Waddell & Reed
Advisors Global
Bond Fund, Inc.
ANNUAL
REPORT
---------------------------------------
For the fiscal year ended September 30, 2000
<PAGE>
CONTENTS
3 Manager's Letter
6 Performance Summary
8 Portfolio Highlights
9 Investments
19 Statement of Assets and Liabilities
20 Statement of Operations
21 Statement of Changes in Net Assets
22 Financial Highlights
26 Notes to Financial statements
32 Independent Auditors' Report
33 Income Tax Information
34 Directors & Officers
This report is submitted for the general information of the shareholders of
Waddell & Reed Advisors Global Bond Fund, Inc.. It is not authorized for
distribution to prospective investors in the Fund unless accompanied with or
preceded by the Waddell & Reed Advisors Global Bond Fund, Inc. current
prospectus and current Fund performance information.
<PAGE>
MANAGER'S LETTER
-----------------------------------------------------------------
SEPTEMBER 30, 2000
Dear Shareholder,
This report relates to the operation of the Waddell & Reed Advisors Global Bond
Fund, Inc. (formerly United High Income Fund II, Inc.) for the fiscal year ended
September 30, 2000. The following discussion, graphs and tables provide you
with information regarding the Fund's performance during the period.
As of September 18, 2000, the Fund began moving in a new direction. Future
strategies and investments will no longer reflect the past. The Fund will still
emphasize high income, but will attempt to achieve its objective through the use
of higher-grade corporate bonds. We will attempt to achieve this through
investments in companies that operate on a global scale or operate outside of
the United States, encompassing both U.S. global companies and foreign issuers.
It is the strategy of the Fund to invest primarily in U.S. dollar-denominated
issues. We feel that this change in strategy, which necessitated a change in
fund management, will allow us to tap into value created as more foreign issuers
borrow in the U.S. market and borrow in U.S. dollars in the global market.
Currently, we feel that financial markets are in the process of sorting out a
variety of themes. The primary concerns appear to be the direction of economic
growth, energy prices and the U.S. presidential election -- and what impact
these will have on inflation, interest rates, and certain sectors of the stock
market. Also of concern are the U.S. current account deficit, the U.S. dollar
and the value of the euro.
The upside potential is that this non-inflationary growth could continue, aided
by continued strong capital investment in technology. Capital investment in
technology often drives even greater improvements in productivity, which could
power the financial markets upward.
The downside risk is a cyclical decline in productivity as the economy slows in
response to tighter monetary policy and higher energy prices. This could lead
to higher costs of capital, a loss of foreign investment in U.S. markets, and
thus a decline of the dollar. The response would likely have to be tighter
fiscal and monetary policies.
Globally, we believe that Western Europe must show stronger growth for the euro
to recover. We feel that government intervention schemes, such as the one in
late September, are doomed to failure if the fundamentals of the economy don't
support it. One big question mark is how quickly European capital flows into
the U.S. might reverse if the Europeans believe U.S. growth will continue to
slow. Since 1996, foreigners have purchased over $500 billion worth of U.S.
corporate debt. In 1999, they bought approximately 35 percent of all U.S.
corporate issues.
In our opinion, Latin American, Asian and East European countries must continue
to spread democracy through a greater transparency in the political process (as
Mexico did in its last election), a stronger rule of law, and constitutional
changes that revamp decades-old and out-of-date pension schemes and government
fiscal and monetary responsibilities. During the coming year, we will continue
to monitor activities in these regions. For the time being, we anticipate that
our focus in emerging markets will be on Latin America.
During the last 12 months, the performance of the Fund largely reflected its
orientation as a domestic high yield fund. In contrast to the relatively weak
performance of domestic high yield funds, global bond fund indices have
performed markedly better. Therefore, for the year, the Fund declined 5.56
percent, while the new benchmark indices for the Fund did much better: the
Lipper Global Income Funds Universe Average (which reflects the universe offunds
with similar investment objectives and strategies) returned 0.34 percent
for the year and the Lehman Brothers U.S. Dollar-Denominated Universal Index
(which reflects the performance of securities that generally represent the
global bond market) returned 7.28 percent for the same period. The Lehman
Brothers index replaces the Salomon Brothers High Yield Composite Index in this
year's report. Due to the changes in the Fund described above, we believe that
this new index provides a more accurate basis for comparing the Fund's
performance to the types of securities in which the Fund invests. Both indexes
are presented in this year's report for comparison purposes. The Lipper
category assigned to the Fund by Lipper, Inc. has also changed from last year's
report.
Going forward, the continued uncertainty in the markets leads us to be cautious,
but opportunistic. We currently exhibit caution by investing in short-term
(one- to five-year) bonds while we await an opportunity to extend maturity. In
our opinion, the volatility in global bond markets today presents many
opportunities to obtain higher yields on those short instruments. We remain
committed at this time to being nearly completely invested in U.S. dollar-
denominated bonds. It is our belief that the euro has not yet stabilized and
therefore investment in euro-denominated bonds isn't warranted.
As always, we remain committed to solid credit research. We intend to emphasize
investments in companies with current positive cash flows rather than companies
with the promise of positive cash flows at some point in the future. In
closing, we would like to thank you for your commitment and support to the
Waddell & Reed Advisors Global Bond Fund.
Sincerely,
Dan Vrabac, Manager
Waddell & Reed Advisors Global Bond Fund, Inc.
<PAGE>
Comparison of Change in Value of $10,000 Investment
==== Waddell & Reed Advisors Global Bond Fund, Inc., Class A Shares --
$24,233*
- - - Lehman Brothers U.S. Dollar-Denominated Universal Index -- $21,942
---- Salomon Brothers High Yield Composite Index -- $31,895
+ + + Lipper Global Income Funds Universe Average -- $18,763
Lehman
Waddell Brothers
& Reed U.S. Salomon Lipper
Advisors Dollar- Brothers Global
GlobalDenominated High Yield Income Funds
Bond Universal Composite Universe
Fund, Inc. Index Index Average
------------------ --------- ----------
09-30-90 $ 9,425 $10,000 $10,000 $10,000
09-30-91 11,655 11,630 13,637 11,205
09-30-92 13,905 13,106 16,819 12,437
09-30-93 15,723 14,455 19,427 13,797
09-30-94 16,087 14,042 19,704 13,522
09-30-95 17,896 15,971 23,049 15,088
09-30-96 20,027 16,886 25,568 16,731
09-30-97 23,272 18,621 29,703 17,992
09-30-98 23,556 20,333 30,577 18,579
09-30-99 24,183 20,452 31,568 18,699
09-30-00 24,233 21,942 31,895 18,763
*The value of the investment in the Fund is impacted by the sales load at the
time of the investment and by the ongoing expenses of the Fund.
Average Annual Total Return+
Class A Class B Class C Class Y
----------------------------------------------
Year Ended
9-30-00 -5.56% --- --- 0.53%
5 Years Ended
9-30-00 5.00% --- --- ---
10 Years Ended
9-30-00 9.25% --- --- ---
Since inception of
Class++ through
9-30-00 --- -5.46% -1.87% 5.56%
+Performance data quoted represents past performance and is based on deduction
of the maximum applicable sales load for each of the periods. Class A shares
carry a maximum front-end sales load of 5.75%. Class B and Class C shares
carry maximum contingent deferred sales charges of 5% and 1%, respectively.
Total returns reflect share price appreciation, including reinvestment of all
income and capital gains distributions. Investment return and principal value
will fluctuate and an investor's shares, when redeemed, may be worth more or
less than their original cost.
++10-6-99 for Class B shares and Class C shares and 2-27-96 for Class Y shares
(the date on which shares were first acquired by shareholders).
Past performance is not predictive of future performance. Indexes are
unmanaged.
Performance data quoted represents periods prior to changes in the Fund's name,
strategies and policies (effective September 18, 2000). Prior to September 18,
2000, the Fund sought to achieve its goals by investing primarily in junk bonds,
with minimal investment in foreign securities. Accordingly, the performance
information above for periods prior to that date reflects the operation of the
Fund under its former investment strategies and related policies.
<PAGE>
SHAREHOLDER SUMMARY
--------------------------------------------------------------
Waddell & Reed Advisors Global Bond Fund, Inc.
PORTFOLIO STRATEGY:
Invests, primarily, in GOALS: To seek, as a primary
intermediate-term bonds goal, a high level of
(range of one to ten year current income, with a
maturity) secondary goal of capital growth
May invest up to 35% of
assets in non-investment STRATEGY: Invests primarily in U.S.
grade junk bonds dollar-denominated
investment grade debt
Maximum 20% Common Stock securities of foreign and U.S. issuers.
Invests primarily in issuers in
countries that are members of the
Organization of Economic Co-Operation
and Development (OECD).
FOUNDED: 1986
SCHEDULED DIVIDEND FREQUENCY: MONTHLY
<PAGE>
PERFORMANCE SUMMARY -- Class A Shares
PER SHARE DATA
For the Fiscal Year Ended September 30, 2000
---------------------------------------
DIVIDENDS PAID $0.33
=====
NET ASSET VALUE ON
9-30-00 $3.56
9-30-99 3.88
------
CHANGE PER SHARE $(0.32)
======
Past performance is not necessarily indicative of future results.
<PAGE>
AVERAGE ANNUAL TOTAL RETURN (1)
Class A Class B
----------------------- ------------------------
With Without With Without
Period Sales Load(2) Sales Load(3) CDSC(4) CDSC(5)
------ ---------- ---------- ----------- ----------
1-year period
ended 9-30-00 -5.56% 0.21% --- ---
5-year period
ended 9-30-00 5.00% 6.25% --- ---
10-year period
ended 9-30-00 9.25% 9.90% --- ---
Cumulative return
since inception
of Class (6) --- --- -5.46% -0.87%
(1)Performance data represents share price appreciation, including reinvestment
of all income and capital gains distributions. Performance data represents
past performance and is no guarantee of future results. Share price,
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.
(2)Performance data is based on deduction of 5.75% sales load on the initial
purchase in the periods.
(3)Performance data does not take into account the sales load deducted on an
initial purchase.
(4)Performance data reflects the effect of paying the applicable contingent
deferred sales charge (CDSC) at a maximum of 5.00% upon redemption at the end
of the period.
(5)Performance data does not reflect the effect of paying the applicable CDSC
upon redemption at the end of the period.
(6)10-6-99 for Class B shares (the date on which shares were first acquired by
shareholders).
AVERAGE ANNUAL TOTAL RETURN(1)
Class C Class Y(2)
----------------------- ----------
With Without
Period CDSC(3) CDSC(4)
------ ---------- ----------
1-year period
ended 9-30-00 --- --- 0.53%
5-year period
ended 9-30-00 --- --- ---
10-year period
ended 9-30-00 --- --- ---
Cumulative return
since inception
of Class(5) -1.87% -0.95% ---
Since inception
of Class(5) --- --- 5.56%
(1)Performance data represents share price appreciation, including reinvestment
of all income and capital gains distributions. Performance data represents
past performance and is no guarantee of future results. Share price,
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.
(2)Performance data does not include the effect of sales charges, as Class Y
shares are not subject to these charges.
(3)Performance data reflects the effect of paying the applicable contingent
deferred sales charge (CDSC) at a maximum of 1.00% which declines to zero at
the end of the first year after investment.
(4)Performance data does not reflect the effect of paying the applicable CDSC
upon redemption at the end of the period.
(5)10-6-99 for Class C shares and 2-27-96 for Class Y shares (the date on which
shares were first acquired by shareholders).
Performance data quoted represents periods prior to changes in the Fund's name,
strategies and policies (effective September 18, 2000). Prior to September 18,
2000, the Fund sought to achieve its goals by investing primarily in junk bonds,
with minimal investment in foreign securities. Accordingly, the performance
information above for periods prior to that date reflects the operation of the
Fund under its former investment strategies and related policies.
<PAGE>
PORTFOLIO HIGHLIGHTS
On September 30, 2000, Waddell & Reed Advisors Global Bond Fund, Inc. had net
assets totaling $301,746,820 invested in a diversified portfolio of:
52.69% Cash and Cash Equivalents
40.14% Corporate Debt Securities
4.53% Common and Preferred Stocks and Warrants
2.64% Other Government Securities
As a shareholder of Waddell & Reed Advisors Global Bond Fund, Inc., for every
$100 you had invested on September 30, 2000, your Fund owned:
$52.69 Cash and Cash Equivalents
21.50 Transportation, Communication, Electric
and Sanitary Services Bonds
12.42 Manufacturing Bonds
4.53 Common and Preferred Stocks and Warrants
3.61 Miscellaneous Bonds
2.64 Other Government Securities
2.61 Services Bonds
<PAGE>
THE INVESTMENTS OF
WADDELL & REED ADVISORS GLOBAL BOND FUND, INC.
SEPTEMBER 30, 2000
Shares Value
COMMON AND PREFERRED STOCKS
AND WARRANTS
Business Services - 0.00%
Cybernet Internet Services
International, Inc., Warrants (A)* .. 1,000 $ 7,500
Chemicals and Allied Products - 0.95%
Smith International, Inc.* ........... 35,000 2,854,687
Communication - 2.50%
Allegiance Telecom, Inc., Warrants (A)* 2,500 137,500
Crown Castle International Corp.* .... 30,000 930,937
GT Group Telecom, Inc., Warrants (A)* 2,250 151,875
IntelCom Group Inc., Warrants (A)* ... 7,425 743
Intermedia Communications Inc.,
13.5% Preferred ..................... 4,009 3,828,792
MetroNet Communications Corp.,
Warrants (A)* ....................... 1,000 90,000
Microcell Telecommunications Inc.,
Warrants (A)* ....................... 20,000 1,247,940
ONO Finance Plc, Rights (A)* ......... 2,500 212,500
OnePoint Communications Corp.,
Warrants (A)* ....................... 2,000 170,000
Powertel, Inc., Warrants* ............ 5,600 302,400
Primus Telecommunications Group,
Incorporated, Warrants* ............. 2,000 11,000
VersaTel Telecom International N.V.,
Warrants (A)* ....................... 1,500 465,000
Total ............................... 7,548,687
Electric, Gas and Sanitary Services - 0.01%
Consolidated Hydro, Inc.,
Class B Warrants* ................... 7,578 26,523
Consolidated Hydro, Inc.,
Class C Warrants* ................... 4,919 49
Total ............................... 26,572
Electronic and Other Electric Equipment - 0.10%
Metricom, Inc., Warrants* ............ 1,250 18,750
PF.Net Communications, Warrants (A)* . 1,250 268,750
Total ............................... 287,500
Nondepository Institutions - 0.28%
California Federal Preferred Capital
Corporation, 9.125% Preferred ....... 37,500 848,437
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
WADDELL & REED ADVISORS GLOBAL BOND FUND, INC.
SEPTEMBER 30, 2000
Shares Value
COMMON AND PREFERRED STOCKS AND
WARRANTS (Continued)
Petroleum and Coal Products - 0.69%
Royal Dutch Petroleum Company,
NY Shares ........................... 35,000 $ 2,097,813
TOTAL COMMON AND PREFERRED STOCKS
AND WARRANTS - 4.53% $13,671,196
(Cost: $10,251,444)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Agricultural Production - Crops - 0.43%
Hines Horticulture, Inc.,
11.75%, 10-15-05 .................... $ 1,301 1,307,505
Amusement and Recreation Services -0.47%
Premier Parks Inc.,
9.75%, 6-15-07 ...................... 1,500 1,410,000
Auto Repair, Services and Parking - 0.72%
Avis Rent A Car, Inc.,
11.0%, 5-1-09 ....................... 2,000 2,175,000
Automotive Dealers and Service Stations - 0.25%
TravelCenters of America, Inc.,
10.25%, 4-1-07 ...................... 750 759,375
Business Services - 1.10%
Adams Outdoor Advertising Limited Partnership,
10.75%, 3-15-06 ..................... 1,750 1,813,437
National Equipment Services, Inc.,
10.0%, 11-30-04 ..................... 1,950 1,501,500
Total ............................... 3,314,937
Cable and Other Pay Television Services - 4.05%
CSC Holdings, Inc.,
8.125%, 8-15-09 ..................... 2,000 1,972,980
Diamond Holdings plc,
9.125%, 2-1-08 ...................... 1,500 1,365,000
United International Holdings, Inc.,
0.0%, 2-15-08 (B) ................... 3,500 2,380,000
Comcast UK Cable Partners Limited,
0.0%, 11-15-07 (B) .................. 4,000 3,780,000
Telewest Communications plc,
0.0%, 10-1-07 (B) ................... 2,850 2,721,750
Total ............................... 12,219,730
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
WADDELL & REED ADVISORS GLOBAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Chemicals and Allied Products - 0.66%
Hanson Overseas Finance B.V.,
7.375%, 1-15-03 ..................... $ 2,000 $ 1,998,900
Communication - 13.80%
Alestra, S. de R.L. de C.V.,
12.625%, 5-15-09 .................... 2,250 2,154,375
Concentric Network Corporation,
12.75%, 12-15-07 .................... 1,000 1,005,000
Dominion Resources, Inc.,
7.4%, 9-16-02 ....................... 2,000 2,000,080
ESAT Telecom Group PLC,
11.875%, 11-1-09 (C) ................ EUR2,000 2,173,656
GST Telecommunications,
0.0%, 11-15-07 (B)(D) ............... $2,500 18,750
GT Group Telecom, Inc.,
0.0%, 2-1-10 (A)(B) ................. 2,250 978,750
Grupo Televisa, S.A.,
8.625%, 8-8-05 ...................... 2,000 1,965,000
Hyperion Telecommunications, Inc.:
0.0%, 4-15-03 (B) ................... 5,000 4,062,500
12.0%, 11-1-07 ...................... 375 243,750
ITC /\ DeltaCom, Inc.,
11.0%, 6-1-07 ....................... 500 475,000
Intercel, Inc.,
0.0%, 2-1-06 (B) .................... 1,750 1,758,750
Intermedia Communications of Florida, Inc.,
0.0%, 5-15-06 (B) ................... 1,250 1,187,500
MetroNet Communications Corp.,
0.0%, 6-15-08 (B) ................... 2,500 2,087,150
Nextel International, Inc.,
12.75%, 8-1-10 (A) .................. 1,500 1,473,750
ONO Finance Plc,
13.0%, 5-1-09 ....................... 2,500 2,225,000
OnePoint Communications Corp.,
14.5%, 6-1-08 ....................... 2,000 2,010,000
Primus Telecommunications Group, Incorporated:
11.75%, 8-1-04 ...................... 2,000 1,130,000
12.75%, 10-15-09 .................... 1,000 560,000
Rogers Communications Inc.,
9.125%, 1-15-06 ..................... 3,000 3,030,000
Sprint Spectrum L.P.,
0.0%, 8-15-06 (B) ................... 5,100 5,019,216
TV Azteca, S.A. de C.V.,
10.125%, 2-15-04 .................... 2,000 1,932,500
Time Warner Telecom LLC and Time Warner
Telecom Inc.,
9.75%, 7-15-08 ...................... 1,750 1,623,125
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
WADDELL & REED ADVISORS GLOBAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Communication (Continued)
Triton PCS, Inc.,
0.0%, 5-1-08 (B) .................... $1,250 $ 950,000
VoiceStream Wireless Corporation,
10.375%, 11-15-09 ................... 1,475 1,585,625
Total ............................... 41,649,477
Eating and Drinking Places - 0.25%
NE Restaurant Company, Inc.,
10.75%, 7-15-08 ..................... 1,000 765,000
Electric, Gas and Sanitary Services - 3.65%
Camuzzi Gas Pampeana and
Camuzzi Gas del Sur,
9.25%, 12-15-01 ..................... 2,000 1,999,000
El Paso Electric Company:
8.9%, 2-1-06 ........................ 2,000 2,091,880
9.4%, 5-1-11 ........................ 2,000 2,144,380
El Paso Natural Gas Company,
7.75%, 1-15-02 ...................... 2,000 2,013,740
Transportadora de Gas del Sur S.A.,
10.375%, 4-15-03 (A) ................ 1,750 1,780,625
WMX Technologies, Inc.,
6.7%, 5-1-01 ........................ 1,000 989,670
Total ............................... 11,019,295
Electronic and Other Electric Equipment - 1.06%
Elgar Holdings, Inc.,
9.875%, 2-1-08 ...................... 1,250 718,750
PF.Net Communications,
13.75%, 5-15-10 (A) ................. 1,250 956,250
TeleCorp PCS, Inc.,
10.625%, 7-15-10 (A) ................ 1,500 1,515,000
Total ............................... 3,190,000
Fabricated Metal Products - 0.76%
Crown Cork & Seal Company, Inc.,
7.125%, 9-1-02 ...................... 2,000 1,901,740
Neenah Corporation,
11.125%, 5-1-07 ..................... 500 390,000
Total ............................... 2,291,740
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
WADDELL & REED ADVISORS GLOBAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Food and Kindred Products - 1.14%
B & G Foods, Inc.,
9.625%, 8-1-07 ...................... $2,000 $ 1,450,000
Diageo Capital plc,
6.0%, 3-27-03 ....................... 1,000 981,470
Coca-Cola FEMSA, S.A. de C.V.,
8.95%, 11-1-06 ...................... 1,000 1,005,000
Total ............................... 3,436,470
Food Stores - 0.34%
Big V Supermarkets, Inc.,
11.0%, 2-15-04 ...................... 1,500 1,027,500
Furniture and Home Furnishings Stores - 0.45%
Grupo Elektra, S.A. de C.V.,
12.75%, 5-15-01 ..................... 1,000 1,035,000
MTS, INCORPORATED,
9.375%, 5-1-05 ...................... 750 323,438
Total ............................... 1,358,438
Hotels and Other Lodging Places - 0.32%
Lodgian Financing Corp.,
12.25%, 7-15-09 ..................... 1,150 977,500
Industrial Machinery and Equipment - 0.57%
Tyco International Group S.A.,
6.25%, 6-15-03 ...................... 1,750 1,704,675
Insurance Carriers - 0.35%
LifePoint Hospitals Holdings, Inc.,
10.75%, 5-15-09 ..................... 1,000 1,057,500
Nondepository Institutions - 0.55%
Banco Nacional de Comercio Exterior, S.N.C.,
Trust Division, Trustee of
Fideicomiso Huites,
8.0%, 8-5-03 (A) .................... 630 628,425
Nacional Financiera, S.N.C.,
9.375%, 7-15-02 (A) ................. 1,000 1,030,000
Total ............................... 1,658,425
Oil and Gas Extraction - 0.68%
Pemex Finance Ltd.,
9.14%, 8-15-04 ...................... 2,000 2,058,520
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
WADDELL & REED ADVISORS GLOBAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Paper and Allied Products - 2.17%
Container Corporation of America:
10.75%, 5-1-02 ...................... $2,000 $ 2,027,500
11.25%, 5-1-04 ...................... 1,000 1,011,250
Federal Paper Board Company, Inc.,
8.125%, 7-1-02 ...................... 2,000 2,022,980
Mail-Well I Corporation,
8.75%, 12-15-08 ..................... 1,750 1,496,250
Total ............................... 6,557,980
Petroleum and Coal Products - 0.29%
Building Materials Corporation of America,
8.0%, 12-1-08 ....................... 1,400 861,000
Primary Metal Industries - 1.91%
CSN Islands Corp.,
9.625%, 8-2-02 (A) .................. 2,000 2,005,000
Commonwealth Aluminum Corporation,
10.75%, 10-1-06 ..................... 2,000 1,860,000
ISG Resources, Inc.,
10.0%, 4-15-08 ...................... 1,750 1,461,250
Wheeling-Pittsburgh Corporation,
9.25%, 11-15-07 ..................... 1,250 437,500
Total ............................... 5,763,750
Printing and Publishing - 0.31%
Quebecor Printing Capital Corporation,
6.5%, 8-1-27 ........................ 1,000 931,100
Rubber and Miscellaneous Plastics Products - 0.93%
Graham Packaging Company and
GPC Capital Corp. I,
8.75%, 1-15-08 ...................... 1,500 1,275,000
Home Products International, Inc.,
9.625%, 5-15-08 ..................... 2,500 1,525,000
Total ............................... 2,800,000
Stone, Clay and Glass Products - 0.67%
Cemex, S.A. de C.V.,
8.625%, 7-18-03 (A) ................. 2,000 2,025,000
Textile Mill Products - 0.93%
Anvil Knitwear, Inc.,
10.875%, 3-15-07 .................... 1,500 1,346,250
Consoltex Group Inc.,
11.0%, 10-1-03 ...................... 2,000 1,465,000
Total ............................... 2,811,250
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
WADDELL & REED ADVISORS GLOBAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Transportation Equipment - 1.02%
Martin Marietta Corporation,
9.0%, 3-1-03 ........................ $2,000 $ 2,073,920
TRW Inc.,
6.5%, 6-1-02 ........................ 1,000 986,160
Total ............................... 3,060,080
Wholesale Trade - Durable Goods - 0.31%
Heafner (J.H.) Company, Inc. (The),
10.0%, 5-15-08 ...................... 2,500 937,500
TOTAL CORPORATE DEBT SECURITIES - 40.14% $121,127,647
(Cost: $135,283,959)
OTHER GOVERNMENT SECURITIES
Argentina - 0.66%
Republic of Argentina (The),
9.25%, 2-23-01 ...................... 2,000 1,997,000
Brazil - 0.66%
FEDERATIVE REPUBLIC OF BRAZIL,
8.875%, 11-5-01 ..................... 2,000 2,010,000
Mexico - 1.32%
United Mexican States,
9.75%, 4-6-05 ....................... 3,750 3,975,000
TOTAL OTHER GOVERNMENT SECURITIES - 2.64% $ 7,982,000
(Cost: $7,770,167)
SHORT-TERM SECURITIES
Cable and Other Pay Television Services - 4.28%
Viacom Inc.:
6.7%, 10-11-00 ...................... 5,000 4,990,694
6.7%, 10-17-00 ...................... 7,940 7,916,356
Total ............................... 12,907,050
Communication - 4.96%
Bell Atlantic Financial Services, Inc.,
6.5%, 10-11-00 ...................... 15,000 14,972,917
Eating and Drinking Places - 2.89%
Marriott International, Inc.,
6.72%, 10-16-00 ..................... 8,735 8,710,542
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
WADDELL & REED ADVISORS GLOBAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Electric, Gas and Sanitary Services - 4.08%
Detroit Edison Co.,
6.85%, 10-3-00 ...................... $ 4,169 $ 4,167,414
Questar Corp.,
6.53%, 10-17-00 ..................... 8,175 8,151,274
Total ............................... 12,318,688
Food and Kindred Products - 5.07%
General Mills, Inc.,
6.67%, Master Note .................. 339 339,000
Nabisco, Inc.,
6.67%, 10-13-00 ..................... 15,000 14,966,650
Total ............................... 15,305,650
Food Stores - 4.97%
Kroger Co. (The),
7.05%, 10-2-00 ...................... 15,000 14,997,062
Insurance Carriers - 0.99%
Aon Corporation,
6.55%, 10-23-00 ..................... 3,012 2,999,944
Motion Pictures - 3.27%
Time Warner Entertainment Company, L.P.,
7.0%, 10-2-00 ....................... 9,866 9,864,082
Nondepository Institutions - 4.48%
PACCAR Financial Corp.,
6.49%, Master Note .................. 325 325,000
Penney (J.C.) Funding Corp.,
6.85%, 10-25-00 ..................... 13,250 13,189,492
Total ............................... 13,514,492
Paper and Allied Products - 2.80%
Westvaco Corp.,
6.7%, 11-9-00 ....................... 8,500 8,438,304
Railroad Transportation - 4.97%
Union Pacific Corporation:
7.05%, 10-3-00 ...................... 13,500 13,494,713
6.95%, 10-6-00 ...................... 1,500 1,498,552
Total ............................... 14,993,265
Transportation Equipment - 4.96%
Dana Corp.,
6.65%, 10-18-00 ..................... 15,000 14,952,896
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
WADDELL & REED ADVISORS GLOBAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Wholesale Trade - Nondurable Goods - 4.96%
Safeway Inc.,
6.66%, 10-11-00 ..................... $15,000 $ 14,972,250
TOTAL SHORT-TERM SECURITIES - 52.68% $158,947,142
(Cost: $158,947,142)
TOTAL INVESTMENT SECURITIES - 99.99% $301,727,985
(Cost: $312,252,712)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.01% 18,835
NET ASSETS - 100.00% $301,746,820
See Notes to Schedule of Investments on page 18.
<PAGE>
THE INVESTMENTS OF
WADDELL & REED ADVISORS GLOBAL BOND FUND, INC.
SEPTEMBER 30, 2000
Notes to Schedule of Investments
*No income dividends were paid during the preceding 12 months.
(A) Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may be resold in transactions exempt from registration, normally
to qualified institutional buyers. At September 30, 2000, the value of
these securities amounted to $15,144,608 or 5.02% of net assets.
(B) The security does not bear interest for an initial period of time and
subsequently becomes interest bearing.
(C) Principal amounts are denominated in the indicated foreign currency, where
applicable (EUR -- Euro).
(D) 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>
WADDELL & REED ADVISORS GLOBAL BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
(In Thousands, Except for Per Share Amounts)
Assets
Investment securities -- at value (Notes 1 and 3) $301,728
Cash ............................................ 58
Receivables:
Investment securities sold ...................... 3,514
Interest and dividends .......................... 2,881
Fund shares sold ................................ 257
Prepaid insurance premium ........................ 16
--------
Total assets .................................. 308,454
--------
Liabilities
Investment securities purchased ................... 5,099
Payable to Fund shareholders ...................... 1,158
Dividends payable ................................ 179
Accrued transfer agency and dividend
disbursing (Note 2).............................. 61
Accrued service fee (Note 2) ..................... 58
Accrued management fee (Note 2) .................. 10
Accrued accounting services fee (Note 2) ......... 5
Accrued distribution fee (Note 2) ................ 3
Other ............................................ 134
--------
Total liabilities ............................. 6,707
--------
Total net assets ............................. $301,747
========
Net Assets
$1.00 par value capital stock
Capital stock ................................... $ 84,816
Additional paid-in capital ...................... 288,424
Accumulated undistributed loss:
Accumulated undistributed net realized
loss on investment transactions ............... (60,965)
Net unrealized depreciation in value of
investments ................................... (10,528)
--------
Net assets applicable to outstanding
units of capital ............................. $301,747
========
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $3.56
Class B .......................................... $3.56
Class C .......................................... $3.56
Class Y .......................................... $3.56
Capital shares outstanding
Class A .......................................... 83,504
Class B .......................................... 540
Class C .......................................... 68
Class Y .......................................... 704
Capital shares authorized .......................... 400,000
See notes to financial statements.
<PAGE>
WADDELL & REED ADVISORS GLOBAL BOND FUND, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended SEPTEMBER 30, 2000
(In Thousands)
Investment Income
Income (Note 1B):
Interest and amortization ....................... $32,407
Dividends ....................................... 949
-------
Total income .................................. 33,356
-------
Expenses (Note 2):
Investment management fee ....................... 2,114
Service fee:
Class A ........................................ 801
Class B ........................................ 3
Class C ........................................ ---*
Transfer agency and dividend disbursing:
Class A ........................................ 715
Class B ........................................ 4
Class C ........................................ 1
Accounting services fee ......................... 54
Distribution fee:
Class A ........................................ 33
Class B ........................................ 8
Class C ........................................ 1
Audit fees ...................................... 20
Custodian fees .................................. 16
Legal fees ...................................... 6
Shareholder servicing - Class Y.................. 4
Other ........................................... 153
-------
Total expenses ................................ 3,933
-------
Net investment income ........................ 29,423
-------
Realized and Unrealized Gain (Loss) on
Investments (Notes 1 and 3)
Realized net loss on securities .................. (31,372)
Realized net gain on foreign currency transactions 13
.Realized gain on forward currency contracts 235
-------
Realized net loss on investments ................ (31,124)
-------
Unrealized appreciation in value of investments
during the period ............................. 3,268
-------
Net loss on investments ....................... (27,856)
-------
Net increase in net assets resulting
from operations ............................ $1,567
=======
*Not shown due to rounding.
See notes to financial statements.
<PAGE>
WADDELL & REED ADVISORS GLOBAL BOND FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
(Dollars In Thousands)
For the fiscal year ended
September 30,
-------------------------
2000 1999
Decrease in Net Assets ------------ ------------
Operations:
Net investment income ............... $29,423 $34,440
Realized net loss on
investments ...................... (31,124) (21,144)
Unrealized appreciation
(depreciation) .................... 3,268 (2,844)
-------- --------
Net increase in net assets
resulting from operations ........ 1,567 10,452
-------- --------
Dividends to shareholders from
net investment income (Note 1D):*
Class A ............................. (29,341) (34,192)
Class B ............................. (85) ---
Class C ............................. (12) ---
Class Y ............................. (233) (248)
-------- --------
(29,671) (34,440)
-------- --------
Capital share transactions
(Note 5) ............................ (43,848) (20,658)
-------- --------
Total decrease ................. (71,952) (44,646)
Net Assets
Beginning of period .................. 373,699 418,345
-------- --------
End of period ........................ 301,747 $373,699
======== ========
Undistributed net investment
income ............................ $--- $---
==== ====
*See "Financial Highlights" on pages 22 - 25.
See notes to financial statements.
<PAGE>
WADDELL & REED ADVISORS GLOBAL BOND FUND, INC.
FINANCIAL HIGHLIGHTS
Class A Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the fiscal year ended
September 30,
------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
Net asset value,
beginning of
period ............ $3.88 $4.12 $4.42 $4.14 $4.03
----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... 0.33 0.35 0.37 0.36 0.35
Net realized and
unrealized gain
(loss) on
investments ..... (0.32) (0.24) (0.30) 0.28 0.11
----- ----- ----- ----- -----
Total from investment
operations ....... 0.01 0.11 0.07 0.64 0.46
----- ----- ----- ----- -----
Less dividends declared
from net investment
income ............ (0.33) (0.35) (0.37) (0.36) (0.35)
----- ----- ----- ----- -----
Net asset value,
end of period .... $3.56 $3.88 $4.12 $4.42 $4.14
===== ===== ===== ===== =====
Total return* ...... 0.21% 2.66% 1.22% 16.20% 11.90%
Net assets, end of
period (in
millions) ........ $297 $371 $416 $407 $368
Ratio of expenses to
average net assets 1.16% 1.06% 0.96% 0.93% 0.95%
Ratio of net investment
income to average
net assets ....... 8.79% 8.60% 8.26% 8.54% 8.60%
Portfolio turnover
rate ............. 53.79% 46.17% 58.85% 64.38% 55.64%
*Total return calculated without taking into account the sales load deducted on
an initial purchase.
See notes to financial statements.
<PAGE>
WADDELL & REED ADVISORS GLOBAL BOND FUND, INC.
FINANCIAL HIGHLIGHTS
Class B Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period
from
10-6-99*
through
9-30-00
-------
Net asset value,
beginning of period $3.88
----
Income (loss) from investment
operations:
Net investment income 0.29
Net realized and
unrealized loss
on investments .. (0.32)
----
Total from investment
operations ....... (0.03)
----
Less dividends declared
from net investment
income (0.29)
----
Net asset value,
end of period .... $3.56
====
Total return ....... -0.87%
Net assets, end of
period (in
millions) ........ $2
Ratio of expenses to
average net assets 2.06%**
Ratio of net investment
income to average
net assets ....... 7.87%**
Portfolio turnover
rate ............. 53.79%***
*Commencement of operations.
**Annualized.
***For the fiscal year ended September 30, 2000.
See notes to financial statements.
<PAGE>
WADDELL & REED ADVISORS GLOBAL BOND FUND, INC.
FINANCIAL HIGHLIGHTS
Class C Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period
from
10-6-99*
through
9-30-00
-------
Net asset value,
beginning of period $3.88
----
Income (loss) from investment
operations:
Net investment income 0.29
Net realized and
unrealized loss
on investments .. (0.32)
----
Total from investment
operations ....... (0.03)
----
Less dividends declared
from net investment
income ........... (0.29)
----
Net asset value,
end of period .... $3.56
====
Total return ....... -0.95%
Net assets, end of
period (000
omitted) ......... $242
Ratio of expenses to
average net assets 2.14%**
Ratio of net investment
income to average
net assets ....... 7.78%**
Portfolio turnover
rate ............. 53.79%***
*Commencement of operations.
**Annualized.
***For the fiscal year ended September 30, 2000.
See notes to financial statements.
<PAGE>
WADDELL & REED ADVISORS GLOBAL BOND FUND, INC.
FINANCIAL HIGHLIGHTS
Class Y Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the
For the fiscal year period
ended September 30, from 2-27-96*
---------------------------- through
2000 1999 1998 1997 9-30-96
------ ------ ------ ------ -------
Net asset value,
beginning of period $3.88 $4.12 $4.42 $4.14 $4.15
----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... 0.34 0.36 0.37 0.37 0.21
Net realized and
unrealized gain (loss)
on investments... (0.32) (0.24) (0.30) 0.28 (0.01)
----- ----- ----- ----- -----
Total from investment
operations ........ 0.02 0.12 0.07 0.65 0.20
----- ----- ----- ----- -----
Less dividends declared
from net investment
income ............ (0.34) (0.36) (0.37) (0.37) (0.21)
----- ----- ----- ----- -----
Net asset value,
end of period ..... $3.56 $3.88 $4.12 $4.42 $4.14
===== ===== ===== ===== =====
Total return ....... 0.53% 2.95% 1.38% 16.38% 5.00%
Net assets, end of
period (in
millions) ........ $3 $3 $2 $2 $2
Ratio of expenses
to average net
assets ............ 0.84% 0.77% 0.79% 0.77% 0.77%**
Ratio of net
investment income
to average net
assets ............ 9.12% 8.89% 8.43% 8.69% 8.83%**
Portfolio
turnover rate ..... 53.79% 46.17% 58.85% 64.38% 55.64%**
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
WADDELL & REED ADVISORS GLOBAL BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 1 -- Significant Accounting Policies
Waddell & Reed Advisors Global Bond Fund, Inc. (the "Fund"), formerly
United High Income Fund II, Inc., 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, with a
secondary objective of capital growth when consistent with the primary
objective. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with accounting principles generally
accepted in the United States of America.
A. Security valuation -- Each stock and convertible bond is valued at the
latest sale price thereof on the last business day of the fiscal period as
reported by the principal securities exchange on which the issue is traded
or, if no sale is reported for a stock, the average of the latest bid and
asked prices. Bonds, other than convertible bonds, are valued using a
pricing system provided by a pricing service or dealer in bonds.
Convertible bonds are valued using this pricing system only on days when
there is no sale reported. Stocks which are traded over-the-counter are
priced using the Nasdaq Stock Market, which provides information on bid and
asked prices quoted by major dealers in such stocks. Restricted securities
and securities for which market quotations are not readily available are
valued at fair value as determined in good faith under procedures
established by and under the general supervision of the Fund's Board of
Directors. Short-term debt securities are valued at amortized cost, which
approximates market.
B. Security transactions and related investment income -- Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Securities gains and losses are calculated on the
identified cost basis. Original issue discount (as defined in the Internal
Revenue Code), premiums 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 Subchapter M of the
Internal Revenue Code. In addition, the Fund intends to pay distributions
as required to avoid imposition of excise tax. Accordingly, provision has
not been made for Federal income taxes. See Note 4 -- Federal Income Tax
Matters.
D. Dividends and distributions -- All of the Fund's net investment income is
declared and recorded by the Fund as dividends payable on each day to
shareholders of record as of the close of the preceding business day. Net
investment income dividends and capital gains distributions are determined
in accordance with income tax regulations which may differ from accounting
principles generally accepted in the United States of America. These
differences are due to differing treatments for items such as deferral of
wash sales and post-October losses, foreign currency transactions, net
operating losses and expiring capital loss carryovers. At September 30,
2000, $8,229,670 was reclassified between accumulated undistributed net
realized gain on investment transactions and additional paid-in-capital and
$247,916 between accumulated undistributed net investment income and
accumulated undistributed net realized gain. Net investment income, net
realized gains and net assets were not affected by this change.
E. Foreign currency translations -- All assets and liabilities denominated in
foreign currencies are translated into U.S. dollars daily. Purchases and
sales of investment securities and accruals of income and expenses are
translated at the rate of exchange prevailing on the date of the
transaction. For assets and liabilities other than investments in
securities, net realized and unrealized gains and losses from foreign
currency translation arise from changes in currency exchange rates. The
Fund combines fluctuations from currency exchange rates and fluctuations in
market value when computing net realized and unrealized gain or loss from
investments.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
NOTE 2 -- Investment Management and Payments to Affiliated Persons
The Fund pays a fee for investment management services. The fee is
computed daily based on the net asset value at the close of business. The fee
is payable by the Fund at the annual rate of 0.625% of net assets up to $500
million, 0.60% of net assets over $500 million and up to $1 billion, 0.55% of
net assets over $1 billion and up to $1.5 billion, and 0.50% of net assets over
$1.5 billion. The Fund accrues and pays the fee daily.
Pursuant to assignment of the Investment Management Agreement between the
Fund and Waddell & Reed, Inc. ("W&R"), Waddell & Reed Investment Management
Company ("WRIMCO"), a wholly owned subsidiary of W&R, serves as the Fund's
investment manager.
The Fund has an Accounting Services Agreement with Waddell & Reed Services
Company ("WARSCO"), a wholly owned subsidiary of W&R. Under the agreement,
WARSCO acts as the agent in providing accounting services and assistance to the
Fund and pricing daily the value of shares of the Fund. For these services, the
Fund pays WARSCO a monthly fee of one-twelfth of the annual fee shown in the
following table.
Accounting Services Fee
Average
Net Asset Level Annual Fee
(all dollars in millions) Rate for Each Level
------------------------- -------------------
From $ 0 to $ 10 $ 0
From $ 10 to $ 25 $ 11,000
From $ 25 to $ 50 $ 22,000
From $ 50 to $ 100 $ 33,000
From $ 100 to $ 200 $ 44,000
From $ 200 to $ 350 $ 55,000
From $ 350 to $ 550 $ 66,000
From $ 550 to $ 750 $ 77,000
From $ 750 to $1,000 $ 93,500
$1,000 and Over $110,000
In addition, for each class of shares in excess of one, the Fund pays WARSCO a
monthly per-class fee equal to 2.5% of the monthly base fee.
Prior to September 1, 2000, the Accounting Services Agreement was as shown in
the following table.
Accounting Services Fee
Average
Net Asset Level Annual Fee
(all dollars in millions) Rate for Each Level
------------------------- -------------------
From $ 0 to $ 10 $ 0
From $ 10 to $ 25 $ 10,000
From $ 25 to $ 50 $ 20,000
From $ 50 to $ 100 $ 30,000
From $ 100 to $ 200 $ 40,000
From $ 200 to $ 350 $ 50,000
From $ 350 to $ 550 $ 60,000
From $ 550 to $ 750 $ 70,000
From $ 750 to $1,000 $ 85,000
$1,000 and Over $100,000
For Class A, Class B and Class C shares, the Fund pays WARSCO a monthly per
account charge for transfer agency and dividend disbursement services of $1.6125
for each shareholder account which was in existence at any time during the prior
month. With respect to Class Y shares, the Fund pays WARSCO a monthly fee at an
annual rate of 0.15% of the average daily net assets of the class for the
preceding month. The Fund also reimburses W&R and WARSCO for certain out-of-
pocket costs.
Prior to September 1, 2000, for Class A, Class B and Class C shares, the
Fund paid WARSCO a monthly per account charge for transfer agency and dividend
disbursement services of $1.3125 for each shareholder account which was in
existence at any time during the prior month, plus $0.30 for each account on
which a dividend or distribution of cash or shares had a record date in that
month.
As principal underwriter for the Fund's shares, W&R received gross sales
commissions for Class A shares (which are not an expense of the Fund) of
$521,845. During the period ended September 30, 2000, W&R received $2,602 and
$687 in deferred sales charges for Class B shares and Class C shares,
respectively. With respect to Class A, Class B and Class C shares, W&R paid
sales commissions of $347,011 and all expenses in connection with the sale of
Fund shares, except for registration fees and related expenses.
Under a Distribution and Service Plan for Class A shares adopted by the
Fund pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund
may pay monthly a distribution and/or service fee to W&R in an amount not to
exceed 0.25% of the Fund's Class A average annual net assets. The fee is to be
paid to reimburse W&R for amounts it expends in connection with the distribution
of the Class A shares and/or provision of personal services to Fund shareholders
and/or maintenance of shareholder accounts.
Under the Distribution and Service Plan adopted by the Fund for Class B and
Class C shares, respectively, the Fund may pay W&R, on an annual basis, a
service fee of up to 0.25% of the average daily net assets of the class to
compensate W&R for providing services to shareholders of that class and/or
maintaining shareholder accounts for that class and a distribution fee of up to
0.75% of the average daily net assets of the class to compensate W&R for
distributing the shares of that class. The Class B Plan and the Class C Plan
each permit W&R to receive compensation, through the distribution and service
fee, respectively, for its distribution activities for that class, which are
similar to the distribution activities described with respect to the Class A
Plan, and for its activities in providing personal services to shareholders of
that class and/or maintaining shareholder accounts of that class, which are
similar to the corresponding activities for which it is entitled to
reimbursement under the Class A Plan.
The Fund paid Directors' fees of $11,168, which are included in other
expenses.
W&R is a subsidiary of Waddell & Reed Financial, Inc., a holding company,
and a direct subsidiary of Waddell & Reed Financial Services, Inc., a holding
company.
NOTE 3 -- Investment Security Transactions
Purchases of investment securities, other than U.S. Government obligations
and short-term securities, aggregated $154,747,374 while proceeds from
maturities and sales aggregated $344,870,966. Purchases of short-term securities
aggregated $3,770,394,476 while proceeds from maturities and sales aggregated
$3,628,125,861. No U.S. Government Securities were bought or sold during the
period ended September 30, 2000.
For Federal income tax purposes, cost of investments owned at September 30,
2000 was $312,252,712, resulting in net unrealized depreciation of $10,524,727,
of which $5,968,727 related to appreciated securities and $16,493,454 related to
depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital losses of
$21,577,429 during its fiscal year ended September 30, 2000, which included the
effect of certain losses deferred into the next fiscal year, as well as the
effect of losses recognized from the prior year (see discussion below). Capital
loss carryovers aggregated $30,950,175 at September 30, 2000, and are available
to offset future realized capital gain net income for Federal income tax
purposes but will expire if not utilized as follows: $390,079 at September 30,
2003; $7,783,310 at September 30, 2004; $1,199,357 at September 30, 2007; and
$21,577,429 at September 30, 2008.
Internal Revenue Code regulations permit the Fund to defer into its next
fiscal year net capital losses or net long-term capital losses incurred between
each November 1 and the end of its fiscal year (``post-October losses''). From
November 1, 1999 through September 30, 2000, the Fund incurred net capital
losses of $29,739,846, which have been deferred to the fiscal year ending
September 30, 2001. In addition, during the year ended September 30, 2000, the
Fund recognized post-October losses of $19,944,947 that had been deferred from
the year ended September 30, 1999.
NOTE 5 -- Multiclass Operations
The Fund is authorized to offer four classes of shares, Class A, Class B,
Class C and Class Y, each of which have equal rights as to assets and voting
privileges. Class Y shares are not subject to a sales charge on purchases, are
not subject to a Rule 12b-1 Distribution and Service Plan and are subject to a
separate transfer agency and dividend disbursement services fee structure. A
comprehensive discussion of the terms under which shares of each class are
offered is contained in the Prospectus and the Statement of Additional
Information for the Fund.
Income, non-class specific expenses, and realized and unrealized gains and
losses are allocated daily to each class of shares based on the value of their
relative net assets as of the beginning of each day adjusted for the prior day's
capital share activity.
Transactions in capital stock are summarized below. Amounts are in
thousands.
For the fiscal
year ended September 30,
------------------------
2000 1999
---------- ----------
Shares issued from sale
of shares:
Class A ............ 7,471 10,626
Class B ............. 608 ---
Class C ............. 89 ---
Class Y ............ 34 655
Shares issued from
reinvestment of dividends:
Class A ............ 7,139 7,683
Class B ............. 23 ---
Class C ............. 3 ---
Class Y ............ 62 60
Shares redeemed:
Class A ............ (26,784) (23,492)
Class B ............. (91) ---
Class C ............. (24) ---
Class Y ............ (82) (648)
------ ------
Decrease in
outstanding capital
shares .............. (11,552) (5,116)
====== ======
Value issued from sale
of shares:
Class A ............ $ 27,962 $ 43,551
Class B ............. 2,287 ---
Class C ............. 335 ---
Class Y ............ 124 2,741
Value issued from
reinvestment of dividends:
Class A ............ 26,724 31,283
Class B ............. 84 ---
Class C ............. 11 ---
Class Y ............ 232 246
Value redeemed:
Class A ............ (100,873) (95,780)
Class B ............. (335) ---
Class C ............. (88) ---
Class Y ............ (311) (2,699)
-------- --------
Decrease in outstanding
capital ............ $(43,848) $(20,658)
======== ========
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Waddell & Reed Advisors Global Bond Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Waddell & Reed Advisors Global Bond Fund, Inc.
(formerly United High Income Fund II, Inc.) (the "Fund") as of September 30,
2000, and the related statement of operations for the fiscal year then ended,
the statements of changes in net assets for each of the two fiscal years in the
period then ended, and the financial highlights for each of the five fiscal
years in the period then ended. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of September 30, 2000, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Waddell & Reed Advisors Global Bond Fund, Inc. as of September 30, 2000, the
results of its operations for the fiscal year then ended, the changes in its net
assets for each of the two fiscal years in the period then ended, and the
financial highlights for each of the five fiscal years in the period then ended
in conformity with accounting principles generally accepted in the United States
of America.
Deloitte & Touche LLP
Kansas City, Missouri
November 3, 2000
<PAGE>
INCOME TAX INFORMATION
Dividends are declared and recorded by the Fund on each day the New York Stock
Exchange is open for business. Dividends are paid monthly.
The table below shows the taxability of dividends paid during the fiscal year
ended September 30, 2000:
PERCENTAGE OF AMOUNTS PAID REPORTABLE AS:
--------------------------------------------------------
For Individuals For Corporations
-------------------------------------------------------
Ordinary Long-Term Non- Long-Term
Record Date IncomeCapital GainQualifyingQualifyingCapital Gain
-------- ---------------------------------------
Class A, B, C and Y
October through
December 1999 100.0000% ---% 2.3990% 97.6010% ---%
January through
September 2000 100.0000% ---% 3.3206% 96.6794% ---%
CORPORATION DEDUCTIONS -- Under Federal tax law, the amounts reportable as
Qualifying Dividends are eligible for the dividends received deduction as
provided by Section 243 of the Internal Revenue Code.
The tax status of dividends will be reported to you on Form 1099-DIV after the
close of the applicable calendar year.
Shareholders are advised to consult with their tax adviser concerning the tax
treatment of dividends and distributions from the Fund.
<PAGE>
DIRECTORS
Keith A. Tucker, Overland Park, Kansas, Chairman of the Board
James M. Concannon, Topeka, Kansas
John A. Dillingham, Kansas City, Missouri
David P. Gardner, San Mateo, California
Linda K. Graves, Topeka, Kansas
Joseph Harroz, Jr., Norman, Oklahoma
John F. Hayes, Hutchinson, Kansas
Robert L. Hechler, Overland Park, Kansas
Henry J. Herrmann, Overland Park, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
Ronald C. Reimer, Mission Hills, Kansas
Frank J. Ross, Jr., Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Frederick Vogel III, Milwaukee, Wisconsin
OFFICERS
Robert L. Hechler, President
Henry J. Herrmann, Vice President
Theodore W. Howard, Vice President and Treasurer
Kristen A. Richards, Vice President and Secretary
Daniel C. Schulte, Vice President
Daniel J. Vrabac, Vice President
To all traditional IRA Planholders:
As required by law, income tax will automatically be withheld from any
distribution or withdrawal from a traditional IRA unless you make a written
election not to have taxes withheld. The election may be made by submitting
forms provided by Waddell & Reed, Inc. which can be obtained from your Waddell &
Reed representative or by submitting Internal Revenue Service Form W-4P. Once
made, an election can be revoked by providing written notice to Waddell & Reed,
Inc. If you elect not to have tax withheld you may be required to make payments
of estimated tax. Penalties may be imposed by the IRS if withholding and
estimated tax payments are not adequate.
<PAGE>
The Waddell & Reed Advisors Group of Mutual Funds
Waddell & Reed Advisors Accumulative Fund
Waddell & Reed Advisors Asset Strategy Fund, Inc.
Waddell & Reed Advisors Bond Fund
Waddell & Reed Advisors Cash Management, Inc.
Waddell & Reed Advisors Continental Income Fund, Inc.
Waddell & Reed Advisors Core Investment Fund
Waddell & Reed Advisors Government Securities Fund, Inc.
Waddell & Reed Advisors High Income Fund, Inc.
Waddell & Reed Advisors Global Bond Fund, Inc.
Waddell & Reed Advisors International Growth Fund, Inc.
Waddell & Reed Advisors Municipal Bond Fund, Inc.
Waddell & Reed Advisors Municipal High Income Fund, Inc.
Waddell & Reed Advisors New Concepts Fund, Inc.
Waddell & Reed Advisors Retirement Shares, Inc.
Waddell & Reed Advisors Science and Technology Fund
Waddell & Reed Advisors Small Cap Fund, Inc.
Waddell & Reed Advisors Tax-Managed Equity Fund, Inc.
Waddell & Reed Advisors Vanguard Fund, Inc.
FOR MORE INFORMATION:
Contact your representative, or your
local office as listed on your
Account Statement, or contact:
WADDELL & REED
CUSTOMER SERVICE
6300 Lamar Avenue
P.O. Box 29217
Shawnee Mission, KS 66201-9217
(888)-WADDELL
(888)-923-3355
Our INTERNET address is:
http://www.waddell.com
For more complete information regarding any of the mutual funds in Waddell &
Reed Advisors Funds, including charges and expenses, please obtain the Fund's
prospectus by calling or writing to the number or address listed above. Please
read the prospectus carefully before investing.
NUR1015A(9-00)
