<PAGE>
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
PERFORMANCE RESULTS
(UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------------- -----------------------------
12 MONTHS 6 MONTHS
09/30/97 03/31/97 09/30/96 ENDED 09/30/97 ENDED 09/30/97
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $30.52 $23.41 $23.82 49.07% 30.37%
- ---------------------------------------------------------------------------------
Class B Shares 29.70 22.87 23.27 47.93 29.86
- ---------------------------------------------------------------------------------
Class C Shares 29.66 22.84 23.27 47.92 29.86
- ---------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS A SHARES
<CAPTION>
NET ASSET VALUE
------------------ CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID 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
- ---------------------------------------------------------------------------------
01/01/97-09/30/97 22.80 30.52 -- -- 33.86
- ---------------------------------------------------------------------------------
Totals: $8.9319 $2.1102
- ---------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 09/30/97: 528.84%
- ---------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS B SHARES
<CAPTION>
NET ASSET VALUE
------------------ CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID 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
- ---------------------------------------------------------------------------------
01/01/97-09/30/97 22.32 29.70 -- -- 33.06
- ---------------------------------------------------------------------------------
Totals: $8.7054 $0.3913
- ---------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 09/30/97: 357.87%
- ---------------------------------------------------------------------------------
</TABLE>
/1/FIGURES ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
AT NET ASSET VALUE ON THE PAYABLE DATES AND DO NOT INCLUDE SALES CHARGES;
RESULTS WOULD BE LOWER IF SALES CHARGES WERE INCLUDED.
THE DATA ABOVE REPRESENTS PAST PERFORMANCE OF THE FUND'S SHARES, WHICH IS NO
GUARANTEE OF FUTURE RESULTS. THE PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND
WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST.
7
<PAGE>
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
PERFORMANCE RESULTS
(UNAUDITED) (CONCLUDED)
PERFORMANCE SUMMARY CLASS C SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN/1/
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/02/92-12/31/92 $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
- ---------------------------------------------------------------------
01/01/97-09/30/97 22.29 29.66 -- -- 33.06
- ---------------------------------------------------------------------
Totals: $8.7054 $0.3939
- ---------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 09/30/97: 219.35%
- ---------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
% RETURN WITHOUT % RETURN AFTER
DEDUCTING DEDUCTING
MAXIMUM SALES MAXIMUM SALES
CHARGE CHARGE
------------------- -------------------
CLASS CLASS
------------------- -------------------
A* B** C*** A* B** C***
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Twelve Months Ended 09/30/97 49.07% 47.93% 47.92% 42.37% 42.93% 46.92%
- -----------------------------------------------------------------------
Five Years Ended 09/30/97 26.58% 25.64% 25.63% 25.42% 25.48% 25.63%
- -----------------------------------------------------------------------
Ten Years Ended 09/30/97 20.09% N/A N/A 19.54% N/A N/A
- -----------------------------------------------------------------------
Commencement of Operations
Through 09/30/97+ 17.56% 27.52% 24.74% 17.08% 27.52% 24.74%
- -----------------------------------------------------------------------
</TABLE>
/1/FIGURES ASSUME REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
AT NET ASSET VALUE ON THE PAYABLE DATES AND DO NOT INCLUDE SALES CHARGES;
RESULTS WOULD BE LOWER IF SALES CHARGES WERE INCLUDED.
* MAXIMUM SALES CHARGE FOR CLASS A SHARES IS 4.5% OF THE PUBLIC OFFERING PRICE.
CLASS A SHARES BEAR ONGOING 12B-1 SERVICE FEES.
** MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS B SHARES IS 5.0% AND IS
REDUCED TO 0% AFTER 6 YEARS. CLASS B SHARES BEAR ONGOING 12B-1 DISTRIBUTION
AND SERVICE FEES.
*** MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C SHARES IS 1.0% AND IS
REDUCED TO 0% AFTER 1 YEAR. CLASS C SHARES BEAR ONGOING 12B-1 DISTRIBUTION
AND SERVICE FEES.
+ COMMENCEMENT OF ISSUANCE DATES ARE MAY 22, 1986, JULY 1, 1991 AND JULY 2,
1992 FOR CLASS A, CLASS B AND CLASS C SHARES, RESPECTIVELY.
NOTE: THE FUND OFFERS CLASS Y SHARES TO INSIGHT INVESTMENT ADVISORY PROGRAM
PARTICIPANTS. FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997, THERE WERE NO
CLASS Y SHARES OUTSTANDING.
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.
8
<PAGE>
PAINEWEBBER CAPITAL APPRECIATION FUND
PERFORMANCE RESULTS
(UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------------- -----------------------------
12 MONTHS 6 MONTHS
09/30/97 03/31/97 09/30/96 ENDED 09/30/97 ENDED 09/30/97
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $18.61 $13.44 $17.18 25.55% 38.47%
- ---------------------------------------------------------------------------------
Class B Shares 18.75 13.59 17.41 24.60 37.97
- ---------------------------------------------------------------------------------
Class C Shares 17.75 12.87 16.61 24.57 37.92
- ---------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS A SHARES
<CAPTION>
NET ASSET VALUE
------------------ CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN/1/
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
04/07/92-12/31/92 $9.55 $10.50 -- -- 9.95%
- ---------------------------------------------------------------------------------
1993 10.50 12.19 -- -- 16.10
- ---------------------------------------------------------------------------------
1994 12.19 11.98 $0.0433 -- (1.36)
- ---------------------------------------------------------------------------------
1995 11.98 14.67 0.7480 -- 28.79
- ---------------------------------------------------------------------------------
1996 14.67 14.92 2.3244 -- 17.87
- ---------------------------------------------------------------------------------
01/01/97-09/30/97 14.92 18.61 -- -- 24.73
- ---------------------------------------------------------------------------------
Totals: $3.1157 $0.0000
- ---------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 09/30/97: 138.40%
- ---------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS B SHARES
<CAPTION>
NET ASSET VALUE
------------------ CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN/1/
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
04/07/92-12/31/92 $10.00 $10.93 -- -- 9.30%
- ---------------------------------------------------------------------------------
1993 10.93 12.59 -- -- 15.19
- ---------------------------------------------------------------------------------
1994 12.59 12.28 $0.0433 -- (2.03)
- ---------------------------------------------------------------------------------
1995 12.28 14.94 0.7480 -- 27.73
- ---------------------------------------------------------------------------------
1996 14.94 15.11 2.3244 -- 17.01
- ---------------------------------------------------------------------------------
01/01/97-09/30/97 15.11 18.75 -- -- 24.09
- ---------------------------------------------------------------------------------
Totals: $3.1157 $0.0000
- ---------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 09/30/97: 128.75%
- ---------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS C SHARES
<CAPTION>
NET ASSET VALUE
------------------ CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN/1/
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/02/92-12/31/92 $8.89 $10.46 -- -- 17.66%
- ---------------------------------------------------------------------------------
1993 10.46 12.05 -- -- 15.20
- ---------------------------------------------------------------------------------
1994 12.05 11.75 $0.0433 -- (2.13)
- ---------------------------------------------------------------------------------
1995 11.75 14.26 0.7480 -- 27.82
- ---------------------------------------------------------------------------------
1996 14.26 14.31 2.3244 -- 16.98
- ---------------------------------------------------------------------------------
01/01/97-09/30/97 14.31 17.75 -- -- 24.04
- ---------------------------------------------------------------------------------
Totals: $3.1157 $0.0000
- ---------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 09/30/97: 146.04%
- ---------------------------------------------------------------------------------
</TABLE>
/1/FIGURES ASSUME REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS, IF ANY, 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.
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.
9
<PAGE>
PAINEWEBBER CAPITAL APPRECIATION FUND
PERFORMANCE RESULTS (UNAUDITED) (CONCLUDED)
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
% RETURN WITHOUT % RETURN AFTER
DEDUCTING DEDUCTING
MAXIMUM SALES MAXIMUM SALES
CHARGE CHARGE
------------------- -------------------
CLASS CLASS
------------------- -------------------
A* B** C*** A* B** C***
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Twelve Months Ended 09/30/97 25.55% 24.60% 24.57% 19.89% 19.60% 23.57%
- -----------------------------------------------------------------------
Five Years Ended 09/30/97 19.96% 19.05% 19.03% 18.87% 18.85% 19.03%
- -----------------------------------------------------------------------
Commencement of Operations
Through 09/30/97+ 17.16% 16.28% 18.70% 16.18% 16.19% 18.70%
- -----------------------------------------------------------------------
</TABLE>
* MAXIMUM SALES CHARGE FOR CLASS A SHARES IS 4.5% OF THE PUBLIC OFFERING PRICE.
CLASS A SHARES BEAR ONGOING 12B-1 SERVICE FEES.
** MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS B SHARES IS 5.0% AND IS
REDUCED TO 0% AFTER 6 YEARS. CLASS B SHARES BEAR ONGOING 12B-1 DISTRIBUTION
AND SERVICE FEES.
*** MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C SHARES IS 1.0% AND IS
REDUCED TO 0% AFTER 1 YEAR. CLASS C SHARES BEAR ONGOING 12B-1 DISTRIBUTION
AND SERVICE FEES.
+ COMMENCEMENT OF OPERATIONS DATES ARE APRIL 7, 1992 FOR CLASS A AND CLASS B
SHARES AND JULY 2, 1992 FOR CLASS C SHARES.
NOTE: THE FUND OFFERS CLASS Y SHARES TO INSIGHT INVESTMENT ADVISORY PROGRAM
PARTICIPANTS. FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997, THERE WERE NO
CLASS Y SHARES OUTSTANDING.
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.
10
<PAGE>
PAINEWEBBER UTILITY INCOME FUND
PERFORMANCE RESULTS
(UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------------- -----------------------------
12 MONTHS 6 MONTHS
09/30/97 03/31/97 09/30/96 ENDED 09/30/97 ENDED 09/30/97
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $11.75 $10.20 $9.77 24.08% 17.12%
- ---------------------------------------------------------------------------------
Class B Shares 11.75 10.20 9.77 23.07 16.68
- ---------------------------------------------------------------------------------
Class C Shares 11.74 10.20 9.77 23.01 16.61
- ---------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS A SHARES
<CAPTION>
NET ASSET VALUE
------------------ CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN/1/
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/02/93-12/31/93 $10.00 $9.70 -- $0.2340 (0.70)%
- ---------------------------------------------------------------------------------
1994 9.70 8.28 -- 0.4829 (9.71)
- ---------------------------------------------------------------------------------
1995 8.28 10.14 -- 0.4662 28.82
- ---------------------------------------------------------------------------------
1996 10.14 10.56 -- 0.3530 7.90
- ---------------------------------------------------------------------------------
01/01/97-09/30/97 10.56 11.75 -- 0.2425 13.75
- ---------------------------------------------------------------------------------
Totals: $0.0000 $1.7786
- ---------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 09/30/97: 41.74%
- ---------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS B SHARES
<CAPTION>
NET ASSET VALUE
------------------ CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN/1/
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/02/93-12/31/93 $10.00 $9.70 -- $0.2010 (1.02)%
- ---------------------------------------------------------------------------------
1994 9.70 8.28 -- 0.4169 (10.40)
- ---------------------------------------------------------------------------------
1995 8.28 10.14 -- 0.3980 27.87
- ---------------------------------------------------------------------------------
1996 10.14 10.56 -- 0.2756 7.06
- ---------------------------------------------------------------------------------
01/01/97-09/30/97 10.56 11.75 -- 0.1777 13.07
- ---------------------------------------------------------------------------------
Totals: $0.0000 $1.4692
- ---------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 09/30/97: 37.28%
- ---------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS C SHARES
<CAPTION>
NET ASSET VALUE
------------------ CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN/1/
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/02/93-12/31/93 $10.00 $9.70 -- $0.2020 (1.01)%
- ---------------------------------------------------------------------------------
1994 9.70 8.28 -- 0.4158 (10.41)
- ---------------------------------------------------------------------------------
1995 8.28 10.14 -- 0.3970 27.86
- ---------------------------------------------------------------------------------
1996 10.14 10.56 -- 0.2766 7.07
- ---------------------------------------------------------------------------------
01/01/97-09/30/97 10.56 11.74 -- 0.1800 13.00
- ---------------------------------------------------------------------------------
Totals: $0.0000 $1.4714
- ---------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 09/30/97: 37.19%
- ---------------------------------------------------------------------------------
</TABLE>
/1/FIGURES ASSUME REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS AT NET
ASSET VALUE ON THE PAYABLE DATES AND DO NOT INCLUDE SALE CHARGES; RESULTS
WOULD BE LOWER IF SALES CHARGES WERE INCLUDED.
THE DATA ABOVE REPRESENTS PAST PERFORMANCE OF THE FUND'S SHARES, WHICH IS NO
GUARANTEE OF FUTURE RESULTS. THE PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND
WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST.
11
<PAGE>
PAINEWEBBER UTILITY INCOME FUND
PERFORMANCE RESULTS
(UNAUDITED) (CONCLUDED)
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
% RETURN WITHOUT % RETURN AFTER
DEDUCTING DEDUCTING
MAXIMUM SALES MAXIMUM SALES
CHARGE CHARGE
------------------- -------------------
CLASS CLASS
------------------- -------------------
A* B** C*** A* B** C***
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Twelve Months Ended 09/30/97 24.08% 23.07% 23.01% 18.51% 18.07% 22.01%
- -----------------------------------------------------------------------
Commencement of Operations
Through 09/30/97+ 8.55% 7.74% 7.73% 7.39% 7.37% 7.73%
- -----------------------------------------------------------------------
</TABLE>
* MAXIMUM SALES CHARGE FOR CLASS A SHARES IS 4.5% OF THE PUBLIC OFFERING PRICE.
CLASS A SHARES BEAR ONGOING 12B-1 SERVICE FEES.
** MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS B SHARES IS 5.0% AND IS
REDUCED TO 0% AFTER 6 YEARS. CLASS B SHARES BEAR ONGOING 12B-1 DISTRIBUTION
AND SERVICE FEES.
*** MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C SHARES IS 1.0% AND IS
REDUCED TO 0% AFTER 1 YEAR. CLASS C SHARES BEAR ONGOING 12B-1 DISTRIBUTION
AND SERVICE FEES.
+ COMMENCEMENT OF OPERATIONS WAS JULY 2, 1993 FOR CLASS A, CLASS B AND CLASS C
SHARES.
NOTE: THE FUND OFFERS CLASS Y SHARES TO INSIGHT INVESTMENT ADVISORY PROGRAM
PARTICIPANTS. FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997, THERE WERE NO
CLASS Y SHARES OUTSTANDING.
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.
12
<PAGE>
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
<C> <S> <C>
COMMON STOCKS -- 85.93%
BUSINESS SERVICES -- 1.05%
80,000 Sterling Commerce Inc.*............................... $ 2,875,000
------------
FINANCIAL SERVICES -- 10.20%
32,500 American Express Co................................... 2,660,937
65,000 CCC Information Services Group, Inc.*................. 1,381,250
82,500 ContiFinancial Corp.*................................. 2,681,250
87,500 Countrywide Credit Industries, Inc.................... 3,188,281
65,000 Federal Home Loan Mortgage Corp....................... 2,291,250
33,500 Federal National Mortgage Association................. 1,574,500
45,000 Finova Group Inc...................................... 4,258,125
65,000 Homeside Inc.*........................................ 1,681,875
100,000 Medallion Financial Corp.............................. 2,175,000
82,500 Moneygram Payment Systems Inc.*....................... 1,479,844
40,000 Morgan Stanley, Dean Witter, Discover & Co............ 2,162,500
16,000 SLM Holding Corp...................................... 2,472,000
------------
28,006,812
------------
INSURANCE -- 28.15%
35,000 Ace Limited........................................... 3,290,000
30,000 Allstate Corp......................................... 2,411,250
80,000 Ambac Inc............................................. 3,255,000
90,000 Amerin Corp.*......................................... 2,581,875
85,000 AmerUs Life Holdings Inc.............................. 2,789,062
75,000 Berkley (W.R.) Corp................................... 3,229,687
25,000 Chubb Corp............................................ 1,776,563
55,000 Conseco Inc........................................... 2,684,688
71,000 Enhance Financial Services Group Inc.(1).............. 3,887,250
60,000 Everest Reinsurance Holdings Inc...................... 2,460,000
55,000 Executive Risk Inc.................................... 3,760,625
100,000 Frontier Insurance Group Inc.(1)...................... 3,800,000
22,500 Hartford Financial Services Group Inc................. 1,936,406
65,000 Hartford Life Inc..................................... 2,498,438
66,000 Horace Mann Educators Corp............................ 3,704,250
53,000 Liberty Financial Companies, Inc...................... 2,782,500
75,000 Life Re Corp.......................................... 3,965,625
90,000 Nationwide Financial Services Inc.*................... 2,508,750
85,000 Orion Capital Corp.................................... 3,851,562
95,000 PennCorp Financial Group, Inc.(1)..................... 2,945,000
80,000 Reinsurance Group of America, Inc..................... 3,270,000
103,000 ReliaStar Financial Corp.............................. 4,100,687
57,000 SunAmerica Inc........................................ 2,233,688
45,000 Travelers Group Inc................................... 3,071,250
65,000 Travelers Property Casualty Corp...................... 2,632,500
65,000 Western National Corp................................. 1,864,688
------------
77,291,344
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
<C> <S> <C>
MONEY CENTER BANKS -- 1.57%
21,250 Republic New York Corp................................ $ 2,414,531
16,000 The Chase Manhattan Corp.............................. 1,888,000
------------
4,302,531
------------
REAL PROPERTY -- 6.51%
85,000 Arden Realty Inc...................................... 2,666,875
80,000 CB Commercial Real Estate Services Group*............. 2,560,000
75,000 Cornerstone Properties Inc............................ 1,434,375
100,000 Excel Realty Trust Inc................................ 3,137,500
70,000 Spieker Properties Inc................................ 2,839,375
55,000 Starwood Lodging Corp................................. 3,159,062
125,000 Westfield America Inc................................. 2,078,125
------------
17,875,312
------------
REGIONAL BANKS -- 30.56%
100,000 Atlantic Bancorp*..................................... 1,440,000
45,000 BankAmerica Corp...................................... 3,299,062
30,000 BankBoston Corp....................................... 2,653,125
32,800 BankNorth Group, Inc.................................. 1,791,700
50,000 BB & T Corp........................................... 2,671,875
45,000 CCB Financial Corp.................................... 3,628,125
46,875 Chittenden Corp....................................... 1,804,688
44,000 Comerica Inc.......................................... 3,473,250
32,500 CoreStates Financial Corp............................. 2,151,094
70,000 Crestar Financial Corp................................ 3,281,250
55,000 Cullen Frost Bankers Inc.............................. 2,605,625
70,000 First American Corp. of Tennessee..................... 3,421,250
9,000 First Empire State Corp............................... 3,735,000
60,000 First Security Corp................................... 1,785,000
70,000 First Union Corp...................................... 3,504,375
59,062 First Western Bancorp, Inc............................ 1,594,674
25,000 Fleet Financial Group, Inc............................ 1,639,063
90,000 HUBCO, Inc............................................ 2,846,250
50,000 Marshall and IIsley Corp.............................. 2,531,250
45,000 NationsBank Corp...................................... 2,787,187
60,000 Northern Trust Corp................................... 3,547,500
55,000 Norwest Corp.......................................... 3,368,750
28,940 Old Kent Financial Corp............................... 1,866,630
35,000 Seacoast Banking Corp. of Florida..................... 1,242,500
70,000 SouthTrust Corp....................................... 3,447,500
63,750 Summit Bancorp, Inc................................... 2,832,891
70,000 Texas Regional Bankshares Inc......................... 2,187,500
55,000 Trans Financial Bancorp, Inc.......................... 1,753,125
25,481 US Bancorp of Oregon, Inc............................. 2,458,892
40,000 Westamerica Bancorporation............................ 3,490,000
</TABLE>
13
<PAGE>
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<C> <S> <C>
COMMON STOCKS -- (CONCLUDED)
REGIONAL BANKS -- (CONCLUDED)
45,000 Wilmington Trust Corp.................................. $ 2,458,125
70,000 Zions Bancorporation................................... 2,625,000
-----------
83,922,256
-----------
THRIFT INSTITUTIONS -- 7.89%
35,000 Ahmanson, H F & Co..................................... 1,988,438
50,000 Bank United Corp....................................... 2,212,500
40,437 Charter One Financial, Inc............................. 2,390,838
45,000 Coast Savings Financial, Inc.*......................... 2,359,687
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
<C> <S> <C>
THRIFT INSTITUTIONS -- (CONCLUDED)
75,000 Commonwealth Bancorp Inc.............................. $ 1,350,000
60,000 Dime Bancorp Inc. New................................. 1,256,250
50,000 Dime Community Bancorp Inc............................ 1,018,750
30,000 First Palm Beach Bancorp Inc.......................... 1,044,375
50,000 Golden State Bancorp Inc.*............................ 1,493,750
39,999 Queens County Bancorp Inc............................. 2,072,448
15,000 RCSB Financial Inc.................................... 817,500
52,500 Washington Mutual, Inc.(1)............................ 3,661,875
------------
21,666,411
------------
Total Common Stocks (cost -- $151,544,810)....................... 235,939,666
------------
</TABLE>
MONEY MARKET FUND -- 0.87%
2,393,674 Liquid Assets Portfolio (cost--$2,393,674)........... 2,393,674
------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES
---------- -------- --------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS -- 2.18%
$ 6,000 U.S. Treasury Bills (cost -- $5,988,375)(1).............................. 10/16/97 4.650%@ 5,988,375
------------
REPURCHASE AGREEMENTS -- 12.86%
11,000 Repurchase agreement dated 09/30/97 with Citicorp Securities, Inc.,
collateralized by $9,810,000 U.S. Treasury Bonds, 7.500%, due 11/15/16;
proceeds; $11,001,833................................................... 10/01/97 6.000 11,000,000
12,000 Repurchase agreement dated 09/30/97 with Daiwa Securities America, Inc.,
collateralized by $9,160,000 U.S. Treasury Bonds, 9.125%, due 05/15/18;
proceeds; $12,002,017................................................... 10/01/97 6.050 12,000,000
12,315 Repurchase agreement dated 09/30/97 with Salomon Brothers, Inc.,
collateralized by $10,450,000 U.S. Treasury Bonds, 8.125%, due 08/15/19;
proceeds; $12,317,052................................................... 10/01/97 6.000 12,315,000
------------
Total Repurchase Agreements (cost -- $35,315,000)................................... 35,315,000
------------
<CAPTION>
NUMBER OF
SHARES
----------
<S> <C> <C> <C> <C>
INVESTMENT OF CASH COLLATERAL FOR SECURITIES LOANED -- 7.14%
MONEY MARKET FUNDS -- 2.81%
10,062,026 Liquid Assets Portfolio.................................................. 7,668,352
37,748 Prime Portfolio.......................................................... 37,748
------------
Total Money Market Funds (cost -- $7,706,100)....................................... 7,706,100
------------
<CAPTION>
PRINCIPAL
AMOUNT
(000)
----------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENT -- 4.33%
11,896 Repurchase agreement dated 09/30/97 with Union Bank of Switzerland,
collateralized by $11,752,000 U.S. Treasury Notes, 6.375%, due 05/15/99;
proceeds; $11,897,999 (cost -- $11,896,000)............................. 10/01/97 6.050 11,896,000
------------
Total Investments of Cash Collateral for Securities Loaned (Cost--$19,602,100)...... 19,602,100
------------
Total Investments (cost -- $214,843,959) -- 108.98%................................. 299,238,815
Liabilities in excess of other assets -- (8.98)%.................................... (24,638,165)
------------
Net Assets 100.00%.................................................................. $274,600,650
============
</TABLE>
- ---------
*NON-INCOME PRODUCING SECURITY
@YIELD TO MATURITY AT DATE OF PURCHASE
(1)SECURITY, OR PORTION THEREOF, WAS ON LOAN AT SEPTEMBER 30, 1997
See accompanying notes to financial statements
14
<PAGE>
PAINEWEBBER CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
<C> <S> <C>
COMMON STOCKS -- 96.01%
AIRLINES -- 0.14%
13,500 Southwest Airlines Co. ............................... $ 431,156
------------
APPAREL, RETAIL -- 0.96%
24,000 Stein Mart Inc.*...................................... 786,000
67,600 TJX Companies, Inc. (1)............................... 2,066,025
------------
2,852,025
------------
APPAREL, TEXTILES -- 1.17%
23,700 Jones Apparel Group Inc.*............................. 1,279,800
54,250 Unifi Inc. ........................................... 2,220,859
------------
3,500,659
------------
CHEMICALS -- 0.78%
17,800 Cytec Industries Inc.*................................ 852,175
29,100 Praxair, Inc. ........................................ 1,489,556
------------
2,341,731
------------
COMPUTER HARDWARE -- 2.00%
20,000 Cisco Systems, Inc.*.................................. 1,461,250
23,200 EMC Corp.*............................................ 1,354,300
16,600 Security Dynamics Tech Inc. .......................... 616,275
37,500 Sun Microsystems Inc.*................................ 1,755,469
10,900 Sync Research Inc.*................................... 42,237
18,400 Western Digital Corp.*................................ 737,150
------------
5,966,681
------------
COMPUTER SOFTWARE -- 6.15%
47,100 Cadence Design Systems Inc.*.......................... 2,519,850
11,800 Compuware Corp.*...................................... 713,900
9,800 Edwards J D & Co. .................................... 328,300
29,400 Electronic Arts Inc.*................................. 1,135,575
20,550 Harbinger Corp.*...................................... 747,506
47,000 ICG Communications Inc.*.............................. 1,151,500
32,050 McAfee Associates Inc.*............................... 1,698,650
99,075 Oracle Systems Corp.*................................. 3,610,046
59,300 Peoplesoft Inc.*...................................... 3,543,175
14,280 Registry Inc. ........................................ 658,665
62,400 Sterling Commerce Inc.*............................... 2,242,500
------------
18,349,667
------------
CONSUMER DURABLES -- 1.39%
136,850 Pier 1 Imports Inc. .................................. 2,454,747
38,300 Samsonite Corp. New (1)............................... 1,680,412
------------
4,135,159
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
<C> <S> <C>
DEFENSE/AEROSPACE -- 0.24%
12,500 Sundstrand Corp. ..................................... $ 720,313
------------
DIVERSIFIED RETAIL -- 2.13%
145,100 Family Dollar Stores Inc. ............................ 3,310,094
35,200 Kohls Corp.*.......................................... 2,499,200
25,900 Saks Holdings Inc.*................................... 540,662
------------
6,349,956
------------
DRUGS & MEDICINE -- 3.34%
7,000 Andrx Corp. .......................................... 318,500
73,100 Biochem Pharmaceuticals Inc.*......................... 2,302,650
42,800 Forest Labs Inc.*..................................... 1,802,950
58,700 North American Vaccine Inc.* (1)...................... 1,482,175
68,240 Watson Pharmaceuticals, Inc.*......................... 4,077,340
------------
9,983,615
------------
ELECTRIC UTILITIES -- 1.69%
115,404 AES Corp.*............................................ 5,048,925
------------
ELECTRICAL EQUIPMENT -- 4.82%
39,000 ADC Telecommunications Inc.*.......................... 1,267,500
1,700 Ciena Corp. .......................................... 82,684
21,900 Hadco Corp. .......................................... 1,186,022
14,400 KLA-Tencor Corp.*..................................... 972,900
134,800 Pairgain Technologies Inc. ........................... 3,841,800
67,600 SCI Systems Inc.* (1)................................. 3,350,425
44,700 Solectron Corp.*...................................... 1,989,150
32,800 Tellabs, Inc.*........................................ 1,689,200
------------
14,379,681
------------
ELECTRICAL POWER -- 0.51%
56,600 Westinghouse Electric Corp. .......................... 1,531,738
------------
ENERGY RESERVES & PRODUCTION -- 4.08%
69,700 Anadarko Petroleum Corp. ............................. 5,005,331
100,600 Apache Corp. (1)...................................... 4,313,225
68,100 Pioneer Natural Resources Co. ........................ 2,851,688
------------
12,170,244
------------
ENTERTAINMENT -- 1.15%
108,200 Westwood One Inc.*.................................... 3,435,350
------------
</TABLE>
15
<PAGE>
PAINEWEBBER CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
ENVIRONMENTAL SERVICES -- 2.86%
47,100 Newpark Resources Inc.*............................... $ 1,851,619
181,200 Philip Services Corp. ................................ 3,306,900
18,300 Republic Industries Inc.* (1)......................... 602,756
69,600 USA Waste Services Inc.* (1).......................... 2,775,300
------------
8,536,575
------------
FINANCIAL SERVICES -- 1.36%
16,800 Credit Acceptance Corp.*.............................. 233,100
13,600 Green Tree Financial Corp. ........................... 639,200
55,866 Mutual Risk Management Limited........................ 2,838,691
53,200 World Acceptance Corp.*............................... 352,450
------------
4,063,441
------------
FREIGHT, AIR, SEA, LAND -- 0.87%
29,400 Tidewater Inc. ....................................... 1,741,950
25,900 US Freightways Corp. ................................. 870,888
------------
2,612,838
------------
HOTELS -- 2.90%
42,400 Four Seasons Hotels Inc............................... 1,738,400
68,200 HFS Inc.*............................................. 5,076,637
82,300 Prime Hospitality Corp.* (1).......................... 1,856,894
------------
8,671,931
------------
HOUSEHOLD PRODUCTS -- 0.56%
41,500 Newell Co. ........................................... 1,660,000
------------
INDUSTRIAL PARTS -- 1.25%
31,100 Culligan Water Technologies Inc....................... 1,430,600
35,900 Ionics Inc.*.......................................... 1,590,819
31,400 Rental Service Corp................................... 704,537
------------
3,725,956
------------
INDUSTRIAL SERVICES/SUPPLIES -- 1.50%
46,500 Apollo Group Inc...................................... 1,970,438
81,118 CUC International, Inc.*.............................. 2,514,658
------------
4,485,096
------------
INFORMATION & COMPUTER SERVICES -- 5.23%
35,800 A. C. Nielson Corp.................................... 859,200
33,400 America Online Inc.* ................................. 2,519,612
21,900 CKS Group Inc. (1).................................... 821,250
21,500 Concord EFS Inc....................................... 580,500
14,700 Fiserv Inc. .......................................... 644,963
89,000 HBO & Co.............................................. 3,359,750
58,800 Medaphis Corp.*....................................... 418,950
75,100 Snyder Communications Inc. (1)........................ 2,065,250
55,050 Sylvan Learning Systems Inc.*......................... 2,415,319
60,125 Technology Solutions Co.*............................. 1,939,031
------------
15,623,825
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
<C> <S> <C>
LEISURE -- 0.45%
38,200 Callaway Golf Co. .................................... $ 1,332,225
------------
LONG DISTANCE & PHONE COMPANIES -- 4.99%
21,700 Intermedia Communications of Florida Inc.* (1)........ 1,018,544
33,700 Teleport Communications Group Inc.*................... 1,512,287
349,592 WorldCom, Inc.* (1)................................... 12,366,817
------------
14,897,648
------------
MEDIA -- 1.59%
33,000 Clear Channel Communications.......................... 2,140,875
16,900 Emmis Broadcasting Corp. ............................. 806,975
33,700 Tribune Co. .......................................... 1,796,631
------------
4,744,481
------------
MEDICAL PRODUCTS -- 1.87%
25,500 Arrow International Inc............................... 844,688
23,500 Guidant Corp. ........................................ 1,316,000
5,900 Lifecore Biomedical Inc............................... 106,200
19,700 Sola International Inc.*.............................. 675,956
61,400 Sybron International Corp.*........................... 2,636,362
------------
5,579,206
------------
MEDICAL PROVIDERS -- 11.53%
40,300 Access Health Inc.*................................... 1,390,350
50,295 Concentra Managed Care Inc. (1)....................... 1,776,042
12,700 FPA Medical Management Inc............................ 436,563
73,700 Genesis Health Ventures Inc.* (1)..................... 2,869,694
79,987 Health Management Associates Inc.*.................... 2,529,589
45,400 HEALTHSOUTH Corp.* (1)................................ 1,211,613
131,800 Loewen Group Inc...................................... 3,632,737
35,200 Orthodontic Centers America Inc. (1).................. 704,000
162,500 Oxford Health Plans Inc.*............................. 12,167,187
35,700 Pediatrix Medical Group*.............................. 1,575,263
69,175 Phycor Inc.* (1)...................................... 2,010,398
36,900 Total Renal Care Holdings Inc.*....................... 1,845,000
39,400 Wellpoint Health Networks Inc. ....................... 2,282,737
------------
34,431,173
------------
MOTOR VEHICLES -- 1.68%
27,700 Cooper Tire & Rubber Co............................... 735,781
81,800 Gentex Corp.*......................................... 2,029,662
33,900 Lear Corp.*........................................... 1,669,575
17,300 OEA Inc............................................... 594,688
------------
5,029,706
------------
OIL SERVICES -- 7.39%
43,600 BJ Services Co.*...................................... 3,237,300
43,190 Camco International Inc. ............................. 3,012,503
100,300 Falcon Drilling (1)................................... 3,541,844
</TABLE>
16
<PAGE>
PAINEWEBBER CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<C> <S> <C> <C>
COMMON STOCKS -- (CONCLUDED)
OIL SERVICES -- (CONCLUDED)
85,800 Nabors Industries Inc.* (1)........................ $ 3,340,837
95,300 Noble Drilling Corp. .............................. 3,073,425
67,900 Reading & Bates Corp.*............................. 2,822,094
63,200 Transocean Offshore Inc. .......................... 3,029,650
-----------
22,057,653
-----------
OTHER INSURANCE -- 2.35%
17,500 Executive Risk Inc. ............................... 1,196,562
85,676 Frontier Insurance Group Inc. (1).................. 3,255,688
20,600 Hartford Life Inc. ................................ 791,813
30,700 MGIC Investment Corp. ............................. 1,759,494
-----------
7,003,557
-----------
REAL PROPERTY -- 0.25%
28,100 Wilmar Industries Inc.*............................ 758,700
-----------
SEMICONDUCTOR -- 5.87%
11,900 Applied Materials Inc.*............................ 1,133,475
78,800 Atmel Corp. ....................................... 2,871,275
12,700 Lattice Semiconductor Corp.* ...................... 827,087
23,700 Maxim Integrated Productions Inc.*................. 1,693,069
35,700 Microchip Technology Inc.*......................... 1,612,078
42,800 Micron Technology, Inc.* (1)....................... 1,484,625
65,300 National Semiconductor Corp.*...................... 2,677,300
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
<C> <S> <C>
SEMICONDUCTOR -- (CONCLUDED)
15,600 Novellus Systems Inc.* (1)............................ $ 1,965,600
22,300 Uniphase Corp.*....................................... 1,772,850
10,700 Unitrode Corp. ....................................... 793,137
13,500 Xilinx Inc.*.......................................... 683,438
------------
17,513,934
------------
SPECIALTY RETAIL -- 9.47%
73,400 Bed, Bath & Beyond Inc.* (1).......................... 2,578,175
147,900 Consolidated Stores Corp.*............................ 6,193,312
16,200 CVS Corp. ............................................ 921,375
140,589 Dollar General Corp. ................................. 4,788,804
123,850 Home Shopping Network Inc. ........................... 5,031,406
80,500 Lowe's Companies Inc. ................................ 3,129,438
17,200 MSC Industrial Direct Inc., Class A*.................. 791,200
91,300 United States Office Products Co. (1)................. 3,218,325
62,200 Zale Corp.*........................................... 1,613,313
------------
28,265,348
------------
WIRELESS TELECOMMUNICATIONS -- 1.49%
16,200 Advanced Fibre Communications......................... 664,200
29,500 Concentric Network Corp. Delaware..................... 383,500
27,700 Nokia Corp. ADR....................................... 2,598,606
23,100 Premiere Technologies Inc............................. 788,288
------------
4,434,594
------------
Total Common Stocks (cost -- $171,072,473)....................... 286,624,787
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATE RATE
---------- -------- --------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT -- 3.75%
$11,206 Repurchase Agreement dated 09/30/97
with State Street Bank & Trust Co.,
collateralized by $11,436,543 U.S.
Treasury Bonds, 12.000% due
08/15/13;
proceeds; $11,207,556 (cost --
$11,206,000)...................... 10/01/97 5.000% 11,206,000
----------
<CAPTION>
NUMBER OF
SHARES
----------
<C> <S> <C> <C> <C>
INVESTMENT OF CASH COLLATERAL FOR SECURITIES LOANED -- 14.81%
MONEY MARKET FUNDS -- 5.95%
14,009,182 Liquid Assets Portfolio............. 14,009,182
2,544,568 Prime Portfolio..................... 2,544,568
73,349 TempCash Portfolio.................. 73,349
1,149,105 TempFund Portfolio.................. 1,149,105
----------
Total Money Market Funds (cost--$17,776,204).... 17,776,204
----------
</TABLE>
17
<PAGE>
PAINEWEBBER CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------- -------- ------------
<C> <S> <C> <C> <C>
INVESTMENT OF CASH COLLATERAL FOR SECURITIES LOANED -- (CONCLUDED)
REPURCHASE AGREEMENTS -- 8.86%
$13,243 Repurchase Agreement dated
09/30/97 with Dresdner Bank AG,
collateralized by $13,508,581
U.S. Treasury Notes, 5.875% due
04/30/98;
proceeds: $13,245,170............ 10/01/97 5.900% $ 13,243,000
13,200 Repurchase Agreement dated
09/30/97 with Union Bank of Swit-
zerland,
collateralized by $13,464,280
U.S. Treasury Notes, 6.000% due
05/31/98;
proceeds: $13,202,218............ 10/01/97 6.050 13,200,000
------------
Total Repurchase Agreements (cost --
$26,443,000)................................ 26,443,000
------------
Total Investments of Cash Collateral for
Securities Loaned (cost -- $44,219,204)...... 44,219,204
------------
Total Investments (cost -- $226,497,677) --
114.57%..................................... 342,049,991
Liabilities in excess of other assets --
(14.57)%.................................... (43,498,825)
------------
Net Assets -- 100.00%........................ $298,551,166
============
</TABLE>
- ---------
*NON-INCOME PRODUCING SECURITY
ADR AMERICAN DEPOSITARY RECEIPT
(1)SECURITY, OR PORTION THEREOF, WAS ON LOAN AT SEPTEMBER 30, 1997.
See accompanying notes to financial statements
18
<PAGE>
PAINEWEBBER UTILITY INCOME FUND
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<C> <S> <C> <C> <C> <C>
COMMON STOCKS -- 87.37%
ELECTRIC UTILITIES -- 34.27%
12,500 Allegheny Power Systems Inc................ $ 378,125
22,500 Baltimore Gas & Electric Co................ 624,375
17,500 Boston Edison Co........................... 537,031
18,000 Carolina Power & Light..................... 646,875
15,000 CILCORP Inc................................ 627,187
14,000 CMS Energy Corp. .......................... 518,000
25,000 DPL Inc.................................... 612,500
20,000 DQE Inc.................................... 675,000
25,000 Edison International Inc................... 631,250
13,000 FPL Group Inc.............................. 666,250
15,000 New Century Energies Inc................... 623,437
15,000 NIPSCO Industries Inc...................... 631,875
15,000 Ohio Edison Co............................. 351,563
22,500 PECO Energy Co............................. 527,344
30,000 Public Service Co. of New Mexico........... 579,375
20,000 Puget Sound Power & Light Co............... 532,500
21,000 SCANA Corp................................. 526,313
17,500 Sierra Pacific Resources................... 561,094
22,500 Southern Co.(1)............................ 507,656
20,000 Wisconsin Energy Corp...................... 520,000
-----------
11,277,750
-----------
FINANCIAL SERVICES -- 2.84%
20,000 INMC Mortgage Holdings Inc................. 500,000
20,000 Medallion Financial Corp................... 435,000
-----------
935,000
-----------
GAS UTILITY -- 10.36%
30,000 AGL Resources Inc.......................... 568,125
25,000 CMS Energy Corp., Class G.................. 539,063
10,000 El Paso Natural Gas Co..................... 605,625
20,000 MCN Energy Group Inc. ..................... 640,000
17,500 NICOR Inc.................................. 656,250
20,000 Public Service Co. of North Carolina....... 401,250
-----------
3,410,313
-----------
INFORMATION & COMPUTER SERVICES -- 0.17%
2,000 International Telecomm Data
Systems Inc.*............................. 55,000
-----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<C> <S> <C> <C> <C> <C>
LONG DISTANCE & PHONE COMPANIES -- 18.41%
7,500 Ameritech Corp............................. $ 498,750
5,688 Bell Atlantic Corp......................... 457,528
11,000 BellSouth Corp............................. 508,750
10,000 Brooks Fiber Properties, Inc.*............. 466,875
10,000 GTE Corp................................... 453,750
20,000 LCI International Inc.*.................... 532,500
9,000 SBC Communications Inc..................... 552,375
25,000 Smartalk Teleservices Inc.*(1)............. 618,750
12,500 Telco Communications Group Inc.*........... 409,375
12,000 Teleport Communications Group Inc.*........ 538,500
15,000 US West Communications Group............... 577,500
12,564 WorldCom, Inc.*............................ 444,452
-----------
6,059,105
-----------
MEDIA -- 0.83%
5,000 Univision Communications Inc.*............. 271,250
-----------
REAL PROPERTY -- 18.47%
25,000 Ambassador Apartments Inc.................. 595,313
20,000 Cousins Properties Inc..................... 598,750
17,000 Crescent Real Estate Equities.............. 682,125
27,500 Excel Realty Trust Inc..................... 862,812
22,500 Franchise Finance Corp. America............ 620,156
18,000 Spieker Properties Inc..................... 730,125
12,000 Starwood Lodging Corp...................... 689,250
10,000 Storage USA Inc............................ 406,250
18,000 Sun Communities............................ 645,750
15,000 Westfield America Inc...................... 249,375
-----------
6,079,906
-----------
WATER -- 2.02%
30,000 American Water Works Co. Inc............... 663,750
-----------
Total Common Stocks (cost -- $21,840,011)............. 28,752,074
-----------
</TABLE>
19
<PAGE>
PAINEWEBBER UTILITY INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------- -------- -----------
<C> <S> <C> <C> <C>
CORPORATE BONDS -- 8.99%
CABLE -- 3.58%
$ 300 Comcast Cable Communications....... 05/01/17 8.875% $ 341,237
750 TCI Communications, Inc............ 03/31/27 9.650 834,789
-----------
1,176,026
-----------
ELECTRIC UTILITIES -- 3.88%
750 Georgia Power Co................... 02/01/23 7.950 763,649
500 Texas Utilities Electric Capital... 01/30/37 8.175 514,015
-----------
1,277,664
-----------
PUBLISHING -- 1.53%
500 News America Holdings Inc.......... 10/17/96 8.250 503,939
-----------
Total Corporate Bonds (cost -- $2,772,266).... 2,957,629
-----------
CONVERTIBLE BOND -- 1.93%
CABLE -- 1.93%
650 International Cabletel Inc.
(cost -- $650,000)................ 06/15/08 7.000 635,375
-----------
REPURCHASE AGREEMENT -- 1.67%
550 Repurchase agreement dated 09/30/97
with State Street Bank and Trust
Co., collateralized by $384,846
U.S. Treasury Bonds, 12.000%, due
08/15/13;
proceeds; $550,076 (cost --
$550,000)........................ 10/01/97 5.000 550,000
-----------
<CAPTION>
NUMBER OF
SHARES
---------
<C> <S> <C> <C> <C>
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED -- 3.18%
MONEY MARKET FUNDS -- 3.18%
1,004,600 Liquid Assets Portfolio............ 1,004,600
42,700 TempCash Portfolio................. 42,700
-----------
Total Investments of Cash Collateral For Secu-
rities Loaned (cost -- $1,047,300)........... 1,047,300
-----------
Total Investments (cost -- $26,859,577) --
103.14%..................................... 33,942,378
Liabilities in excess of other assets --
(3.14)%..................................... (1,032,278)
-----------
Net Assets -- 100.00%......................... $32,910,100
===========
</TABLE>
- ---------
*NON-INCOME PRODUCING SECURITY
(1)SECURITY, OR PORTION THEREOF, WAS ON LOAN AT SEPTEMBER 30, 1997
See accompanying notes to financial statements
20
<PAGE>
PAINEWEBBER
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 (UNAUDITED)
--------------------------------------
FINANCIAL CAPITAL UTILITY
SERVICES APPRECIATION INCOME
GROWTH FUND FUND FUND
------------ ------------ -----------
<S> <C> <C> <C>
ASSETS
Investments in securities, at value
(cost--$159,926,859, $171,072,473,
and $25,262,277 respectively)........ $244,321,715 $286,624,787 $32,345,078
Repurchase Agreements (cost--
$35,315,000, $11,206,000, and
$550,000, respectively).............. 35,315,000 11,206,000 550,000
Investments of Cash Collateral for
Securities Loaned (cost--$21,995,774,
$44,219,204 and $1,047,300,
respectively)........................ 19,602,100 44,219,204 1,047,300
Receivable for investments sold....... 2,887,440 4,529,903 6,874
Receivable for fund shares sold....... -- 226,652 --
Dividends and interest receivable..... 454,276 125,961 172,432
Deferred organizational expenses...... -- -- 21,157
Other assets.......................... 76,812 24,164 39,736
------------ ------------ -----------
Total assets.......................... 302,657,343 346,956,671 34,182,577
------------ ------------ -----------
LIABILITIES
Collateral for securities loaned...... 19,602,100 44,118,759 1,047,300
Payable for investments purchased..... 5,327,083 3,076,829 --
Payable for fund shares repurchased... 218,451 392,307 88,277
Payable to affiliate.................. 274,192 419,286 41,085
Due to custodian...................... 2,390,848 -- 17,858
Accrued expenses and other
liabilities.......................... 244,019 398,324 77,957
------------ ------------ -----------
Total liabilities..................... 28,056,693 48,405,505 1,272,477
------------ ------------ -----------
NET ASSETS
Capital Stock/Beneficial Interest
shares of $0.001 par value
outstanding.......................... 174,091,902 137,210,040 31,048,506
Accumulated net investment income
(loss)............................... 1,277,364 (2,332,422) 10,510
Accumulated net realized gains
(losses) from investments............ 14,836,528 48,121,234 (5,231,717)
Net unrealized appreciation of
investments.......................... 84,394,856 115,552,314 7,082,801
------------ ------------ -----------
Net assets............................ $274,600,650 $298,551,166 $32,910,100
============ ============ ===========
CLASS A:
Net assets............................ $139,831,546 $101,969,980 $ 6,550,527
------------ ------------ -----------
Shares outstanding.................... 4,582,385 5,479,471 557,725
------------ ------------ -----------
Net asset and redemption value per
share................................ $30.52 $18.61 $11.75
====== ====== ======
Maximum offering price per share (net
asset value plus sales charge of
4.50% of offering price)............. $31.95 $19.49 $12.30
====== ====== ======
CLASS B:
Net assets............................ $102,781,605 $166,180,297 $19,837,647
------------ ------------ -----------
Shares outstanding.................... 3,460,563 8,865,244 1,688,317
------------ ------------ -----------
Net asset value and offering price per
share................................ $29.70 $18.75 $11.75
====== ====== ======
CLASS C:
Net assets............................ $ 31,987,499 $ 30,400,889 $ 6,521,926
------------ ------------ -----------
Shares outstanding.................... 1,078,402 1,712,987 555,398
------------ ------------ -----------
Net asset value and offering price per
share................................ $29.66 $17.75 $11.74
====== ====== ======
</TABLE>
See accompanying notes to financial statements
21
<PAGE>
PAINEWEBBER
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
FINANCIAL CAPITAL UTILITY
SERVICES APPRECIATION INCOME
GROWTH FUND FUND FUND
----------- ------------ ----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends................................. $ 1,515,297 $ 276,611 $ 635,858
Interest.................................. 849,240 176,058 188,863
----------- ----------- ----------
2,364,537 452,669 824,721
----------- ----------- ----------
EXPENSES:
Investment advisory and administration.... 690,034 1,343,487 114,248
Service fees--Class A..................... 138,648 111,966 7,636
Service and distribution fees--Class B.... 328,137 756,498 99,953
Service and distribution fees--Class C.... 103,038 135,452 32,719
Transfer agency and service............... 70,864 121,565 24,019
Custody and accounting.................... 59,146 80,927 10,577
Reports and notices to shareholders....... 42,101 96,670 36,116
Federal and state registration fees....... 40,891 49,455 33,819
Legal and audit........................... 38,950 51,567 34,387
Amortization of organizational expenses... -- 650 14,134
Directors/Trustees' fees.................. 5,250 5,250 5,250
Other expenses............................ 11,192 32,233 17,927
----------- ----------- ----------
1,528,251 2,785,720 430,785
----------- ----------- ----------
NET INVESTMENT INCOME (LOSS).............. 836,286 (2,333,051) 393,936
----------- ----------- ----------
REALIZED AND UNREALIZED GAINS FROM
INVESTMENT ACTIVITIES:
Net realized gains from investment
transactions............................. 7,873,789 28,139,877 542,131
Net change in unrealized
appreciation/depreciation of investments. 42,432,976 59,689,839 4,082,899
----------- ----------- ----------
NET REALIZED AND UNREALIZED GAINS FROM
INVESTMENT ACTIVITIES.................... 50,306,765 87,829,716 4,625,030
----------- ----------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS............................... $51,143,051 $85,496,665 $5,018,966
=========== =========== ==========
</TABLE>
See accompanying notes to financial statements
22
<PAGE>
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
SEPTEMBER 30, 1997 YEAR ENDED
(UNAUDITED) MARCH 31, 1997
------------------ --------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income........................ $ 836,286 $ 701,720
Net realized gains from investment
transactions................................ 7,873,789 15,834,386
Net change in unrealized
appreciation/depreciation of investments.... 42,432,976 9,457,066
------------ ------------
Net increase in net assets resulting from
operations.................................. 51,143,051 25,993,172
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income--Class A............... -- (672,645)
Net investment income--Class B............... -- (73,321)
Net investment income--Class C............... -- (31,544)
Net realized gains from investment
transactions--Class A....................... -- (9,905,437)
Net realized gains from investment
transactions--Class B....................... -- (4,194,912)
Net realized gains from investment
transactions--Class C....................... -- (1,240,890)
------------ ------------
Total dividends and distributions to
shareholders................................ -- (16,118,749)
------------ ------------
FROM CAPITAL STOCK TRANSACTIONS:
Net proceeds from the sale of shares......... 155,436,169 72,986,530
Cost of shares repurchased................... (71,575,759) (55,705,343)
Proceeds from dividends reinvested........... -- 13,302,440
------------ ------------
Net increase in net assets from capital stock
transactions................................ 83,860,410 30,583,627
------------ ------------
Net increase in net assets................... 135,003,461 40,458,050
NET ASSETS:
Beginning of period.......................... 139,597,189 99,139,139
------------ ------------
End of period (including undistributed net
investment income of
$1,277,364 and $441,078, respectively)...... $274,600,650 $139,597,189
============ ============
</TABLE>
See accompanying notes to financial statements
23
<PAGE>
PAINEWEBBER CAPITAL APPRECIATION FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
SEPTEMBER 30, 1997 YEAR ENDED
(UNAUDITED) MARCH 31, 1997
------------------ --------------
<S> <C> <C>
FROM OPERATIONS:
Net investment loss.......................... $ (2,333,051) $ (4,625,849)
Net realized gains from investment
transactions................................ 28,139,877 43,647,978
Net change in unrealized
appreciation/depreciation of investments.... 59,689,839 (39,065,630)
------------ ------------
Net increase (decrease) in net assets
resulting from operations................... 85,496,665 (43,501)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gains from investment
transactions--Class A....................... -- (11,486,154)
Net realized gains from investment
transactions--Class B....................... -- (21,420,626)
Net realized gains from investment
transactions--Class C....................... -- (4,124,987)
------------ ------------
Total distributions to shareholders.......... -- (37,031,767)
------------ ------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares......... 19,137,761 49,527,172
Cost of shares repurchased................... (42,297,168) (72,555,703)
Proceeds from dividends reinvested........... -- 35,137,523
------------ ------------
Net increase (decrease) in net assets from
beneficial interest transactions............ (23,159,407) 12,108,992
------------ ------------
Net increase (decrease) in net assets........ 62,337,258 (24,966,276)
NET ASSETS:
Beginning of period.......................... 236,213,908 261,180,184
------------ ------------
End of period (including undistributed net
investment income of
$629 at March 31, 1997)..................... $298,551,166 $236,213,908
============ ============
</TABLE>
See accompanying notes to financial statements
24
<PAGE>
PAINEWEBBER UTILITY INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
SEPTEMBER 30, 1997 YEAR ENDED
(UNAUDITED) MARCH 31, 1997
------------------ --------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income........................ $ 393,936 $ 1,140,891
Net realized gains from investment
transactions................................ 542,131 3,613,062
Net change in unrealized
appreciation/depreciation of investments.... 4,082,899 (1,498,897)
------------ ------------
Net increase in net assets resulting from
operations.................................. 5,018,966 3,255,056
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income--Class A............... (103,197) (235,539)
Net investment income--Class B............... (256,756) (647,343)
Net investment income--Class C............... (90,968) (212,445)
------------ ------------
Total dividends to shareholders.............. (450,921) (1,095,327)
------------ ------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares......... 4,234,148 5,928,914
Cost of shares repurchased................... (10,330,947) (30,023,725)
Proceeds from dividends reinvested........... 420,753 700,359
------------ ------------
Net decrease in net assets from beneficial
interest transactions....................... (5,676,046) (23,394,452)
------------ ------------
Net decrease in net assets................... (1,108,001) (21,234,723)
NET ASSETS:
Beginning of period.......................... 34,018,101 55,252,824
------------ ------------
End of period (including undistributed net
investment income of
$10,510 and $67,495, respectively).......... $ 32,910,100 $ 34,018,101
============ ============
</TABLE>
See accompanying notes to financial statements
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(UNAUDITED)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Financial Services Growth Fund Inc. ("Financial Services Growth
Fund"), PaineWebber Capital Appreciation Fund ("Capital Appreciation Fund") and
PaineWebber Utility Income Fund ("Utility Income Fund") (collectively, the
"Funds") are registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended, as diversified open-end management
investment companies. Financial Services Growth Fund was incorporated in the
state of Maryland on February 13, 1986, Capital Appreciation Fund is a series
of PaineWebber Managed Asset Trust and Utility Income Fund is a series of
PaineWebber Managed Investments Trust (collectively, the "Trusts") which were
organized under Massachusetts law by a Declaration of Trust dated August 9,
1991 and November 21, 1986, respectively. Organizational costs have been de-
ferred and are being amortized using the straight line method over a period not
to exceed 60 months from the date the Funds commenced operations.
Currently, each Fund offers Class A, Class B, Class C and Class Y shares. Each
Fund had no Class Y shares outstanding during the period. Each class represents
interests in the same assets of the applicable Fund, and the classes are iden-
tical 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.
The preparation of financial statements in accordance with generally accepted
accounting principles requires Fund management to make estimates and assump-
tions that affect the reported amounts and disclosures in the financial state-
ments. Actual results could differ from those estimates. The following is a
summary of significant accounting policies:
Valuation of Investments--Securities which are listed on stock exchanges are
valued at the last sales price on the day the securities are being 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 Man-
agement Inc. ("Mitchell Hutchins"), a wholly owned asset management subsidiary
of PaineWebber Incorporated ("PaineWebber") and investment adviser, administra-
tor and distributor of the Financial Services Growth Fund and the Utility In-
come Fund and by Denver Investment Advisors, LLC, ("Denver Investment"), the
sub-adviser of ("Sub-Adviser") the Capital Appreciation Fund. Securities traded
in the over-the-counter ("OTC") market and listed on the Nasdaq Stock Market,
Inc. ("Nasdaq") are valued at the last available sales price, or last bid price
available if no sale occurs on Nasdaq prior to the time of valuation. Where
market quotations are readily available, debt securities are valued thereon,
provided such quotations adequately reflect the fair values of the securities
in the judgement of Mitchell Hutchins or Denver Investment, as applicable. When
market quotations are not readily available, securities are valued based upon
appraisals derived from information concerning those securities or similar se-
curities received from recognized dealers in those securities. The amortized
cost method of valuation is used to value short-term debt instruments with
sixty days or less remaining to maturity. Securities for which market quota-
tions are not readily available including restricted securities subject to lim-
itations as to their sale are valued at fair value as determined in good faith
by, or under the direction of, the Fund's/Trusts' Board of Directors/Trustees.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(UNAUDITED)
Repurchase Agreements--Each Fund's custodian takes possession of the collat-
eral pledged for investments in repurchase agreements. The underlying collat-
eral is valued daily on a mark-to-market basis to ensure that the value, in-
cluding accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, each Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the obliga-
tion. 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. Each Fund occasionally participates in
joint repurchase agreement transactions with other funds managed by Mitchell
Hutchins.
Investment Transactions and Investment Income--Investment transactions are re-
corded on the trade date. Realized gains and losses from investment transac-
tions are calculated using the identified cost method. Interest income is re-
corded on an accrual basis. Dividend income is recorded on the ex-dividend
date. Discounts are accreted and premiums are amortized as adjustments to in-
terest income and the identified costs 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 (af-
ter 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
are determined in accordance with federal income tax regulations, which may
differ from generally accepted accounting principles. These "book/tax" differ-
ence are either considered temporary or 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
Financial Services Growth Fund invests primarily in equity securities of fi-
nancial services companies and Utility Income Fund invests primarily in securi-
ties of utility companies. Economic, legislative and regulatory developments
impacting those industries may affect the market value of each Fund's invest-
ments. Capital Appreciation Fund invests in securities of medium-sized and
smaller companies which entail greater market volatility and risks of adverse
financial developments than is the case for securities of larger companies. In
addition, each Funds' ability to invest in U.S. dollar-denominated foreign eq-
uity securities and ability to use options and futures contracts also entail
special risks.
INVESTMENT ADVISER AND ADMINISTRATOR
Each Fund has an Investment Advisory and Administration Contract ("Advisory
Contract") with Mitchell Hutchins, under which Mitchell Hutchins serves as in-
vestment adviser and administrator of the Funds. In accordance with the Advi-
sory Contracts, Financial Services Growth Fund, Capital Appreciation Fund and
Utility Income Fund pay Mitchell Hutchins an investment advisory and adminis-
tration fee, which is accrued daily and paid monthly, at the annual rate of
0.70%, 1.00% and 0.70%, respectively, of
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(UNAUDITED)
each Funds' average daily net assets. At September 30, 1997, Financial Services
Growth Fund, Capital Appreciation Fund and Utility Income Fund owed Mitchell
Hutchins $146,450, $240,446, and $18,531 respectively, in investment advisory
and administration fees.
Under a separate contract, Mitchell Hutchins (not the Fund) pays the Sub Ad-
viser of the Capital Appreciation Fund, a monthly fee in an amount equal to 50%
of the fee paid to Mitchell Hutchins under the Advisory Contract.
For the six months ended September 30, 1997, Financial Services Growth Fund,
Capital Appreciation Fund and the Utility Income Fund paid $5,796, $0 and $0,
respectively, in brokerage commissions to PaineWebber for transactions executed
on behalf of the Fund.
DISTRIBUTION PLANS
Mitchell Hutchins is the distributor of each Fund's shares and has appointed
PaineWebber as the exclusive dealer for the sale of those shares. Under sepa-
rate plans of service and/or distribution pertaining to Class A, Class B and
Class C shares, the Funds pay Mitchell Hutchins monthly service fees at an an-
nual 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, 1997,
Financial Services Growth Fund, Capital Appreciation Fund, and Utility Income
Fund owed Mitchell Hutchins $127,742, $178,840 and $22,554 respectively, in
service and distribution fees.
Mitchell Hutchins also receives the proceeds of the initial sales charges paid
by shareholders upon the purchase of Class A shares and the contingent deferred
sales charges paid by shareholders upon certain redemptions of Class A, Class B
and Class C shares. Mitchell Hutchins has informed each Fund that for the six
months ended September 30, 1997 it had earned $753,685, $184,928, and $49,069
in sales charges for the Financial Services Growth Fund, Capital Appreciation
Fund and Utility Income Fund, respectively.
SECURITY LENDING
Each Fund may lend up to 33 1/3% of its total assets to qualified institu-
tions. 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. Each
Fund will regain record ownership of loaned securities to exercise certain ben-
eficial rights, however, each Fund may bear the risk of delay in recovery of,
or even loss of rights in, the securities loaned should the borrower fail fi-
nancially. Each Fund receives compensation, which is included in interest in-
come, for
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(UNAUDITED)
lending its securities from interest earned on the cash or U.S. government se-
curities held as collateral, net of fee rebates paid to the borrower plus rea-
sonable administrative and custody fees. Each Fund's lending agent is
PaineWebber, who received compensation from the Funds for the six months ended
September 30, 1997 as follows:
<TABLE>
<S> <C>
Financial Services Growth Fund............. $ 5,434
Capital Appreciation Fund.................. $19,296
Utility Income Fund........................ $ 300
</TABLE>
As of September 30, 1997, each Fund held cash and/or cash equivalents as col-
lateral and market values of securities loaned as follows:
<TABLE>
<CAPTION>
COLLATERAL MARKET VALUE
FOR SECURITIES OF SECURITIES
LOANED LOANED
-------------- -------------
<S> <C> <C>
Financial Services Growth Fund. $19,602,100 $18,239,325
Capital Appreciation Fund...... $44,118,759 $42,518,231
Utility Income Fund............ $ 1,047,300 $ 1,012,640
</TABLE>
BANK LINE OF CREDIT
Each Fund may participate with other funds managed by Mitchell Hutchins in a
$200 million committed credit facility ("Facility") to be utilized for tempo-
rary financing until the settlement of sale or purchase of portfolio securi-
ties, the repurchase or redemption of shares of each Fund at the request of the
shareholders and other temporary or emergency purposes. In connection there-
with, each Fund has agreed to pay a commitment fee, pro rata, based on the rel-
ative asset size of the Funds in the Facility. Interest is charged to each Fund
at rates based on prevailing market rates in effect at the time of borrowings.
For the six months ended September 30, 1997, the Funds did not borrow under the
Facility.
TRANSFER AGENCY SERVICE FEES
Prior to August 1, 1997, each Fund paid PaineWebber an annual fee of $4.00 per
active PaineWebber shareholder account for certain services not provided by the
Fund's transfer agent. For these services for the four months ended July 31,
1997, PaineWebber earned $14,088, $28,077, and $4,244 from Financial Services
Growth Fund, Capital Appreciation Fund and Utility Income Fund, respectively.
Subsequent to August 1, 1997, PaineWebber provides transfer agency related
services to each 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 Funds.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at September 30,
1997 was substantially the same as the cost of securities for financial state-
ment purposes.
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(UNAUDITED)
At September 30, 1997, the components of net unrealized appreciation of in-
vestments were as follows:
<TABLE>
<CAPTION>
FINANCIAL
SERVICES CAPITAL UTILITY
GROWTH APPRECIATION INCOME
FUND FUND FUND
----------- ------------ ----------
<S> <C> <C> <C>
Gross appreciation (investments having
an excess of value over cost).......... $84,537,087 $118,600,993 $7,344,023
Gross depreciation (investments having
an excess of cost over value).......... (142,231) (3,048,679) (261,222)
----------- ------------ ----------
Net unrealized appreciation of
investments............................ $84,394,856 $115,552,314 $7,082,801
=========== ============ ==========
</TABLE>
For the six months ended September 30, 1997, total aggregate purchases and
sales of portfolio securities, excluding short-term securities, were as fol-
lows:
<TABLE>
<CAPTION>
FINANCIAL
SERVICES CAPITAL UTILITY
GROWTH APPRECIATION INCOME
FUND FUND FUND
----------- ------------ ----------
<S> <C> <C> <C>
Purchases................................... $86,952,550 $ 71,440,996 $1,198,469
Sales....................................... $18,228,368 $100,200,418 $7,320,310
</TABLE>
FEDERAL TAX STATUS
The Funds intend to distribute substantially all of their 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 sub-
stantially all of their net investment income, capital gains and certain other
amounts, if any, the Funds intend not to be subject to a federal excise tax.
At March 31, 1997, Utility Income Fund had a net capital loss carryforward of
$5,773,848 which will expire by March 31, 2003. To the extent such losses are
used, as provided in the regulations, to offset future net realized capital
gains, it is probable these gains will not be distributed.
CAPITAL STOCK/BENEFICIAL INTEREST
There are 300 million shares of $0.001 par value common stock authorized for
the Financial Services Growth Fund. Transactions in common stock were as fol-
lows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------------------ ---------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL SERVICES
GROWTH FUND
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1997
Shares sold............. 2,444,348 $ 65,854,954 2,004,919 $54,078,387 1,345,125 $ 35,502,828
Shares repurchased...... (1,595,679) (42,825,368) (286,534) (7,616,452) (807,757) (21,133,939)
Shares converted from
Class B to Class A..... 74,097 2,005,197 (75,978) (2,005,197) -- --
Dividends reinvested.... -- -- -- -- -- --
---------- ------------ --------- ----------- ---------- ------------
Net increase............ 922,766 $ 25,034,783 1,642,407 $44,456,738 537,368 $ 14,368,889
========== ============ ========= =========== ========== ============
FOR THE YEAR ENDED MARCH
31, 1997
Shares sold............. 1,113,912 $ 26,533,887 776,675 $18,827,973 1,174,919 $ 27,624,670
Shares repurchased...... (946,302) (22,225,854) (398,605) (9,493,411) (1,023,207) (23,986,078)
Shares converted from
Class B to Class A..... 92,207 2,144,531 (94,299) (2,144,531) -- --
Dividends reinvested.... 375,301 8,305,421 178,094 3,859,299 52,575 1,137,720
---------- ------------ --------- ----------- ---------- ------------
Net increase............ 635,118 $ 14,757,985 461,865 $11,049,330 204,287 $ 4,776,312
========== ============ ========= =========== ========== ============
</TABLE>
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(UNAUDITED)
There is an unlimited amount of $0.001 par value shares of beneficial interest
authorized for the Capital Appreciation Fund and the Utility Fund. Transactions
in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------------------ ------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL APPRECIATION
FUND
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1997
Shares sold............. 598,321 $ 9,932,173 237,545 $ 3,935,151 338,512 $ 5,270,437
Shares repurchased...... (1,005,160) (16,248,284) (1,106,885) (17,699,913) (553,589) (8,348,971)
Shares converted from
Class B to Class A..... 163,922 2,685,075 (162,431) (2,685,075) -- --
Dividends reinvested.... -- -- -- -- -- --
---------- ------------ ---------- ------------ -------- ------------
Net decrease............ (242,917) $ (3,631,036) (1,031,771) $(16,449,837) (215,077) $ (3,078,534)
========== ============ ========== ============ ======== ============
FOR THE YEAR ENDED MARCH
31, 1997
Shares sold............. 1,503,465 $ 24,453,506 836,560 $ 13,630,373 750,047 $ 11,443,293
Shares repurchased...... (1,739,943) (28,153,504) (1,892,839) (30,262,849) (929,189) (14,139,350)
Shares converted from
Class B to Class A..... 303,527 4,759,952 (299,572) (4,759,952) -- --
Dividends reinvested.... 750,634 10,974,277 1,361,871 20,169,309 284,672 3,993,937
---------- ------------ ---------- ------------ -------- ------------
Net increase (decrease). 817,683 $ 12,034,231 6,020 $ (1,223,119) 105,530 $ 1,297,880
========== ============ ========== ============ ======== ============
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
--------------------- ------------------------ ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ----------- ---------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
UTILITY INCOME FUND
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1997
Shares sold............. 44,125 $ 486,035 23,836 $ 259,504 323,935 $ 3,488,609
Shares repurchased...... (112,724) (1,204,598) (396,974) (4,251,184) (453,664) (4,875,165)
Shares converted from
Class B to Class A..... 25,044 269,481 (25,048) (269,481) -- --
Dividends reinvested.... 9,213 101,028 21,343 234,667 7,745 85,058
-------- ----------- ---------- ------------ -------- -----------
Net decrease............ (34,342) $ (348,054) (376,843) $ (4,026,494) (121,984) $(1,301,498)
======== =========== ========== ============ ======== ===========
FOR THE YEAR ENDED MARCH
31, 1997
Shares sold............. 31,806 $ 320,817 105,433 $ 1,042,199 438,359 $ 4,565,898
Shares repurchased...... (451,582) (4,514,693) (1,612,857) (16,178,370) (911,460) (9,330,662)
Shares converted from
Class B to Class A..... 32,221 326,093 (32,241) (326,093) -- --
Dividends reinvested.... 14,673 145,098 40,939 404,457 15,259 150,804
-------- ----------- ---------- ------------ -------- -----------
Net decrease............ (372,882) $(3,722,685) (1,498,726) $(15,057,807) (457,842) $(4,613,960)
======== =========== ========== ============ ======== ===========
</TABLE>
31
<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 FOR THE YEARS ENDED MARCH 31,
SEPTEMBER 30, 1997 --------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $23.41 $21.16 $17.11 $16.92 $19.45 $13.36
-------- ------- ------- ------- ------- -------
Net investment income
(loss)................. 0.10 0.18 0.30 0.25 0.15 0.10
Net realized and
unrealized gains
(losses) from
investments............ 7.01 5.69 6.25 1.34 (0.76) 6.01
-------- ------- ------- ------- ------- -------
Net increase (decrease)
from investment
operations............. 7.11 5.87 6.55 1.59 (0.61) 6.11
-------- ------- ------- ------- ------- -------
Dividends from net
investment income...... -- (0.23) (0.29) (0.13) (0.08) (0.02)
Distributions from net
realized gains from
investment
transactions........... -- (3.39) (2.21) (1.27) (1.84) --
-------- ------- ------- ------- ------- -------
Total dividends and
distributions.......... -- (3.62) (2.50) (1.40) (1.92) (0.02)
-------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $30.52 $23.41 $21.16 $17.11 $16.92 $19.45
======== ======= ======= ======= ======= =======
Total investment return
(1).................... 30.37% 28.72% 39.02% 10.22% (3.14)% 46.79%
======== ======= ======= ======= ======= =======
Ratios/Supplemental
Data:
Net assets, end of
period (000's)......... $139,832 $85,661 $64,003 $49,295 $48,032 $61,645
Expenses to average net
assets................. 1.22%* 1.52% 1.37% 1.45% 1.44% 1.87%
Net investment income
(loss) to average net
assets................. 1.17%* 0.90% 1.50% 1.40% 0.76% 0.60%
Portfolio turnover rate. 11% 40% 53% 14% 22% 28%
Average commission rate
paid (2)............... $0.0596 $0.0600 -- -- -- --
</TABLE>
- ---------
* ANNUALIZED
+ COMMENCEMENT OF ISSUANCE OF SHARES
(1) TOTAL INVESTMENT RETURN IS CALCULATED ASSUMING A $1,000 INVESTMENT ON THE
FIRST DAY OF EACH PERIOD REPORTED, REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS AT NET ASSET VALUE ON THE PAYABLE DATES AND A SALE AT NET
ASSET VALUE ON THE LAST DAY OF EACH PERIOD REPORTED. THE FIGURES DO NOT
INCLUDE SALES CHARGES; RESULTS WOULD BE LOWER IF SALES CHARGES WERE
INCLUDED. TOTAL INVESTMENT RETURN FOR PERIODS LESS THAN ONE YEAR HAS NOT
BEEN ANNUALIZED.
(2) EFFECTIVE FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, THE
FUND IS REQUIRED TO DISCLOSE THE AVERAGE COMMISSION RATE PAID PER SHARE OF
COMMON STOCK INVESTMENTS PURCHASED OR SOLD.
32
<PAGE>
<TABLE>
<CAPTION>
CLASS B
- --- ---------------------------------------------------------------
FOR THE
SIX MONTHS ENDED FOR THE YEARS ENDED MARCH 31,
- --- SEPTEMBER 30, 1997 --------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
- --- ------------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$22.87 $20.75 $16.85 $16.71 $19.34 $13.36
-------- ------- ------- ------- ------- -------
0.04 0.04 0.13 0.11 0.02 (0.01)
6.79 5.53 6.16 1.33 (0.75) 5.99
-------- ------- ------- ------- ------- -------
6.83 5.57 6.29 1.44 (0.73) 5.98
-------- ------- ------- ------- ------- -------
-- (0.06) (0.18) (0.03) (0.06) --
-- (3.39) (2.21) (1.27) (1.84) --
-------- ------- ------- ------- ------- -------
-- (3.45) (2.39) (1.30) (1.90) --
-------- ------- ------- ------- ------- -------
$29.70 $22.87 $20.75 $16.85 $16.71 $19.34
======== ======= ======= ======= ======= =======
29.86% 27.74% 37.97% 9.37% (3.83)% 44.76%
======== ======= ======= ======= ======= =======
$102,782 $41,579 $28,147 $16,368 $11,517 $10,364
1.97%* 2.27% 2.12% 2.22% 2.16% 2.45%
0.44%* 0.15% 0.74% 0.67% 0.05% (0.03)%
11% 40% 53% 14% 22% 28%
$0.0596 $0.0600 -- -- -- --
<CAPTION>
CLASS C
- ---- -------------------------------------------------------------------------
FOR THE FOR THE PERIOD
SIX MONTHS ENDED FOR THE YEARS ENDED MARCH 31, JULY 2, 1992+ TO
- ---- SEPTEMBER 30, 1997 ------------------------------------- MARCH 31,
(UNAUDITED) 1997 1996 1995 1994 1993
- ---- ------------------ --------- -------- -------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
$22.84 $20.75 $ 16.86 $16.71 $ 19.34 $14.61
------------------ --------- -------- -------- --------- ----------------
0.06 0.06 0.12 0.11 0.01 --
6.76 5.51 6.16 1.33 (0.73) 4.77
------------------ --------- -------- -------- --------- ----------------
6.82 5.57 6.28 1.44 (0.72) 4.77
------------------ --------- -------- -------- --------- ----------------
-- (0.09) (0.18) (0.02) (0.07) (0.04)
-- (3.39) (2.21) (1.27) (1.84) --
------------------ --------- -------- -------- --------- ----------------
-- (3.48) (2.39) (1.29) (1.91) (0.04)
------------------ --------- -------- -------- --------- ----------------
$29.66 $22.84 $ 20.75 $ 16.86 $ 16.71 $19.34
================== ========= ======== ======== ========= ================
29.86% 27.74% 37.92% 9.34% (3.76)% 32.66%
================== ========= ======== ======== ========= ================
$31,987 $ 12,357 $ 6,989 $ 4,160 $ 4,370 $4,636
1.97%* 2.28% 2.14% 2.23% 2.17% 2.36%*
0.44%* 0.15% 0.72% 0.61% 0.03% 0.01%*
11% 40% 53% 14% 22% 28%
$0.0596 $ 0.0600 -- -- -- --
</TABLE>
33
<PAGE>
PAINEWEBBER CAPITAL APPRECIATION FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------
FOR THE FOR THE YEARS ENDED FOR THE PERIOD
SIX MONTHS ENDED MARCH 31, APRIL 7, 1992+ TO
SEPTEMBER 30, 1997 ------------------------------------- MARCH 31,
(UNAUDITED) 1997 1996 1995 1994 1993
------------------ ------- ------- ------- ------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $13.44 $15.61 $12.81 $11.65 $10.53 $ 9.55
-------- ------- ------- ------- ------- -------
Net investment loss..... (0.10) (0.17) (0.16) (0.09) (0.09) (0.06)
Net realized and
unrealized gains from
investments............ 5.27 0.32 3.71 1.29 1.21 1.04
-------- ------- ------- ------- ------- -------
Net increase from
investment operations.. 5.17 0.15 3.55 1.20 1.12 0.98
-------- ------- ------- ------- ------- -------
Distributions from net
realized gains from
investments............ -- (2.32) (0.75) (0.04) -- --
-------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $18.61 $13.44 $15.61 $12.81 $11.65 $10.53
======== ======= ======= ======= ======= =======
Total investment return
(1).................... 38.47 % (0.21)% 28.16 % 10.36 % 10.64 % 10.26 %
======== ======= ======= ======= ======= =======
Ratios/Supplemental
Data:
Net assets, end of
period (000's)......... $101,970 $76,909 $76,558 $62,673 $58,523 $48,582
Expenses to average net
assets................. 1.57 %* 1.60 % 1.58 % 1.58 % 1.54 % 1.72 %*
Net investment loss to
average net assets..... (1.22)%* (1.20)% (1.11)% (0.79)% (0.84)% (0.78)%*
Portfolio turnover rate. 27 % 56 % 57 % 42 % 60 % 51 %
Average commission rate
paid (2)............... $0.0484 $0.0475 -- -- -- --
</TABLE>
- ---------
* ANNUALIZED
+ COMMENCEMENT OF OPERATIONS
# COMMENCEMENT OF ISSUANCE OF SHARES
(1) TOTAL INVESTMENT RETURN IS CALCULATED ASSUMING A $1,000 INVESTMENT ON THE
FIRST DAY OF EACH PERIOD REPORTED, REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS, IF ANY, AT NET ASSET VALUE ON THE PAYABLE DATES, AND A SALE
AT NET ASSET VALUE ON THE LAST DAY OF EACH PERIOD REPORTED. THE FIGURES DO
NOT INCLUDE SALES CHARGES; RESULTS WOULD BE LOWER IF SALES CHARGES WERE
INCLUDED. TOTAL INVESTMENT RETURN FOR PERIODS OF LESS THAN ONE YEAR HAS NOT
BEEN ANNUALIZED.
(2) EFFECTIVE FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, THE
FUND IS REQUIRED TO DISCLOSE THE AVERAGE COMMISSION RATE PAID PER SHARE OF
COMMON STOCK INVESTMENTS PURCHASED OR SOLD.
34
<PAGE>
<TABLE>
<CAPTION>
CLASS B
- ---------------------------------------------------------------------------------
FOR THE FOR THE YEARS ENDED FOR THE PERIOD
SIX MONTHS ENDED MARCH 31, APRIL 7, 1992+ TO
SEPTEMBER 30, 1997 ----------------------------------------- MARCH 31,
(UNAUDITED) 1997 1996 1995 1994 1993
- ------------------ -------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
$13.59 $15.88 $13.11 $12.02 $10.94 $10.00
-------- -------- -------- -------- -------- --------
(0.17) (0.31) (0.29) (0.20) (0.17) (0.11)
5.33 0.34 3.81 1.33 1.25 1.05
-------- -------- -------- -------- -------- --------
5.16 0.03 3.52 1.13 1.08 0.94
-------- -------- -------- -------- -------- --------
-- (2.32) (0.75) (0.04) -- --
-------- -------- -------- -------- -------- --------
$18.75 $13.59 $15.88 $13.11 $12.02 $10.94
======== ======== ======== ======== ======== ========
37.97 % (0.99)% 27.28 % 9.46 % 9.87 % 9.40 %
======== ======== ======== ======== ======== ========
$166,180 $134,495 $157,021 $139,302 $133,828 $105,490
2.32 %* 2.36 % 2.34 % 2.34 % 2.30 % 2.49 %*
(1.98)%* (1.95)% (1.87)% (1.56)% (1.60)% (1.55)%*
27 % 56 % 57 % 42 % 60 % 51 %
$ 0.0484 $ 0.0475 -- -- -- --
<CAPTION>
CLASS C
- ----------------------------------------------------------------------------
FOR THE FOR THE YEARS ENDED FOR THE PERIOD
SIX MONTHS ENDED MARCH 31, JULY 2, 1992# TO
SEPTEMBER 30, 1997 --------------------------------------- MARCH 31,
(UNAUDITED) 1997 1996 1995 1994 1993
------------------ --------- --------- --------- --------- ----------------
<C> <C> <C> <C> <C> <C>
$12.87 $15.14 $12.54 $11.50 $10.47 $ 8.89
------------------ --------- --------- --------- --------- ----------------
(0.16) (0.29) (0.27) (0.19) (0.10) (0.05)
5.04 0.34 3.62 1.27 1.13 1.63
------------------ --------- --------- --------- --------- ----------------
4.88 0.05 3.35 1.08 1.03 1.58
------------------ --------- --------- --------- --------- ----------------
-- (2.32) (0.75) (0.04) -- --
------------------ --------- --------- --------- --------- ----------------
$17.75 $12.87 $15.14 $12.54 $11.50 $10.47
================== ========= ========= ========= ========= ================
37.92 % (0.91)% 27.16 % 9.45 % 9.84 % 17.77 %
================== ========= ========= ========= ========= ================
$30,401 $24,810 $27,601 $24,993 $29,884 $13,806
2.35 %* 2.37 % 2.36 % 2.35 % 2.28 % 2.31 %*
(2.00)%* (1.97)% (1.89)% (1.57)% (1.58)% (1.53)%*
27 % 56 % 57 % 42 % 60 % 51 %
$0.0484 $0.0475 -- -- -- --
</TABLE>
35
<PAGE>
PAINEWEBBER UTILITY INCOME FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------------
FOR THE FOR THE YEARS
FOR THE FOR THE FOUR MONTHS ENDED FOR THE PERIOD
SIX MONTHS ENDED YEAR ENDED ENDED NOVEMBER 30, JULY 2, 1993+ TO
SEPTEMBER 30, 1997 MARCH 31, MARCH 31, ----------------- NOVEMBER 30,
(UNAUDITED) 1997 1996 1995 1994 1993
------------------ ---------- ----------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $10.20 $ 9.76 $ 9.77 $ 8.31 $ 9.66 $10.00
------- ------- ------- ------- ------- -------
Net investment income... 0.17 0.34 0.15 0.47 0.48 0.20
Net realized and
unrealized gains
(losses) from
investments............ 1.57 0.41 -- 1.44 (1.31) (0.39)
------- ------- ------- ------- ------- -------
Net increase (decrease)
from investment
operations............. 1.74 0.75 0.15 1.91 (0.83) (0.19)
------- ------- ------- ------- ------- -------
Dividends from net
investment income...... (0.19) (0.31) (0.16) (0.45) (0.52) (0.15)
------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $11.75 $10.20 $ 9.76 $ 9.77 $ 8.31 $ 9.66
======= ======= ======= ======= ======= =======
Total investment
return(1).............. 17.12% 7.83% 1.46% 23.64% (8.76)% (1.95)%
======= ======= ======= ======= ======= =======
Ratios/Supplemental
Data:
Net assets, end of
period (000's)......... $6,551 $6,039 $9,416 $10,750 $12,532 $16,224
Expenses to average net
assets, net of waivers
from adviser........... 2.03%* 1.93% 1.09%* 1.49% 1.58% 1.55%*
Expenses to average net
assets, before waivers
from adviser........... 2.03%* 2.00% 1.44%* 1.49% 1.58% 1.55%*
Net investment income to
average net assets, net
of waivers from
adviser................ 3.02%* 3.27% 4.26%* 5.13% 5.49% 5.38%*
Net investment income to
average net assets,
before waivers from
adviser................ 3.02%* 3.20% 3.91%* 5.13% 5.49% 5.38%*
Portfolio turnover rate. 4% 41% 21% 30% 92% 13%
Average commission rate
paid(2)................ $0.0612 $0.0600 $0.0600 -- -- --
</TABLE>
- ---------
* ANNUALIZED
+ COMMENCEMENT OF OPERATIONS
(1) TOTAL INVESTMENT RETURN IS CALCULATED ASSUMING A $1,000 INVESTMENT ON THE
FIRST DAY OF EACH PERIOD REPORTED, REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS AT NET ASSET VALUE ON THE PAYABLE DATES, AND A SALE AT NET
ASSET VALUE ON THE LAST DAY OF EACH PERIOD REPORTED. THE FIGURES DO NOT
INCLUDE SALES CHARGES; RESULTS WOULD BE LOWER IF SALES CHANGES WERE
INCLUDED. TOTAL INVESTMENT RETURN FOR PERIODS OF LESS THAN ONE YEAR HAS NOT
BEEN ANNUALIZED.
(2) EFFECTIVE FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, THE
FUND IS REQUIRED TO DISCLOSE THE AVERAGE COMMISSION RATE PAID PER SHARE OF
COMMON STOCK INVESTMENTS PURCHASED OR SOLD.
36
<PAGE>
<TABLE>
<CAPTION>
CLASS B
- ----------------------------------------------------------------------------
FOR THE FOR THE YEARS FOR THE PERIOD
FOR THE FOR THE FOUR MONTHS ENDED JULY 2, 1993+
SIX MONTHS ENDED YEAR ENDED ENDED NOVEMBER 30, TO
SEPTEMBER 30, 1997 MARCH 31, MARCH 31, ---------------- NOVEMBER 30,
(UNAUDITED) 1997 1996 1995 1994 1993
- ------------------ ---------- ----------- ------- ------- --------------
<S> <C> <C> <C> <C> <C>
$10.20 $ 9.75 $ 9.77 $ 8.31 $ 9.65 $10.00
------ ------- ------- ------- ------- -------
0.13 0.26 0.12 0.40 0.42 0.17
1.56 0.42 (0.01) 1.45 (1.31) (0.39)
------ ------- ------- ------- ------- -------
1.69 0.68 0.11 1.85 (0.89) (0.22)
------ ------- ------- ------- ------- -------
(0.14) (0.23) (0.13) (0.39) (0.45) (0.13)
------ ------- ------- ------- ------- -------
$11.75 $10.20 $ 9.75 $ 9.77 $ 8.31 $ 9.65
====== ======= ======= ======= ======= =======
16.68% 7.05% 1.10% 22.73% (9.35)% (2.29)%
====== ======= ======= ======= ======= =======
$19,838 $21,071 $34,765 $37,554 $37,156 $45,382
2.78%* 2.69% 1.85%* 2.23% 2.33% 2.29%*
2.78%* 2.76% 2.20%* 2.23% 2.33% 2.29%*
2.28%* 2.51% 3.51%* 4.37% 4.72% 4.67%*
2.28%* 2.44% 3.16%* 4.37% 4.72% 4.67%*
4% 41% 21% 30% 92% 13%
$0.0612 $0.0600 $0.0600 -- -- --
<CAPTION>
CLASS C
- ----------------------------------------------------------------------------
FOR THE FOR THE YEARS FOR THE PERIOD
FOR THE FOR THE FOUR MONTHS ENDED JULY 2, 1993+
SIX MONTHS ENDED YEAR ENDED ENDED NOVEMBER 30, TO
SEPTEMBER 30, 1997 MARCH 31, MARCH 31, ------------------ NOVEMBER 30,
(UNAUDITED) 1997 1996 1995 1994 1993
------------------ ---------- ----------- -------- --------- --------------
<C> <C> <C> <C> <C> <C>
$10.20 $ 9.75 $ 9.77 $ 8.31 $ 9.65 $10.00
------------------ ---------- ----------- -------- --------- --------------
0.12 0.25 0.12 0.40 0.42 0.16
1.57 0.43 (0.01) 1.45 (1.31) (0.38)
------------------ ---------- ----------- -------- --------- --------------
1.69 0.68 0.11 1.85 (0.89) (0.22)
------------------ ---------- ----------- -------- --------- --------------
(0.15) (0.23) (0.13) (0.39) (0.45) (0.13)
------------------ ---------- ----------- -------- --------- --------------
$11.74 $10.20 $ 9.75 $ 9.77 $ 8.31 $ 9.65
================== ========== =========== ======== ========= ==============
16.61% 7.06% 1.10% 22.71% (9.36)% (2.28)%
================== ========== =========== ======== ========= ==============
$ 6,522 $6,909 $11,072 $12,222 $13,922 $17,866
2.79%* 2.70% 1.85%* 2.24% 2.32% 2.29%*
2.79%* 2.76% 2.20%* 2.24% 2.32% 2.29%*
2.27%* 2.51% 3.50%* 4.37% 4.69% 4.67%*
2.27%* 2.44% 3.15%* 4.37% 4.69% 4.67%*
4% 41% 21% 30% 92% 13%
$0.0612 $0.0600 $0.0600 -- -- --
</TABLE>
37
