<PAGE>
PAINEWEBBER UTILITY INCOME FUND ANNUAL REPORT
PERFORMANCE AT A GLANCE
Comparison of the change of a $10,000 investment in PaineWebber Utility Income
Fund (A) and the S&P 500 Index and the S&P Utility Index.
[GRAPH]
S&P 500
S&P Utility
PaineWebber Utility Income Fund (A)
Past performance is not predictive of future performance.
The performance of the other classes will vary from the performance of the class
shown based on the difference in sales charges and fees paid by shareholders
investing in different classes.
The graph depicts the performance of PaineWebber Utility Income Fund (A) versus
the S&P 500 Index and the S&P Utility Index. It is important to note PaineWebber
Utility Income Fund is a professionally managed mutual fund while the index is
not available for investment and is unmanaged. The comparison is shown for
illustrative purposes only.
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
Commencement of
Twelve Months Operations
Ended 3/31/97 Through 3/31/97+
<S> <C> <C> <C>
Class A* 7.8% 5.2%
% Return Without Deducting
Maximum Sales Charge Class B** 7.1% 4.4%
Class C*** 7.1% 4.4%
Class A* 3.0% 3.9%
% Return After Deducting
Maximum Sales Charge Class B** 2.1% 4.0%
Class C*** 6.1% 4.4%
</TABLE>
* Maximum sales charge for Class A shares is 4.5% of the public offering
price. Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5.0%
and is reduced to 0% after 6 years. Class B shares bear ongoing 12b-1
distribution and service fees.
*** Maximum contingent deferred sales charge for Class C shares is 1.0%
and is reduced to 0% after 1 year. Class C shares bear ongoing 12b-1
distribution and service fees.
+ Commencement of operations was July 2, 1993, for Class A, Class B and
Class C shares.
The investment return and principal value of an investment in the Fund will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
1
<PAGE>
ANNUAL REPORT
PAINEWEBBER UTILITY INCOME FUND
FUND PROFILE
- -GOAL:
Current income and capital appreciation
- -PORTFOLIO MANAGERS:
Karen L. Finkel/MH
Asset Management
Inc., Sr. Vice President;
Julianna M. Berry,
Vice President;
James F. Keegan,
Sr. Vice President
- -TOTAL NET ASSETS:
$34.0 million
- -DIVIDEND PAYMENTS:
Quarterly
May 14, 1997
Dear Shareholder,
We are pleased to present you with the Annual Report for PaineWebber Utility
Income Fund for the year ended March 31, 1997.
GENERAL MARKET OVERVIEW
- --------------------------------------------------------------------------------
Continued strong corporate earnings growth and low inflation helped lead
the equity markets to a series of record highs over the past year. With a few
exceptions, almost all stocks rose during the period, led by the largest
companies in the equity indices. The Dow Jones Industrial Average reached
several milestones, blitzing past 6,000 in July 1996 and surpassing 7,000 for
the first time in February 1997, before slipping somewhat toward the end of the
period.
Income-producing stocks, however, could not escape the prospect of rising
short-term interest rates and the regulatory uncertainty surrounding
telecommunications and electric utility companies. In the first quarter of this
year, stock volatility and rising rates made many investors wonder how long the
bull market could continue. After signs of a strengthening economy
reignitedinflationary fears, the Federal Reserve raised short-term interest
rates 25 basis points in March. (A basis point is one one-hundredth of a full
percentage point.) This move hurt virtually all sectors of the fixed income
market, stocks in general and utilities stocks in particular. This is not
surprising given utilities stocks' high interest rate sensitivity.
Equally detrimental to utilities stock performance was the continuing drama
of local and long distance telephone regulation. The fact that these regulations
have not been clarified has concerned utility investors and kept many of them on
the sidelines until the long-term effects of deregulation are understood.
Looking ahead, we believe that regulatory change will reshape the industry,
reward profitability and productivity and ultimately reward shareholders of the
better-managed companies. With that in mind, we continue to search for the best
companies we believe will be the long-term beneficiaries of this massive
industry restructuring.
2
<PAGE>
PORTFOLIO REVIEW & OUTLOOK
- --------------------------------------------------------------------------------
The Fund's total return for the year ended March 31, 1997 without deducting
sales charges was 7.8% for Class A shares, 7.1% for Class B shares and 7.1% for
Class C shares. The Fund's total return for this period, after deducting the
maximum applicable sales charges, was 3.0% for Class A shares, 2.1% for Class B
shares and 6.1% for Class C shares. These returns compare to a 4.7% gain for the
NYSE Utilities Index. Please keep in mind that the Index is unmanaged and is not
available for investment.
At March 31, 1997, we held 86% of the Fund's net assets in stocks, with the
balance allocated to bonds and cash. We believe this portfolio weighting will
keep the Fund in line with the asset allocation of its peers, which, by and
large, do not maintain significant fixed income positions.
OUR STRATEGY
While considerable uncertainty remains concerning how regulatory changes will
play out in telecommunications, we maintain our long-term commitment to this
industry. As of March 31, 1997, this sector made up 18% of the Fund's net
assets. In general, we believe deregulation will ultimately expand
diversification opportunities for all telecommunications providers, including
allowing long distance companies to offer local telephone service, which they
were previously denied. We are seeking long-term growth opportunities in
companies in the telephone and communications industries that we believe will be
rewarded once regulatory issues are finally interpreted. Consistent with this
strategy, we remain cautious about the prospects of regional Bell operating
companies (RBOCs) and their ability to compete in a deregulated environment. We
therefore reduced our position in RBOCs during the period.
Mergers and acquisitions were another important factor in
telecommunications over the past year. The announcement of the British
Telecommunications PLC acquisition of MCI Communications benefited the Fund. We
sold our position in MCI on the announcement of this acquisition. Long distance
provider WorldCom's acquisition of local telecommunications firm MFS
Communications Company--a Fund holding at the time--also benefited performance.
Deregulation is also an issue in the electric utility sector, though its
rollout will be more gradual than in telecommunications, since it is carried out
on a state-by-state basis. We believe that, as legislative uncertainty ebbs as
it did (in California in mid 1996), investors' worst fears will be allayed and
depressed valuations will improve among affected electric utilities. We believe
interest rate fears that arose in the first quarter of 1997 have distracted
investors from the fundamentals, and it is our view that the negative
sentiment, over time, will abate.
PAINEWEBBER
UTILITY INCOME
FUND INC.
Top Ten Holdings*
(%of net assets as of
March 31, 1997)
Nicor 27%
- ----------------------
FPL Group Inc. 24%
- ---------------------
MCN Energy Group Inc.
23%
- ---------------------
Nipsco INDS Inc. 23%
- ---------------------
Excel Realty tr.Inc. 22%
- ---------------------
Wisconsin Energy
Group 22%
- ---------------------
Edison International
21%
- ---------------------
Starwood Lodging 21%
- ---------------------
Crescent Real Estate
Properties 21%
- ---------------------
Spieker Properties Inc.
20%
- ---------------------
*Holdings subject to change
3
<PAGE>
OUR HOLDINGS
Our performance may have been held back somewhat by our small position in
international utilities, strong performers in the sector during the period,
compared with many funds in the Lipper universe that are global in focus; 1.3%
of Fund net assets were in this sector on March 31, 1997.
The Fund's prospectus mandates that at least 65% of portfolio assets are
held in utilities securities, allowing up to 35% of assets to be invested
outside this sector. We have utilized that allowance to reduce our bond position
and to deploy those assets in Real Estate Investment Trusts (REITs), public
companies that invest in real estate assests and are required to return most of
their earnings to shareholders in the form of dividends.
We believe REITs offer outstanding total return opportunities, through
potential price appreciation and attractive dividend yields as well as
potentially lower interest rate sensitivity than electric utility stocks. As of
March 31, 1997, REITs comprised 18% of the Fund's net assets (includes stocks
from two subcategories-- Real Property and Financial Services).
Our REIT position contributed significantly to performance for the past
year. Within this sector, we have concentrated on those companies serving
markets with the most attractive supply/demand charact-eristics. We are seeking
long-term opportunities that we believe offer the best of the REITs industry--
income producing equities with attractive current income and capital
appreciation potential. Two REITs we believe meet these criteria include luxury
hotel REIT Starwood Lodging Trust, in which supply has been constrained, and
Crescent Real Estate Equities Company a leader in the office sector, where new
construction has been negligible and demand is growing in its geographic
markets.
As always, we appreciate the opportunity to report to you on the Fund's
activities. We thank you for your continued support and welcome any questions
or comments you may have.
Sincerely,
/s/ Margo Alexander /s/ Julianna M. Berry
- --------------------- ---------------------
MARGO N. ALEXANDER JULIANNA M. BERRY
President, Vice President,
Mitchell Hutchins Asset
Mitchell Hutchins Management Inc.
Asset Management Inc.
Portfolio Manager,
PaineWebber Utility
/s/ Karen Finkel Income Fund
- ---------------------
KAREN FINKEL
Sr. Vice President, /s/ James Keegan
Mitchell Hutchins Asset ---------------------
Management Inc. JAMES F. KEEGAN
Senior Vice President
Portfolio Manager, Mitchell Hutchins Asset
PaineWebber Utility Management Inc.
Income Fund
Portfolio Manager,
PaineWebber Utility
Income Fund
4
<PAGE>
PAINEWEBBER UTILITY INCOME FUND
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
TOTAL RETURN(1)
------------------------------
12 MONTHS 6 MONTHS
ENDED ENDED
NET ASSET VALUE 03/31/97 03/31/97
---------------------------------------
03/31/97 09/30/96 03/31/96
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Class A Shares $ 10.20 $ 9.77 $ 9.76 7.83% 5.94%
Class B Shares 10.20 9.77 9.75 7.05 5.47
Class C Shares 10.20 9.77 9.75 7.06 5.49
- ----------------------------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS A SHARES
<CAPTION>
CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED NET ASSET VALUE DISTRIBUTED PAID RETURN(1)
----------------------
BEGINNING ENDING
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
07/02/93-12/31/93 $10.00 $ 9.70 -- $ 0.2340 (0.70)%
- -------------------------------------------------------------------------------------------------------
1994 9.70 8.28 -- 0.4829 (9.71)
- -------------------------------------------------------------------------------------------------------
1995 8.28 10.14 -- 0.4662 28.82
- -------------------------------------------------------------------------------------------------------
1996 10.14 10.56 -- 0.3530 7.90
- -------------------------------------------------------------------------------------------------------
01/01/97-03/31/97 10.56 10.20 -- 0.0555 (2.88)
- -------------------------------------------------------------------------------------------------------
Totals: $ 0.0000 $ 1.5916
- -------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 03/31/97: 21.01%
- -------------------------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS B SHARES
<CAPTION>
CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED NET ASSET VALUE DISTRIBUTED PAID RETURN(1)
----------------------
BEGINNING ENDING
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
07/02/93-12/31/93 $10.00 $ 9.70 -- $ 0.2010 (1.02)%
- -------------------------------------------------------------------------------------------------------
1994 9.70 8.28 -- 0.4169 (10.40)
- -------------------------------------------------------------------------------------------------------
1995 8.28 10.14 -- 0.3980 27.87
- -------------------------------------------------------------------------------------------------------
1996 10.14 10.56 -- 0.2756 7.06
- -------------------------------------------------------------------------------------------------------
01/01/97-03/31/97 10.56 10.20 -- 0.0332 (3.09)
- -------------------------------------------------------------------------------------------------------
Totals: $ 0.0000 $ 1.3247
- -------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 03/31/97: 17.65%
- -------------------------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS C SHARES
<CAPTION>
CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED NET ASSET VALUE DISTRIBUTED PAID RETURN(1)
----------------------
BEGINNING ENDING
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
07/02/93-12/31/93 $10.00 $ 9.70 -- $ 0.2020 (1.01)%
- -------------------------------------------------------------------------------------------------------
1994 9.70 8.28 -- 0.4158 (10.41)
- -------------------------------------------------------------------------------------------------------
1995 8.28 10.14 -- 0.3970 27.86
- -------------------------------------------------------------------------------------------------------
1996 10.14 10.56 -- 0.2766 7.07
- -------------------------------------------------------------------------------------------------------
01/01/97-03/31/97 10.56 10.20 -- 0.0328 (3.10)
- -------------------------------------------------------------------------------------------------------
Totals: $ 0.0000 $ 1.3242
- -------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 03/31/97: 17.65%
- -------------------------------------------------------------------------------------------------------
</TABLE>
1Figures assume reinvestment of all dividends and other distributions at net
asset value on the payable dates and do not include sales charges; results
would be lower if sales charges were included.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost.
5
<PAGE>
PAINEWEBBER UTILITY INCOME FUND
PORTFOLIO OF INVESTMENTS MARCH 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------ --------------
<C> <S> <C>
COMMON STOCKS -- 85.55%
ELECTRIC UTILITY -- 37.55%
22,500 Allegheny Power Systems Incorporated.... $ 666,562
25,000 Baltimore Gas & Electric Company........ 668,750
17,500 Boston Edison Company................... 457,188
18,000 Carolina Power & Light.................. 652,500
15,000 CILCORP Incorporated.................... 570,000
14,000 CMS Energy Corporation.................. 460,250
25,000 DPL Incorporated........................ 603,125
20,000 DQE Incorporated........................ 555,000
30,000 Edison International Incorporated....... 675,000
17,000 FPL Group Incorporated.................. 750,125
18,000 NIPSCO Industries Incorporated.......... 706,500
30,000 Ohio Edison Company..................... 633,750
22,500 PECO Energy Company..................... 458,438
17,500 Public Service Company of Colorado...... 678,125
30,000 Public Service Company of New Mexico.... 517,500
20,000 Puget Sound Power & Light Company....... 505,000
21,000 SCANA Corporation....................... 532,875
20,000 Sierra Pacific Resources................ 587,500
22,500 Southern Company........................ 475,312
30,000 TNP Enterprises Incorporated............ 641,250
12,500 Unicom Corporation...................... 243,750
30,000 Wisconsin Energy Corporation............ 735,000
--------------
12,773,500
--------------
FINANCIAL SERVICES -- 4.58%
25,000 Ambassador Apartments Incorporated...... 625,000
20,000 Cousins Properties Incorporated......... 545,000
20,000 CWM Mortgage Holdings Incorporated...... 387,500
--------------
1,557,500
--------------
GAS UTILITY -- 10.12%
30,000 AGL Resources Incorporated.............. 551,250
25,000 CMS Energy Corporation, Class G......... 465,625
10,000 El Paso Natural Gas Company............. 566,250
25,000 MCN Corporation......................... 703,125
25,000 NICOR Incorporated...................... 800,000
20,000 Public Service Company of North 357,500
Carolina..............................
--------------
3,443,750
--------------
INFORMATION & COMPUTER SERVICES -- 0.10%
2,000 International Telecomm Systems 34,000
Incorporated*.........................
--------------
LONG DISTANCE & PHONE COMPANIES -- 17.16%
12,000 Alltel Corporation...................... 390,000
9,000 Ameritech Corporation................... 553,500
3,000 Bell Atlantic Corporation............... 182,625
16,000 BellSouth Corporation................... 676,000
</TABLE>
6
<PAGE>
PAINEWEBBER UTILITY INCOME FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------ --------------
<C> <S> <C>
COMMON STOCKS -- (CONCLUDED)
LONG DISTANCE & PHONE COMPANIES -- (CONCLUDED)
10,000 Brooks Fiber Properties, $ 178,750
Incorporated*.........................
15,000 GTE Corporation......................... 699,375
20,000 LCI International Incorporated*......... 335,000
3,500 NYNEX Corporation....................... 159,688
12,000 SBC Communications Incorporated......... 631,500
25,000 SmarTalk Teleservices Incorporated*..... 337,500
12,500 Telco Communications Group 248,437
Incorporated*.........................
12,000 Teleport Communications Group 276,000
Incorporated*.........................
21,000 US West Communications Incorporated..... 714,000
27,000 Viatel Incorporated*.................... 178,875
12,564 WorldCom Incorporated*.................. 276,408
--------------
5,837,658
--------------
MEDIA -- 0.48%
5,000 Univision Communications 163,125
Incorporated*.........................
--------------
REAL PROPERTY -- 13.02%
25,000 Crescent Real Estate Equities........... 668,750
25,300 Excel Realty Trust Incorporated......... 638,825
25,000 Franchise Finance Corporation America... 596,875
18,000 Spieker Properties Incorporated......... 702,000
22,500 Starwood Lodging Trust.................. 877,500
10,000 Storage USA Incorporated................ 368,750
18,000 Sun Communities......................... 576,000
--------------
4,428,700
--------------
WATER UTILITY -- 1.85%
30,000 American Water Works Company 630,000
Incorporated..........................
--------------
WIRELESS TELECOMMUNICATIONS -- 0.69%
12,500 COLT Telecom Group Plc*................. 235,937
--------------
Total Common Stocks (cost -- $25,894,033)............... 29,104,170
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES
- ------------ -------------- --------------
<C> <S> <C> <C> <C>
CORPORATE BONDS -- 12.28%
CABLE -- 2.16%
$ 750 TCI Communications, Incorporated........ 03/31/27 9.650% 733,493
--------------
ELECTRIC UTILITY -- 7.90%
800 Duquesne Light Company.................. 06/15/04 6.625 754,299
750 Georgia Power Company................... 02/01/23 7.950 731,426
750 Illinois Power Company.................. 08/01/03 6.500 715,397
</TABLE>
7
<PAGE>
PAINEWEBBER UTILITY INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------ -------------- -------------- --------------
<C> <S> <C> <C> <C>
CORPORATE BONDS -- (CONCLUDED)
ELECTRIC UTILITY -- (CONCLUDED)
$ 500 Texas Utilities Electric Capital........ 01/30/37 8.175% $ 486,458
--------------
2,687,580
--------------
MEDIA -- 2.22%
500 News America Holdings Incorporated...... 10/17/96 8.250 486,124
300 Viacom Incorporated..................... 01/15/16 7.625 269,547
--------------
755,671
--------------
4,176,744
Total Corporate Bonds (cost -- $4,297,604)..............
--------------
CONVERTIBLE BOND -- 1.65%
CABLE -- 1.65%
650 International Cabletel Incorporated
(cost -- $650,000).................... 06/15/08 7.000 560,625
--------------
REPURCHASE AGREEMENT -- 1.13%
385 Repurchase agreement dated 03/31/97 with
State Street Bank and Trust Company,
collateralized by $371,625 U.S.
Treasury Notes, 7.500%, due 11/15/16;
proceeds: $385,053 (cost --
$385,000)............................. 04/01/97 5.000 385,000
--------------
34,226,539
Total Investments (cost -- $31,226,637) -- 100.61%......
(208,438)
Liabilities in excess of other assets -- (0.61)%........
--------------
$ 34,018,101
Net Assets -- 100.00%...................................
--------------
--------------
</TABLE>
- -----------------
*Non-Income producing
See accompanying notes to financial statements
8
<PAGE>
PAINEWEBBER UTILITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 1997
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $31,226,637)................................................. $34,226,539
Dividends and interest receivable...................................................................... 181,963
Deferred organizational expenses....................................................................... 35,291
Other assets........................................................................................... 82,804
----------
Total assets........................................................................................... 34,526,597
----------
LIABILITIES
Payable for shares of beneficial interest repurchased.................................................. 150,129
Dividends payable...................................................................................... 124,977
Payable for investments purchased...................................................................... 63,574
Payable to affiliate................................................................................... 49,391
Accrued expenses and other liabilities................................................................. 120,425
----------
Total liabilities...................................................................................... 508,496
----------
NET ASSETS
Beneficial interest -- $0.001 par value (unlimited amount authorized).................................. 36,724,552
Undistributed net investment income.................................................................... 67,495
Accumulated net realized losses from investment transactions........................................... (5,773,848)
Net unrealized appreciation of investments............................................................. 2,999,902
----------
Net assets............................................................................................. $34,018,101
----------
----------
CLASS A:
Net assets............................................................................................. $6,038,574
----------
Shares outstanding..................................................................................... 592,067
----------
Net asset value and redemption value per share......................................................... $10.20
----------
----------
Maximum offering price per share (net asset value plus sales charge of 4.50% of offering price)........ $10.68
----------
----------
CLASS B:
Net assets............................................................................................. $21,070,504
----------
Shares outstanding..................................................................................... 2,065,160
----------
Net asset value and offering price per share........................................................... $10.20
----------
----------
CLASS C:
Net assets............................................................................................. $6,909,023
----------
Shares outstanding..................................................................................... 677,382
----------
Net asset value and offering price per share........................................................... $10.20
----------
----------
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
PAINEWEBBER UTILITY INCOME FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends.............................................................................................. $1,678,936
Interest............................................................................................... 613,956
----------
2,292,892
----------
EXPENSES:
Investment advisory and administration................................................................. 314,323
Service fees--Class A.................................................................................. 18,987
Service and distribution fees--Class B................................................................. 282,135
Service and distribution fees--Class C................................................................. 91,072
Reports and notices to shareholders.................................................................... 117,478
Legal and audit........................................................................................ 90,484
Transfer agency and service fees....................................................................... 88,814
State registration..................................................................................... 56,006
Custody and accounting................................................................................. 50,454
Amortization of organizational expenses................................................................ 28,193
Trustees' fees......................................................................................... 12,250
Other expenses......................................................................................... 32,285
----------
1,182,481
Less: Fee waivers from investment adviser.............................................................. (30,480)
----------
Net expenses........................................................................................... 1,152,001
----------
Net investment income.................................................................................. 1,140,891
----------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT ACTIVITIES:
Net realized gains from investment transactions........................................................ 3,613,062
Net change in unrealized appreciation/depreciation of investments...................................... (1,498,897)
----------
NET REALIZED AND UNREALIZED GAIN FROM INVESTMENT ACTIVITIES............................................ 2,114,165
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................................... $3,255,056
----------
----------
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
PAINEWEBBER UTILITY INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
FOR THE FOUR MONTHS FOR THE
YEAR ENDED ENDED YEAR ENDED
MARCH 31, 1997 MARCH 31, 1996 NOVEMBER 30, 1995
--------------- --------------- ------------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment income............................. $ 1,140,891 $ 725,940 $ 2,812,246
Net realized gains (losses) from investment
transactions.................................... 3,613,062 (120,140) (248,279)
Net change in unrealized appreciation/depreciation
of investments.................................. (1,498,897) 246,922 10,159,054
--------------- --------------- ------------------
Net increase in net assets resulting from
operations...................................... 3,255,056 852,722 12,723,021
--------------- --------------- ------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income--Class A.................... (235,539) (160,776) (569,343)
Net investment income--Class B.................... (647,343) (486,821) (1,637,731)
Net investment income--Class C.................... (212,445) (156,103) (559,933)
--------------- --------------- ------------------
Total dividends to shareholders................... (1,095,327) (803,700) (2,767,007)
--------------- --------------- ------------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares.............. 5,928,914 3,128,944 13,428,355
Cost of shares repurchased........................ (30,023,725) (9,026,092) (28,464,756)
Proceeds from dividends reinvested................ 700,359 575,298 1,996,330
--------------- --------------- ------------------
Net decrease in net assets from beneficial
interest transactions........................... (23,394,452) (5,321,850) (13,040,071)
--------------- --------------- ------------------
Net decrease in net assets........................ (21,234,723) (5,272,828) (3,084,057)
NET ASSETS:
Beginning of period............................... 55,252,824 60,525,652 63,609,709
--------------- --------------- ------------------
End of period (including undistributed net
investment income
of $67,495, $21,931 and $99,691,
respectively)................................... $ 34,018,101 $ 55,252,824 $ 60,525,652
--------------- --------------- ------------------
--------------- --------------- ------------------
</TABLE>
See accompanying notes to financial statements
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Managed Investments Trust (the "Trust") was organized under
Massachusetts law by a Declaration of Trust dated November 21, 1986 and is
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, as an open-end, diversified investment company.
The Trust is a series mutual fund with six funds: PaineWebber Utility Income
Fund (the "Fund"), PaineWebber U.S. Government Income Fund, PaineWebber
Investment Grade Income Fund, PaineWebber High Income Fund, PaineWebber Low
Duration U.S. Government Income Fund and the newly created PaineWebber Asia
Pacific Growth Fund. The financial statements for PaineWebber U.S. Government
Income Fund, PaineWebber Investment Grade Income Fund, PaineWebber High Income
Fund, PaineWebber Low Duration U.S. Government Income Fund and PaineWebber Asia
Pacific Growth Fund are not included herein.
Currently, the Fund offers Class A, Class B, Class C and Class Y shares (no
Class Y shares were outstanding during the period). Each class represents
interests in the same assets of the Fund, the classes are identical except for
differences in their sales charge structure, ongoing service/ distribution
charges and certain transfer agency expenses. In addition, Class B shares and
all corresponding dividend reinvested shares automatically convert to Class A
shares approximately six years after initial issuance. All classes of shares
have equal voting privileges, except that each class has exclusive voting rights
with respect to its service and/or distribution plan. Organizational costs have
been deferred and are being amortized using the straight line method over a
period not to exceed 60 months from the date the costs were incurred.
The preparation of financial statements in accordance with generally accepted
accounting principles requires Fund management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies:
VALUATION OF INVESTMENTS--Where market quotations are readily available,
portfolio securities are valued thereon, provided such quotations adequately
reflect, in the judgment of Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins"), a wholly owned subsidiary of PaineWebber Incorporated
("PaineWebber") and investment adviser and administrator of the Fund, the fair
value of the securities. Such quotations are based on the last sales price, or
if no sales price, at the closing bid price. 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 Trust's board
of trustees. The amortized cost method of valuation, which approximates market
value, generally is used to value short term debt instruments with sixty days or
less remaining to maturity, unless the Trust's board of trustees determines that
this does not represent fair value.
REPURCHASE AGREEMENTS--The Fund's custodian takes possession of the collateral
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
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are
recorded on the trade date. Realized gains and losses from investment
transactions are calculated using the identified cost method. Interest income is
recorded on an accrual basis. Dividend income is recorded on the ex-dividend
date. Discounts are accreted and premiums are amortized as adjustments to
interest income and the identified cost of investments.
Income, expenses (excluding class-specific expenses) and realized/unrealized
gains/losses are allocated proportionately to each class of shares based upon
the relative net asset value of outstanding shares (or the value of
dividend-eligible shares, as appropriate) of each class at the beginning of the
day (after adjusting for current capital share activity of the respective
classes). Class-specific expenses are charged directly to the applicable class
of shares.
DIVIDENDS AND DISTRIBUTIONS--Dividends and distributions to shareholders are
recorded on the ex-dividend date. Dividends from net investment income and
distributions from 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
reclassification.
CONCENTRATION OF RISK
The Fund follows an investment policy of investing primarily in securities of
utility companies. Economic, legislative and regulatory developments impacting
those industries may affect the market value of the Fund's investments.
INVESTMENT ADVISER AND ADMINISTRATOR
The Trust's board of trustees 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, the Fund pays Mitchell Hutchins
an investment advisory and administration fee, which is accrued daily and paid
monthly, at the annual rate of 0.70% of the Fund's average daily net assets. At
March 31, 1997, the Fund owed Mitchell Hutchins $21,536 in investment advisory
and administration fees. Mitchell Hutchins voluntarily waived $30,480 of its
investment advisory and administration fee for the year ended March 31, 1997.
DISTRIBUTION PLANS
Mitchell Hutchins is the distributor of the Fund's shares and has appointed
PaineWebber as the exclusive dealer for the sale of those shares. Under separate
plans of service and/or distribution pertaining to the Class A, Class B, and
Class C shares, the Fund pays Mitchell Hutchins monthly service fees at the
annual rate of 0.25% of the average daily net assets of Class A, Class B and
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Class C shares and monthly distribution fees at the annual rate of 0.75% of the
average daily net assets of Class B and Class C shares. At March 31, 1997, the
Fund owed Mitchell Hutchins $26,699 in service and distribution fees.
Mitchell Hutchins also receives the proceeds of the initial sales charges paid
by shareholders upon the purchase of Class A shares and the contingent deferred
sales charges paid by shareholders upon certain redemptions of Class A, Class B
and Class C shares. Mitchell Hutchins has informed the Fund that for the year
ended March 31, 1997, it earned approximately $170,294 in sales charges.
SECURITY LENDING
The Fund may lend up to 33 1/3% of its total assets to qualified institutions.
The loans are secured at all times by cash or U.S. government securities in an
amount at least equal to the market value of the securities loaned, plus accrued
interest, determined on a daily basis and adjusted accordingly. The Fund will
retain record ownership of loaned securities to exercise certain beneficial
rights, however, the Fund may bear the risk of delay in recovery of, or even
loss of rights in, the securities loaned should the borrower fail financially.
The Fund receives compensation, which is included in interest income, for
lending its securities from interest earned on the cash or U.S. government
securities held as collateral, net of fee rebates paid to the borrower plus
reasonable administrative and custody fees. The lending agent is PaineWebber,
who received no compensation from the Fund for the year ended March 31, 1997.
As of March 31, 1997, the Fund had no portfolio securities loaned outstanding.
TRANSFER AGENCY SERVICE FEES
The Fund pays PaineWebber an annual fee of $4.00 per active PaineWebber
shareholder account for certain services not provided by the Fund's transfer
agent. For these services for the year ended March 31, 1997, PaineWebber earned
$17,118. At March 31, 1997, the Fund owed PaineWebber $1,156 for transfer agency
service fees.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at March 31,
1997 was substantially the same as the cost of securities for financial
statement purposes.
At March 31, 1997, the components of the net unrealized appreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value over cost)................. $4,474,612
Gross depreciation (investments having an excess of cost over value)................. (1,474,710)
----------
Net unrealized appreciation of investments........................................... $2,999,902
----------
----------
</TABLE>
For the year ended March 31, 1997, total aggregate purchases and sales of
portfolio securities, excluding short-term securities, were as follows:
<TABLE>
<S> <C>
Purchases............................................................................ $17,264,563
Sales................................................................................ $37,015,782
</TABLE>
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FEDERAL TAX STATUS
The Fund intends to distribute substantially 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.
At March 31, 1997, the Fund had a net capital loss carryforward of $5,773,848
part of which will expire on March 31, 2002 and the remainder on March 31, 2003.
To the extent such losses are used, as provided in the regulations, to offset
future net realized capital gains, it is probable these gains will not be
distributed.
BENEFICIAL INTEREST
There is an unlimited amount of $0.001 par value shares of beneficial interest
authorized. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
---------------------- ------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- ---------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED MARCH 31, 1997:
Shares sold................................ 31,806 $ 320,817 105,433 $ 1,042,199 438,359 $ 4,565,898
Shares repurchased......................... (451,582) (4,514,693) (1,612,857) (16,178,370) (911,460) (9,330,662)
Dividends reinvested....................... 14,673 145,098 40,939 404,457 15,259 150,804
Shares converted from Class B to Class A... 32,221 326,093 (32,241) (326,093) -- --
--------- ----------- ---------- ------------ --------- -----------
Net decrease............................... (372,882) $(3,722,685) (1,498,726) $(15,057,807) (457,842) $(4,613,960)
--------- ----------- ---------- ------------ --------- -----------
--------- ----------- ---------- ------------ --------- -----------
FOUR MONTHS ENDED MARCH 31, 1996:
Shares sold................................ 31,380 $ 312,020 200,178 $ 2,022,789 79,126 $ 794,135
Shares repurchased......................... (179,206) (1,801,015) (513,198) (5,128,898) (207,611) (2,096,179)
Dividends reinvested....................... 11,257 112,880 33,769 338,597 12,349 123,821
Shares converted from Class B to Class A... 1,409 14,346 (1,410) (14,346) -- --
--------- ----------- ---------- ------------ --------- -----------
Net decrease............................... (135,160) $(1,361,769) (280,661) $ (2,781,858) (116,136) $(1,178,223)
--------- ----------- ---------- ------------ --------- -----------
--------- ----------- ---------- ------------ --------- -----------
YEAR ENDED NOVEMBER 30, 1995:
Shares sold................................ 202,622 $ 1,796,027 1,035,911 $ 9,257,241 267,682 $ 2,375,087
Shares repurchased......................... (677,777) (5,988,235) (1,767,458) (15,877,641) (740,795) (6,598,880)
Dividends reinvested....................... 44,624 400,419 128,806 1,156,031 49,070 439,880
Shares converted from Class B to Class A... 23,499 218,286 (23,473) (218,286) -- --
--------- ----------- ---------- ------------ --------- -----------
Net decrease............................... (407,032) $(3,573,503) (626,214) $ (5,682,655) (424,043) $(3,783,913)
--------- ----------- ---------- ------------ --------- -----------
--------- ----------- ---------- ------------ --------- -----------
</TABLE>
15
<PAGE>
PAINEWEBBER UTILITY INCOME FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------
FOR THE YEARS
FOR THE FOR THE ENDED FOR THE PERIOD
YEAR ENDED FOUR MONTHS NOVEMBER 30, JULY 2, 1993+
MARCH 31, ENDED MARCH ------------------ TO NOVEMBER 30,
1997 31, 1996 1995 1994 1993
------------- ------------- ------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................. $ 9.76 $ 9.77 $ 8.31 $ 9.66 $10.00
------------- ------------- ------- ------- -------
Net investment income................ 0.34 0.15 0.47 0.48 0.20
Net realized and unrealized gains
(losses) from investments.......... 0.41 -- 1.44 (1.31) (0.39)
------------- ------------- ------- ------- -------
Net increase (decrease) from
investment operations.............. 0.75 0.15 1.91 (0.83) (0.19)
------------- ------------- ------- ------- -------
Dividends from net investment
income............................. (0.31) (0.16) (0.45) (0.52) (0.15)
------------- ------------- ------- ------- -------
Net asset value, end of period....... $10.20 $ 9.76 $ 9.77 $ 8.31 $ 9.66
------------- ------------- ------- ------- -------
------------- ------------- ------- ------- -------
Total investment return(1)........... 7.83% 1.46% 23.64% (8.76)% (1.95)%
------------- ------------- ------- ------- -------
------------- ------------- ------- ------- -------
Ratios/Supplemental Data:
Net assets, end of period (000's).... $6,039 $9,416 $10,750 $12,532 $16,224
Expenses to average net assets, net
of waivers from adviser............ 1.93% 1.09%* 1.49% 1.58% 1.55%*
Expenses to average net assets,
before waivers from adviser........ 2.00% 1.44%* 1.49% 1.58% 1.55%*
Net investment income to average net
assets, net of waivers from
adviser............................ 3.27% 4.26%* 5.13% 5.49% 5.38%*
Net investment income to average net
assets, before waivers from
adviser............................ 3.20% 3.91%* 5.13% 5.49% 5.38%*
Portfolio turnover rate.............. 41% 21% 30% 92% 13%
Average commission rate paid(2)...... $0.0600 $0.0600 -- -- --
</TABLE>
*Annualized
+Commencement of issuance of shares
(1)Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates, and a sale at net asset
value on the last day of each period reported. The figures do not include sales
charges; results would be lower if sales charges were included. Total investment
return for periods of less than one year has not been annualized.
(2)Effective for fiscal years beginning on or after September 1, 1995, the Fund
is required to disclose the average commission rate paid per share of common
stock investments purchased or sold.
16
<PAGE>
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------
FOR THE
FOUR FOR THE YEARS
MONTHS ENDED FOR THE PERIOD
FOR THE ENDED NOVEMBER 30, JULY 2, 1993+
YEAR ENDED MARCH ------------------- TO NOVEMBER
MARCH 31, 1997 31, 1996 1995 1994 30, 1993
-------------- -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 9.75 $ 9.77 $ 8.31 $ 9.65 $10.00
------- -------- -------- -------- -------
Net investment income.......................... 0.26 0.12 0.40 0.42 0.17
Net realized and unrealized gains (losses) from
investments.................................... 0.42 (0.01) 1.45 (1.31) (0.39)
------- -------- -------- -------- -------
Net increase (decrease) from investment
operations..................................... 0.68 0.11 1.85 (0.89) (0.22)
------- -------- -------- -------- -------
Dividends from net investment income........... (0.23) (0.13) (0.39) (0.45) (0.13)
------- -------- -------- -------- -------
Net asset value, end of period................. $10.20 $ 9.75 $ 9.77 $ 8.31 $ 9.65
------- -------- -------- -------- -------
------- -------- -------- -------- -------
Total investment return(1)..................... 7.05% 1.10% 22.73% (9.35)% (2.29)%
------- -------- -------- -------- -------
------- -------- -------- -------- -------
Ratios/Supplemental Data:
Net assets, end of period (000's).............. $21,071 $34,765 $37,554 $37,156 $45,382
Expenses to average net assets, net of waivers
from adviser................................... 2.69% 1.85%* 2.23% 2.33% 2.29%*
Expenses to average net assets, before waivers
from adviser................................... 2.76% 2.20%* 2.23% 2.33% 2.29%*
Net investment income to average net assets,
net of waivers from adviser.................... 2.51% 3.51%* 4.37% 4.72% 4.67%*
Net investment income to average net assets,
before waivers from adviser.................... 2.44% 3.16%* 4.37% 4.72% 4.67%*
Portfolio turnover rate........................ 41% 21% 30% 92% 13%
Average commission rate paid(2)................ $0.0600 $0.0600 -- -- --
<CAPTION>
CLASS C
-----------------------------------------------------------------
FOR THE
FOUR FOR THE YEARS
MONTHS ENDED FOR THE PERIOD
FOR THE ENDED NOVEMBER 30, JULY 2, 1993+
YEAR ENDED MARCH -------------------- TO NOVEMBER
MARCH 31, 1997 31, 1996 1995 1994 30, 1993
-------------- -------- --------- -------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 9.75 $ 9.77 $ 8.31 $ 9.65 $10.00
------- -------- --------- -------- -------
Net investment income.......................... 0.25 0.12 0.40 0.42 0.16
Net realized and unrealized gains (losses) from
investments.................................... 0.43 (0.01) 1.45 (1.31) (0.38)
------- -------- --------- -------- -------
Net increase (decrease) from investment
operations..................................... 0.68 0.11 1.85 (0.89) (0.22)
------- -------- --------- -------- -------
Dividends from net investment income........... (0.23) (0.13) (0.39) (0.45) (0.13)
------- -------- --------- -------- -------
Net asset value, end of period................. $10.20 $ 9.75 $ 9.77 $ 8.31 $ 9.65
------- -------- --------- -------- -------
------- -------- --------- -------- -------
Total investment return(1)..................... 7.06% 1.10% 22.71% (9.36)% (2.28)%
------- -------- --------- -------- -------
------- -------- --------- -------- -------
Ratios/Supplemental Data:
Net assets, end of period (000's).............. $6,909 $11,072 $12,222 $13,922 $17,866
Expenses to average net assets, net of waivers
from adviser................................... 2.70% 1.85%* 2.24% 2.32% 2.29%*
Expenses to average net assets, before waivers
from adviser................................... 2.76% 2.20%* 2.24% 2.32% 2.29%*
Net investment income to average net assets,
net of waivers from adviser.................... 2.51% 3.50%* 4.37% 4.69% 4.67%*
Net investment income to average net assets,
before waivers from adviser.................... 2.44% 3.15%* 4.37% 4.69% 4.67%*
Portfolio turnover rate........................ 41% 21% 30% 92% 13%
Average commission rate paid(2)................ $0.0600 $0.0600 -- -- --
</TABLE>
17
<PAGE>
PAINEWEBBER UTILITY INCOME FUND
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
PaineWebber Managed Investments Trust
We have audited the accompanying statement of assets and
liabilities, including the portfolio of investments, of PaineWebber
Utility Income Fund (one of the Portfolios of PaineWebber Managed
Investments Trust) (the "Fund") as of March 31, 1997, and the
related statement of operations for the year then ended, the
statements of changes in net assets for the year ended March 31,
1997, the four months ended March 31, 1996 and the year ended
November 30, 1995 and the financial highlights for each of the
indicated periods. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included
confirmation of investments owned as of March 31, 1997 by
correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of PaineWebber Utility Income Fund as of March
31, 1997, the results of its operations for the year then ended
March 31, 1997, the changes in its net assets for the year ended
March 31, 1997, the four months ended March 31, 1996 and the year
ended November 30, 1995 and the financial highlights for each of
the indicated periods, in conformity with generally accepted
accounting principles.
[SIGNATURE]
New York, New York
May 13, 1997
18
<PAGE>
PAINEWEBBER UTILITY INCOME FUND
TAX INFORMATION (UNAUDITED)
We are required by Subchapter M of the Internal Revenue Code of
1986, as amended, to advise you within 60 days of the Fund's fiscal
period end (March 31, 1997) as to the federal tax status of
distributions received by shareholders during such fiscal period
from the Fund. Accordingly, we are advising you that all of the
distributions paid by the Utility Income Fund during the period
were derived from net investment income and are taxable as ordinary
income. Of these distributions, 72.95% qualifies for the dividends
received deduction available to corporate shareholders.
Dividends received by tax-exempt recipients (e.g., IRAs and
Keoghs) need not be reported as taxable income. Some retirement
trusts (e.g., corporate, Keogh and 403(b)(7) plans) may need this
information for their annual reporting.
Because the Fund's fiscal year is not the calendar year, another
notification will be sent in respect of calendar year 1997. The
second notification, which will reflect the amounts to be used by
calendar year taxpayers on their federal income tax returns, will
be made in conjunction with Form 1099 DIV and will be mailed in
January 1998. Shareholders are advised to consult their own tax
advisers with respect to the tax consequences of their investment
in the Fund.
19
<PAGE>
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES
E. Garrett Bewkes, Jr. Meyer Feldberg
CHAIRMAN
George W. Gowen
Margo N. Alexander
Frederic V. Malek
Richard Q. Armstrong
Carl W. Schafer
Richard R. Burt
Mary C. Farrell
PRINCIPAL OFFICERS
Margo N. Alexander Julian F. Sluyters
PRESIDENT VICE PRESIDENT AND TREASURER
Victoria E. Schonfeld Karen Finkel
VICE PRESIDENT VICE PRESIDENT
Dianne E. O'Donnell
VICE PRESIDENT AND SECRETARY
INVESTMENT ADVISER,
ADMINISTRATOR AND DISTRIBUTOR
MITCHELL HUTCHINS ASSET MANAGEMENT INC.
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
THIS REPORT IS NOT TO BE USED IN CONNECTION WITH THE OFFERING OF SHARES OF THE
FUND UNLESS ACCOMPANIED OR PRECEDED BY AN EFFECTIVE PROSPECTUS.
A PROSPECTUS CONTAINING MORE COMPLETE INFORMATION FOR ANY OF THE FUNDS LISTED ON
THE BACK COVER CAN BE OBTAINED FROM A PAINEWEBBER INVESTMENT EXECUTIVE OR
CORRESPONDENT FIRM.
READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
<PAGE>
UTILITY INCOME FUND
ANNUAL REPORT
MARCH 31, 1997
- ----------
PaineWebber offers a family of 22 funds which
encompass a diversified range of investment goals.
BOND FUNDS
- - High Income Fund
- - Investment Grade Income Fund
- - Low Duration U.S. Government Income Fund
- - Strategic Income Fund
- - U.S. Government Income Fund
TAX-FREE BOND FUNDS
- - California Tax-Free Income Fund
- - Municipal High Income Fund
- - National Tax-Free Income Fund
- - New York Tax-Free Income Fund
STOCK FUNDS
- - Capital Appreciation Fund
- - Financial Services Growth Fund
- - Growth Fund
- - Growth and Income Fund
- - Small Cap Fund
- - Utility Income Fund
ASSET ALLOCATION FUNDS
- - Balanced Fund
- - Tactical Allocation Fund
GLOBAL FUNDS
- - Asia Pacific Growth Fund
- - Emerging Markets Equity Fund
- - Global Equity Fund
- - Global Income Fund
PAINEWEBBER MONEY MARKET FUND
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