United
Municipal
High Income
Fund, Inc.
SEMIANNUAL
REPORT
---------------------------------------
For the six months ended March 31, 1997
This report is submitted for the general information of the shareholders of
United Municipal High Income Fund, Inc. It is not authorized for distribution
to prospective investors in the Fund unless accompanied with or preceded by the
United Municipal High Income Fund, Inc. current prospectus.
<PAGE>
PRESIDENT'S LETTER
MARCH 31, 1997
Dear Shareholder:
As President of your Fund, I would like to thank you for your continued
confidence in our products and services. Our goal to provide the best service
possible to our shareholders has not changed since we opened our doors nearly 60
years ago. Waddell & Reed's team of professionals, including the Fund's
manager, our customer service representatives and your personal account
representative continue to strive to meet your financial needs.
Waddell & Reed plays a special role in the investment industry. We take
pride in being one of the few financial services firms committed to locally
based account representatives who provide the personal service you need. When
you're ready to evaluate your financial plan to keep up with life's changes, or
to find an answer to a financial question that you may have, your representative
is ready to assist you--when you need it. He or she is available to help you
plan for your retirement, fund a child's education or make plans for other long-
term financial goals.
All of us are committed to helping you meet the financial goals that are
important to you. This is accomplished by our offering investment products to
meet a variety of personal financial objectives, along with the personal service
to make the investment process more convenient and accessible.
We want to continue to meet your financial needs for many years to come.
Should you have any questions about your account or other financial issues that
are important to you, 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 Municipal High Income Fund, Inc.
PORTFOLIO STRATEGY:
Ordinarily, at least 75% OBJECTIVE: High level of income
medium and lower rated which is not
Municipal Bonds subject to Federal income taxation.
(Income may be
Generally less than 20% subject to state and
Taxable Debt Securities local taxes. A portion may be subject
to Federal
No more than 25% in taxes, including
industrial revenue alternative minimum tax.)
bonds of any one industry
STRATEGY: Invests primarily in municipal bonds
(debt securities the interest on which
is generally exempt from Federal income
tax) in the medium- and lower-rated
categories as classified by recognized
rating agencies. (May invest in
securities subject to repurchase
agreements. May invest in certain
futures.)
FOUNDED: 1986
SCHEDULED DIVIDEND FREQUENCY: MONTHLY
<PAGE>
PERFORMANCE SUMMARY
PER SHARE DATA
For the Six Months Ended March 31, 1997
- ---------------------------------------
DIVIDENDS PAID $0.17
=====
CAPITAL GAINS DISTRIBUTION $0.01
=====
NET ASSET VALUE ON
3/31/97 $5.35 adjusted to: $5.36(A)
9/30/96 5.31
-----
CHANGE PER SHARE $0.05
=====
(A)This number includes the capital gains distribution of $0.01 paid in December
1996 added to the actual net asset value on March 31, 1997.
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 3-31-97 3.44% 8.03%
5-year period ended 3-31-97 7.49% 8.43%
10-year period ended 3-31-97 7.60% 8.07%
Performance data quoted represents past performance and is based on deduction of
4.25% sales load on the initial purchase in each of the three periods.
Performance data quoted in this column represents past performance without
taking into account the sales load deducted on an initial purchase.
Investment return and principal value will fluctuate and an investor's shares,
when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On March 31, 1997, United Municipal High Income Fund, Inc. had net assets
totaling $417,997,174 invested in a diversified portfolio.
As a shareholder of United Municipal High Income Fund, Inc., for every $100 you
had invested on March 31, 1997, your Fund owned:
$22.96 Life Care/Nursing Center Revenue Bonds
18.80 Other Municipal Bonds
13.14 Industrial Development Revenue Bonds
11.29 Hospital Revenue Bonds
10.00 Airport Revenue Bonds
5.62 Resource Recovery Bonds
4.49 Water and Sewer Revenue Bonds
4.10 Housing Revenue Bonds
3.69 Transportation Revenue Bonds
3.20 Cash and Cash Equivalents
2.71 Lease/Certificates of Participation Bonds
1997 TAX YEAR TAXABLE EQUIVALENT YIELDS*
- -----------------------------------------------------------------
If your Taxable Income is:
Your Equivalent
Marginal Tax Free Yields
Joint Single Tax ----------------------
return Return Bracket Is 5% 6% 7% 8%
$ 0- 41,200 $ 0- 24,650 15% 5.88 7.06 8.24 9.41
$ 41,201- 99,600 $ 24,651- 59,750 28% 6.94 8.33 9.72 11.11
$ 99,601-151,750 $ 59,751-124,650 31% 7.25 8.70 10.14 11.59
$151,751-271,050 $124,651-271,050 36% 7.81 9.38 10.94 12.50
$271,051 and above$271,051 and above39.6% 8.28 9.93 11.59 13.25
Above table is for illustration only and does not represent the actual
performance of United Municipal High Income Fund, Inc.
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS
ALABAMA - 1.69%
The Industrial Development Board of the Town of
Courtland (Alabama), Solid Waste Disposal
Revenue Bonds (Champion International
Corporation Project), Series 1995A,
6.5%, 9-1-2025 ........................ $ 5,000 $ 4,975,000
The Medical Clinic Board of the City of Ozark,
Alabama, First Mortgage Revenue Bonds (United
States Health & Housing Foundation, Inc.
Project), Series 1988-A,
10.0%, 10-1-2015 ...................... 1,000 1,046,250
The Marshall County Health Care Authority,
Hospital Revenue Refunding Bonds,
Series 1992 (Guntersville-Arab
Medical Center),
7.0%, 10-1-2013 ....................... 1,000 1,022,500
Total ................................. 7,043,750
ALASKA - 0.86%
City of Seward, Alaska, Revenue Bonds, 1996
(Alaska Sealife Center Project),
7.65%, 10-1-2016 ...................... 2,000 2,025,000
Anchorage Parking Authority, Lease Revenue
Refunding Bonds, Series 1993 (5th Avenue
Garage Project),
6.75%, 12-1-2008 ...................... 1,500 1,565,625
Total ................................. 3,590,625
ARIZONA - 0.62%
Hayden-Winkelman Unified School District
No. 41 of Gila County, Arizona, Capital
Appreciation Refunding Bonds, Series 1995,
0.0%, 7-1-2010 ........................ 6,145 2,596,262
ARKANSAS - 0.42%
The Fayetteville Public Facilities Board,
Refunding and Improvement Revenue Bonds,
Series 1989A (Butterfield Trail Village
Project),
9.5%, 9-1-2014 ........................ 1,600 1,742,000
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
CALIFORNIA - 5.90%
Foothill/Eastern Transportation Corridor
Agency, Toll Road Revenue Bonds, Series
1995A,
0.0%, 1-1-2013 (A) .................... $11,925 $ 7,810,875
San Joaquin Hills Transportation Corridor
Agency (Orange County, California):
Junior Lien Toll Road Revenue Bonds,
0.0%, 1-1-2002 ........................ 2,755 2,152,344
Senior Lien Toll Road Revenue Bonds,
0.0%, 1-1-2011 (A) .................... 2,500 2,053,125
Hi-Desert Memorial Hospital District,
Revenue Bonds, Series 1994A,
8.0%, 10-1-2019 ....................... 3,000 3,157,500
Sierra Kings Health Care District Revenue
Bonds, Series 1996,
6.5%, 12-1-2026 ....................... 3,000 2,898,750
Student Education Loan Marketing Corporation,
Student Loan Program Revenue Bonds,
Junior Subordinate Series III-D-2 Bonds,
6.75%, 7-1-2008 ....................... 2,500 2,500,000
Certificates of Participation (1991 Capital
Improvement Project), Bella Vista Water
District (California),
7.375%, 10-1-2017 ..................... 1,500 1,588,125
Carson Redevelopment Agency (California),
Redevelopment Project Area No. 1,
Tax Allocation Bonds, Series 1993B,
6.0%, 10-1-2016 ....................... 1,500 1,455,000
Kings County Waste Management Authority,
Solid Waste Revenue Bonds, Series 1994
(California),
7.2%, 10-1-2014 ....................... 1,000 1,053,750
Total ................................. 24,669,469
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
COLORADO - 3.76%
City and County of Denver, Colorado:
Revenue Bonds (Jewish Community Centers
of Denver Project), Series 1994:
8.25%, 3-1-2024 ....................... $ 2,390 $ 2,452,738
7.875%, 3-1-2019 ...................... 815 837,412
Airport System Revenue Bonds,
Series 1994A,
7.5%, 11-15-2023 ...................... 3,000 3,285,000
Special Facilities Airport Revenue Bonds
(United Air Lines Project), Series 1992A,
6.875%, 10-1-2032 ..................... 2,500 2,556,250
City of Colorado Springs, Colorado,
Airport System Revenue Bonds, Series 1992A,
7.0%, 1-1-2022 ........................ 2,200 2,282,500
Pitkin County, Colorado, Lease Purchase
Agreement, Certificates of Participation
(County Administration Building Project),
Series 1991,
7.4%, 10-1-2011 ....................... 1,500 1,603,125
Mountain Village Metropolitan District, San
Miguel County, Colorado, General
Obligation Refunding Bonds, Series 1992,
8.1%, 12-1-2011 ....................... 1,435 1,596,438
Bachelor Gulch Metropolitan District,
Eagle County, Colorado, General Obligation
Bonds, Series 1996,
7.0%, 12-1-2015 ....................... 1,095 1,110,056
Total ................................. 15,723,519
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
CONNECTICUT - 1.47%
Connecticut Development Authority, First
Mortgage Gross Revenue Health Care
Project Bonds, Church Homes, Inc.:
Congregational Avery Heights Project -
1990 Series,
9.0%, 4-1-2020 ........................ $ 2,500 $ 2,700,000
Congregational Avery Nursing Facilities
Project - 1991 Series,
8.5%, 4-1-2021 ........................ 1,490 1,586,850
Eastern Connecticut Resource Recovery
Authority, Solid Waste Revenue Bonds
(Wheelabrator Lisbon Project),
Series 1993A,
5.5%, 1-1-2014 ........................ 2,000 1,857,500
Total ................................. 6,144,350
DISTRICT OF COLUMBIA - 1.26%
Certificates of Participation, Series 1993,
District of Columbia,
7.3%, 1-1-2013 ........................ 3,000 3,172,500
District of Columbia Revenue Bonds
(National Public Radio Issue),
Series 1992,
7.625%, 1-1-2013 ...................... 2,000 2,080,000
Total ................................. 5,252,500
FLORIDA - 4.79%
Lake County, Florida, Resource Recovery
Industrial Development Refunding Revenue
Bonds (NRG/Recovery Group Project),
Series 1993A,
5.95%, 10-1-2013 ...................... 8,350 8,141,250
Sanford Airport Authority (Florida),
Industrial Development Revenue Bonds
(Central Florida Terminals, Inc. Project):
Series 1995A,
7.75%, 5-1-2021 ....................... 4,000 4,040,000
Series 1995C,
7.5%, 5-1-2021 ........................ 500 493,125
St. Johns County Industrial Development
Authority, Health Care Revenue Bonds,
Tax Exempt Series 1997A (Bayview Project),
7.1%, 10-1-2026 ....................... 4,000 3,930,000
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
FLORIDA (Continued)
Dade County Industrial Development Authority,
Industrial Development Revenue Bonds,
Series 1995 (Miami Cerebral Palsy
Residential Services, Inc. Project),
8.0%, 6-1-2022 ........................ $ 2,000 $ 2,060,000
City of Fort Walton Beach, First Mortgage
Industrial Development Revenue Bonds,
Series 1986 (Ft. Walton Beach Ventures,
Inc. Project),
10.5%, 12-1-2016 ...................... 1,295 1,338,706
Total ................................. 20,003,081
GEORGIA - 1.18%
Coffee County Hospital Authority (Georgia),
Revenue Anticipation Certificates (Coffee
Regional Medical Center, Inc. Project),
Series 1997A,
6.75%, 12-1-2016 ...................... 5,000 4,925,000
GUAM - 0.73%
Guam Airport Authority, General Revenue
Bonds, 1993 Series B,
6.6%, 10-1-2010 ....................... 3,000 3,071,250
IDAHO - 0.51%
Idaho Health Facilities Authority, Hospital
Revenue Refunding Bonds, Series 1992
(IHC Hospitals, Inc.), Indexed Inverse
Floating Rate Securities,
8.49%, 2-15-2021 (B) .................. 2,000 2,132,500
ILLINOIS - 4.73%
Illinois Health Facilities Authority:
Revenue Refunding Bonds,
Series 1995A (Fairview Obligated
Group),
7.125%, 8-15-2017 ..................... 3,525 3,454,500
Revenue Bonds, Series 1995 (Mercy
Center for Health Care Services),
6.375%, 10-1-2015 ..................... 2,500 2,453,125
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
ILLINOIS (Continued)
City of Hillsboro, Montgomery County,
Illinois, General Obligation Bonds
(Alternate Revenue Source), Series 1991,
7.5%, 12-1-2021 ....................... $ 2,640 $ 2,814,900
Illinois Development Finance Authority
Revenue Bonds, Series 1993C (Catholic
Charities Housing Development
Corporation Project),
6.1%, 1-1-2020 ........................ 2,500 2,403,125
Village of Lansing, Illinois, Landings
Redevelopment Project Area, Tax Increment
Refunding Revenue Bonds (Limited Sales
Tax Pledge), Series 1992,
7.0%, 12-1-2008 ....................... 2,000 2,140,000
Village of Hanover Park, Cook and DuPage
Counties, Illinois, First Mortgage
Revenue Bonds, Series 1989 (Windsor
Park Manor Project),
9.5%, 12-1-2014 ....................... 2,000 2,098,080
Village of Hodgkins, Cook County, Illinois,
Tax Increment Revenue Refunding Bonds,
Series 1995A,
7.625%, 12-1-2013 ..................... 1,750 1,813,438
Village of Carol Stream, DuPage County,
Illinois, First Mortgage Revenue
Refunding Bonds, Series 1997 (Windsor
Park Manor Project),
7.0%, 12-1-2013 ....................... 1,500 1,464,375
Village of Bourbonnais, Kankakee County,
Illinois, Sewerage Revenue Bonds,
Series 1993,
7.25%, 12-1-2012 ...................... 1,085 1,136,537
Total ................................. 19,778,080
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
INDIANA - 4.96%
Indianapolis Airport Authority, Special
Facilities Revenue Bonds:
Series 1995A, United Air Lines, Inc.,
Indianapolis Maintenance Center Project,
6.5%, 11-15-2031 ...................... $ 6,000 $ 6,060,000
Series 1994, Federal Express
Corporation Project,
7.1%, 1-15-2017 ....................... 4,500 4,770,000
City of East Chicago, Indiana, Pollution
Control Refunding Revenue Bonds (Inland
Steel Company Project No. 10),
Series 1993,
6.8%, 6-1-2013 ........................ 3,000 3,037,500
Indiana Development Finance Authority, Pollution
Control Refunding Revenue Bonds (Inland Steel
Company Project No. 12), Series 1995,
6.85%, 12-1-2012 ...................... 2,500 2,528,125
Indiana Health Facility Financing Authority:
Hospital Revenue Refunding Bonds, Series 1996
(Hancock Memorial Hospital and Health Services),
6.125%, 8-15-2017 ..................... 1,250 1,203,125
Hospital Revenue Bonds, Series 1992
(Fayette Memorial Hospital Project),
7.2%, 10-1-2022 ....................... 1,000 1,046,250
City of Carmel, Indiana, Retirement Rental
Housing Revenue Refunding Bonds (Beverly
Enterprises - Indiana, Inc. Project),
Series 1992,
8.75%, 12-1-2008 ...................... 1,500 1,642,500
Indiana Housing Finance Authority, Residential
Mortgage Bonds, 1988 Series R-A,
0.0%, 1-1-2013 ........................ 1,725 450,656
Total ................................. 20,738,156
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
IOWA - 0.34%
City of Ottumwa, Iowa, Hospital Facility
Revenue Refunding and Improvement Bonds,
Series 1993 (Ottumwa Regional Health
Center, Incorporated),
6.0%, 10-1-2018 ....................... $ 1,550 $ 1,429,875
KANSAS - 1.23%
Kansas Development Finance Authority,
Community Provider Loan Program (Community
Living Opportunities, Inc.), Series
1992A Revenue Bonds,
8.875%, 9-1-2011 ...................... 2,790 2,967,863
City of Prairie Village, Kansas, Claridge
Court Project Revenue Bonds, Series 1993A:
8.5%, 8-15-2004 ....................... 1,000 1,085,000
8.75%, 8-15-2023 ...................... 1,000 1,085,000
Total ................................. 5,137,863
KENTUCKY - 1.01%
Kenton County Airport Board (Commonwealth
of Kentucky), Special Facilities Revenue
Bonds, 1992 Series A (Delta Air Lines,
Inc. Project),
7.5%, 2-1-2020 ........................ 3,000 3,206,250
County of Perry, Kentucky, Solid Waste
Disposal Revenue Bonds (TJ International
Project), Series 1994,
7.0%, 6-1-2024 ........................ 1,000 1,033,750
Total ................................. 4,240,000
LOUISIANA - 1.94%
Parish of St. Charles, State of Louisiana:
Environmental Revenue Bonds (Louisiana
Power & Light Company Project),
Series 1994-A,
6.875%, 7-1-2024 ...................... 2,750 2,856,563
Pollution Control Revenue Bonds
(Union Carbide Project),
Series 1992,
7.35%, 11-1-2022 ...................... 2,000 2,140,000
Board of Commissioners of the Port of New
Orleans, Industrial Development Revenue
Refunding Bonds (Continental Grain Company
Project), Series 1993,
7.5%, 7-1-2013 ........................ 2,000 2,145,000
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
LOUISIANA (Continued)
LaFourche Parish Home Mortgage Authority,
Tax-Exempt Capital Appreciation Refunding
Bonds, Series 1990-B, Class B-2,
0.0%, 5-20-2014 ....................... $ 3,300 $ 973,500
Total ................................. 8,115,063
MAINE - 0.66%
Maine Veterans' Homes, Revenue Bonds,
1995 Series,
7.75%, 10-1-2020 ...................... 2,810 2,778,387
MARYLAND - 1.04%
Maryland Economic Development Corporation,
Senior Lien Revenue Bonds (Rocky Gap
Golf Course and Hotel/Meeting Center
Project), Series 1996 A,
8.375%, 10-1-2009 ..................... 3,250 3,278,437
Baltimore County, Maryland, Pollution
Control Revenue Refunding Bonds,
Series 1994A (Bethlehem Steel
Corporation Project),
7.55%, 6-1-2017 ....................... 1,000 1,050,000
Total ................................. 4,328,437
MASSACHUSETTS - 6.01%
Massachusetts Industrial Finance Agency:
First Mortgage Revenue Bonds, Reeds
Landing Project, Series 1993,
8.625%, 10-1-2023 ..................... 9,945 10,740,600
Resource Recovery Revenue Bonds (SEMASS
Project), Series 1991B,
9.25%, 7-1-2015 ....................... 5,000 5,662,500
Revenue Bonds, Glenmeadow Retirement
Community Project, Series 1996C:
8.625%, 2-15-2026 ..................... 2,200 2,205,500
8.375%, 2-15-2018 ..................... 1,260 1,247,400
Revenue Bonds, Beaver Country Day School
Issue, Series 1992, Subseries A,
8.1%, 3-1-2008 ........................ 1,505 1,548,269
Massachusetts Health and Educational
Facilities Authority, Revenue Bonds,
New England Deaconess Hospital Issue,
Series D,
6.875%, 4-1-2022 ...................... 3,490 3,699,400
Total ................................. 25,103,669
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
MICHIGAN - 0.48%
Michigan Strategic Fund, Limited Obligation
Revenue Bonds:
Knollwood Corporation Project, Series A,
10.146%, 10-1-2016 (C)................. $ 1,300 $ 1,105,000
Mercy Services for Aging Project,
Series 1990,
9.4%, 5-15-2020 ....................... 800 890,000
Total ................................. 1,995,000
MISSISSIPPI - 0.52%
Lowndes County, Mississippi, Solid Waste
Disposal and Pollution Control Refunding
Revenue Bonds (Weyerhaeuser Company
Project), Series 1992B, Indexed Inverse
Floating/Fixed Term Bonds,
8.49%, 4-1-2022 (D) ................... 2,000 2,172,500
MISSOURI - 4.63%
State Environmental Improvement and Energy
Resources Authority (State of Missouri),
Water Facilities Revenue Bonds
(Tri-County Water Authority Project),
Series 1992:
8.75%, 4-1-2022 ....................... 4,340 4,757,725
8.25%, 4-1-2002 ....................... 620 661,075
Lake of the Ozarks Community Bridge
Corporation, Bridge System Revenue Bonds,
Series 1996,
6.4%, 12-1-2025 ....................... 3,500 3,425,625
The Industrial Development Authority of the
City of Kansas City, Missouri, Revenue Bonds
(The Bishop Spencer Place, Incorporated
Project), Series 1994,
8.0%, 9-1-2016 ........................ 2,965 3,057,656
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
MISSOURI (Continued)
The City of Lake Saint Louis, Missouri,
Public Facilities Authority, Certificates
of Participation (Municipal Golf Course
Project), Series 1993,
7.55%, 12-1-2014 ...................... $ 2,000 $ 2,072,500
Regional Convention and Sports Complex
Authority, Convention and Sports Facility
Project Bonds, Series C 1991 (The City of
St. Louis, Missouri, Sponsor),
7.9%, 8-15-2021 ....................... 1,500 1,665,000
The Industrial Development Authority of
the City of St. Louis, Missouri,
Industrial Revenue Refunding Bonds
(Kiel Center Multipurpose Arena Project),
Series 1992,
7.75%, 12-1-2013 ...................... 1,500 1,606,875
The Industrial Development Authority of the
City of Springfield, Missouri,
Industrial Development Refunding Revenue
Bonds (Health Care Realty of Springfield,
Ltd. Project), Series 1988,
10.25%, 12-1-2010 ..................... 1,130 1,158,838
The Industrial Development Authority of
Callaway County, Missouri, Industrial
Development Revenue Bonds (A.P. Green
Refractories Co. Project), Series 1984,
8.6%, 11-1-2014 ....................... 900 967,500
Total ................................. 19,372,794
NEVADA - 1.62%
Clark County, Nevada, Industrial Development
Revenue Bonds (Southwest Gas Corporation),
1992 Series B,
7.5%, 9-1-2032 ........................ 4,000 4,245,000
Reno-Sparks Convention & Visitors Authority,
Nevada, Limited Obligation Medium-Term
Refunding Bonds, Series November 1, 1996,
6.0%, 11-1-2006 ....................... 2,640 2,541,000
Total ................................. 6,786,000
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
NEW HAMPSHIRE - 4.63%
New Hampshire Higher Educational and Health
Facilities Authority:
First Mortgage Revenue Bonds:
RiverMead at Peterborough Issue,
Series 1994,
8.5%, 7-1-2024 ........................ $ 4,110 $ 4,464,487
RiverWoods at Exeter Issue,
Series 1993,
9.0%, 3-1-2023 ........................ 2,000 2,177,500
Hospital Revenue Bonds:
Catholic Medical Center Issue,
Series 1989,
8.25%, 7-1-2013 ....................... 3,000 3,187,500
Monadnock Community Hospital
Issue, Series 1990,
9.125%, 10-1-2020 ..................... 1,440 1,553,400
St. Joseph Hospital Issue,
Series 1991,
7.5%, 1-1-2016 ........................ 1,000 1,046,250
Revenue Bonds, New Hampshire Catholic
Charities Issue, Series 1991,
8.4%, 8-1-2011 ........................ 1,700 1,829,625
The Industrial Development Authority of the
State of New Hampshire, Pollution Control
Revenue Bonds, Public Service Company of
New Hampshire Project:
1991 Tax-Exempt Series A,
7.65%, 5-1-2021 ....................... 2,000 2,035,000
1991 Tax-Exempt Series C,
7.65%, 5-1-2021 ....................... 2,000 2,035,000
Lisbon Regional School District, New
Hampshire, General Obligation Capital
Appreciation School Bonds,
0.0%, 2-1-2013 ........................ 1,720 1,019,100
Total ................................. 19,347,862
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
NEW JERSEY - 4.83%
New Jersey Economic Development Authority:
First Mortgage Revenue Fixed Rate Bonds:
Franciscan Oaks Project - Series 1992A,
8.5%, 10-1-2023 ....................... $ 3,500 $ 3,797,500
Winchester Gardens at Ward Homestead
Project - Series 1996A,
8.625%, 11-1-2025 ..................... 3,000 3,116,250
Fellowship Village Project - Series 1995A,
9.25%, 1-1-2025 ....................... 2,500 2,843,750
Senior Mortgage Revenue Bonds, Arbor
Glen of Bridgewater Project - Series
1996A Bonds,
8.75%, 5-15-2026 ...................... 3,000 3,176,250
First Mortgage Revenue Bonds, The
Evergreens - Series 1992,
9.25%, 10-1-2022 ...................... 2,000 2,255,000
Pollution Control Financing Authority of
Camden County (Camden County, New Jersey),
Solid Waste Disposal and Resource
Recovery System Revenue Bonds,
Series 1991B (AMT),
7.5%, 12-1-2009 ....................... 5,000 5,012,500
Total ................................. 20,201,250
NEW MEXICO - 1.56%
City of Santa Fe, New Mexico, Industrial
Revenue Housing Refunding Bonds (Ponce
de Leon Limited Partnership Project),
Series 1995,
7.25%, 12-1-2005 ...................... 3,500 3,587,500
New Mexico Educational Assistance
Foundation, Student Loan Purchase Bonds,
Second Subordinate 1994 Series II-C (AMT),
6.0%, 12-1-2008 ....................... 3,000 2,940,000
Total ................................. 6,527,500
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
NEW YORK - 0.91%
Tompkins County Industrial Development
Agency, Life Care Community Revenue Bonds,
1994 (Kendal at Ithaca, Inc. Project),
7.875%, 6-1-2024 ...................... $ 3,700 $ 3,815,625
OHIO - 0.76%
Hamilton County, Ohio, Health System Revenue
Bonds, Providence Hospital Issue,
Series 1992,
6.875%, 7-1-2015 ...................... 2,000 2,090,000
County of Lorain, Ohio, First Mortgage
Revenue Bonds, 1992 Series A (Kendal at
Oberlin Project),
8.625%, 2-1-2022 ...................... 1,000 1,085,000
Total ................................. 3,175,000
OKLAHOMA - 3.55%
Oklahoma County Industrial Authority,
Industrial Development Revenue Bonds:
1986 Series B (Choctaw Nursing
Center Project):
10.25%, 9-1-2016 (C) .................. 1,230 1,045,500
10.125%, 9-1-2006 (C) ................. 525 446,250
1986 Series A (Westlake Nursing Center
Project):
10.25%, 9-1-2016 ...................... 905 928,240
10.125%, 9-1-2006 ..................... 430 441,042
Bixby Public Works Authority, Utility
System Revenue Bonds, Refunding
Series 1994,
7.25%, 11-1-2019 ...................... 2,685 2,839,387
The Clinton Public Works Authority,
Refunding and Improvement Revenue
Bonds, Series 1994,
6.25%, 1-1-2019 ....................... 2,575 2,594,313
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
OKLAHOMA (Continued)
The Broken Arrow Public Golf Authority
(Broken Arrow, Oklahoma), Recreational
Facilities Revenue Bonds, Series 1995,
7.25%, 8-1-2020 ....................... $ 2,025 $ 2,052,844
Trustees of the Oklahoma Ordnance Works
Authority, Industrial Development Revenue
Refunding Bonds (A.P. Green Industries,
Inc. Project), Series 1992,
8.5%, 5-1-2008 ........................ 1,600 1,728,000
The Guthrie Public Works Authority
(Guthrie, Oklahoma), Utility System
Revenue Bonds, Series 1994A,
6.75%, 9-1-2019 ....................... 1,415 1,482,213
Holdenville Industrial Authority,
Correctional Facility Revenue Bonds,
Series 1995,
6.7%, 7-1-2015 ........................ 1,250 1,262,500
Total ................................. 14,820,289
OREGON - 1.59%
Klamath Falls Intercommunity Hospital
Authority, Gross Revenue Bonds,
Series 1994 (Merle West Medical Center
Project),
7.1%, 9-1-2024 ........................ 3,500 3,688,125
Myrtle Creek Building Authority, Gross
Revenue Bonds, Series 1996A (Myrtle Creek
Golf Course Project),
8.0%, 6-1-2021 ........................ 3,000 2,966,250
Total ................................. 6,654,375
PENNSYLVANIA - 8.30%
Delaware County Authority (Pennsylvania),
First Mortgage Revenue Bonds
(Riddle Village Project):
Series 1992,
9.25%, 6-1-2022 ....................... 6,000 7,230,000
Series 1994,
8.25%, 6-1-2022 ....................... 4,000 4,805,000
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
PENNSYLVANIA (Continued)
Luzerne County Industrial Development
Authority:
Exempt Facilities Revenue Refunding Bonds,
1992 Series A (Pennsylvania Gas and
Water Company Project),
7.2%, 10-1-2017 ....................... $ 2,000 $ 2,115,000
Exempt Facilities Revenue Bonds, 1992
Series B (Pennsylvania Gas and Water
Company Project),
7.125%, 12-1-2022 ..................... 1,000 1,053,750
Philadelphia Authority for Industrial
Development, Commercial Development Revenue
Refunding Bonds (Doubletree Guest Suites
Project), Series 1997A,
6.5%, 10-1-2027........................ 3,500 3,399,375
Allegheny County Industrial Development
Authority (Pennsylvania), Environmental
Improvement Revenue Bonds (USX Corporation
Project), Refunding Series A 1994,
6.7%, 12-1-2020 ....................... 3,000 3,105,000
McKeesport Hospital Authority (Commonwealth
of Pennsylvania), Hospital Revenue Bonds,
Series of 1993 (McKeesport Hospital Project),
6.5%, 7-1-2008 ........................ 2,500 2,537,500
Pennsylvania Economic Development Financing
Authority, Exempt Facilities Revenue Bonds
(MacMillan Bloedel Clarion Limited
Partnership Project), Series of 1995,
7.6%, 12-1-2020 ....................... 2,000 2,212,500
Allentown Area Hospital Authority, Hospital
Revenue Bonds (Sacred Heart Hospital of
Allentown), Series A of 1993,
6.75%, 11-15-2014 ..................... 2,115 2,178,450
Clearfield Hospital Authority, Hospital
Revenue and Refunding Bonds (Clearfield
Hospital Project), Series 1994,
6.875%, 6-1-2016 ...................... 2,000 2,057,500
South Wayne County Water and Sewer Authority
(Wayne County, Pennsylvania), Sewer Revenue
Bonds, Series of 1992,
8.2%, 4-15-2013 ....................... 1,830 1,864,312
The Cambria County Industrial Development
Authority (Pennsylvania), Pollution
Control Revenue Refunding Bonds,
Series 1994 (Bethlehem Steel
Corporation Project),
7.5%, 9-1-2015 ........................ 1,440 1,504,800
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
PENNSYLVANIA (Continued)
Wilkins Area Industrial Development Authority
(Pennsylvania), First Mortgage Revenue
Bonds (Longwood at Oakmont, Inc. Continuing
Care Retirement Community Project),
Series 1991A,
10.0%, 1-1-2021 ....................... $ 525 $ 584,719
Clarion County Industrial Development Authority
(Pennsylvania), Health Facilities Revenue
Refunding Bonds (Beverly Enterprises
Project), Series 1985,
10.125%, 5-1-2007 ..................... 35 37,844
Total ................................. 34,685,750
RHODE ISLAND - 0.49%
City of Providence, Rhode Island, Special
Obligation Tax Increment Bonds, Series D,
6.65%, 6-1-2016 ....................... 2,000 2,030,000
SOUTH CAROLINA - 0.87%
South Carolina State Housing, Finance
and Development Authority, Multifamily
Housing Mortgage Revenue Bonds (United
Dominion-Plum Chase), Series 1991,
8.5%, 10-1-2021 ....................... 2,000 2,160,000
McCormick County, South Carolina, Hospital
Facilities Revenue Bonds, Series 1988
(McCormick Health Care Center Project),
10.5%, 3-1-2018 ....................... 1,440 1,474,733
Total ................................. 3,634,733
SOUTH DAKOTA - 0.48%
South Dakota Health and Educational
Facilities Authority, Refunding Revenue
Bonds (Westhills Village Retirement
Community Issue), Series 1993,
7.25%, 9-1-2013 ....................... 2,000 2,000,000
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
TENNESSEE - 1.34%
The Industrial Development Board of the
County of McMinn, Solid Waste Recycling
Facilities Revenue Bonds, Series 1992
(Calhoun Newsprint Company Project -
Bowater Incorporated Obligor),
7.4%, 12-1-2022 ....................... $ 2,000 $ 2,140,000
The Health and Educational Facilities
Board of the City of Crossville, Tennessee,
Hospital Revenue Improvement Bonds,
Series 1992 (Cumberland Medical Center),
6.75%, 11-1-2012 ...................... 2,000 2,045,000
Upper Cumberland Gas Utility District
(of Cumberland County, Tennessee),
Gas System Revenue Bonds, Series 1996,
7.0%, 3-1-2016 ........................ 1,400 1,396,500
Total ................................. 5,581,500
TEXAS - 7.22%
AllianceAirport Authority, Inc., Special
Facilities Revenue Bonds:
American Airlines, Inc. Project:
Series 1990,
7.5%, 12-1-2029 ....................... 7,885 8,387,669
Series 1991,
7.0%, 12-1-2011 ....................... 4,500 4,905,000
Federal Express Corporation Project,
Series 1996,
6.375%, 4-1-2021 ...................... 8,500 8,393,750
Dallas-Fort Worth International Airport
Facility Improvement Corporation:
American Airlines, Inc., Revenue Bonds,
Series 1990,
7.5%, 11-1-2025 ....................... 2,000 2,125,000
Delta Air Lines, Inc. Revenue Bonds,
Series 1991,
7.6%, 11-1-2011........................ 1,300 1,399,125
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
TEXAS (Continued)
City of Houston Housing Corporation
No. 1, First Lien Revenue Refunding
Bonds, Series 1996 (6800 Long Drive
Apartments - Section 8 New Construction
Program), Houston, Texas,
6.625%, 2-1-2020 ...................... $ 2,305 $ 2,273,306
Tyler Health Facilities Development
Corporation, Hospital Revenue Bonds
(East Texas Medical Center Regional
Healthcare System Project),
Series 1993B,
6.75%, 11-1-2025 ...................... 1,500 1,533,750
Housing Authority of the City of Odessa,
Texas, Multifamily Mortgage Revenue Bonds,
Series 1993A (Section 8 Assisted Project),
6.375%, 10-1-2010 ..................... 1,225 1,180,594
Total ................................. 30,198,194
UTAH - 0.85%
Brigham City, Box Elder County, Utah,
Special Assessment Bonds, Series 1990
(Brigham City, Utah, Special Improvement
District No. 22),
9.25%, 8-1-2010 ....................... 1,690 1,801,962
Carbon County, Utah, Solid Waste Disposal
Refunding Revenue Bonds, Series 1991
(Sunnyside Cogeneration Associates Project),
9.25%, 7-1-2018 ....................... 2,500 1,750,000
Total ................................. 3,551,962
VERMONT - 1.79%
Vermont Industrial Development Authority,
Mortgage Revenue Bonds, Wake Robin
Corporation Project, Series 1993A:
8.75%, 4-1-2023 ....................... 4,465 4,799,875
8.75%, 3-1-2023 ....................... 2,500 2,687,500
Total ................................. 7,487,375
VIRGIN ISLANDS - 0.36%
Virgin Islands Public Finance Authority,
Revenue Refunding Bonds (Virgin Islands
General Obligation/Matching Fund Loan
Notes), Series 1992 A,
7.25%, 10-1-2018 ...................... 1,400 1,503,250
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
VIRGINIA - 1.56%
Norfolk Redevelopment and Housing Authority,
Multifamily Rental Housing Facility
Revenue Bonds, Series 1996 (1016 Limited
Partnership-Sussex Apartments Project),
8.0%, 9-1-2026 ........................ $3,500 $ 3,515,575
Fairfax County Redevelopment and Housing
Authority, Multifamily Housing Revenue
Refunding Bonds (Burke Shire Commons
Apartments Project), Series 1996,
7.6%, 10-1-2036 ....................... 3,000 3,000,000
Total ................................. 6,515,575
WEST VIRGINIA - 0.37%
Upshur County, West Virginia, Solid Waste
Disposal Revenue Bonds (TJ International
Project), Series 1995,
7.0%, 7-15-2025 ....................... 1,500 1,554,375
WISCONSIN - 2.36%
Wisconsin Health and Educational Facilities
Authority, Revenue Bonds, Series 1995:
National Regency of New Berlin, Inc.
Project,
8.0%, 8-15-2025 ....................... 4,500 4,590,000
Hess Memorial Hospital Association, Inc.
Project,
7.75%, 11-1-2015 ...................... 3,400 3,446,750
City of Superior, Wisconsin, Water Supply
Facilities Revenue Refunding Bonds
(Superior Water, Light and Power Company
Project), Series 1996,
6.125%, 11-1-2021 ..................... 1,910 1,821,663
Total ................................. 9,858,413
WYOMING - 0.62%
Sweetwater County, Wyoming, Solid Waste
Disposal Revenue Bonds (FMC Corporation
Project), Series 1994B,
6.9%, 9-1-2024 ........................ 2,500 2,612,500
TOTAL MUNICIPAL BONDS - 96.80% $404,625,658
(Cost: $388,536,929)
TOTAL SHORT-TERM SECURITIES - 2.33% $ 9,728,601
(Cost: $9,728,601)
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 1997
Value
TOTAL INVESTMENT SECURITIES - 99.13% $414,354,259
(Cost: $398,265,530)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.87% 3,642,915
NET ASSETS - 100.00% $417,997,174
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED MUNICIPAL HIGH INCOME FUND, INC.
MARCH 31, 1997
Notes to Schedule of Investments
(A) The security does not bear interest for an initial period of time and
subsequently becomes interest bearing.
(B) Coupon resets weekly based on the formula 11.95% less the Kenny S&P Index.
Minimum coupon rate is 0%. On February 15, 1999, rate becomes fixed at
6.65%.
(C) Non-income producing as the issuer has either missed its most recent
interest payment or declared bankruptcy.
(D) Coupon resets weekly based on the formula 11.95% less the Kenny S&P Index.
Minimum coupon rate is 0%. On April 1, 1999, rate becomes fixed at 6.70%.
See Note 1 to financial statements for security valuation and other significant
accounting policies concerning investments.
See Note 3 to financial statements for cost and unrealized appreciation and
depreciation of investments owned for Federal income tax purposes.
<PAGE>
UNITED MUNICIPAL HIGH INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997
Assets
Investment securities - at value
(Notes 1 and 3) ................................. $414,354,259
Cash ............................................. 65,319
Receivables:
Interest ........................................ 8,562,201
Fund shares sold ................................ 775,207
Prepaid insurance premium ........................ 7,871
Other ............................................ 2,682
------------
Total assets .................................. 423,767,539
------------
Liabilities
Payable for investment securities purchased ...... 3,500,000
Payable for Fund shares redeemed ................. 1,831,568
Dividends payable ................................ 284,456
Accrued service fee (Note 2) ..................... 114,854
Accrued transfer agency and dividend
disbursing (Note 2) ............................. 28,726
Accrued management fee (Note 2) .................. 5,761
Accrued accounting services fee (Note 2) ......... 5,000
------------
Total liabilities ............................. 5,770,365
------------
Total net assets ............................. $417,997,174
============
Net Assets
$1.00 par value capital stock, authorized --
100,000,000; shares outstanding -- 78,071,377
Capital stock ................................... $ 78,071,377
Additional paid-in capital ...................... 321,042,208
Accumulated undistributed income:
Accumulated undistributed net realized
gain on investment transactions ............... 2,794,860
Net unrealized appreciation in value of
investments ................................... 16,088,729
------------
Net assets applicable to outstanding
units of capital ............................. $417,997,174
============
Net asset value per share (net assets divided
by shares outstanding) ........................... $5.35
=====
See notes to financial statements.
<PAGE>
UNITED MUNICIPAL HIGH INCOME FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended MARCH 31, 1997
Investment Income
Interest and amortization (Note 1B) .............. $14,516,031
-----------
Expenses (Note 2):
Investment management fee ....................... 1,027,732
Service fee ..................................... 301,320
Transfer agency and dividend disbursing ......... 177,577
Accounting services fee ......................... 30,000
Audit fees ...................................... 12,332
Custodian fees .................................. 12,347
Legal fees ...................................... 11,684
Other ........................................... 81,084
-----------
Total expenses ................................ 1,654,076
-----------
Net investment income ........................ 12,861,955
-----------
Realized and Unrealized Gain (Loss) on Investments
(Notes 1 and 3)
Realized net gain on investments ................. 4,389,249
Unrealized depreciation in value of investments
during the period ............................... (283,886)
-----------
Net gain on investments ......................... 4,105,363
-----------
Net increase in net assets resulting
from operations .............................. $16,967,318
===========
See notes to financial statements.
UNITED MUNICIPAL HIGH INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the For the
six months fiscal year
ended ended
March 31, September 30,
1997 1996
------------ ------------
Increase in Net Assets
Operations:
Net investment income ...............$ 12,861,955 $ 25,039,519
Realized net gain on
investments ....................... 4,389,249 2,528,353
Unrealized appreciation
(depreciation) ..................... (283,886) 772,319
------------ ------------
Net increase in net assets
resulting from operations ........ 16,967,318 28,340,191
------------ ------------
Dividends to shareholders (Note 1D):*
From net investment income .......... (12,861,955) (25,039,519)
Realized net gain on investment
transactions ...................... (1,101,874) ---
------------ ------------
(13,963,829) (25,039,519)
------------ ------------
Capital share transactions:
Proceeds from sale of shares
(4,848,547 and 7,034,526 shares,
respectively) ..................... 26,087,984 37,292,742
Proceeds from reinvestment of
dividends and/or capital gains
distribution (2,124,658 and 3,840,968
shares, respectively) ............. 11,429,623 20,390,179
Payments for shares redeemed
(4,154,484 and 8,297,041 shares,
respectively) ..................... (22,347,615) (43,964,829)
------------ ------------
Net increase in net assets
resulting from capital
share transactions ............... 15,169,992 13,718,092
------------ ------------
Total increase ................... 18,173,481 17,018,764
Net Assets
Beginning of period .................. 399,823,693 382,804,929
------------ ------------
End of period ........................$417,997,174 $399,823,693
============ ============
Undistributed net investment
income ............................ $--- $---
==== ====
*See "Financial Highlights" on page .
See notes to financial statements.
<PAGE>
UNITED MUNICIPAL HIGH INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the
six For the fiscal year ended
months September 30,
ended ------------------------------------
3/31/97 1996 1995 1994 1993 1992
------- ------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $5.31 $5.27 $5.12 $5.53 $5.23 $5.05
----- ----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income........... 0.17 .34 .35 .34 .35 .36
Net realized and
unrealized gain
(loss) on
investments ..... 0.05 .04 .17 (0.34) .34 .18
----- ----- ----- ----- ----- -----
Total from investment
operations ....... 0.22 .38 .52 0.00 .69 .54
----- ----- ----- ----- ----- -----
Less distributions:
Dividends declared from
net investment
income .......... (0.17) (0.34) (0.35) (0.34) (0.35) (0.36)
Distribution from
capital gains ... (0.01) (0.00) (0.00) (0.07) (0.04) (0.00)
Distribution in excess
of capital gains. (0.00) (0.00) (0.02) (0.00) (0.00) (0.00)
----- ----- ----- ----- ----- -----
Total distributions. (0.18) (0.34) (0.37) (0.41) (0.39) (0.36)
----- ----- ----- ----- ----- -----
Net asset value, end
of period ........ $5.35 $5.31 $5.27 $5.12 $5.53 $5.23
===== ===== ===== ===== ===== =====
Total return* ...... 8.03% 7.40% 10.63% 0.05% 13.77% 11.08%
Net assets, end
of period (000
omitted) ..........$417,997$399,824$382,805$345,162$329,373$260,777
Ratio of expenses to
average net
assets ........... 0.81%** 0.81% 0.76% 0.76% 0.70% 0.72%
Ratio of net investment
income to average
net assets ....... 6.29%** 6.41% 6.75% 6.39% 6.49% 7.08%
Portfolio turnover
rate ............. 12.57% 26.91% 19.07% 26.26% 26.13% 54.18%
*Total return calculated without taking into account the sales load deducted
on an initial purchase.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED MUNICIPAL HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 1 -- Significant Accounting Policies
United Municipal High Income Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940 as a diversified, open-end management
investment company. Its investment objective is to provide a high level of
income which is not subject to Federal income taxation. 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 -- Municipal bonds and the taxable obligations in the
Fund's investment portfolio are not listed or traded on any securities
exchange. Therefore, municipal bonds are valued using a pricing system
provided by a pricing service or dealer in bonds. Short-term debt
securities, whether taxable or nontaxable, are valued at amortized cost,
which approximates market.
B. Security transactions and related investment income -- Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Securities gains and losses are calculated on the
identified cost basis. Original issue discount (as defined by the Internal
Revenue Code) and premiums on the purchase of bonds are amortized for both
financial and tax reporting purposes over the remaining lives of the bonds.
Interest income is recorded on the accrual basis. See Note 3 -- Investment
Security Transactions.
C. Federal income taxes -- The Fund intends to distribute all of its net
investment income and capital gains to its shareholders and otherwise
qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code. The Fund intends to pay distributions as required
to avoid imposition of excise tax. Accordingly, provision has not been
made for Federal income taxes. In addition, the Fund intends to meet
requirements of the Internal Revenue Code which will permit it to pay
dividends from net investment income, substantially all of which will be
exempt from Federal income tax. See Note 4 -- Federal Income Tax Matters.
D. Dividends and distributions -- All of the Fund's net investment income is
declared and recorded by the Fund as dividends payable on each day to
shareholders of record as of the close of the preceding business day. Net
investment income dividends and capital gains distributions are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are due to differing
treatments for items such as deferral of wash sales and post-October
losses, net operating losses and expiring capital loss 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 .10% 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 $15.0 billion of
combined net assets at March 31, 1997) at annual rates of .51% of the first $750
million of combined net assets, .49% on that amount between $750 million and$1.5
billion, .47% between $1.5 billion and $2.25 billion, .45% between $2.25
billion and $3 billion, .43% between $3 billion and $3.75 billion, .40% between
$3.75 billion and $7.5 billion, .38% between $7.5 billion and $12 billion, and
.36% of that amount over $12 billion. The Fund accrues and pays this fee daily.
Pursuant to assignment of the Investment Management Agreement between the
Fund and Waddell & Reed, Inc. ("W&R"), Waddell & Reed Investment Management
Company ("WRIMCO"), a wholly-owned subsidiary of W&R, serves as the Fund's
investment manager.
The Fund has an Accounting Services Agreement with Waddell & Reed Services
Company ("WARSCO"), a wholly-owned subsidiary of W&R. Under the agreement,
WARSCO acts as the agent in providing accounting services and assistance to the
Fund and pricing daily the value of shares of the Fund. For these services, the
Fund pays WARSCO a monthly fee of one-twelfth of the annual fee shown in the
following table.
Accounting Services Fee
Average
Net Asset Level Annual Fee
(all dollars in millions) Rate for Each Level
------------------------- -------------------
From $ 0 to $ 10 $ 0
From $ 10 to $ 25 $ 10,000
From $ 25 to $ 50 $ 20,000
From $ 50 to $ 100 $ 30,000
From $ 100 to $ 200 $ 40,000
From $ 200 to $ 350 $ 50,000
From $ 350 to $ 550 $ 60,000
From $ 550 to $ 750 $ 70,000
From $ 750 to $1,000 $ 85,000
$1,000 and Over $100,000
The Fund also pays WARSCO a monthly per account charge for transfer agency
and dividend disbursement services of $1.3125 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 was paid in that month.
The Fund also reimburses W&R and WARSCO for certain out-of-pocket costs.
As principal underwriter for the Fund's shares, W&R received gross sales
commissions (which are not an expense of the Fund) of $657,909, out of which W&R
paid sales commissions of $363,749 and all expenses in connection with the sale
of Fund shares, except for registration fees and related expenses.
Under a Service Plan adopted by the Fund pursuant to Rule 12b-1 under the
Investment Company Act of 1940, the Fund may pay monthly a fee to W&R in an
amount not to exceed .25% of the Fund's average annual net assets. The fee is
to be paid to reimburse W&R for amounts it expends in connection with the
provision of personal services to Fund shareholders and/or maintenance of
shareholder accounts.
The Fund paid Directors' fees of $8,583, which are included in other
expenses.
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 $59,459,325, while proceeds from maturities and
sales aggregated $50,566,424. Purchases of short-term securities aggregated
$61,489,613, while proceeds from maturities and sales aggregated $57,460,036.No
U.S. Government securities were bought or sold during the period ended March
31, 1997.
For Federal income tax purposes, cost of investments owned at March 31,
1997 was $399,039,315, resulting in net unrealized appreciation of $15,314,944,
of which $17,454,941 related to appreciated securities and $2,139,997 related to
depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized net capital gain net
income of $279,195 during its fiscal year ended September 30, 1996, which
included losses of $1,960,745 deferred from the year ended September 30, 1995
(see discussion below). The capital gain has been distributed to the Fund's
shareholders.
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 capital losses of $1,960,745, which
were deferred to the fiscal year ended September 30, 1996.
NOTE 5 -- Multiclass Operations
On January 30, 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 A shares represent existing shareholders;
Class Y shares are offered through a separate Prospectus to certain
institutional investors. 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. As of March
31, 1997, the Fund had not commenced multiclass operations.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
United Municipal High Income Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of United Municipal High Income
Fund, Inc. (the ``Fund'') as of March 31, 1997, the related statements of
operations and changes in net assets for the six-month period then ended,
and the financial highlights for the six-month 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
audit. The financial statements and the financial highlights of the Fund
for each of the periods presented in the five-year period ended September
30, 1996 were audited by other auditors whose report, dated November 8,
1996, expressed an unqualified opinion on those statements and financial
highlights.
We conducted our audit in accordance with generally accepted auditing
standards. 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 at March 31, 1997 by correspondence with
the custodian and broker. 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 audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of the
United Municipal High Income Fund, Inc. as of March 31, 1997, the
results of its operations, the changes in its net assets, and the
financial highlights for the six-month period then ended in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
May 7, 1997
<PAGE>
DIRECTORS
Ronald K. Richey, Birmingham, Alabama, Chairman of the Board
Henry L. Bellmon, Red Rock, Oklahoma
Dodds I. Buchanan, Boulder, Colorado
Linda Graves, Topeka, Kansas
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
William L. Rogers, Los Angeles, California
Frank J. Ross, Jr., 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
Carl E. Sturgeon, Vice President
<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
(800) 366-5465
Our INTERNET address is:
http://www.waddell.com
NUR1014SA(3-97)
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