United
High Income
Fund, Inc.
SEMIANNUAL
REPORT
-------------------------------------------
For the six months ended September 30, 1999
<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, 1999
Dear Shareholder:
As president of your Fund, I would like to thank you for your continued
confidence as an investor. I especially want to express our appreciation for
your confidence during our conversion to a new shareholder accounting system.
During this period some of you may have experienced delays in reaching our home
office shareholder services staff and we apologize for any inconvenience and
frustration you experienced.
Our conversion is now complete. Our new system complies with all of the date
requirements for the new millennium. It has the capacity to handle our growing
business and its modern structure will allow us to expand our services available
to you. We have also added to our telephone line capacity and have doubled the
size of our shareholder services staff. We are committed to the goal of
providing the best service possible to our shareholders.
With respect to your investment program, while it is impossible to predict the
future of the markets, there are some basic principles that we stand by that can
help investors achieve their financial goals.
. Work with your financial advisor to develop a comprehensive financial plan.
A comprehensive plan can help you pinpoint your financial objectives and
identify specific strategies for turning your financial dreams into reality.
A financial plan can also help ensure that your investment portfolio is
appropriately diversified. It can be one of the best ways to plan for your
financial future.
. Review your financial plan regularly. Financial planning is an ongoing
process that requires periodic reviews to adapt to life's changes.
. Make regular investments and adopt a long-term investment view. Over the
long term, regular contributions to your investments can smooth out the bumps
of volatility and enable investors to take advantage of the power of
compounding.
Waddell & Reed is positioned to assist you as you work toward your financial
goals. We will continue to offer quality investment products and personal
service to make the financial planning and investment process convenient and
accessible to you. Your financial advisor is ready to assist you in completing
your comprehensive financial plan to reach the financial goals that are most
important to you.
We look forward to assisting you in the future. If you have any questions about
your account, wish to review your financial plan or have other financial issues,
please contact your financial advisor or your local Waddell & Reed office.
Again, thank you for your continued confidence.
Respectfully,
Robert L. Hechler
President
<PAGE>
SHAREHOLDER SUMMARY
- --------------------------------------------------------------
UNITED HIGH INCOME FUND, INC.
PORTFOLIO STRATEGY:
Invests generally in OBJECTIVE: To seek a high level of
High-Risk, High-Yield current income as its
primary goal, with a
secondary goal of
Fixed Income Securities capital growth when
consistent with its
Maximum 20% Common Stock primary goal.
STRATEGY: Invests primarily in a diversified
portfolio of high-yield, high-risk,
fixed income securities. The Fund may
invest up to 20% of its total assets in
common stock in order to seek capital
growth.
FOUNDED: 1979
SCHEDULED DIVIDEND FREQUENCY: MONTHLY
<PAGE>
PERFORMANCE SUMMARY -- Class A Shares
PER SHARE DATA
For the Six Months Ended September 30, 1999
- -------------------------------------------
DIVIDENDS PAID $0.40
=====
NET ASSET VALUE ON
9/30/99 $8.83
3/31/99 9.39
-----
CHANGE PER SHARE $(0.56)
=====
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 9-30-99 -2.29% 3.68%
5-year period ended 9-30-99 7.90% 9.18%
10-year period ended 9-30-99 7.70% 8.34%
*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, 1999, United High Income Fund, Inc. had net assets totaling
$923,933,598 invested in a diversified portfolio of:
85.17% Corporate Debt Securities
8.67% Cash and Cash Equivalents
4.95% Common and Preferred Stocks and Warrants
1.21% Other Government Security
As a shareholder of United High Income Fund, Inc., for every $100 you had
invested on September 30, 1999, your Fund owned:
$41.05 Transportation, Communication, Electric
and Sanitary Services Bonds
22.17 Manufacturing Bonds
13.22 Services Bonds
8.67 Cash and Cash Equivalents
7.15 Wholesale and Retail Trade Bonds
4.95 Common and Preferred Stocks and Warrants
1.58 Miscellaneous Bonds
1.21 Other Government Security
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1999
Shares Value
COMMON AND PREFERRED STOCKS AND WARRANTS
Business Services - 0.50%
Clear Channel Communications, Inc.* .. 57,865 $ 4,621,967
Cable and Other Pay Television Services - 0.06%
Adelphia Communications Corporation,
13.0% Preferred ..................... 5,000 565,000
Communication - 1.81%
Allegiance Telecom, Inc., Warrants (A)* 7,000 560,000
Cox Communications, Inc., Class A* ... 100,000 4,175,000
Crown Castle International Corp.* .... 60,000 1,123,125
IXC Communications, Inc.,
12.5% Preferred* .................... 1,316 1,381,800
IntelCom Group Inc., Warrants (A)* ... 20,625 159,844
Intermedia Communications, Inc.,
13.5% Preferred* .................... 7,028 6,413,155
Iridium LLC, Warrants (A)* ........... 6,500 6
Microcell Telecommunications Inc.,
Warrants (A)* ....................... 58,000 1,611,066
OnePoint Communications Corp.,
Warrants (A)* ....................... 4,000 4,000
Powertel, Inc., Warrants* ............ 16,000 672,000
Primus Telecommunications Group, Incorporated,
Warrants* ........................... 5,000 100,000
VersaTel Telecom International N.V.,
Warrants (A)* ....................... 3,750 468,750
Total ............................... 16,668,746
Electric, Gas and Sanitary Services - 0.00%
Consolidated Hydro, Inc.,
Class B Warrants* ................... 7,578 477
Consolidated Hydro, Inc.,
Class C Warrants* ................... 4,919 615
Total ............................... 1,092
Food and Kindred Products - 0.54%
Keebler Foods Company* ............... 166,500 4,974,188
Food Stores - 0.43%
Kroger Co. (The)* .................... 180,000 3,971,250
Nondepository Institutions - 0.38%
California Federal Preferred Capital
Corporation, 9.125% Preferred ....... 150,000 3,543,750
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1999
Shares Value
COMMON AND PREFERRED STOCKS AND
WARRANTS (Continued)
Paper and Allied Products - 0.08%
SF Holdings Group, Inc., Class C (A)* 18,900 $ 189
SF Holdings Group, Inc.,
13.75% Preferred* ................... 200 570,000
SF Holdings Group, Inc.,
13.75% Preferred (A)* ............... 44 124,448
Total ............................... 694,637
Printing and Publishing - 0.38%
PRIMEDIA Inc., 10.0% Preferred ....... 35,000 3,552,500
Radio and Television Broadcasting Stations - 0.57%
Infinity Broadcasting Corporation,
Class A* ............................ 180,000 5,276,250
Wholesale Trade - Nondurable Goods - 0.20%
U.S. Foodservice* .................... 104,000 1,872,000
TOTAL COMMON AND PREFERRED STOCKS
AND WARRANTS - 4.95% $ 45,741,380
(Cost: $41,635,857)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Agricultural Production - Crops - 0.29%
Hines Horticulture, Inc.,
11.75%, 10-15-2005 .................. $ 2,550 2,718,938
Amusement and Recreation Services - 4.17%
Empress Entertainment, Inc.,
8.125%, 7-1-2006 .................... 1,750 1,732,500
Hollywood Park, Inc.,
9.25%, 2-15-2007 .................... 4,000 3,840,000
MGM Grand, Inc.,
6.875%, 2-6-2008 .................... 5,000 4,523,300
Mohegan Tribal Gaming Authority,
8.75%, 1-1-2009 ..................... 4,250 4,165,000
Premier Parks Inc.:
9.25%, 4-1-2006 ..................... 2,000 1,880,000
9.75%, 6-15-2007 .................... 5,000 4,750,000
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1999
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Amusement and Recreation Services (Continued)
Station Casinos, Inc.:
10.125%, 3-15-2006 .................. $ 2,500 $ 2,562,500
8.875%, 12-1-2008 ................... 13,000 12,642,500
Trump Hotels & Casino Resorts
Holdings, L.P.,
15.5%, 6-15-2005 .................... 2,500 2,475,000
Total ............................... 38,570,800
Apparel and Accessory Stores - 0.39%
Wilsons The Leather Experts Inc.,
11.25%, 8-15-2004 ................... 3,500 3,578,750
Apparel and Other Textile Products - 0.77%
Consoltex Group Inc.,
11.0%, 10-1-2003 .................... 7,000 7,070,000
Auto Repair, Services and Parking - 0.55%
Avis Rent A Car, Inc.,
11.0%, 5-1-2009 (A) ................. 5,000 5,125,000
Automotive Dealers and Service - 0.32%
TravelCenters of America, Inc.,
10.25%, 4-1-2007 .................... 3,000 2,970,000
Building Materials and Garden Supplies - 0.27%
Central Tractor Farm & Country, Inc.,
10.625%, 4-1-2007 ................... 2,500 2,500,000
Business Services - 3.90%
Adams Outdoor Advertising Limited Partnership,
10.75%, 3-15-2006 ................... 5,000 5,150,000
Coinmach Corporation,
11.75%, 11-15-2005 .................. 6,620 7,133,050
Cybernet Internet Services
International, Inc., Units,
14.0%, 7-1-2009 (A)(B) .............. 3,250 3,233,750
Lamar Advertising Company:
9.625%, 12-1-2006 ................... 3,000 3,052,500
8.625%, 9-15-2007 ................... 1,500 1,455,000
National Equipment Services, Inc.,
10.0%, 11-30-2004 ................... 11,500 11,270,000
PSINet Inc.,
10.0%, 2-15-2005 .................... 5,000 4,781,250
Total ............................... 36,075,550
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1999
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Cable and Other Pay Television Services - 7.04%
Adelphia Communications Corporation:
10.25%, 7-15-2000 ................... 2,250 2,278,125
9.25%, 10-1-2002 .................... 7,000 7,035,000
10.5%, 7-15-2004 .................... 4,000 4,130,000
9.875%, 3-1-2007 .................... 3,000 3,030,000
Bresnan Communications Group LLC and
Bresnan Capital Corporation:
0.0%, 2-1-2009 (C)................... 1,250 818,750
8.0%, 2-1-2009 ..................... 2,500 2,465,625
CSC Holdings, Inc.,
8.125%, 8-15-2009 ................... 4,000 4,035,400
Classic Cable, Inc.,
9.375%, 8-1-2009 (A) ................ 3,250 3,128,125
Comcast Corporation,
9.5%, 1-15-2008 ..................... 5,250 5,454,697
Comcast UK Cable Partners Limited,
0.0%, 11-15-2007 (C) ................ 9,000 8,145,000
Diamond Cable Communications Plc,
0.0%, 12-15-2005 (C) ................ 13,500 12,116,250
Renaissance Media Group LLC,
0.0%, 4-15-2008 (C) ................. 5,000 3,462,500
Rifkin Acquisition Partners, L.L.L.P.,
11.125%, 1-15-2006 .................. 4,000 4,400,000
Telewest Communications plc,
0.0%, 4-15-2009 (A)(C) .............. 2,500 1,518,750
United International Holdings, Inc.,
0.0%, 2-15-2008 (C) ................. 5,000 3,025,000
Total ............................... 65,043,222
Chemicals and Allied Products - 2.10%
Chattem, Inc.,
8.875%, 4-1-2008 .................... 1,500 1,417,500
Dade International Inc.,
11.125%, 5-1-2006 ................... 2,500 2,593,750
Outsourcing Services Group, Inc.,
10.875%, 3-1-2006 ................... 3,000 2,820,000
Sterling Chemicals, Inc.,
12.375%, 7-15-2006 (A) .............. 3,000 2,835,000
UCC Investors Holding, Inc.,
10.5%, 5-1-2002 ..................... 9,000 9,697,500
Total ............................... 19,363,750
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1999
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Communication - 22.23%
Alestra, S.A. de C.V.,
12.625%, 5-15-2009 (A) .............. $ 6,500 $ 6,175,000
Allbritton Communications Company,
9.75%, 11-30-2007 ................... 4,500 4,477,500
Allegiance Telecom, Inc.,
0.0%, 2-15-2008 (C) ................. 8,550 5,557,500
Charter Communications Holdings, LLC
and Charter Communications Holdings
Capital Corporation,
8.625%, 4-1-2009 (A) ................ 17,000 15,810,000
Concentric Network Corporation,
12.75%, 12-15-2007 .................. 4,000 4,030,000
Crown Castle International Corp.:
0.0%, 5-15-2011 (C) ................. 11,000 6,325,000
9.0%, 5-15-2011 ..................... 4,000 3,750,000
EchoStar DBS Corporation,
9.375%, 2-1-2009 .................... 15,500 15,267,500
Hyperion Telecommunications, Inc.:
0.0%, 4-15-2003 (C) ................. 8,750 7,350,000
12.25%, 9-1-2004 .................... 2,000 2,100,000
12.0%, 11-1-2007 .................... 4,500 4,522,500
ICG Holdings, Inc.,
0.0%, 9-15-2005 (C) ................. 6,250 5,437,500
ICG Services, Inc.,
0.0%, 5-1-2008 (C) .................. 4,000 2,220,000
ITC /\ DeltaCom, Inc.:
11.0%, 6-1-2007 ..................... 2,750 2,887,500
8.875%, 3-1-2008 .................... 2,400 2,280,000
9.75%, 11-15-2008 ................... 3,000 2,992,500
Intercel, Inc.,
0.0%, 2-1-2006 (C) .................. 5,000 4,337,500
Intermedia Communications Inc.,
8.5%, 1-15-2008 ..................... 1,000 855,000
Intermedia Communications of Florida, Inc.,
0.0%, 5-15-2006 (C).................. 4,500 3,645,000
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1999
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Communication (Continued)
MetroNet Communications Corp.,
0.0%, 6-15-2008 (C) ................. $ 7,000 $ 5,399,940
Microcell Telecommunications Inc.,
0.0%, 6-1-2006 (C) .................. 10,000 8,350,000
Nextel Communications, Inc.:
9.75%, 8-15-2004 .................... 6,750 6,800,625
0.0%, 9-15-2007 (C) ................. 7,500 5,531,250
0.0%, 2-15-2008 (C) ................. 6,400 4,464,000
Nextel Partners, Inc.,
0.0%, 2-1-2009 (C) .................. 13,000 7,572,500
NEXTLINK Communications, Inc.,
10.75%, 6-1-2009 .................... 2,500 2,512,500
OnePoint Communications Corp.,
14.5%, 6-1-2008 (A) ................. 4,000 2,620,000
Powertel, Inc.,
11.125%, 6-1-2007 ................... 1,500 1,567,500
Primus Telecommunications Group, Incorporated,
11.75%, 8-1-2004 .................... 5,000 4,912,500
Qwest Communications International Inc.,
0.0%, 10-15-2007 (C) ................ 2,750 2,180,008
RSL Communications, Ltd.,
10.5%, 11-15-2008 ................... 16,250 14,787,500
Rhythms NetConnections Inc.,
12.75%, 4-15-2009 (A) ............... 4,000 3,600,000
Sprint Spectrum L.P.,
0.0%, 8-15-2006 (C) ................. 12,000 11,113,200
Time Warner Telecom LLC and Time Warner Telecom Inc.,
9.75%, 7-15-2008 .................... 4,250 4,281,875
Tritel PCS, Inc.,
0.0%, 5-15-2009 (A)(C) .............. 4,750 2,660,000
Triton PCS, Inc.,
0.0%, 5-1-2008 (C) .................. 3,000 2,010,000
VersaTel Telecom B.V.,
11.875%, 7-15-2009 .................. 2,000 1,895,000
VersaTel Telecom International N.V.,
13.25%, 5-15-2008 ................... 3,750 3,712,500
Viatel, Inc.,
11.5%, 3-15-2009 .................... 3,000 2,835,000
WinStar Communications, Inc.:
0.0%, 3-15-2008 (C) ................. 3,000 2,610,000
10.0%, 3-15-2008 .................... 4,750 3,942,500
Total ............................... 205,378,398
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1999
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Eating and Drinking Places - 1.47%
Domino's, Inc.,
10.375%, 1-15-2009 .................. 5,000 4,750,000
Foodmaker, Inc.,
8.375%, 4-15-2008 ................... 7,250 6,996,250
NE Restaurant Company, Inc.,
10.75%, 7-15-2008 ................... 2,000 1,820,000
Total ............................... 13,566,250
Electric, Gas and Sanitary Services - 2.99%
Allied Waste North America, Inc.:
7.875%, 1-1-2009 .................... 11,000 9,693,750
10.0%, 8-1-2009 (A) ................. 6,250 5,828,125
Browning Ferris Industries Inc.,
6.375%, 1-15-2008 ................... 3,500 2,800,000
El Paso Electric Company,
9.4%, 5-1-2011 ...................... 5,000 5,497,800
Niagara Mohawk Power Corporation,
7.25%, 10-1-2002 .................... 3,780 3,807,935
Total ............................... 27,627,610
Electronic and Other Electric Equipment - 2.16%
Communications & Power Industries, Inc.,
12.0%, 8-1-2005 ..................... 4,000 3,440,000
Elgar Holdings, Inc.,
9.875%, 2-1-2008 .................... 4,000 2,880,000
Exide Corporation,
10.0%, 4-15-2005 .................... 1,000 995,000
Juno Lighting, Inc.,
11.875%, 7-1-2009 (A) ............... 2,750 2,729,375
Level 3 Communications, Inc.:
9.125%, 5-1-2008 .................... 4,500 4,072,500
0.0%, 12-1-2008 (C) ................. 10,500 5,880,000
Total ............................... 19,996,875
Fabricated Metal Products - 1.85%
AXIA Incorporated,
10.75%, 7-15-2008 ................... 1,600 1,512,000
Falcon Building Products, Inc.,
0.0%, 6-15-2007 (C) ................. 7,000 4,970,000
Neenah Corporation,
11.125%, 5-1-2007 ................... 11,250 10,631,250
Total ............................... 17,113,250
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1999
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Food and Kindred Products - 1.59%
B & G Foods, Inc.,
9.625%, 8-1-2007 .................... 4,500 4,173,750
Fresh Foods, Inc.,
10.75%, 6-1-2006 .................... 3,350 3,216,000
Pilgrim's Pride Corporation,
10.875%, 8-1-2003 ................... 3,500 3,609,375
Southern Foods Group, L.P.
and SFG Capital Corporation,
9.875%, 9-1-2007 .................... 3,450 3,700,125
Total ............................... 14,699,250
Food Stores - 0.99%
Big V Supermarkets, Inc.,
11.0%, 2-15-2004 .................... 5,000 5,062,500
Pueblo Xtra International, Inc.,
9.5%, 8-1-2003 ...................... 4,750 4,037,500
Total ............................... 9,100,000
Furniture and Fixtures - 0.43%
Sealy Mattress Company,
0.0%, 12-15-2007 (C) ................ 6,000 4,005,000
Furniture and Home Furnishings Stores - 0.13%
Mattress Discounters, Inc., Units,
12.625%, 7-15-2007 (A)(D) ........... 1,250 1,209,375
Holding and Other Investment Offices - 0.76%
Grupo Industrial Durango, S.A. de C.V.,
12.625%, 8-1-2003 ................... 5,000 4,887,500
LTC Properties, Inc.,
8.5%, 1-1-2001 (Convertible) ........ 3,000 2,092,500
Total ............................... 6,980,000
Hotels and Other Lodging Places - 3.54%
CapStar Hotel Company,
8.75%, 8-15-2007 .................... 2,500 2,275,000
Coast Hotels and Casinos, Inc.,
9.5%, 4-1-2009 ...................... 5,000 4,725,000
HMH Properties, Inc.,
7.875%, 8-1-2008 .................... 15,000 13,387,500
Lodgian Financing Corp.,
12.25%, 7-15-2009 (A) ............... 6,000 5,880,000
Prime Hospitality Corp.:
9.25%, 1-15-2006 .................... 4,000 4,025,000
9.75%, 4-1-2007 ..................... 2,500 2,400,000
Total ............................... 32,692,500
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1999
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Industrial Machinery and Equipment - 0.91%
American Standard Inc.,
9.25%, 12-1-2016 .................... $ 1,400 $ 1,407,000
Anchor Lamina Inc. and Anchor Lamina America, Inc.,
9.875%, 2-1-2008 .................... 1,500 1,320,000
Terex Corporation,
8.875%, 4-1-2008 .................... 6,000 5,670,000
Total ............................... 8,397,000
Instruments and Related Products - 1.06%
Maxxim Medical, Inc.,
10.5%, 8-1-2006 ..................... 9,250 9,805,000
Insurance Carriers - 0.32%
LifePoint Hospitals, Inc.,
10.75%, 5-15-2009 (A) ............... 3,000 2,992,500
Miscellaneous Manufacturing Industries - 0.33%
Hedstrom Corporation,
10.0%, 6-1-2007 ..................... 3,500 3,010,000
Miscellaneous Retail - 1.52%
Frank's Nursery & Crafts, Inc.,
10.25%, 3-1-2008 .................... 5,650 5,367,500
Michaels Stores, Inc.:
6.75%, 1-15-2003 (Convertible) ...... 500 487,500
10.875%, 6-15-2006 .................. 7,800 8,229,000
Total ............................... 14,084,000
Motion Pictures - 1.06%
AMC Entertainment Inc.,
9.5%, 3-15-2009 ..................... 3,500 2,922,500
Loews Cineplex Entertainment Corporation,
8.875%, 8-1-2008 .................... 3,500 3,167,500
Regal Cinemas, Inc.,
9.5%, 6-1-2008 ...................... 5,500 3,740,000
Total ............................... 9,830,000
Oil and Gas Extraction - 0.21%
Canadian Forest Oil Co. Ltd.,
8.75%, 9-15-2007 .................... 2,000 1,930,000
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1999
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Paper and Allied Products - 1.65%
Buckeye Cellulose Corporation,
8.5%, 12-15-2005 .................... $ 2,750 $ 2,681,250
Container Corporation of America,
11.25%, 5-1-2004 .................... 3,500 3,640,000
Mail-Well I Corporation,
8.75%, 12-15-2008 ................... 5,000 4,800,000
SF Holdings Group, Inc.,
0.0%, 3-15-2008 (C) ................. 5,750 2,573,125
Sweetheart Cup Company, Inc.,
10.5%, 9-1-2003 ..................... 1,725 1,552,500
Total ............................... 15,246,875
Petroleum and Coal Products - 0.50%
Building Materials Corporation of America,
8.0%, 12-1-2008 ..................... 5,000 4,625,000
Primary Metal Industries - 1.35%
Commonwealth Aluminum Corporation,
10.75%, 10-1-2006 ................... 3,000 3,067,500
ISG Resources, Inc.,
10.0%, 4-15-2008 .................... 3,000 2,910,000
Wheeling-Pittsburgh Corporation,
9.25%, 11-15-2007 ................... 6,750 6,480,000
Total ............................... 12,457,500
Printing and Publishing - 2.68%
Big Flower Press Holdings, Inc.,
8.625%, 12-1-2008 ................... 6,250 6,000,000
K-III Communications Corporation,
8.5%, 2-1-2006 ...................... 5,000 4,850,000
Perry-Judd's Incorporated,
10.625%, 12-15-2007 ................. 5,250 4,790,625
TransWestern Publishing Company LLC and
TWP Capital Corp. II,
9.625%, 11-15-2007 .................. 3,000 2,925,000
World Color Press, Inc.,
8.375%, 11-15-2008 .................. 6,250 6,171,875
Total ............................... 24,737,500
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1999
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Radio and Television Broadcasting Stations - 5.59%
ACME Television, LLC,
0.0%, 9-30-2004 (C) ................. $ 7,400 $ 6,493,500
American Radio Systems Corporation,
9.0%, 2-1-2006 ...................... 3,250 3,396,250
Chancellor Media Corporation,
9.0%, 10-1-2008 ..................... 4,000 4,040,000
Chancellor Media Corporation of Los Angeles,
8.0%, 11-1-2008 ..................... 5,000 4,850,000
Citadel Broadcasting Company,
9.25%, 11-15-2008 ................... 2,000 1,960,000
JCAC, Inc.,
10.125%, 6-15-2006 .................. 2,000 2,160,000
LIN Holdings Corp.,
0.0%, 3-1-2008 (C) .................. 7,000 4,742,500
LIN Television Corporation,
8.375%, 3-1-2008 .................... 5,900 5,516,500
Rogers Communications Inc.,
9.125%, 1-15-2006 ................... 7,500 7,706,250
SFX Broadcasting, Inc.,
10.75%, 5-15-2006 ................... 2,303 2,556,330
Salem Communications Corporation,
9.5%, 10-1-2007 ..................... 3,425 3,425,000
Sinclair Broadcast Group, Inc.,
9.0%, 7-15-2007 ..................... 2,500 2,362,500
Susquehanna Media Co.,
8.5%, 5-15-2009 (A) ................. 2,500 2,462,500
Total ............................... 51,671,330
Railroad Transportation - 0.21%
TFM, S.A. de C.V.,
0.0%, 6-15-2009 (C) ................. 3,500 1,925,000
Rubber and Miscellaneous Plastics Products - 2.21%
AMM Holdings, Inc.,
0.0%, 7-1-2009 (C) .................. 2,500 840,625
Furon Company,
8.125%, 3-1-2008 .................... 1,900 1,790,750
Globe Manufacturing Corp.,
10.0%, 8-1-2008 ..................... 3,750 2,437,500
Graham Packaging Company and GPC Capital Corp. I,
8.75%, 1-15-2008 .................... 7,000 6,580,000
Graham Packaging Holdings Company
0.0%, 1-15-2009 (C) ................. 1,250 796,875
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1999
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Rubber and Miscellaneous Plastics Products (Continued)
Home Products International, Inc.,
9.625%, 5-15-2008 ................... $ 6,500 $ 5,785,000
LDM Technologies, Inc.,
10.75%, 1-15-2007 ................... 2,500 2,150,000
Total ............................... 20,380,750
Textile Mill Products - 0.78%
Anvil Knitwear, Inc.,
10.875%, 3-15-2007 .................. 3,500 2,240,000
Collins & Aikman Products Co.,
11.5%, 4-15-2006 .................... 3,500 3,307,500
Glenoit Corporation,
11.0%, 4-15-2007 .................... 2,500 1,656,250
Total ............................... 7,203,750
Transportation by Air - 1.21%
Atlas Air, Inc.,
9.375%, 11-15-2006 .................. 11,500 11,155,000
Transportation Equipment - 1.80%
Federal-Mogul Corporation,
7.875%, 7-1-2010 .................... 7,000 6,377,910
Safety Components International, Inc.,
10.125%, 7-15-2007 .................. 6,500 5,265,000
Westinghouse Air Brake Company (The):
9.375%, 6-15-2005 ................... 3,000 2,970,000
9.375%, 6-15-2005 ................... 2,000 2,027,500
Total ............................... 16,640,410
Transportation Services - 0.53%
Railworks Corporation,
11.5%, 4-15-2009 (A) ................ 5,000 4,900,000
Trucking and Warehousing - 0.91%
Iron Mountain Incorporated,
10.125%, 10-1-2006 .................. 2,500 2,587,500
Pierce Leahy Corp.,
9.125%, 7-15-2007 ................... 6,000 5,850,000
Total ............................... 8,437,500
Water Transportation - 0.34%
Equimar Shipholdings Ltd.,
9.875%, 7-1-2007 .................... 5,000 3,100,000
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1999
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Wholesale Trade - Durable Goods - 1.47%
AAi.Fostergrant, Inc.,
10.75%, 7-15-2006 ................... $ 500 $ 205,000
Federal Data Corporation,
10.125%, 8-1-2005 ................... 2,500 2,287,500
Heafner (J.H.) Company, Inc. (The),
10.0%, 5-15-2008 .................... 8,500 8,245,000
WESCO Distribution, Inc.,
9.125%, 6-1-2008 .................... 3,000 2,827,500
Total ............................... 13,565,000
Wholesale Trade - Nondurable Goods - 0.59%
Amscan Holdings, Inc.,
9.875%, 12-15-2007 .................. 3,400 2,771,000
Core-Mark International, Inc.,
11.375%, 9-15-2003 .................. 2,800 2,691,500
Total ............................... 5,462,500
TOTAL CORPORATE DEBT SECURITIES - 85.17% $ 786,941,133
(Cost: $821,156,225)
OTHER GOVERNMENT SECURITY - 1.21%
Mexico
United Mexican States,
9.75%, 4-6-2005 ..................... 11,000 11,137,500
(Cost: $10,995,936)
TOTAL SHORT-TERM SECURITIES - 7.11% $ 65,716,353
(Cost: $65,716,353)
TOTAL INVESTMENT SECURITIES - 98.44% $909,536,366
(Cost: $939,504,371)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 1.56% 14,397,232
NET ASSETS - 100.00% $923,933,598
See Notes to Schedule of Investments on page 18.
<PAGE>
UNITED HIGH INCOME FUND, INC.
SEPTEMBER 30, 1999
Notes to Schedule of Investments
*No income dividends were paid during the preceding 12 months.
(A) Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may be resold in transactions exempt from registration, normally
to qualified institutional buyers. At September 30, 1999, the value of
these securities amounted to $75,635,803 or 8.19% of net assets.
(B) Each unit of Cybernet Internet Services International, Inc. consists of
$1,000 principal amount of 14.0% senior notes due 2009 and one warrant to
purchase 30.2310693 shares of common stock.
(C) The security does not bear interest for an initial period of time and
subsequently becomes interest bearing.
(D) Each unit of Mattress Discounters, Inc. consists of $1,000 principal amount
of 12.625% senior notes due 2007 and one warrant to purchase 4.85 shares of
Class A common stock and 0.539 shares of Class L common stock at an
exercise price of $0.01 per share.
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, 1999
(In Thousands, Except for Per Share Amounts)
Assets
Investment securities -- at value
(Notes 1 and 3) ............................... $ 909,536
Receivables:
Dividends and interest ........................ 18,884
Investment securities sold .................... 1,427
Fund shares sold .............................. 1,057
Prepaid insurance premium ...................... 57
----------
Total assets ................................ 930,961
----------
Liabilities
Payable for investment securities purchased .... 3,686
Payable to Fund shareholders ................... 2,821
Accrued service fee (Note 2) ................... 160
Accrued transfer agency and dividend
disbursing (Note 2) ........................... 142
Due to custodian ............................... 118
Accrued distribution fee (Note 2) .............. 33
Accrued management fee (Note 2) ................ 15
Accrued accounting services fee (Note 2) ....... 7
Other .......................................... 45
----------
Total liabilities ........................... 7,027
----------
Total net assets ........................... $ 923,934
==========
Net Assets
$1.00 par value capital stock
Capital stock ................................. $ 104,617
Additional paid-in capital .................... 1,044,518
Accumulated undistributed income (loss):
Accumulated undistributed net investment income 2,125
Accumulated undistributed net realized
loss on investment transactions ............. (197,358)
Net unrealized depreciation in value of
investments ................................. (29,968)
----------
Net assets applicable to outstanding
units of capital ........................... $ 923,934
==========
Net asset value per share (net assets divided
by shares outstanding)
Class A ........................................ $8.83
Class Y ........................................ $8.83
Capital shares outstanding
Class A ........................................ 104,311
Class Y ........................................ 306
Capital shares authorized ........................ 500,000
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended SEPTEMBER 30, 1999
(In Thousands)
Investment Income
Income (Note 1B):
Interest and amortization ....................... $45,524
Dividends ....................................... 1,074
--------
Total income .................................. 46,598
--------
Expenses (Note 2):
Investment management fee ....................... 2,804
Service fee - Class A ........................... 1,130
Transfer agency and dividend disbursing - Class A 749
Distribution fee - Class A ...................... 108
Accounting services fee ......................... 44
Custodian fees .................................. 14
Audit fees ...................................... 12
Legal fees ...................................... 8
Shareholder servicing - Class Y ................. 2
Other ........................................... 144
--------
Total expenses ................................ 5,015
--------
Net investment income ........................ 41,583
--------
Realized and Unrealized Loss on
Investments (Notes 1 and 3)
Realized net loss on investments ................. (30,391)
Unrealized depreciation in value of
investments during the period ................... (27,903)
--------
Net loss on investments ....................... (58,294)
--------
Net decrease in net assets resulting
from operations ............................ $(16,711)
========
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
(Dollars In Thousands)
For the For the
six months fiscal year
ended ended
September 30, March 31,
1999 1999
Decrease in Net Assets -------------- -------------
Operations:
Net investment income .......... $ 41,583 $ 88,331
Realized net gain (loss) on
investments .................. (30,391) 6,301
Unrealized depreciation ........ (27,903) (78,843)
---------- ----------
Net increase (decrease) in net assets
resulting from operations ... (16,711) 15,789
---------- ----------
Dividends to shareholders from
net investment income (Note 1D):*
Class A ........................ (41,927) (86,920)
Class Y ........................ (119) (261)
---------- ----------
(42,046) (87,181)
---------- ----------
Capital share transactions:
Proceeds from sale of shares:
Class A (5,781,003 and 11,212,153
shares, respectively) ....... 53,001 107,437
Class Y (42,584 and 243,388
shares, respectively) ....... 393 2,313
Proceeds from reinvestment
of dividends:
Class A (3,922,792 and
7,730,209 shares, respectively) 35,730 73,752
Class Y (13,090 and 27,373
shares, respectively) ....... 119 261
Payments for shares redeemed:
Class A (12,869,519 and 21,192,900
shares, respectively) ....... (117,602) (203,166)
Class Y (24,970 and 317,451
shares, respectively) ....... (229) (3,016)
---------- ----------
Net decrease in net assets
resulting from capital share
transactions .............. (28,588) (22,419)
---------- ----------
Total decrease ............ (87,345) (93,811)
Net Assets
Beginning of period ............. 1,011,279 1,105,090
---------- ----------
End of period, including undistributed
net investment income of $2,125
and $2,588, respectively ....... $ 923,934 $1,011,279
========== ==========
*See "Financial Highlights" on pages 22 - 23.
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
Class A Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the
six months For the fiscal year ended March 31,
ended -----------------------------------
9/30/99 1999 1998 1997 1996 1995
------- ------ ------ ------ ------ ------
Net asset value,
beginning of period $9.39 $10.04 $ 9.25 $9.09 $8.70 $9.20
------ ------ ------ ----- ----- -----
Income from investment
operations:
Net investment
income .......... 0.39 0.81 0.82 0.80 0.79 0.80
Net realized and
unrealized gain
(loss) on
investments ..... (0.55) (0.66) 0.79 0.16 0.40 (0.51)
------ ------ ------ ----- ----- -----
Total from investment
operations ....... (0.16) 0.15 1.61 0.96 1.19 0.29
------ ------ ------ ----- ----- -----
Less dividends
from net
investment income . (0.40) (0.80) (0.82) (0.80) (0.80) (0.79)
------ ------ ------ ----- ----- -----
Net asset value,
end of period .... $8.83 $ 9.39 $10.04 $9.25 $9.09 $8.70
====== ====== ====== ===== ===== =====
Total return* ...... -1.80% 1.70% 18.03% 10.94% 14.16% 3.41%
Net assets, end
of period (in
millions) ........ $921 $1,009 $1,102 $983 $972 $934
Ratio of expenses to
average net assets 1.03%** 0.94% 0.84% 0.89% 0.85% 0.84%
Ratio of net investment
income to average
net assets ....... 8.54%** 8.44% 8.38% 8.68% 8.74% 9.07%
Portfolio turnover
rate ............. 16.15% 53.19% 63.40% 53.17% 41.67% 18.94%
*Total return calculated without taking into account the sales load deducted
on an initial purchase.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
Class Y Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the For the
six For the fiscal period
months year ended March 31, from 1/4/96*
ended --------------------- through
9/30/99 1999 1998 1997 3/31/96
------- ------ ------ ------ --------
Net asset value,
beginning of period $9.39 $10.04 $ 9.25 $9.10 $9.19
------ ------ ------ ----- -----
Income from investment
operations:
Net investment
income .......... 0.40 0.83 0.82 0.81 0.20
Net realized and
unrealized gain (loss)
on investments .. (0.55) (0.66) 0.79 0.15 (0.10)
------ ------ ------ ----- -----
Total from investment
operations ........ (0.15) 0.17 1.61 0.96 0.10
------ ------ ------ ----- -----
Less dividends
from net
investment income . (0.41) (0.82) (0.82) (0.81) (0.19)
------ ------ ------ ----- -----
Net asset value,
end of period ..... $8.83 $9.39 $10.04 $9.25 $9.10
====== ====== ====== ===== =====
Total return ....... -1.67% 1.90% 18.13% 11.07% 1.00%
Net assets, end of
period (in
millions) ........ $3 $2 $3 $3 $2
Ratio of expenses
to average net
assets ........... 0.79%** 0.74% 0.77% 0.77% 0.80%**
Ratio of net
investment income
to average net
assets ........... 8.79%** 8.62% 8.46% 8.78% 8.55%**
Portfolio
turnover rate .... 16.15% 53.19% 63.40% 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, 1999
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 the Nasdaq Stock Market, which provides information on bid and
asked 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 business day following 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 carryovers.
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. As of
June 30, 1999, the fee is payable by the Fund at the annual rates of: 0.625% of
net assets up to $500 million; 0.60% of net assets over $500 million and up to
$1 billion; 0.55% of net assets over $1 billion and up to $1.5 billion; and
0.50% of net assets over $1.5 billion. Prior to June 30, 1999, the fee
consisted 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 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
the 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
$1,040,384, out of which W&R paid sales commissions of $600,430 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 Class A 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 $18,263, which are included in other
expenses.
W&R is a subsidiary of Waddell & Reed Financial, Inc., a holding company,
and a direct subsidiary of Waddell & Reed Financial Services, Inc., a holding
company.
NOTE 3 -- Investment Security Transactions
Purchases of investment securities, other than U.S. Government obligations
and short-term securities, aggregated $144,165,959, while proceeds from
maturities and sales aggregated $186,158,187. Purchases of short-term
securities aggregated $4,050,855,487, while proceeds from maturities and sales
aggregated $4,056,133,000. No U.S. Government securities were bought or sold
during the period ended September 30, 1999.
For Federal income tax purposes, cost of investments owned at September 30,
1999 was $939,504,371, resulting in net unrealized depreciation of $29,968,005,
of which $17,334,888 related to appreciated securities and $47,302,893 related
to depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized net capital gain net
income of $13,784,884 during its fiscal year ended March 31, 1999, which
included the effect of certain losses deferred into the next fiscal year (see
discussion below). This capital gain net income was entirely offset by
utilization of capital loss carryovers. Remaining capital loss carryovers
aggregated $160,249,659 at March 31, 1999 and are available to offset future
realized capital gain net income for Federal income tax purposes but will expire
if not utilized as follows: $114,024,403 at March 31, 2000; $17,962,753 at March
31, 2003; $20,841,730 at March 31, 2004; and $7,420,773 at March 31, 2005.
Internal Revenue Code regulations permits the Fund to defer into its next
fiscal year net capital losses or net long-term capital losses incurred between
each November 1 and the end of its fiscal year (_post-October losses_). From
November 1, 1998 through March 31, 1999, the Fund incurred net capital losses of
$6,717,770, which have been deferred to the fiscal year ending March 31, 2000.
NOTE 5 -- Multiclass Operations
The Fund is authorized to offer four classes of shares, Class A, Class B,
Class C and Class Y, each of which have equal rights as to assets and voting
privileges. Only Class A and Class Y shares were issued during the six months
ended September 30, 1999. Class Y shares are not subject to a sales charge on
purchases, are not subject to a Rule 12b-1 Distribution and Service Plan and are
subject to 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 their
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, 1999, and the related statement of operations for the six-month
period then ended, the statements of changes in net assets for the six-month
period then ended and the fiscal year ended March 31, 1999, and the financial
highlights for the six-month period ended September 30, 1999, and for each of
the five fiscal years in the period ended March 31, 1999. 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 as of
September 30, 1999, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of United
High Income Fund, Inc. as of September 30, 1999, the results of its operations
for the six-month period then ended, the changes in its net assets for the six-
month period then ended and the fiscal year ended March 31, 1999, and the
financial highlights for the six-month period ended September 30, 1999, and for
each of the five fiscal years in the period ended March 31, 1999 in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
November 5, 1999
<PAGE>
Shareholder Meeting Results
A special meeting of United High Income Fund, Inc. was held on June 22, 1999.
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 Withhold Non-Votes*
J. Concannon 57,974,650 1,869,908 0
J. Dillingham 57,977,336 1,867,222 0
D. Gardner 57,905,684 1,938,874 0
L. Graves 57,916,592 1,927,966 0
J. Harroz Jr. 57,907,482 1,937,076 0
J. Hayes 57,899,583 1,944,975 0
R. Hechler 57,958,897 1,885,661 0
H. Herrmann 57,972,426 1,872,132 0
G. Johnson 57,852,041 1,992,517 0
W. Morgan 57,935,210 1,909,348 0
R. Reimer 57,934,954 1,909,604 0
F. Ross 57,975,377 1,869,181 0
E. Schwartz 57,968,247 1,876,311 0
K. Tucker 57,967,298 1,877,260 0
F. Vogel 57,996,599 1,847,959 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 Abstain Non-Votes*
56,903,782 358,312 2,582,464 0
Item 3. To approve or disapprove the amendment to the Fund's investment
management agreement with Waddell & Reed Investment Management Company:
Broker
For Against Abstain Non-Votes*
54,289,302 2,559,616 2,948,203 47,437
Item 4. To approve or disapprove amendment of the Fund's policy regarding
securities lending:
Broker
For Against Abstain Non-Votes*
53,949,874 1,794,628 4,052,619 47,437
Item 5. To approve or disapprove the Fund's Articles of Incorporation to
change the par value of Fund shares to $0.001:
Broker
For Against Abstain Non-Votes*
53,170,375 1,732,604 4,940,873 706
*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
Keith A. Tucker, Overland Park, Kansas, Chairman of the Board
James M. Concannon, Topeka, Kansas
John A. Dillingham, Kansas City, Missouri
David P. Gardner, Menlo Park, California
Linda K. Graves, Topeka, Kansas
Joseph Harroz, Jr., Norman, Oklahoma
John F. Hayes, Hutchinson, Kansas
Robert L. Hechler, Overland Park, Kansas
Henry J. Herrmann, Overland Park, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
Ronald C. Reimer, Mission Hills, Kansas
Frank J. Ross, Jr., Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Frederick Vogel III, Milwaukee, Wisconsin
OFFICERS
Robert L. Hechler, President
Henry J. Herrmann, Vice President
John M. Holliday, Vice President
Theodore W. Howard, Vice President and Treasurer
Helge K. Lee, Vice President and Secretary
Louise D. Rieke, Vice President
To all traditional IRA Planholders:
As required by law, income tax will automatically be withheld from any
distribution or withdrawal from a traditional IRA unless you make a written
election not to have taxes withheld. The election may be made by submitting
forms provided by Waddell & Reed, Inc. which can be obtained from your Waddell &
Reed representative or by submitting Internal Revenue Service Form W-4P. Once
made, an election can be revoked by providing written notice to Waddell & Reed,
Inc. If you elect not to have tax withheld you may be required to make payments
of estimated tax. Penalties may be imposed by the IRS if withholding and
estimated tax payments are not adequate.
<PAGE>
The United Group of Mutual Funds
United Accumulative Fund
United Asset Strategy Fund, Inc.
United Bond Fund
United Cash Management, Inc.
United Continental Income Fund, Inc.
United Government Securities Fund, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
United Income Fund
United International Growth Fund, Inc.
United Municipal Bond Fund, Inc.
United Municipal High Income Fund, Inc.
United New Concepts Fund, Inc.
United Retirement Shares, Inc.
United Science and Technology Fund
United Small Cap Fund, Inc.
United Vanguard 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(9-99)
printed on recycled paper
