, the results of its operations, the changes
in its net assets and the financial highlights for the periods presented in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
November 7, 1997
<PAGE>
Shareholder Meeting Results
A special meeting of shareholders of United High Income Fund, Inc. was held on
July 24, 1997. The matters voted upon by the shareholders and the resulting
votes for each matter are presented below.
Item 1. To elect the Board of Directors;
Broker
For WithheldNon-Votes*
Henry L. Bellmon 58,364,186 1,025,132 0
Dodds I. Buchanan 58,430,514 958,804 0
James M. Concannon 58,439,918 949,400 0
John A. Dillingham 58,428,653 960,665 0
Linda Graves 58,364,168 1,025,150 0
John F. Hayes 58,362,142 1,027,176 0
Glendon E. Johnson 58,377,525 1,011,793 0
William T. Morgan 58,397,438 991,880 0
Ronald K. Richey 58,385,090 1,004,228 0
William L. Rogers 58,425,968 963,350 0
Frank J. Ross, Jr. 58,428,795 960,523 0
Eleanor B. Schwartz 58,420,717 968,601 0
Keith A. Tucker 58,376,208 1,013,110 0
Frederick Vogel III 58,439,148 950,170 0
Paul S. Wise 58,374,120 1,015,198 0
Item 2.To ratify the selection of Deloitte & Touche LLP as the Fund's
independent accountants for its current fiscal year;
Broker
For Against AbstainNon-Votes*
56,483,565 226,738 2,679,015 0
Item 3.To approve or disapprove changes to the following fundamental investment
policies and restrictions:
3.1 Elimination of Fundamental Restrictions Regarding Restricted
Securities
Broker
For Against AbstainNon-Votes*
54,236,725 1,070,441 4,042,698 39,454
3.2 Modification of Fundamental Restriction Regarding Diversification
of Assets
Broker
For Against AbstainNon-Votes*
54,251,129 1,055,340 4,043,395 39,454
3.3 Elimination of Fundamental Restrictions Regarding Unseasoned
Issuers
Broker
For Against AbstainNon-Votes*
54,235,412 1,070,558 4,043,894 39,454
3.4 Modification and/or Elimination of Fundamental Restrictions
Regarding Options, Commodities, Forward Contracts and/or Futures
Contracts
Broker
For Against AbstainNon-Votes*
54,204,197 1,101,816 4,043,851 39,454
3.5 Elimination of Fundamental Restrictions Regarding Mortgaging or
Pledging Securities
Broker
For Against AbstainNon-Votes*
54,241,008 1,066,158 4,042,698 39,454
3.6 Modification of Fundamental Restriction Regarding Margin Purchases
of Securities
Broker
For Against AbstainNon-Votes*
54,234,758 1,072,408 4,042,698 39,454
3.7 Modification of Fundamental Restriction Regarding Short Sales of
Securities
Broker
For Against AbstainNon-Votes*
54,255,930 1,049,821 4,044,113 39,454
3.8 Elimination of Fundamental Restriction Regarding Investment in
Warrants and Rights
Broker
For Against AbstainNon-Votes*
54,243,004 1,062,747 4,044,113 39,454
3.9 Elimination of Fundamental Restrictions Regarding Arbitrage
Transactions
Broker
For Against AbstainNon-Votes*
54,252,201 1,053,454 4,044,209 39,454
3.10 Elimination of Fundamental Restriction Regarding Investments in
Issuers Whose Securities are Owned by Certain Persons
Broker
For Against AbstainNon-Votes*
54,203,269 1,102,797 4,043,798 39,454
3.11 Modification of Fundamental Policy Regarding Loans
Broker
For Against AbstainNon-Votes*
54,226,665 1,071,972 4,051,227 39,454
Item 4.To amend the terms of the service plan adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940.
Broker
For Against AbstainNon-Votes*
52,398,645 1,461,937 5,216,913 6,163
*Broker non-votes are proxies received by the Fund from brokers or nominees when
the broker or nominee neither has received instructions from the beneficial
owner or other persons entitled to vote nor has discretionary power to vote on
a particular matter.
<PAGE>
DIRECTORS
Ronald K. Richey, Birmingham, Alabama, Chairman of the Board
Henry L. Bellmon, Red Rock, Oklahoma
Dodds I. Buchanan, Boulder, Colorado
James M. Concannon, Topeka, Kansas
John A. Dillingham, Kansas City, Missouri
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
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
NUR1009SA(9-97)
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