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SIGNATURE PAUL SCHUBERT
TITLE TREASURER
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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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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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, 2000, we
considered its internal control, including
control activities for safeguarding
securities, 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, and not to provide assurance on
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 internal
control. Generally, internal controls
that are relevant to an audit pertain to the
entity's objective of preparing financial
statements for external purposes that are
fairly presented in conformity with accounting
principles generally accepted in the United
States. Those internal controls include
the safeguarding of assets against unauthorized
acquisition, use, or disposition.
Because of inherent limitations in any internal
control, misstatements due to errors
or fraud may occur and not be detected. Also,
projections of any evaluation of
internal control to future periods are subject
to the risk that internal control may
become inadequate because of changes in
conditions, or that the degree of
compliance with the policies or procedures may
deteriorate.
Our consideration of internal control would not
necessarily disclose all matters in
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 specific 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 internal control, including
control activities for safeguarding
securities, and its operation that we consider
to be material weaknesses as defined
above as of March 31, 2000.
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 and
is not intended to be and should
not be used by anyone other than these
specified parties.
ERNST &
YOUNG LLP
May 25, 2000
FORM 10f-3 FUND: PaineWebber Financial
Services Growth Fund, Inc.
Record of Securities Purchased Under the Fund's
Rule 10f-3 Procedures
1. Issuer: Compu Credit Corp
2. Date of Purchase 2/16/00 3. Date
offering commenced: 2/16/00
4. Underwriters from whom purchased:
Donaldson Lufkin
5. "Affiliated Underwriter" managing or
participating in syndicate:
PaineWebber
6. Aggregate principal amount of shares
purchase: 10,000
7. Aggregate principal amount of offering:
4.6 million
8. Purchase price (net of fees and
expenses): 33.50
9. Secondary offering price: 33.50
10. Commission, spread or profit: %
$ 1.00
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.
Yes
b. The securities were purchased prior to
the end of the 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).
Yes
c. The underwriting was a firm commitment
underwriting.
Yes
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.
Yes
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.
Yes
(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.
Yes
g. The purchase price was less than 3% of
the Fund's total
assets.
Yes
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.
Yes
Approved: Date: 2/16/00
