United
High Income
Fund II, Inc.
SEMIANNUAL
REPORT
---------------------------------------
For the six months ended March 31, 1995
<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, 1995
Dear Shareholder:
As President of your Fund, I would like to take this opportunity to share
my thoughts on a subject that I believe is very important to all of us; the need
for tax incentives that will help Americans take personal responsibility for
their futures.
Voters all across America sent two clear messages in the elections held in
November 1994. They want their taxes reduced and they want their concern for
financial security addressed without adding new bureaucracies or government
programs. One of the methods to do this is to expand the availability of tax
incentives for individuals to invest in Individual Retirement Accounts. This
could be done in several ways such as:
restoring the universal availability of fully tax-deductible Individual
Retirement Accounts,
allowing non-working spouses to make a full contribution of $2,000 to an
Individual Retirement Account instead of only $250 as currently allowed,
eliminating the taxation on the distribution of earnings from Individual
Retirement Accounts.
All of us recognize that future generations will need to supplement social
security benefits by private savings in order to provide an adequate level of
retirement income. Expanding the benefits of IRA's provides tax incentives to
encourage savings which allows all individuals the opportunity to provide
financial security for themselves and their families. Encouraging savings
through tax incentives has additional indirect benefits. Americans' personal
savings rate has fallen from 8% in the 1960's to just 2% of disposable income
today. Expanding the benefits of IRA's will help reverse this trend, will
increase the amount of U.S. capital available for investment and should make the
U.S. less dependent on capital from foreign sources.
Changes to our current IRA laws, such as the ones I mentioned above, are
being discussed in Congress. I urge you to write to your Members of Congress
and to the President to tell them that you support expanded IRA legislation that
provides incentives and opportunities for all Americans to improve their
financial well being.
Finally, I appreciate your continued confidence in our products and
services.
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
Risk, High-Yield Fixed Income income, by investing
Securities primarily in a diversified portfolio of
Maximum 20% Common Stock high-yield, high-risk fixed income
securities, with a secondary objective
of capital growth when consistent
with the primary objective.
STRATEGY: Invests generally in debt securities in
lower rating categories as classified by
recognized rating agencies; may also
invest up to 20% in common stocks. (May
purchase securities subject to
repurchase agreements. May invest in
certain options and futures.)
FOUNDED: 1986
SCHEDULED DIVIDEND FREQUENCY: MONTHLY
<PAGE>
PERFORMANCE SUMMARY
PER SHARE DATA
For the Six Months Ended March 31, 1995
- ---------------------------------------
DIVIDENDS PAID $0.18
=====
NET ASSET VALUE ON
3/31/95 $3.92
9/30/94 $3.96
-----
CHANGE PER SHARE ($0.04)
=====
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 3-31-95 -2.68% 3.25%
5-year period ended 3-31-95 10.80% 12.12%
Period from 7-1-86*
through 3-31-95 7.39% 8.12%
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, 1995, United High Income Fund II, Inc. had net assets totaling
$355,189,281 invested in a diversified portfolio of:
87.96% Corporate Debt Securities
9.15% Cash and Cash Equivalents
2.89% Common and Preferred Stocks and Warrants
As a shareholder of United High Income Fund II, Inc., for every $100 you had
invested on March 31, 1995, your Fund owned:
$46.58 Consumer Bonds
27.09 Basic Industries Bonds
9.41 Technological Bonds
9.15 Cash and Cash Equivalents
2.89 Common and Preferred Stocks and Warrants
2.63 Energy and Energy-Related Bonds
1.69 Financial Bonds
0.56 Public Utilities Bonds
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1995
Shares Value
COMMON AND PREFERRED STOCKS
AND WARRANTS
Banks and Savings and Loans - 0.14%
California Federal Bank, F.S.B.,
Preferred, Series B ................... 5,000 $ 510,000
Reliance Group Holdings, Inc., Warrants* 1,061 2,122
WestFed Holdings, Inc., Preferred,
Series A* ............................. 14,243 14
WestFed Holdings, Inc., Series B* ...... 7,610 8
Total ................................. 512,144
Building - 0.48%
NVR L.P., Warrants* ................... 34,286 25,715
Triangle Pacific Corp.* ................ 127,442 1,664,647
Total ................................. 1,690,362
Chemicals Specialty and Miscellaneous
Technology - 0.01%
Plastic Specialties and Technologies, Inc. 20,000 20,000
Hospital Management - 0.47%
LTC Properties, Inc. ................... 75,000 993,750
National Health Investors, Preferred,
Convertible ........................... 30,000 678,750
Total ................................. 1,672,500
Leisure Time - 0.56%
FLAGSTAR COMPANIES, INC.* .............. 24,600 136,825
Infinity Broadcasting Corporation,
Class A* .............................. 45,000 1,867,500
Total ................................. 2,004,325
Public Utilities - Electric - 0.39%
Consolidated Hydro, Inc., Preferred* ... 3,000 1,350,000
Consolidated Hydro, Inc., Warrants (A)* 5,400 32,400
Total ................................. 1,382,400
Publishing and Advertising - 0.27%
Advanstar Communications Inc.* ......... 30,000 960,000
Retailing - 0.56%
Federated Department Stores, Inc. ...... 67,465 1,492,663
Federated Department Stores, Inc.,
Warrants, Class C* .................... 44,938 247,159
Federated Department Stores, Inc.,
Warrants, Class D* .................... 44,938 252,776
Total ................................. 1,992,598
See Notes to Schedule of Investments on page 15.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1995
Shares Value
COMMON AND PREFERRED STOCKS
AND WARRANTS (Continued)
Textiles and Apparel - 0.01%
American Marketing Industries
Holdings, Inc., Preferred (A)* ........ 2,275 $ 18,200
TOTAL COMMON AND PREFERRED STOCKS
AND WARRANTS - 2.89% $ 10,252,529
(Cost: $16,195,507)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Airlines - 1.90%
GP Group, Inc.,
8.75%, 12-15-98 ....................... $ 3,500 2,773,750
NWA, Inc.,
8.625%, 8-1-96 ........................ 4,000 3,960,000
Total ................................. 6,733,750
Automotive - 2.32%
Burlington Motor Holdings Inc.,
11.5%, 11-1-2003 ...................... 2,500 2,225,000
Doehler-Jarvis Limited Partnership,
11.875%, 6-1-2002 ..................... 1,500 1,515,000
Lear Seating Corporation,
8.25%, 2-1-2002 ....................... 4,000 3,640,000
Venture Holdings Trust,
9.75%, 4-1-2004 ....................... 1,000 870,000
Total ................................. 8,250,000
Beverages - 0.98%
Dr Pepper Bottling Holdings, Inc.,
0.0%, 2-15-2003 (B) ................... 1,000 725,000
ROYAL CROWN CORPORATION,
9.75%, 8-1-2000 ....................... 3,000 2,760,000
Total ................................. 3,485,000
Biotechnology and Medical Services - 0.58%
Abbey Healthcare Group Incorporated,
9.5%, 11-1-2002 ....................... 2,000 2,045,000
Building - 9.59%
American Standard Inc.:
9.875%, 6-1-2001 ...................... 2,500 2,493,750
11.375%, 5-15-2004 .................... 500 542,500
0.0%, 6-1-2005 (B) .................... 1,250 850,000
9.25%, 12-1-2016 ...................... 5,000 4,750,000
See Notes to Schedule of Investments on page 15.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Building (Continued)
Beazer Homes USA, Inc.,
9.0%, 3-1-2004 ........................ $ 1,500 $ 1,267,500
Del Webb Corporation:
9.75%, 3-1-2003 ....................... 2,000 1,800,000
9.0%, 2-15-2006 ....................... 2,000 1,630,000
Eagle Industries, Inc.,
0.0%, 7-15-2003 (B) ................... 4,000 2,600,000
Hillsborough Holdings Corporation:
16.625%, 1-1-95 (C) ................... 5,863 5,511,056
17.0%, 1-1-96 (C) ..................... 11,000 7,026,030
NVR L.P.,
11.0%, 4-15-2003 ...................... 1,500 1,297,500
Nortek, Inc.,
9.875%, 3-1-2004 ...................... 2,000 1,835,000
Triangle Pacific Corp.,
10.5%, 8-1-2003 ....................... 2,500 2,475,000
Total ................................. 34,078,336
Chemicals Major - 2.05%
UCC Investors Holding, Inc.:
10.5%, 5-1-2002 ....................... 5,500 5,527,500
0.0%, 5-1-2005 (B) .................... 2,500 1,762,500
Total ................................. 7,290,000
Chemicals Specialty and Miscellaneous
Technology - 1.60%
Envirotest Systems Corp.,
9.125%, 3-15-2001 ..................... 1,000 800,000
LaRoche Industries Inc.,
13.0%, 8-15-2004 ...................... 2,500 2,475,000
OSi Specialties, Inc.,
9.25%, 10-1-2003 ...................... 2,500 2,400,000
Total ................................. 5,675,000
Computers and Office Equipment - 0.78%
Corporate Express, Inc.,
9.125%, 3-15-2004 ..................... 2,000 1,890,000
Mail-Well Corporation,
10.5%, 2-15-2004 ...................... 1,000 895,000
Total ................................. 2,785,000
See Notes to Schedule of Investments on page 15.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Consumer Electronics and Appliances - 0.57%
Sealy Corporation,
9.5%, 5-1-2003 ........................ $ 2,000 $ 2,010,000
Domestic Oil - 0.96%
Clark R&M Holdings, Inc.,
0.0%, 2-15-2000 ...................... 6,000 3,420,000
Drugs and Hospital Supply - 1.94%
AmeriSource Distribution Corporation,
11.25%, 7-15-2005 ..................... 1,762 1,861,209
General Medical Corporation:
10.875%, 8-15-2003 .................... 3,000 2,962,500
12.125%, 8-15-2005 .................... 2,121 2,065,896
Total ................................. 6,889,605
Electronics - 0.55%
Essex Group, Inc.,
10.0%, 5-1-2003 ....................... 2,000 1,940,000
Food and Related - 1.36%
Specialty Foods Corporation:
10.25%, 8-15-2001 ..................... 2,000 1,950,000
11.25%, 8-15-2003 ..................... 3,000 2,895,000
Total ................................. 4,845,000
Hospital Management - 5.42%
Hillhaven Corporation (The),
10.125%, 9-1-2001 ..................... 4,500 4,623,750
LTC Properties, Inc., Convertible,
8.5%, 1-1-2000 ........................ 2,000 2,000,000
Multicare Companies, Inc. (The),
12.5%, 7-1-2002 ....................... 415 468,950
National Medical Enterprises, Inc.:
9.625%, 9-1-2002 ...................... 2,000 2,045,000
10.125%, 3-1-2005 ..................... 2,000 2,052,500
Pathmark Stores, Inc.:
9.625%, 5-1-2003 ...................... 2,000 1,867,500
0.0%, 11-1-2003 (B) ................... 1,500 802,500
Quorum Health Group, Inc.,
11.875%, 12-15-2002 ................... 4,000 4,320,000
Surgical Health Corporation,
11.5%, 7-15-2004 ...................... 1,000 1,080,000
Total ................................. 19,260,200
See Notes to Schedule of Investments on page 15.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Household Products - 1.25%
Exide Corporation:
10.75%, 12-15-2002 .................... $ 3,000 $ 3,015,000
0.0%, 12-15-2004 (B) .................. 2,000 1,430,000
Total ................................. 4,445,000
Insurance - 1.69%
American Annuity Group, Inc.:
9.5%, 8-15-2001 ....................... 2,500 2,443,750
11.125%, 2-1-2003 ..................... 3,500 3,561,250
Total ................................. 6,005,000
Leisure Time - 17.22%
Act III Broadcasting, Inc.,
9.625%, 12-15-2003 .................... 2,000 1,930,000
Argosy Gaming Company, Convertible,
12.0%, 6-1-2001 ....................... 2,005 2,010,012
Cablevision Industries Corporation:
10.75%, 1-30-2002 ..................... 3,000 3,150,000
9.25%, 4-1-2008 ...................... 2,000 1,970,000
California Hotel Finance Corporation,
11.0%, 12-1-2002 ...................... 4,000 3,920,000
COMCAST CELLULAR CORPORATION,
0.0%, 3-5-2000 ........................ 3,700 2,664,000
COMCAST CORPORATION,
9.5%, 1-15-2008 ....................... 4,000 3,770,000
Continental Cablevision, Inc.:
10.625%, 6-15-2002 .................... 1,000 1,025,000
8.875%, 9-15-2005 ..................... 2,000 1,900,000
11.0%, 6-1-2007 ....................... 1,200 1,272,000
Embassy Suites, Inc.,
10.875%, 4-15-2002 .................... 2,000 2,140,000
Family Restaurants, Inc.,
0.0%, 2-1-2004 (B) .................... 1,000 390,000
FLAGSTAR COMPANIES, INC.,
10.75%, 9-15-2001 ..................... 6,000 5,760,000
GNS Finance Corp.,
9.25%, 3-15-2003 ...................... 1,500 1,500,000
Infinity Broadcasting Corporation,
10.375%, 3-15-2002 .................... 5,000 5,175,000
LaQuinta Motor Inns, Inc.,
9.25%, 5-15-2003 ...................... 4,000 3,840,000
NewCity Communications, Inc.,
11.375%, 11-1-2003 .................... 1,000 930,000
Plitt Theatres, Inc.,
10.875%, 6-15-2004 .................... 2,000 1,975,000
See Notes to Schedule of Investments on page 15.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Leisure Time (Continued)
Rogers Communications Incorporated,
10.875%, 4-15-2004 .................... $ 4,000 $ 4,020,000
Showboat, Inc.,
9.25%, 5-1-2008 ....................... 4,000 3,490,000
Sinclair Broadcast Group, Inc.,
10.0%, 12-15-2003 ..................... 1,250 1,200,000
Turner Broadcasting System, Inc.,
8.375%, 7-1-2013 ...................... 4,125 3,495,113
Viacom International, Inc.,
8.0%, 7-7-2006 ........................ 4,000 3,620,000
Total ................................. 61,146,125
Machinery - 0.53%
Fairfield Manufacturing Company, Inc.,
11.375%, 7-1-2001 ..................... 2,000 1,890,000
Metals and Mining - 0.30%
Ucar Global Enterprises Inc.,
12.0%, 1-15-2005 (A) .................. 1,000 1,050,000
Multi-Industry - 2.42%
Federal Industries Ltd.,
10.25%, 6-15-2000 ..................... 2,000 1,890,000
Jordan Industries, Inc.,
10.375%, 8-1-2003 ..................... 2,000 1,845,000
Mark IV Industries, Inc.,
8.75%, 4-1-2003 ....................... 5,000 4,850,000
Total ................................. 8,585,000
Oil Services - 1.67%
Falcon Drilling, Inc.,
9.75%, 1-15-2001 ...................... 1,500 1,417,500
Noble Drilling Corporation,
9.25%, 10-1-2003 ...................... 2,500 2,437,500
Wainoco Oil Corporation,
12.0%, 8-1-2002 ....................... 2,000 2,060,000
Total ................................. 5,915,000
See Notes to Schedule of Investments on page 15.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Packaging and Containers - 5.15%
Anchor Glass Container Corporation,
9.875%, 12-15-2008 .................... $ 2,500 $ 2,156,250
Container Corporation of America,
10.75%, 5-1-2002 ...................... 2,000 2,060,000
Gaylord Container Corporation:
11.5%, 5-15-2001 ...................... 3,000 3,150,000
0.0%, 5-15-2005 (B) ................... 2,000 1,900,000
Owens-Illinois, Inc.:
10.0%, 8-1-2002 ....................... 2,000 1,990,000
9.75%, 8-15-2004 ...................... 4,500 4,365,000
Silgan Corporation,
0.0%, 12-15-2002 (B) .................. 3,000 2,670,000
Total ................................. 18,291,250
Paper - 4.74%
Fort Howard Corporation:
9.25%, 3-15-2001 ...................... 4,500 4,342,500
11.0%, 1-2-2002 ....................... 4,214 4,320,152
S. D. Warren Company,
12.0%, 12-15-2004 (A) ................. 1,000 1,055,000
Stone Container Corporation:
10.75%, 10-1-2002 ..................... 3,000 3,090,000
11.5%, 10-1-2004 ...................... 2,000 2,100,000
Williamhouse-Regency of Delaware, Inc.,
11.5%, 6-15-2005 ...................... 2,000 1,930,000
Total ................................. 16,837,652
Public Utilities - Electric - 0.56%
Consolidated Hydro, Inc.,
0.0%, 7-15-2003 (B) ................... 3,000 1,994,880
Publishing and Advertising - 2.90%
American Media Operations, Inc.,
11.625%, 11-15-2004 ................... 3,000 3,165,000
Big Flower Press, Inc.,
10.75%, 8-1-2003 ...................... 2,500 2,412,500
Lamar Advertising Company,
11.00%, 5-15-2003 ..................... 2,000 1,950,000
Outdoor Systems, Inc.,
10.75%, 8-15-2003 ..................... 3,000 2,790,000
Total ................................. 10,317,500
See Notes to Schedule of Investments on page 15.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Railroad Equipment - 0.49%
Harman International Industries, Incorporated,
12.0%, 8-1-2002 ....................... $ 1,635 $ 1,733,100
Railroads - 1.13%
Southern Pacific Rail Corporation,
9.375%, 8-15-2005 ..................... 4,000 4,020,000
Retailing - 9.82%
Barnes & Noble, Inc.,
11.875%, 1-15-2003 .................... 1,000 1,070,000
Big V Supermarkets, Inc.,
11.0%, 2-15-2004 ...................... 1,500 1,237,500
COLOR TILE, INC.,
10.75%, 12-15-2001 .................... 2,500 2,000,000
Eckerd Corporation,
9.25%, 2-15-2004 ...................... 5,500 5,527,500
Musicland Stores Corporation,
9.0%, 6-15-2003 ....................... 2,000 1,680,000
Orchard Supply Hardware Stores Corporation,
9.375%, 2-15-2002 ..................... 2,500 1,962,500
Penn Traffic Company:
10.25%, 2-15-2002...................... 3,500 3,517,500
8.625%, 12-15-2003 .................... 3,000 2,737,500
9.625%, 4-15-2005 ..................... 4,000 3,695,000
Safeway Inc.,
10.0%, 12-1-2001 ...................... 5,000 5,350,000
SuperRite, Inc.,
10.625%, 4-01-2002..................... 3,400 3,366,000
WestPoint Stevens Inc.,
9.375%, 12-15-2005 .................... 3,000 2,745,000
Total ................................. 34,888,500
Services, Consumer and Business - 1.05%
Bell & Howell Company:
9.25%, 7-15-2000 ...................... 2,000 1,945,000
10.75%, 10-01-2002 .................... 1,750 1,785,000
Total ................................. 3,730,000
Steel - 1.62%
AK Steel Corporation,
10.75%, 4-1-2004 ...................... 3,000 3,026,250
Inland Steel Industries, Inc.,
12.75%, 12-15-2002 .................... 2,500 2,712,500
Total ................................. 5,738,750
See Notes to Schedule of Investments on page 15.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Telecommunications - 3.96%
MFS Communications Company, Inc.,
0.0%, 1-15-2004 (B) ................... $ 2,000 $ 1,265,000
PanAmSat, L.P.:
9.75%, 8-1-2000 ....................... 2,500 2,468,750
0.0%, 8-1-2003 (B) .................... 5,000 3,300,000
Rogers Cantel Mobile Communications Inc.,
10.75%, 11-1-2001 ..................... 3,000 3,067,500
Summit Communications Group, Inc.,
10.5%, 4-15-2005 ...................... 3,000 3,120,000
USA Mobile Communications, Inc. II,
9.5%, 2-1-2004 ........................ 1,000 850,000
Total ................................. 14,071,250
Textiles and Apparel - 0.86%
CMI Industries, Inc.,
9.5%, 10-1-2003 ....................... 1,500 1,275,000
CONSOLTEX GROUP INC.,
11.0%, 10-1-2003 ...................... 2,000 1,780,000
Linter Textiles Corporation Limited,
13.75%, 10-1-2000 (C) ................. 2,500 6,250
Total ................................. 3,061,250
TOTAL CORPORATE DEBT SECURITIES - 87.96% $312,427,148
(Cost: $319,141,079)
TOTAL SHORT-TERM SECURITIES - 5.85% $ 20,777,924
(Cost: $20,777,924)
TOTAL INVESTMENT SECURITIES - 96.70% $343,457,601
(Cost: $356,114,510)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 3.30% 11,731,680
NET ASSETS - 100.00% $355,189,281
See Notes to Schedule of Investments on page 15.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1995
Notes to Schedule of Investments
* No income dividends were paid during the preceding 12 months.
(A) As of March 31, 1995, the following restricted securities were owned:
Shares/
Principal
Acquisition Amount Market
Security Date in 000's Cost Value
-------- ----------- --------------------------------
American Marketing
Industries
Holdings, Inc.,
Preferred Stock 5/12/89 2,275$ 56,875 $ 18,200
Consolidated Hydro, Inc.,
Warrants 6/15/93 5,400 127,817 32,400
S. D. Warren Company,
12.0%, 12-15-200412/31/94 $1,000 1,000,000 1,055,000
Ucar Global Enterprises
Inc.,
12.0%, 1-15-2005 1/20/95 1,000 1,000,000 1,050,000
---------- ----------
$2,184,692 $2,155,600
========== ==========
The total market value of restricted securities represents approximately
0.61% of the total net assets at March 31, 1995.
(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, 1995
Assets
Investment securities - at value (Notes 1 and 3) . $343,457,601
Cash ............................................. 7,075
Receivables:
Interest and dividends .......................... 7,498,370
Investment securities sold ...................... 5,411,250
Fund shares sold ................................ 527,090
Prepaid insurance premium ........................ 13,765
------------
Total assets .................................. 356,915,151
------------
Liabilities
Payable for Fund shares redeemed ................. 1,227,249
Dividends payable ................................ 319,891
Accrued service fee .............................. 72,766
Accrued transfer agency and dividend disbursing .. 45,131
Accrued accounting services fee .................. 5,000
Other ............................................ 55,833
------------
Total liabilities ............................. 1,725,870
------------
Total net assets ............................. $355,189,281
============
Net Assets
$1.00 par value capital stock, authorized --
400,000,000; shares outstanding -- 90,644,603
Capital stock ................................... $ 90,644,603
Additional paid-in capital ...................... 327,833,463
Accumulated undistributed loss:
Accumulated undistributed net realized
loss on investment transactions ............... (50,631,876)
Net unrealized depreciation in value of
investments at end of period .................. (12,656,909)
------------
Net assets applicable to outstanding
units of capital ............................. $355,189,281
============
Net asset value per share (net assets divided
by shares outstanding) ........................... $3.92
=====
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND II, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended MARCH 31, 1995
Investment Income
Income:
Interest ....................................... $17,404,272
Dividends ....................................... 101,937
-----------
Total income .................................. 17,506,209
-----------
Expenses (Note 2):
Investment management fee ....................... 991,875
Transfer agency and dividend disbursing ......... 280,881
Service fee ..................................... 210,040
Accounting services fee ......................... 27,500
Audit fees ...................................... 18,863
Custodian fees .................................. 11,481
Legal fees ...................................... 9,627
Other ........................................... 52,110
-----------
Total expenses ................................ 1,602,377
-----------
Net investment income ........................ 15,903,832
-----------
Realized and Unrealized Gain (Loss) on Investments
Realized net loss on investments ................. (10,175,178)
Unrealized appreciation in value of investments
during the period ............................... 5,832,090
-----------
Net loss on investments ......................... (4,343,088)
-----------
Net increase in net assets resulting
from operations .............................. $11,560,744
===========
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND II, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the For the
six months fiscal year
ended ended
March 31, September 30,
1995 1994
------------ ------------
Decrease in Net Assets
Operations:
Net investment income ...............$ 15,903,832 $ 32,038,734
Realized net gain (loss) on
investments ........................ (10,175,178) 7,099,487
Unrealized appreciation
(depreciation) .................... 5,832,090 (30,013,344)
------------ ------------
Net increase in net assets
resulting from operations ........ 11,560,744 9,124,877
------------ ------------
Dividends to shareholders from
net investment income* .............. (15,903,832) (32,038,734)
------------ ------------
Capital share transactions:
Proceeds from sale of shares
(3,932,691 and 9,117,319
shares, respectively) ............. 15,200,514 38,145,169
Proceeds from reinvestment of
dividends (3,628,726 and 6,784,080
shares, respectively) ............. 14,052,604 28,264,415
Payments for shares redeemed
(8,379,272 and 14,806,281 shares,
respectively) ..................... (32,363,367) (61,672,228)
------------ ------------
Net increase (decrease) in net
assets resulting from capital
share transactions ............... (3,110,249) 4,737,356
------------ ------------
Total decrease ................... (7,453,337)(18,176,501)
Net Assets
Beginning of period .................. 362,642,618 380,819,119
------------ ------------
End of period ........................$355,189,281 $362,642,618
============ ============
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 ------------------------------------
3/31/95 1994 1993 1992 1991 1990
------- ------ ------ ------ ------ ------
Net asset value,
beginning of
period ............ $3.96 $4.21 $4.06 $3.75 $3.45 $4.22
----- ----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... .18 .35 .36 .39 .45 .44
Net realized and
unrealized gain
(loss) on
investments ..... (0.04) (0.25) .15 .31 .30 (0.77)
----- ----- ----- ----- ----- -----
Total from investment
operations ....... .14 .10 .51 .70 .75 (0.33)
Less dividends declared
from net investment
income ............ (0.18) (0.35) (0.36) (0.39) (0.45) (0.44)
----- ----- ----- ----- ----- -----
Net asset value,
end of period .... $3.92 $3.96 $4.21 $4.06 $3.75 $3.45
===== ===== ===== ===== ===== =====
Total return* ...... 3.55% 2.31% 13.07% 19.31% 23.66% -8.03%
Net assets, end of
period (000
omitted) .........$355,189$362,643$380,819$345,376$291,436$257,118
Ratio of expenses to
average net assets 0.92%** 0.88% 0.80% 0.82% 0.89% 0.89%
Ratio of net investment
income to average
net assets ....... 9.09%** 8.41% 8.64% 9.79% 12.94% 11.74%
Portfolio turnover
rate ............. 22.43%**47.05% 69.24% 80.28% 53.88% 55.94%
Total return calculated without taking into account the sales load deducted on
an initial purchase.
Annualized.
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND II, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
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. Net investment income distributions and capital gains
distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences are due to differing treatments for items such as deferral of
wash sales and post-October losses, foreign currency transactions, net
operating losses and expiring capital loss carryforwards.
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 $11.5 billion of
combined net assets at March 31, 1995) 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
$515,024, out of which W&R paid sales commissions of $298,571 and all expenses
in connection with the sale of Fund shares, except for registration fees and
related expenses.
Under a Service Plan adopted by the Fund pursuant to Rule 12b-1 under the
Investment Company Act of 1940, the Fund may pay monthly a fee to W&R in an
amount not to exceed .25% of the Fund's average annual net assets. The fee is
to be paid to reimburse W&R for amounts it expends in connection with the
provision of personal services to Fund shareholders and/or maintenance of
shareholder accounts.
The Fund paid Directors' fees of $6,521.
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 $36,018,000 while proceeds from maturities and sales
aggregated $38,039,536. Purchases of short-term securities aggregated
$173,337,391 while proceeds from maturities and sales aggregated $180,578,195.
For Federal income tax purposes cost of investments owned at March 31, 1995
was $355,645,774, resulting in net unrealized depreciation of $12,188,173, of
which $9,997,215 related to appreciated securities and $22,185,388 related to
depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $7,099,487 during its fiscal year ended September 30, 1994, which was fully
offset by utilization of capital loss carryforwards. Remaining prior year
capital loss carryforwards of the Fund aggregated $40,649,981 at September 30,
1994. This amount is available to offset future net realized gains for Federal
income tax purposes through September 30, 1998; $40,158,670 of this amount 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, 1995, 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 the 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, 1995 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 LLP
Kansas City, Missouri
May 5, 1995
<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
Sharon K. Pappas, Vice President and Secretary
Louise D. Rieke, Vice President
Carl E. Sturgeon, Vice President
To all IRA Planholders:
As required by law, income tax will automatically be withheld from any
distribution or withdrawal from an IRA unless you make a written election not to
have taxes withheld. The election may be made by submitting forms provided by
Waddell & Reed, Inc. which can be obtained from your Waddell & Reed
representative or by submitting Internal Revenue Service form W-4P. Once made,
an election can be revoked by providing written notice to Waddell & Reed, Inc.
If you elect not to have tax withheld you may be required to make payments of
estimated tax. Penalties may be imposed by the IRS if withholding and estimated
tax payments are not adequate.
<PAGE>
The United Group of Mutual Funds
United Cash Management, Inc.
United Government Securities Fund, Inc.
United Bond Fund
United Municipal Bond Fund, Inc.
United Municipal High Income Fund, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
United Continental Income Fund, Inc.
United Retirement Shares, Inc.
United Asset Strategy Fund, Inc.
United Income Fund
United Accumulative Fund
United Vanguard Fund, Inc.
United New Concepts Fund, Inc.
United Science and Technology Fund
United International Growth Fund, Inc.
United Gold & Government Fund, Inc.
FOR MORE INFORMATION:
Contact your representative, or your
local office as listed on your
Account Statement, or contact:
WADDELL & REED
CUSTOMER SERVICE
6300 Lamar Avenue
P.O. Box 29217
Shawnee Mission, KS 66201-9217
(913) 236-1303
NUR1015SA(3-95)
printed on recycled paper
