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001 C000000 2127131074
002 A000000 1285 AVENUE OF THE AMERICAS
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<PAGE> PAGE 2
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<PAGE> PAGE 3
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<PAGE> PAGE 4
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<PAGE> PAGE 7
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SIGNATURE PAUL SCHUBERT
TITLE TREASURER
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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</TABLE>
For period ending March 31, 1998
File number 811-4587
77. A. Is the Registrant filing any of the following attachments with the
current filing of Form
N-SAR? (ANSWER FOR ALL SERIES AS A GROUP) _Y_
Y/N
NOTE: If answer is Y (Yes), mark those items below being filed as an
attachment to this form or incorporated by
reference. __
Y/N
B. Accountant s report on internal control ___
C. Matters submitted to a vote of security holders _N_
D. Policies with respect to security investments _N_
E. Legal proceedings _N_
F. Changes in security for debt _N_
G. Defaults and arrears on senior securities _N_
H. Changes in control of Registrant _N_
I. Terms of new or amended securities _N_
J. Revaluation of assets or restatement of capital share account _N_
K. Changes in Registrant s certifying accountant _N_
L. Changes in accounting principles and practices _n__
M. Mergers _N_
N. Actions required to be reported pursuant to Rule 2a-7 _N_
O. Transactions effected pursuant to Rule 10f-3 _Y_
P. Information required to be filed pursuant to existing exemptive
orders _N_
Attachment Information (Cont. On Screen 39)
For period ending March 31, 1998
File number 811-4587
Attachment Information (Cont. from Screen 38)
77. Q. 1. Exhibits _N_
Y/N
2. Any information called for by instructions to sub-item 77Q2
_N_
Y/N
3. Any information called for by instructions to sub-item 77Q3
_N_
Y/N
SCREEN NUMBER: 39
__ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __
__ __ __ __ __ __ __ __ __ __ __ __ __ __
79. List the 811 numbers and names of Registrant s
wholly-owned investment company subsidiaries consolidated in this
report.
811 Number Subsidiary Name
For period ending March 31, 1998
File number 811-4587
ANNUAL SUPPLEMENT
Page 53 is to be filed only once each year at the end of Registrant s fiscal
year.
105. Fidelity bond(s) in effect at the end of the period:
A. Insurer Name: ICI Mutual Insurance Co.
B. Second Insurer:
C. Aggregate face amount of coverage for Registrant on all bonds on
which
it is named as an insured ($000 s omitted) $45,000
106. A. Is the bond part of a joint fidelity bond(s) shared with other
investment companies
or other entities? Y
Y/N
B. If the answer to 106A is Y (Yes), how many other investment
companies or other
entities are covered by the bond? 67
NOTE: Count each series as a separate investment company.
107. A. Does the mandatory coverage of the fidelity bond have a
deductible? N
Y/N
B. If the answer to 107A is Y (Yes), what is the amount of the
deductible? $______
108. A. Were any claims with respect to this Registrant filed under the
bond during
the period? N
Y/N
B. If the answer to 108A is Y (Yes), what was the total amount of
such claim(s)? $______
109. A. Were any losses incurred with respect to this Registrant that
could have been filed
as a claim under the fidelity bond but were not? N
Y/N
B. If the answer to sub-item 109A is Y (Yes), what was the total
amount of such
losses? ($000 s omitted)
$______
110. A. Are Registrant s officers and directors covered as officers and
directors of
Registrant under any errors and omissions insurance policy owned
by the Registrant
or anyone else? Y
Y/N
B. Were any claims filed under such policy during the period with
respect to
Registrant? N
Y/NFORM
10f-3
FUND:
PaineWebber Financial Services Growth Fund,
Inc.
Record of Securities Purchased Under the Fund's Rule 10f-3
Procedures
1. Issuer: Boston Properties
2. Date of Purchase: 6/17/97
3. Date offering commenced: 6/18/97
4. Underwriters from whom purchased: Merrill Lynch
5. "Affiliated Underwriter" managing or participating in
syndicate:
PaineWebber
6. Aggregate principal amount of purchase: 305,000
7. Aggregate principal amount of offering: 785,000,000
8. Purchase price (net of fees and expenses): $25
9. Initial public offering price: $25
10. Commission, spread or profit: % $.95
11. Have the following conditions been satisfied?
YES
NO
a. The securities are part of an issue registered under the Securities Act
of 1933 which is being offered to the public or are "municipal securities"
as defined in Section 3(a)(29) of the Securities Exchange Act of 1934.
___X___
_______
b. The securities were purchased prior to the end of the end first full
business day of the offering at not more than the initial offering price
(or, if a rights offering, , the securities were purchased on or before
the fourth day preceding the day on which the offering terminated).
___X___ _______
c. The underwriting was a firm commitment underwriting.
___X___
_______
d. The commission, spread or profit was reasonable and fair in relation to
that being received by others for underwriting similar securities during
the same period.
_X___
_______
e. (1) If securities are registered under the Securities Act of 1933, the
issuer of the securities and its predecessor have been in continuous operation
for not less than three years.
___X___
(2) If securities are municipal securities, the issue of securities has
received an investment grade rating from a nationally recognized
statistical rating organization or, if the issuer or entity supplying the
revenues from which the issue is to be paid shall have been in continuous
operation for less than three years (including any predecessor),
the issue has received one of the three highest ratings from at least one
such rating organization.
__
_______
f. The amount of such securities purchased by all of the investment
companies advised by Mitchell Hutchins did not exceed 4% of the principal
amount of the offering or $500,000 in principal amount, whichever is greater,
provided that in no event did such amount exceed 10% of the principal amount
of the offering.
___X___
_______
The purchase price was less than 3% of the Fund's total assets.
___X___
_______
h. No Affiliated Underwriter was a direct or indirect participant in or
beneficiary of the sale or, with respect to municipal securities, no
purchases were designated as group sales or otherwise allocated to the
account of any Affiliated Underwriter.
X___
_____
Approved: Date: 6/19/97
FORM 10f-3 FUND: PaineWebber Financial Services Growth Fund, Inc.
Record of Securities Purchased Under the Fund's Rule 10f-3 Procedures
1. Issuer: Arm Financial
2. Date of Purchase: 6-18-97
3. Date offering commenced: 6-18-97
4. Underwriters from whom purchased: Morgan Stanley
5. "Affiliated Underwriter" managing or participating in syndicate:
PWJ
6. Aggregate principal amount of purchase: 142,500
7. Aggregate principal amount of offering: 120,000,000
8. Purchase price (net of fees and expenses): 15
9. Initial public offering price: 15
10. Commission, spread or profit: % $.63
11. Have the following conditions been satisfied?
YES
NO
a. The securities are part of an issue registered under the Securities Act
of 1933 which is being offered to the public or are "municipal securities"
as defined in Section 3(a)(29) of the Securities Exchange Act of 1934.
___X___
_______
b. The securities were purchased prior to the end of the end first full
business day of the offering at not more than the initial offering
price (or, if a rights offering, , the securities were purchased on
or before the fourth day preceding the day on which the offering
terminated).
___X___
______
c. The underwriting was a firm commitment underwriting.
___X___
_______
d. The commission, spread or profit was reasonable and fair in relation to
that being received by others for underwriting similar securities during
the same period.___X___ _______
e. (1) If securities are registered under the Securities Act of 1933,
the issuer of the securities and its predecessor have been in continuous
operation for not less than three years. ___X___ _______
(2) If securities are municipal securities, the issue of securities
has received an investment grade rating from a nationally recognized
statistical rating or ganization or, if the issuer or entity supplying
the revenues from which the issue is to be paid shall have been in
continuous operation for less than three years (including any predecessor),
the issue has received one of the three highest ratings from at least
ne such rating organization. _______ _______
f. The amount of such securities purchased by all of the investment
companies advised by Mitchell Hutchins did not exceed 4% of the principal
amount of the offering or $500,000 in principal amount, whichever is greater,
provided that in no event did such amount exceed 10% of the principal amount
of the offering. ___X___ _______
g. The purchase price was less than 3% of the Fund's total assets.
___X___ _______
h. No Affiliated Underwriter was a direct or indirect participant in or
beneficiary of the sale or, with respect to municipal securities, no
purchases were designated as group sales or otherwise allocated to the
account of any Affiliated Underwriter. ___X___ _______ Approved: Date:
5/19/97 FORM 10f-3 FUND: PaineWebber Financial Services Growth Fund, Inc.
Record of Securities Purchased Under the Fund's Rule 10f-3 Procedures
. Issuer: Equity Office 2. Date of Purchase: 7/7/97
3. Date offering commenced: 7/7/97
4. Underwriters from whom purchased: Merrill Lynch
5. "Affiliated Underwriter" managing or participating in syndicate:
PaineWebber
. Aggregate principal amount of purchase: 283,500
7. Aggregate principal amount of offering: 525,000,000
8. Purchase price (net of fees and expenses): $21
9. Initial public offering price: $21
10. Commission, spread or profit: % $.82
11. Have the following conditions been satisfied? YES
nO
a. The securities are part of an issue registered under the Securities
Act of 1933 which is being offered to the public or are "municipal
securities" as defined in Section 3(a)(29) of the Securities Exchange Act
of 1934. ___X___ _______
b. The securities were purchased prior to the end of the end first full
business day of the offering at not more than the initial offering price
(or, if a rights offering, , the securities were purchased on or before
the fourth day preceding the day on which the offering terminated).
___X___ _______
c. The underwriting was a firm commitment underwriting. ___X___ _______
d. The commission, spread or profit was reasonable and fair in relation
to that being received by others for underwriting similar securities during
the same period. ___X___ _______
e. (1) If securities are registered under the Securities Act of 1933,
the issuer of the securities and its predecessor have been in continuous
operation for not less than three years. ___X___ _______
(2) If securities are municipal securities, the issue of securities has
received an investment grade rating from a nationally recognized
statistical rati n g organization or, if the issuer or entity supplying the
revenues from which the issue is to be paid shall have been in continuous
operation for less than three years (including any predecessor), the issue
has received one of the three highest ratings from at least one such rating
organization. _______ _______
f. The amount of such securities purchased by all of the investment
companies advised by Mitchell Hutchins did not exceed 4% of the principal
amount of the offering or $500,000 in principal amount, whichever is greater,
provided that in no event did such amount exceed 10% of the principal amount
of the offering. ___X___ ______
g. The purchase price was less than 3% of the Fund's total assets. ___X___
_______
h. No Affiliated Underwriter was a direct or indirect participant in or
beneficiary of the sale or, with respect to municipal securities,
no purchases were designated as group sales or otherwise allocated to the
account of any Affiliated Underwriter. __X____ _______
Approved: Date: 7/8/97
FORM 10f-3 FUND: PaineWebber Financial Services Growth Fund, Inc.
Record of Securities Purchased Under the Fund's Rule 10f-3 Procedures
1. Issuer: Arden Realty
2. Date of Purchase: 7/17/97
3. Date offering commenced: 7/17/97
4. Underwriters from whom purchased: Lehman Brothers
5. "Affiliated Underwriter" managing or participating in syndicate:
PaineWebber
6. Aggregate principal amount of purchase: $653,125
7. Aggregate principal amount of offering: $313,500,000
8. Purchase price (net of fees and expenses): $26.125
9. Initial public offering price: $26.125
10. Commission, spread or profit: % $.78
11. Have the following conditions been satisfied? YES NO
a. The securities are part of an issue registered under the Securities
Act of 1933 which is being offered to the public or are "municipal
securities" as defined in Section 3(a)(29) of the Securities Exchange Act
of 1934. ___X___ _______
b. The securities were purchased prior to the end of the end first full
business day of the offering at not more than the initial offering
price (or, if a rights offering, , the securities were purchased on
or before the fourth day preceding the day on which the offering
terminated). __X___ _______
c. The underwriting was a firm commitment underwriting. ___X___ _______
d. The commission, spread or profit was reasonable and fair in relation to
that being received by others for underwriting similar securities during
the same period. ___X___ _______
e. (1) If securities are registered under the Securities Act of 1933,
the issuer of the securities and its predecessor have been in continuous
operation for not less than three years. ___X___ _______
(2) If securities are municipal securities, the issue of securities
has received an investment grade rating from a nationally recognized
statistical rating organization or, if the issuer or entity supplying
the revenues from which the issue is to be paid shall have been in
continuous operation for less than three years (including any predecessor),
the issue has received one of the three highest ratings from at least one
such rating organization. _______ _______
f. The amount of such securities purchased by all of the investment
companies advised by Mitchell Hutchins did not exceed 4% of the principal
amount of the offering or $500,000 in principal amount, whichever is
greater, provided that in no event did such amount exceed 10% of the
principal amount of the offering. ___X___ _______
g. The purchase price was less than 3% of the Fund's total assets.
___X___ ______
h. No Affiliated Underwriter was a direct or indirect participant in or
beneficiary of the sale or, with respect to municipal securities, no
purchases were designated as group sales or otherwise allocated to the
account of any Affiliated Underwriter. ___X____ _______ Approved:
Date: 7/29/97 FORM 10f-3 FUND: PaineWebber Financial Services Growth
Fund, Inc. Record of Securities Purchased Under the Fund's Rule 10f-3
Procedures
1. Issuer: Liberty Financial 2. Date of Purchase: 7/17/97 3. Date
offering commenced: 7/17/97 4. Underwriters from whom purchased: Merrill
Lynch 5. "Affiliated Underwriter" managing or participating in syndicate:
PaineWebber 6. Aggregate principal amount of purchase: $2,782,500
7. Aggregate principal amount of offering: $131,250,000
8. Purchase price (net of fees and expenses): $52.50
9. Initial public offering price: $52.50
10. Commission, spread or profit: % $1.5
11. Have the following conditions been satisfied? YES NO
a. The securities are part of an issue registered under the Securities
Act of 1933 which is being offered to the public or are
"municipal securities" as defined in Section 3(a)(29) of the Securities
Exchange Act of 1934. ___X___ _______
b. The securities were purchased prior to the end of the end first full
business day of the offering at not more than the initial offering price
(or, if a rights offering, , the securities were purchased on or before
the fourth day preceding the day on which the offering terminated).
___X___ ______ c. The underwriting was a firm commitment underwriting.
___X___ _______
d. The commission, spread or profit was reasonable and fair in relation
to that being received by others for underwriting similar securities during
the same period. ___X___ _______
e. (1) If securities are registered under the Securities Act of 1933,
the issuer of the securities and its predecessor have been in continuous
operation for not less than three years. ___X___ _______
(2) If securities are municipal securities, the issue of securities has
received an investment grade rating from a nationally recognized
statistical rating organization or, if the issuer or entity supplying
the revenues from which the issue is to be paid shall have been in
continuous operation for less than three years (including any predecessor),
the issue has received one of the three highest ratings from at least one
such rating organization. _______ _______
f. The amount of such securities purchased by all of the investment
companies advised by Mitchell Hutchins did not exceed 4% of the principal
amount of the offering or $500,000 in principal amount, whichever is
greater, provided that in no event did such amount exceed 10% of the
principal amount of the offering. ___X___ _______
g. The purchase price was less than 3% of the Fund's total assets.
___X___ ______
h. No Affiliated Underwriter was a direct or indirect participant in or
beneficiary of the sale or, with respect to municipal securities, no
purchases were designated as group sales or otherwise allocated to the
account of any Affiliated Underwriter. ___X____ _______ Approved: Date:
7/29/97 FORM 10f-3 FUND: PaineWebber Financial Services Growth Fund,
Inc. Record of Securities Purchased Under the Fund's Rule 10f-3 Procedures
1. Issuer: S.L. Green Realty
2. Date of Purchase: 8/15/97
3. Date offering commenced: 8/15/97
4. Underwriters from whom purchased: Lehman Bros.
5. "Affiliated Underwriter" managing or participating in syndicate: PWJ
6. Aggregate principal amount of purchase: 525,000
7. Aggregate principal amount of offering: 212,100,000
8. Purchase price (net of fees and expenses): 21
9. Initial public offering price: 21
10. Commission, spread or profit: % $.79
11. Have the following conditions been satisfied? ?YES NO
a. The securities are part of an issue registered under the Securities
Act of 1933 which is being offered to the public or are "municipal
securities" as defined in Section 3(a)(29) of the Securities Exchange Act
of 1934. ___X___ _______
b. The securities were purchased prior to the end of the end first full
business day of the offering at not more than the initial offering
price (or, if a rights offering, , the securities were purchased on or
before the fourth day preceding the day on which the offering terminated).
___X___ _______
c. The underwriting was a firm commitment underwriting. __X___ _______
d. The commission, spread or profit was reasonable and fair in relation
to that being received by others for underwriting similar securities during
the same period. ___X___ _______
e. (1) If securities are registered under the Securities Act of 1933,
the issuer of the securities and its predecessor have been in continuous
operation for not less than three years. ___X___ _______
(2) If securities are municipal securities, the issue of securities has
received an investment grade rating from a nationally recognized
statistical rating organization or, if the issuer or entity supplying
the revenues from which the issue is to be paid shall have been in
continuous operation for less than three years (including any predecessor),
the issue has received one of the three highest ratings from at least one
such rating organization. _______ _______
f. The amount of such securities purchased by all of the investment
companies advised by Mitchell Hutchins did not exceed 4% of the principal
amount of the offering or $500,000 in principal amount, whichever is
greater, provided that in no event did such amount exceed 10% of the
principal amount of the offering. ___X___ _______
g. The purchase price was less than 3% of the Fund's total assets. ___X___
_______
h. No Affiliated Underwriter was a direct or indirect participant in or
beneficiary of the sale or, with respect to municipal securities, no
purchases were designated as group sales or otherwise allocated to the
account of any Affiliated Underwriter. ___X____ _______ Approved:Date:8/15/97
FORM 10f-3 Registered Domestic Securities FUND:PaineWebber Financial Services
Growth Fund Record of Securities Purchased Under the Fund's Rule 10f-3
Procedures
1. Issuer: Vornado Realty
2. Date of Purchase: 10/21/97
3. Date offering commenced: 10/21/97
4. Underwriters from whom purchased: Merrill Lynch
5. "Affiliated Underwriter" managing or participating in syndicate:
PaineWebber
6. Aggregate principal amount of purchase: $1,935,000
7. Aggregate principal amount of offering: $450,000,000
8. Purchase price (net of fees and expenses): $45
9. Initial public offering price: $45
10. Commission, spread or profit: % 1.20
11. Have the following conditions been satisfied? YES NO
a. The securities are part of an issue registered under the Securities Act
of 1933 which is being offered to the public. ___X___ _______
b. The securities were purchased prior to the end of the end first full
business day of the offering at not more than the initial offering price
(or, if a rights offering, the securities were purchased on or before
the fourth day preceding the day on which the offering terminated).
___X___ _______
c. The securities were purchased at a price not more than the price paid
by each other purchaser in the offering. ___X___ _______
d. The underwriting was a firm commitment underwriting,___X___ _______
e. The commission, spread or profit was reasonable and fair in relation
to that being received by others for underwriting similar securities during
the same period. ___X___ ________
f. The issuer of the securities and any predecessor have been in
continuous operation for not less than three years . ___X___ _______
g. The amount of such securities purchased by all of the investment
companies advised by Mitchell Hutchins (of the Fund s Sub-Adviser, if
applicable) did not exceed 25% of the principal amount of the offering.
___X___ ________
h. No Affiliated Underwriter was a direct or indirect participant in or
beneficiary of the sale. ___X____ _______ Note: Refer to the Rule 10f-3
Procedures for the definitions of the capitalized terms above. In particular,
Affiliated Underwriter is defined as Paine Webber Group Inc. and any of
its affiliates, including PaineWebber Incorporated. In the case of a Fund
advised by a Sub-Adviser, Affiliated Underwriter shall also include any
brokerage affiliate of the Sub-Adviser. Approved: Date: 11/4/97 FORM 10f-3
FUND: PaineWebber Financial Services Growth Fund, Inc. Record of Securities
Purchased Under the Fund's Rule 10f-3 Procedures
1. Issuer: Southwest Corp.
2. Date of Purchase: 10/9/97
3. Date offering commenced: 10/9/97
4. Underwriters from whom purchased: Merrill Lynch
5. "Affiliated Underwriter" managing or participating in syndicate: PWJ
6. Aggregate principal amount of purchase: $255,000
7. Aggregate principal amount of offering: $127,500,000
8. Purchase price (net of fees and expenses): 51
9. Initial public offering price: 51
10. Commission, spread or profit: % $.91
11. Have the following conditions been satisfied? YES NO
a. The securities are part of an issue registered under the Securities Act
of 1933 which is being offered to the public or are "municipal securities"
as defined in Section 3(a)(29) of the Securities Exchange Act of 1934.
___X___ _______
b. The securities were purchased prior to the end of the end first full
business day of the offering at not more than the initial offering
price (or, if a rights offering, the securities were purchased on or
before the fourth day preceding the day on which the offering terminated).
___X___ _______
c. The underwriting was a firm commitment underwriting. ___X___ _______
d. The commission, spread or profit was reasonable and fair in relation
to that being received by others for underwriting similar securities during
the same period.___X___ _______
e. (1) If securities are registered under the Securities Act of 1933,
the issuer of the securities and its predecessor have been in continuous
operation for not less than three years. ___X___ _______ (
2) If securities are municipal securities, the issue of securities has
received an investment grade rating from a nationally recognized
statistical rating organization or, if the issuer or entity supplying
the revenues from which the issue is to be paid shall have been in
continuous operation for less than three years (including any predecessor),
the issue has received one of the three highest ratings from at least one
such rating organization. _______ _______
f. The amount of such securities purchased by all of the investment
companies advised by Mitchell Hutchins did not exceed 4% of the principal
amount of the offering or $500,000 in principal amount, whichever is
greater, provided that in no event did such amount exceed 10% of the
principal amount of the offering. ___X___ _______
g. The purchase price was less than 3% of the Fund's total assets. ___X___
_______
h. No Affiliated Underwriter was a direct or indirect participant in or
beneficiary of the sale or, with respect to municipal securities, no
purchases were designated as group sales or otherwise allocated to the
account of any Affiliated Underwriter. ___X____ _______Approved:
Date: 10/10/97 FORM 10f-3 FUND: PaineWebber Financial Services Growth
Fund, Inc. Record of Securities Purchased Under the Fund's Rule 10f-3
Procedures
1. Issuer: Cresent Real Estate
2. Date of Purchase: 10/8/97
3. Date offering commenced: 10/8/97
4. Underwriters from whom purchased: UBS
5. "Affiliated Underwriter" managing or participating in syndicate: PWJ
6. Aggregate principal amount of purchase: $195,000
7. Aggregate principal amount of offering: $390,000,000
8. Purchase price (net of fees and expenses): 39
9. Initial public offering price: 39
10. Commission, spread or profit: % $.20
11. Have the following conditions been satisfied? YES NO
a. The securities are part of an issue registered under the Securities Act
of 1933 which is being offered to the public or are "municipal securities"
as defined in Section 3(a)(29) of the Securities Exchange Act of 1934.
___X___ _______
b. The securities were purchased prior to the end of the end first full
business day of the offering at not more than the initial offering
price (or, if a rights offering, the securities were purchased on or
before the fourth day preceding the day on which the offering terminated).
___X___ _______
c. The underwriting was a firm commitment underwriting. ___X___ _______
d. The commission, spread or profit was reasonable and fair in relation
to that being received by others for underwriting similar securities during
the same period. ___X___ _______
e. (1) If securities are registered under the Securities Act of 1933,
the issuer of the securities and its predecessor have been in continuous
operation for not less than three years. ___X___ _______ (
2) If securities are municipal securities, the issue of securities has
received an investment grade rating from a nationally recognized
statistical rating organization or, if the issuer or entity supplying
the revenues from which the issue is to be paid shall have been in
continuous operation for less than three years (including any predecessor),
the issue has received one of the three highest ratings from at least one
such rating organization. _______ _______
f. The amount of such securities purchased by all of the investment
companies advised by Mitchell Hutchins did not exceed 4% of the principal
amount of the offering or $500,000 in principal amount, whichever is
greater, provided that in no event did such amount exceed 10% of the
principal amount of the offering. ___X___ _______
g. The purchase price was less than 3% of the Fund's total assets.___X___
_______
h. No Affiliated Underwriter was a direct or indirect participant in or
beneficiary of the sale or, with respect to municipal securities, no
purchases were designated as group sales or otherwise allocated to the
account of any Affiliated Underwriter. ___X____ ______ Approved:Date:
10/9/97
Report of Independent Auditors
To the Shareholders and Board of Directors of
PaineWebber Financial Services Growth Fund Inc.
In planning and performing our audit of the financial statements of
PaineWebber Financial Services Growth Fund Inc. for the year ended March 31,
1998, we considered its internal control, including control activities for
safeguarding securities, in order to determine our auditing procedures for
the purpose of expressing our opinion on the financial statements and to
comply with the requirements of Form N-SAR, not to provide assurance on the
internal control.
The management of PaineWebber Financial Services Growth Fund Inc. is
responsible for establishing and maintaining internal control. In fulfilling
this responsibility, estimates and judgments by management are required to
assess the expected benefits and related costs of controls. Generally,
controls that are relevant to an audit pertain to the entitys objective of
preparing financial statements for external purposes that are fairly
presented in conformity with generally accepted accounting principles.
Those controls include the safeguarding of assets against unauthorized
acquisition, use or disposition.
Because of inherent limitations in internal control, errors or fraud may
occur and not be detected. Also, projection of any evaluation of internal
control to future periods is subject to the risk that it may become
inadequate because of changes in conditions or that the effectiveness of
the design and operation may deteriorate.
Our consideration of the internal control would not necessarily disclose all
matters in the internal control that might be material weaknesses under
standards established by the American Institute of Certified Public
Accountants. A material weakness is a condition in which the design or
operation of one or more of the internal control components does not reduce
to a relatively low level the risk that errors or fraud in amounts that would
be material in relation to the financial statements being audited may occur
and not be detected within a timely period by employees in the normal course
of performing their assigned functions. However, we noted no matters
involving the internal control and its operation, including controls for
safeguarding securities, that we consider to be material weaknesses as
defined above at March 31, 1998.
This report is intended solely for the information and use of the
shareholders, board of directors and management of PaineWebber Financial
Services Growth Fund Inc. and the Securities and Exchange Commission.
ERNST & YOUNG LLP
May 13, 1998
