<PAGE>
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC. SEMIANNUAL REPORT
Dear Shareholder, November 15, 2000
We are pleased to present you with the semiannual report for the PaineWebber
Financial Services Growth Fund (the "Fund") for the six-month period ended
September 30, 2000.
MARKET REVIEW
--------------------------------------------------------------------------------
[ICON]During the six-month period ended September 30, 2000, market sentiment
changed dramatically. While the economic backdrop of relatively strong growth
and moderate inflation was positive for stocks, other economic factors
contributed to an unsettled investment environment. Rising oil prices, the
prospect of a slowdown in the pace of economic growth, the decline of the
euro (Europe's single currency) against the U.S. dollar and weaker corporate
profits resulted in widespread volatility in the stock market.
Going into the period, growth stocks--particularly those in the technology
sector--continued to be market leaders. As growth stock valuations rose,
however, investors grew concerned that such valuations were unsustainable. As a
result, investors began selling their growth shares in favor of value stocks. At
the end of the six-month period, the performance of value stocks bested that of
growth stocks. Returns on value stocks of every stripe--small, mid and large
cap--outpaced their growth counterparts. The shift in market sentiment away from
high-growth technology companies and into well-established traditional companies
generally benefited the performance of financial stocks.
[SIDENOTE:]
PAINEWEBBER FINANCIAL
SERVICES GROWTH FUND, INC.
INVESTMENT GOAL:
Long-term capital
appreciation
ADVISOR/TEAM:
Mitchell Hutchins
Asset Management Inc.
COMMENCEMENT:
May 22, 1986 (Class A)
July 1, 1991 (Class B)
July 2, 1992 (Class C)
March 30, 1998 (Class Y)
DIVIDEND PAYMENTS:
Annually
1
<PAGE>
SEMIANNUAL REPORT PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
<TABLE>
<CAPTION>
PERFORMANCE AT A GLANCE
-----------------------------------------------------------------------------
---------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS, PERIODS ENDED 9/30/00
---------------------------------------------------
-------------------------------------------------------------------------------------
6 Months 1 Year 5 Years 10 Years Inception(0)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A* 23.91% 31.27% 17.43% 24.08% 15.18%
Before Deducting CLASS B** 23.40 30.13 16.52 N/A 20.34
Maximum Sales Charge CLASS C+ 23.40 30.21 16.53 N/A 17.50
CLASS Y++ 24.11 31.45 N/A N/A 2.25
------------------------------------------------------------------------------------
After Deducting CLASS A* 18.32 25.34 16.36 23.51 14.81
Maximum Sales Charge CLASS B** 18.40 25.13 16.30 N/A 20.34
CLASS C+ 22.40 29.21 16.53 N/A 17.50
------------------------------------------------------------------------------------
S&P 500 Index -3.60 13.27 21.68 19.42 16.07
S&P 500 Financial Index 20.33 33.78 24.62 25.47 15.35
Lipper Financial Services 19.14 26.64 17.84 24.06 15.52
Funds Median
------------------------------------------------------------------------------------
</TABLE>
The investment return and 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. Six-month and one-year returns are cumulative.
0 Inception: since commencement of issuance on May 22, 1986 for Class A
shares, July 1, 1991 for Class B shares, July 2, 1992 for Class C shares
and March 30, 1998 for Class Y shares. Lipper Median inception return is as
of May 22, 1986. Index inception returns are as of May 31, 1986.
* 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% and is
reduced to 0% after six years. Class B shares bear ongoing 12b-1
distribution and service fees.
+ Maximum contingent deferred sales charge for Class C shares is 1% and is
reduced to 0% after one year. Class C shares bear ongoing 12b-1
distribution and service fees.
++ The Fund offers Class Y shares to a limited group of eligible investors,
including participants in certain investment programs that are sponsored by
PaineWebber and that may invest in PaineWebber mutual funds. Class Y shares
do not bear initial or contingent deferred sales charges or ongoing 12b-1
distribution and service fees.
2
<PAGE>
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
SEMIANNUAL REPORT
PORTFOLIO HIGHLIGHTS
During the six-month period, it appeared that the Federal Reserve Board
(the "Fed") had come to the end of its interest rate-raising cycle. The Fed had
periodically raised short-term interest rates from June 1999 through June 2000
but took no action on rates in August 2000. The Fed's interest rate stance was
positive for the Fund, because the stocks of financial companies tend to perform
well when interest rates are relatively stable or declining.
The Fund was well positioned to take advantage of the improved
interest-rate environment. Its commitment to companies that have the potential
to benefit from growth in capital markets helped boost performance. Money center
banks, such as Bank of America (4.8%),* Citigroup (4.6%)* and Chase Manhattan
(3.7%),* which were among the Fund's top ten holdings, were strong contributors
to performance. The Fund's return was also aided by investments in Federal
National Mortgage Association (4.1%)* and Bank of New York (2.9%).* Both of
these financial institutions produced strong earnings streams, which in turn
boosted their share prices. While asset management firms enhanced performance
early in the period, the Fund's exposure to this area of the market was reduced
when the share prices of some asset managers reached target levels. The Fund's
relatively small exposure to regional banks was positive for performance,
because many regional banks reported weak earnings. The Fund took advantage of
attractive valuations in the property casualty sector and added Hartford
Financial Services Group and ACE Ltd. (1.7%)* to the portfolio in May.
OUTLOOK
There is evidence that the Fed's efforts of slowing the pace of economic
growth and containing inflation may be working. This good news, however, has
been tempered by concerns about high energy prices and declining corporate
profits. As we move toward the end of 2000 and into 2001, the outlook for the
equity markets seems to be improving. The Fed left interest rates unchanged at
its October meeting. Oil prices have declined, and although oil prices have been
sustained at far higher levels than many expected just six months ago, we may
have seen the highs. The euro's weakness persists, but support may have been
established with recent coordinated central bank intervention. There is much to
preoccupy the markets, but the weight of the evidence suggests a cautiously
optimistic posture. The underpinnings of the economy remain solid, productivity
continues to be strong and inflation remains in check. Such positive economic
factors are generally good for the financial markets.
As we move into 2001, the investment environment for financial services
stocks appears to be positive. The Fed may have achieved its goal of slowing the
pace of economic growth and this bodes well for a more favorable interest rate
environment. The Fund's emphasis on large financial companies that conduct a
substantial amount of business in global capital markets should be positive for
the Fund in the months ahead.
* Weightings represent percentages of net assets as of September 30, 2000.
3
<PAGE>
SEMIANNUAL REPORT
PAINEWEBBER FINANCIAL SERVICES GROWTH
FUND INC.--PORTFOLIO STATISTICS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CHARACTERISTICS* 9/30/00 3/31/00
----------------------------------------------------------------------------------------
<S> <C> <C>
Net Assets ($mm) $283.6 $258.8
Number of Securities 92 49
Stocks 99.4% 95.1%
Cash & Equivalents 0.6% 4.9%
----------------------------------------------------------------------------------------
<CAPTION>
TOP FIVE SECTORS* 9/30/00 3/31/00
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Banks 37.4% Brokerage & Asset Management 29.0%
Financial Services 24.5 Banks 24.8
Securities & Asset Management 15.6 Financial Services 18.6
Other Insurance 12.6 Other Insurance 15.7
Life Insurance 5.8 Business Services 7.2
----------------------------------------------------------------------------------------
Total 95.9 Total 95.3
<CAPTION>
TOP TEN HOLDINGS* 9/30/00 3/31/00
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bank of America 4.8% Chase Manhattan 4.7%
Citigroup 4.6 AMBAC Financial Group 4.7
American Express 4.3 Lehman Brothers Holdings 4.5
American International Group 4.3 AXA Financial 4.4
Federal National Mortgage Assn. 4.1 Kansas City Southern Industries 4.3
Morgan Stanley Dean Witter 3.7 Travelers Property Casualty 4.3
Chase Manhattan 3.7 Citigroup 3.9
Wells Fargo 3.4 Capital One Financial 3.9
Bank of New York 2.9 Affiliated Managers Group 3.7
Federal Home Loan Mortgage Corp. 2.5 Wells Fargo 3.5
----------------------------------------------------------------------------------------
Total 38.3 Total 41.9
</TABLE>
* Weightings represent percentages of net assets as of the dates indicated.
The Fund's portfolio is actively managed and its composition will vary over
time.
4
<PAGE>
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC. SEMIANNUAL REPORT
Our ultimate objective in managing your investments is to help you successfully
meet your financial goals. We thank you for your continued support and welcome
any comments or questions you may have. For a QUARTERLY REVIEW on PaineWebber
Financial Services Growth Fund, Inc., or another fund in the PaineWebber Family
of Funds,(1) please contact your Financial Advisor. For additional information,
visit us at www.painewebber.com.
Sincerely,
/s/ Brian M. Storms
BRIAN M. STORMS
Chief Executive Officer and
President
Mitchell Hutchins
Asset Management Inc.
This letter is intended to assist shareholders in understanding how the
Fund performed during the six-month period ended September 30, 2000, and
reflects our views at the time of its writing. Of course, these views may change
in response to changing circumstances. We encourage you to consult your
Financial Advisor regarding your personal investment program.
(1) Mutual funds are sold by prospectus only. The prospectuses for the funds
contain more complete information regarding risks, charges and expenses,
and should be read carefully before investing.
5
<PAGE>
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
PERFORMANCE RESULTS(UNAUDITED)
<TABLE>
<CAPTION>
TOTAL RETURN(1)
NET ASSET VALUE -----------------------------------
----------------------------------------- 12 MONTHS 6 MONTHS
09/30/00 03/31/00 09/30/99 ENDED 09/30/00 ENDED 09/30/00
<S> <C> <C> <C> <C> <C>
Class A Shares $33.06 $26.68 $26.01 31.27% 23.91%
Class B Shares 31.75 25.73 25.15 30.13 23.40
Class C Shares 31.69 25.68 25.09 30.21 23.40
<CAPTION>
PERFORMANCE SUMMARY CLASS A SHARES
NET ASSET VALUE
-------------------------- CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL RETURN(1)
<S> <C> <C> <C> <C> <C>
05/22/86-12/31/86 $ 9.25 $ 8.31 -- -- (10.16)%
1987 8.31 6.88 $0.2265 $0.3703 (11.05)
1988 6.88 7.70 -- 0.2375 15.38
1989 7.70 9.08 -- 0.2900 21.71
1990 9.08 7.73 -- 0.2410 (12.33)
1991 7.73 12.55 -- 0.2070 65.37
1992 12.55 17.38 -- 0.0237 38.68
1993 17.38 17.22 1.8425 0.0820 10.32
1994 17.22 15.68 1.2660 0.1345 (0.75)
1995 15.68 20.57 2.2099 0.2942 47.46
1996 20.57 22.80 3.3870 0.2300 28.96
1997 22.80 31.24 1.5895 0.2068 45.20
1998 31.24 31.24 0.4139 0.2780 2.31
1999 31.24 27.40 0.7891 0.0779 (9.42)
01/01/00-09/30/00 27.40 33.06 -- -- 20.66
Totals: $11.7244 $2.6729
CUMULATIVE TOTAL RETURN AS OF 09/30/00: 662.73%
<CAPTION>
PERFORMANCE SUMMARY CLASS B SHARES
NET ASSET VALUE
-------------------------- CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL RETURN(1)
<S> <C> <C> <C> <C> <C>
07/01/91-12/31/91 $10.24 $12.56 -- $0.0640 23.30%
1992 12.56 17.31 -- -- 37.82
1993 17.31 17.04 $1.8425 0.0571 9.57
1994 17.04 15.47 1.2660 0.0344 (1.53)
1995 15.47 20.21 2.2099 0.1766 46.36
1996 20.21 22.32 3.3870 0.0592 28.00
1997 22.32 30.42 1.5895 0.0884 44.10
1998 30.42 30.38 0.4139 0.0755 1.55
1999 30.38 26.49 0.7891 -- (10.12)
01/01/00-09/30/00 26.49 31.75 -- -- 19.86
Totals $11.4979 $0.5552
CUMULATIVE TOTAL RETURN AS OF 09/30/00: 455.36%
</TABLE>
(1) Figures assume reinvestment of all dividends and other distributions at net
asset value on the payable dates and do not include sales charges; results
for each class would be lower if sales charges were included. Total
investment return for periods of less than one year has not been
annualized.
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.
6
<PAGE>
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
PERFORMANCE RESULTS(UNAUDITED) (CONCLUDED)
<TABLE>
<CAPTION>
PERFORMANCE SUMMARY CLASS C SHARES
NET ASSET VALUE
----------------------- CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL RETURN(1)
<S> <C> <C> <C> <C> <C>
07/01/92-12/31/92 $14.61 $17.32 -- $0.0359 18.80%
1993 17.32 17.03 $1.8425 0.0691 9.52
1994 17.03 15.48 1.2660 0.0209 (1.50)
1995 15.48 20.21 2.2099 0.1819 46.30
1996 20.21 22.29 3.3870 0.0861 27.99
1997 22.29 30.37 1.5895 0.0938 44.09
1998 30.37 30.31 0.4139 0.0944 1.55
1999 30.31 26.43 0.7891 -- (10.11)
01/01/00-09/30/00 26.43 31.69 -- -- 19.90
Totals $11.4979 $0.5821
CUMULATIVE TOTAL RETURN AS OF 09/30/00: 278.51%
</TABLE>
(1) Figures 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. Total investment return for
periods of less than one year has not been annualized.
Note: The Fund offers Class Y shares to a limited group of eligible investors,
including participants in certain investment programs that are sponsored by
PaineWebber and may invest in PaineWebber mutual funds. For the six months ended
September 30, 2000 and since inception, March 30, 1998 through September 30,
2000, Class Y shares have a total return of 24.11% and 5.74%, respectively.
Class Y shares do not have initial or contingent deferred sales charges or
ongoing distribution and service fees.
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.
7
<PAGE>
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCKS--99.40%
BANKS--37.37%
14,700 Amsouth Bancorporation ..................... $ 183,750
148,100 Bank of New York Company, Inc. ............. 8,302,856
118,100 Bank One Corp. ............................. 4,561,612
261,000 Bank of America Corp. ...................... 13,669,875
30,200 BB&T Corp. ................................. 909,775
6,090 Charter One Financial, Inc. ................ 148,444
225,000 Chase Manhattan Corp. ...................... 10,392,187
240,000 Citigroup, Inc. ............................ 12,975,000
20,400 Comerica, Inc. (1) ......................... 1,192,125
85,100 Cullen Frost Bankers Inc. (1) .............. 2,765,750
41,500 Fifth Third Bancorp ........................ 2,235,812
127,100 First Union Corp. (1) ...................... 4,091,031
119,100 Firstar Corp. .............................. 2,664,862
126,800 FleetBoston Financial Corp. ................ 4,945,200
21,000 Huntington Bancshares, Inc. ................ 308,438
24,600 J.P. Morgan & Company, Inc. ................ 4,019,025
33,200 KeyCorp .................................... 840,375
67,400 Mellon Financial Corp. ..................... 3,125,675
82,500 National City Corp. ........................ 1,825,312
19,100 Northern Trust Corp. ....................... 1,697,513
4,700 Old Kent Financial Corp. ................... 136,006
27,400 PNC Bank Corp. ............................. 1,781,000
85,500 Prosperity Bancshares Inc. ................. 1,571,063
6,200 Regions Financial Corp. .................... 140,663
32,200 Silicon Valley Bancshares * (1) ............ 1,875,147
4,800 SouthTrust Corp. ........................... 150,900
15,500 State Street Corp. ......................... 2,015,000
10,900 Summit Bancorp, Inc. ....................... 376,050
36,200 Suntrust Banks, Inc. ....................... 1,803,213
42,000 Synovus Financial Corp. .................... 889,875
76,700 Texas Regional Bankshares Inc. ............. 2,176,362
4,500 Union Planters Corp. ....................... 148,781
72,000 US Bancorp, Inc. (1) ....................... 1,638,000
16,200 Wachovia Corp. ............................. 918,338
206,900 Wells Fargo & Co. .......................... 9,504,469
-----------
105,979,484
-----------
FINANCIAL SERVICES--24.47%
202,800 American Express Co. (1) ................... 12,320,100
46,400 AON Corp. .................................. 1,821,200
78,900 Associates First Capital Corp. ............. 2,998,200
40,500 Capital One Financial Corp. ................ 2,837,531
7,800 CIT Group Inc. ............................. 136,500
62,400 Compucredit Corp. * (1) .................... 3,500,250
3,600 Countrywide Credit Industries, Inc. ........ 135,900
130,000 Federal Home Loan Mortgage Corp. ........... 7,028,125
162,900 Federal National Mortgage Association ...... 11,647,350
97,900 Household International, Inc. .............. 5,543,587
11,700 John Hancock Financial Services * .......... 314,438
37,300 Marsh & McLennan Co., Inc. ................. 4,951,575
NUMBER OF
SHARES VALUE
------ -----
<S> <C> <C>
176,100 MBNA Corp. ................................. $ 6,779,850
49,800 Metris Companies Inc. (1) .................. 1,967,100
34,400 Providian Corp. ............................ 4,368,800
63,500 USA Education, Inc. ........................ 3,059,907
-----------
69,410,413
-----------
INFORMATION & COMPUTER SERVICES--0.78%
56,800 First Data Corp. ........................... 2,218,750
-----------
LIFE INSURANCE--5.76%
49,400 AFLAC, Inc. ................................ 3,164,688
28,500 American General Corp. ..................... 2,223,000
64,400 Annuity & Life Re Holdings ................. 1,553,650
99,100 AXA Financial Inc. ......................... 5,047,906
8,400 CIGNA Corp. ................................ 876,960
18,000 Lincoln National Corp. ..................... 866,250
4,900 Torchmark, Inc. ............................ 136,281
90,800 UnumProvident Corp. ........................ 2,474,300
-----------
16,343,035
-----------
OTHER INSURANCE--12.63%
33,200 ACE Ltd. ................................... 1,303,100
46,000 Allstate Corp. ............................. 1,598,500
29,400 AMBAC Financial Group Inc. ................. 2,153,550
125,434 American International Group, Inc. ......... 12,002,466
10,600 Chubb Corp. ................................ 838,725
6,900 Cincinnati Financial Corp. ................. 244,950
48,400 Hartford Financial Services Group, Inc. .... 3,530,175
40,300 Jefferson-Pilot Corp. (1) .................. 2,735,362
3,500 Loews Corp. ................................ 291,813
7,300 MBIA, Inc. ................................. 519,213
189,400 Metlife Inc.* (1) .......................... 4,959,912
14,100 MGIC Investment Corp. ...................... 861,863
24,400 PMI Group Inc. ............................. 1,653,100
3,600 Progressive Corp. .......................... 294,750
8,100 Radian Group Inc. .......................... 546,750
5,300 SAFECO Corp. ............................... 144,425
43,300 St. Paul Companies, Inc. (1) ............... 2,135,231
-----------
35,813,885
-----------
REAL PROPERTY--0.72%
42,600 Equity Residential Properties Trust ........ 2,044,800
-----------
SECURITIES & ASSET MANAGEMENT--15.62%
39,800 Affiliated Managers Group Inc.* (1) ........ 2,266,113
22,300 Allmerica Financial Corp. .................. 1,425,806
4,400 Bear Stearns Co., Inc. ..................... 277,200
179,400 Charles Schwab Corp. (1) ................... 6,368,700
65,300 Franklin Resources, Inc. ................... 2,901,279
55,000 Goldman Sachs Group Inc. ................... 6,266,562
33,900 Lehman Brothers Holdings, Inc. (1) ......... 5,008,725
99,200 Merrill Lynch & Co., Inc. .................. 6,547,200
8
<PAGE>
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC
<CAPTION>
NUMBER OF
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCKS--(CONCLUDED)
SECURITIES & ASSET MANAGEMENT--(CONCLUDED)
115,500 Morgan Stanley Dean Witter & Co. ........... $10,561,031
58,000 Stilwell Financial, Inc. (1) ............... 2,523,000
3,200 T. Rowe Price & Associates, Inc. ........... 150,200
-----------
44,295,816
-----------
THRIFT--2.05%
48,300 Golden West Financial Corp. (1) ............ $ 2,590,087
39,700 Mony Group Inc. (1) ........................ 1,583,038
41,200 Washington Mutual, Inc. .................... 1,640,275
-----------
5,813,400
-----------
Total Common Stocks (cost--$237,671,230) ... 281,919,583
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATE RATE VALUE
----- ---- ---- -----
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENT--0.72%
$2,051 Repurchase Agreement dated 09/29/00 with SG Warburg,
collateralized by $1,679,000 U.S. Treasury Bonds, 8.125%
due 08/15/21 (value--$2,092,454); proceeds: $2,052,111
(cost--$2,051,000) ......................................... 10/02/00 6.500% 2,051,000
------------
Total Investments (cost--$239,722,230)--100.13% ......................... 283,970,583
Liabilities in excess of other assets--(0.13)% .......................... (359,881)
------------
Net Assets--100.00% ..................................................... $283,610,702
============
</TABLE>
----------
* Non-income producing security.
(1) Security, or portion thereof, was on loan at September 30, 2000.
See accompanying notes to financial statements
9
<PAGE>
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2000(UNAUDITED)
<S> <C>
ASSETS
Investments in securities, at value (cost--$239,722,230) ...................................... $283,970,583
Investments of cash collateral received for securities loaned, at value (cost--$25,754,200) ... 25,754,200
Cash .......................................................................................... 6,751
Receivable for investments sold ............................................................... 214,940
Dividends and interest receivable ............................................................. 295,431
Receivable for fund shares sold ............................................................... 163,858
Other assets .................................................................................. 32,588
------------
Total assets .................................................................................. 310,438,351
------------
LIABILITIES
Collateral for securities loaned .............................................................. 25,754,200
Payable for fund shares repurchased ........................................................... 544,584
Payable to affiliates ......................................................................... 297,952
Accrued expenses and other liabilities ........................................................ 230,913
------------
Total liabilities ............................................................................. 26,827,649
------------
NET ASSETS
Capital Stock of $0.001 par value outstanding ................................................. 192,679,093
Accumulated net investment loss ............................................................... (117,193)
Accumulated net realized gains from investment transactions ................................... 46,800,449
Net unrealized apppreciation of investments ................................................... 44,248,353
------------
Net assets .................................................................................... $283,610,702
============
CLASS A:
Net assets .................................................................................... $143,782,422
------------
Shares outstanding ............................................................................ 4,349,621
------------
Net asset value and redemption value per share ................................................ $ 33.06
============
Maximum offering price per share (net asset value plus sales charge of 4.50% of offering price) $ 34.62
============
CLASS B:
Net assets .................................................................................... $ 94,087,588
------------
Shares outstanding ............................................................................ 2,963,004
------------
Net asset value and offering price per share .................................................. $ 31.75
============
CLASS C:
Net assets .................................................................................... $ 42,807,522
------------
Shares outstanding ............................................................................ 1,350,961
------------
Net asset value and offering price per share .................................................. $ 31.69
============
CLASS Y:
Net assets .................................................................................... $ 2,933,170
------------
Shares outstanding ............................................................................ 88,607
------------
Net asset value, offering price and redemption value per share ................................ $ 33.10
============
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000(UNAUDITED)
<S> <C>
INVESTMENT INCOME:
Dividends ................................................................................ $ 1,531,907
Interest ................................................................................. 509,352
------------
2,041,259
------------
EXPENSES:
Investment advisory and administration ................................................... 903,722
Service fees--Class A .................................................................... 160,741
Service and distribution fees--Class B ................................................... 444,173
Service and distribution fees--Class C ................................................... 190,752
Transfer agency and service .............................................................. 188,690
Custody and accounting ................................................................... 86,958
Federal and state registration fees ...................................................... 48,981
Reports and notices to shareholders ...................................................... 47,946
Professional fees ........................................................................ 38,044
Directors fees ........................................................................... 5,250
Other expenses ........................................................................... 47,424
------------
2,162,681
Less: Fee waiver from adviser ............................................................ (4,229)
------------
Net expenses ............................................................................. 2,158,452
------------
Net investment loss ...................................................................... (117,193)
------------
REALIZED AND UNREALIZED GAINS FROM INVESTMENT TRANSACTIONS:
Net realized gains from investment transactions .......................................... 45,008,448
Net change in unrealized appreciation/depreciation of investments ........................ 10,764,632
------------
NET REALIZED AND UNREALIZED GAINS FROM TRANSACTIONS ...................................... 55,773,080
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..................................... $ 55,655,887
============
</TABLE>
See accompanying notes to financial statements
11
<PAGE>
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 2000 FOR THE YEAR ENDED
(UNAUDITED) MARCH 31, 2000
------------------------ ------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment loss ......................................................... $ (117,193) $ (252,125)
Net realized gains from investment transactions ............................. 45,008,448 1,358,327
Net change in unrealized appreciation/depreciation of investments ........... 10,764,632 (39,756,249)
------------- -------------
Net increase (decrease) in net assets resulting from operations ............. 55,655,887 (38,650,047)
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class A .............................................. -- (415,492)
Net investment income--Class B .............................................. -- --
Net investment income--Class C .............................................. -- --
Net investment income--Class Y .............................................. -- (11,800)
Net realized gains from investment transactions--Class A .................... -- (4,208,795)
Net realized gains from investment transactions--Class B .................... -- (3,471,055)
Net realized gains from investment transactions--Class C .................... -- (1,409,862)
Net realized gains from investment transactions--Class Y .................... -- (80,615)
------------- -------------
Total Dividends and Distributions to Shareholders ........................... -- (9,597,619)
------------- -------------
FROM CAPITAL STOCK TRANSACTIONS:
Net proceeds from the sale of shares ........................................ 52,762,473 189,272,936
Cost of shares repurchased .................................................. (83,568,067) (374,535,641)
Proceeds from dividends reinvested .......................................... -- 8,483,816
------------- -------------
Net decrease in net assets from capital stock transactions .................. (30,805,594) (176,778,889)
------------- -------------
Net increase (decrease) in net assets ....................................... 24,850,293 (225,026,555)
NET ASSETS:
Beginning of period ......................................................... 258,760,409 483,786,964
------------- -------------
End of period ............................................................... $ 283,610,702 $ 258,760,409
============= =============
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (UNAUDITED)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Financial Services Growth Fund Inc. (the "Fund") is registered
with the Securities and Exchange Commission under the Investment Company Act of
1940, as amended, as a diversified open-end management investment company. The
Fund was incorporated in the state of Maryland on February 13, 1986.
The Fund currently offers Class A, Class B, Class C and Class Y shares. Each
class represents interests in the same assets of the Fund, and the classes are
identical except for differences in their sales charge structures, ongoing
service and distribution charges and certain transfer agency expenses. In
addition, Class B shares and all corresponding reinvested dividend shares
automatically convert to Class A shares approximately six years after 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, if
any.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States 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--The Fund calculates net asset values based on the
current market value for its portfolio's securities. The Fund normally
obtains market values for its securities from independent pricing sources.
Independent pricing sources may use reported last sale prices, current market
quotations or valuations from computerized "matrix" systems that derive
values based on comparable securities. Securities traded in the
over-the-counter ("OTC") market and listed on The Nasdaq Stock Market, Inc.
("Nasdaq") normally are valued at the last sale price on Nasdaq prior to
valuation. Other OTC securities are valued at the last bid price available
prior to valuation. Securities which are listed on U.S. and foreign stock
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 as the primary
market by Mitchell Hutchins Asset Management Inc.("Mitchell Hutchins"), the
investment adviser and administrator of the Fund. Mitchell Hutchins is a
wholly owned asset management subsidiary of PaineWebber Incorporated
("PaineWebber"), a wholly owned indirect subsidiary of UBSAG. If a market
value is not available from an independent pricing source for a particular
security, that security is valued at fair value as determined in good faith
by or under the direction of the Fund's Board of Directors (the "board"). 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 Fund's board 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 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
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS(CONTINUED)
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. The amount of dividends and
distributions is determined in accordance with federal income tax
regulations, which may differ from accounting principles generally accepted
in the United States. 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 invests primarily in equity securities of financial services
companies. Economic, legislative and regulatory developments impacting those
industries may affect the market value of the Fund's investments. In addition,
the Fund's ability to invest in U.S. dollar-denominated foreign equity
securities and ability to use options and futures contracts also entail special
risks.
INVESTMENT ADVISER AND ADMINISTRATOR
The Fund has 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 September 30, 2000, the Fund
owed Mitchell Hutchins $158,285 in investment advisory and administration fees.
Mitchell Hutchins waived a portion of its investment advisory and administration
fees in connection with the Fund's investment of cash collateral from security
lending in the Mitchell Hutchins Private Money Market Fund LLC. For the six
months ended September 30, 2000, Mitchell Hutchins waived $4,229.
For the six months ended September 30, 2000, the Fund paid $31,578 in
brokerage commissions to PaineWebber for transactions executed on behalf of the
Fund.
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 Class A, Class B and Class C
shares, the Fund pays Mitchell Hutchins monthly service fees at an annual rate
of 0.25% of the average daily net assets of Class A, Class B and 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 September 30, 2000, the Fund owed
Mitchell Hutchins $138,772 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 earned $375,949 in sales charges
for the Fund for the six months ended September 30, 2000.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS(CONTINUED)
SECURITY LENDING
The Fund may lend securities 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 regain 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. For the six months ended September 30, 2000, the Fund earned
$11,233 for lending securities. The Fund's lending agent is PaineWebber,
which received compensation from the Fund for the six months ended September
30, 2000 of $4,195.
At September 30, 2000, the Fund owed PaineWebber $895 in compensation as
security lending agent.
As of September 30, 2000, the Fund's custodian held cash and/or cash
equivalents having an aggregate value of $25,754,200 as collateral for portfolio
securities loaned having a market value of $24,950,086. The cash collateral was
invested in the following money market funds:
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
------ -----
<S> <C> <C>
1,849,368 AIM Liquid Assets Portfolio ................................................... $ 1,849,368
21,532,751 Mitchell Hutchins Private Money Market Fund LLC ............................... 21,532,751
247,921 AIM Prime Portfolio ........................................................... 247,921
2,019,740 Provident Tempcash Portfolio .................................................. 2,019,740
104,420 Scudder Institutional Fund .................................................... 104,420
-----------
Total investments of cash collateral received for securities loaned
(cost--$25,754,200) .......................................................... $25,754,200
===========
</TABLE>
BANK LINE OF CREDIT
The Fund may participate with other funds managed by Mitchell Hutchins in a
$200 million committed credit facility ("Facility") to be utilized for temporary
financing until the settlement of sale or purchase of portfolio securities, the
repurchase or redemption of shares of the Fund at the request of the
shareholders and other temporary or emergency purposes. In connection therewith,
the Fund has agreed to pay a commitment fee, pro rata, based on the relative
asset size of the Funds in the Facility. Interest is charged to the Fund at
rates based on prevailing market rates in effect at the time of borrowings. For
the six months ended September 30, 2000, the Fund had an amount outstanding
under the Facility of $1,100,000 with an interest rate of 7.02% on September 28,
2000. The Fund did not borrow under the Facility at any other time for the six
months ended September 30, 2000.
TRANSFER AGENCY SERVICE FEES
PaineWebber provides certain transfer agency related services to the Fund
pursuant to a delegation of authority from PFPC, Inc., the Fund's transfer
agent, and is compensated for these services by PFPC, Inc., not the Fund. For
the six months ended September 30, 2000, PaineWebber received from PFPC, Inc.,
not the Fund, approximately 48% of the total transfer agency service fees
collected by PFPC, Inc. from the Fund.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS(CONTINUED)
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at September
30, 2000 was substantially the same as the cost of securities for financial
statement purposes.
At September 30, 2000, the components of net unrealized appreciation of
investments were as follows:
<TABLE>
<CAPTION>
<S> <C>
Gross appreciation (investment having an excess of value over cost) .................... $47,592,792
Gross depreciation (investment having an excess of cost over value) .................... (3,344,439)
-----------
Net unrealized appreciation of investments ............................................. $44,248,353
===========
</TABLE>
For the six months ended September 30, 2000, total aggregate purchases and
sales of portfolio securities, excluding short-term securities, were as follows:
<TABLE>
<CAPTION>
<S> <C>
Purchases .............................................................................. $267,662,185
Sales .................................................................................. $288,309,792
</TABLE>
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.
CAPITAL STOCK
There are 300 million shares of $0.001 par value common stock authorized for
the Fund. Transactions in common stock were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 2000:
Shares sold ...................... 1,261,739 $ 36,232,331 135,705 $ 3,591,311
Shares repurchased ............... (1,704,053) (48,589,357) (675,591) (18,250,687)
Shares converted from
Class B to Class A ............ 56,296 1,634,396 (58,477) (1,634,396)
--------- ------------- ---------- -------------
Net decrease ..................... (386,018) $ (10,722,630) (598,363) $ (16,293,772)
========= ============= ========== =============
FOR THE YEAR ENDED MARCH 31, 2000:
Shares sold ...................... 4,659,804 $ 135,090,999 516,161 $ 14,047,614
Shares repurchased ............... (7,239,977) (207,821,936) (3,315,872) (89,858,005)
Shares converted from
Class B to Class A ............. 405,494 11,626,177 (418,960) (11,626,177)
Dividends reinvested ............. 149,338 3,954,469 122,317 3,131,318
--------- ------------- ---------- -------------
Net decrease ..................... (2,025,341) $ (57,150,291) (3,096,354) $ (84,305,250)
========= ============= ========== =============
<CAPTION>
CLASS C CLASS Y
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- --------- -------------
<S> <C> <C> <C> <C>
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 2000:
Shares sold ...................... 443,531 $ 12,470,020 16,938 $ 468,811
Shares repurchased ............... (583,535) (16,103,155) (22,113) (624,868)
Shares converted from
Class B to Class A ............ -- -- -- --
--------- ------------- ---------- -------------
Net decrease ..................... (140,004) $ (3,633,135) (5,175) $ (156,057)
========= ============= ========== =============
FOR THE YEAR ENDED MARCH 31, 2000:
Shares sold ...................... 1,416,379 $ 38,470,701 58,581 $ 1,663,622
Shares repurchased ............... (2,663,184) (72,777,596) (143,320) (4,078,104)
Shares converted from
Class B to Class A ............. -- -- -- --
Dividends reinvested ............. 51,175 1,307,005 3,436 91,024
--------- ------------- ---------- -------------
Net decrease ..................... (1,195,630) $ (32,999,890) (81,303) $ (2,323,458)
========= ============= ========== =============
</TABLE>
16
<PAGE>
[This page has been left blank intentionally.]
17
<PAGE>
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout each period is
presented below:
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED
SEPTEMBER 30, FOR THE YEARS ENDED MARCH 31,
2000 ------------------------------------------------------
(UNAUDITED) 2000 1999 1998 1997 1996
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................. $26.68 $30.24 $33.56 $23.41 $21.16 $17.11
-------- -------- -------- -------- ------- -------
Net investment income ................................ 0.04@ 0.10@ 0.33@ 0.20 0.18 0.30
Net realized and unrealized gains (losses)
from investments ............................ 6.34@ (2.79)@ (2.96)@ 11.75 5.69 6.25
-------- -------- -------- -------- ------- -------
Net increase (decrease) from
investment operations ....................... 6.38 (2.69) (2.63) 11.95 5.87 6.55
-------- -------- -------- -------- ------- -------
Dividends from net investment income ................. -- (0.08) (0.28) (0.21) (0.23) (0.29)
Distributions from net realized gains
from investment transactions ................ -- (0.79) (0.41) (1.59) (3.39) (2.21)
-------- -------- -------- -------- ------- -------
Total dividends and distributions .................... -- (0.87) (0.69) (1.80) (3.62) (2.50)
-------- -------- -------- -------- ------- -------
Net asset value, end of period ....................... $33.06 $26.68 $30.24 $33.56 $23.41 $21.16
======== ======== ======== ======== ======= =======
Total investment return (1) .......................... 23.91% (8.88)% (7.81)% 51.92% 28.72% 39.02%
======== ======== ======== ======== ======= =======
Ratios/Supplemental data:
Net assets, end of period (000's) .................... $143,782 $126,334 $204,433 $209,818 $85,661 $64,003
Expenses to average net assets
net of waivers from adviser (2) ............. 1.27%* 1.23% 1.17% 1.17% 1.52% 1.37%
Net investment income to average net assets
net of waivers from adviser (2) ............. 0.31%* 0.35% 1.07% 1.12% 0.90% 1.50%
Portfolio turnover rate .............................. 108% 122% 59% 23% 40% 53%
</TABLE>
----------
* Annualized.
+ Commencement of issuance of shares.
(1) Total investment return is calculated assuming a $10,000 investment on the
first day of each period reported, reinvestment of all dividends and other
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 or program fees; results would be lower if sales
charges or program fees were included. Total investment return for periods
of less than one year has not been annualized.
(2) During the six months ended September 30, 2000 Mitchell Hutchins waived a
portion of its advisory and administration fees. The ratios excluding the
waiver are the same since the fee waiver represents less than 0.005%.
@ Calculated using the average monthly shares outstanding for the period.
18
<PAGE>
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED
SEPTEMBER 30, FOR THE YEARS ENDED MARCH 31,
2000 ------------------------------------------------------
(UNAUDITED) 2000 1999 1998 1997 1996
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................. $25.73 $29.35 $32.62 $22.87 $20.75 $16.85
-------- -------- -------- -------- ------- -------
Net investment income ................................ (0.07)@ (0.12)@ 0.09@ 0.09 0.04 0.13
Net realized and unrealized gains (losses)
from investments ............................ 6.09@ (2.71)@ (2.87)@ 11.34 5.53 6.16
-------- -------- -------- -------- ------- -------
Net increase (decrease) from
investment operations ....................... 6.02 (2.83) (2.78) 11.43 5.57 6.29
-- -- (0.08) (0.09) (0.06) (0.18)
Dividends from net investment income .................
Distributions from net realized gains -- (0.79) (0.41) (1.59) (3.39) (2.21)
from investment transactions ................ -------- -------- -------- -------- ------- -------
-- (0.79) (0.49) (1.68) (3.45) (2.39)
Total dividends and distributions .................... -------- -------- -------- -------- ------- -------
$31.75 $25.73 $29.35 $32.62 $22.87 $20.75
Net asset value, end of period ....................... ======== ======== ======== ======== ======= =======
23.40% (9.63)% (8.51)% 50.80% 27.74% 37.97%
Total investment return (1) .......................... ======== ======== ======== ======== ======= =======
Ratios/Supplemental data: $94,088 $91,643 $195,392 $198,473 $41,579 $28,147
Net assets, end of period (000's) ....................
Expenses to average net assets 2.10%* 2.02% 1.94% 1.92% 2.27% 2.12%
net of waivers from adviser (2) .............
Net investment income to average net assets (0.52)%* (0.44)% 0.29% 0.37% 0.15% 0.74%
net of waivers from adviser (2) ............. 108% 122% 59% 23% 40% 53%
Portfolio turnover rate ..............................
<CAPTION>
CLASS C
------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED
SEPTEMBER 30, FOR THE YEARS ENDED MARCH 31,
2000 ------------------------------------------------------
(UNAUDITED) 2000 1999 1998 1997 1996
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................. $25.68 $29.28 $32.56 $22.84 $20.75 $16.86
-------- -------- -------- -------- ------- -------
Net investment income ................................ (0.07)@ (0.12)@ 0.08@ 0.12 0.06 0.12
Net realized and unrealized gains (losses)
from investments ............................ 6.08@ (2.69)@ (2.86)@ 11.28 5.51 6.16
-------- -------- -------- -------- ------- -------
Net increase (decrease) from
investment operations ....................... 6.01 (2.81) (2.78) 11.40 5.57 6.28
-------- -------- -------- -------- ------- -------
Dividends from net investment income ................. -- -- (0.09) (0.09) (0.09) (0.18)
Distributions from net realized gains
from investment transactions ................ -- (0.79) (0.41) (1.59) (3.39) (2.21)
-------- -------- -------- -------- ------- -------
Total dividends and distributions .................... -- (0.79) (0.50) (1.68) (3.48) (2.39)
-------- -------- -------- -------- ------- -------
Net asset value, end of period ....................... $31.69 $25.68 $29.28 $32.56 $22.84 $20.75
======== ======== ======== ======== ======= =======
Total investment return (1) .......................... 23.40% (9.59)% (8.50)% 50.76% 27.74% 37.92%
======== ======== ======== ======== ======= =======
Ratios/Supplemental data:
Net assets, end of period (000's) .................... $42,808 $38,282 $78,670 $63,809 $12,357 $6,989
Expenses to average net assets
net of waivers from adviser (2) ............. 2.09%* 2.01% 1.94% 1.92% 2.28% 2.14%
Net investment income to average net assets
net of waivers from adviser (2) ............. (0.50)%* (0.43)% 0.27% 0.36% 0.15% 0.72%
Portfolio turnover rate .............................. 108% 122% 59% 23% 40% 53%
</TABLE>
19
<PAGE>
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout each period
is presented below:
<TABLE>
<CAPTION>
CLASS Y
----------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE YEARS
SEPTEMBER 30, ENDED MARCH 31, FOR THE PERIOD
2000 ----------------------------- MARCH 30, 1998+
(UNAUDITED) 2000 1999 TO MARCH 31, 1998
----------- ---- ---- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period .................... $ 26.67 $ 30.23 $ 33.56 $ 33.22
--------- --------- --------- ---------
Net investment income ................................... 0.09@ 0.17@ 0.34@ --
Net realized and unrealized gains (losses)
from investments ............................... 6.34@ (2.82)@ (2.89)@ 0.34
--------- --------- --------- ---------
Net increase (decrease) from
investment operations .......................... 6.43 (2.65) (2.55) 0.34
--------- --------- --------- ---------
Dividends from net investment income .................... -- (0.12) (0.37) --
Distributions from net realized gains
from investment transactions ................... -- (0.79) (0.41) --
--------- --------- --------- ---------
Total dividends and distributions ....................... -- (0.91) (0.78) --
--------- --------- --------- ---------
Net asset value, end of period .......................... $ 33.10 $ 26.67 $ 30.23 $ 33.56
========= ========= ========= =========
Total investment return (1) ............................. 24.11% (8.76)% (7.57)% 1.02%
========= ========= ========= =========
Ratios/Supplemental data:
Net assets, end of period (000's) ....................... $ 2,933 $ 2,502 $ 5,292 $ 2
Expenses to average net assets
net of waivers from adviser (2) ................ 0.97%* 1.00% 0.90% 0.80%*
Net investment income to average net assets
net of waivers from adviser (2) ................ 0.61%* 0.58% 1.22% 0.00%*
Portfolio turnover rate ................................. 108% 122% 59% 23%
</TABLE>
----------
* Annualized.
+ Commencement of issuance of shares.
(1) Total investment return is calculated assuming a $10,000 investment on the
first day of each period reported, reinvestment of all dividends and other
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 or program fees; results would be lower if sales
charges or program fees were included. Total investment return for periods
of less than one year has not been annualized.
(2) During the six months ended September 30, 2000 Mitchell Hutchins waived a
portion of its advisory and administration fees. The ratios excluding the
waiver are the same since the fee waiver represents less than 0.005%.
@ Calculated using the average monthly shares outstanding for the period.
20
<PAGE>
================================================================================
DIRECTORS
E. Garrett Bewkes, Jr.
CHAIRMAN
Margo N. Alexander
Richard Q. Armstrong
Richard R. Burt
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
Brian M. Storms
PRINCIPAL OFFICERS
Brian M. Storms
PRESIDENT
Amy R. Doberman
VICE PRESIDENT
Dianne E. O'Donnell
VICE PRESIDENT AND SECRETARY
Paul H. Schubert
VICE PRESIDENT AND TREASURER
John J. Holmgren
VICE PRESIDENT
John J. Holmgren, Jr.
VICE PRESIDENT
INVESTMENT ADVISER,
ADMINISTRATOR AND DISTRIBUTOR
Mitchell Hutchins Asset Management Inc.
51 West 52nd Street
New York, New York 10019-6114
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 FINANCIAL ADVISOR OR
CORRESPONDING FIRM. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
THE FINANCIAL INFORMATION INCLUDED HEREIN IS TAKEN FROM THE RECORDS OF THE FUND
WITHOUT EXAMINATION BY INDEPENDENT AUDITORS WHO DO NOT EXPRESS AN OPINION
THEREON.
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PaineWebber offers a family of 26 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
- Enhanced S&P 500 Fund
- Enhanced Nasdaq-100 Fund
- Financial Services Growth Fund
- Growth Fund
- Growth and Income Fund
- Mid Cap Fund
- Small Cap Fund PAINEWEBBER
- S&P 500 Index Fund
- Strategy Fund
- Tax-Managed Equity Fund
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ASSET ALLOCATION FUNDS FINANCIAL
SERVICES
- Balanced Fund GROWTH FUND INC.
- Tactical Allocation Fund
GLOBAL FUNDS
- Asia Pacific Growth Fund SEMIANNUAL REPORT
- Emerging Markets Equity Fund
- Global Equity Fund
- Global Income Fund
PAINEWEBBER MONEY MARKET FUND SEPTEMBER 30, 2000
PAINEWEBBER
-C-2000 PaineWebber Incorporated
All rights reserved
