United
High Income
Fund II, Inc.
SEMIANNUAL
REPORT
---------------------------------------
For the six months ended March 31, 1996
<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, 1996
Dear Shareholder:
As President of your Fund, I would like to thank you for your continued
confidence in our products and services. We strive to provide the best service
possible to our shareholders: from the Fund's manager, to Waddell & Reed's
customer service representatives, to your personal account representative and
the Waddell & Reed office nearest you.
While personalized service has become increasingly rare in the investment
industry, we remain committed to locally based account representatives who
provide the personal service you need. They are ready to assist you through
regular reviews of your financial plan and to answer any financial questions you
may have. Your account representative is anxious to help you plan for your
retirement, fund a child's education or make plans for other long-term financial
goals.
We want to help you open the door to a better financial future. We will
continue to help you meet your specific financial needs through quality
investment products and personalized service that makes the investment process
more convenient and accessible for you.
Should you have any questions about your account or other financial issues,
contact your personal account representative or your local Waddell & Reed
office. They're ready to help you make the most of your financial future.
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 -- Class A Shares
PER SHARE DATA
For the Six Months Ended March 31, 1996
- ---------------------------------------
DIVIDENDS PAID $0.17
=====
NET ASSET VALUE ON
3/31/96 $4.08
9/30/95 4.03
-----
CHANGE PER SHARE $0.05
=====
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 3-31-96 6.93% 13.45%
5-year period ended 3-31-96 11.43% 12.76%
Period from 7-1-86*
through 3-31-96 8.00% 8.65%
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, 1996, United High Income Fund II, Inc. had net assets totaling
$368,496,041 invested in a diversified portfolio of:
90.37% Corporate Debt Securities
5.69% Common and Preferred Stocks and Warrants
3.94% Cash and Cash Equivalents
As a shareholder of United High Income Fund II, Inc., for every $100 you had
invested on March 31, 1996, your Fund owned:
$31.19 Manufacturing Bonds
25.33 Transportation, Communication, Electric
and Sanitary Services Bonds
15.59 Services Bonds
11.48 Wholesale and Retail Trade Bonds
5.69 Common and Preferred Stocks and Warrants
3.94 Cash and Cash Equivalents
2.69 Finance, Insurance and Real Estate Bonds
2.15 Contract Construction Bonds
1.11 Mining Bonds
0.83 Miscellaneous Investing Institutions Bonds
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1996
Shares Value
COMMON AND PREFERRED STOCKS
AND WARRANTS
Amusement and Recreation Services - 0.25%
Trump Hotels & Casino Resorts, Inc.* . 31,250 $ 914,063
Communication - 1.06%
American Radio Systems Corporation* .. 27,000 911,250
Infinity Broadcasting Corporation,
Class A* ............................ 67,500 2,927,813
IntelCom Group Inc., Warrants (A)* .... 7,425 59,400
Total ............................... 3,898,463
Depository Institutions - 0.15%
California Federal Bank, F.S.B.,
Preferred, Series B ................. 5,000 548,750
Electric, Gas and Sanitary Services - 0.39%
Consolidated Hydro, Inc., Preferred* . 3,000 405,000
Consolidated Hydro, Inc., Warrants (A)* 5,400 5
El Paso Electric Company, Preferred* . 10,000 1,032,500
Total ............................... 1,437,505
General Building Contractors - 1.80%
NVR L.P., Warrants* .................. 6,386 6,782
Walter Industries, Inc.* ............. 482,265 6,631,144
Total ............................... 6,637,926
Health Services - 0.30%
Beverly Enterprises, Inc.* ........... 100,000 1,100,000
Holding and Other Investment Offices - 0.57%
LTC Properties, Inc. ................. 75,000 1,218,750
National Health Investors, Inc. ...... 27,150 882,375
Total ............................... 2,101,125
Industrial Machinery and Equipment - 0.17%
Bell & Howell Holdings Company* ...... 18,750 614,062
Lumber and Wood Products - 0.59%
Triangle Pacific Corp.* .............. 127,442 2,190,346
See Notes to Schedule of Investments on pages 18 and 19.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1996
Shares Value
COMMON AND PREFERRED STOCKS
AND WARRANTS (Continued)
Printing and Publishing - 0.40%
Advanstar Holdings, Inc.* ............ 30,000 $ 510,000
K-III Communications Corporation,
Preferred (A)*....................... 10,000 982,500
Total ............................... 1,492,500
Miscellaneous - 0.01%
Plastic Specialties and Technologies,
Inc.* .............................. 20,000 25,000
Reliance Group Holdings, Inc.,
Warrants*............................ 1,061 2,255
Total ............................... 27,255
TOTAL COMMON AND PREFERRED STOCKS
AND WARRANTS - 5.69% $20,961,995
(Cost: $24,102,456)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Amusement and Recreation Services - 4.44%
AMF Group Inc.:
0.0%, 3-15-2006 (A)(B)............... $ 1,750 953,750
10.875%, 3-15-2006 (A)............... 1,250 1,243,750
Argosy Gaming Company, Convertible,
12.0%, 6-1-2001 ..................... 1,000 897,500
Cobb Theatres, L.L.C.,
10.625%, 3-1-2003 (A)................ 1,500 1,530,000
GNS Finance Corp.,
9.25%, 3-15-2003 .................... 1,500 1,608,750
Harrah's Operating Company, Inc.,
10.875%, 4-15-2002 .................. 2,000 2,150,000
Plitt Theatres, Inc.,
10.875%, 6-15-2004 .................. 2,000 2,040,000
Rio Hotel & Casino, Inc.,
10.625%, 7-15-2005 .................. 2,000 2,110,000
Showboat Marina Casino Partnership,
13.5%, 3-15-2003 (A)................. 1,500 1,526,250
Trump Hotels & Casino Resorts
Holdings, L.P.,
15.5%, 6-15-2005 .................... 2,000 2,290,000
Total ............................... 16,350,000
Building Materials and Garden Supplies - 0.66%
Orchard Supply Hardware Stores Corporation,
9.375%, 2-15-2002 ................... 2,500 2,425,000
See Notes to Schedule of Investments on pages 18 and 19.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Business Services - 2.54%
Adams Outdoor Advertising Limited Partnership,
10.75% 3-15-2006 (A)................. $1,500 $ 1,533,750
Heritage Media Corporation,
8.75%, 2-15-2006 .................... 1,000 952,500
Lamar Advertising Company,
11.0%, 5-15-2003 .................... 2,000 2,110,000
Outdoor Systems, Inc.,
10.75%, 8-15-2003 ................... 3,000 3,030,000
Scotsman Group, Inc.,
9.5%, 12-15-2000 .................... 1,000 1,025,000
Shared Technologies Fairchild
Communications Corp.,
0.0%, 3-1-2006 (A)(B)................ 1,000 710,000
Total ............................... 9,361,250
Chemicals and Allied Products - 3.17%
Chattem, Inc.,
12.75%, 6-15-2004 ................... 1,500 1,466,250
LaRoche Industries Inc.,
13.0%, 8-15-2004 .................... 500 535,000
Revlon Worldwide Corporation,
0.0%, 3-15-98 ....................... 2,500 1,950,000
UCC Investors Holding, Inc.:
10.5%, 5-1-2002 ..................... 5,500 5,747,500
0.0%, 5-1-2005 (B) .................. 2,500 1,975,000
Total ............................... 11,673,750
Communication - 22.56%
Adelphia Communications Corporation,
12.5%, 5-15-2002 .................... 3,000 3,157,500
Allbritton Communications Company,
9.75%, 11-30-2007 (A)................ 2,000 1,885,000
American Radio Systems Corporation,
9.0%, 2-1-2006 ...................... 1,500 1,470,000
Arch Communications Group, Inc.,
0.0%, 3-15-2008 (B).................. 2,000 1,145,000
Argyle Television Operations, Inc.,
9.75%, 11-1-2005 .................... 3,000 2,880,000
Brooks Fiber Properties, Inc.,
0.0%, 3-1-2006 (A)(B)................ 2,500 1,450,000
CS Wireless Systems, Inc., Units,
0.0%, 3-1-2006 (A)(B)(D)............. 100 2,140,000
Cablevision Industries Corporation,
9.25%, 4-1-2008 ..................... 2,000 2,160,000
Cablevision Systems Corporation,
10.75%, 4-1-2004 .................... 1,500 1,582,500
See Notes to Schedule of Investments on pages 18 and 19.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Communication (Continued)
CenCall Communications Corp.,
0.0%, 1-15-2004 (B).................. $2,500 $ 1,487,500
Chancellor Broadcasting Company,
9.375%, 10-1-2004.................... 2,000 1,890,000
COMCAST CELLULAR CORPORATION,
0.0%, 3-5-2000 ...................... 2,200 1,584,000
COMCAST CORPORATION,
9.5%, 1-15-2008 ..................... 4,000 4,050,000
Comcast UK Cable Partners Limited,
0.0%, 11-15-2007 (B)................. 4,000 2,310,000
Continental Cablevision, Inc.:
10.625%, 6-15-2002 .................. 1,000 1,090,000
8.875%, 9-15-2005 ................... 2,000 2,160,000
8.3%, 5-15-2006 (A).................. 2,000 2,065,000
11.0%, 6-1-2007 ..................... 1,200 1,368,000
Diamond Cable Communications Plc,
0.0%, 12-15-2005 (B)................. 1,000 585,000
EZ Communications, Inc.,
9.75%, 12-1-2005 .................... 2,000 1,985,000
Granite Broadcasting Corporation:
10.375%, 5-15-2005 .................. 1,000 1,011,250
9.375%, 12-1-2005 (A)................ 1,500 1,417,500
Infinity Broadcasting Corporation,
10.375%, 3-15-2002 .................. 2,500 2,650,000
IntelCom Group Inc., Units,
0.0%, 9-15-2005 (B).................. 2,250 1,440,000
InterCel, Inc., Units,
0.0%, 2-1-2006 (B)(E) ............... 18 1,058,750
International CableTel Incorporated,
0.0%, 2-1-2006 (A)(B)................ 4,000 2,260,000
MFS Communications Company, Inc.:
0.0%, 1-15-2004 (B) ................. 2,475 1,881,000
0.0%, 1-15-2006 (B) ................. 2,500 1,550,000
Marcus Cable Operating Company,
0.0%, 8-1-2004 (B) .................. 3,500 2,537,500
Metrocall, Inc.,
10.375%, 10-1-2007 .................. 1,000 1,020,000
PanAmSat, L.P.:
9.75%, 8-1-2000 ..................... 2,500 2,600,000
0.0%, 8-1-2003 (B) .................. 5,000 4,200,000
Rifkin Acquisition Partners, L.L.L.P.,
11.125%, 1-15-2006 (A)............... 1,500 1,522,500
Rogers Cantel Mobile Communications Inc.,
10.75%, 11-1-2001 ................... 3,000 3,135,000
Rogers Communications Inc.,
9.125%, 1-15-2006 ................... 3,000 2,902,500
Sullivan Broadcasting Company, Inc.,
10.25%, 12-15-2005 .................. 500 495,000
See Notes to Schedule of Investments on pages 18 and 19.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Communication (Continued)
Turner Broadcasting System, Inc.,
8.375%, 7-1-2013 .................... $4,125 $ 4,116,750
USA Mobile Communications, Inc. II,
9.5%, 2-1-2004 ...................... 1,000 970,000
United International Holdings, Inc.,
0.0%, 11-15-99 ...................... 2,500 1,615,625
Viacom International, Inc.,
8.0%, 7-7-2006 ...................... 6,000 5,685,000
Videotron Plc,
0.0%, 8-15-2005 (B).................. 1,000 635,000
Total ............................... 83,147,875
Eating and Drinking Places - 0.53%
Foodmaker, Inc.,
9.25%, 3-1-99 ....................... 2,000 1,950,000
Electric, Gas and Sanitary Services - 0.55%
El Paso Electric Company,
8.9%, 2-1-2006 ...................... 2,000 2,025,000
Electronic and Other Electric Equipment - 2.87%
A+ Network, Inc.,
11.875%, 11-1-2005 .................. 2,500 2,550,000
Communications & Power Industries,
Inc.,
12.0%, 8-1-2005 ..................... 2,000 2,075,000
Exide Corporation:
10.75%, 12-15-2002 .................. 1,000 1,027,500
0.0%, 12-15-2004 (B) ................ 2,000 1,600,000
10.0%, 4-15-2005 .................... 1,500 1,526,250
Harmon Industries, Inc.,
12.0%, 8-1-2002 ..................... 1,635 1,806,675
Total ............................... 10,585,425
Fabricated Metal Products - 2.12%
American Safety Razor Company,
9.875%, 8-1-2005 .................... 2,000 2,052,500
Nortek, Inc.,
9.875%, 3-1-2004 .................... 3,000 2,820,000
Silgan Corporation,
0.0%, 12-15-2002 (B) ................ 3,000 2,940,000
Total ............................... 7,812,500
See Notes to Schedule of Investments on pages 18 and 19.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Food and Kindred Products - 1.64%
Dr Pepper Holdings, Inc.,
0.0%, 2-15-2003 (B) ................. $1,000 $ 850,000
Specialty Foods Corporation:
10.25%, 8-15-2001 ................... 2,000 1,810,000
11.125%, 10-1-2002 .................. 1,000 935,000
11.25%, 8-15-2003 ................... 3,000 2,430,000
Total ............................... 6,025,000
Food Stores - 4.62%
Big V Supermarkets, Inc.,
11.0%, 2-15-2004 .................... 1,500 1,327,500
Bruno's Inc.,
10.5%, 8-1-2005 ..................... 2,000 1,920,000
Dominick's Finer Foods, Inc.,
10.875%, 5-1-2005 ................... 1,000 1,052,500
Jitney-Jungle Stores of America, Inc.,
12.0%, 3-1-2006 ..................... 1,500 1,485,000
Penn Traffic Company:
10.25%, 2-15-2002 ................... 3,500 3,430,000
8.625%, 12-15-2003 .................. 2,500 2,275,000
Safeway Inc.,
10.0%, 12-1-2001 .................... 5,000 5,550,000
Total ............................... 17,040,000
Furniture and Fixtures - 1.32%
Knoll Group, Inc. (The),
10.875%, 3-15-2006 (A)............... 1,000 1,020,000
Lear Seating Corp.,
8.25%, 2-1-2002 ..................... 4,000 3,840,000
Total ............................... 4,860,000
General Building Contractors - 2.15%
Beazer Homes USA, Inc.,
9.0%, 3-1-2004 ...................... 1,500 1,440,000
Del Webb Corporation:
9.75%, 3-1-2003 ..................... 2,000 2,025,000
9.0%, 2-15-2006 ..................... 2,000 1,920,000
NVR L.P.,
11.0%, 4-15-2003 .................... 1,500 1,515,000
U.S. Home Corporation,
9.75%, 6-15-2003 .................... 1,000 1,020,000
Total ............................... 7,920,000
See Notes to Schedule of Investments on pages 18 and 19.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Health Services - 4.23%
Abbey Healthcare Group Incorporated,
9.5%, 11-1-2002 ..................... $2,000 $ 2,112,500
Assisted Living Concepts, Inc., Convertible,
7.0%, 7-31-2005 (A) ................. 1,000 1,290,000
Multicare Companies, Inc. (The),
12.5%, 7-1-2002 ..................... 415 462,725
Quorum Health Group, Inc.:
11.875%, 12-15-2002 ................. 4,000 4,430,000
8.75%, 11-1-2005 .................... 2,000 2,010,000
Regency Health Services, Inc.,
9.875%, 10-15-2002 .................. 1,000 1,015,000
Tenet Healthcare Corporation:
9.625%, 9-1-2002 .................... 2,000 2,145,000
10.125%, 3-1-2005 ................... 2,000 2,140,000
Total ............................... 15,605,225
Holding and Other Investment Offices - 1.33%
Jordan Industries, Inc.,
10.375%, 8-1-2003 ................... 2,000 1,850,000
LTC Properties, Inc., Convertible:
8.5%, 1-1-2000 ...................... 2,000 2,010,000
8.5%, 1-1-2001 ...................... 1,000 1,040,000
Total ............................... 4,900,000
Hotels and Other Lodging Places - 4.38%
GNF, CORP.,
10.625%, 4-1-2003 ................... 2,000 1,995,000
HMC Acquisition Properties, Inc.,
9.0%, 12-15-2007 (A)................. 1,500 1,417,500
LaQuinta Motor Inns, Inc.,
9.25%, 5-15-2003 .................... 4,000 4,180,000
Premier Parks Inc.,
12.0%, 8-15-2003 .................... 1,000 1,065,000
Prime Hospitality Corp.,
9.25%, 1-15-2006 .................... 2,000 1,945,000
Showboat, Inc.,
9.25%, 5-1-2008 ..................... 4,000 4,080,000
Station Casinos, Inc.,
10.125%, 3-15-2006 .................. 1,500 1,477,500
Total ............................... 16,160,000
Industrial Machinery and Equipment - 4.10%
American Standard Inc.:
0.0%, 6-1-2005 (B) .................. 4,750 4,049,375
9.25%, 12-1-2016 .................... 5,000 5,112,500
Bell & Howell Company:
9.25%, 7-15-2000 .................... 2,000 2,040,000
10.75%, 10-1-2002 ................... 1,750 1,855,000
See Notes to Schedule of Investments on pages 18 and 19.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Industrial Machinery and Equipment (Continued)
Fairfield Manufacturing Company, Inc.,
11.375%, 7-1-2001 ................... $2,000 $ 2,035,000
Total ............................... 15,091,875
Instruments and Related Products - 1.69%
IVAC Corporation,
9.25%, 12-1-2002 .................... 1,000 1,040,000
Mark IV Industries, Inc.,
8.75%, 4-1-2003 ..................... 5,000 5,200,000
Total ............................... 6,240,000
Insurance Carriers - 1.73%
American Annuity Group, Inc.:
9.5%, 8-15-2001 ..................... 2,500 2,600,000
11.125%, 2-1-2003 ................... 3,500 3,762,500
Total ............................... 6,362,500
Lumber and Wood Products - 0.71%
Triangle Pacific Corp.,
10.5%, 8-1-2003 ..................... 2,500 2,625,000
Miscellaneous Retail - 1.55%
Eckerd Corporation,
9.25%, 2-15-2004 .................... 5,500 5,720,000
Nondepository Institutions - 0.96%
GP Group, Inc.,
8.75%, 12-15-98 ..................... 3,500 3,535,000
Oil and Gas Extraction - 1.11%
Falcon Drilling, Inc.,
9.75%, 1-15-2001 .................... 1,500 1,552,500
Noble Drilling Corporation,
9.25%, 10-1-2003 .................... 2,500 2,525,000
Total ............................... 4,077,500
Paper and Allied Products - 4.02%
Asia Pulp & Paper Company Ltd,
11.75%, 10-1-2005 ................... 2,000 1,942,500
Container Corporation of America,
10.75%, 5-1-2002 .................... 2,000 2,045,000
Fort Howard Corporation:
9.25%, 3-15-2001 .................... 4,500 4,533,750
11.0%, 1-2-2002 ..................... 4,089 4,252,936
Mail-Well Corporation,
10.5%, 2-15-2004 .................... 1,000 972,500
See Notes to Schedule of Investments on pages 18 and 19.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Paper and Allied Products (Continued)
S. D. Warren Company,
12.0%, 12-15-2004 ................... $1,000 $ 1,055,000
Total ............................... 14,801,686
Petroleum and Coal Products - 0.43%
Clark USA, Inc.,
10.875%, 12-1-2005 (A)............... 1,500 1,567,500
Primary Metal Industries - 1.73%
Essex Group, Inc.,
10.0%, 5-1-2003 ..................... 2,000 2,020,000
Inland Steel Industries, Inc.,
12.75%, 12-15-2002 .................. 2,500 2,787,500
Russel Metals Inc.,
10.25%, 6-15-2000 ................... 1,000 990,000
Ucar Global Enterprises Inc.,
12.0%, 1-15-2005 .................... 515 592,250
Total ............................... 6,389,750
Printing and Publishing - 2.38%
American Media Operations, Inc.,
11.625%, 11-15-2004 ................. 3,000 3,045,000
Big Flower Press, Inc.,
10.75%, 8-1-2003 .................... 1,667 1,708,675
Herff Jones, Inc.,
11.0%, 8-15-2005 .................... 2,000 2,127,500
K-III Communications Corporation,
8.5%, 2-1-2006 (A)................... 2,000 1,900,000
Total ............................... 8,781,175
Railroad Transportation - 1.13%
Southern Pacific Rail Corporation,
9.375%, 8-15-2005 ................... 4,000 4,180,000
Rubber and Miscellaneous Plastics Products - 0.53%
RBX Corporation,
11.25%, 10-15-2005 (A)............... 2,000 1,950,000
Stone, Clay and Glass Products - 1.81%
Owens-Illinois, Inc.:
10.0%, 8-1-2002 ..................... 2,000 2,070,000
9.75%, 8-15-2004 .................... 4,500 4,601,250
Total ............................... 6,671,250
See Notes to Schedule of Investments on pages 18 and 19.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Textile Mill Products - 1.62%
CMI Industries, Inc.,
9.5%, 10-1-2003 ..................... $1,500 $ 1,185,000
CONSOLTEX GROUP INC.,
11.0%, 10-1-2003 .................... 2,000 1,825,000
Linter Textiles Corporation Limited,
13.75%, 10-1-2000 (C) ............... 2,500 12,500
WestPoint Stevens Inc.,
9.375%, 12-15-2005 .................. 3,000 2,962,500
Total ............................... 5,985,000
Transportation By Air - 1.09%
NWA, Inc.,
8.625%, 8-1-96 ...................... 4,000 4,000,000
Transportation Equipment - 0.70%
Walbro Corporation,
9.875%, 7-15-2005 ................... 1,000 1,020,000
Westinghouse Air Brake Company,
9.375%, 6-15-2005 ................... 1,500 1,560,000
Total ............................... 2,580,000
Wholesale Trade - Durable Goods - 1.75%
Alvey Systems, Inc.,
11.375%, 1-31-2003 (A)............... 1,000 1,040,000
General Medical Corporation:
10.875%, 8-15-2003 .................. 3,000 3,000,000
12.125%, 8-15-2005 .................. 2,385 2,396,046
Total ............................... 6,436,046
Wholesale Trade - Nondurable Goods - 2.22%
AmeriSource Distribution Corporation,
11.25%, 7-15-2005 ................... 1,100 1,196,486
Corporate Express, Inc.,
9.125%, 3-15-2004 ................... 2,000 2,045,000
Hines Horticulture, Inc.,
11.75%, 10-15-2005 .................. 2,000 2,120,000
United Stationers Supply Co.,
12.75%, 5-1-2005 .................... 2,500 2,825,000
Total ............................... 8,186,486
See Notes to Schedule of Investments on pages 18 and 19.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
TOTAL CORPORATE DEBT SECURITIES - 90.37% $333,021,793
(Cost: $328,601,850)
TOTAL SHORT-TERM SECURITIES - 2.39% $ 8,797,668
(Cost: $8,797,668)
TOTAL INVESTMENT SECURITIES - 98.45% $362,781,456
(Cost: $361,501,974)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 1.55% 5,714,585
NET ASSETS - 100.00% $368,496,041
See Notes to Schedule of Investments on pages 18 and 19.
<PAGE>
THE INVESTMENTS OF
UNITED HIGH INCOME FUND II, INC.
MARCH 31, 1996
Notes to Schedule of Investments
* No income dividends were paid during the preceding 12 months.
(A) As of March 31, 1996, the following restricted securities were owned:
Shares/
Principal
Acquisition Amount Market
Security Date in 000's Cost Value
-------- ----------- --------------------------------
Consolidated Hydro, Inc.,
Warrants 6/15/93 5,400$ 127,817 $ 5
IntelCom Group Inc.,
Warrants 8/3/95 7,425 28,881 59,400
K-III Communications
Corporation,
Preferred 1/19/96 10,000 1,000,000 982,500
AMF Group Inc.:
0.0%, 3-15-2006 3/7/96 $1,750 967,645 953,750
10.875%, 3-15-2006 3/7/96 1,250 1,250,000 1,243,750
Adams Outdoor Advertising
Limited Partnership,
10.75%, 3-15-2006 3/5/96 1,500 1,500,000 1,533,750
Allbritton Communications Company,
9.75%, 11-30-2007 2/1/96 2,000 1,990,000 1,885,000
Alvey Systems, Inc.,
11.375%, 1-31-20031/19/96 1,000 1,000,000 1,040,000
Assisted Living Concepts,
Inc., Convertible,
7.0%, 7-31-2005 8/2/95 1,000 1,000,000 1,290,000
Brooks Fiber Properties, Inc.,
0.0%, 3-1-2006 2/16/96 1,500 907,500 870,000
2/16/96 1,000 588,040 580,000
CS Wireless Systems, Inc.,
Units,
0.0%, 3-1-2006 2/16/96 100 2,294,840 2,140,000
Clark USA, Inc.,
10.875%, 12-1-200511/22/95 1,500 1,500,000 1,567,500
Cobb Theatres, L.L.C.,
10.625%, 3-1-2003 2/29/96 1,500 1,500,000 1,530,000
Continental Cablevision, Inc.,
8.3%, 5-15-2006 12/8/95 2,000 1,993,580 2,065,000
Granite Broadcasting Corporation,
9.375%, 12-1-2005 2/13/96 1,500 1,492,500 1,417,500
HMC Acquisition Properties, Inc.,
9.0%, 12-15-2007 12/15/95 1,500 1,500,000 1,417,500
International CableTel Incorporated,
0.0%, 2-1-2006 1/25/96 4,000 2,286,200 2,260,000
K-III Communications
Corporation,
8.5%, 2-1-2006 1/19/96 2,000 1,991,560 1,900,000
Knoll Group, Inc. (The),
10.875%, 3-15-2006 2/22/96 1,000 1,000,000 1,020,000
RBX Corporation,
11.25%, 10-15-2005 10/6/95 750 750,000 731,250
10/6/95 1,250 1,262,500 1,218,750
Rifkin Acquisition Partners, L.L.L.P.,
11.125%, 1-15-2006 1/26/96 1,000 1,000,000 1,015,000
2/6/96 500 516,250 507,500
Shared Technologies Fairchild
Communications Corp.,
0.0%, 3-1-2006 3/8/96 1,000 702,770 710,000
Showboat Marina Casino
Partnership,
13.5%, 3-15-2003 3/21/96 1,500 1,500,000 1,526,250
-----------------------
$31,650,083$31,464,405
=======================
The total market value of restricted securities represents approximately
8.54% of the total net assets at March 31, 1996.
(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.
(D) Each Unit consists of 1 Senior Discount Note due 3/1/2006 and 1.1 shares of
Common Stock.
(E) Each Unit consists of 10 Senior Discount Notes due 2/1/2006 and 32
warrants.
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, 1996
Assets
Investment securities -- at value (Notes 1 and 3) $362,781,456
Cash ............................................. 15,862
Receivables:
Interest and dividends .......................... 6,954,013
Investment securities sold ...................... 526,250
Fund shares sold ................................ 308,654
Prepaid insurance premium ........................ 12,493
------------
Total assets .................................. 370,598,728
------------
Liabilities
Payable for Fund shares redeemed ................. 1,585,986
Dividends payable ................................ 330,159
Accrued service fee .............................. 106,388
Accrued transfer agency and dividend disbursing .. 42,352
Accrued accounting services fee .................. 5,000
Other ............................................ 32,802
------------
Total liabilities ............................. 2,102,687
------------
Total net assets ............................. $368,496,041
============
Net Assets
$1.00 par value capital stock
Capital stock ................................... $ 90,293,386
Additional paid-in capital ...................... 326,697,244
Accumulated undistributed gain (loss):
Accumulated undistributed net realized
loss on investment transactions ............... (49,774,071)
Net unrealized appreciation in value of
investments at end of period .................. 1,279,482
------------
Net assets applicable to outstanding
units of capital ............................. $368,496,041
============
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $4.08
Class Y .......................................... $4.08
Capital shares outstanding
Class A .......................................... 89,911,009
Class Y .......................................... 382,377
Capital shares authorized .......................... 400,000,000
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND II, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended MARCH 31, 1996
Investment Income
Income:
Interest ....................................... $17,365,406
Dividends ....................................... 130,947
-----------
Total income .................................. 17,496,353
-----------
Expenses (Note 2):
Investment management fee ....................... 1,036,779
Service fee - Class A ........................... 270,982
Transfer agency and dividend disbursing - Class A 270,505
Accounting services fee ......................... 30,000
Legal fees ...................................... 21,959
Audit fees ...................................... 17,674
Custodian fees .................................. 10,313
Shareholder servicing - Class Y.................. 219
Other ........................................... 72,972
-----------
Total expenses ................................ 1,731,403
-----------
Net investment income ........................ 15,764,950
-----------
Realized and Unrealized Gain (Loss) on Investments
Realized net loss on investments ................. (254,544)
Unrealized appreciation in value of investments
during the period ............................... 4,528,641
-----------
Net gain on investments ......................... 4,274,097
-----------
Net increase in net assets resulting
from operations .............................. $20,039,047
===========
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND II, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the For the
six months fiscal year
ended ended
March 31, September 30,
1996 1995
Increase (Decrease) in Net Assets ------------ ------------
Operations:
Net investment income ...............$ 15,764,950 $ 32,004,221
Realized net loss on
investments ...................... (254,544) (9,062,829)
Unrealized appreciation ............. 4,528,641 15,239,840
------------ ------------
Net increase in net assets
resulting from operations ........ 20,039,047 38,181,232
------------ ------------
Dividends to shareholders from
net investment income:*
Class A ............................. (15,752,676) (32,004,221)
Class Y ............................. (12,274) ---
------------ ------------
(15,764,950)(32,004,221)
------------ ------------
Capital share transactions:
Proceeds from sale of shares
Class A (3,153,861 and 7,993,791
shares, respectively) ............ 12,891,795 31,537,803
Class Y (391,334 and 0
shares, respectively) ............ 1,623,999 ---
Proceeds from reinvestment of
dividends
Class A (3,421,334 and 7,199,082
shares, respectively) ............ 13,987,277 28,417,425
Class Y (2,640 and 0
shares, respectively) ............ 10,798 ---
Payments for shares redeemed
Class A (7,824,511 and 15,495,006
shares, respectively) ............ (32,025,495) (60,993,212)
Class Y (11,597 and 0
shares, respectively) ............ (48,075) ---
------------ ------------
Net decrease in net assets
resulting from capital
share transactions ............... (3,559,701) (1,037,984)
------------ ------------
Total increase ................... 714,396 5,139,027
Net Assets
Beginning of period .................. 367,781,645 362,642,618
------------ ------------
End of period ........................$368,496,041 $367,781,645
============ ============
Undistributed net investment
income ............................ $--- $---
==== ====
*See "Financial Highlights" on pages 23 - 24.
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND II, 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 ------------------------------------
3/31/96 1995 1994 1993 1992 1991
------- ------ ------ ------ ------ ------
Net asset value,
beginning of
period ............ $4.03 $3.96 $4.21 $4.06 $3.75 $3.45
----- ----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... 0.17 0.35 .35 .36 .39 .45
Net realized and
unrealized gain
(loss) on
investments ..... 0.05 0.07 (0.25) .15 .31 .30
----- ----- ----- ----- ----- -----
Total from investment
operations ....... 0.22 0.42 .10 .51 .70 .75
----- ----- ----- ----- ----- -----
Less dividends declared
from net investment
income ............ (0.17) (0.35) (0.35) (0.36) (0.39) (0.45)
----- ----- ----- ----- ----- -----
Net asset value,
end of period .... $4.08 $4.03 $3.96 $4.21 $4.06 $3.75
===== ===== ===== ===== ===== =====
Total return* ...... 5.60% 11.25% 2.31% 13.07% 19.31% 23.66%
Net assets, end of
period (000
omitted) .........$366,936$367,782$362,643$380,819$345,376$291,436
Ratio of expenses to
average net assets 0.93%** 0.89% 0.88% 0.80% 0.82% 0.89%
Ratio of net investment
income to average
net assets ....... 8.48%** 8.93% 8.41% 8.64% 9.79% 12.94%
Portfolio turnover
rate ............. 25.67% 26.82% 47.05% 69.24% 80.28% 53.88%
*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.
FINANCIAL HIGHLIGHTS
Class Y Shares
For a Share of Capital Stock Outstanding
Throughout the Period:
For the
period
from 2/27/96
through
3/31/96*
--------
Net asset value,
beginning of period $4.15
-----
Income from investment
operations:
Net investment
income .......... 0.03
Net realized and
unrealized loss
on investments... (0.07)
-----
Total from investment
operations ........ (0.04)
-----
Less dividends declared
from net investment
income ............ (0.03)
-----
Net asset value,
end of period ..... $4.08
=====
Total return ....... -1.00%
Net assets, end of
period (000
omitted) ......... $1,560
Ratio of expenses
to average net
assets ............ 0.81%**
Ratio of net
investment income
to average net
assets ............ 8.63%**
Portfolio
turnover rate ..... 25.67%
*On January 12, 1996, the Fund began offering Class Y shares to the public.
Fund
shares outstanding prior to that date were designated Class A shares.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED HIGH INCOME FUND II, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
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. Its investment objective is to provide a high level of current income,
by investing primarily in a diversified portfolio of high-yield, high-risk
fixed-income securities, with a secondary objective of capital growth when
consistent with the primary objective. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles.
A. Security valuation -- Each stock and convertible bond is valued at the
latest sale price thereof on the last business day of the fiscal period as
reported by the principal securities exchange on which the issue is traded
or, if no sale is reported for a stock, the average of the latest bid and
asked prices. Bonds, other than convertible bonds, are valued using a
pricing system provided by a 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.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
NOTE 2 -- Investment Management and Payments to Affiliated Persons
The Fund pays a fee for investment management services. The fee is
computed daily based on the net asset value at the close of business. 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 $14.0 billion of
combined net assets at March 31, 1996) 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
For Class A shares, 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. With respect to Class Y shares, the
Fund pays WARSCO a monthly fee at an annual rate of .15% of the average daily
net assets of the class for the preceding month. The Fund also reimburses W&R
and WARSCO for certain out-of-pocket costs.
As principal underwriter for the Fund's shares, W&R received direct and
indirect gross sales commissions for Class A shares (which are not an expense of
the Fund) of $471,756, out of which W&R paid sales commissions of $261,282 and
all expenses in connection with the sale of Fund shares, except for registration
fees and related expenses.
Under a 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
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 $7,699.
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 $100,667,023 while proceeds from maturities and
sales aggregated $88,936,299. Purchases of short-term securities aggregated
$155,274,207 while proceeds from maturities and sales aggregated $168,410,077.
No U.S. Government securities were bought or sold during the period ended March
31, 1996.
For Federal income tax purposes cost of investments owned at March 31, 1996
was $361,033,238, resulting in net unrealized appreciation of $1,748,218, of
which $15,212,545 related to appreciated securities and $13,464,327 related to
depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized net capital losses of
$390,078 during its fiscal year ended September 30, 1995 including the effect of
losses of $8,672,751 which were deferred to the year ending September 30, 1996
(see discussion below). Capital loss carryforwards aggregated $41,040,060 at
September 30, 1995 and are available to offset future realized capital gain net
income for Federal income tax purposes through September 30, 1998; $40,548,748
of this amount is available through September 30, 1999; $8,619,748 is available
through September 30, 2000 and $390,078 is available through September 30, 2003.
Internal Revenue Code regulations permit the Fund to defer into its next
fiscal year net capital losses incurred between each November 1 and the end of
its next fiscal year ("post-October losses"). From November 1, 1994 through
September 30, 1995, the Fund incurred net long-term capital losses of $8,672,751
which have been deferred to the fiscal year ending September 30, 1996.
NOTE 5 -- Commencement of Multiclass Operations
On January 21, 1996, the Fund was authorized to offer investors a choice of
two classes of shares, Class A and Class Y, each of which has equal rights as to
assets and voting privileges. Class Y shares are not subject to a sales charge
on purchases; they are not subject to a Rule 12b-1 Service Plan and have a
separate transfer agency and dividend disbursement services fee structure. A
comprehensive discussion of the terms under which shares of either class are
offered is contained in the prospectus and the Statement of Additional
Information for the Fund. The Fund commenced multiclass operations on February
27, 1996.
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
relative net assets as of the beginning of each day adjusted for the prior day's
capital share activity.
<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, 1996, the results of its operations for the six months
then ended and the changes in its net assets and the financial highlights for
each of 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, 1996 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 10, 1996
<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
Linda Graves, Topeka, Kansas
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Los Angeles, California
Doyle Patterson, Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Keith A. Tucker, Overland Park, Kansas
Frederick Vogel III, Milwaukee, Wisconsin
Paul S. Wise, Carefree, Arizona
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
Our INTERNET address is:
http://www.waddell.com
NUR1015SA(3-96)
printed on recycled paper
