United
Municipal
High Income
Fund, Inc.
SEMIANNUAL
REPORT
---------------------------------------
For the six months ended March 31, 2000
<PAGE>
This report is submitted for the general information of the shareholders of
United Municipal High Income Fund, Inc. It is not authorized for distribution
to prospective investors in the Fund unless accompanied with or preceded by the
United Municipal High Income Fund, Inc. current prospectus.
<PAGE>
PRESIDENT'S LETTER
MARCH 31, 2000
Dear Shareholder:
We are delighted to share with you this report on your Fund's operations for the
six months ended March 31, 2000.
This six-month period provided some remarkable gains, especially in many of the
so-called "new economy" stocks. The exceptional performance of these stocks was
evident in the Nasdaq Composite Index, which is made up primarily of technology-
oriented companies; and in the Russell 2000, which includes many small-cap
growth companies. The Nasdaq Composite recorded a remarkable gain of 67 percent
over the six months ended March 31, 2000. The Russell 2000 rose a very strong
27 percent over the period.
The performance of the two other major indices -- the Dow Jones Industrial
Average and the Standard & Poor's 500 -- did not match the Nasdaq or Russell,
reflecting a growing investor sentiment that the "old economy" companies that
they include could not provide the growth opportunity of their "new economy"
counterparts. Still, their performance, by historical standards, was very
strong. The S&P 500, the index most often used to track the performance of the
largest U.S. stocks, rose 18 percent for the six months ended March 31. The Dow
Jones Industrial Average, which includes 30 of the nation's largest companies,
rose 6 percent.
The across-the-board strength of the equity market and, especially, the enormous
gains in the Nasdaq over this period, left many investors wondering if this
upward trend was sustainable. The answer came just after the period's end, as a
sharp sell-off erased all of the market's gains of the first three months of
2000. The sell-off was most pronounced, by far, in the Nasdaq Composite.
Nonetheless, at May 1, 2000, the Nasdaq remained up 41 percent from its
September 30, 1999 level.
For the six months ended March 31, bonds remained depressed, the result of
several forces weighing on all fixed-income markets. The Federal Reserve began
raising short-term interest rates at the end of June 1999, and has now raised
interest rates five times. Tax-loss selling and investor preference for
equities over fixed-income securities placed additional pressure on bonds.
Looking ahead, the market is still trying to find direction. Currently,
economic news suggests that the economy remains sufficiently strong to perhaps
prompt additional interest rate hikes by the Federal Reserve. Other factors
that may affect the market during the coming year include the presidential
election, the high trade deficit and the implications of that deficit for the
value of the U.S. dollar abroad.
Overall, investors have been rewarded well in recent years. Those who continue
a structured and consistent investment program remain well positioned to take
advantage of opportunities, including those presented by the market's occasional
downdrafts. Just as we urge you not to become unduly concerned if the market
moves downward in the near term, we would urge that you not become too exuberant
when it moves higher in similarly short periods.
It is impossible to predict with certainty where markets will go next, but one
thing that remains certain is that a well-thought-out investment plan is
essential. Remember, a plan that is appropriate for you is appropriate
regardless of inevitable market changes. You have a partnership with your
Waddell & Reed financial advisor, and that partnership is built upon a
customized program based on your specific needs. Focusing on that plan, despite
market fluctuations, is your key to a sound financial future. Thank you for
your ongoing commitment and support.
Respectfully,
Robert L. Hechler
President
<PAGE>
SHAREHOLDER SUMMARY
--------------------------------------------------------------
United Municipal High Income Fund, Inc.
PORTFOLIO STRATEGY:
Ordinarily, at least 75% OBJECTIVE: To seek a high level of
medium and lower rated income which is not
Municipal Bonds subject to Federal income taxation.
(Income may be
Generally less than 20% subject to state and
Taxable Debt Securities local taxes. A portion may be subject
to Federal
No more than 25% in taxes, including Federal
industrial revenue alternative minimum tax.)
bonds of any one industry
STRATEGY: Invests primarily in tax-exempt
municipal bonds rated in the lower tier
of investment grade (BBB by Standard &
Poor's and Baa by Moody's Investors
Service, Inc.) or lower, including bonds
rated below investment grade, junk bonds
and lower-quality unrated bonds.
FOUNDED: 1986
SCHEDULED DIVIDEND FREQUENCY: MONTHLY
PERFORMANCE SUMMARY - Class A Shares
PER SHARE DATA
For the Six Months Ended March 31, 2000
---------------------------------------
DIVIDENDS PAID $0.15
=====
CAPITAL GAINS DISTRIBUTION $0.004
======
NET ASSET VALUE ON
3/31/00 $ 4.94
9/30/99 5.19
------
CHANGE PER SHARE $(0.25)
======
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 -8.75% -4.70%
5-year period ended 3-31-00 5.15% 6.06 %
10-year period ended 3-31-00 7.01% 7.48 %
*Performance data quoted represents past performance and is based on deduction
of 4.25% 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 Municipal High Income Fund, Inc. had net assets
totaling $438,021,127 invested in a diversified portfolio.
As a shareholder of United Municipal High Income Fund, Inc., for every $100 you
had invested on March 31, 2000, your Fund owned:
$24.61 Life Care/Nursing Center Revenue Bonds
18.19 Other Municipal Bonds
13.98 Industrial Development Revenue Bonds
9.87 Cash and Cash Equivalents
7.94 Hospital Revenue Bonds
7.82 Housing Revenue Bonds
4.39 Resource Recovery Bonds
4.25 Water and Sewer Revenue Bonds
3.76 Airport Revenue Bonds
3.66 Transportation Revenue Bonds
1.53 City General Obligation Bonds
2000 TAX YEAR TAXABLE EQUIVALENT YIELDS*
---------------------------------------------------------------------------
If your Taxable Income is:
Your Equivalent
Marginal Tax Free Yields
Joint Single Tax---------------------------
return Return Bracket Is 5% 6% 7% 8%
$ 0- 43,850 $ 0- 26,250 15% 5.88 7.06 8.24 9.41
$ 43,851-105,950 $ 26,251- 63,550 28% 6.94 8.33 9.72 11.11
$105,951-161,450 $ 63,551-132,600 31% 7.25 8.70 10.14 11.59
$161,451-288,350 $132,601-288,350 36% 7.81 9.38 10.94 12.50
$288,351 and above$288,351 and above 39.6% 8.28 9.93 11.59 13.25
*Table is for illustration only and does not represent the actual performance of
United Municipal High Income Fund, Inc.
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS
ALABAMA - 0.23%
The Marshall County Health Care Authority,
Hospital Revenue Refunding Bonds, Series
1992 (Guntersville-Arab Medical Center),
7.0%, 10-1-13 ......................... $ 1,000 $ 1,013,750
ALASKA - 0.46%
City of Seward, Alaska, Revenue Bonds, 1996
(Alaska Sealife Center Project),
7.65%, 10-1-16 ........................ 2,000 2,020,000
ARIZONA - 1.63%
The Industrial Development Authority of the
County of Gila, Arizona, Environmental Revenue
Refunding Bonds (ASARCO Incorporated Project),
Series 1998,
5.55%, 1-1-27 ......................... 4,750 3,740,625
Hayden-Winkelman Unified School District No.
41 of Gila County, Arizona, Capital
Appreciation Refunding Bonds, Series 1995,
0.0%, 7-1-10 .......................... 6,145 3,402,794
Total ................................. 7,143,419
CALIFORNIA - 2.15%
California Statewide Communities Development
Authority, Hospital Refunding Revenue Certificates
of Participation, Series 1993, Cedars-Sinai
Medical Center, Inverse Floating Rate
Security (INFLOS),
7.049%, 11-1-15 (A) ................... 4,000 3,680,000
Sierra Kings Health Care District Revenue
Bonds, Series 1996,
6.5%, 12-1-26 ......................... 2,000 1,635,000
Certificates of Participation (1991 Capital
Improvement Project), Bella Vista Water
District (California),
7.375%, 10-1-17 ....................... 1,500 1,565,625
Carson Redevelopment Agency (California),
Redevelopment Project Area No. 1,
Tax Allocation Bonds, Series 1993B,
6.0%, 10-1-16 ......................... 1,500 1,513,125
Kings County Waste Management Authority, Solid
Waste Revenue Bonds, Series 1994 (California),
7.2%, 10-1-14 ......................... 940 1,023,425
Total ................................. 9,417,175
See Notes to Schedule of Investments on page 23.
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
COLORADO - 3.04%
Sand Creek Metropolitan District, Adams
County and City and County of Denver,
Colorado, General Obligation Limited
Tax Bonds:
Series 1998,
6.625%, 12-1-17 ....................... $ 3,070 $ 2,858,937
Series 1997,
7.125%, 12-1-16 ....................... 2,000 1,967,500
City and County of Denver, Colorado,
Revenue Bonds (Jewish Community Centers
of Denver Project), Series 1994:
8.25%, 3-1-24 ......................... 2,390 2,443,775
7.875%, 3-1-19 ........................ 815 824,169
Colorado Health Facilities Authority,
Revenue Bonds (Steamboat Springs
Health Care Association Project),
Series 1999,
5.7%, 9-15-23 ......................... 3,000 2,388,750
Bachelor Gulch Metropolitan District,
Eagle County, Colorado, General Obligation
Bonds, Series 1996,
7.0%, 12-1-15 ......................... 1,095 1,118,269
Eaglebend Affordable Housing Corporation,
Multifamily Housing Project Revenue
Refunding Bonds, Series 1997A,
6.45%, 7-1-21 ......................... 1,000 968,750
Deer Creek Metropolitan District, Jefferson
County, Colorado, General Obligation Bonds,
Series 2000,
7.625%, 12-1-19 ....................... 750 756,563
Total ................................. 13,326,713
CONNECTICUT - 2.07%
Eastern Connecticut Resource Recovery
Authority, Solid Waste Revenue Bonds
(Wheelabrator Lisbon Project),
Series 1993A,
5.5%, 1-1-14 .......................... 5,250 4,652,812
Connecticut Development Authority, Pollution
Control Revenue Refunding Bonds (The
Connecticut Light and Power Company
Project - 1993B Series),
5.95%, 9-1-28 ......................... 2,500 2,243,750
State of Connecticut Health and
Education Facilities Authority,
Revenue Bonds, Edgehill Issue
Series A (Fixed Rate),
6.875%, 7-1-27 ........................ 2,300 2,173,500
Total ................................. 9,070,062
See Notes to Schedule of Investments on page 23.
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
DISTRICT OF COLUMBIA - 1.21%
Certificates of Participation, Series 1993,
District of Columbia,
7.3%, 1-1-13 .......................... $ 3,000 $ 3,176,250
District of Columbia Revenue Bonds
(National Public Radio Issue),
Series 1992,
7.625%, 1-1-13 ........................ 2,000 2,125,000
Total ................................. 5,301,250
FLORIDA - 4.99%
Sanford Airport Authority (Florida),
Industrial Development Revenue Bonds
(Central Florida Terminals, Inc. Project):
Series 1995A,
7.75%, 5-1-21 ......................... 4,000 4,195,000
Series 1995C,
7.5%, 5-1-21 .......................... 500 516,875
Lake County, Florida, Resource Recovery
Industrial Development Refunding Revenue
Bonds (NRG/Recovery Group Project),
Series 1993A,
5.95%, 10-1-13 ........................ 4,850 4,704,500
St. Johns County Industrial Development
Authority (Florida), Health Care Revenue
Bonds, Tax Exempt Series 1997A
(Bayview Project),
7.1%, 10-1-26 ......................... 4,000 3,920,000
Escambia County Health Facilities Authority,
Health Facilities Revenue Bonds (Azalea
Trace, Inc.), Series 1997,
6.0%, 1-1-15 .......................... 3,000 2,805,000
Sarasota County (Florida) Health Facilities
Authority, Health Care Facilities Revenue
Refunding Bonds, Series 1995 (Sarasota-
Manatee Jewish Housing Council, Inc.
Project),
6.7%, 7-1-25 .......................... 3,000 2,557,500
Dade County Industrial Development Authority,
Industrial Development Revenue Bonds,
Series 1995 (Miami Cerebral Palsy
Residential Services, Inc. Project),
8.0%, 6-1-22 .......................... 1,900 1,919,000
City of Fort Walton Beach, First Mortgage
Industrial Development Revenue Bonds,
Series 1986 (Ft. Walton Beach Ventures,
Inc. Project),
10.5%, 12-1-16 ........................ 1,210 1,237,540
Total ................................. 21,855,415
See Notes to Schedule of Investments on page 23.
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
GEORGIA - 1.70%
Coffee County Hospital Authority (Georgia),
Revenue Anticipation Certificates (Coffee
Regional Medical Center, Inc. Project),
Series 1997A,
6.75%, 12-1-16 ........................ $ 5,000 $ 4,650,000
Savannah Economic Development Authority,
First Mortgage Revenue Bonds (Senior Care
Group, Inc. - Shadowmoss Project),
Series 1999A,
6.75%, 7-1-29 ......................... 3,185 2,790,856
Total ................................. 7,440,856
HAWAII - 0.58%
Department of Transportation of the State
of Hawaii, Special Facility Revenue Bonds
(Continental Airlines, Inc.), Series 1997,
5.625%, 11-15-27 ...................... 3,000 2,557,500
ILLINOIS - 3.16%
Illinois Health Facilities Authority:
Revenue Refunding Bonds, Series
1995A (Fairview Obligated Group),
7.125%, 8-15-17 ....................... 3,525 3,525,000
Revenue Refunding Bonds, Series 1998
(Lifelink Corporation Obligated Group),
5.7%, 2-15-24 ......................... 1,750 1,400,000
Illinois Development Finance Authority
Revenue Bonds, Series 1993C (Catholic
Charities Housing Development
Corporation Project),
6.1%, 1-1-20 .......................... 2,500 2,384,375
Village of Lansing, Illinois, Landings
Redevelopment Project Area, Tax Increment
Refunding Revenue Bonds (Limited Sales
Tax Pledge), Series 1992,
7.0%, 12-1-08 ......................... 2,000 2,107,500
Village of Hodgkins, Cook County, Illinois,
Tax Increment Revenue Refunding Bonds,
Series 1995A,
7.625%, 12-1-13 ....................... 1,750 1,839,687
See Notes to Schedule of Investments on page 23.
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
ILLINOIS (Continued)
Village of Carol Stream, DuPage County, Illinois,
First Mortgage Revenue Refunding Bonds,
Series 1997 (Windsor Park Manor Project),
7.0%, 12-1-13 ......................... $ 1,500 $ 1,453,125
Village of Bourbonnais, Kankakee County,
Illinois, Sewerage Revenue Bonds,
Series 1993,
7.25%, 12-1-12 ........................ 1,085 1,135,181
Total ................................. 13,844,868
INDIANA - 1.63%
Indiana Health Facility Financing Authority:
Revenue Refunding Bonds, Series 1998
(Greenwood Village South Project),
5.625%, 5-15-28 ....................... 4,100 3,192,875
Hospital Revenue Bonds, Series 1992
(Fayette Memorial Hospital Project),
7.2%, 10-1-22 ......................... 1,000 993,750
City of Goshen, Indiana, Revenue Bonds,
Series 1998 (Greencroft Obligated Group),
5.75%, 8-15-28 ........................ 2,000 1,545,000
City of Carmel, Indiana, Retirement Rental
Housing Revenue Refunding Bonds (Beverly
Enterprises - Indiana, Inc. Project),
Series 1992,
8.75%, 12-1-08 ........................ 1,335 1,413,431
Total ................................. 7,145,056
IOWA - 3.12%
City of Creston, Iowa, Industrial Development
Revenue Bonds, Series 1997A (CF Processing,
L.C. Project),
8.0%, 8-1-26 .......................... 5,000 4,931,250
Iowa Finance Authority:
Community Provider Revenue Bonds (Boys and
Girls Home and Family Services, Inc. Project),
Series 1998,
6.25%, 12-1-28 ........................ 4,000 3,555,000
Community Rehabilitation Providers
Revenue Bonds (Lutheran Children's Home
Society - Bremwood Project), Series 1998,
5.8%, 12-1-24 ......................... 1,500 1,175,625
City of Cedar Rapids, Iowa, First Mortgage
Revenue Bonds, Series 1998-A (Cottage Grove
Place Project),
5.875%, 7-1-28 ........................ 5,000 4,025,000
Total ................................. 13,686,875
See Notes to Schedule of Investments on page 23.
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
KANSAS - 4.26%
Kansas Development Finance Authority:
Revenue Bonds (Village Shalom Obligated Group),
Series 1998 AA,
5.625%, 11-15-28 ...................... $ 5,000 $ 3,862,500
Community Provider Loan Program (Community
Living Opportunities, Inc.), Series
1992A Revenue Bonds,
8.875%, 9-1-11 ........................ 2,790 2,884,162
Multifamily Housing Revenue Bonds, Series 1998K
(Pioneer Olde Town Apartments Project),
6.5%, 10-1-30 ......................... 3,200 2,840,000
Certificates of Participation, Series 1998A,
Evidencing Proportionate Interests of the
Owners Thereof in Rental Payments to be
Made by the City of Spring Hill, Kansas, to
Spring Hill Golf Corporation,
6.5%, 1-15-28 ......................... 4,000 3,530,000
City of Olathe, Kansas, Senior Living Facility
Revenue Bonds (Aberdeen Village, Inc.),
Series 2000A,
8.0%, 5-15-30 ......................... 2,505 2,476,819
City of Prairie Village, Kansas, Revenue Bonds,
(Claridge Court Project), Series 1993A:
8.75%, 8-15-23 ........................ 1,000 1,075,000
8.5%, 8-15-04 ......................... 770 825,825
City of Wichita, Kansas, Health Care Facilities
Refunding and Improvement Revenue Bonds,
Series I, 1999 (Larksfield Place),
5.875%, 5-15-27 ....................... 850 697,000
Neosho County Community College, Neosho County,
Kansas, Student Union and Dormitory System
Refunding and Improvement Revenue Bonds,
Series 1999,
6.75%, 6-1-25 ......................... 500 476,875
Total ................................. 18,668,181
KENTUCKY - 0.81%
Kentucky Economic Development Finance Authority,
Health Care Facilities Revenue Bonds, Series
1998 (The Christian Church Homes of Kentucky,
Inc. Obligated Group),
5.5%, 11-15-30 ........................ 3,350 2,525,062
County of Perry, Kentucky, Solid Waste
Disposal Revenue Bonds (TJ International
Project), Series 1994,
7.0%, 6-1-24 .......................... 1,000 1,035,000
Total ................................. 3,560,062
See Notes to Schedule of Investments on page 23.
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
LOUISIANA - 1.27%
Louisiana Public Facilities Authority,
Revenue Bonds (Progressive Healthcare
Providers/Louisiana, Inc. Project), Series 1998:
6.375%, 10-1-20 ....................... $ 2,000 $ 1,797,500
6.375%, 10-1-28 ....................... 2,000 1,747,500
Board of Commissioners of the Port of New Orleans,
Industrial Development Revenue Refunding Bonds
(Continental Grain Company Project), Series 1993,
7.5%, 7-1-13 .......................... 2,000 1,995,000
Total ................................. 5,540,000
MAINE - 1.98%
Maine Health and Higher Educational Facilities
Authority, Revenue Bonds, Piper Shores
Issue, Series 1999A:
7.55%, 1-1-29 ......................... 5,000 4,837,500
7.5%, 1-1-19 .......................... 1,000 972,500
Maine Veterans' Homes, Revenue Bonds, 1995 Series,
7.75%, 10-1-20 ........................ 2,810 2,859,175
Total ................................. 8,669,175
MARYLAND - 0.76%
Maryland Economic Development Corporation,
Senior Lien Revenue Bonds (Rocky Gap
Golf Course and Hotel/Meeting Center
Project), Series 1996 A,
8.375%, 10-1-09 ....................... 3,250 3,327,187
MASSACHUSETTS - 6.09%
Massachusetts Industrial Finance Agency:
First Mortgage Revenue Bonds, Reeds
Landing Project, Series 1993,
8.625%, 10-1-23 ....................... 9,945 10,628,719
Resource Recovery Revenue Bonds (SEMASS
Project), Series 1991B,
9.25%, 7-1-15 ......................... 5,000 5,343,750
Resource Recovery Revenue Refunding Bonds
(Ogden Haverhill Project),
Series 1998A Bonds,
5.6%, 12-1-19 ......................... 2,500 2,146,875
Revenue Bonds, Beaver Country Day School
Issue, Series 1992, Subseries A,
8.1%, 3-1-08 .......................... 1,215 1,231,706
Massachusetts Municipal Wholesale Electric
Company, Power Supply System Revenue Bonds,
1993 Series A, Inverse Floating Rate
Security (INFLOS),
6.245%, 7-1-18 (A) .................... 8,000 7,330,000
Total ................................. 26,681,050
See Notes to Schedule of Investments on page 23.
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
MINNESOTA - 0.97%
City of Victoria, Minnesota, Private School
Facility Revenue Bonds (Holy Family Catholic
High School Project), Series 1999A,
5.85%, 9-1-24 ......................... $ 3,200 $ 2,896,000
City of Coon Rapids, Minnesota, Multifamily
Housing Revenue Bonds (Wedum Redwood
Terrace, LLC Project), Series 1999A,
6.375%, 11-1-29 ....................... 1,450 1,337,625
Total ................................. 4,233,625
MISSOURI - 4.32%
The Industrial Development Authority of the
City of Kansas City, Missouri:
Revenue Bonds (The Bishop Spencer Place,
Incorporated Project), Series 1994,
8.0%, 9-1-16 .......................... 2,965 3,065,069
Multifamily Housing Revenue Bonds (Village
Green Apartments Project), Series 1998,
6.25%, 4-1-30 ......................... 1,750 1,557,500
The Industrial Development Authority of the
City of Bridgeton, Missouri, Senior Housing
Revenue Bonds (The Sarah Community Project),
Series 1998,
5.9%, 5-1-28 .......................... 4,600 3,743,250
Missouri Housing Development Commission,
Multifamily Housing Revenue Bonds (The Mansion
Apartments Phase II Project), Series 1999,
6.17%, 10-1-32 ........................ 3,915 3,469,669
The City of Lake Saint Louis, Missouri,
Public Facilities Authority, Certificates
of Participation (Municipal Golf Course
Project), Series 1993,
7.55%, 12-1-14 ........................ 2,000 2,122,500
The Industrial Development Authority of
St. Joseph, Missouri, Multifamily Housing
Revenue Bonds (Hillcrest Village Apartments
Project), Series 1998A,
6.375%, 9-1-28 ........................ 2,250 1,999,687
The Industrial Development Authority of
the City of St. Louis, Missouri,
Industrial Revenue Refunding Bonds
(Kiel Center Multipurpose Arena Project),
Series 1992,
7.75%, 12-1-13 ........................ 1,500 1,576,875
See Notes to Schedule of Investments on page 23.
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
MISSOURI (Continued)
The Industrial Development Authority of
Callaway County, Missouri, Industrial
Development Revenue Bonds (A.P. Green
Refractories Co. Project), Series 1984,
8.6%, 11-1-14 ......................... $ 900 $ 936,918
Tax Increment Financing Commission of Kansas City,
Missouri, Tax Increment Refunding and Improvement
Revenue Bonds (Briarcliff West Project),
Series 1999,
6.0%, 8-1-21 .......................... 500 456,250
Total ................................. 18,927,718
NEVADA - 0.60%
Reno-Sparks Convention & Visitors Authority,
Nevada, Limited Obligation Medium-Term
Refunding Bonds, Series November 1, 1996,
6.0%, 11-1-06 ......................... 2,640 2,613,600
NEW HAMPSHIRE - 2.51%
State of New Hampshire, Turnpike System Revenue
Bonds, 1994 Series C, Linked Select Auction
Variable Rate Securities (SAVRS) and Residual
Interest Bonds (RIBS),
5.23%, 2-1-24 ......................... 11,200 10,094,000
Lisbon Regional School District, New
Hampshire, General Obligation Capital
Appreciation School Bonds,
0.0%, 2-1-13 .......................... 1,390 880,913
Total ................................. 10,974,913
NEW JERSEY - 2.02%
New Jersey Economic Development Authority:
First Mortgage Revenue Fixed Rate Bonds
(Winchester Gardens at Ward Homestead
Project), Series 1996A,
8.625%, 11-1-25 ....................... 3,000 3,191,250
Economic Development Bonds, Kapkowski
Road Landfill Reclamation Improvement
District Project (City of Elizabeth),
Series 1998A:
6.375%, 4-1-18 ........................ 2,385 2,325,375
0.0%, 4-1-11 .......................... 1,740 813,450
Senior Mortgage Revenue and Revenue Refunding
Bonds (Arbor Glen of Bridgewater Project),
Series 1998A,
6.0%, 5-15-28 ......................... 3,250 2,502,500
Total ................................. 8,832,575
See Notes to Schedule of Investments on page 23.
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
NEW YORK - 2.55%
New York City Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, Inverse
Rate Securities, Fiscal 1994 Series E,
Newly Linked Bonds,
5.21%, 6-15-12 ........................ $5,500 $ 5,527,500
Tompkins County Industrial Development
Agency, Life Care Community Revenue Bonds,
1994 (Kendal at Ithaca, Inc. Project),
7.875%, 6-1-24 ........................ 4,035 4,166,138
Suffolk County Industrial Development Agency,
Continuing Care Retirement Community, First
Mortgage Fixed Rate Revenue Bonds
(Jefferson's Ferry Project - Series 1999A),
7.2%, 11-1-19 ......................... 1,500 1,479,375
Total.................................. 11,173,013
NORTH CAROLINA - 1.01%
City of Charlotte, North Carolina, Charlotte/
Douglas International Airport, Special
Facility Refunding Revenue Bonds, Series 1998
(US Airways, Inc. Project),
5.6%, 7-1-27 .......................... 3,075 2,348,531
City of Durham, North Carolina, Multifamily
Housing Revenue Bonds (Ivy Commons Project),
Series 1997,
8.0%, 3-1-29 .......................... 2,205 2,061,675
Total ................................. 4,410,206
NORTH DAKOTA - 0.69%
City of Grand Forks, North Dakota, Senior
Housing Revenue Bonds (4000 Valley
Square Project), Series 1997:
6.25%, 12-1-34 ........................ 2,000 1,672,500
6.375%, 12-1-34 ....................... 1,500 1,370,625
Total ................................. 3,043,125
OHIO - 1.99%
Ohio Water Development Authority, State of
Ohio, Solid Waste Disposal Revenue Bonds
(Bay Shore Power Project), Tax-Exempt
Series 1998 A,
5.875%, 9-1-20 ........................ 6,000 4,995,000
City of Toledo, Ohio, Multifamily Housing
Mortgage Revenue Bonds, Series 1998-A
(Hillcrest Apartments Project),
6.125%, 12-1-29 ....................... 4,000 3,715,000
Total ................................. 8,710,000
See Notes to Schedule of Investments on page 23.
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
OKLAHOMA - 2.97%
Bixby Public Works Authority, Utility
System Revenue Bonds, Refunding
Series 1994,
7.25%, 11-1-19 ........................ $ 2,685 $ 2,812,537
The Clinton Public Works Authority,
Refunding and Improvement Revenue
Bonds, Series 1994,
6.25%, 1-1-19 ......................... 2,575 2,584,656
Oklahoma County Industrial Authority,
Industrial Development Revenue Bonds:
1986 Series A (Westlake Nursing Center
Project):
10.25%, 9-1-16 ........................ 905 916,865
10.125%, 9-1-06 ....................... 430 435,672
1986 Series B (Choctaw Nursing
Center Project):
10.25%, 9-1-16 (B) .................... 1,230 713,400
10.125%, 9-1-06 (B) ................... 525 304,500
The Broken Arrow Public Golf Authority
(Broken Arrow, Oklahoma), Recreational
Facilities Revenue Bonds, Series 1995,
7.25%, 8-1-20 ......................... 2,025 2,073,094
Trustees of the Oklahoma Ordnance Works
Authority, Industrial Development Revenue
Refunding Bonds (A.P. Green Industries,
Inc. Project), Series 1992,
8.5%, 5-1-08 .......................... 1,600 1,680,000
The Guthrie Public Works Authority
(Guthrie, Oklahoma), Utility System
Revenue Bonds, Series 1994A,
6.75%, 9-1-19 ......................... 1,415 1,475,138
Total ................................. 12,995,862
OREGON - 1.75%
Klamath Falls Intercommunity Hospital
Authority, Gross Revenue Bonds, Series
1994 (Merle West Medical Center Project),
7.1%, 9-1-24 .......................... 3,500 3,552,500
City of Klamath Falls, Oregon, Tax-Exempt
Senior Lien Electric Revenue Refunding
Bonds (Klamath Cogeneration Project),
Series 1999,
6.0%, 1-1-25 .......................... 3,000 2,617,500
Myrtle Creek Building Authority, Gross
Revenue Bonds, Series 1996A (Myrtle Creek
Golf Course Project),
6.27%, 6-1-21 (B) ..................... 3,000 1,500,000
Total ................................. 7,670,000
See Notes to Schedule of Investments on page 23.
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
PENNSYLVANIA - 6.01%
Monroeville Hospital Authority:
Hospital Revenue Bonds, Series of 1992
(Forbes Health System),
7.0%, 10-1-13 ......................... $ 3,630 $ 3,412,200
Hospital Revenue Refunding Bonds, Series of
1995 (Forbes Health System),
6.25%, 10-1-15 ........................ 2,110 1,978,125
Delaware County Authority (Pennsylvania),
First Mortgage Revenue Bonds, Series 1994,
(Riddle Village Project),
8.25%, 6-1-22 ......................... 4,000 4,620,000
Pennsylvania Higher Educational Facilities
Authority (Commonwealth of Pennsylvania),
Revenue Bonds (Allegheny General Hospital),
1991 Series A,
7.125%, 9-1-07 ........................ 3,670 3,527,788
Philadelphia Authority for Industrial
Development, Commercial Development Revenue
Refunding Bonds (Doubletree Guest Suites
Project), Series 1997A,
6.5%, 10-1-27.......................... 3,500 3,351,250
Clearfield Hospital Authority, Hospital
Revenue and Refunding Bonds (Clearfield
Hospital Project), Series 1994,
6.875%, 6-1-16 ........................ 3,350 3,270,437
Allentown Area Hospital Authority, Hospital
Revenue Bonds (Sacred Heart Hospital of
Allentown), Series A of 1993,
6.75%, 11-15-14 ....................... 2,865 2,793,375
Susquehanna Area Regional Airport Authority,
Airport Facilities Revenue Bonds (Aero
Harrisburg, LLC Project), Series 1999,
5.5%, 1-1-24 .......................... 2,000 1,705,000
South Wayne County Water and Sewer Authority
(Wayne County, Pennsylvania), Sewer Revenue
Bonds, Series of 1992,
8.2%, 4-15-13 ......................... 1,665 1,675,406
Total ................................. 26,333,581
RHODE ISLAND - 0.47%
City of Providence, Rhode Island, Special
Obligation Tax Increment Bonds, Series D,
6.65%, 6-1-16 ......................... 2,000 2,060,000
See Notes to Schedule of Investments on page 23.
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
SOUTH CAROLINA - 3.18%
South Carolina Jobs - Economic Development Authority,
Solid Waste Recycling Facilities Revenue Bonds
(Santee River Rubber Project):
Tax-Exempt Series 1998A,
8.0%, 12-1-14 ......................... $ 4,000 $ 3,710,000
Tax-Exempt Series 1998B,
9.0%, 12-1-11 ......................... 2,460 2,383,125
Connector 2000 Association, Inc., Toll Road
Revenue Bonds (Southern Connector Project,
Greenville, South Carolina):
Senior Capital Appreciation Bonds, Series 1998B:
0.0%, 1-1-35 .......................... 17,000 1,211,250
0.0%, 1-1-36 .......................... 11,000 728,750
Senior Current Interest Bonds, Series 1998A,
5.25%, 1-1-23 ......................... 2,000 1,515,000
McCormick County, South Carolina, Hospital
Facilities Revenue Refunding and Improvement
Bonds, Series 1997 (McCormick Health Care
Center Project),
7.0%, 3-1-18 .......................... 2,530 2,267,513
South Carolina State Housing, Finance
and Development Authority, Multifamily
Housing Mortgage Revenue Bonds (United
Dominion-Plum Chase), Series 1991,
8.5%, 10-1-21 ......................... 2,000 2,092,500
Total ................................. 13,908,138
SOUTH DAKOTA - 0.46%
South Dakota Health and Educational
Facilities Authority, Refunding Revenue
Bonds (Westhills Village Retirement
Community Issue), Series 1993,
7.25%, 9-1-13 ......................... 2,000 1,997,500
TENNESSEE - 0.78%
The Health and Educational Facilities
Board of the City of Crossville, Tennessee,
Hospital Revenue Improvement Bonds,
Series 1992 (Cumberland Medical Center),
6.75%, 11-1-12 ........................ 2,000 2,017,500
Upper Cumberland Gas Utility District
(of Cumberland County, Tennessee),
Gas System Revenue Bonds, Series 1996,
7.0%, 3-1-16 .......................... 1,400 1,414,000
Total ................................. 3,431,500
See Notes to Schedule of Investments on page 23.
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
TEXAS - 5.80%
AllianceAirport Authority, Inc., Special
Facilities Revenue Bonds:
Series 1991 (American Airlines, Inc. Project),
7.0%, 12-1-11 ......................... $ 4,700 $ 5,034,875
Series 1996 (Federal Express Corporation Project),
6.375%, 4-1-21 ........................ 4,000 3,925,000
Lubbock Health Facilities Development Corporation,
Fixed Rate First Mortgage Revenue Bonds
(Carillon, Inc. Project), Series 1999A,
6.5%, 7-1-19 .......................... 6,000 5,340,000
North Central Texas Health Facilities Development
Corporation, Retirement Facility Revenue Bonds
(Northwest Senior Housing Corporation -
Edgemere Project), Series 1999A, Fixed
Rate Bonds,
7.5%, 11-15-29 ........................ 3,000 2,857,500
Alvarado Industrial Development Corporation,
Industrial Development Revenue Bonds
(Rich-Mix Products of Texas, Inc. Project),
Series 1996,
7.75%, 3-1-10 ......................... 2,625 2,542,969
City of Houston, Housing Corporation
No. 1, First Lien Revenue Refunding
Bonds, Series 1996 (6800 Long Drive
Apartments - Section 8 New Construction
Program), Houston, Texas,
6.625%, 2-1-20 ........................ 2,305 2,181,106
City of Houston, Texas, Airport System
Special Facilities Revenue Bonds
(Continental Airlines, Inc. Terminal
Improvement Projects), Series 1997B,
6.125%, 7-15-17 ....................... 2,000 1,817,500
Gulf Coast Waste Disposal Authority, Waste
Disposal Revenue Bonds (Valero Energy
Corporation Project), Series 1999,
5.7%, 4-1-32 .......................... 2,000 1,690,000
Total ................................. 25,388,950
UTAH - 4.21%
Tooele County, Utah, Hazardous Waste
Treatment Revenue Bonds (Union Pacific
Corporation/USPCI, Inc. Project),
Series A,
5.7%, 11-1-26 ......................... 17,000 14,790,000
See Notes to Schedule of Investments on page 23.
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
UTAH (Continued)
Utah Housing Finance Agency, Revenue Bonds
(RHA Community Services of Utah, Inc.
Project), Series 1997A,
6.875%, 7-1-27 ........................ $ 2,440 $ 2,327,150
Carbon County, Utah, Solid Waste Disposal
Refunding Revenue Bonds (Sunnyside Cogeneration
Project and Sunnyside Generation, LLC):
Series 1999A,
7.1%, 8-15-23 ......................... 1,270 1,270,000
Series 1999B,
0.0%, 8-15-24 ......................... 390 64,350
Total ................................. 18,451,500
VIRGINIA - 2.97%
Peninsula Ports Authority of Virginia,
Port Facility Refunding Revenue Bonds
(Zeigler Coal Project), Series 1997 (Non-AMT),
6.9%, 5-2-22 .......................... 5,000 4,350,000
Norfolk Redevelopment and Housing Authority
Multifamily Rental Housing Facility Revenue
Bonds, Series 1996 (1016 Limited Partnership -
Sussex Apartments Project),
8.0%, 9-1-26 .......................... 3,495 3,333,356
Fairfax County Redevelopment and Housing
Authority, Multifamily Housing Revenue
Refunding Bonds (Burke Shire Commons
Apartments Project), Series 1996,
7.6%, 10-1-36 ......................... 3,000 2,835,000
Pocahontas Parkway Association, Route 895
Connector, Toll Road Revenue Bonds, Senior
Capital Appreciation Bonds, Series 1998B,
0.0%, 8-15-18 ......................... 9,000 2,497,500
Total ................................. 13,015,856
See Notes to Schedule of Investments on page 23.
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
WASHINGTON - 1.07%
Port of Anacortes, Washington, Revenue and
Refunding Bonds, 1998 Series A (AMT),
5.625%, 9-1-16 ........................ $ 3,790 $ 3,439,425
Housing Authority of the City of Seattle,
Low-Income Housing Assistance Revenue
Bonds, 1995 (GNMA Collateralized Mortgage
Loan - Kin On Project),
7.4%, 11-20-36 ........................ 1,142 1,267,620
Total ................................. 4,707,045
WEST VIRGINIA - 0.36%
Upshur County, West Virginia, Solid Waste
Disposal Revenue Bonds (TJ International
Project), Series 1995,
7.0%, 7-15-25 ......................... 1,500 1,554,375
WISCONSIN - 2.30%
Wisconsin Health and Educational Facilities
Authority, Revenue Bonds, Series 1995:
National Regency of New Berlin, Inc.
Project,
8.0%, 8-15-25 ......................... 4,480 4,664,800
Hess Memorial Hospital Association, Inc.
Project,
7.75%, 11-1-15 ........................ 3,400 3,553,000
City of Superior, Wisconsin, Water Supply
Facilities Revenue Refunding Bonds
(Superior Water, Light and Power Company
Project), Series 1996,
6.125%, 11-1-21 ....................... 1,910 1,859,863
Total ................................. 10,077,663
TOTAL MUNICIPAL BONDS - 90.13% $394,779,339
(Cost: $418,214,475)
TOTAL SHORT-TERM SECURITIES - 8.13% $ 35,618,734
(Cost: $35,618,734)
TOTAL INVESTMENT SECURITIES - 98.26% $430,398,073
(Cost: $453,833,209)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 1.74% 7,623,054
NET ASSETS - 100.00% $438,021,127
See Notes to Schedule of Investments on page 23.
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 2000
Notes to Schedule of Investments
(A) The interest rate is subject to change periodically and inversely based
upon prevailing market rates. The interest rate shown is the rate in
effect at March 31, 2000.
(B) Non-income producing as the issuer has either missed its most recent
interest payment or declared bankruptcy.
See Note 1 to financial statements for security valuation and other significant
accounting policies concerning investments.
See Note 3 to financial statements for cost and unrealized appreciation and
depreciation of investments owned for Federal income tax purposes.
<PAGE>
UNITED MUNICIPAL HIGH INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2000
(In Thousands, Except for Per Share and Share Amounts)
Assets
Investment securities - at value
(Notes 1 and 3) ................................. $430,398
Cash ............................................. 210
Receivables:
Interest ........................................ 7,724
Investment securities sold....................... 2,667
Fund shares sold................................. 86
Prepaid insurance premium ........................ 9
Other ............................................ 55
--------
Total assets .................................. 441,149
--------
Liabilities
Payable to Fund shareholders ..................... 2,688
Dividends payable ................................ 287
Accrued service fee (Note 2) ..................... 87
Accrued transfer agency and dividend
disbursing (Note 2) ............................. 51
Accrued management fee (Note 2) .................. 6
Accrued accounting services fee (Note 2) ......... 5
Accrued distribution fee (Note 2) ................ 4
--------
Total liabilities ............................. 3,128
--------
Total net assets ............................. $438,021
========
Net Assets
$1.00 par value capital stock
Capital stock ................................... $ 88,755
Additional paid-in capital ...................... 375,285
Accumulated undistributed loss:
Accumulated undistributed net realized
loss on investments ........................... (2,471)
Distribution in excess of net realized
loss on investment transactions ............... (113)
Net unrealized depreciation in value of
investments ................................... (23,435)
--------
Net assets applicable to outstanding
units of capital ............................. $438,021
========
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $4.94
Class B ........................................... $4.94
Class C ........................................... $4.94
Class Y .......................................... $4.94
Capital shares outstanding
Class A .......................................... 88,551,885
Class B ........................................... 135,456
Class C ........................................... 67,037
Class Y .......................................... 390
Capital shares authorized .......................... 300,000,000
See notes to financial statements.
<PAGE>
UNITED MUNICIPAL HIGH INCOME FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended MARCH 31, 2000
(In Thousands)
Investment Income
Interest and amortization (Note 1B) .............. $ 16,413
--------
Expenses (Note 2):
Investment management fee ....................... 1,234
Service fee:
Class A ........................................ 541
Class B ........................................ 1
Class C ........................................ -*
Transfer agency and dividend disbursing:
Class A ........................................ 255
Class B ........................................ 1
Class C ........................................ -*
Accounting services fee ......................... 30
Distribution fee:
Class A ........................................ 18
Class B ........................................ 1
Class C ........................................ 1
Legal fees....................................... 18
Custodian fees .................................. 11
Audit fees ...................................... 10
Other ........................................... 107
--------
Total expenses ................................ 2,228
--------
Net investment income ........................ 14,185
--------
Realized and Unrealized Loss on Investments
(Notes 1 and 3)
Realized net loss on investments ................. (2,229)
Unrealized depreciation in value of
investments during the period ................... (22,055)
--------
Net loss on investments ......................... (24,284)
--------
Net decrease in net assets resulting
from operations .............................. $(10,099)
========
*Not shown due to rounding.
See notes to financial statements.
<PAGE>
UNITED MUNICIPAL HIGH INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
(In Thousands)
For the six For the fiscal
months ended year ended
March 31, September 30,
2000 1999
Decrease in Net Assets ------------ --------------
Operations:
Net investment income ............... $14,185 $29,398
Realized net gain (loss) on
investments ....................... (2,229) 721
Unrealized depreciation ............. (22,055) (37,310)
-------- --------
Net decrease in net assets
resulting from operations ........ (10,099) (7,191)
-------- --------
Distributions to shareholders (Note 1D):*
From net investment income:
Class A ........................... (14,170) (29,398)
Class B ........................... (8) ---
Class C ........................... (7) ---
Class Y ........................... ---** ---**
From realized net gains on investment
transactions:
Class A ........................... (222) (12,257)
Class B ........................... (1) ---
Class C ........................... ---** ---
Class Y ........................... ---** ---**
In excess of realized capital gains:
Class A ........................... (113) (19)
Class B ........................... ---** ---
Class C ........................... ---** ---
Class Y ........................... ---** ---**
-------- --------
(14,521) (41,674)
-------- --------
Capital share transactions
(Note 5) ............................ (47,226) 36,537
-------- --------
Total decrease ................. (71,846) (12,328)
Net Assets
Beginning of period .................. 509,867 522,195
-------- --------
End of period ........................ 438,021 $509,867
======== ========
Undistributed net investment income . $--- $---
==== ====
*See "Financial Highlights" on pages 27 - 30.
**Not shown due to rounding.
See notes to financial statements.
<PAGE>
UNITED MUNICIPAL HIGH INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
Class A Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the
six For the fiscal year ended
months September 30,
ended ------------------------------------
3/31/00 1999 1998 1997 1996 1995
------- ------- ------ ------ ------ ------
Net asset value,
beginning of
period ........... $5.19 $5.69 $5.55 $5.31 $5.27 $5.12
----- ----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income........... 0.15 0.31 0.32 0.34 0.34 0.35
Net realized and
unrealized gain
(loss) on
investments ..... (0.25) (0.37) 0.21 0.25 0.04 0.17
----- ----- ----- ----- ----- -----
Total from investment
operations ....... (0.10) (0.06) 0.53 0.59 0.38 0.52
----- ----- ----- ----- ----- -----
Less distributions:
Declared from net
investment income (0.15) (0.31) (0.32) (0.34) (0.34) (0.35)
From capital gains (0.00)* (0.13) (0.07) (0.01) (0.00) (0.00)
In excess of capital
gains ........... (0.00)* (0.00)*(0.00) (0.00) (0.00) (0.02)
----- ----- ----- ----- ----- -----
Total distributions. (0.15) (0.44) (0.39) (0.35) (0.34) (0.37)
----- ----- ----- ----- ----- -----
Net asset value, end
of period ........ $4.94 $5.19 $5.69 $5.55 $5.31 $5.27
===== ===== ===== ===== ===== =====
Total return** ..... -1.82% -1.22% 9.88% 11.45% 7.40% 10.63%
Net assets, end
of period (in
millions) ......... $437 $510 $522 $474 $400 $383
Ratio of expenses to
average net
assets ........... 0.95%*** 0.87% 0.82% 0.78% 0.81% 0.76%
Ratio of net investment
income to average
net assets ....... 6.03%***5.59% 5.72% 6.19% 6.41% 6.75%
Portfolio turnover
rate ............. 10.60% 26.83% 35.16% 19.47% 26.91% 19.07%
*Not shown due to rounding.
**Total return calculated without taking into account the sales load
deducted on an initial purchase.
***Annualized.
See notes to financial statements.
<PAGE>
UNITED MUNICIPAL HIGH INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
Class B Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period
from
10/5/99*
through
3/31/00
-------
Net asset value,
beginning of period $5.16
----
Income from investment
operations:
Net investment income 0.12
Net realized and
unrealized loss
on investments .. (0.22)
----
Total from investment
operations ....... (0.10)
----
Less distributions:
Declared from net
investment income (0.12)
From capital gains (0.00)**
In excess of capital
gains ........... (0.00)**
----
Total distributions (0.12)
----
Net asset value,
end of period .... $4.94
====
Total return ....... -1.88%
Net assets, end of
period (in millions) $1
Ratio of expenses to
average net assets 1.96%***
Ratio of net investment
income to average
net assets ....... 5.10%***
Portfolio turnover
rate ............. 10.60%****
*Commencement of operations.
**Not shown due to rounding.
***Annualized.
****For the six months ended March 31, 2000.
See notes to financial statements.
<PAGE>
UNITED MUNICIPAL HIGH INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
Class C Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period
from
10/8/99*
through
3/31/00
-------
Net asset value,
beginning of period $5.16
----
Income from investment
operations:
Net investment income 0.12
Net realized and
unrealized loss
on investments .. (0.22)
----
Total from investment
operations ....... (0.10)
----
Less distributions:
Declared from net
investment income (0.12)
From capital gains (0.00)**
In excess of capital
gains ........... (0.00)**
----
Total distributions (0.12)
----
Net asset value,
end of period .... $4.94
====
Total return ....... -1.91%
Net assets, end of
period (000 omitted) $331
Ratio of expenses to
average net assets 1.87%***
Ratio of net investment
income to average
net assets ....... 5.16%***
Portfolio turnover
rate ............. 10.60%****
*Commencement of operations.
**Not shown due to rounding.
***Annualized.
****For the six months ended March 31, 2000.
See notes to financial statements.
<PAGE>
UNITED MUNICIPAL HIGH INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
Class Y Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the For the
For the period period
six from from
months 12/30/98* 7/1/98*
ended to to
3/31/00 9/30/99 8/25/98
------- ------- -------
Net asset value,
beginning of
period ........... $5.19 $5.65 $5.64
----- ----- -----
Income from investment
operations:
Net investment
income........... 0.15 0.24 0.05
Net realized and
unrealized gain (loss)
on investments .. (0.25) (0.33) 0.01
----- ----- -----
Total from investment
operations ....... (0.10) (0.09) 0.06
----- ----- -----
Less distributions:
Declared from net
investment income (0.15) (0.24) (0.05)
From capital gains (0.00)** (0.13) (0.00)
In excess of capital
gains ........... (0.00)** (0.00)** (0.00)
----- ----- -----
Total distributions (0.15) (0.37) (0.05)
----- ----- -----
Net asset value, end
of period ........ $4.94 $5.19 $5.65
===== ===== =====
Total return ....... -1.60% -1.53% 1.07%
Net assets, end
of period (000
omitted) .......... $2 $2 $0
Ratio of expenses to
average net
assets ........... 0.94%*** 0.80%*** 0.61%***
Ratio of net investment
income to average
net assets ....... 5.94%*** 5.68%*** 5.99%***
Portfolio turnover
rate ............. 10.60% 26.83%**** 35.16%***
*Class Y shares commenced operations on July 1, 1998 and continued operations
until August 25, 1998 when all outstanding Class Y shares were redeemed at
the ending net asset value shown in the table. Operations recommenced on
December 30, 1998.
**Not shown due to rounding.
***Annualized.
****For the fiscal year ended September 30, 1999.
See notes to financial statements.
<PAGE>
UNITED MUNICIPAL HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 1 -- Significant Accounting Policies
United Municipal 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 seek to provide a high level
of income which is not subject to Federal income tax. 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 -- Municipal bonds and the taxable obligations in the
Fund's investment portfolio are not listed or traded on any securities
exchange. Therefore, municipal bonds are valued using a pricing system
provided by a pricing service or dealer in bonds. Short-term debt
securities, whether taxable or nontaxable, 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) and premiums on the purchase of bonds are amortized for both
financial and tax reporting purposes over the remaining lives of the bonds.
Interest income is recorded on the accrual basis. See Note 3 -- Investment
Security Transactions.
C. Federal income taxes -- The Fund intends to distribute all of its net
investment income and capital gains to its shareholders and otherwise
qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code. The Fund intends to pay distributions as required
to avoid imposition of excise tax. Accordingly, provision has not been
made for Federal income taxes. In addition, the Fund intends to meet
requirements of the Internal Revenue Code which will permit it to pay
dividends from net investment income, substantially all of which will be
exempt from Federal income tax. See Note 4 -- Federal Income Tax Matters.
D. Dividends and distributions -- All of the Fund's net investment income is
declared and recorded by the Fund as dividends payable on each day to
shareholders of record as of the close of the preceding business day. 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, net operating losses and expiring
capital loss carryovers.
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 rate of 0.525% of net assets up to $500
million, 0.50% of net assets over $500 million and up to $1 billion, 0.45% of
net assets over $1 billion and up to $1.5 billion, and 0.40% 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
$160,235. With respect to Class A, Class B and Class C shares, W&R paid sales
commissions of $111,885 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 $39 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 $8,561, 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 and short-
term securities, aggregated $46,894,270, while proceeds from maturities and
sales aggregated $104,903,204. Purchases of short-term securities aggregated
$527,030,041, while proceeds from maturities and sales aggregated $517,472,619.
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 $453,946,016, resulting in net unrealized depreciation of $23,547,943,
of which $6,238,798 related to appreciated securities and $29,786,741 related to
depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $720,801 during its fiscal year ended September 30, 1999, which has been
distributed to the Fund's shareholders.
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 For the
six months fiscal year
ended ended
March 31, September 30,
2000 1999
------------ ------------
Shares issued from sale
of shares:
Class A ............ 4,392 12,672
Class B ............. 151 ---
Class C ............. 81 ---
Class Y ............ ---* ---*
Shares issued from
reinvestment of dividends
and/or capital gains
distribution:
Class A ............ 2,296 6,356
Class B ............. 1 ---
Class C ............. 1 ---
Class Y ............ ---* ---*
Shares redeemed:
Class A ............ (16,441) (12,423)
Class B ............. (17) ---
Class C ............. (15) ---
Class Y ............ --- ---
------ ------
Increase (decrease) in
outstanding capital
shares .............. (9,551) 6,605
====== ======
Value issued from sale
of shares:
Class A ............ $21,753 $69,498
Class B ............. 746 ---
Class C ............. 409 ---
Class Y ............ ---* 2
Value issued from
reinvestment of dividends
and/or capital gains
distribution:
Class A ............ 11,373 34,776
Class B ............. 7 ---
Class C ............. 7 ---
Class Y ............ ---* ---*
Value redeemed:
Class A ............ (81,362) (67,739)
Class B ............. (82) ---
Class C ............. (77) ---
Class Y ............ --- ---
-------- -------
Increase (decrease) in
outstanding capital $(47,226) $36,537
======== =======
*Not shown due to rounding.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
United Municipal High Income Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of United Municipal High Income Fund, Inc. (the
"Fund") as of March 31, 2000, 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 September 30, 1999, and
the financial highlights for the six-month period ended March 31, 2000, and for
each of the five fiscal years in the period ended September 30, 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 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.
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
Municipal High Income Fund, Inc. as of March 31, 2000, 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 September 30,
1999, and the financial highlights for the six-month period ended March 31,
2000, and for each of the five fiscal years in the period ended September 30,
1999, in conformity with accounting principles generally accepted in the United
States of America.
Deloitte & Touche LLP
Kansas City, Missouri
May 5, 2000
<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
Kristen A. Richards, Vice President and Secretary
Daniel C. Schulte, Vice President
<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
NUR1014SA(3-00)
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