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Previous: DIVERSIFIED CORPORATE RESOURCES INC, DEF 14A, 2000-05-01 |
Next: APPLIED VOICE RECOGNITION INC /DE/, 10KSB/A, 2000-05-01 |
PAINEWEBBER MASTER SERIES INC.
(on behalf of PAINEWEBBER BALANCED FUND)
PAINEWEBBER MANAGED INVESTMENTS TRUST
(on behalf of PAINEWEBBER UTILITY INCOME FUND)
51 West 52nd Street
New York, New York 10019
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information relates specifically to the
proposed Reorganization whereby PaineWebber Balanced Fund ("Balanced Fund"), a
portfolio of PaineWebber Master Series, Inc., would acquire all of the assets of
PaineWebber Utility Income Fund ("Utility Income Fund"), a series of PaineWebber
Managed Investments Trust, in exchange solely for shares of Balanced Fund and
the assumption by Balanced Fund of all of Utility Income Fund's liabilities.
This Statement of Additional Information consists of this cover page, the pro
forma financial statements of Balanced Fund (giving effect to the
Reorganization) for the year ended August 31, 1999, and the following described
documents, each of which is incorporated by reference herein and accompanies
this Statement of Additional Information:
(1) The Statement of Additional Information of Balanced Fund, dated
December 10, 1999;
(2) The Annual Report to Shareholders of Balanced Fund for the fiscal
year ended August 31, 1999;
(3) The Semi-Annual Report to Shareholders of Utility Income Fund, dated
September 30, 1999;
(4) The Annual Report to Shareholders of Utility Income Fund for the
fiscal year ended March 31, 1999.
This Statement of Additional Information is not a prospectus and should be
read only in conjunction with the Prospectus/Proxy Statement dated April 25,
2000 relating to the proposed Reorganization. A copy of the Prospectus/Proxy
Statement may be obtained without charge by calling toll-free 1-800-647-1568.
This Statement of Additional Information is dated April 25, 2000.
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
The following tables set forth the unaudited pro forma condensed Statement
of Assets and Liabilities as of August 31, 1999, the unaudited pro forma
<PAGE>
condensed Statement of Operations for the twelve month period ended August 31,
1999 as adjusted giving effect to the Reorganization, and the unaudited pro
forma Portfolio of Investments as of August 31, 1999, for Utility Income Fund
and Balanced Fund.
The pro forma Portfolio of Investments contains information about the
securities holdings of the Balanced Fund and Utility Income Fund as of August
31, 1999, which has, and will continue to, change over time due to normal
portfolio turnover in response to changes in market conditions. Mitchell
Hutchins currently estimates that Utility Income Fund will sell between one
quarter and one half of its total assets in connection with the Reorganization,
and the proceeds of these sales will be held in temporary investments or
reinvested in assets that are consistent with the holdings of Balanced Fund. It
also is expected that some of Utility Income Fund's holdings may not remain at
the time of the Reorganization due to normal portfolio turnover. As of the date
of this Proxy Statement/Prospectus, Mitchell Hutchins anticipates that, in
connection with the Reorganization, Utility Income Fund will likely restructure
its portfolio to reflect a reduction in its investments in certain types of
companies, primarily electric utility companies. These anticipated sales of
portfolio securities are based upon Mitchell Hutchins' current assessment of
Utility Income Fund's holdings and may change depending on changes in market
conditions and on Mitchell Hutchins' continuing assessment of the compatibility
of Utility Income Fund's investments with Balanced Fund's portfolio composition
and its investment objective or policies at the approximate time of the
Reorganization.
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1999 (UNAUDITED) PRO FORMA
BALANCED UTILITY INCOME COMBINED
FUND FUND BALANCED FUND
---------------- --------------- ---------------
<S> <C> <C> <C>
ASSETS
Investments in securities, at value (cost - $242,375,904,
$24,437,227, and $266,813,131, respectively)................... $263,739,778 $33,458,395 $297,198,173
Investment of cash collateral for securities loaned (cost
-$19,214,874, $0 and $19,214,874, respectively)............... 19,214,874 0 19,214,874
Receivable for investments sold................................. 896,862 0 896,862
Receivable for fund shares sold................................. 101,115 18,759 119,874
Dividends and interest receivable............................... 1,349,895 68,046 1,417,941
Other assets.................................................... 23,549 67,702 91,251
------------- ------------- -------------
Total assets.................................................... 285,326,073 33,612,902 318,938,975
------------- ------------- -------------
LIABILITIES
Collateral for securities loaned................................ 19,214,874 0 19,214,874
Payable for investments purchased............................... 18,867,864 0 18,867,864
Payable for fund shares repurchased............................. 628,736 119,365 748,101
Payable to affiliates........................................... 249,156 38,097 287,253
Payable to custodian............................................ 370,202 0 370,202
Accrued expenses and other liabilities.......................... 179,476 136,127 315,603
------------- ------------- -------------
Total liabilities............................................... 39,510,308 293,589 39,803,897
------------- ------------- -------------
NET ASSETS
Common Stock/Beneficial interest shares of $0.001 par value
outstanding................................................... 205,287,556 25,352,045 230,639,601
Undistributed net investment income............................ 1,006,149 153,854 1,160,003
Accumulated net realized gains (losses) from investment
transactions.................................................. 18,158,186 -1,207,753 16,950,433
Net unrealized appreciation of investments .................... 21,363,874 9,021,167 30,385,041
------------- ------------- -------------
Net assets applicable to shares outstanding..................... $245,815,765 $33,319,313 $279,135,078
============= ============= =============
CLASS A:
Net assets .................................................... $196,684,251 $16,721,084 $213,405,335
------------- ------------- -------------
Shares outstanding ............................................ 16,956,736 1,196,014 18,398,209
------------- ------------- -------------
Net asset and redemption value per share ...................... $11.60 $13.98 $11.60
------------- ------------- -------------
Maximum offering price per share (net asset value plus sales
charge of 4.50% of offering price)............................ $12.15 $14.64 $12.15
------------- ------------- -------------
CLASS B:
Net assets .................................................... $28,718,607 $8,770,251 $37,488,858
------------- ------------- -------------
Shares outstanding ............................................ 2,426,201 627,389 3,166,932
------------- ------------- -------------
Net asset value and offering price per share.................... $11.84 $13.98 $11.84
------------- ------------- -------------
CLASS C:
Net assets .................................................... $19,893,631 $7,744,574 $27,638,205
------------- ------------- -------------
Shares outstanding ............................................ 1,715,018 555,264 2,382,654
------------- ------------- -------------
Net asset value and offering price per share .................. $11.60 $13.95 $11.60
------------- ------------- -------------
Page 1
<PAGE>
CLASS Y:
Net assets .................................................... $519,276 $83,404 $602,680
------------- ------------- -------------
Shares outstanding ............................................ 44,788 5,986 51,984
------------- ------------- -------------
Net asset value and offering price per share ................ $11.59 $13.93 $11.59
------------- ------------- -------------
See accompanying notes to pro forma financial statements
</TABLE>
Page 2
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
PRO FORMA
UTILITY INCOME COMBINED
BALANCED FUND FUND ADJUSTMENTS BALANCED FUND
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest............................................ $6,055,004 $347,451 $0 $6,402,455
Dividend............................................ 1,572,149 980,153 0 2,552,302
-----------------------------------------------------------------
7,627,153 1,327,604 0 8,954,757
----------- ----------- ----------- ----------
EXPENSES:
Investment advisory and administration.............. 1,890,996 246,711 17,622(a) 2,155,329
Service fees - Class A ............................. 505,425 24,078 0 529,503
Service and distribution fees - Class B............. 305,401 177,086 0 482,487
Service and distribution fees - Class C............. 190,716 78,670 0 269,386
Transfer agency and service......................... 166,820 36,171 0 202,991
Custody and accounting.............................. 153,799 20,147 0 173,946
Legal and audit..................................... 95,725 42,450 -47,450(b) 90,725
Reports and notices to shareholders................. 73,300 34,055 -25,000(b) 82,355
State registration fees............................. 47,056 51,766 -40,334(b) 58,488
Amortization of organizational expenses............. 0 28,193 -28,193(c) 0
Directors/Trustees' fees............................ 13,500 8,395 -8,395(b) 13,500
Other expenses...................................... 1,815 488 0 2,303
----------- ----------- ----------- ----------
3,444,553 748,210 -131,750 4,061,013
Less: Fee waivers from adviser...................... -1,469 0 -1,469
----------- ----------- ----------
Net Expenses........................................ 3,443,084 748,210 4,059,544
----------- ----------- ----------
Net investment income............................... 4,184,069 579,394 4,895,213
----------- ----------- ----------
Realized and unrealized gains (losses) from investment
transactions:
Net realized gains (losses) from:
Investment transactions, futures and options...... 18,273,326 -975,966 17,297,360
Net change in unrealized appreciation/depreciation of:
Investments, futures and options.................. 13,576,016 2,706,548 16,282,564
----------- ----------- ----------
Net realized and unrealized gains from investment
activities........................................ 31,849,342 1,730,582 33,579,924
----------- ----------- ----------
Net increase in net assets resulting from operations... $36,033,411 $2,309,976 $38,475,137
=========== =========== ==========
------------
(a) Reflects increase in fees resulting from the higher fee schedule of
Balanced Fund.
(b) Reflects the anticipated savings of the merger.
(c) Reflects write-off of unamortized organizational expenses.
See accompanying notes to pro forma financial statements
</TABLE>
<PAGE>
<TABLE>
PRO FORMA PORTFOLIO OF INVESTMENTS
<CAPTION> PRO FORMA
AUGUST 31, 1999 (UNAUDITED) BALANCED UTILITY COMBINED
FUND INCOME FUND BALANCED FUND
----------- -------------- -------------
<S> <C> <C> <C>
Combined
Number of
Shares
- -----------
COMMON STOCKS - 63.19%
Airlines - 0.57%
31,400 Delta Air Lines, Inc. $ 1,595,513 0 $ 1,595,513
----------- -------------- -----------
Alcohol - 0.25%
8,900 Anheuser-Busch Companies, Inc. 685,300 0 685,300
----------- -------------- -----------
Apparel, Retail - 1.03%
99,200 TJX Companies, Inc. 2,864,400 0 2,864,400
----------- -------------- -----------
Apparel, Textiles - 0.55%
17,800 Tommy Hilfiger Corp.* 604,088 0 604,088
38,400 Westpoint Stevens Inc. 921,600 0 921,600
----------- -------------- -----------
1,525,688 0 1,525,688
----------- -------------- -----------
Banks - 2.07%
30,774 Bank of New York Co. Inc. 1,100,171 0 1,100,171
47,800 The Chase Manhattan Corp. 4,000,262 0 4,000,262
20,200 Mellon Bank Corp. 674,175 0 674,175
----------- -------------- -----------
5,774,608 0 5,774,608
----------- -------------- -----------
Beverages & Tobacco - 0.26%
37,800 Pepsi Bottling Group Inc. 715,838 0 715,838
----------- -------------- -----------
Cable - 1.09%
28,800 JDS Uniphase Corp.* 3,054,600 0 3,054,600
----------- -------------- -----------
Chemicals - 0.30%
7,400 Dow Chemical Co. 840,825 0 840,825
----------- -------------- -----------
Computer Hardware - 3.05%
67,300 Cisco Systems, Inc.* 4,563,781 0 4,563,781
27,100 Dell Computer Corp.* 1,322,819 0 1,322,819
21,200 IBM Corp. 2,640,725 0 2,640,725
----------- -------------- -----------
8,527,325 0 8,527,325
----------- -------------- -----------
1
<PAGE>
COMBINED PRO FORMA
NUMBER OF BALANCED UTILITY COMBINED
SHARES FUND INCOME FUND BALANCED FUND
- ----------- ----------- -------------- -----------
Computer Software - 3.21%
10,100 BMC Software, Inc.* 543,506 0 543,506
23,100 Compuware Corp.* 697,331 0 697,331
3,000 Covad Communications Group Inc.* 0 138,375 138,375
32,600 Microsoft Corp.* 3,017,538 0 3,017,538
10,000 Northpoint Communications Holding* 0 264,375 264,375
46,000 Sterling Software Inc.* 925,750 0 925,750
78,600 Unisys Corp.* 3,379,800 0 3,379,800
----------- -------------- -----------
8,563,925 402,750 8,966,675
----------- -------------- -----------
Construction - 0.29%
23,300 Lafarge Corp. 640,750 0 640,750
8,364 Reckson Associates Realty Corporation 0 181,917 181,917
----------- -------------- -----------
640,750 181,917 822,667
----------- -------------- -----------
Consumer Durables - 0.56%
25,000 Maytag Corp. 1,565,625 0 1,565,625
----------- -------------- -----------
Defense & Aerospace - 0.59%
27,100 Allied-Signal, Inc. 1,659,875 0 1,659,875
----------- -------------- -----------
Diversified Retail - 2.37%
55,800 Dayton Hudson Corp. 3,236,400 0 3,236,400
23,900 Family Dollar Stores Inc. 470,531 0 470,531
46,100 Federated Department Stores, Inc.* 2,120,600 0 2,120,600
17,500 Wal-Mart Stores, Inc. 775,469 0 775,469
----------- -------------- -----------
6,603,000 0 6,603,000
----------- -------------- -----------
Drugs & Medicine - 2.41%
42,700 Biogen Inc.* 3,277,225 0 3,277,225
2,100 Elan Corp. PLC, ADR* 67,331 0 67,331
8,000 Pharmacia & Upjohn, Inc. ADR 418,000 0 418,000
34,600 Schering-Plough Corp. 1,818,663 0 1,818,663
17,300 Warner Lambert Co. 1,146,125 0 1,146,125
----------- -------------- -----------
6,727,344 0 6,727,344
----------- -------------- -----------
Electric Utilities - 6.87%
20,000 Allegheny Energy Inc. 0 675,000 675,000
15,000 Alliant Corporation 0 434,063 434,063
5,000 Calpine Corp. 0 453,125 453,125
20,000 Central Hudson Gas & Electric Corp. 0 845,000 845,000
14,000 CMS Energy Corp. 0 553,875 553,875
32,200 Consolidated Edison Co. of New York Inc. 756,800 660,000 1,416,800
20,000 Constellation Energy Group, Inc. 0 592,500 592,500
37,500 DPL Inc. 0 710,156 710,156
2
<PAGE>
COMBINED PRO FORMA
NUMBER OF BALANCED UTILITY COMBINED
SHARES FUND INCOME FUND BALANCED FUND
- ----------- ----------- -------------- -------------
20,000 DQE Inc. 0 773,750 773,750
25,300 Duke Energy Corp. 1,167,250 287,500 1,454,750
20,000 El Paso Energy Corp. 0 731,250 731,250
77,800 Energy East Corp.* 1,195,000 750,000 1,945,000
20,000 Illinova Corp. 0 637,500 637,500
25,000 New Century Energies, Inc. 0 903,125 903,125
24,000 Nisource Inc. 0 570,000 570,000
17,500 Nstar 0 755,781 755,781
10,000 PECO Energy Co. 0 406,250 406,250
30,000 Public Service Co. of New Mexico 0 564,375 564,375
20,000 Puget Sound Power & Light Co. 0 473,750 473,750
25,000 RGS Energy Group Inc. 0 646,875 646,875
25,000 SCANA Corp. 0 625,000 625,000
25,200 Sierra Pacific Resources New 0 614,250 614,250
20,000 Texas Utilities Co. 0 808,750 808,750
20,000 Unicom Corp. 0 772,500 772,500
34,400 Utilicorp United Inc. 797,650 0 797,650
----------- -------------- -----------
3,916,700 15,244,375 19,161,075
----------- -------------- -----------
Electrical Equipment - 0.09%
9,825 Global Crossing Ltd.* 0 254,222 254,222
----------- -------------- -----------
Entertainment - 0.12%
15,000 Fox Entertainment Group Inc.* 0 345,938 345,938
----------- -------------- -----------
Entertainment and Leisure - 0.01%
900 Time Warner Telecom Inc. 0 24,300 24,300
----------- -------------- -----------
Energy Reserves & Production - 1.60%
18,900 Mobil Corp. 1,934,888 0 1,934,888
40,900 Royal Dutch Petroleum Co. ADR 2,530,687 0 2,530,687
----------- -------------- -----------
4,465,575 0 4,465,575
----------- -------------- -----------
Financial Services - 0.47%
18,200 Marsh & McLennan Companies, Inc. 1,325,188 0 1,325,188
----------- -------------- -----------
Food Retail - 0.70%
83,900 Kroger Co.* 1,940,187 0 1,940,187
----------- -------------- -----------
Forest Products, Paper - 1.71%
13,400 Champion International Corp. 737,000 0 737,000
46,200 Fort James Corp. 1,489,950 0 1,489,950
37,200 Georgia-Pacific Corp. 1,539,150 0 1,539,150
17,800 Weyerhaeuser Co. 1,001,250 0 1,001,250
----------- -------------- -----------
4,767,350 0 4,767,350
----------- -------------- -----------
3
<PAGE>
COMBINED PRO FORMA
NUMBER OF BALANCED UTILITY COMBINED
SHARES FUND INCOME FUND BALANCED FUND
- ----------- ----------- -------------- -------------
Gas Utility - 0.55%
25,950 Columbia Gas Systems Inc. 942,047 590,625 1,532,672
----------- -------------- -----------
Household Products - 0.60%
37,900 Avon Products, Inc. 1,662,862 0 1,662,862
----------- -------------- -----------
Industrial Parts - 3.70%
13,100 American Standard Companies Inc.* 537,100 0 537,100
41,200 Ingersoll Rand Co. 2,621,350 0 2,621,350
68,300 Mettler Toledo International Inc.* 1,818,487 0 1,818,487
12,069 SPX Corp.* 1,022,848 0 1,022,848
65,600 United Technologies Corp. 4,337,800 0 4,337,800
----------- -------------- -----------
10,337,585 0 10,337,585
----------- -------------- -----------
Industrial Services & Supplies - 1.62%
14,167 Delphi Automotive Systems Corp. 265,631 0 265,631
41,900 Tyco International Ltd. 4,244,994 0 4,244,994
----------- -------------- -----------
4,510,625 0 4,510,625
----------- -------------- -----------
Information & Computer Services - 0.73%
9,100 Computer Sciences Corp.* 629,606 0 629,606
32,300 Valassis Communications Inc.* 1,413,125 0 1,413,125
----------- -------------- -----------
2,042,731 0 2,042,731
----------- -------------- -----------
Leisure - 0.94%
17,361 Eastman Kodak Co. 1,274,948 0 1,274,948
55,700 Hasbro, Inc. 1,361,169 0 1,361,169
----------- -------------- -----------
2,636,117 0 2,636,117
----------- -------------- -----------
Life Insurance - 1.23%
34,600 American General Corp. 2,456,600 0 2,456,600
32,600 Protective Life Corp. 969,850 0 969,850
----------- -------------- -----------
3,426,450 0 3,426,450
----------- -------------- -----------
4
<PAGE>
COMBINED PRO FORMA
NUMBER OF BALANCED UTILITY COMBINED
SHARES FUND INCOME FUND BALANCED FUND
- ----------- ----------- -------------- -------------
Long Distance & Phone Companies - 6.22%
10,000 Ameritech Corp. 0 631,250 631,250
28,100 AT&T Corp. 814,500 450,000 1,264,500
15,376 Bell Atlantic Corp. 0 941,780 941,780
62,000 BellSouth Corp. 1,810,000 995,500 2,805,500
22,500 Century Telephone Enterprises, Inc. 0 884,531 884,531
6,000 Global Telesystems Group Inc. 0 193,875 193,875
29,200 GTE Corp. 1,317,600 686,250 2,003,850
25,000 ITC Deltacom* 0 659,375 659,375
10,000 Level 3 Communications Inc. 0 597,500 597,500
53,400 MCI WorldCom, Inc.* 2,908,800 1,136,250 4,045,050
13,201 NTL Incorporated 0 1,296,173 1,296,173
27,000 Qwest Communications International Inc. 0 776,250 776,250
10,000 SBC Communications, Inc. 0 480,000 480,000
15,000 U.S. West, Inc. 0 783,750 783,750
----------- -------------- -----------
6,850,900 10,512,484 17,363,384
----------- -------------- -----------
Media - 0.98%
42,200 Comcast Corp., Class A 1,376,775 0 1,376,775
23,100 Infinity Broadcasting Corp. Class A* 625,144 0 625,144
10,000 Univision Communications Inc.* 0 737,500 737,500
----------- -------------- -----------
2,001,919 737,500 2,739,419
----------- -------------- -----------
Medical Products - 0.95%
31,038 Boston Scientific Corp.* 1,053,352 0 1,053,352
43,800 St. Jude Medical, Inc.* 1,587,750 0 1,587,750
----------- -------------- -----------
2,641,102 0 2,641,102
----------- -------------- -----------
Medical Providers - 0.53%
20,300 Wellpoint Health Networks, Inc. Class A* 1,479,363 0 1,479,363
----------- -------------- -----------
Medical-Wholesale Drug Distributors - 0.59%
63,800 Amerisource Health Corp. Class A* 1,646,837 0 1,646,837
----------- -------------- -----------
Mining & Metals - 0.84%
17,800 Alcoa, Inc. 1,149,213 0 1,149,213
26,500 Martin Marietta Materials Inc. 1,209,062 0 1,209,062
----------- -------------- -----------
2,358,275 0 2,358,275
----------- -------------- -----------
Motor Vehicles - 1.46%
14,000 Borg Warner Automotive, Inc. 663,250 0 663,250
39,600 Ford Motor Co. 2,064,150 0 2,064,150
20,300 General Motors Corp. 1,342,337 0 1,342,337
----------- -------------- -----------
4,069,737 0 4,069,737
----------- -------------- -----------
5
<PAGE>
COMBINED PRO FORMA
NUMBER OF BALANCED UTILITY COMBINED
SHARES FUND INCOME FUND BALANCED FUND
- ----------- ----------- -------------- -------------
Oil Refining - 1.97%
18,400 Atlantic Richfield Co. 1,618,050 0 1,618,050
63,100 Coastal Corp. 1,996,706 736,313 2,733,019
36,800 USX-Marathon Group 1,145,400 0 1,145,400
----------- -------------- -----------
4,760,156 736,313 5,496,469
----------- -------------- -----------
Other Insurance - 1.76%
42,500 ACE Ltd. 911,094 0 911,094
30,500 Ambac Financial Group Inc. 1,610,781 0 1,610,781
17,262 American International Group, Inc. 1,599,972 0 1,599,972
22,200 Travelers Property Casualty Corp. 788,100 0 788,100
----------- -------------- -----------
4,909,947 0 4,909,947
----------- -------------- -----------
Publishing - 0.82%
42,400 Knight Ridder, Inc. 2,286,950 0 2,286,950
----------- -------------- -----------
Real Property - 0.23%
18,000 Sun Communities 0 643,500 643,500
----------- -------------- -----------
Restaurants - 0.29%
33,300 Brinker International Inc.* 799,200 0 799,200
----------- -------------- -----------
Securities & Asset Management - 1.12%
17,700 AXA Financial Inc. 1,092,975 0 1,092,975
23,600 Morgan Stanley Dean Witter & Co. 2,025,175 0 2,025,175
----------- -------------- -----------
3,118,150 0 3,118,150
----------- -------------- -----------
Semiconductor - 2.95%
51,400 Applied Materials, Inc.* 3,652,612 0 3,652,612
22,200 Atmel Corp.* 872,738 0 872,738
23,600 Intel Corp. 1,939,625 0 1,939,625
26,100 Vitesse Semiconductor Corp.* 1,774,800 0 1,774,800
----------- -------------- -----------
8,239,775 0 8,239,775
----------- -------------- -----------
6
<PAGE>
COMBINED PRO FORMA
NUMBER OF BALANCED UTILITY COMBINED
SHARES FUND INCOME FUND BALANCED FUND
- ----------- ----------- -------------- -------------
Specialty Retail - 1.74%
100,800 Office Depot Inc.* 1,052,100 0 1,052,100
36,950 Staples Inc.* 803,662 0 803,662
64,700 Williams Sonoma Inc.* 2,523,300 0 2,523,300
13,479 Zale Corp.* 467,553 0 467,553
----------- -------------- -----------
4,846,615 0 4,846,615
----------- -------------- -----------
Thrift - 0.29%
31,200 Greenpoint Financial Corp. 807,300 0 807,300
----------- -------------- -----------
Tobacco - 0.24%
18,000 Philip Morris Companies, Inc. 673,875 0 673,875
----------- -------------- -----------
Water - 0.30%
30,000 American Water Works Co. Inc. 0 $ 873,750 873,750
----------- -------------- -----------
Wireless Telecommunications - 0.27%
19,200 Century Telephone Enterprises, Inc. 754,800 0 754,800
----------- -------------- -----------
Total Common Stocks (cost - $122,038,182, $21,504,302 145,562,934 30,547,674 176,110,608
and $143,542,484, respectively)
----------- -------------- -----------
PREFERRED STOCKS - 0.20%
Electric Utilities - 0.20%
14,000 CMS Energy Corp. (cost - $0, $581,000, $581,000, 0 565,250 565,250
respectively)
----------- -------------- -----------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Combined
Principal Pro Forma
Amount Maturity Interest Balanced Utility Combined
(000) Dates Rates Fund Income Fund Balanced Fund
- ----------- -------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 13.54%
Banks - 0.82%
$ 670 Bank One Corp. 08/01/06 6.875% 656,894 0 656,894
1,700 Providian National Bank Concord 02/01/04 6.650 1,637,744 0 1,637,744
----------- -------------- -----------
2,294,638 0 2,294,638
----------- -------------- -----------
Beverages & Entertainment - 0.47%
1,370 Seagram Joseph E & Sons Inc. 12/15/05 6.625 1,125,847 181,281 1,307,128
----------- -------------- -----------
Cable - 0.51%
1,350 TCI Communications Inc. 05/01/03 to 03/31/27 6.375 to 9.650 786,658 624,267 1,410,925
----------- -------------- -----------
Electric Utilities - 0.17%
500 TXU Electric Capital V 01/30/37 8.175 0 487,772 487,772
----------- -------------- -----------
Entertainment - 0.07%
200 Time Warner Inc. 01/15/08 7.480 0 199,988 199,988
----------- -------------- -----------
Financial Services - 2.68%
1,915 Associates Corp. NA 11/01/08 6.250 1,777,137 0 1,777,137
1,500 AT&T Capital Corp. 01/16/01 6.875 1,500,542 0 1,500,542
2,600 Ford Motor Credit Co. 01/14/03 to 01/12/09 5.800 to 6.000 2,435,729 0 2,435,729
1,850 Heller Financial Inc. 03/19/04 6.000 1,756,834 0 1,756,834
----------- -------------- -----------
7,470,242 0 7,470,242
----------- -------------- -----------
Industrial Services & Supplies - 0.34%
965 Tyco International Group SA 06/15/01 6.125 956,016 0 956,016
----------- -------------- -----------
Insurance - 1.68%
2,000 American Re Corp. 12/15/26 7.450 1,945,424 0 1,945,424
700 Hartford Financial Services Group Inc. 11/01/08 6.375 664,052 0 664,052
800 Loews Corp. 12/15/06 6.750 756,958 0 756,958
1,350 Lumbermen's Mutual Casualty Co. 07/01/26 9.150 1,324,723 0 1,324,723
----------- -------------- -----------
4,691,157 0 4,691,157
----------- -------------- -----------
Media - 0.42%
1,230 News America Holdings Inc. 12/01/95 to 10/17/96 7.900 to 8.250 592,951 572,163 1,165,114
----------- -------------- -----------
Securities & Asset Management - 2.71%
2,305 Donaldson Lufkin & Jenrette 04/01/02 5.875 2,247,121 0 2,247,121
1,315 FMR Corp. 06/15/29 7.570 1,260,407 0 1,260,407
1,350 Lehman Brothers Holdings Inc. 04/01/04 6.625 1,304,528 0 1,304,528
1,200 Merrill Lynch & Company Inc. 02/17/09 6.000 1,081,886 0 1,081,886
1,775 Morgan Stanley Group Inc. 01/20/04 5.625 1,679,145 0 1,679,145
----------- -------------- -----------
7,573,087 0 7,573,087
----------- -------------- -----------
Telecommunications - 0.77%
2,345 US West Capital Funding Inc. 07/15/08 6.375 2,149,980 0 2,149,980
----------- -------------- -----------
Tobacco - 1.03%
1,850 Philip Morris Companies Inc. 07/01/08 to 01/15/27 7.650 to 7.750 1,849,916 0 $ 1,849,916
1,035 RJ Reynolds Tobacco Holdings Inc. 05/15/03 7.375 1,010,550 0 1,010,550
----------- -------------- -----------
2,860,466 0 2,860,466
----------- -------------- -----------
Yankee - 1.87%
995 Canadian Imperial Bank of Commerce 08/01/00 6.200 994,584 0 994,584
8
<PAGE>
Combined
Principal Pro Forma
Amount Maturity Interest Balanced Utility Combined
(000) Dates Rates Fund Income Fund Balanced Fund
- ----------- -------------- ------------- ------------- ------------- -------------
2,000 Household International Netherlands BV 12/01/03 6.200 1,941,846 0 1,941,846
1,400 Imperial Tobacco Overseas B V 04/01/09 7.125 1,310,154 0 1,310,154
1,000 Sony Corp. 03/04/03 6.125 982,417 0 982,417
----------- -------------- -----------
5,229,001 0 5,229,001
----------- -------------- -----------
Total Corporate Bonds (cost - $37,593,179, 35,730,043 2,065,471 37,795,514
$2,071,925 and $39,665,104, respectively)
----------- -------------- -----------
CONVERTIBLE BONDS - 0.48%
Specialty Retail - 0.48%
500 Home Depot Inc. (cost - $500,000, $0 and 10/01/01 3.250 1,341,250 0 1,341,250
$500,000, respectively)
----------- -------------- -----------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 8.83%
45 Federal Home Loan Mortgage Corporation 03/18/08 6.220 42,687 0 42,687
4,230 Federal National Mortgage Association 01/15/09 5.250 3,765,808 0 3,765,808
2,570 International Bank For Reconstruction & 03/17/03 5.625 2,501,769 0 2,501,769
Development
5,769 U.S. Treasury Bonds(1) 08/15/13 to 02/15/29 5.250 to 12.000 6,676,546 0 6,676,546
11,962 U.S. Treasury Notes(1) 07/15/02 to 05/15/09 3.625 to 5.500 11,673,794 0 11,673,794
----------- -------------- -----------
Total U.S. Government and Agency Obligations (cost 24,660,604 0 24,660,604
$25,694,724, $0 and $25,694,724, respectively)
----------- -------------- -----------
MORTGAGE BACKED SECURITIES - 8.78%
Collateralized Mortgage Obligations - 1.37%
551 Amresco Commercial Mortgage Funding I Corp., 06/17/29 6.730 544,176 0 544,176
Series 1997-C1, Class A1
249 CS First Boston Mortgage Securities Corp., 06/01/20 7.500 248,459 0 248,459
Series 1997-2, Class A+
53 FDIC REMIC, Series 1994-C1, Class 2A2 09/25/25 7.850 52,636 0 52,636
238 FDIC REMIC, Series 1996-C1, Class 1A 05/25/26 6.750 235,864 0 235,864
250 FNMA REMIC, Series 1996-M6, Class E 09/17/19 7.750 252,720 0 252,720
478 GMAC Commercial Mortgage Security, Series 09/15/03 6.790 477,927 0 477,927
1996-C1, Class A2A
1,400 LB Commercial Conduit Mortgage Trust, 10/15/08 6.210 1,298,808 0 1,298,808
Series 1998-C4, Class A1B
174 Morgan Stanley Capital I Inc., 02/15/20 6.850 173,352 0 173,352
Series 1997-C1, Class A1A
554 Morgan Stanley Capital I Inc., 10/15/06 6.830 550,960 0 550,960
Series 1997-WF1, Cl;ass A1+
----------- -------------- -----------
3,834,902 0 3,834,902
----------- -------------- -----------
Federal Home Loan Mortgage Corporation - 0.60%
1,780 FHLMC 30 Yr TBA TBA 6.500 1,685,438 0 1,685,438
----------- -------------- -----------
Federal National Mortgage Association - 5.98%
557 FNMA 09/01/28 6.500 527,747 0 527,747
835 FNMA 01/01/26 to 02/01/26 7.500 831,782 0 831,782
12,780 FNMA 30 Yr TBA TBA 6.000 11,745,612 0 11,745,612
2,720 FNMA 15 Yr TBA TBA 6.500 2,641,800 0 2,641,800
995 FNMA 30 Yr TBA TBA 6.500 941,519 0 941,519
----------- -------------- -----------
16,688,460 0 16,688,460
----------- -------------- -----------
9
<PAGE>
Combined
Principal Pro Forma
Amount Maturity Interest Balanced Utility Combined
(000) Dates Rates Fund Income Fund Balanced Fund
- ----------- -------------- ------------- ------------- ------------- -------------
Government National Mortgage Association - 0.83%
2,223 GNMA 11/15/17 8.500 2,307,422 0 2,307,422
----------- -------------- -----------
Total Mortgage Backed Securities (cost - 24,516,222 0 24,516,222
$24,621,094, $0 and $24,621,094, respectively)
----------- -------------- -----------
SHORT TERM U.S. GOVERNMENT AGENCY OBLIGATIONS - 11.44%
10,000 Federal Home Loan Bank Consolidated Discount 09/15/99 5.080 9,980,244 0 9,980,244
Notes
16,000 Federal Home Loan Mortgage Discount Notes 09/16/99 4.950 15,967,000 0 15,967,000
5,000 Federal National Mortgage Association Discount 09/27/99 5.090 4,981,619 0 4,981,619
Notes
1,000 Student Loan Marketing Association Discount 09/02/99 4.980 999,862 0 999,862
Notes ----------- -------------- -----------
Total Short Term U.S. Government Agency
Obligations (cost - $31,928,725, $0 and 31,928,725 0 31,928,725
$31,928,725, respectively) ----------- -------------- -----------
REPURCHASE AGREEMENT - 0.11%
280 Repurchase Agreement dated 08/31/99 with State
Street Bank & Trust Company, collateralized
by $258,872 U.S. Treasury Notes, 7.875%
due 11/15/04 (value - $285,730); proceeds: 09/01/99 4.250% 0 280,000 280,000
$280,033 (cost - $280,000)
----------- -------------- -----------
Total Investments (cost - $242,375,904, $ 263,739,778 33,458,395 297,198,173
$24,437,227 and $266,813,131 respectively)
- 106.47%
Liabilities in excess of other assets - (6.47%) -17,924,013 -139,082 -18,063,095
----------- -------------- -----------
Net Assets - 100.00% $ 245,815,765 $ 33,319,313 $279,135,078
=========== ============== ===========
</TABLE>
- -----------
* Non-Income producing security.
+ 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.
ADR American Depositary Receipt.
TBA (To Be Assigned) Securities are purchased on a forward commitment basis
with an approximated principal amount (generally +/- 1.0%) and generally
stated maturity date. The actual principal amount and maturity date will
be determined upon settlement when the specific mortgage pools are
assigned.
REMIC Real Estate Mortgage Investment Conduit.
(1) Security, or portion thereof, was on loan at August 31, 1999.
See accompanying notes to pro forma financial statements.
10
<PAGE>
Notes To Pro Forma Financial Statements (unaudited)
Basis of Presentation:
Subject to the approval of the Agreement and Plan of Reorganization and
Termination ("Plan") by the shareholders of PaineWebber Utility Income Fund
("Utility Income Fund"), PaineWebber Balanced Fund ("Balanced Fund") would
acquire the assets of Utility Income Fund in exchange solely for the assumption
by Balanced Fund of Utility Income Fund's assets and liabilities and shares of
Balanced Fund that correspond to the outstanding shares of Utility Income Fund
("Reorganization"). The number of shares to be received would be based on the
relative net asset value of Balanced Fund's shares on the effective date of the
Reorganization and Utility Income Fund will be terminated as soon as practicable
thereafter.
The pro forma financial statements reflect the financial position of Balanced
Fund and Utility Income Fund at August 31, 1999 and the combined results of
operations of Balanced Fund and Utility Income Fund for the year ended August
31, 1999.
As a result of the Reorganization, the investment advisory and administration
agreement fee will increase due to the higher fee schedule of Balanced Fund. As
open-end funds, Balanced Fund and Utility Income Fund currently both pay Rule
12b-1 distribution or service fees. Other fixed expenses will be reduced due to
the elimination of duplicative expenses. In addition, the pro forma statement of
assets and liabilities has not been adjusted as a result of the proposed
transaction because such adjustment would not be material. It is estimated that
the cost of approximately $195,000 associated with the merger will be charged to
Balanced Fund and Utility Income Fund so that each fund bears its own expenses
of the reorganization. These costs are not included in the pro forma statement
of operations since they are not recurring.
The pro forma financial statements are presented for the information of the
reader and may not necessarily be representative of what the actual combined
financial statements would have been had the Reorganization occurred August 31,
1999. The pro forma financial statements should be read in conjunction with the
historical financial statements of the Balanced Fund and Utility Income Fund
included in or incorporated by reference in the applicable statement of
additional information.
Significant Accounting Policies:
The financial statements of Balanced Fund and Utility Income Fund are prepared
in accordance with generally accepted accounting principles that require the use
of management accruals and estimates. These unaudited financial statements
reflect all adjustments, which are, in the opinion of management, necessary to a
fair statement of the results for the interim period presented. The following is
a summary of significant accounting policies followed by Balanced Fund and
Utility Income Fund.
VALUATION OF INVESTMENTS-Securities and other assets are valued based upon
market quotations when those quotations are readily available unless, in the
judgment of Mitchell Hutchins Asset Management, Inc. ("Mitchell Hutchins"), the
investment adviser, administrator and distributor of Balanced Fund and Utility
Income Fund, those quotations do not adequately reflect the fair value of the
security. Securities that are listed on exchanges normally are valued at the
last sale price on the day the securities are valued or, lacking any sales on
such day, at the last available bid price. In cases where securities are traded
on more than one exchange, the securities are valued on the exchange designated
by Mitchell Hutchins as the primary market. Securities traded in the
over-the-counter ("OTC") market and listed on the Nasdaq Stock Market, Inc.
("Nasdaq") normally are valued at the last available sale price on Nasdaq prior
to valuation; other over-the-counter securities are valued at the last bid price
available prior to valuation (other than short-term investments that mature in
60 days or less, which are valued as described further below). Securities and
assets for which market quotations are not readily available may be valued based
upon appraisals received from a pricing service using a computerized matrix
system or based upon appraisals derived from information concerning the security
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 Board of Directors/Trustees. It should be recognized
that judgment often plays a greater role in valuing thinly traded securities,
<PAGE>
including many lower rated bands, than is the case with respect to securities
for which a broader range of dealer quotations and last-sale information is
available. The amortized cost method of valuation generally is used to value
debt obligations with 60 days or less remaining until maturity, unless the
applicable board determines that this does not represent fair value.
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