United
High Income
Fund II, Inc.
SEMIANNUAL
REPORT
---------------------------------------
For the six months ended March 31, 1994
<PAGE>
This report is submitted for the general information of the shareholders of
United High Income Fund II, Inc. It is not authorized for distribution to
prospective investors in the Fund unless accompanied with or preceded by the
United High Income Fund II, Inc. current prospectus.
<PAGE>
PRESIDENT'S LETTER
- -----------------------------------------------------------------
MARCH 31, 1994
Dear Shareholder:
This report covers the investment performance of your Fund for the six
months ended March 31, 1994.
During the past six months, bond and equity markets have experienced
considerable fluctuations due to increases in interest rates and other economic
developments. These markets will continue to react to events that affect the
economy such as actions on health care proposals and many other issues.
We are hoping to see improved economies throughout the world over the next
year. We believe this would contribute to a favorable outlook for U.S. and
foreign securities.
Regardless of the rise and decline of markets, we will continue to use the
strengths and abilities we have developed over the past 55 years. These
include:
Professional portfolio management-- As investment professionals, we pay
careful attention to economic trends; we understand the business of each company
in which we invest; and we have the ability to judge the management of such
companies as they adapt to changes in the industries and markets they serve.
A widely diversified approach-- Our extensive experience managing a variety
of securities allows us to see the whole "investment pie." We use this broad
view to consider every investment opportunity available that meets your Fund's
objectives, and to take advantage of these opportunities in an effort to achieve
maximum return.
These are just two of the many attributes that we bring to the table when
making investment decisions. We believe your Fund is designed appropriately to
meet its investment objectives, and can reward the long-term investor. We never
forget that we are managing your money.
The following is a comprehensive look at your Fund's recent performance.
We believe you will find that the information continues to reflect our aim of
meeting the stated objectives of your Fund.
Respectfully,
Keith A. Tucker
President
<PAGE>
SHAREHOLDER SUMMARY
- --------------------------------------------------------------
United High Income Fund II, Inc.
PORTFOLIO STRATEGY:
Invests generally in High OBJECTIVE: High level of current
Yield Fixed Income income with secondary
Securities objective of capital growth when
consistent
Maximum 20% Common Stocks with the primary objective.
STRATEGY: Invests generally in debt securities in
lower rating categories as classified by
recognized rating agencies; may also
invest up to 20% in common stocks.
FOUNDED: 1986
DIVIDENDS: PAID MONTHLY
<PAGE>
PERFORMANCE SUMMARY
PER SHARE DATA
For the Six Months Ended March 31, 1994
- ---------------------------------------
DIVIDENDS PAID $0.17
=====
NET ASSET VALUE ON
3/31/94 $ 4.15
9/30/93 4.21
------
CHANGE PER SHARE $(0.06)
======
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 3-31-94 2.63% 8.89%
5-year period ended 3-31-94 7.94% 9.22%
Period from 7-1-86*
through 3-31-94 7.94% 8.77%
Initial public offering of the Fund.
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, 1994, United High Income Fund II, Inc. had net assets totaling
$380,154,016 invested in a diversified portfolio of:
92.00% Corporate Debt Securities
4.58% Cash and Cash Equivalents
3.42% Common and Preferred Stocks and Warrants
As a shareholder in United High Income Fund II, Inc., for every $100 you had
invested on March 31, 1994, your Fund owned:
$46.16 Consumer Bonds
26.50 Basic Industries Bonds
11.33 Technological Bonds
5.30 Energy and Energy-Related Bonds
4.58 Cash and Cash Equivalents
3.42 Common and Preferred Stocks and Warrants
1.98 Financial Bonds
0.73 Public Utilities Bonds
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1994
Shares Value
COMMON AND PREFERRED STOCKS
AND WARRANTS
Banks and Savings and Loans - 0.13%
California Federal Bank, F.S.B.,
Preferred ............................. 5,000 $ 505,000
Reliance Group Holdings, Inc., Warrants* 1,061 2,122
WestFed Holdings, Inc., Preferred ...... 14,243 14
WestFed Holdings, Inc., Series B* ...... 7,610 8
Total ................................. 507,144
Building - 1.48%
NVR L.P.* .............................. 410,563 3,079,223
NVR L.P., Warrants* ................... 34,286 111,430
National Health Investors, Preferred,
Convertible ........................... 30,000 750,000
Triangle Pacific Corp.* ................ 127,442 1,696,508
Total ................................. 5,637,161
Hospital Management - 0.26%
LTC Properties, Inc. ................... 75,000 993,750
Leisure Time - 0.39%
FLAGSTAR COMPANIES, INC.* .............. 17,200 167,700
Infinity Broadcasting Corporation* ..... 45,000 1,147,500
Santa Fe Hotel, Inc., Warrants* ........ 250 178,750
Total ................................. 1,493,950
Packaging and Containers - 0.27%
Envirodyne Industries, Inc. ............ 136,334 1,013,916
Paper - 0.12%
Stone Container Corporation* ........... 35,000 463,750
Public Utilities - Electric - 0.39%
Consolidated Hydro, Inc., Preferred* ... 3,000 1,350,000
Consolidated Hydro, Inc., Warrants* (A) 5,400 108,000
Total ................................. 1,458,000
Publishing and Advertising - 0.37%
Advanstar Communications Inc.* ......... 30,000 960,000
K-III Communications Corporation,
Series B, Preferred ................... 4,469 444,666
Total ................................. 1,404,666
See Notes to Schedule of Investments on page 15.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1994
Shares Value
COMMON AND PREFERRED STOCKS
AND WARRANTS (Continued)
Miscellaneous - 0.01%
American Marketing Industries
Holdings, Inc., Preferred (A)* ........ 2,275 $ 27,300
PST Holdings, Inc., Warrants* ........... 20,000 20,000
Total ................................. 47,300
TOTAL COMMON AND PREFERRED STOCKS
AND WARRANTS - 3.42% $ 13,019,637
(Cost: $20,291,603)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Airlines - 1.67%
GP Group, Inc.,
8.75%, 12-15-98 ....................... $ 3,500 2,800,000
NWA, Inc.,
8.625%, 8-1-96 ........................ 4,000 3,560,000
Total ................................. 6,360,000
Automotive - 1.64%
Burlington Motors,
11.5%, 11-1-2003 ...................... 2,500 2,412,500
Lear Siegler Seating Corp.,
8.25%, 2-1-2002 ....................... 3,000 2,775,000
Motor Wheel,
11.5%, 3-1-2000 ....................... 1,000 1,070,000
Total ................................. 6,257,500
Banks and Savings and Loans - 0.65%
Riggs National Corporation,
8.5%, 2-1-2006 ........................ 2,500 2,456,250
Beverages - 1.10%
Dr Pepper Bottling Company of Texas,
10.25%, 2-15-2000 ..................... 500 520,000
Dr Pepper Bottling Holdings, Inc.,
0.0%, 2-15-2003 (B) ................... 1,000 680,000
ROYAL CROWN CORPORATION,
9.75%, 8-1-2000 ....................... 3,000 2,970,000
Total ................................. 4,170,000
See Notes to Schedule of Investments on page 15.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Biotechnology and Medical Services - 1.67%
Abbey Healthcare Group Incorporated,
9.5%, 11-1-2002 ....................... $ 2,000 $ 1,910,000
Quorum Health Group, Inc.,
11.875%, 12-15-2002 ................... 4,000 4,440,000
Total ................................. 6,350,000
Building - 12.29%
American Standard Inc.:
9.875%, 6-1-2001 ...................... 2,500 2,400,000
14.25%, 6-30-2003 ..................... 800 824,000
11.375%, 5-15-2004 .................... 500 527,500
0.0%, 6-1-2005 (B) .................... 6,500 3,932,500
9.25%, 12-1-2016 ...................... 5,000 4,900,000
Beazer Homes USA, Inc.,
9.0%, 3-1-2004 ........................ 3,000 2,730,000
Del Webb Corporation:
9.75%, 3-1-2003 ....................... 3,000 2,895,000
9.0%, 2-15-2006 ....................... 2,000 1,905,000
Eagle Industries, Inc.,
0.0%, 7-15-2003 (B) ................... 4,000 2,480,000
Hillsborough Company:
16.625%, 1-1-95 (C) ................... 5,863 5,569,685
17.0%, 1-1-96 (C) ..................... 11,000 9,570,000
NVR L.P.,
11.0%, 4-15-2003 ...................... 1,500 1,560,000
Nortek, Inc.,
9.875%, 3-1-2004 ...................... 2,000 1,860,000
Toll Brothers, Inc.,
9.5%, 3-15-2003 ....................... 1,500 1,477,500
Triangle Pacific Corp.,
10.5%, 8-1-2003 ....................... 4,000 4,080,000
Total ................................. 46,711,185
Chemicals Major - 1.97%
UCC Investors Holding, Inc.:
10.5%, 5-1-2002 ....................... 5,500 5,830,000
0.0%, 5-1-2005 (B) .................... 2,500 1,650,000
Total ................................. 7,480,000
Chemicals Specialty and Miscellaneous
Technology - 2.30%
Allied Waste Industries, Inc.,
10.75%, 2-1-2004 ...................... 1,000 1,015,000
Carlisle Plastics, Inc.,
10.25%, 6-15-97 ....................... 2,000 2,060,000
See Notes to Schedule of Investments on page 15.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Chemicals Specialty and Miscellaneous
Technology (Continued)
Envirotest Systems Corp.,
9.125%, 3-15-2001 ..................... $ 1,000 $ 975,000
HARRIS CHEMICAL NORTH AMERICA, INC.,
0.0%, 7-15-2001 (B) ................... 2,500 2,212,500
OSi Specialties, Inc.,
9.25%, 10-1-2003 ...................... 2,500 2,500,000
Total ................................. 8,762,500
Computers and Office Equipment - 0.75%
Corporate Express, Inc.,
9.625%, 3-15-2004 (A) ................. 2,000 1,885,000
Mail-Well Corporation,
10.5%, 2-15-2004 (A) .................. 1,000 955,000
Total ................................. 2,840,000
Consumer Electronics and Appliances - 1.54%
Levitz Furniture Corporation,
9.625%, 7-15-2003 ..................... 4,000 3,900,000
Sealy Corporation,
9.5%, 5-1-2003 ........................ 2,000 1,940,000
Total ................................. 5,840,000
Domestic Oil - 1.08%
Clark R&M Holdings, Inc.,
0.0%, 2-15-2000 ...................... 6,000 3,390,000
Triton Energy Corporation,
0.0%, 12-15-2000 (B) .................. 1,000 720,000
Total ................................. 4,110,000
Drugs and Hospital Supply - 1.24%
Alco Health Distribution Corporation,
11.25%, 7-15-2005 ..................... 1,579 1,628,758
General Medical Corporation,
10.875%, 8-15-2003 .................... 3,000 3,090,000
Total ................................. 4,718,758
Electronics - 0.78%
Essex Group, Inc.,
10.0%, 5-1-2003 ....................... 2,000 1,960,000
LSI Logic Corporation, Convertible,
5.5%, 3-15-2001 (A) ................... 1,000 1,000,000
Total ................................. 2,960,000
Financial - 0.26%
American Express Company,
6.25%, 10-15-96 ....................... 919 996,871
See Notes to Schedule of Investments on page 15.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Food and Related - 1.36%
Specialty Foods Corporation:
10.25%, 8-15-2001 .................... $ 2,000 $ 2,080,000
11.25%, 8-15-2003 .................... 3,000 3,075,000
Total ................................. 5,155,000
Hospital Management - 2.34%
Hallmark Healthcare Corporation,
10.625%, 11-15-2003 ................... 1,250 1,250,000
Hillhaven Corporation (The),
10.125%, 9-1-2001 ..................... 3,000 3,045,000
Multicare Companies, Inc. (The),
12.5%, 7-1-2002 ....................... 415 485,550
Pathmark:
9.625%, 5-1-2003 ...................... 3,000 2,850,000
0.0%, 11-1-2003 (B) ................... 2,500 1,275,000
Total ................................. 8,905,550
Household Products - 1.17%
Exide Corporation:
10.75%, 12-15-2002 .................... 3,000 3,060,000
0.0%, 12-15-2004 (B) .................. 2,000 1,380,000
Total ................................. 4,440,000
Insurance - 1.07%
American Annuity Group, Inc.:
9.5%, 8-15-2001 ....................... 2,500 2,525,000
11.125%, 2-1-2003 ..................... 1,500 1,560,000
Total ................................. 4,085,000
Leisure Time - 15.36%
Act III Broadcasting, Inc.,
9.625%, 12-15-2003 .................... 2,000 1,910,000
Cablevision Industries Corporation:
10.75%, 1-30-2002 ..................... 5,000 5,050,000
9.25%, 4-1-2008 ...................... 2,000 1,820,000
California Hotel Finance Corporation,
11.0%, 12-1-2002 ...................... 4,000 4,200,000
Comcast Corporation:
0.0%, 3-5-2000 ........................ 3,700 2,035,000
9.5%, 1-15-2008 ....................... 4,000 3,940,000
Continental Cablevision, Inc.:
10.625%, 6-15-2002 .................... 1,000 1,050,000
8.875%, 9-15-2005 ..................... 2,000 1,920,000
11.0%, 6-1-2007 ....................... 1,200 1,296,000
Embassy Suites, Inc.,
10.875%, 4-15-2002 .................... 2,000 2,220,000
See Notes to Schedule of Investments on page 15.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Leisure Time (Continued)
Family Restaurants, Inc.:
9.75%, 2-1-2002 ....................... $ 2,500 $ 2,312,500
0.0%, 2-1-2004 (B) .................... 1,500 1,020,000
FLAGSTAR COMPANIES, INC.:
10.75%, 9-15-2001 ..................... 5,000 4,950,000
11.25%, 11-1-2004 ..................... 2,000 1,970,000
Infinity Broadcasting Corporation,
10.375%, 3-15-2002 .................... 5,000 5,150,000
La Quinta Motor Inns, Inc.,
9.25%, 5-15-2003 ...................... 2,000 1,920,000
NewCity Communications, Inc.,
11.375%, 11-1-2003 .................... 1,000 1,050,000
Rogers Communications Incorporated,
10.875%, 4-15-2004 .................... 4,000 4,200,000
Santa Fe Hotel Inc.,
11.0%, 12-15-2000 ..................... 2,500 2,462,500
Showboat, Inc.,
9.25%, 5-1-2008 ....................... 4,000 3,680,000
Sinclair Broadcast Group, Inc.,
10.0%, 12-15-2003 ..................... 1,250 1,309,375
Treasure Island Finance Corp.,
9.875%, 10-1-2000 ..................... 1,000 1,060,000
Trump Plaza Funding, Inc.,
10.875%, 6-15-2001 .................... 2,000 1,860,000
Total ................................. 58,385,375
Machinery - 0.53%
Fairfield Manufacturing Company, Inc.,
11.375%, 7-1-2001 ..................... 2,000 2,020,000
Multi-Industry - 1.17%
Federal Industries Ltd.,
10.25%, 6-15-2000 ..................... 2,000 1,990,000
Jordan Industries, Inc.,
10.375%, 8-1-2003 ..................... 2,000 1,980,000
Mark IV Industries, Inc.,
8.75%, 4-1-2003 ....................... 500 480,000
Total ................................. 4,450,000
See Notes to Schedule of Investments on page 15.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Oil Services - 1.57%
Falcon Drilling, Inc.,
9.75%, 1-15-2001 (A) .................. $ 1,500 $ 1,470,000
Noble Drilling Corporation,
9.25%, 10-1-2003 ...................... 2,500 2,375,000
Wainoco Oil Corporation,
12.0%, 8-1-2002 ....................... 2,000 2,120,000
Total ................................. 5,965,000
Packaging and Containers - 3.75%
Anchor Glass Container Corporation,
9.875%, 12-15-2008 .................... 2,500 2,400,000
Gaylord Container Corporation,
11.5%, 5-15-2001 ...................... 4,000 4,040,000
Ivex Packaging Corporation,
12.5%, 12-15-2002 ..................... 1,000 1,112,500
Owens-Illinois, Inc.,
9.75%, 8-15-2004 ...................... 4,500 4,455,000
Silgan Corporation,
0.0%, 12-15-2002 (B) .................. 3,000 2,265,000
Total ................................. 14,272,500
Paper - 3.22%
Fort Howard Corporation:
9.25%, 3-15-2001 ...................... 4,500 4,365,000
11.0%, 1-2-2002 ....................... 4,290 4,418,472
Stone Container Corporation,
9.875%, 2-1-2001 ...................... 1,500 1,380,000
Williamhouse-Regency of Delaware, Inc.,
11.5%, 6-15-2005 ...................... 2,000 2,070,000
Total ................................. 12,233,472
Propane - 2.65%
Ferrellgas, Inc.,
11.625%, 12-15-2003 ................... 5,000 5,400,000
National Propane Corporation,
13.125%, 3-1-99 ....................... 4,669 4,680,673
Total ................................. 10,080,673
Public Utilities - Electric - 0.73%
Calpine Corporation,
9.25%, 2-1-2004 ....................... 1,000 930,000
Consolidated Hydro, Inc.,
0.0%, 7-15-2003 (B) ................... 3,000 1,838,010
Total ................................. 2,768,010
See Notes to Schedule of Investments on page 15.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Publishing and Advertising - 2.98%
Big Flower Press, Inc.,
10.75%, 8-1-2003 ...................... $ 2,500 $ 2,425,000
Enquirer/Star, Inc.,
10.375%, 5-15-2002 .................... 3,500 3,823,750
Lamar Advertising Company,
11.00%, 5-15-2003 ..................... 2,000 1,980,000
Outdoor Systems, Inc.,
10.75%, 8-15-2003 ..................... 3,000 3,090,000
Total ................................. 11,318,750
Railroad Equipment - 0.46%
Harmon Industries, Inc.,
12.0%, 8-1-2002 ....................... 1,635 1,749,450
Railroads - 1.04%
Southern Pacific Rail Corporation,
9.375%, 8-15-2005 ..................... 4,000 3,960,000
Retailing - 13.44%
Barnes & Noble, Inc.,
11.875%, 1-15-2003 ................... 1,000 1,100,000
Bibb Company (The),
14.0%, 10-1-99 ........................ 1,000 1,040,000
Big V Supermarkets, Inc.,
11.0%, 2-15-2004 (A) .................. 1,500 1,522,500
Bradlees, Inc.,
9.25%, 3-1-2003 ...................... 3,000 2,790,000
COLOR TILE, INC.,
10.75%, 12-15-2001 .................... 2,500 2,450,000
Eckerd (Jack) Corporation,
9.25%, 2-15-2004 ...................... 5,500 5,032,500
Grand Union Capital Company (The),
0.0%, 7-15-2004 (B) ................... 10,000 4,200,000
Grand Union Company (The):
11.375%, 2-15-99 ..................... 2,500 2,484,375
12.25%, 7-15-2002 ..................... 2,500 2,475,000
Hook-SupeRx, Inc.,
10.125%, 6-1-2002 ..................... 2,000 1,940,000
Mayfair Super Markets, Inc.,
11.75%, 3-30-2003 ..................... 1,750 1,802,500
Musicland Group, Inc.,
9.0%, 6-15-2003 ....................... 2,000 1,920,000
Orchard Supply Hardware Stores Corporation,
9.375%, 2-15-2002 ..................... 2,500 2,400,000
See Notes to Schedule of Investments on page 15.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Retailing (Continued)
Penn Traffic Company:
10.25%, 2-15-2002...................... $ 3,500 $ 3,570,000
8.625%, 12-15-2003 .................... 3,000 2,835,000
9.625%, 4-15-2005 ..................... 4,000 3,840,000
Safeway Inc.,
10.0%, 12-1-2001 ...................... 5,000 5,200,000
SuperRite, Inc.,
10.625%, 4-01-2002..................... 3,400 3,502,000
Venture Holdings Trust,
9.75%, 4-1-2004 ....................... 1,000 985,000
Total ................................. 51,088,875
Services, Consumer and Business - 0.99%
Bell & Howell Company:
9.25%, 7-15-2000 ...................... 2,000 1,940,000
10.75%, 10-01-2002 .................... 1,750 1,828,750
Total ................................. 3,768,750
Steel - 2.51%
AK Steel, Inc.,
10.75%, 4-1-2004 ...................... 3,000 2,985,000
Inland Steel Industries, Inc.,
12.75%, 12-15-2002 .................... 2,500 2,787,500
Wheeling-Pittsburgh Corporation,
9.375%, 11-15-2003 .................... 4,000 3,780,000
Total ................................. 9,552,500
Telecommunications - 4.59%
CenCall Communications Corp.,
0.0%, 1-15-2004 (B) ................... 4,000 2,320,000
Dial Page, Inc.,
12.25%, 2-15-2000 ..................... 1,000 1,040,000
MFS Communications Company, Inc.,
0.0%, 1-15-2004 (B) ................... 2,000 1,190,000
PanAmSat, L.P.:
9.75%, 8-1-2000 ....................... 2,500 2,525,000
0.0%, 8-1-2003 (B) .................... 5,000 3,050,000
Rogers Cantel Mobile Communications, Inc.,
10.75%, 11-1-2001 ..................... 3,000 3,210,000
Summit Communications Group, Inc.,
10.5%, 4-15-2005 ...................... 3,000 3,150,000
USA Mobile Communications, Inc. II,
9.5%, 2-1-2004 ........................ 1,000 950,000
Total ................................. 17,435,000
See Notes to Schedule of Investments on page 15.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Textiles and Apparel - 2.13%
CMI Industries, Inc.,
9.5%, 10-1-2003 ....................... $ 1,500 $ 1,380,000
CONSOLTEX GROUP INC.,
11.0%, 10-1-2003 (A) .................. 2,000 2,000,000
JPS Textile Group, Inc.:
11.75%, 6-1-96 (A) .................... 1,500 1,503,750
10.25%, 6-1-99 ........................ 3,250 3,185,000
Linter Textiles Corporation Limited,
13.75%, 10-1-2000 (C) ................. 2,500 25,000
Total ................................. 8,093,750
TOTAL CORPORATE DEBT SECURITIES - 92.00% $349,740,719
(Cost: $347,782,814)
TOTAL SHORT-TERM SECURITIES - 2.93% $ 11,121,872
(Cost: $11,121,872)
TOTAL INVESTMENT SECURITIES - 98.35% $373,882,228
(Cost: $379,196,289)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 1.65% 6,271,788
NET ASSETS - 100.00% $380,154,016
See Notes to Schedule of Investments on page 15.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1994
Notes to Schedule of Investments
* No income dividends were paid during the preceding 12 months.
(A) As of March 31, 1994, the following restricted securities were owned:
Shares/
Principal
Acquisition Amount Market
Security Date in 000's Cost Value
-------- ----------- --------------------------------
American Marketing
Industries
Holdings, Inc.,
Preferred Stock 5/12/89 2,275$ 56,875$ 27,300
Consolidated Hydro, Inc.,
Warrants 6/15/93 5,400 127,817 108,000
Big V Supermarkets, Inc.,
11.0%, 2-15-2004 12/10/93 $1,500 1,500,000 1,522,500
CONSOLTEX GROUP INC.,
11.0%, 10/1/2003 9/23/93 2,000 2,000,000 2,000,000
Corporate Express, Inc.,
9.625%, 3-15-2004 2/22/94 2,000 2,000,000 1,885,000
Falcon Drilling, Inc.,
9.75%, 1-15-2001 1/14/94 1,500 1,500,000 1,470,000
JPS Textile Group,
Inc.,
11.75%, 6/1/96 1/18/93 1,500 1,505,625 1,503,750
LSI Logic Corporation,
Convertible,
5.5%, 3-15-2001 3/16/94 1,000 1,000,000 1,000,000
Mail-Well Corporation,
10.5%, 2-15-2004 2/17/94 1,000 1,000,000 955,000
----------------------
$10,690,317$10,471,550
======================
The total market value of restricted securities represents approximately
2.75% of the total net assets at March 31, 1994.
(B) The security does not bear interest for an initial period of time and
subsequently becomes interest bearing.
(C) 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 HIGH INCOME FUND II, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1994
Assets
Investment securities - at value
(Notes 1 and 3) ................................. $373,882,228
Cash ............................................. 938
Receivables:
Interest and dividends .......................... 7,370,717
Investment securities sold ...................... 4,642,208
Fund shares sold ................................ 452,843
Prepaid insurance premium ........................ 13,937
------------
Total assets .................................. 386,362,871
------------
Liabilities
Payable for investment securities purchased ...... 3,928,361
Payable for Fund shares redeemed ................. 1,574,156
Dividends payable ................................ 554,580
Accrued service fee .............................. 81,923
Accrued transfer agency and dividend disbursing .. 46,877
Accrued accounting services fee .................. 5,000
Other ............................................ 17,958
------------
Total liabilities ............................. 6,208,855
------------
Total net assets ............................. $380,154,016
============
Net Assets
$1.00 par value capital stock, authorized --
400,000,000; shares outstanding -- 91,646,298
Capital stock ................................... $ 91,646,298
Additional paid-in capital ...................... 330,732,775
Accumulated undistributed loss:
Accumulated undistributed net realized
loss on investment transactions ............... (36,910,996)
Net unrealized depreciation in value of
investments at end of period .................. (5,314,061)
------------
Net assets applicable to outstanding
units of capital ............................. $380,154,016
============
Net asset value per share (net assets divided
by shares outstanding) ........................... $4.15
=====
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND II, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended MARCH 31, 1994
Investment Income
Income:
Interest ....................................... $17,723,390
Dividends ....................................... 63,273
-----------
Total income .................................. 17,786,663
-----------
Expenses (Note 2):
Investment management fee ....................... 1,109,789
Transfer agency and dividend disbursing ......... 294,660
Service fee ..................................... 197,803
Accounting services fee ......................... 30,000
Audit fees ...................................... 19,999
Custodian fees .................................. 14,982
Legal fees ...................................... 4,296
Other ........................................... 59,957
-----------
Total expenses ................................ 1,731,486
-----------
Net investment income ........................ 16,055,177
-----------
Realized and Unrealized Gain (Loss) on Investments
Realized net gain on investments ................. 10,645,189
Unrealized depreciation in value of investments
during the period ............................... (16,838,406)
-----------
Net loss on investments ......................... (6,193,217)
-----------
Net increase in net assets resulting
from operations .............................. $ 9,861,960
===========
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND II, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the For the
six months fiscal year
ended ended
March 31, September 30,
1994 1993
------------ ------------
Increase (Decrease) in Net Assets
Operations:
Net investment income ...............$ 16,055,177 $ 31,212,297
Realized net gain on investments .... 10,645,189 7,571,126
Unrealized appreciation
(depreciation) .................... (16,838,406) 6,403,334
------------ ------------
Net increase in net assets
resulting from operations ........ 9,861,960 45,186,757
------------ ------------
Dividends to shareholders from
net investment income* .............. (16,055,177) (31,212,297)
------------ ------------
Capital share transactions:
Proceeds from sale of shares
(4,681,911 and 10,779,291
shares, respectively) ............. 20,220,337 44,311,353
Proceeds from reinvestment of
dividends (3,226,989 and 6,652,442
shares, respectively) ............. 13,922,572 27,439,954
Payments for shares redeemed
(6,629,942 and 12,223,553 shares,
respectively) ..................... (28,614,795) (50,282,400)
------------ ------------
Net increase in net assets
resulting from capital share
transactions ..................... 5,528,114 21,468,907
------------ ------------
Total increase (decrease) ........ (665,103) 35,443,367
Net Assets
Beginning of period .................. 380,819,119 345,375,752
------------ ------------
End of period ........................$380,154,016 $380,819,119
============ ============
Undistributed net investment
income ............................ $--- $---
==== ====
*See "Financial Highlights" on page 19.
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND II, INC.
FINANCIAL HIGHLIGHTS
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the
six For the fiscal year ended
months September 30,
ended ------------------------------------
3/31/94 1993 1992 1991 1990 1989
------- ------ ------ ------ ------ ------
Net asset value,
beginning of
period ............ $4.21 $4.06 $3.75 $3.45 $4.22 $4.66
----- ----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income........... 0.18 .36 .39 .45 .44 .54
Net realized and
unrealized gain
(loss) on
investments ..... (0.06) .15 .31 .30 (0.77) (0.44)
----- ----- ----- ----- ----- -----
Total from investment
operations ....... .12 .51 .70 .75 (0.33) .10
Less dividends declared
from net investment
income ............ (0.18) (0.36) (0.39) (0.45) (0.44) (0.54)
----- ----- ----- ----- ----- -----
Net asset value,
end of period .... $4.15 $4.21 $4.06 $3.75 $3.45 $4.22
===== ===== ===== ===== ===== =====
Total return* ...... 2.60% 13.07% 19.31% 23.66% -8.03% 1.96%
Net assets, end of
period (000
omitted) .........$380,154$380,819$345,376$291,436$257,118$313,339
Ratio of expenses to
average net assets 0.88%** 0.80% 0.82% 0.89% 0.89% 0.83%
Ratio of net investment
income to average
net assets ....... 8.20%** 8.64% 9.79% 12.94% 11.74% 11.90%
Portfolio turnover
rate ............. 69.72%**69.24% 80.28% 53.88% 55.94% 122.30%
Total return calculated without taking into account the sales load deducted on
an initial purchase.
*Annualized.
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND II, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1994
NOTE 1 -- Significant Accounting Policies
United High Income Fund II, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
A. Security valuation -- Each stock and convertible bond is valued at the
latest sale price thereof on the last business day of the fiscal period as
reported by the principal securities exchange on which the issue is traded
or, if no sale is reported for a stock, the average of the latest bid and
asked prices. Bonds, other than convertible bonds, are valued using a
pricing system provided by a major dealer in bonds. Convertible bonds are
valued using this pricing system only on days when there is no sale
reported. Stocks which are traded over-the-counter are priced using NASDAQ
(National Association of Securities Dealers Automated Quotations) which
provides information on bid and asked or closing prices quoted by major
dealers in such stocks. Restricted securities and securities for which
market quotations are not readily available are valued at fair value as
determined in good faith under procedures established by and under the
general supervision of the Fund's Board of Directors. Short-term debt
securities are valued at amortized cost, which approximates market.
B. Security transactions and related investment income -- Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Securities gains and losses are calculated on the
identified cost basis. Original issue discount (as defined in the Internal
Revenue Code), premiums on the purchase of bonds and post-1984 market
discount 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 -- 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 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 -- 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 at the time of the previous determination of net
asset value. During the period ended March 31, 1994, the Fund adopted
Statement of Position 93-2 Determination, Disclosure, and Financial
Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies. Accordingly, permanent book and tax
basis differences relating to future shareholder distributions have been
reclassified to additional paid-in capital. As of October 1, 1993, the
cumulative effect of such differences totaling $1,428,894 was reclassified
from accumulated undistributed net realized gain on investment transactions
to additional paid-in capital. Net investment income, net realized gains
and net assets were not affected by this change.
NOTE 2 -- Investment Management and Payments to Affiliated Persons
The Fund pays a fee for investment management services. The fee is
computed daily based on the net asset value at the close of business. The fee
consists of two elements: (i) a "Specific" fee computed on net asset value as of
the close of business each day at the annual rate of .15% of net assets and (ii)
a "Group" fee computed each day on the combined net asset values of all of the
funds in the United Group of mutual funds (approximately $10.9 billion of
combined net assets at March 31, 1994) at annual rates of .51% of the first $750
million of combined net assets, .49% on that amount between $750 million and
$1.5 billion, .47% between $1.5 billion and $2.25 billion, .45% between $2.25
billion and $3 billion, .43% between $3 billion and $3.75 billion, .40% between
$3.75 billion and $7.5 billion, .38% between $7.5 billion and $12 billion, and
.36% of that amount over $12 billion. The Fund accrues and pays this fee daily.
Pursuant to assignment of the Investment Management Agreement between the
Fund and Waddell & Reed, Inc. ("W&R"), Waddell & Reed Investment Management
Company ("WRIMCO"), a wholly-owned subsidiary of W&R, serves as the Fund's
investment manager.
The Fund has an Accounting Services Agreement with Waddell & Reed Services
Company ("WARSCO"), a wholly-owned subsidiary of W&R. Under the agreement,
WARSCO acts as the agent in providing accounting services and assistance to the
Fund and pricing daily the value of shares of the Fund. For these services, the
Fund pays WARSCO a monthly fee of one-twelfth of the annual fee shown in the
following table.
Accounting Services Fee
Average
Net Asset Level Annual Fee
(all dollars in millions) Rate for Each Level
------------------------- -------------------
From $ 0 to $ 10 $ 0
From $ 10 to $ 25 $ 10,000
From $ 25 to $ 50 $ 20,000
From $ 50 to $ 100 $ 30,000
From $ 100 to $ 200 $ 40,000
From $ 200 to $ 350 $ 50,000
From $ 350 to $ 550 $ 60,000
From $ 550 to $ 750 $ 70,000
From $ 750 to $1,000 $ 85,000
$1,000 and Over $100,000
The Fund also pays WARSCO a monthly per account charge for transfer agency
and dividend disbursement services of $1.0208 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. 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 direct and
indirect gross sales commissions (which are not an expense of the Fund) of
$764,758, out of which W&R paid sales commissions of $428,673 and all expenses
in connection with the sale of Fund shares, except for registration fees and
related expenses.
Effective October 1, 1993, the Fund adopted a 12b-1 Service Plan with a
maximum fee of .25%
The Fund paid Directors' fees of $7,327.
W&R is an indirect subsidiary of Torchmark Corporation, a holding company,
and United Investors Management Company, a holding company, and a direct
subsidiary of Waddell & Reed Financial Services, Inc., a holding company.
NOTE 3 -- Investment Security Transactions
Purchases of investment securities, other than U.S. Government and short-
term securities, aggregated $132,341,445 while proceeds from maturities and
sales aggregated $125,270,501. Purchases of short-term securities aggregated
$117,013,081. Proceeds from maturities and sales of short-term securities and
U.S. Government securities aggregated $111,948,738 and $5,633,594, respectively.
There was no gain or loss on the sale of short-term securities. There was a
gain of $593,634 on the sale of U.S. Government securities.
For Federal income tax purposes cost of investments owned at March 31, 1994
was $379,196,289, resulting in net unrealized depreciation of $5,314,061, of
which $13,022,006 related to appreciated securities and $18,336,067 related to
depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $7,571,126 during its fiscal year ended September 30, 1993, which was fully
offset by utilization of capital loss carryforwards. Remaining prior year
capital loss carryforwards of the Fund aggregated $47,749,468 at September 30,
1993. This amount is available to offset future net realized gains for Federal
income tax purposes through September 30, 1997; $41,463,629 of this amount is
available through September 30, 1998; $40,158,670 is available through September
30, 1999 and $8,229,670 is available through September 30, 2000.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
United High Income Fund II, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of United High Income Fund II, Inc.
(the "Fund") at March 31, 1994, the results of its operations for the six months
then ended and the changes in its net assets and the financial highlights for
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at March 31, 1994 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE
Kansas City, Missouri
April 29, 1994
<PAGE>
DIRECTORS
Ronald K. Richey, Birmingham, Alabama, Chairman of the Board
Henry L. Bellmon, Red Rock, Oklahoma
Dodds I. Buchanan, Boulder, Colorado
Jay B. Dillingham, Kansas City, Missouri
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Los Angeles, California
Doyle Patterson, Kansas City, Missouri
Keith A. Tucker, Overland Park, Kansas
Frederick Vogel, III, Milwaukee, Wisconsin
Paul S. Wise, Carefree, Arizona
Leslie S. Wright, Birmingham, Alabama
OFFICERS
Keith A. Tucker, President
Robert L. Hechler, Vice President
Henry J. Herrmann, Vice President
John M. Holliday, Vice President
Theodore W. Howard, Vice President and Treasurer
Rodney O. McWhinney, Vice President
Sharon K. Pappas, Vice President and Secretary
Louise D. Rieke, Vice President
Carl E. Sturgeon, Vice President
To all IRA Planholders:
As required by law, income tax will automatically be withheld from any
distribution or withdrawal from an IRA unless you make a written election not to
have taxes withheld. The election may be made by submitting forms provided by
Waddell & Reed, Inc. which can be obtained from your Waddell & Reed
representative or by submitting Internal Revenue Service form W-4P. Once made,
an election can be revoked by providing written notice to Waddell & Reed, Inc.
If you elect not to have tax withheld you may be required to make payments of
estimated tax. Penalties may be imposed by the IRS if withholding and estimated
tax payments are not adequate.
<PAGE>
The United Group of Mutual Funds
United Cash Management, Inc.
United Government Securities Fund, Inc.
United Bond Fund
United Municipal Bond Fund, Inc.
United Continental Income Fund, Inc.
United Income Fund
United Municipal High Income Fund, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
United Accumulative Fund
United Vanguard Fund, Inc.
United New Concepts Fund, Inc.
United Science and Technology Fund
United International Growth Fund, Inc.
United Gold & Government Fund, Inc.
United Retirement Shares, 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
(913) 236-1303
NUR1015SA(3-94)
printed on recycled paper
