United
High Income
Fund, Inc.
ANNUAL
REPORT
----------------------------------------
For the fiscal year ended March 31, 2000
<PAGE>
MANAGER'S LETTER
-----------------------------------------------------------------
MARCH 31, 2000
Dear Shareholder:
This report relates to the operation of United High Income Fund for
the fiscal year ended March 31, 2000. The following discussion, graphs and
tables provide you with information regarding the Fund's performance during
that period.
The Federal Reserve raised interest rates five times in the past year.
In August, after the second increase, investors became defensive, raising
cash, which widened out spreads to Treasuries. The default rate rose as
well, which added to investors' intolerance for risk. As a result of the
high returns achieved by many Nasdaq stocks, a significant amount of
investor money went out of high-yield mutual funds and into the equity
market. Also, the main buyers in the high-yield market last year were the
structured products known as collateralized bond obligations. By the end
of 1999, the cash in these CBOs had been invested, leaving very few large
buyers to support the market. These factors caused downward pressure on
high-yield bond prices.
During the past year, we have attempted to upgrade the quality of the
Fund's portfolio by selling smaller issues and potential credit risks. We
have been redirecting the Fund's portfolio into shorter duration, higher
coupon callable securities. This has been done in anticipation of higher
interest rates.
The strategies and techniques we applied resulted in the Fund nearly
matching the Lipper High Current Yield Fund Universe Average for the fiscal
year and outperforming the Salomon Brothers High Yield Market Index, as
charted on the following page. The Lipper index reflects the universe of
funds with similar investment objectives. The Salomon Brothers High Yield
Market Index reflects the performance of securities that generally
represent the high-yield bond market. This index replaces the Salomon
Brothers High Yield Composite Index in this year's report. We believe that
the new index provides a more accurate basis for comparing the Fund's
performance to the types of securities in which the Fund invests. Both
indexes are presented in this year's report for comparison purposes.
As we begin a new fiscal year, we continue to see a lot of cash
leaving the high-yield market. Investors are nervous as they watch the
correction in the Nasdaq market and are continuing to buy defensive issues.
On the other hand, the CBO bid is starting to come back and yields
available on high-yield bonds have improved. Nevertheless, we believe that
the market will continue to be choppy until we see an end to the interest
rate hikes by the Fed. We intend to continue holding our defensive
securities for the near term while monitoring the economy for signs of
slowing.
Thank you very much for your continued support and confidence in our
organization.
Respectfully,
Louise D. Rieke
Manager, United High Income Fund, Inc.
<PAGE>
<PAGE>
Comparison of Change in Value of $10,000 Investment in
United High Income Fund, Inc., Class A Shares,
Salomon Brothers High Yield Market Index,
Salomon Brothers High Yield Composite Index
and the Lipper High Current Yield Fund Universe Average
Lipper
United Salomon Salomon High
High Brothers Brothers Current
Income High High Yield
Fund, Inc., Yield Yield Fund
Class Market Composite Universe
A Shares Index Index Average
--------- ---------- ---------- ----------
03/31/90 Purchase 9,425 10,000 10,000
10,000
03/31/91 9,666 11,270 11,400 10,583
03/31/92 12,732 14,424 14,674 13,621
03/31/93 14,607 16,765 17,196 15,749
03/31/94 15,878 18,178 18,612 17,407
03/31/95 16,421 19,418 19,818 17,693
03/31/96 18,747 22,297 23,055 20,303
03/31/97 20,799 24,771 25,615 22,632
03/31/98 24,550 28,771 30,182 26,504
03/31/99 24,967 29,072 30,693 26,076
03/31/00 24,805 28,379 29,565 26,184
===== United High Income Fund, Class A Shares* -- $24,805
..... Salomon Brothers High Yield Market Index - $28,379
***** Salomon Brothers High Yield Composite Index - $29,565
----- Lipper High Current Yield Fund Universe Average -- $26,184
*The value of the investment in the Fund is impacted by the sales load at
the time of the investment and by the ongoing expenses of the Fund.
Average Annual Total Return+
Class A Class B Class C Class Y
----------------------------------------------
Year Ended
3/31/00 -6.36% N/A N/A -0.39%
5 Years Ended
3/31/00 7.32% N/A N/A N/A
10 Years Ended
3/31/00 9.51% N/A N/A N/A
Since inception of
Class** through
3/31/00 N/A -3.25% -0.32% 7.24%
*Performance data quoted represents past performance and is based on
deduction of the maximum applicable sales load for each of the periods.
Class A shares carry a maximum front-end sales load of 5.75%. Class B
and Class C shares carry maximum contingent deferred sales charges of 5%
and 1%, respectively. Total returns reflect share price appreciation,
including reinvestment of all income and capital gains distributions.
Investment return and principal value will fluctuate and an investor's
shares, when redeemed, may be worth more or less than their original
cost.
**10/4/99 for Class B shares, 10/4/99 for Class C shares and 1/4/96 for
Class Y shares (the date on which shares were first acquired by
shareholders).
Past performance is not predictive of future performance. Indexes are
unmanaged.
<PAGE>
SHAREHOLDER SUMMARY
--------------------------------------------------------------
UNITED HIGH INCOME FUND, INC.
PORTFOLIO STRATEGY:
Invests generally in OBJECTIVE: To seek a high level of
High-Risk, High-Yield current income as its
Fixed Income Securities primary goal, with a
secondary goal of
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
PERFORMANCE SUMMARY -- Class A Shares
<PAGE>
PER SHARE DATA
For the Fiscal Year Ended March 31, 2000
----------------------------------------
DIVIDENDS PAID $0.79
=====
NET ASSET VALUE ON
3/31/00 $ 8.54
3/31/99 9.39
------
CHANGE PER SHARE $(0.85)
======
Past performance is not necessarily indicative of future results.
TOTAL RETURN HISTORY
Average Annual Total Return
---------------------------
With Without
Period Sales Load* Sales Load**
------ ----------- ------------
1-year period ended 3-31-00 -6.36% -0.65%
5-year period ended 3-31-00 7.32% 8.60%
10-year period ended 3-31-00 9.51% 10.16%
*Performance data quoted represents past performance and is based on
deduction of 5.75% sales load on the initial purchase in each of the
three periods.
**Performance data quoted in this column represents past performance
without taking into account the sales load deducted on an initial
purchase.
Investment return and principal value will fluctuate and an investor's
shares, when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On March 31, 2000, United High Income Fund, Inc. had net assets totaling
$831,214,302 invested in a diversified portfolio of:
82.87% Corporate Debt Securities
8.53% Common and Preferred Stocks and Warrants
7.23% Cash and Cash Equivalents
1.37% Other Government Security
As a shareholder of United High Income Fund, Inc., for every $100 you had
invested on March 31, 2000, your Fund owned:
$46.39 Transportation, Communication, Electric
and Sanitary Services Bonds
14.80 Services Bonds
14.35 Manufacturing Bonds
8.53 Common and Preferred Stocks and Warrants
7.23 Cash and Cash Equivalents
5.51 Wholesale and Retail Trade Bonds
1.82 Miscellaneous Bonds
1.37 Other Government Security
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 2000
Shares Value
COMMON AND PREFERRED STOCKS AND WARRANTS
Business Services - 0.52%
Clear Channel Communications, Inc.* .. 57,865 $ 3,996,302
Cybernet Internet Services International,
Inc., Warrants (A)* ................. 3,250 325,000
Total ............................... 4,321,302
Cable and Other Pay Television Services - 0.06%
Adelphia Communications Corporation,
13.0% Preferred ..................... 5,000 540,000
Chemicals and Allied Products - 1.17%
Smith International, Inc.* ........... 125,000 9,687,500
Communication - 1.83%
Allegiance Telecom, Inc., Warrants (A)* 7,000 1,050,000
Crown Castle International Corp.* .... 60,000 2,270,625
IXC Communications, Inc.,
12.5% Preferred ..................... 1,357 1,397,710
IntelCom Group Inc., Warrants (A)* ... 20,625 618,750
Intermedia Communications Inc.,
13.5% Preferred* .................... 7,510 7,210,084
OnePoint Communications Corp.,
Warrants (A)* ....................... 4,000 80,000
Primus Telecommunications Group, Incorporated,
Warrants* ........................... 5,000 310,000
VersaTel Telecom International N.V.,
Warrants (A)* ....................... 3,750 2,250,000
Total ............................... 15,187,169
Electric, Gas and Sanitary Services - 0.00%
Consolidated Hydro, Inc.,
Class B Warrants* ................... 7,578 15
Consolidated Hydro, Inc.,
Class C Warrants* ................... 4,919 10
Total ............................... 25
Electronic and Other Electric Equipment - 0.41%
Level 3 Communications, Inc.* ........ 30,000 3,171,562
Metricom Inc, Warrants* .............. 4,000 200,000
Total ............................... 3,371,562
Food and Kindred Products - 0.57%
Keebler Foods Company ................ 166,500 4,776,469
Nondepository Institutions - 0.39%
California Federal Preferred Capital
Corporation, 9.125% Preferred ....... 150,000 3,281,250
Oil and Gas Extraction - 0.51%
Burlington Resources Incorporated .... 115,000 4,255,000
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 2000
Shares Value
COMMON AND PREFERRED STOCKS AND
WARRANTS (Continued)
Paper and Allied Products - 0.14%
SF Holdings Group, Inc., Class C (A)* 1,890 $ 19
SF Holdings Group, Inc.,
13.75% Preferred .................... 200 910,000
SF Holdings Group, Inc.,
13.75% Preferred (A)* ............... 60 271,430
Total ............................... 1,181,449
Petroleum and Coal Products - 1.06%
Exxon Mobil Corporation .............. 65,000 5,057,812
Royal Dutch Petroleum Company,
NY Shares ........................... 65,000 3,741,563
Total ............................... 8,799,375
Printing and Publishing - 0.42%
PRIMEDIA Inc., 10% Preferred ......... 35,000 3,526,250
Radio and Television Broadcasting Stations - 0.71%
Infinity Broadcasting Corporation,
Class A* ............................ 180,000 5,827,500
Radio Telephone Communications - 0.74%
Microcell Telecommunications Inc.,
Warrants (A)* ....................... 58,000 5,214,548
Powertel, Inc., Warrants* ............ 16,000 928,000
Total ............................... 6,142,548
TOTAL COMMON AND PREFERRED STOCKS
AND WARRANTS - 8.53% $ 70,897,399
(Cost: $54,026,370)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Agricultural Production - Crops - 0.33%
Hines Horticulture, Inc.,
11.75%, 10-15-05 .................... $ 2,750 2,763,750
Amusement and Recreation Services - 3.44%
Aztar Corporation,
8.875%, 5-15-07 ..................... 1,500 1,357,500
Hollywood Park, Inc.,
9.25%, 2-15-07 ...................... 4,000 3,940,000
Mohegan Tribal Gaming Authority,
8.75%, 1-1-09 ....................... 4,250 3,984,375
Premier Parks Inc.:
9.25%, 4-1-06 ....................... 2,000 1,860,000
9.75%, 6-15-07 ...................... 5,000 4,712,500
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Amusement and Recreation Services (Continued)
Station Casinos, Inc.:
10.125%, 3-15-06 .................... $ 2,500 $ 2,518,750
8.875%, 12-1-08 ..................... 7,650 7,038,000
YankeeNets LLC,
12.75%, 3-1-07 (A) .................. 3,500 3,220,000
Total ............................... 28,631,125
Auto Repair, Services and Parking - 0.59%
Avis Rent A Car, Inc.,
11.0%, 5-1-09 ....................... 5,000 4,925,000
Automotive Dealers and Service Stations - 0.35%
TravelCenters of America, Inc.,
10.25%, 4-1-07 ...................... 3,000 2,880,000
Business Services - 4.78%
Adams Outdoor Advertising Limited Partnership,
10.75%, 3-15-06 ..................... 5,000 5,100,000
Coinmach Corporation,
11.75%, 11-15-05 .................... 6,620 6,289,000
Cybernet Internet Services
International, Inc.,
14.0%, 7-1-09 ....................... 3,250 2,600,000
Lamar Advertising Company:
9.625%, 12-1-06 ..................... 3,000 3,000,000
8.625%, 9-15-07 ..................... 1,500 1,417,500
National Equipment Services, Inc.,
10.0%, 11-30-04 ..................... 11,500 10,905,625
PSINet, Inc.:
10.0%, 2-15-05 ...................... 7,500 7,087,500
10.5%, 12-1-06 (A) .................. 3,500 3,360,000
Total ............................... 39,759,625
Cable and Other Pay Television Services - 8.25%
Adelphia Communications Corporation:
10.25%, 7-15-00 ..................... 2,250 2,250,000
9.25%, 10-1-02 ...................... 3,000 2,970,000
10.5%, 7-15-04 ...................... 4,000 4,040,000
CSC Holdings, Inc.,
8.125%, 8-15-09 ..................... 4,000 4,032,600
Charter Communications Holdings, LLC
and Charter Communications Holdings
Capital Corporation,
8.625%, 4-1-09 ...................... 9,000 7,920,000
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Cable and Other Pay Television Services (Continued)
Classic Cable, Inc.,
9.375%, 8-1-09 ...................... $ 3,250 $ 3,006,250
Comcast UK Cable Partners Limited,
0.0%, 11-15-07 (B) .................. 9,000 8,550,000
Diamond Cable Communications Plc,
0.0%, 12-15-05 (B) .................. 15,500 14,802,500
FrontierVision Holdings, L.P.,
11.0%, 10-15-06 ..................... 5,000 5,112,500
Renaissance Media Group LLC,
0.0%, 4-15-08 (B) ................... 5,000 3,300,000
Telewest Communications plc:
0.0% 10-1-07 (B) .................... 3,250 3,038,750
0.0%, 4-15-09 (A)(B) ................ 2,500 1,412,500
United International Holdings, Inc.,
0.0%, 2-15-08 (B) ................... 12,000 8,100,000
Total ............................... 68,535,100
Chemicals and Allied Products - 0.48%
Chattem, Inc.,
8.875%, 4-1-08 ...................... 1,000 855,000
Sterling Chemicals, Inc.,
12.375%, 7-15-06 .................... 3,000 3,097,500
Total ............................... 3,952,500
Communication - 19.70%
Alestra, S. de R.L. de C.V.,
12.625%, 5-15-09 .................... 6,500 6,516,250
Allegiance Telecom, Inc.,
0.0%, 2-15-08 (B) ................... 8,550 6,070,500
Concentric Network Corporation,
12.75%, 12-15-07 .................... 4,000 4,180,000
Crown Castle International Corp.:
0.0%, 5-15-11 (B) ................... 11,000 6,297,500
9.0%, 5-15-11 ....................... 4,000 3,680,000
EchoStar DBS Corporation,
9.375%, 2-1-09 ...................... 15,500 14,957,500
Global Crossing Holdings Ltd.,
9.5%, 11-15-09 (A) .................. 4,500 4,320,000
Hyperion Telecommunications, Inc.:
0.0%, 4-15-03 (B) ................... 10,750 9,890,000
12.25%, 9-1-04 ...................... 2,000 2,060,000
12.0%, 11-1-07 ...................... 2,500 2,512,500
ICG Holdings, Inc.,
0.0%, 9-15-05 (B) ................... 6,250 5,843,750
ICG Services, Inc.,
0.0%, 5-1-08 (B) .................... 4,000 2,160,000
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Communication (Continued)
ITC /\ DeltaCom, Inc.:
11.0%, 6-1-07 ....................... $ 5,250 $ 5,328,750
8.875%, 3-1-08 ...................... 2,400 2,232,000
9.75%, 11-15-08 ..................... 3,000 2,925,000
Intermedia Communications of Florida, Inc.,
0.0%, 5-15-06 (B).................... 4,500 4,196,250
Jazztel p.l.c.,
13.25%, 12-15-09 (A)(C) ............. EUR3,500 3,401,519
Leap Wireless International,
Inc., Units,
12.5%, 4-15-10 (A)(D) ............... $ 4,750 4,750,000
MetroNet Communications Corp.,
0.0%, 6-15-08 (B) ................... 7,000 5,592,720
NEXTLINK Communications, Inc.:
9.625%, 10-1-07 ..................... 2,250 2,058,750
10.75%, 6-1-09 ...................... 2,500 2,400,000
ONO Finance Plc,
13.0%, 5-1-09 ....................... 3,500 3,640,000
OnePoint Communications Corp.,
14.5%, 6-1-08 ....................... 4,000 2,600,000
Primus Telecommunications Group, Incorporated:
11.75%, 8-1-04 ...................... 5,000 4,825,000
12.75%, 10-15-09 .................... 2,500 2,437,500
Qwest Communications International Inc.,
0.0%, 10-15-07 (B) .................. 2,750 2,312,860
RSL Communications, Ltd.,
10.5%, 11-15-08 ..................... 11,000 9,405,000
Rhythms NetConnections Inc.:
12.75%, 4-15-09 ..................... 4,000 3,400,000
14.0%, 2-15-10 (A) .................. 5,000 4,350,000
Rogers Cablesystems Limited,
10.0%, 12-1-07 ...................... 3,555 3,706,087
SpectraSite Holdings, Inc.,
0.0%, 3-15-10 (A)(B) ................ 10,750 5,321,250
Time Warner Telecom LLC and Time
Warner Telecom Inc.,
9.75%, 7-15-08 ...................... 4,250 4,165,000
VersaTel Telecom B.V.,
11.875%, 7-15-09 .................... 2,000 1,965,000
VersaTel Telecom International N.V.,
13.25%, 5-15-08 ..................... 3,750 3,834,375
Viatel, Inc.,
11.5%, 3-15-09 ...................... 3,000 2,700,000
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Communication (Continued)
Winstar Communications, Inc.:
0.0%, 10-15-05 (B) .................. $ 4,250 $ 4,377,500
0.0%, 4-15-10 (A)(B) ................ 725 340,750
12.75%, 4-15-10 (A) ................. 3,127 3,033,190
Total ............................... 163,786,501
Depository Institutions - 0.30%
Sovereign Bancorp, Inc.,
10.25%, 5-15-04 ..................... 2,500 2,515,575
Eating and Drinking Places - 1.56%
Domino's, Inc.,
10.375%, 1-15-09 .................... 5,000 4,575,000
Foodmaker, Inc.,
8.375%, 4-15-08 ..................... 7,250 6,642,812
NE Restaurant Company, Inc.,
10.75%, 7-15-08 ..................... 2,000 1,722,500
Total ............................... 12,940,312
Electric, Gas and Sanitary Services - 0.66%
El Paso Electric Company,
9.4%, 5-1-11 ........................ 5,000 5,463,600
Electronic and Other Electric Equipment - 2.26%
Alamosa PCS Holdings, Inc.,
0.0%, 2-15-10 (B) ................... 4,500 2,182,500
Covad Communications Group, Inc.,
12.0%, 2-15-10 (A) .................. 4,000 3,560,000
Elgar Holdings, Inc.,
9.875%, 2-1-08 ...................... 4,000 1,960,000
Level 3 Communications, Inc.:
11.0%, 3-15-08 (A) .................. 4,000 3,840,000
9.125%, 5-1-08 ...................... 2,000 1,720,000
0.0%, 12-1-08 (B) ................... 5,500 3,176,250
Metricom, Inc.,
13.0% 2-15-10 ....................... 3,000 2,340,000
Total ............................... 18,778,750
Fabricated Metal Products - 0.50%
AXIA Incorporated,
10.75%, 7-15-08 ..................... 1,600 1,232,000
Neenah Corporation,
11.125%, 5-1-07 ..................... 3,250 2,900,625
Total ............................... 4,132,625
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Food and Kindred Products - 0.86%
B & G Foods, Inc.,
9.625%, 8-1-07 ...................... $ 4,500 $ 3,622,500
Pilgrim's Pride Corporation,
10.875%, 8-1-03 ..................... 3,500 3,500,000
Total ............................... 7,122,500
Food Stores - 0.55%
Big V Supermarkets, Inc.,
11.0%, 2-15-04 ...................... 5,000 4,550,000
Furniture and Fixtures - 0.51%
Sealy Mattress Company,
0.0%, 12-15-07 (B) .................. 6,000 4,245,000
Health Services - 2.11%
Abbey Healthcare Group Incorporated,
9.5%, 11-1-02 ....................... 8,500 8,181,250
Columbia/HCA Healthcare Corporation,
7.25%, 5-20-08 ...................... 2,250 1,996,875
Extendicare Health Services, Inc.,
9.35%, 12-15-07 ..................... 2,000 1,080,000
IASIS Healthcare Corporation,
13.0%, 10-15-09 (A) ................. 3,750 3,721,875
Tenet Healthcare Corporation,
8.625%, 1-15-07 ..................... 2,750 2,591,875
Total ............................... 17,571,875
Holding and Other Investment Offices - 0.61%
Grupo Industrial Durango, S.A. de C.V.,
12.625%, 8-1-03 ..................... 5,000 5,062,500
Hotels and Other Lodging Places - 3.41%
CapStar Hotel Company,
8.75%, 8-15-07 ...................... 2,500 2,175,000
Coast Hotels and Casinos, Inc.,
9.5%, 4-1-09 ........................ 5,000 4,600,000
HMH Properties, Inc.,
7.875%, 8-1-08 ...................... 12,000 10,020,000
Lodgian Financing Corp.,
12.25%, 7-15-09 ..................... 6,000 5,295,000
Prime Hospitality Corp.:
9.25%, 1-15-06 ...................... 4,000 3,880,000
9.75%, 4-1-07 ....................... 2,500 2,381,250
Total ............................... 28,351,250
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Industrial Machinery and Equipment - 0.89%
American Standard Inc.,
9.25%, 12-1-16 ...................... $ 1,099 $ 1,079,768
Anchor Lamina Inc. and Anchor Lamina America, Inc.,
9.875%, 2-1-08 ...................... 1,500 1,123,125
Terex Corporation,
8.875%, 4-1-08 ...................... 6,000 5,220,000
Total ............................... 7,422,893
Insurance Carriers - 0.36%
LifePoint Hospitals Holdings, Inc.,
10.75%, 5-15-09 ..................... 3,000 3,015,000
Miscellaneous Retail - 1.18%
Frank's Nursery & Crafts, Inc.,
10.25%, 3-1-08 ...................... 5,650 1,695,000
Michaels Stores, Inc.,
10.875%, 6-15-06 .................... 7,800 8,102,250
Total ............................... 9,797,250
Motion Pictures - 0.46%
AMC Entertainment Inc.,
9.5%, 3-15-09 ....................... 3,500 1,785,000
Regal Cinemas, Inc.,
9.5%, 6-1-08 ........................ 4,500 2,002,500
Total ............................... 3,787,500
Oil and Gas Extraction - 0.22%
Canadian Forest Oil Co. Ltd.,
8.75%, 9-15-07 ...................... 2,000 1,840,000
Paper and Allied Products - 2.17%
APP China Group Limited, Units,
14.0%, 3-15-10 (A)(E) ............... 3,250 2,778,750
Buckeye Cellulose Corporation,
8.5%, 12-15-05 ...................... 2,750 2,626,250
Container Corporation of America,
11.25%, 5-1-04 ...................... 3,500 3,543,750
Mail-Well I Corporation,
8.75%, 12-15-08 ..................... 5,000 4,375,000
SF Holdings Group, Inc.,
0.0%, 3-15-08 (B) ................... 5,750 3,090,625
Sweetheart Cup Company, Inc.,
10.5%, 9-1-03 ....................... 1,725 1,638,750
Total ............................... 18,053,125
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Petroleum and Coal Products - 0.53%
Building Materials Corporation of America,
8.0%, 12-1-08 ....................... $ 5,000 $ 4,393,750
Primary Metal Industries - 1.53%
Commonwealth Aluminum Corporation,
10.75%, 10-1-06 ..................... 3,000 2,985,000
ISG Resources, Inc.,
10.0%, 4-15-08 ...................... 3,000 2,692,500
WCI Steel, Inc.,
10.0%, 12-1-04 ..................... 1,000 985,000
Wheeling-Pittsburgh Corporation,
9.25%, 11-15-07 ..................... 6,750 6,041,250
Total ............................... 12,703,750
Printing and Publishing - 0.77%
Perry-Judd's Incorporated,
10.625%, 12-15-07 ................... 750 594,375
World Color Press, Inc.,
8.375%, 11-15-08 .................... 6,250 5,835,063
Total ............................... 6,429,438
Radio and Television Broadcasting Stations - 6.41%
ACME Television, LLC,
0.0%, 9-30-04 (B) ................... 7,400 6,586,000
Allbritton Communications Company,
9.75%, 11-30-07 ..................... 4,500 4,230,000
American Radio Systems Corporation,
9.0%, 2-1-06 ........................ 3,250 3,310,937
Chancellor Media Corporation,
9.0%, 10-1-08 ....................... 4,000 4,000,000
Chancellor Media Corporation of Los Angeles,
8.0%, 11-1-08 ....................... 8,500 8,372,500
Citadel Broadcasting Company,
9.25%, 11-15-08 ..................... 2,000 1,865,000
LIN Holdings Corp.,
0.0%, 3-1-08 (B) .................... 7,000 4,322,500
LIN Television Corporation,
8.375%, 3-1-08 ...................... 5,900 5,133,000
Rogers Communications Inc.,
9.125%, 1-15-06 ..................... 7,500 7,462,500
Salem Communications Corporation,
9.5%, 10-1-07 ....................... 3,425 3,185,250
Spanish Broadcasting System, Inc.,
9.625%, 11-1-09 ..................... 2,500 2,412,500
Susquehanna Media Co.,
8.5%, 5-15-09 ....................... 2,500 2,387,500
Total ............................... 53,267,687
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Radio Telephone Communications - 8.23%
GT Group Telecom, Inc., Unit,
0.0%, 2-1-10 (A)(B)(F) .............. $ 6,250 $ 3,500,000
Intercel, Inc.,
0.0%, 2-1-06 (B) .................... 5,000 4,537,500
Microcell Telecommunications Inc.,
0.0%, 6-1-06 (B) .................... 10,000 8,850,000
Nextel Communications, Inc.:
0.0%, 9-15-07 (B) ................... 7,500 5,475,000
0.0%, 2-15-08 (B) ................... 6,400 4,320,000
Nextel International, Inc.,
0.0%, 4-15-08 (B) ................... 12,500 7,750,000
Nextel Partners, Inc.,
0.0%, 2-1-09 (B) .................... 13,000 8,320,000
Powertel, Inc.,
11.125%, 6-1-07 ..................... 1,500 1,552,500
Sprint Spectrum L.P.,
0.0%, 8-15-06 (B) ................... 12,000 11,485,080
Teligent, Inc.,
11.5%, 12-1-07 ...................... 2,000 1,800,000
Tritel PCS, Inc.,
0.0%, 5-15-09 (B) ................... 4,750 2,945,000
Triton PCS, Inc.,
0.0%, 5-1-08 (B) .................... 3,000 2,062,500
US Unwired Inc.,
0.0%, 11-1-09 (A)(B) ................ 2,000 1,070,000
VoiceStream Wireless Corporation,
10.375%, 11-15-09 (A) ............... 4,750 4,726,250
Total ............................... 68,393,830
Railroad Transportation - 0.31%
TFM, S.A. de C.V.,
0.0%, 6-15-09 (B) ................... 3,500 2,555,000
Rubber and Miscellaneous Plastics Products - 1.44%
Globe Manufacturing Corp.,
10.0%, 8-1-08 ....................... 3,750 1,500,000
Graham Packaging Company and GPC Capital Corp. I,
8.75%, 1-15-08 ...................... 2,500 2,025,000
Graham Packaging Holdings Company,
0.0%, 1-15-09 (B) ................... 1,250 687,500
Home Products International, Inc.,
9.625%, 5-15-08 ..................... 6,500 5,915,000
LDM Technologies, Inc.,
10.75%, 1-15-07 ..................... 2,500 1,875,000
Total ............................... 12,002,500
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Textile Mill Products - 1.13%
Anvil Knitwear, Inc.,
10.875%, 3-15-07 .................... $ 3,500 $ 2,905,000
Consoltex Group Inc.,
11.0%, 10-1-03 ...................... 7,000 6,370,000
Glenoit Corporation,
11.0%, 4-15-07 ...................... 575 132,250
Total ............................... 9,407,250
Transportation by Air - 1.30%
Atlas Air, Inc.,
9.375%, 11-15-06 .................... 11,500 10,838,750
Transportation Equipment - 1.28%
Federal-Mogul Corporation,
7.875%, 7-1-10 ...................... 7,000 5,701,500
Westinghouse Air Brake Company (The),
9.375%, 6-15-05 ..................... 5,000 4,907,500
Total ............................... 10,609,000
Transportation Services - 0.57%
Railworks Corporation,
11.5%, 4-15-09 ...................... 5,000 4,725,000
Trucking and Warehousing - 0.97%
Iron Mountain Incorporated,
10.125%, 10-1-06 .................... 2,500 2,437,500
Pierce Leahy Corp.,
9.125%, 7-15-07 ..................... 6,000 5,625,000
Total ............................... 8,062,500
Wholesale Trade - Durable Goods - 1.21%
AAi.Fostergrant, Inc.,
10.75%, 7-15-06 ..................... 500 152,500
Federal Data Corporation,
10.125%, 8-1-05 ..................... 2,500 1,700,000
Heafner (J.H.) Company, Inc. (The),
10.0%, 5-15-08 ...................... 8,500 6,927,500
WESCO Distribution, Inc.,
9.125%, 6-1-08 ...................... 1,500 1,305,000
Total ............................... 10,085,000
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Wholesale Trade - Nondurable Goods - 0.66%
Amscan Holdings, Inc.,
9.875%, 12-15-07 .................... $ 3,400 $ 2,868,750
Core-Mark International, Inc.,
11.375%, 9-15-03 .................... 2,800 2,611,000
Total ............................... 5,479,750
TOTAL CORPORATE DEBT SECURITIES - 82.87% $688,836,561
(Cost: $738,842,602)
OTHER GOVERNMENT SECURITY - 1.37%
Mexico
United Mexican States,
9.75%, 4-6-05 ....................... 11,000 $ 11,412,500
(Cost: $10,996,198)
TOTAL SHORT-TERM SECURITIES - 3.32% $ 27,569,780
(Cost: $27,569,780)
Face Amount
in Thousands
UNREALIZED GAIN ON OPEN FORWARD CURRENCY CONTRACTS - 0.01%
Euro Dollar, 5-30-00 (C) ............. EUR1,750 $ 66,150
TOTAL INVESTMENT SECURITIES - 96.10% $798,782,390
(Cost: $831,434,950)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 3.90% 32,431,912
NET ASSETS - 100.00% $831,214,302
See Notes to Schedule of Investments on page 18.
<PAGE>
UNITED HIGH INCOME FUND, INC.
MARCH 31, 2000
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 March 31, 2000, the
value of these securities amounted to $66,515,831 or 8.00% of net
assets.
(B) The security does not bear interest for an initial period of time and
subsequently becomes interest bearing.
(C) Traded in a foreign currency.
(D) Each unit of Leap Wireless International, Inc. consists of one 12.5%
senior note due 2010 and one warrant to purchase common stock.
(E) Each unit of APP China Group Limited consists of one 14% guaranteed
senior discount note due 2010 and one warrant to purchase ordinary
shares of Asia Pulp & Paper Company Ltd.
(F) Each unit of GT Group Telecom, Inc. consists of $1,000 principal
amount of 13.25% senior discount notes due 2010 and one warrant to
purchase 4.9106 Class B non-voting shares.
See Note 1 to financial statements for security valuation and other
significant accounting policies concerning investments.
See Note 3 to financial statements for cost and unrealized appreciation and
depreciation of investments owned for Federal income tax purposes.
<PAGE>
UNITED HIGH INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2000
(In Thousands, Except for Per Share Amounts)
Assets
Investment securities -- at value
(Notes 1 and 3) ............................... $798,782
Cash .......................................... 2
Receivables:
Investment securities sold .................... 29,047
Dividends and interest ........................ 17,092
Fund shares sold .............................. 564
Prepaid insurance premium ...................... 56
Other .......................................... 5
--------
Total assets ................................ 845,548
--------
Liabilities
Payable for investment securities purchased .... 10,577
Payable to Fund shareholders ................... 3,412
Accrued service fee (Note 2) ................... 165
Accrued transfer agency and dividend
disbursing (Note 2) ........................... 150
Accrued management fee (Note 2) ................ 14
Accrued distribution fee (Note 2) .............. 9
Accrued accounting services fee (Note 2) ....... 7
--------
Total liabilities ........................... 14,334
--------
Total net assets ........................... $831,214
========
Net Assets
$1.00 par value capital stock
Capital stock ................................. $ 97,294
Additional paid-in capital .................... 873,688
Accumulated undistributed income (loss):
Accumulated undistributed net investment income 984
Accumulated undistributed net realized
loss on investment transactions ............. (108,095)
Net unrealized depreciation in value of
investments ................................. (32,657)
--------
Net assets applicable to outstanding
units of capital ........................... $831,214
========
Net asset value per share (net assets divided
by shares outstanding)
Class A ........................................ $8.54
Class B ........................................ $8.54
Class C ........................................ $8.54
Class Y ........................................ $8.54
Capital shares outstanding
Class A ........................................ 96,693
Class B ........................................ 310
Class C ........................................ 47
Class Y ........................................ 244
Capital shares authorized ........................ 500,000
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended MARCH 31, 2000
(In Thousands)
Investment Income
Income (Note 1B):
Interest and amortization ....................... $88,826
Dividends ....................................... 2,302
-------
Total income .................................. 91,128
-------
Expenses (Note 2):
Investment management fee ....................... 5,601
Service fee:
Class A ........................................ 2,214
Class B ........................................ 2
Class C ........................................ ---*
Transfer agency and dividend disbursing:
Class A ........................................ 1,491
Class B ........................................ 2
Class C ........................................ ---*
Distribution fee:
Class A ........................................ 133
Class B ........................................ 5
Class C ........................................ 1
Accounting services fee ......................... 86
Custodian fees .................................. 21
Audit fees ...................................... 19
Legal fees ...................................... 13
Shareholder servicing - Class Y ................. 4
Other ........................................... 218
-------
Total expenses ................................ 9,810
-------
Net investment income ........................ 81,318
-------
Realized and Unrealized Loss on
Investments (Notes 1 and 3)
Realized net loss on securities .................. (55,152)
Realized net gain on forward currency contracts .. 27
Realized net gain on foreign currency transactions 14
-------
Realized net loss on investments ................ (55,111)
-------
Unrealized depreciation in value of securities
during the period ............................... (30,658)
Unrealized appreciation in value of open forward
currency contracts during the period ............ 66
-------
Unrealized depreciation in value of
investments during the period ................. (30,592)
-------
Net loss on investments ....................... (85,703)
-------
Net decrease in net assets resulting
from operations ............................ $(4,385)
=======
*Not shown due to rounding.
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
(In Thousands)
For the fiscal year ended
March 31,
-----------------------------
2000 1999
Decrease in Net Assets -------------- --------------
Operations:
Net investment income .......... $ 81,318 $ 88,331
Realized net gain (loss) on
investments .................. (55,111) 6,301
Unrealized depreciation ........ (30,592) (78,843)
---------- ----------
Net increase (decrease) in net assets
resulting from operations ... (4,385) 15,789
---------- ----------
Dividends to shareholders from
net investment income (Note 1D):*
Class A ........................ (82,674) (86,920)
Class B ........................ (47) ---
Class C ........................ (10) ---
Class Y ........................ (232) (261)
---------- ----------
(82,963) (87,181)
---------- ----------
Capital share transactions
(Note 5) ....................... (92,717) (22,419)
---------- ----------
Total decrease ............ (180,065) (93,811)
Net Assets
Beginning of period ............. 1,011,279 1,105,090
---------- ----------
End of period, including undistributed
net investment income of $984
and $2,588, respectively ....... $ 831,214 $1,011,279
========== ==========
*See "Financial Highlights" on pages 22 - 25.
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
Class A Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the fiscal year ended March 31,
-----------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
Net asset value,
beginning of period $9.39 $10.04 $ 9.25 $9.09 $8.70
------ ------ ------ ----- -----
Income from investment
operations:
Net investment
income .......... 0.78 0.81 0.82 0.80 0.79
Net realized and
unrealized gain
(loss) on
investments ..... (0.84) (0.66) 0.79 0.16 0.40
------ ------ ------ ----- -----
Total from investment
operations ....... (0.06) 0.15 1.61 0.96 1.19
------ ------ ------ ----- -----
Less dividends
from net
investment income . (0.79) (0.80) (0.82) (0.80) (0.80)
------ ------ ------ ----- -----
Net asset value,
end of period .... $8.54 $ 9.39 $10.04 $9.25 $9.09
====== ====== ====== ===== =====
Total return* ...... -0.65% 1.70% 18.03% 10.94% 14.16%
Net assets, end
of period (in
millions) ........ $826 $1,009 $1,102 $983 $972
Ratio of expenses to
average net assets 1.04% 0.94% 0.84% 0.89% 0.85%
Ratio of net investment
income to average
net assets ....... 8.65% 8.44% 8.38% 8.68% 8.74%
Portfolio turnover
rate ............. 41.55% 53.19% 63.40% 53.17% 41.67%
*Total return calculated without taking into account the sales load
deducted on an initial purchase.
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
Class B Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period
from
10/4/99*
through
3/31/00
-------
Net asset value,
beginning of period $8.84
----
Income from investment
operations:
Net investment income 0.36
Net realized and
unrealized loss
on investments .. (0.30)
----
Total from investment
operations ....... 0.06
----
Less dividends from
net investment
income ........... (0.36)
----
Net asset value,
end of period .... $8.54
====
Total return ....... 0.61%
Net assets, end of
period (in
millions) ........ $3
Ratio of expenses to
average net assets 1.96%**
Ratio of net investment
income to average
net assets ....... 7.79%**
Portfolio turnover
rate ............. 41.55%**
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
Class C Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period
from
10/4/99*
through
3/31/00
-------
Net asset value,
beginning of period $8.84
----
Income from investment
operations:
Net investment income 0.36
Net realized and
unrealized loss
on investments .. (0.30)
----
Total from investment
operations ....... 0.06
----
Less dividends from
net investment
income ........... (0.36)
----
Net asset value,
end of period .... $8.54
====
Total return ....... 0.65%
Net assets, end of
period (000
omitted) ......... $404
Ratio of expenses to
average net assets 1.91%**
Ratio of net investment
income to average
net assets ....... 7.88%**
Portfolio turnover
rate ............. 41.55%**
*Commencement of operations.
**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
period
For the fiscal from
year ended March 31, 1/4/96*
--------------------------- through
2000 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 .......... 0.81 0.83 0.82 0.81 0.20
Net realized and
unrealized gain (loss)
on investments .. (0.84) (0.66) 0.79 0.15 (0.10)
------ ------ ------ ----- -----
Total from investment
operations ........ (0.03) 0.17 1.61 0.96 0.10
------ ------ ------ ----- -----
Less dividends from
net investment
income ............ (0.82) (0.82) (0.82) (0.81) (0.19)
------ ------ ------ ----- -----
Net asset value,
end of period ..... $8.54 $9.39 $10.04 $9.25 $9.10
====== ====== ====== ===== =====
Total return ....... -0.39% 1.90% 18.13% 11.07% 1.00%
Net assets, end of
period (in
millions) ........ $2 $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 ........... 8.91% 8.62% 8.46% 8.78% 8.55%+
Portfolio
turnover rate .... 41.55% 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
MARCH 31, 2000
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 accounting principles generally accepted in the United
States of America.
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 accounting principles generally accepted in the
United States of America. 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. At March 31, 2000, $27,475 was
reclassified between accumulated undistributed net investment income
and accumulated undistributed net realized gain on investment
transactions. Also, $114,024,403 was reclassified between additional
paid-in capital and accumulated undistributed net realized gain on
investment transactions. Net investment income, net realized gains
and net assets were not affected by this change.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America 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 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. 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, Class B and Class C shares, the Fund 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 0.15% 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 $581,523. With respect to Class A, Class B and Class C shares, W&R paid
sales commissions of $548,324 and all expenses in connection with the sale
of Fund shares, except for registration fees and related expenses.
A contingent deferred sales charge ("CDSC") may be assessed against
a shareholder's redemption amount of Class B and Class C shares and is paid
to W&R. The purpose of the deferred sales charge is to compensate W&R for
the costs incurred by W&R in connection with the sale of Fund shares.
With respect to Class B shares, the amount of the CDSC will be the
following percent of the total amount invested during a calendar year to
acquire the shares or the value of the shares redeemed, whichever is less.
Redemption at any time during the first calendar year of investment, 5%;
the second calendar year, 4%; the third calendar year, 3%; the fourth
calendar year, 3%; the fifth calendar year, 2%; the sixth calendar year, 1%
and thereafter, 0%.
If Class C shares are sold within 12 months of buying these shares, a
1% CDSC will be imposed.
The deferred sales charge will not be imposed on shares representing
payment of dividends or distributions or on amounts which represent an
increase in the value of the shareholder's account resulting from capital
appreciation above the amount paid for shares purchased during the deferred
sales charge period. During the period ended March 31, 2000, W&R received
$271 in deferred sales charges from Class C shares. No CDSC fees were
received from Class B shares.
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 0.25% 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.
Under the Distribution and Service Plan adopted by the Fund for Class
B and Class C shares, respectively, the Fund may pay W&R, on an annual
basis, a service fee of up to 0.25% of the average daily net assets of the
class to compensate W&R for providing services to shareholders of that
class and/or maintaining shareholder accounts for that class and a
distribution fee of up to 0.75% of the average daily net assets of the
class to compensate W&R for distributing the shares of that class. The
Class B Plan and the Class C Plan each permit W&R to receive compensation,
through the distribution and service fee, respectively, for its
distribution activities for that class, which are similar to the
distribution activities described with respect to the Class A Plan, and for
its activities in providing personal services to shareholders of that class
and/or maintaining shareholder accounts of that class, which are similar to
the corresponding activities for which it is entitled to reimbursement
under the Class A Plan.
The Fund paid Directors' fees of $34,314, 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 $355,174,961, while
proceeds from maturities and sales aggregated $451,840,150. Purchases of
short-term securities aggregated $9,493,364,298, while proceeds from
maturities and sales aggregated $9,538,896,000. No U.S. Government
securities were bought or sold during the period ended March 31, 2000.
For Federal income tax purposes, cost of investments owned at March
31, 2000 was $831,434,950, resulting in net unrealized depreciation of
$32,718,710, of which $27,908,386 related to appreciated securities and
$60,627,096 related to depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital losses of
$40,878,811 during its fiscal year ended March 31, 2000, which included the
effect of certain losses deferred into the next fiscal year, as well as the
effect of losses recognized from the prior year (see discussion below).
Capital loss carryovers aggregated $87,104,067 at March 31, 2000 and are
available to offset future realized capital gain net income for Federal
income tax purposes but will expire if not utilized as follows:
$17,962,753 at March 31, 2003; $20,841,730 at March 31, 2004; $7,420,773 at
March 31, 2005; and $40,878,811 at March 31, 2008.
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, 1999 through March 31, 2000, the Fund
incurred net capital losses of $20,990,651, which have been deferred to the
fiscal year ending March 31, 2001. In addition, during the year ending
March 31, 2000, the Fund recognized post-October losses of $6,717,770 that
had been deferred from the year ended March 31, 1999.
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. 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 each 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.
Transactions in capital stock are summarized below. Amounts are in
thousands.
For the fiscal
year ended March 31,
--------------------------
2000 1999
------------ ------------
Shares issued from sale
of shares:
Class A ............ 11,205 11,212
Class B ............. 321 ---
Class C ............. 51 ---
Class Y ............ 65 244
Shares issued from
reinvestment of dividends:
Class A ............ 7,881 7,730
Class B ............. 5 ---
Class C ............. 1 ---
Class Y ............ 26 27
Shares redeemed:
Class A ............ (29,870) (21,193)
Class B ............. (16) ---
Class C ............. (5) ---
Class Y ............ (122) (317)
------ ------
Decrease in
outstanding capital
shares .............. (10,458) (2,297)
====== ======
Value issued from sale
of shares:
Class A ............ $100,747 $107,437
Class B ............. 2,822 ---
Class C ............. 453 ---
Class Y ............ 591 2,313
Value issued from
reinvestment of dividends:
Class A ............ 70,485 73,752
Class B ............. 42 ---
Class C ............. 6 ---
Class Y ............ 233 261
Value redeemed:
Class A ............ (266,830) (203,166)
Class B ............. (141) ---
Class C ............. (43) ---
Class Y ............ (1,082) (3,016)
-------- --------
Decrease in outstanding
capital ............ $(92,717) $(22,419)
======== ========
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
United High Income Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of United High Income Fund, Inc.
(the "Fund") as of March 31, 2000, and the related statement of operations
for the fiscal year then ended, the statements of changes in net assets for
each of the two fiscal years in the period then ended, and the financial
highlights for each of the five fiscal years in the period then ended.
These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and the financial highlights based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 March 31, 2000,
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 March 31, 2000, the results of its
operations for the fiscal year then ended, the changes in its net assets
for each of the two fiscal years in the period then ended, and the
financial highlights for each of the five fiscal years in the period then
ended in conformity with accounting principles generally accepted in the
United States of America.
Deloitte & Touche LLP
Kansas City, Missouri
May 5, 2000
<PAGE>
INCOME TAX INFORMATION
The amounts of the dividends below, multiplied by the number of shares
owned by you on the record dates, will give you the total amounts to be
reported in your Federal income tax return for the years in which the
dividends were received or reinvested.
PER-SHARE AMOUNTS REPORTABLE AS:
---------------------------------------------------------
For Individuals For Corporations
-------------------------------------------------------
Record OrdinaryLong-Term Non- Long-Term
Date Total IncomeCapital GainQualifyingQualifyingCapital Gain
----------- ------------- -------- ----------------------------
Class A
04-14-99 $0.066 $0.0660 $--- $0.0019 $0.0641 $---
05-12-99 0.066 .0660 --- .0018 .0642 ---
06-09-99 0.066 .0660 --- .0018 .0642 ---
07-14-99 0.066 .0660 --- .0018 .00642 ---
08-11-99 0.066 .0660 --- .0018 .0642 ---
09-15-99 0.066 .0660 --- .0018 .0642 ---
10-13-99 0.066 .0660 --- .0018 .0642 ---
11-10-99 0.066 .0660 --- .0018 .0642 ---
12-15-99 0.076 .0760 --- .0021 .0739 ---
01-12-00 0.064 .0640 --- .0019 .0621 ---
02-09-00 0.062 .0620 --- .0019 .0601 ---
03-15-00 0.063 .0630 --- .0019 .0611 ---
------ ------- ---- ------- ------- ----
Total $0.793 $0.7930 $--- $0.0223 $0.7707 $---
====== ======= ==== ======= ======= ====
Class B
10-13-99 0.064 $0.0640 $--- $0.0018 $0.0622 $---
11-10-99 0.059 .0590 --- .0016 .0574 ---
12-15-99 0.066 .0660 --- .0018 .0642 ---
01-12-00 0.057 .0570 --- .0017 .0553 ---
02-09-00 0.055 .0550 --- .0016 .0534 ---
03-15-00 0.057 .0570 --- .0017 .0553 ---
------ ------- ---- ------- ------- ----
Total $0.358 $0.3580 $--- $0.0102 $0.3478 $---
====== ======= ==== ======= ======= ====
Class C
10-13-99 0.064 $0.0640 $--- $0.0018 $0.0622 $---
11-10-99 0.059 .0590 --- .0016 .0574 ---
12-15-99 0.066 .0660 --- .0018 .0642 ---
01-12-00 0.059 .0590 --- .0018 .0572 ---
02-09-00 0.057 .0570 --- .0017 .0553 ---
03-15-00 0.056 .0560 --- .0017 .0543 ---
------ ------- ---- ------- ------- ----
Total $0.361 $0.3610 $--- $0.0104 $0.3506 $---
====== ======= ==== ======= ======= ====
Class Y
04-14-99 $0.068 $0.0680 $--- $0.0019 $0.0661 $---
05-12-99 0.068 .0680 --- .0019 .0661 ---
06-09-99 0.067 .0670 --- .0019 .0651 ---
07-14-99 0.068 .0680 --- .0019 .0661 ---
08-11-99 0.068 .0680 --- .0019 .0661 ---
09-15-99 0.069 .0690 --- .0019 .0671 ---
10-13-99 0.068 .0680 --- .0019 .0661 ---
11-10-99 0.068 .0680 --- .0019 .0661 ---
12-15-99 0.077 .0770 --- .0021 .0749 ---
01-12-00 0.066 .0660 --- .0020 .0640 ---
02-09-00 0.064 .0640 --- .0019 .0621 ---
03-15-00 0.066 .0660 --- .0020 .0640 ---
------ ------- ---- ------- ------- ----
Total $0.817 $0.8170 $--- $0.0232 $0.7938 $---
====== ======= ==== ======= ======= ====
CORPORATION DEDUCTIONS -- Under Federal tax law, the amounts reportable as
Qualifying Dividends are eligible for the dividends received deduction in
the year received as provided by Section 243 of the Internal Revenue Code.
The tax status of dividends paid will be reported to you on Form 1099-DIV
after the close of the applicable calendar year.
Shareholders are advised to consult with their tax adviser concerning the
tax treatment of dividends and distributions from the Fund.
<PAGE>
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 the 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, San Mateo, 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
Louise D. Rieke, Vice President
Kristen A. Richards, Vice President and Secretary
Daniel C. Schulte, Vice President
This report is submitted for the general information of the shareholders of
United High Income Fund, Inc. It is not authorized for distribution to
prospective investors in the Fund unless accompanied with or preceded by
the United High Income Fund, Inc. current prospectus.
To all 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 Tax-Managed Equity 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
(888)-WADDELL
(888)-923-3355
Our INTERNET address is:
http://www.waddell.com
NUR1009A(3-00)
printed on recycled paper
