<PAGE>
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
October 15, 1997
Dear Shareholder:
We are pleased to present to you the Semi-Annual Report of The United Kingdom
Fund Inc. (the "Fund"). On September 30, 1997, the end of the period under
review, the Fund's net assets totaled $66 million. This represents a net asset
value per share of $16.45, a rise of 184.98% from its initial value in August
1987 after taking into account underwriting discounts, commissions, offering
expenses and distributions. This compares with an increase of 202.70% in the
FTSE All-Share Index (U.S.$) over the same time period. At the end of the period
under review, the Fund was quoted at $13.938 per share on the New York Stock
Exchange, which represents a 15.27% discount to the Fund's net asset value per
share.
At the Annual Meeting of the Fund on September 16, 1997, a vote of
shareholders was taken in accordance with the terms of the prospectus, which
state that if the average cumulative discount for the twelve weeks prior to the
end of March in any year exceeds 10%, an open-ending vote must take place. For
the twelve weeks prior to the end of March, 1997, the cumulative average
discount was 15.60%. Votes cast in favor of open-ending the Fund accounted for
20.26% of all shares outstanding and the Fund will therefore remain in its
current closed-end form.
We also enclose an investment review and United Kingdom market outlook
together with a summary of the major portfolio investments.
Yours sincerely,
/s/ Anthony M. Solomon /s/ J. Loughlin Callahan
Anthony M. Solomon J. Loughlin Callahan
Chairman of the Board President
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INVESTMENT MANAGER
- --------------------------------------------------------------------------------
INVESTMENT REVIEW
During the third quarter of 1997, your Fund experienced a rise in net asset
value of 5.58%, which compares with a 10.06% increase in the FTSE All-Share
Index. For 1997 calendar year to date, the Fund's net asset value has increased
by 8.62%, which compares with a 17.97% increase in the FTSE All-Share Index.
These figures are recorded in total return and U.S. dollar based terms.
The U.K. equity market made strong progress over the quarter. Declining gilt
yields and a reassuring economic environment led to renewed buying of U.K.
equities which ended the period at new highs. A further positive factor was the
new Chancellor's first budget, which had a favorable reception from investors.
It included a reduction in corporation tax and the elimination of the dividend
tax credit for pension funds, thus discouraging companies from issuing new
equity. Although base interest rates rose by 0.5% over the period, this
confirmed the commitment of the Bank of England to keeping inflation under
control.
The best performing areas of the equity market were insurance, retailers-food,
gas distribution, and engineering-vehicles. News of a bid approach for T & N and
reassuring interim results from Laird Group helped the engineering-vehicles
sector recover some of its previous underperformance caused by sterling's
strength. The insurance sector was viewed as a beneficiary of the strong equity
and gilt markets and retailers-food were encouraged by hopes of reduced
competitive pressures. The weakest sector was extractive industries which was
led by Rio Tinto on the prospect of falling metal prices. The telecommunications
and tobacco sectors were adversely affected by industry-specific factors. The
pharmaceuticals sector ceded some of its previous gains, as investors began to
favor other sectors, such as engineering-vehicles, which had fallen sharply as a
result of sterling's earlier strength. The building materials sector
underperformed, following a profit warning from Redland and concerns over the
overseas earnings of companies such as Blue Circle Industries and RMC Group.
The U.K. gilt market continued to derive strength from the government's
anti-inflationary stance and was further encouraged by speculation of early U.K.
entry into the Economic and Monetary Union ("EMU"). Longer dated stocks
performed well with a return of 7.0%. Index-linked stocks also benefited from
falling long-term interest rates and returned 5.7%. These figures are reported
in sterling terms.
The Fund's and the FTSE All-Share Index's sector weightings expressed as a
percentage of total equities held at September 30, 1997 are outlined below:
<TABLE>
<CAPTION>
% OF FTSE
% U.K. ALL-SHARE
FUND INDEX
------------ ------------
<S> <C> <C>
Mineral Extraction........................ 5.6 10.4
General Industrials....................... 23.2 13.7
Consumer Goods............................ 27.9 16.8
Services.................................. 10.7 21.2
Utilities................................. 17.5 10.0
Finance................................... 15.1 24.9
Investment Trusts......................... 0.0 3.0
</TABLE>
2
<PAGE>
ECONOMIC & MARKET OUTLOOK
The outlook for the U.K. economy for the next six months is for continued
consumer-led economic expansion. Personal disposable incomes are expected to
show significant increases in the current year which together with building
society windfalls are expected to keep consumer spending at a high level. There
are some signs that the windfall effect may now be past its peak and this,
together with the forthcoming consultative or "green" budget in November which
is expected to contain suggested changes in taxation, may dampen the rate of
growth. The Bank of England could well increase interest rates further to keep
inflation tightly under control, especially as sterling's climb against
Continental European currencies appears to have leveled out.
Industrial companies are still faced with sterling at relatively uncompetitive
levels. Export orders have been much harder to win and have been accompanied by
reduced margins. There has also been evidence of pricing pressures for U.K.
manufacturers from imports in their domestic market-place.
Despite the buoyant domestic economy, the Bank of England's control of
interest rates will probably ensure that inflation is kept at modest levels. The
outlook for the U.K. fixed interest market has improved following the Budget
which has increased the relative yield attractions of gilts compared with
equities. This remains a positive background for longer dated gilts where the
combination of increased buying by pension funds and a declining supply will
lead to lower yields although shorter dated gilts would be adversely affected by
any further increases in base rates. Overall, gilts still offer reasonable value
with some further prospects for capital appreciation, especially if the
government were to indicate its intention for the U.K. to participate in EMU.
The outlook for the U.K. equity market remains mixed. While U.K. manufacturers
face the difficulty of a relatively uncompetitive exchange rate, some consumer
and building-related companies are enjoying substantial upturns in business. The
FTSE-100 index has reached new highs with investors favoring those stocks with
high visibility of earnings progression. Smaller and medium-sized companies have
lagged larger companies for some time and are selling at substantially lower
ratings. There are some signs that investors are now looking for value and are
beginning to switch from the more highly rated market leaders into lower rated
stocks. U.K. equities are expected to remain volatile with continuing divergence
in performance between different sectors and stocks. The introduction of the
order-driven market on October 20th may lead to even further volatility.
Overall, following its steep rise, the equity market is probably due for some
correction before making further significant progress.
3
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
- --------------------------------------------------------------------------------
The strategy over the period was to build up the cash balance within the
portfolio prior to making the July distribution. We reduced several larger
holdings including British Airways, LucasVarity, Wessex Water and British
Petroleum. We sold Kingfisher and disposed of Inspirations. The holdings of
several smaller stocks were reduced with partial sales of Greggs, Whitecroft and
Scholl. New holdings included Zeneca Group, the pharmaceuticals company which
offers good growth prospects, and Royal Bank of Scotland Group which has
significant potential to increase profits by reducing its costs. British
Telecommunications was also purchased in view of the likely benefits from its
proposed merger with MCI Communications.
The Fund's ten largest equity holdings as of September 30, 1997 were:
BARCLAYS
<TABLE>
<S> <C>
Market Price as of 09/30/97................................. 1675p
Prospective Earnings per share (to December 1997)........... 113.5p
Prospective Earnings Multiple............................... 14.8x
</TABLE>
Barclays has shown a strong recovery in banking profits following a reduction
in bad debts and success in controlling costs through branch closures and
centralization of service functions. We believe that substantial further cost
savings can be achieved through the introduction of new technology and staff
reductions. BZW, the securities arm of Barclays, is expected to be sold shortly,
which will release significant capital on which an unsatisfactory return was
being achieved. Barclays has bought back its own shares on a regular basis and
we expect a continued focus on improving shareholder value.
BRITISH PETROLEUM
<TABLE>
<S> <C>
Market Price as of 09/30/97................................. 936p
Prospective Earnings per share (to December 1997)........... 48.1p
Prospective Earnings Multiple............................... 19.4x
</TABLE>
British Petroleum ("BP") is a leading international oil company with a
substantial exploration and production profile. BP continues to develop its oil
production interests in the Gulf of Mexico, Colombia and the region West of
Shetlands. It is planning to cut its refining capacity to match production with
customer demand and has reduced the cyclicality of its chemicals operations.
Strong cash flow from the company may see a sharp reduction in the level of
borrowings and we expect excellent dividend progression.
GLAXO WELLCOME
<TABLE>
<S> <C>
Market Price as of 09/30/97................................. 1395p
Prospective Earnings per share (to December 1997)........... 53.7p
Prospective Earnings Multiple............................... 30.0x
</TABLE>
Glaxo Wellcome is a leading international pharmaceuticals company which is
expected to return to strong earnings growth in 1998. Although its patents on
Zovirax and Zantac expire this year, sales of newer drugs are likely to increase
rapidly. Sales of Retrovir and Epivir, Glaxo Wellcome's treatments for HIV
infection, are performing well with the drugs being used increasingly in
combination therapy. New compounds to treat hepatitis (B&C), malaria and
influenza could also have significant long-term potential.
4
<PAGE>
SHELL TRANSPORT & TRADING
<TABLE>
<S> <C>
Market Price as of 09/30/97................................. 454p
Prospective Earnings per share (to December 1997)........... 20.1p
Prospective Earnings Multiple............................... 22.6x
</TABLE>
Shell Transport & Trading is a leading oil company with substantial
production, refining and petrochemical activities. Profits from oil exploration
and production are expected to grow, helped by the recent strength in the price
of crude oil. Cash flow remains highly positive, despite a substantial increase
in exploration expenditure and we continue to expect strong dividend progression
for at least the next two years.
NATIONAL WESTMINSTER BANK
<TABLE>
<S> <C>
Market Price as of 09/30/97................................. 937p
Prospective Earnings per share (to December 1997)........... 65.3p
Prospective Earnings Multiple............................... 14.3x
</TABLE>
National Westminster Bank is a leading retail bank in the U.K. Like other
clearing banks it is undergoing a strategy of branch closures and reductions in
its workforce. It has rapidly expanded its investment banking activities and in
the last two years it has increased its investment management and corporate
advisory capabilities. Although the company has recently suffered from a setback
in its derivatives operation, profits are expected to continue their steady
growth, helped by a lack of bad debts and increasing fee income.
ALLIED DOMECQ
<TABLE>
<S> <C>
Market Price as of 09/30/97................................. 492p
Prospective Earnings per share (to August 1998)............. 38.5p
Prospective Earnings Multiple............................... 12.8x
</TABLE>
Allied Domecq is an international spirits company with several leading brands
including Ballantine's and Canadian Club whiskies, Beefeater gin, Tia Maria and
Kahlua. It also is a liquor retailer through public houses and off-licenses and
owns the franchises to Dunkin' Donuts and Baskin-Robbins ice cream parlors. We
expect earnings to make steady progress as the management maximizes the
profitability of its brand portfolio.
ANGLIAN WATER
<TABLE>
<S> <C>
Market Price as of 09/30/97................................. 819p
Prospective Earnings per share (to March 1998).............. 87.8p
Prospective Earnings Multiple............................... 9.3x
</TABLE>
Anglian Water provides water supply to a population of 4 million people and
sewerage services to 5.3 million people in Eastern England. It also has a number
of unregulated international activities which contribute little to profits.
These include process engineering and membrane products for the water industry.
We expect Anglian Water to demonstrate continued growth in profits from its core
water and sewerage business and this should allow steady progression in
dividends.
FINLAY (JAMES)
<TABLE>
<S> <C>
Market Price as of 09/30/97................................. 121p
Prospective Earnings per share (to December 1997)........... 7.8p
Prospective Earnings Multiple............................... 15.5x
</TABLE>
Finlay (James) is a major tea producer, owning tea estates in Kenya and
Bangladesh. It also has a stake in a Ugandan tea estate and manages a group of
estates on behalf of the Sri Lankan government. Finlay (James) also produces
special teas, including instant tea and packaged tea on an exclusive basis for
J. Sainsbury plc, one of Britain's major supermarket chains. Finlay (James)
continues to refocus following its previous diversification strategy and is
expected to show strong profit growth over the next few years.
5
<PAGE>
BARR (AG)
<TABLE>
<S> <C>
Market Price as of 09/30/97................................. 445p
Prospective Earnings per share (to January 1998)............ 32.2p
Prospective Earnings Multiple............................... 13.8x
</TABLE>
Barr (AG) is a manufacturer of soft drink brands based in Scotland. It has
recently completed new manufacturing facilities in Cumbernauld which will
produce significant production efficiencies that should enhance its competitive
position.
SCHOLL
<TABLE>
<S> <C>
Market Price as of 09/30/97................................. 292p
Prospective Earnings per share (to December 1997)........... 17.3p
Prospective Earnings Multiple............................... 16.9x
</TABLE>
Scholl is a footwear and healthcare group with a substantial European
presence. It is currently undergoing a major restructuring, which should
increase the company's focus on exploiting the Scholl brand. It has recently
expanded into Latin America and is expected to show continued progress in
developing its overseas sales.
6
<PAGE>
- ----------------------------------------------------
THE UNITED KINGDOM FUND INC.
STATEMENT OF INVESTMENTS
SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
SHARES DESCRIPTION VALUE
- ----------------------------------------------------------------------------------------
<C> <S> <C>
INVESTMENTS IN UNITED KINGDOM SECURITIES--
97.7% OF NET ASSETS
COMMON STOCKS--97.7%
ALCOHOLIC BEVERAGES--3.4%
250,000 Allied Domecq plc Ord 25p................................... $ 1,980,745
270,000 Merrydown plc Ord 25p....................................... 256,792
---------------
2,237,537
---------------
Banking--14.7%
100,000 Abbey National plc Ord 10p.................................. 1,538,654
150,000 Barclays plc Ord 100p....................................... 4,048,941
200,000 National Westminster Bank plc Ord 100p...................... 3,019,276
100,000 Royal Bank of Scotland Group plc Ord 25p.................... 1,113,086
---------------
9,719,957
---------------
BUILDING MATERIALS & MERCHANTS--6.7%
476,000 Cape plc Ord 25p............................................ 1,177,824
300,000 Johnston Group plc Ord 10p.................................. 1,571,700
550,000 Norcros plc Ord 25p......................................... 611,754
454,000 Universal Ceramic Materials plc Ord 5p...................... 669,641
344,370 Vibroplant plc Ord 5p....................................... 394,138
---------------
4,425,057
---------------
CHEMICALS--4.5%
600,000 Manders plc Ord 25p......................................... 1,387,932
50,000 Wolstenholme Rink plc Ord 25p............................... 521,885
325,000 Yorkshire Group plc Ord 25p................................. 1,055,659
---------------
2,965,476
---------------
DIVERSIFIED INDUSTRIALS--2.2%
200,000 Wardle Storeys plc Ord 10p.................................. 1,192,880
140,100 Whitecroft plc Ord 25p...................................... 282,302
---------------
1,475,182
---------------
ELECTRICITY--2.1%
300,000 National Grid Group plc Ord 10p............................. 1,368,588
---------------
ELECTRONICS & ELECTRICAL EQUIPMENT--5.0%
220,000 Alphameric plc Ord 2.5p*.................................... 184,413
315,000 Beales Hunter plc Ord 20p................................... 444,308
425,000 CML Microsystems plc Ord 5p................................. 1,051,629
250,000 General Electric Co. plc Ord 5p............................. 1,577,745
---------------
3,258,095
---------------
ENGINEERING-GENERAL--2.3%
331,186 Ash & Lacy plc Ord 5p....................................... 904,913
1,250,000 Beauford plc Ord 10p........................................ 594,425
---------------
1,499,338
---------------
ENGINEERING-VEHICLES--2.0%
350,000 LucasVarity plc Ord 25p..................................... 1,320,228
---------------
FOOD PRODUCERS--7.3%
270,000 Barr (AG) plc Ord 25p....................................... 1,936,818
170,500 CPL Aromas plc Ord 10p...................................... 292,711
1,000,000 Finlay (James) plc Ord 25p.................................. 1,942,460
450,000 Paramount Foods plc Ord 10p................................. 623,844
---------------
4,795,833
---------------
HEALTH CARE--2.8%
400,000 Scholl plc Ord 5p........................................... 1,879,592
---------------
HOUSEHOLD GOODS--0.9%
182,500 Royal Doulton plc Ord 100p.................................. 610,444
---------------
LEISURE & HOTELS--1.7%
350,000 MacDonald Hotels plc Ord 5p................................. $ 1,100,190
---------------
<CAPTION>
- ----------------------------------------------------------------------------------------
SHARES DESCRIPTION VALUE
- ----------------------------------------------------------------------------------------
<C> <S> <C>
OIL & GAS--11.9%
200,000 BG plc Ord 25p.............................................. 868,868
225,000 British Petroleum plc Ord 25p............................... 3,393,059
200,000 Centrica plc Ord 5p*........................................ 299,832
450,000 Shell Transport & Trading plc Ord 25p (Regd.)............... 3,289,689
---------------
7,851,448
---------------
PHARMACEUTICALS--7.1%
150,000 Glaxo Wellcome plc Ord 25p.................................. 3,371,901
40,000 Zeneca Group plc Ord 25p*................................... 1,303,463
---------------
4,675,364
---------------
RETAILERS-FOOD--2.3%
48,444 Greggs plc Ord 20p.......................................... 1,491,552
---------------
RETAILERS-GENERAL--4.0%
106,250 Courts plc Ord 25p.......................................... 999,390
250,000 John Menzies plc Ord 25p.................................... 1,652,300
---------------
2,651,690
---------------
TEXTILES & APPAREL--3.4%
350,000 French plc Ord 10p.......................................... 296,205
165,000 Shiloh plc Ord 25p.......................................... 320,506
1,550,000 Sirdar plc Ord 25p.......................................... 1,636,583
---------------
2,253,294
---------------
TELECOMMUNICATIONS--1.0%
100,000 British Telecommunications plc Ord 25p...................... 660,114
---------------
TOBACCO--2.3%
175,000 BAT Industries plc Ord 25p.................................. 1,531,803
---------------
TRANSPORT--2.5%
150,000 British Airways plc Ord 25p................................. 1,640,613
---------------
WATER--7.6%
150,000 Anglian Water plc Ord 100p.................................. 1,979,133
100,000 South West Water plc Ord 100p............................... 1,429,038
200,000 Wessex Water plc Ord 60p.................................... 1,632,952
---------------
5,041,123
---------------
Total Common Stocks
(cost $48,013,252)........................................ 64,452,518
---------------
UNITED STATES SHORT-TERM INVESTMENT--
1.0% OF NET ASSETS
682,045 Federated Investors, Trust for Short-Term U.S. Government
Securities+--(cost $682,045).............................. 682,045
---------------
Total Investments (cost $48,695,297)--98.7%................. 65,134,563
---------------
Cash and other assets in excess of liabilities--1.3%........ 845,932
---------------
NET ASSETS--100.0%.......................................... $ 65,980,495
---------------
---------------
NUMBER OF SHARES ISSUED AND OUTSTANDING..................... 4,011,655
---------------
---------------
NET ASSET VALUE PER SHARE................................... $16.45
---------------
---------------
</TABLE>
- ------------------
* Non-income producing securities.
+ Money market fund.
See Notes to Financial Statements.
7
<PAGE>
- -----------------------------------------------
THE UNITED KINGDOM FUND INC.
STATEMENT OF
ASSETS AND LIABILITIES
SEPTEMBER 30, 1997 (UNAUDITED)
- ----------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $48,695,297)........................................ $ 65,134,563
Cash, at value (cost $335,805).................................................. 335,850
Dividends and interest receivable............................................... 591,196
U.K. withholding tax refund receivable.......................................... 183,023
Receivable for securities sold.................................................. 6,045
Other assets.................................................................... 3,712
------------
Total assets.............................................................. 66,254,389
------------
LIABILITIES
Investment management fee payable............................................... 78,044
Administration fee payable...................................................... 16,067
Accrued expenses................................................................ 179,783
------------
Total liabilities......................................................... 273,894
------------
NET ASSETS...................................................................... $ 65,980,495
------------
------------
Net assets consist of:
Common stock, $0.01 par value
(Authorized 15,000,000 shares)............................................... $ 40,116
Paid-in-surplus............................................................... 45,960,154
Undistributed net investment income........................................... 444,446
Accumulated net realized gains on investments and pound sterling.............. 3,098,010
Net unrealized appreciation on investments and translation of other assets and
liabilities denominated in pound sterling.................................... 16,437,769
------------
Net assets.................................................................... $ 65,980,495
------------
------------
Net asset value per share
($65,980,495 DIVIDED BY 4,011,655 shares of common stock issued and
outstanding)................................................................. $16.45
------------
------------
</TABLE>
- ----------------------------------------------------
THE UNITED KINGDOM FUND INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1997 (UNAUDITED)
- ----------------------------------------------------
<TABLE>
<S> <C>
NET INVESTMENT INCOME
Income
Dividends..................................................................... $ 1,741,052
Interest...................................................................... 48,060
-----------
1,789,112
Less: U.K. withholding tax.................................................... 253,347
-----------
Total income.............................................................. 1,535,765
-----------
Expenses
Investment management fee..................................................... 245,026
Administration fee............................................................ 49,005
Directors' fees and expenses.................................................. 37,698
Legal fee..................................................................... 33,881
Reports and notices to shareholders........................................... 26,574
Custodian's fees and expenses................................................. 22,326
Audit fee..................................................................... 16,862
Transfer agent's fees and expenses............................................ 11,895
NYSE listing fee.............................................................. 8,085
Insurance fee................................................................. 2,664
Miscellaneous expenses........................................................ 4,758
-----------
Total expenses............................................................ 458,774
-----------
Net investment income........................................................... 1,076,991
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND POUND
STERLING TRANSACTIONS
Net realized gain on:
Investments................................................................... 2,865,130
Pound sterling transactions................................................... 69,234
Net change in unrealized appreciation on:
Investments................................................................... 1,406,842
Pound sterling transactions................................................... (29,788)
-----------
Net gain on investments and pound sterling transactions......................... 4,311,418
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ $ 5,388,409
-----------
-----------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
- -----------------------------------------------
THE UNITED KINGDOM FUND INC.
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
SEPTEMBER 30, YEAR ENDED
1997 MARCH 31,
(UNAUDITED) 1997
-------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income................. $ 1,076,991 $ 1,437,437
Net realized gain on investments...... 2,865,130 8,484,000
Net realized gain on pound sterling
transactions......................... 69,234 384,938
Net change in unrealized appreciation
on investments and pound sterling
transactions......................... 1,377,054 2,273,395
-------------- --------------
Net increase in net assets resulting
from operations...................... 5,388,409 12,579,770
-------------- --------------
Dividends and distributions to
shareholders from
Net investment income ($0.20 and
$0.422 per share, respectively)...... (802,333) (1,691,006)
Net realized gains ($1.41 and $0.948
per share, respectively)............. (5,656,434) (3,804,962)
-------------- --------------
Total dividends and distributions..... (6,458,767) (5,495,968)
-------------- --------------
Total increase/(decrease)............... (1,070,358) 7,083,802
NET ASSETS
Beginning of period................... 67,050,853 59,967,051
-------------- --------------
End of year (including undistributed
net investment income of $444,446 and
$169,788, respectively).............. $ 65,980,495 $ 67,050,853
-------------- --------------
-------------- --------------
</TABLE>
See Notes to Financial Statements.
- -----------------------------------------------
THE UNITED KINGDOM FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- -----------------------------------------------
NOTE 1. SIGNIFICANT
ACCOUNTING POLICIES
The United Kingdom Fund Inc. (the "Fund") was incorporated in the State of
Maryland on May 28, 1987, as a closed-end, diversified management investment
company, prior to commencing investment operations on August 14, 1987.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
MANAGEMENT ESTIMATES: The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
certain estimates and assumptions that may affect the reported amounts and
disclosures in the financial statements. Actual results could differ from those
estimates.
VALUATION OF INVESTMENTS: All securities for which current market quotations
are readily available are valued at the last sales price prior to the time of
determination. If there is no sales price on that date, the securities would be
valued at the most recently available sales price. Unless otherwise determined
by the Fund's Board of Directors, United States short-term investments having a
maturity of 60 days or less are valued at amortized cost. Short-term U.K.
securities are valued at cost after reflecting any unrealized foreign exchange
gains or losses. Securities and assets for which current market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors of the Fund. Forward currency
contracts are valued at the current cost of covering or offsetting the
contracts. Any assets or liabilities initially expressed in terms of pound
sterling ("Sterling") are translated into U.S. dollars at the prevailing market
rates as quoted by one or more banks or dealers on the date of valuation.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
recorded on the trade date (the date on which the order to buy or sell is
executed). Realized gains and losses from security and foreign currency
transactions are calculated on the identified cost basis and interest income is
recorded on an accrual basis. Dividend income is recorded on the ex-dividend
date, except that certain dividends from U.K. securities are recorded as soon as
the Fund is
9
<PAGE>
informed of the ex-dividend date. Such dividend income and interest income is
recorded before U.K. withholding tax. U.K. withholding tax is recorded as a
reduction of investment income, net of an amount receivable from the U.K. tax
authorities pursuant to the tax treaty with the U.S.
FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are
maintained in U.S. dollars as follows:
(i) the foreign currency market value of investment securities and other
assets and liabilities stated in Sterling are translated at the exchange
rate prevailing at the end of the period; and
(ii) purchases, sales of investments, income and expenses are translated at
the rate of exchange prevailing on the respective dates of such
transactions.
The resultant exchange gains and losses are included in the Statement of
Operations.
The Fund does not generally isolate the effect of fluctuations in foreign
exchange rates from the effect of fluctuations in the market price of
investments. However, the Fund does isolate the effect of fluctuations in
Sterling rates when determining the gain or loss upon the sale or maturity of
Sterling-denominated debt obligations pursuant to U.S. federal income tax
regulations; such amount is categorized as foreign exchange gain or loss for
both financial reporting and income tax reporting purposes.
Net realized foreign exchange gains of $69,234 represent foreign exchange
gains and losses from holdings of Sterling, exchange gains or losses realized
between the trade date and settlement dates on security transactions, and the
difference between the amounts of interest and dividends recorded on the Fund's
books and the U.S. dollar equivalent of the amounts actually received.
The 12:00 p.m. midpoint rate of exchange at September 30, 1997 was U.S.
$1.6165 to L1 Sterling.
FORWARD FOREIGN CURRENCY CONTRACTS: The Fund may enter into forward foreign
currency exchange contracts ("Forward Contracts") in connection with planned
purchases or sales of securities or to hedge the U.S. dollar value of portfolio
securities denominated in Sterling.
The Fund may not position a hedge with respect to Sterling or another currency
to an extent greater than the aggregate market value (at the time of making such
transaction) of the securities held in its portfolio denominated or generally
quoted in or currently convertible into Sterling or such other currency. If the
Fund enters into a currency hedging transaction, the Fund's custodian will place
cash or U.S. government securities or other high quality short-term debt
obligations or a combination thereof in a segregated account of the Fund in an
amount equal to the value of the Fund's total assets committed to the
consummation of the forward contract, which value will be adjusted on a daily
basis. If the value of the securities placed in the segregated account declines,
additional cash or securities will be placed in the account so that the value of
the account will equal the amount of the Fund's commitment with respect to the
contract. The Fund did not enter into such contracts during the six month period
ending September 30, 1997.
Risks may arise upon entering these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of the foreign currency relative to the U.S. dollar.
Fluctuations in the value of forward contracts are recorded for book purposes
as unrealized gains or losses by the Fund.
Realized gains and losses include net gains or losses recognized by the Fund
on forward contracts that the Fund has terminated by entering into offsetting
commitments.
U.S. FEDERAL TAX STATUS: The Fund intends to distribute all of its taxable
income and to comply with the other requirements of the U.S. Internal Revenue
Code applicable to regulated investment companies. Accordingly, no provision for
U.S. federal income taxes is required. In addition, by distributing during each
calendar year substantially all of its ordinary income and capital gains, if
any, the Fund intends not to be subject to a U.S. federal excise tax.
UNITED KINGDOM WITHHOLDING TAXES: Dividend income received from U.K.
corporations is subject to the Advance Corporation Tax ("ACT"). Pursuant to the
U.K.-U.S. tax treaty, the Fund will generally be entitled to receive from the
United Kingdom Inland Revenue a payment equal to the ACT minus a 15% withholding
tax. The withholding tax is based upon the sum of the dividend received plus the
ACT. The Fund is not subject to U.K. taxes on capital gains and interest income.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund records dividends and
distributions to its shareholders on the ex-dividend date.
The amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with U.S. federal income tax
regulations which may differ from net investment income and net realized capital
gains as determined by generally accepted accounting principles. These
"book/tax" differences are either considered temporary or permanent in nature.
To the extent these
10
<PAGE>
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their U.S. federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized capital
gains. To the extent dividends and distributions exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-surplus.
NOTE 2. AGREEMENTS
The Fund has entered into Agreements with Mercury Asset Management
International (Channel Islands) Ltd. (the "Investment Manager"), Mercury Asset
Management International Ltd. (the "Investment Adviser") and Bear Stearns Funds
Management Inc. (the "Administrator").
The Investment Management Agreement provides that the Fund pays the Investment
Manager a fee, computed weekly and payable monthly, at the following rates:
0.75% of the Fund's average weekly net assets up to $150 million, and 0.65% of
such assets in excess of $150 million. The Administration Agreement provides
that the Fund pays the Administrator a fee at the annual rate of 0.15% of the
Fund's average weekly net assets up to $200 million and 0.10% on such assets in
excess of $200 million. The Investment Manager makes investment decisions on
behalf of the Fund on the basis of recommendations from the Investment Adviser
subject to the overall supervision of the Board of Directors of the Fund. The
Investment Manager pays a fee to the Investment Adviser for the services
rendered. The Administrator provides certain clerical and bookkeeping services
to the Fund.
NOTE 3. TRANSACTIONS WITH AFFILIATES
Of the 4,011,655 shares outstanding at September 30, 1997, Mercury Asset
Management Group plc (the parent company of the Investment Adviser and
Investment Manager) owned 844. Such shares were acquired through dividend
reinvestment from its initial capital contribution.
Certain directors and officers of the Fund are also directors and officers of
either the Investment Manager, the Investment Adviser or Mercury Asset
Management Group plc.
NOTE 4. INVESTMENTS IN
SECURITIES
For U.S. federal income taxpurposes, the cost of securities owned at September
30, 1997 was $48,695,297.
At September 30, 1997, the net unrealized appreciation of investments on a tax
basis of $16,439,266 was composed of gross appreciation of $20,606,331 for those
investments having an excess of value over cost and gross depreciation of
$4,167,065 for those investments having an excess of cost over value.
For the six months ended September 30, 1997 aggregate purchases and proceeds
from the sales of portfolio securities (excluding short-term securities) were
$3,656,303 and $8,784,212, respectively.
NOTE 5. CONCENTRATION
OF RISK
Investments in the United Kingdom may involve certain considerations and risks
not typically associated with investments in the United States as a result of,
among others, the possibility of future political and economic developments and
the level of the United Kingdom governmental supervision and regulation of its
securities markets.
The ability of the issuers of the debt securities held by the Fund to meet
their obligations may be affected by economic and political developments in a
specific industry or region.
11
<PAGE>
- --------------------------------------------------------------------------------
THE UNITED KINGDOM FUND INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CONTAINED BELOW IS PER SHARE OPERATING PERFORMANCE DATA FOR A SHARE OF COMMON
STOCK OUTSTANDING, TOTAL INVESTMENT RETURN, RATIOS TO AVERAGE NET ASSETS AND
OTHER SUPPLEMENTAL DATA FOR EACH PERIOD INDICATED. THIS INFORMATION HAS BEEN
DERIVED FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS AND MARKET PRICE
DATA FOR THE FUND'S SHARES.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX PERIOD
MONTHS FROM
ENDED AUGUST
SEPTEMBER FOR THE YEAR ENDED MARCH 31, 14, 1987*
30, 1997 --------------------------------------------------------------------------------------- TO MARCH
(UNAUDITED) 1997 1996 1995 1994 1993 1992 1991 1990 1989 31, 1988
--------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............. $16.71 $14.95 $13.18 $12.32 $10.84 $ 9.93 $11.67 $10.38 $12.15 $10.94 $11.63
--------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
Operations:
Net investment
income........... 0.27 0.36 0.50 0.40 0.17 0.26 0.40 0.38 0.36 0.25 0.20
Net realized and
unrealized
gain/(loss) on
investments and
pound sterling
transactions..... 1.08 2.77 1.66 0.92 1.45 1.19 (1.31) 1.64 (1.53) 1.61 (0.36)
--------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
Total from
operations..... 1.35 3.13 2.16 1.32 1.62 1.45 (0.91) 2.02 (1.17) 1.86 (0.16)
Distributions to
shareholders from:
Net investment
income........... (0.20) (0.42) (0.38) (0.40) (0.14) (0.14) (0.45) -- (0.35) (0.22) (0.13)
Net realized
gains............ (1.41) (0.95) (0.01) (0.06) -- (0.41) (0.38) (0.73) (0.25) (0.43) (0.22)
--------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
Total from
distributions... (1.61) (1.37) (0.39) (0.46) (0.14) (0.55) (0.83) (0.73) (0.60) (0.65) (0.35)
From capital
transactions:
Reduction in
offering costs... -- -- -- -- -- 0.01 -- -- -- -- --
Offering costs
charged to
capital.......... -- -- -- -- -- -- -- -- -- -- (0.18)
--------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
Net asset value, end
of period.......... $16.45 $16.71 $14.95 $13.18 $12.32 $10.84 $ 9.93 $11.67 $10.38 $12.15 $10.94
--------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
--------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
Per share market
value, end of
period............. $13.94 $13.75 $12.00 $10.88 $10.50 $ 9.63 $ 9.13 $10.25 $ 8.75 $10.00 $ 8.88
--------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
--------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
Total investment
return, market
value**............ 13.25%(a) 26.54% 13.91% 7.93% 10.32% 11.45% (2.63)% 26.40% (7.40)% 20.68% (22.92)%(a)
Net assets at end of
period (000
omitted)........... $65,980 $67,051 $59,967 $52,883 $49,435 $43,467 $39,823 $46,775 $41,609 $48,707 $43,864
Ratios of operating
expenses to average
net assets......... 1.40%(b) 1.53% 1.55% 1.47% 1.50% 1.78% 1.74% 2.19% 1.92% 1.89% 1.99%(b)
Ratios of net
investment income
to average net
assets............. 3.30%(b) 2.22% 3.45% 3.15% 1.43% 2.43% 3.73% 3.34% 3.06% 4.10% 3.01%(b)
Portfolio turnover
rate............... 5.78% 32.58% 20.85% 19.73% 27.05% 45.54% 47.30% 36.37% 22.07% 40.91% 22.15%
Average commission
rate per share
(c)................ $0.0067 $0.0155 -- -- -- -- -- -- -- -- --
</TABLE>
- ------------------------
* Commencement of operations.
** Total investment return, market value, is based on the change in market
price of a share during the period and assumes reinvestment of
distributions at actual prices pursuant to the Fund's Dividend Reinvestment
Plan. Total investment return does not reflect brokerage commissions.
(a) Not annualized.
(b) Annualized.
(c) Disclosure is required for fiscal years beginning on or after September 1,
1995. Represents average commission rate per share charged to the Fund on
purchases and sales of investments subject to such commissions during the
period.
12
<PAGE>
- --------------------------------------------------------------------------------
THE UNITED KINGDOM FUND INC.
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
- --------------------------------------------------------------------------------
On September 16, 1997, the annual meeting of shareholders of the Fund was held
and the following matters were voted upon:
(1) To re-elect directors to the Board of Directors of the Fund.
<TABLE>
<CAPTION>
NAME OF DIRECTOR VOTES FOR VOTES WITHHELD NON-VOTES
- -------------------------------------------------------------------- ----------- --------------- -----------
<S> <C> <C> <C>
Anthony M. Solomon.................................................. 2,843,754 114,666 1,053,235
George F. Bennet.................................................... 2,856,328 102,092 1,053,235
Livio Borghese...................................................... 2,856,249 102,171 1,053,235
Sir Arthur Bryan.................................................... 2,839,954 118,466 1,053,235
Peter Stormonth Darling............................................. 2,830,229 128,191 1,053,235
Leon Levy........................................................... 2,844,143 114,277 1,053,235
J. Murray Logan..................................................... 2,849,170 109,250 1,053,235
James S. Martin..................................................... 2,829,971 128,449 1,053,235
</TABLE>
(2) To ratify the selection of Ernst & Young LLP, as independent public
accountants for the year ending March 31, 1998.
<TABLE>
<CAPTION>
VOTES FOR VOTES AGAINST VOTES WITHHELD NON-VOTES
- ----------- ------------- --------------- -----------
<S> <C> <C> <C>
2,770,883 20,219 167,318 1,053,235
</TABLE>
(3) To amend and restate the charter to convert the Fund from a closed-end
investment company to an open-end investment company.
<TABLE>
<CAPTION>
VOTES FOR VOTES AGAINST VOTES WITHHELD NON-VOTES
- ----------- ------------- --------------- -----------
<S> <C> <C> <C>
812,874 476,310 33,006 2,689,465
</TABLE>
13
<PAGE>
-----------------------------------------------
THE UNITED KINGDOM FUND INC.
AMENDED DIVIDEND REINVESTMENT
AND CASH PURCHASE PLAN
TERMS AND CONDITIONS
-----------------------------------------------
1. Each shareholder of The United Kingdom Fund Inc. (the "Fund") will have all
distributions automatically reinvested by The Bank of New York (the "Plan
Agent"), in Fund shares pursuant to the Fund's Amended Dividend Reinvestment and
Cash Purchase Plan. Shareholders who do not wish to participate in the Plan may
elect to receive all distributions in cash paid by check in U.S. dollars mailed
directly to the shareholder by the Plan Agent, as dividend paying agent.
2. The Plan Agent serves as agent for the shareholders in administering the
Plan. If the directors of the Fund declare a dividend, participants in the Plan
will receive the equivalent in stock in the Fund valued at the lower of market
price or net asset value, in either case as determined on the record date for
that dividend. Whenever the market price is equal to or exceeds net asset value
at the time shares are valued for the purpose of determining the number of
shares equivalent to the cash dividend or distribution, participants will be
issued shares of the Fund at a price equal to the greater of net asset value or
an amount equal to 95% of the then current market price of the Fund's shares.
The Fund will not issue shares under the Plan below net asset value. If net
asset value exceeds the market price of Fund shares at such time, or if the Fund
should declare a dividend or other distribution payable only in cash (i.e., if
the Board of Directors should preclude reinvestment at net asset value), the
Plan Agent will, as agent for the participants, buy Fund shares in the open
market, on the New York Stock Exchange or elsewhere, for the participants'
accounts. If, before the Plan Agent has completed its purchases, the market
price exceeds the net asset value of a Fund share, the average per share
purchase price paid by the Plan Agent may exceed the net asset value of the
Fund's shares, resulting in the acquisition of fewer shares than if the dividend
or distribution had been paid in shares issued by the Fund.
3. Participants have the option of making additional cash payments to the Plan
Agent, quarterly, in any amount from U.S. $100 to U.S. $3,000, for investment in
the Fund's common stock. The Plan Agent will use all funds received from
participants to purchase Fund shares in the open market on or about March 15,
June 15, September 15 and December 15 of each year. Any voluntary cash payments
received more than 30 days prior to these dates will be returned by the Plan
Agent, and interest will not be paid on any uninvested cash payments. To avoid
unnecessary cash accumulations, and also to allow ample time for receipt and
processing by the Plan Agent, participants should send in voluntary cash
payments to be received by the Plan Agent approximately ten days before March
15, June 15, September 15 or December 15, as the case may be. Optional cash
payments must be made in U.S. dollars. Optional cash payments drawn on a
non-U.S. bank will be subject to collection fees and must be collected by the
foregoing quarterly dates to be invested. A participant may withdraw a voluntary
cash payment by written notice, if the notice is received by the Plan Agent not
less than 48 hours before the payment is to be invested.
4. The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmation of all transactions in the account, including information
needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in non-certificated form in
the name of the participant, and each shareholder's proxy will include those
shares purchased pursuant to the Plan.
5. In the case of shareholders, such as banks, brokers or nominees, which hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
shareholder as representing the total amount registered in the shareholder's
name and held for the account of beneficial owners who are to participate in the
Plan. Shareholders whose shares are held in the name of a broker or nominee
should consult with the broker or nominee to determine whether they should
participate in the Plan or how they may withdraw from the Plan.
6. There is no charge to participants for reinvesting dividends or capital
gains distributions. The Plan Agent's fees for the handling of reinvestment of
dividends and distributions will be paid by the Fund. There will be no brokerage
charges with respect to shares issued directly by the Fund as a result of
dividends or capital gains distributions payable either in stock or cash.
However, each participant will pay a pro rata share of brokerage commissions
incurred with respect to the Plan Agent's open market purchases in connection
with the reinvestment of dividends or capital gains distributions. The Plan
Agent may use its wholly-owned subsidiary, BNY Brokerage Inc., for trading
activity relating to the Plan, on behalf of Plan participants.
7. With respect to purchases for voluntary cash payments, the Plan Agent will
charge U.S. $2.00 for each purchase for a participant, plus a pro rata share of
the brokerage commission. Brokerage charges for purchasing small amounts of
stock for individual accounts through the Plan are expected to be
14
<PAGE>
less than the usual brokerage charges for these transactions because the Plan
Agent will be purchasing stock for all participants in blocks and prorating the
lower commission thus attainable.
8. The automatic reinvestment of dividends and distributions will not relieve
participants of any U.S. income tax that may be payable on such dividends or
distributions.
9. Participants in the Plan may effect "book-to-book" transfers, which involve
transferring shares from an existing participant account in the Plan to a new
participant account, by contacting the Plan Agent.
10. Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan as
applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to notice of the change sent to the members of the Plan at least
90 days before the record date for such dividend or distribution. The Plan also
may be amended or terminated by the Plan Agent by at least 90 days' written
notice to members of the Plan. All correspondence concerning the Plan should be
directed to the Plan Agent, the Bank of New York, at P.O. Box 11002, Church
Street Station, New York, New York, 10249.
15
<PAGE>
- ------------------------------------------------------------------
DIRECTORS AND OFFICERS
ANTHONY M. SOLOMON, Chairman of the Board and Director
GEORGE F. BENNETT, Director
LIVIO BORGHESE, Director
* SIR ARTHUR BRYAN, Director
PETER STORMONTH DARLING, Director
LEON LEVY, Director
* J. MURRAY LOGAN, Director
* JAMES S. MARTIN, Director
J. LOUGHLIN CALLAHAN, President and Treasurer
STEVEN W. GOLANN, Vice President, Assistant Treasurer
RITA J. KLEINMAN, Secretary
THADDEA M. FELDMAN, Assistant Secretary
AMANDA J. MARSH, Assistant Secretary
* Member of the Audit Committee
- ----------------------------------------------------
EXECUTIVE OFFICES--
245 Park Avenue
15th Floor
New York, New York 10167
(For latest net asset value and market data, please call (212) 272-2323;
regarding shareholder inquiries and requests for Fund reports, please call
1-800-432-8224.)
INVESTMENT MANAGER--
Mercury Asset Management International
(Channel Islands) Ltd.
Forum House, Grenville Street
St Helier, Jersey JE4 8RL
Channel Islands
INVESTMENT ADVISER--
Mercury Asset Management International Ltd.
33 King William Street
London EC4R 9AS
England
ADMINISTRATOR--
Bear Stearns Funds Management Inc.
245 Park Avenue
New York, New York 10167
CUSTODIAN--
Custodial Trust Company
101 Carnegie Center
Princeton, New Jersey 08540
TRANSFER AGENT AND REGISTRAR--
The Bank of New York
Shareholder Relations Department-11E
P.O. Box 11258
Church Street Station
New York, New York 10286
LEGAL COUNSEL--
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
INDEPENDENT AUDITORS--
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
ADDITIONAL INFORMATION
This report, including the financial statements herein, is transmitted to the
shareholders of The United Kingdom Fund Inc. for their information. The
financial information included herein is taken from the records of the Fund
without audit by the Fund's independent auditors who do not express an opinion
thereon. This is not a prospectus, circular or representation intended for use
in the purchase of shares of the Fund or any securities mentioned in this
report.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its common stock in the open market.
Comparisons between changes in the Fund's net asset value per share and
changes in the FTSE All-Share Index should be considered in light of the
Fund's investment policy and objectives, the characteristics and quality of
the Fund's investments, the size of the Fund and variations in the U.S.
dollar/pound sterling exchange rate.
<PAGE>
-------------------------------------------
SUMMARY OF GENERAL INFORMATION
---------------------------------------
THE FUND
The United Kingdom Fund Inc. is a diversified, closed-end management
investment company whose shares trade on the New York Stock Exchange. Its
investment objective is long-term capital appreciation through investments
primarily in United Kingdom equities. The Fund is managed by Mercury Asset
Management International Channel Islands Ltd., (Regulated by IMRO), relying on
investment advice from Mercury Asset Management International Ltd. (Regulated by
IMRO).
SHAREHOLDER INFORMATION
Daily market prices for the Fund's shares are published in the New York Stock
Exchange Composite Transactions section of newspapers under the designation "Utd
KingFd" or "UKing". The Fund's New York Stock Exchange trading symbol is UKM.
Weekly comparative net asset value (NAV) and market price information about the
Fund shares are published each Monday in THE WALL STREET JOURNAL, THE NEW YORK
TIMES, and BARRON'S as well as other newspapers in a table called "Closed End
Funds," and are also available on REUTERS under the designation "MAMINDEX".
Shareholders interested in receiving the quarterly newsletter entitled "Closed
End Fund Focus" should call 1-212-888-6941 and request to be placed on the
mailing list or send a request by mail to the Fund's address.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN--SUMMARY
An automatic Dividend Reinvestment and Cash Purchase Plan is available to
provide shareholders with automatic reinvestment of their dividend income and
capital gains distributions in additional shares of the Fund's common stock and
the opportunity to purchase additional shares of the Fund on a quarterly basis.
Information describing the Plan is available from the Plan Agent, The Bank of
New York, by calling: 1-800-432-8224.
All shareholders are automatically enrolled in the Dividend Reinvestment Plan
unless they have elected to receive distributions in cash. Therefore, if you
wish to participate and your shares are held in your own name, no action is
required on your part. If you have previously elected to receive distributions
in cash and now wish to participate in the Plan, please call the Plan Agent at
the number above. If your shares are held in the name of a brokerage firm, bank
or other nominee, you should instruct your nominee to participate in the Plan on
your behalf. If your nominee is unable to participate on your behalf, you should
request it to register your shares in your own name which will enable you to
participate in the Plan.
[LOGO]
THE UNITED KINGDOM FUND INC.
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1997
