<PAGE>
PAINEWEBBER
PREMIER HIGH
INCOME TRUST INC.
SEMI-ANNUAL REPORT
JANUARY 31, 1995
<PAGE>
--------------------------------------------------------------------------------
March 15, 1994
Dear Shareholder,
During the six months ended January 31, 1995, the United States economy
exhibited steady growth. In a series of monetary tightenings that began early in
1994, the Federal Reserve Board raised the benchmark Federal Funds rate, the
rate banks charge each other for overnight borrowing, six times in 1994 for a
total increase of 2.5%. These increases, which were implemented to moderate
economic expansion and forestall inflation, triggered stock and bond market
volatility throughout most of 1994. The Federal Reserve tightened another 0.5%
on February 1, 1995, increasing the Federal Funds rate to 6.0%.
Productivity gains in the workplace and the increased competitiveness of United
States corporations in the global marketplace contributed to the low inflation
and steady growth which characterized the economy during the six months ended
January 31, 1995. Unemployment continued to decline, and retail sales remained
brisk, sparked by strengthened consumer confidence and an upward trend in
personal income. However, side effects of higher interest rates, including a
decline in single family housing starts, crept into economic data during the
latter half of the period. As we move into the new year, the economy remains
healthy--although it is not yet clear what impact higher interest rates will
have on economic growth.
PORTFOLIO REVIEW
The Federal Reserve's successive interest rate increases in 1994 initiated a
period of widescale declines in the prices of most fixed income securities. As
short-term interest rates increased during the six months ended January 31,
1995, most bond prices depreciated. The total return for PaineWebber Premier
High Income Trust Inc. ('the Fund') for the six months ended January 31, 1995
was (3.01)% based on the Fund's net asset value and 3.70% based on the Fund's
share price on the New York Stock Exchange ('NYSE'). As of January 31, 1995, the
Fund's net asset value per share was $12.61, while the share price on the NYSE
was $12.13. During the period, the Fund paid dividends from net investment
income totalling $0.68 per share. The Fund has paid a monthly dividend of $0.116
per share since October 1994.
During the six months ended January 31, 1995, the Fund continued to be well
diversified, with investments distributed among 22 different sectors. The Fund's
exposure in the gaming sector was reduced to 11.8% of the portfolio as of
January 31, 1995, from 14.3% on July 31, 1994. In particular, the portfolio's
pure-play Atlantic City exposure was eliminated, although the Fund continued to
focus on rapidly growing markets like New Orleans and the Chicago area, as well
as on riverboat gaming. During the period, the Fund maintained its position in
the retailing sector (10.8% of the portfolio as of January 31, 1995). Over the
next six to twelve months, we believe a number of retailers will go public which
will deleverage their balance sheets and should be positive for those retailers.
A recent example of this activity is Finlay Jewelers (1.2% of the portfolio).
This company's recently announced initial public offering (IPO) should provide
it with financing for growth which, in turn, should be beneficial to its
outstanding bonds. An area of expansion continued to be the packaging sector,
which was increased to 9.9% of the portfolio as of January 31, 1995 versus 4.8%
on July 31, 1994. This sector continues to exhibit pricing flexibility, along
with the possibility for credit upgrades within the next twelve to eighteen
months.
--------------------------------------------------------------------------------
<PAGE>
The Fund's strategy continued to focus on increasing the overall credit quality
of the portfolio during the six months ended January 31, 1995. Specifically, the
portfolio's exposure to BB rated securities was increased to 27.3% of the
portfolio as of January 31, 1995. In conjunction with this activity, the Fund
also concentrated on select B rated securities. These smaller, growth-oriented
companies offer the potential for price appreciation as well as the possibility
of credit upgrades. We expect these companies to reinvest earnings and cash flow
which should improve their fundamentals and the credit ratings of their
corresponding securities. A breakdown of the Fund's credit quality as of January
31, 1995 follows:
Warrants and Common Stock 1.8%
Not Rated 12.2%
AAA 0.9%
BB 27.3%
CCC 3.2%
B 54.6%
Going forward, we believe that a low inflation environment coupled with steady
economic growth should prove beneficial to high yield securities. The Fund's
investment strategy will continue to concentrate on the upper tier of the high
yield market (credits rated B or better). We believe the Fund's BB exposure will
provide downside protection from an economic slowdown, while the smaller, B
rated securities within the portfolio will offer the potential for price
appreciation as well as credit upgrades. In addition, we will attempt to
maintain a stable distribution rate.
We value you as a shareholder and as a client, and thank you for your continued
support. We welcome any comments or questions you may have.
Sincerely,
FRANK P.L. MINARD THOMAS J. LIBASSI
Chairman, Portfolio Manager,
Mitchell Hutchins Asset Management PaineWebber Premier High Income Trust
Inc. Inc.
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PAINEWEBBER PREMIER HIGH INCOME TRUST INC.
--------------------------------------------------------------------------------
Portfolio of Investments
January 31, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
---------- -------- ------- -----------
<S> <C> <C> <C>
CORPORATE BONDS - 90.75%
AEROSPACE - 1.30%
$1,000 Rohr Inc.......................................... 05/15/03 11.625% $ 990,000
-----------
AIRLINES -+0.84%
750 USAfrica Airways, Inc............................. 05/31/99 12.000 637,500
BANKING & FINANCIAL - 3.98%
1,000 American Life Holding Co.......................... 09/15/04 11.250 985,000
1,000 Chartwell Re. Corporation......................... 03/01/04 10.250 890,000
1,500 Imperial Credit Industries Inc.................... 01/15/04 9.750 1,155,000
-----------
3,030,000
-----------
CABLE - 3.93%
1,000 Continental Cablevision Inc....................... 09/15/05 8.875* 915,000
1,250 Insight Communications............................ 03/01/00 8.250 1,175,000
1,000 Marcus Cable Co................................... 10/01/05 11.875 900,000
-----------
2,990,000
-----------
CHEMICAL - 1.64%
2,000 NL Industries..................................... 10/15/05 13.000* 1,250,000
-----------
COMMUNICATIONS+- 6.16%
3,825 Comcast Cellular.................................. 03/05/00 0.000* 2,648,814
1,000 Mobile Telecommunications......................... 12/15/02 13.500* 1,016,250
2,000 PageMart Nationwide**............................. 02/01/05 15.000 1,022,400
-----------
4,687,464
CONSUMER MANUFACTURING+- 7.96%
2,000 Acme Boot Inc. ................................... 12/15/00 11.500* 900,000
2,000 Apparel Ventures Inc.............................. 12/31/00 12.250 1,815,000
2,000 Chattem Inc....................................... 06/15/04 12.750 1,820,000
3,000 Icon Health & Fitness............................. 11/15/04 15.000 1,515,000
-----------
6,050,000
-----------
ENERGY - 7.93%
1,000 Crown Central Petroleum........................... 02/01/05 10.875* 995,000
2,500 Empire Gas Corporation............................ 07/15/04 7.000 1,800,000
1,000 Flores & Ruckes................................... 12/01/04 13.500 1,010,000
1,500 Petroleum Heat & Power Inc........................ 02/01/06 9.375 1,260,000
1,000 TransTexas Gas.................................... 09/01/00 10.500 962,500
-----------
6,027,500
-----------
</TABLE>
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3
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PAINEWEBBER PREMIER HIGH INCOME TRUST INC.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
---------- -------- ------- ------------
<S> <C> <C> <C>
CORPORATE BONDS--(CONTINUED)
FOOD & BEVERAGE - 7.99%
$1,000 Flagstar.......................................... 12/01/02 10.875% $ 920,000
1,500 Fresh Delmonte Produce N.V........................ 05/01/03 10.000 930,000
5,000 Iowa Select Farms................................. 02/15/04 17.250* 1,804,500
2,500 Specialty Equipment Co............................ 12/01/03 11.375 2,425,000
-----------
6,079,500
-----------
GAMING/HOTEL - 12.68%
1,000 Embassy Suites Hotel.............................. 03/15/00 8.750 963,750
2,500 Empress River Casino Financial Corporation........ 04/01/02 10.750 2,337,500
1,500+ Grand Palais Casino Inc........................... 11/01/97 18.250 1,500,000
2,650 Hemmeter Enterprises**............................ 12/15/00 12.000 1,457,500
1,000 Kloster Cruise Ltd................................ 05/01/03 13.000 780,000
1,853 PRT Funding Inc................................... 04/15/04 11.625 1,426,810
2,000+ Sam Houston Race Park (a)......................... 07/15/99 11.750 300,000
1,000+ Santa Fe Hotel Inc................................ 12/15/00 11.000 880,000
-----------
9,645,560
-----------
HEALTHCARE - 1.04 %
1,000+ Total Renal Care Inc.............................. 08/15/04 12.000* 790,000
-----------
HOMEBUILDINGS - 3.96%
1,500 Inter City Products Corporation................... 03/01/00 9.750 1,398,750
1,000 MDC Holdings Corporation.......................... 12/15/03 11.125 805,000
1,000 Peters JM Inc. ................................... 05/01/02 12.750 810,000
-----------
3,013,750
-----------
INDUSTRIAL - 3.65%
1,000 Kindercare Learning Centers....................... 06/01/01 10.375 1,007,500
1,000 Poindexter JB Inc................................. 05/15/04 12.500 945,000
1,000+ Uniroyal Technology Corp.......................... 06/01/03 11.750 820,000
-----------
2,772,500
-----------
MANUFACTURING - 1.10%
1,000 U.S. Leather Inc.................................. 07/31/03 10.250 835,000
-----------
MEDIA - 4.65%
2,000 Affiliated Newspaper.............................. 07/01/06 13.250 980,000
3,700 Universal Outdoor Holdings Inc.................... 07/01/04 14.000* 1,905,500
1,750 Viacom............................................ 07/07/06 8.000 652,500
-----------
3,538,000
-----------
</TABLE>
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4
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PAINEWEBBER PREMIER HIGH INCOME TRUST INC.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
---------- -------- -------- -----------
<S> <C> <C> <C>
CORPORATE BONDS--(CONCLUDED)
PACKAGING - 9.74%
$1,500+ Data Documents Inc................................ 07/15/02 13.500% $ 1,500,000
1,000 Doman Industries.................................. 03/15/04 8.750 882,500
1,400 Grupo Industrial Durango S.A...................... 07/15/01 12.000 1,120,000
1,000 Indah Kiat International.......................... 06/15/06 12.500 950,000
1,000 Rainy River Forest Products....................... 10/15/01 10.750 1,005,000
1,000 Stone Container................................... 10/01/02 10.750 990,000
1,000 Tijiwi Kimia International........................ 08/01/01 13.250 957,500
-----------
7,405,000
-----------
RETAIL - 9.35%
1,500 Central Rents..................................... 12/15/03 12.875 1,365,000
1,500 Color Tile Corporation............................ 12/15/01 10.750 1,320,000
1,000 Finlay Jewelers Inc. ............................. 05/01/03 10.625 920,000
1,500 Great American Cookie Inc......................... 01/15/01 10.875 1,342,500
1,500 Petro PSC Properties.............................. 06/01/02 12.500 1,432,500
750 Wickes Lumber..................................... 12/15/03 11.625 727,500
-----------
7,107,500
-----------
SUPERMARKETS/DRUGSTORES - 1.01%
1,000 Duane Reade Corporation........................... 09/15/02 12.000 770,000
-----------
TRANSPORTATION - 1.84%
1,500 Viking Star....................................... 07/15/03 9.625 1,398,750
-----------
Total Corporate Bonds (cost--$76,043,941)..................... 69,018,024
-----------
CONVERTIBLE BONDS - 4.63%
GAMING/HOTEL - 0.76%
750 Bally's Entertainment Corporation................. 12/15/06 10.000 577,500
-----------
RETAIL - 1.12%
1,250 Carter Hawley Hale Stores......................... 12/31/00 6.250 850,000
-----------
TECHNOLOGY - 2.75%
1,000 Ampex Corporation................................. 06/30/97 0.000* 480,000
1,500 EMC Corporation................................... 01/01/01 4.250 1,612,500
-----------
2,092,500
-----------
Total Convertible Bonds (cost--$4,063,187).................... 3,520,000
-----------
</TABLE>
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5
<PAGE>
PAINEWEBBER PREMIER HIGH INCOME TRUST INC.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
---------- -----------
<S> <C>
COMMON STOCK (A) - 0.19%
CONSUMER MANUFACTURING - 0.12%
2,000 Acme Boot Inc......................................................... $ 2,000
2,000 AVI Holdings.......................................................... 90,000
-----------
92,000
-----------
MEDIA - 0.07%
2,000 Affiliated Newspapers................................................. 50,000
-----------
Total Common Stock (cost--$46,780)................................................ 142,000
-----------
<CAPTION>
NUMBER
OF
WARRANTS
----------
<S> <C>
WARRANTS (A) - 1.59%
COMMUNICATIONS - 0.04%
6,900 PageMart Nationwide**................................................. 31,050
-----------
CONSUMER MANUFACTURING - 0.01%
2,000 Chattam Inc........................................................... 6,500
-----------
ENERGY - 0.00%
3,450 Empire Gas Corporation................................................ 3,450
-----------
FOOD & BEVERAGE - 0.53%
50,000 Iowa Select Farms..................................................... 405,400
-----------
GAMING/HOTEL - 0.67%
6,000 Casino Magic Financial Corporation.................................... 300
48,529 Grand Palais Casino Inc............................................... 461,029
30,000 Hemmeter Enterprises**................................................ 45,000
-----------
506,329
-----------
MEDIA - 0.19%
3,700 Universal Outdoor..................................................... 148,000
-----------
REAL ESTATE/BUILDINGS - 0.01%
7,900 Peters JM Inc. ....................................................... 3,950
-----------
RETAIL - 0.14%
1,500 Central Rents......................................................... 45,000
270 Cookies USA........................................................... 10,800
1,500 Petro PSC............................................................. 51,000
-----------
106,800
-----------
Total Warrants (cost--$632,762)................................................... 1,211,479
-----------
</TABLE>
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6
<PAGE>
PAINEWEBBER PREMIER HIGH INCOME TRUST INC.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
---------- -------- -------- -----------
<S> <C> <C> <C>
REPURCHASE AGREEMENT - 0.87%
$660 Repurchase Agreement dated 01/31/95, with State
Street Bank and Trust Company collateralized by
$698,943 U.S. Treasury Notes, 6.375% due
01/15/99; proceeds: $660,094 (cost--$660,000)... 02/01/95 5.150% $ 660,000
-----------
Total Investments (cost--$81,446,670) - 98.03%................ 74,551,503
Other assets in excess of liabilities - 1.97%................. 1,501,832
-----------
Net Assets - 100.00%.......................................... $76,053,335
-----------
-----------
</TABLE>
------------------
<TABLE>
<S> <C>
+ Security represents a unit which is comprised of the stated
bond with attached warrants or common stock.
* Denotes a zero coupon bond or step-up bond that converts to
the noted fixed rate at a designated future date.
** Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers.
(a) Non-income producing
</TABLE>
See accompanying notes to financial statements
--------------------------------------------------------------------------------
7
<PAGE>
PAINEWEBBER PREMIER HIGH INCOME TRUST INC.
--------------------------------------------------------------------------------
Statement of Assets and Liabilities
January 31, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value
(cost--$81,446,670).................................... $74,551,503
Interest receivable...................................... 1,537,445
Receivable for investments sold.......................... 1,074,250
Deferred organizational expenses......................... 116,357
Other assets............................................. 2,652
-----------
Total assets.......................................... 77,282,207
-----------
LIABILITIES
Payable for investments purchased........................ 998,264
Payable to affiliate..................................... 58,237
Accrued expenses and other liabilities................... 172,371
-----------
Total liabilities..................................... 1,228,872
-----------
NET ASSETS
Common stock--$0.001 par value; total authorized
100,000,000 shares; 6,031,667 shares issued and
outstanding............................................ 90,475,005
Undistributed net investment income...................... 152,005
Accumulated net realized losses.......................... (7,678,508)
Net unrealized depreciation of investments............... (6,895,167)
-----------
Net assets............................................... $76,053,335
-----------
-----------
Net asset value per share................................ $12.61
</TABLE>
See accompanying notes to financial statements
--------------------------------------------------------------------------------
8
<PAGE>
PAINEWEBBER PREMIER HIGH INCOME TRUST INC.
--------------------------------------------------------------------------------
Statement of Operations
For the Six Months Ended January 31, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest................................................. $4,682,173
-----------
EXPENSES:
Investment advisory and administration................... 358,809
Legal and audit.......................................... 29,745
Custody and accounting................................... 28,819
Reports and notices to shareholders...................... 24,303
Amortization of organizational expenses.................. 15,272
Transfer agency and service fees......................... 4,017
Trustees' fees........................................... 3,041
Other expenses........................................... 12,473
-----------
476,479
-----------
NET INVESTMENT INCOME....................................... 4,205,694
-----------
REALIZED AND UNREALIZED LOSSES FROM INVESTMENT ACTIVITIES:
Net realized losses from investment transactions............ (4,275,766 )
Net change in unrealized appreciation/depreciation of
investments............................................... (2,745,682 )
-----------
Net realized and unrealized losses from investment
activities................................................ (7,021,448 )
-----------
Net decrease in net assets resulting from operations........ $(2,815,754)
-----------
-----------
</TABLE>
See accompanying notes to financial statements
--------------------------------------------------------------------------------
9
<PAGE>
PAINEWEBBER PREMIER HIGH INCOME TRUST INC.
--------------------------------------------------------------------------------
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six For the
Months Period
Ended December 7,
January 31, 1993+
1995 to July 31,
(unaudited) 1994
----------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income.......................... $ 4,205,694 $ 4,638,546
Net realized losses from investment
transactions................................. (4,275,766) (3,393,412)
Net realized losses from foreign currency
transactions................................. -- (9,330)
Net change in unrealized
appreciation/depreciation of investments..... (2,745,682) (4,149,485)
----------- -----------
Net decrease in net assets resulting from
operations................................... (2,815,754) (2,913,681)
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income.......................... (4,125,660) (4,566,575)
----------- -----------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from initial public offering.......... -- 90,375,000
----------- -----------
Net increase (decrease) in net assets.......... (6,941,414) 82,894,744
----------- -----------
NET ASSETS:
Beginning of period............................ 82,994,749 100,005
----------- -----------
End of period (including undistributed net
investment income of $152,005 and $71,971,
respectively)................................ $76,053,335 $82,994,749
----------- -----------
----------- -----------
</TABLE>
------------------
+ Commencement of operations
See accompanying notes to financial statements
10
<PAGE>
PAINEWEBBER PREMIER HIGH INCOME TRUST INC.
--------------------------------------------------------------------------------
Notes to Financial Statements--(unaudited)
--------------------------------------------------------------------------------
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Premier High Income Trust Inc. (the 'Fund') was incorporated in
Maryland on June 11, 1993 as a closed-end, diversified management investment
company. Prior to December 7, 1993, the Fund had no activities other than
organizational matters and the sale of 6,667 shares of common stock to Mitchell
Hutchins Asset Management Inc. ('Mitchell Hutchins'), a wholly owned subsidiary
of PaineWebber Incorporated. Organizational costs of $152,757 have been deferred
and are being amortized on the straight line method over a period not to exceed
60 months from the date the Fund commenced operations.
Valuation of Investments--Where market quotations are readily available,
portfolio securities are valued based thereon, provided such quotations
adequately reflect, in the judgment of Mitchell Hutchins, investment adviser and
administrator of the Fund, the fair value of the securities. When market
quotations are not readily available, securities are valued based upon
appraisals derived from information concerning those securities or similar
securities received from recognized dealers in those securities. All other
securities are valued at fair value as determined in good faith by or under the
direction of the Fund's board of directors. The amortized cost method of
valuation, which approximates market value, is used to value certain debt
obligations with 60 days or less remaining to maturity, unless the Fund's board
of directors determines that this does not represent fair value.
The ability of the issuers of the debt securities held by the Fund to meet
their obligations may be affected by economic developments, including those
particular to a specific industry, country or region.
Foreign currency exchange rates are generally determined prior to the close
of the New York Stock Exchange ('NYSE'). Occasionally, events affecting the
value of foreign investments and such exchange rates occur between the time at
which they are determined and the close of the NYSE, which will not be reflected
in a computation of the Fund's net asset value. If events materially affecting
the value of such securities or currency exchange rates occurred during such
time period, the securities will be valued at their fair value as determined in
good faith by or under the direction of the Fund's board of directors. All
investments quoted in foreign currencies will be valued daily in U.S. dollars on
the basis of the foreign currency exchange rates prevailing at the time such
valuation is determined by the Fund's custodian.
Investment Transactions and Investment Income--Investment transactions are
recorded on trade date. Realized gains and losses from investment and foreign
exchange transactions are calculated on the identified cost method. Interest
income is recorded on an accrual basis. Discounts are accreted and premiums are
amortized as adjustments to interest income and identified cost of investments.
11
<PAGE>
PAINEWEBBER PREMIER HIGH INCOME TRUST INC.
--------------------------------------------------------------------------------
Notes to Financial Statements--(continued)
--------------------------------------------------------------------------------
Foreign Currency Translation--The books and records of the Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:
(1) market value of investment securities, other assets and liabilities--at
the exchange rates prevailing at the end of the period.
(2) purchases and sales of investment securities, income and expenses--at
the exchange rates prevailing on the respective dates of such transactions.
Although the net assets and the market values of the Fund are presented at
the foreign exchange rates at the close of the period, the Fund does not
generally isolate the effect of fluctuations in foreign exchange rates from the
effect of changes in the market prices of securities. However, the Fund does
isolate the effect of fluctuations in foreign exchange rates when determining
the gain or loss upon the sale or maturity of foreign currency-denominated debt
obligations pursuant to federal income tax regulations. Foreign security and
currency transactions may involve certain considerations and risks not typically
associated with investing in U.S. companies and U.S. government securities.
These risks include revaluation of currencies and future adverse political and
economic developments, which could cause securities and their markets to be less
liquid and prices more volatile than those of comparable U.S. companies and U.S.
government securities.
Repurchase Agreements--The Fund's custodian takes possession of the
collaterial pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. The Fund occasionally
participates in joint repurchase agreement transactions with other funds managed
by Mitchell Hutchins.
Federal Tax Status--The Fund intends to distribute all of its taxable
income and to comply with the other requirements of the Internal Revenue Code
applicable to regulated investment companies. Accordingly, no provision for
federal income taxes is required. In addition, by distributing during each
calendar year substantially all of its net investment income, capital gains and
certain other amounts, if any, the Fund intends not to be subject to a federal
excise tax.
Dividends and Distributions to Shareholders--The Fund records dividends and
distributions to its shareholders on the ex-date. The amount of dividends and
distributions from net investment income and net realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These 'book/tax' differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassifications. Dividends and
12
<PAGE>
PAINEWEBBER PREMIER HIGH INCOME TRUST INC.
--------------------------------------------------------------------------------
Notes to Financial Statements--(concluded)
--------------------------------------------------------------------------------
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 they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
INVESTMENT ADVISER AND ADMINISTRATOR
The Fund's board of directors has approved an investment advisory and
administration contract ('Advisory Contract') with Mitchell Hutchins, under
which Mitchell Hutchins serves as investment adviser and administrator of the
Fund. In accordance with the Advisory Contract, Mitchell Hutchins receives
compensation from the Fund, computed weekly and paid monthly, at the annual rate
of 0.90% of the Fund's average weekly net assets.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at January
31, 1995 was substantially the same as the cost of securities for financial
statements purposes.
At January 31, 1995, the components of the net unrealized depreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value $ 673,938
over cost)..................................................
Gross depreciation (investments having an excess of cost (7,569,105)
over value).................................................
-----------
Net unrealized depreciation of investments.................. $(6,895,167)
===========
</TABLE>
For the six months ended January 31, 1995, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $61,718,436 and
$58,036,054, respectively.
COMMON STOCK
There are 100,000,000 shares of $0.001 par value common stock authorized;
of the 6,031,667 common shares outstanding, 6,667 shares are owned by Mitchell
Hutchins.
Transactions in shares of common stock for the period December 7, 1993
through January 31, 1994 were as follows:
<TABLE>
<S> <C>
Shares sold............................................ 6,025,000
===========
</TABLE>
PaineWebber Incorporated paid all costs incurred in connection with the
offering of the common stock, aggregating $319,259.
13
<PAGE>
PAINEWEBBER PREMIER HIGH INCOME TRUST INC.
--------------------------------------------------------------------------------
Quarterly Results of Operations (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Realized and
Unrealized Net Increase
Gains/(Losses)
on Investments (Decrease)
and Foreign in Net Assets
Net Investment Currency Resulting from
Income Transactions Operations
----------------- ----------------- -----------------
Per Per Per
Total Common Total Common Total Common
Quarter Ended (000's) Share (000's) Share (000's) Share
-------------------------------------------------- ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
January 31, 1995.................................. $ 2,054 $0.34 $(3,340) $(0.56) $(1,286) $(0.22)
October 31, 1994.................................. 2,152 0.36 (3,682) (0.61) (1,530) (0.25)
------- ------ ------- ------ ------- ------
Totals....................................... $ 4,206 $0.70 $(7,022) $(1.17) $(2,816) $(0.47)
====== ===== ======= ====== ======= ======
July 31, 1994..................................... $ 2,066 $0.34 $(2,873) $(0.47) $ (807) $(0.13)
April 30, 1994.................................... 1,959 0.33 (5,959) (0.99) (4,000) (0.66)
January 31, 1994*................................. 614 0.10 1,280 0.21 1,894 0.31
------- ------ ------- ------ ------- ------
Totals....................................... $ 4,639 $0.77 $(7,552) $(1.25) $(2,913) $(0.48)
====== ===== ======= ====== ======= ======
</TABLE>
------------------
* For the period December 7, 1993 (commencement of operations) to January 31,
1994.
14
<PAGE>
PAINEWEBBER PREMIER HIGH INCOME TRUST INC.
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
Selected data for a share of common stock outstanding throughout each
period:
<TABLE>
<CAPTION>
For the Six Months
Ended For the Period
January 31, 1995 December 7, 1993+
(unaudited) to July 31, 1994
------------------ -----------------
<S> <C> <C>
Net asset value, beginning of
period........................... $ 13.76 $ 15.00
------------------ -----------------
Net decrease from investment
operations:
Net investment income............ 0.70 0.77
Net realized and unrealized
losses on investments
and foreign currency
transactions.................. (1.17) (1.25)
------------------ -----------------
Net decrease from investment
operations....................... (0.47) (0.48)
------------------ -----------------
Dividends and distributions from
net investment income............ (0.68) (0.76)
------------------ -----------------
Net asset value, end of period..... $ 12.61 $ 13.76
================== =================
Per share market value, end of
period........................... $ 12.13 $ 12.38
================== =================
Total investment return:
On net asset value (1).......... (3.01)% (3.00)%
================== =================
On market value (2)............. 3.70% (12.76)%
================== =================
Ratios/Supplemental Data:
Net assets, end of period (000's
omitted)...................... $ 76,053 $82,995
Ratio of expenses to average net
assets........................ 1.24%* 1.17%*
Ratio of net investment income
to average net assets......... 10.91%* 8.27%*
Portfolio turnover rate......... 76.86% 85.40%
</TABLE>
---------------
+ Commencement of operations
* Annualized
(1) Total investment return on net asset value is calculated assuming
a purchase of one share at net asset value on the first day of
the period reported and a sale at net asset value on the last day
of the period reported and assuming reinvestment of dividends at
prices obtained under the Fund's Dividend Reinvestment Plan.
Total investment return on net asset value has not been
annualized. Total investment return does not reflect brokerage
commissions.
(2) Total investment return on market value is calculated assuming a
purchase of one share at market value on the first day of the
period reported and a sale at market value on the last day of the
period reported and assuming reinvestment of dividends at prices
obtained under the Fund's Dividend Reinvestment Plan. Total
investment return on market value has not been annualized. Total
investment return does not reflect brokerage commissions.
15
<PAGE>
------------------------------------
DIRECTORS
E. Garrett Bewkes, Jr., Chairman
John R. Torell III
William D. White
------------------------------------
PRINCIPAL OFFICERS
Paul B. Guenther
President
Victoria E. Schonfeld
Vice President
Dianne E. O'Donnell
Vice President and Secretary
Julian F. Sluyters
Vice President and Treasurer
------------------------------------
INVESTMENT ADVISER AND
ADMINISTRATOR
Mitchell Hutchins Asset Management
Inc.
1285 Avenue of the Americas
New York, New York 10019
------------------------------------
Notice is hereby given in accordance
with Section 23(c) of the Investment
Company Act of 1940 that from time
to time the Fund may purchase at
market prices shares of its common
stock in the open market.
The financial information included
herein is taken from the records of
the Fund without examination by
independent accountants who do not
express an opinion thereon.
This report is sent to the
shareholders of the Fund for their
information. It is not a prospectus,
circular or representation intended
for use in the purchase or sale of
shares of the Fund or of any
securities mentioned in the report.
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