<PAGE>
PAINEWEBBER S&P 500 INDEX FUND ANNUAL REPORT
----------------------------
| |
| PAINEWEBBER |
| S&P 500 Index Fund |
| FUND PROFILE |
| |
|o GOAL: |
| Replicate the total |
| return of the S$P 500 |
| Index |
| |
|o PORTFOLIO MANAGERS: |
| T.Kirkham Barneby |
| Mitchell Hutchins Asset |
| Management Inc. |
| |
|o TOTAL NET ASSETS: |
| $13.7 millions as of |
| May 31, 1998 |
| |
|o DIVIDENT PAYMENTS: |
| Annually |
----------------------------
July 15, 1998
Dear Shareholder,
We are pleased to present you with the first annual report for the PaineWebber
S&P 500 Index Fund (the "Fund"), covering the period from commencement of
issuance (December 31, 1997) to the end of the Fund's fiscal year (May 31,
1998).
GENERAL MARKET OVERVIEW
- ------------------------------------------------------------------------------
[GRAPHIC] After getting off to a slow start in January, the S&P 500 Index
advanced 13.1% by the end of May. Robust economic growth, which
produced low unemployment and low inflation, contributed to the market's
strength.
Sectors that fared poorly at the end of 1997 turned in outstanding
performances in early 1998. Technology stocks, department stores, auto supply
companies and airlines all rebounded sharply from year-end slumps. Financial
services companies did reasonably well. Energy stocks performed the worst as
weakening economies in Asia drove down oil prices. Consumer nondurables, a
traditionally defensive sector, continued to lag.
PORTFOLIO REVIEW
- ------------------------------------------------------------------------------
[GRAPHIC] PERFORMANCE
The commencement of issuance for Class A and Class Y shares was December 31,
1997. The Fund's total return (the net asset value change with dividends
reinvested) for the five-month period ended May 31, 1998 was 12.88% for Class
A shares and 12.96% for Class Y shares.
PORTFOLIO HIGHLIGHTS
The Fund's objective is to replicate the total return of the S&P 500 Index
(the "Index") before fees and expenses. To achieve this objective the Fund
invests substantially all of its assets in common stocks issued by companies
in the Index and in related derivative instruments that simulate investment in
the Index.
Sector Weightings*
PaineWebber S&P 500 Index Fund vs. S&P 500 Index
Fund Index
- ------------------------------------------------------------------------------
Basic materials 5.96% 5.99%
Capital goods 4.85 4.93
Consumer cyclical 13.73 13.71
Consumer noncyclical 11.02 10.96
Energy 7.36 7.24
Financial services 19.98 20.13
Healthcare 11.65 11.65
Technology 14.88 14.72
Transportation 0.99 1.14
Utilities 9.58 9.53
* Percent of portfolio assets as of May 31, 1998. Weightings subject to change.
1
<PAGE>
ANNUAL REPORT
Portfolio Characteristics*
PaineWebber S&P 500 Index Fund vs. S&P 500 Index
Fund Index
- ------------------------------------------------------------------------------
Weighted average market capitalization $64.524 billion $63.751 billion
Price/earnings ratio 26.5x 26.9x
Current dividend yield 1.66% 1.67%
Price/book ratio 7.04x 7.19x
* Based on holdings as of May 31, 1998. Characteristics subject to change.
OUTLOOK
- ------------------------------------------------------------------------------
[GRAPHIC] The extent of the economic turmoil in Asia and its ultimate impact
on corporate profits remain unclear. We are cautious in the near
term and expect continued choppy markets ahead as the effect of negative
earnings announcements takes its toll. Over the longer term, however, we see
little cause for the market to lose strength. Our ultimate objective in
managing your investments is to help you successfully meet your financial
goals. We thank you for your continued support and welcome any comments or
questions you may have. For a quarterly Fund Profile on PaineWebber S&P 500
Index Fund or another fund in the PaineWebber Family of Funds,1 please contact
your investment executive.
Sincerely,
<TABLE>
<S> <C>
/s/ Margo Alexander /s/ T. Kirkham Barneby
Margo Alexander T. Kirkham Barneby
President Managing Director, Chief Investment Officer--
Mitchell Hutchins Asset Management Inc. Quantitative Investments
Mitchell Hutchins Asset Management Inc.
Portfolio Manager, PaineWebber S&P 500 Index Fund
</TABLE>
This letter is intended to assist shareholders in understanding how the Fund
performed during the period ended May 31, 1998, and reflects our views at the
time we are writing this report. Of course, these views may change in response
to changing circumstances. We encourage you to consult your investment
executive regarding your personal investment program.
1 Mutual funds are sold by prospectus only. The prospectuses for the funds
contain more complete information regarding risks, charges and expenses, and
should be read carefully before investing.
2
<PAGE>
PAINEWEBBER S&P 500 INDEX FUND
PORTFOLIO OF INVESTMENTS MAY 31, 1998
Number of
Shares Value
- --------- -----------------
COMMON STOCKs--100.22%
AGRICULTURE, FOOD & BEVERAGE--5.65%
900 Archer-Daniels-Midland Co. ..................... $ 16,988
500 Bestfoods Co. .................................. 28,219
700 Campbell Soup Co. .............................. 38,150
800 Conagra, Inc. .................................. 23,400
200 General Mills, Inc. ............................ 13,650
600 Heinz, H. J. and Co. ........................... 31,837
200 Hershey Foods Corp. ............................ 13,850
700 Kellogg Co. .................................... 28,919
2,500 PepsiCo, Inc. .................................. 102,031
400 Pioneer Hi-Bred International, Inc. ............ 15,225
200 Quaker Oats Co. ................................ 11,538
200 Ralston Purina Co. ............................. 22,262
100 Supervalue, Inc. ............................... 4,188
500 Sysco Corp. .................................... 11,656
4,000 The Coca-Cola Co. .............................. 313,500
1,000 Unilever N.V ................................... 78,937
200 Wrigley, Wm. Jr. Co. ........................... 19,250
------------
773,600
------------
Airlines--0.33%
100 AMR Corporation* ............................... 15,394
100 Delta Air Lines, Inc. .......................... 11,500
400 Southwest Airlines Co. ......................... 10,675
100 USAir Group, Inc.* ............................. 7,000
------------
44,569
------------
Alcohol--0.31%
800 Anheuser-Busch Companies, Inc. ................. 36,750
100 Brown Forman Corp. ............................. 5,763
------------
42,513
------------
Apparel, Retail--0.56%
600 Gap, Inc. ...................................... 32,400
100 Harcourt General, Inc. ......................... 5,450
400 Limited, Inc. .................................. 13,300
100 Nordstrom, Inc. ................................ 7,206
300 TJX Companies, Inc. ............................ 14,025
200 Woolworth Corp.* ............................... 3,950
------------
76,331
------------
Apparel, Textiles--0.67%
100 Fruit of the Loom, Inc.* ....................... 3,594
100 Liz Claiborne, Inc. ............................ 5,069
500 Nike Inc. ...................................... 23,000
100 Reebok International Ltd.* ..................... 2,875
800 Sara Lee Corp. ................................. 47,100
200 V. F. Corp. .................................... 10,637
------------
92,275
------------
Banks--8.54%
1,000 Banc One Corp. ................................. 55,125
600 Bank of New York Co. Inc. ...................... 36,675
1,100 BankAmerica Corp. .............................. 90,956
200 BankBoston Corp. ............................... 21,075
200 Bankers Trust New York Corp. ................... 24,700
Banks (concluded)
200 BB & T Corp. ................................... $ 13,238
700 Citicorp ....................................... 104,387
200 Comerica Inc. .................................. 13,150
400 Fifth Third Bancorp ............................ 19,700
500 First Chicago Corp. ............................ 43,719
1,586 First Union Corp. .............................. 87,726
400 Fleet Financial Group, Inc. .................... 32,800
300 Huntington Bancshares, Inc. .................... 9,825
300 J.P. Morgan & Co., Inc. ........................ 37,256
700 KeyCorp ........................................ 26,556
400 Mellon Bank Corp. .............................. 26,975
200 Mercantile Bancorporation, Inc. ................ 10,225
500 National City Corp. ............................ 33,875
1,500 NationsBank Corp. .............................. 113,625
200 Northern Trust Corp. ........................... 14,106
1,200 Norwest Corp. .................................. 46,650
500 PNC Bank Corp. ................................. 28,875
100 Republic New York Corp. ........................ 12,844
200 State Street Corp. ............................. 13,788
300 Summit Bancorp, Inc. ........................... 15,037
300 Suntrust Banks, Inc. ........................... 23,700
450 Synovus Financial Corp. ........................ 10,097
700 The Chase Manhattan Corp. ...................... 95,156
1,200 US Bancorp, Inc. ............................... 46,950
300 Wachovia Corp. ................................. 24,019
100 Wells Fargo and Co. ............................ 36,150
------------
1,168,960
------------
Chemicals--3.04%
200 Air Products & Chemicals, Inc. ................. 17,400
100 Ashland, Inc. .................................. 4,988
200 Avery Dennison Corp. ........................... 10,362
400 Dow Chemical Co. ............................... 38,750
1,800 DuPont (E.I.) de Nemours & Co. ................. 138,600
100 Eastman Chemical Co. ........................... 6,700
200 Engelhard Corp. ................................ 4,163
100 FMC Corp.* ..................................... 7,644
100 Goodrich, B.F. Co. ............................. 5,125
100 Grace W.R. & Co. ............................... 1,856
100 Great Lakes Chemical Corp. ..................... 4,000
100 Hercules, Inc. ................................. 4,406
200 International Flavors and Fragrances ........... 9,600
100 Kerr-McGee Corp. ............................... 6,325
1,000 Monsanto Co. ................................... 55,375
200 Morton International, Inc. ..................... 6,088
500 Occidental Petroleum Corp. ..................... 13,812
300 PPG Industries, Inc. ........................... 21,862
200 Praxair, Inc. .................................. 9,863
100 Rohm & Haas Co. ................................ 10,987
100 Sealed Air Corp.* .............................. 5,350
300 Sherwin Williams Co. ........................... 9,975
300 Tenneco, Inc. .................................. 12,487
200 Union Carbide Corp. ............................ 9,988
------------
415,706
------------
3
<PAGE>
PAINEWEBBER S&P 500 INDEX FUND
Number of
Shares Value
- --------- -----------------
COMMON STOCKS-(CONTINUED)
Computer Hardware--5.72%
600 3Com Corp.* .................................... $ 15,225
200 Apple Computer, Inc.* .......................... 5,325
400 Bay Networks, Inc.* ............................ 11,075
300 Cabletron Systems, Inc.* ....................... 3,863
1,600 Cisco Systems, Inc.* ........................... 121,000
2,400 Compaq Computer Corp. .......................... 65,550
100 Data General Corp.* ............................ 1,525
1,100 Dell Computer Corp.* ........................... 90,647
200 Digital Equipment Corp* ........................ 10,975
800 EMC Corp.* ..................................... 33,150
200 Gateway Inc.* .................................. 9,013
1,700 Hewlett-Packard Co. ............................ 105,612
1,600 International Business Machines ................ 187,800
500 Pitney Bowes, Inc. ............................. 23,500
400 Seagate Technology, Inc.* ...................... 9,250
300 Silicon Graphics, Inc.* ........................ 3,600
600 Sun Microsystems Inc.* ......................... 24,037
400 Unisys Corp.* .................................. 9,800
500 Xerox Corp. .................................... 51,375
------------
782,322
------------
Computer Software--3.35%
100 Adobe Systems, Inc. ............................ 3,994
100 Autodesk, Inc. ................................. 4,250
900 Computer Associates International Inc. ......... 47,250
4,000 Microsoft Corp.* ............................... 339,250
600 Novell, Inc.* .................................. 6,300
1,600 Oracle Systems Corp.* .......................... 37,800
400 Parametric Technology Corp.* ................... 12,262
200 Thermo Electron Corp.* ......................... 7,025
------------
458,131
------------
Construction, Real Property--0.25%
100 Armstrong World Industries, Inc. ............... 8,412
100 Centex Corp. ................................... 3,575
100 Fluor Corp. .................................... 4,769
300 Masco Corp. .................................... 16,875
------------
33,631
------------
Consumer Durables--0.09%
100 Maytag Corp. ................................... 5,044
100 Whirlpool Corp. ................................ 6,831
------------
11,875
------------
Defense/Aerospace--1.59%
900 Allied-Signal, Inc. ............................ 38,475
1,600 Boeing Company ................................. 76,200
200 General Dynamics Corp. ......................... 8,887
300 Lockheed Martin Corp. .......................... 33,675
100 Northrop Grumman Corp. ......................... 10,719
500 Raytheon Co. ................................... 27,344
300 Textron Inc. ................................... 22,256
------------
217,556
------------
Diversified Retail--2.70%
700 Dayton Hudson Corp. ............................ $ 32,462
200 Dillard Department Stores, Inc. ................ 8,413
300 Federated Department Stores, Inc.* ............. 15,544
800 K Mart Corp.* .................................. 15,500
400 May Department Stores Co. ...................... 25,725
100 Mercantile Stores, Inc. ........................ 7,863
400 Penney, J.C., Inc. ............................. 28,725
600 Sears Roebuck & Co. ............................ 37,087
3,600 Wal Mart Stores, Inc. .......................... 198,675
------------
369,994
------------
Drugs & Medicine--8.02%
100 Allergan, Inc. ................................. 4,200
100 Alza Corp.* .................................... 4,838
2,100 American Home Products Corp. ................... 101,456
400 Amgen, Inc.* ................................... 24,200
1,600 Bristol-Myers Squibb Co. ....................... 172,000
200 Cardinal Health Inc. ........................... 17,825
1,800 Lilly, Eli & Co. ............................... 110,587
1,900 Merck & Co., Inc. .............................. 222,419
2,100 Pfizer, Inc. ................................... 220,106
800 Pharmacia & Upjohn Inc. ........................ 35,350
1,200 Schering-Plough Corp. .......................... 100,425
200 Sigma-Aldrich Corp. ............................ 7,300
1,200 Warner Lambert Co. ............................. 76,575
------------
1,097,281
------------
Electric Utilities--2.42%
200 Ameren Corp. ................................... 7,825
300 American Electric Power, Inc. .................. 13,612
200 Baltimore Gas & Electric Co. ................... 6,088
200 Carolina Power & Light Co. ..................... 8,200
300 Central & South West Corp. ..................... 7,931
300 Cinergy Corp. .................................. 9,694
400 Consolidated Edison of New York, Inc. .......... 17,125
300 Dominion Resources, Inc. ....................... 11,906
200 DTE Energy Co. ................................. 7,913
600 Duke Power Co. ................................. 34,575
600 Edison International, Inc. ..................... 17,700
400 Entergy Corp. .................................. 10,525
400 Firstenergy Corp. .............................. 11,875
300 FPL Group, Inc. ................................ 18,431
200 General Public Utilities Corp. ................. 7,700
500 Houston Industries, Inc. ....................... 14,312
100 Northern States Power Co. ...................... 5,688
500 PacifiCorp ..................................... 11,531
400 PECO Energy Co. ................................ 11,300
300 Pennsylvania Power & Light Co. ................. 6,638
700 PG&E Corp. ..................................... 22,050
400 Public Service Enterprise Group, Inc. .......... 13,225
1,100 Southern Co. ................................... 29,219
400 Texas Utilities Co. ............................ 15,800
300 Unicom Corp. ................................... 10,312
------------
331,175
------------
4
<PAGE>
PAINEWEBBER S&P 500 INDEX FUND
Number of
Shares Value
- --------- -----------------
COMMON STOCKS-(CONTINUED)
Electrical Equipment--2.42%
200 DSC Communications Corp.* ...................... $ 3,419
100 Eaton Corp. .................................... 8,981
100 Harris Corp. ................................... 4,819
200 Honeywell, Inc. ................................ 16,787
100 Johnson Controls, Inc. ......................... 5,950
100 KLA-Tencor Corp. * ............................. 3,387
2,100 Lucent Technologies Inc. ....................... 148,969
100 Millipore Corp. ................................ 3,338
1,000 Motorola Inc. .................................. 52,937
800 Northern Telecommunications Ltd. ............... 51,200
25 Octel Corp.* ................................... 545
100 Perkin Elmer Corp. ............................. 6,850
100 Tektronix, Inc. ................................ 3,825
300 Tellabs, Inc.* ................................. 20,616
------------
331,623
------------
Electrical Power--0.80%
300 AMP, Inc. ...................................... 11,400
100 Andrew Corp.* .................................. 2,197
200 Cooper Industries, Inc. ........................ 12,875
700 Emerson Electric Co. ........................... 42,525
100 General Signal Corp. ........................... 4,112
100 Grainger,W.W., Inc. ............................ 10,556
100 Raychem Corp. .................................. 3,763
300 Rockwell International Corp. ................... 16,500
100 Thomas & Betts Corp. ........................... 5,344
------------
109,272
------------
Energy Reserves & Production--6.65%
1,600 Amoco Corp. .................................... 66,900
100 Anadarko Petroleum Corp. ....................... 6,600
100 Apache Corp. ................................... 3,419
500 Atlantic Richfield Co. ......................... 39,437
300 Burlington Resources, Inc. ..................... 12,637
1,100 Chevron Corp. .................................. 87,862
100 Columbia Energy Corp. .......................... 8,438
4,000 Exxon Corp. .................................... 282,000
1,300 Mobil Corp. .................................... 101,400
200 Oryx Energy Co.* ............................... 4,663
100 Pennzoil Co. ................................... 5,781
400 Phillips Petroleum Co. ......................... 20,025
3,500 Royal Dutch Petroleum Co. ...................... 196,219
900 Texaco, Inc. ................................... 51,975
400 Union Pacific Resources Group Inc. ............. 8,100
400 Unocal Corp. ................................... 14,250
------------
909,706
------------
Entertainment--2.13%
1,100 CBS Corp.* ..................................... 34,925
1,100 Disney, Walt Co. ............................... 124,437
100 King World Productions, Inc.* .................. 2,550
600 Seagram Co. Ltd. ............................... 26,363
900 Time Warner Inc. ............................... 70,031
600 Viacom, Inc., Class B* ......................... 33,000
------------
291,306
------------
Environmental Services--0.29%
300 Browning Ferris Industries, Inc. ............... $ 10,669
500 Laidlaw Inc. ................................... 6,187
700 Waste Management Inc. .......................... 22,750
------------
39,606
------------
Financial Services--6.10%
700 American Express Co. ........................... 71,837
300 AON Corp. ...................................... 19,219
545 Associates First Capital Corp. ................. 40,773
100 Beneficial Corp. ............................... 13,400
200 Countrywide Credit Industries, Inc. ............ 9,250
1,100 Federal Home Loan Mortgage Corp. ............... 50,050
1,700 Federal National Mortgage Association .......... 101,787
5,300 General Electric Co. ........................... 441,887
200 Green Tree Financial Corp. ..................... 8,038
200 Household International, Inc. .................. 27,063
300 Marsh & McLennan Companies, Inc. ............... 26,269
800 MBNA Corp. ..................................... 25,350
------------
834,923
------------
Forest Products, Paper--1.19%
100 Bemis, Inc. .................................... 4,219
100 Boise Cascade Corp. ............................ 3,338
200 Champion International Corp. ................... 9,600
300 Fort James Corp. ............................... 14,344
100 Georgia-Pacific Corp. .......................... 6,419
200 Ikon Office Solutions Inc. ..................... 4,237
500 International Paper Co. ........................ 23,000
900 Kimberly Clark Corp. ........................... 44,606
200 Louisiana Pacific Corp. ........................ 3,987
200 Mead Corp. ..................................... 6,225
200 Stone Container Corp.* ......................... 3,550
100 Temple-Inland, Inc. ............................ 5,875
100 Union Camp Corp. ............................... 5,469
200 Westvaco Corp. ................................. 5,700
300 Weyerhaeuser Co. ............................... 15,244
200 Willamette Industries, Inc. .................... 6,862
------------
162,675
------------
Food Retail--0.42%
400 Albertson's, Inc. .............................. 18,525
400 American Stores Co. ............................ 9,975
100 Giant Food, Inc., Class A ...................... 4,300
400 Kroger Co.* .................................... 17,175
200 Winn Dixie Stores, Inc. ........................ 8,138
------------
58,113
------------
Freight, Air, Sea & Land--0.09%
200 FDX Corp.* ..................................... 12,825
------------
Gas Utility--0.13%
100 Consolidated Natural Gas Co. ................... 5,656
100 Pacific Enterprises ............................ 3,806
200 Sonat, Inc. .................................... 7,838
------------
17,300
------------
5
<PAGE>
PAINEWEBBER S&P 500 INDEX FUND
Number of
Shares Value
- --------- -----------------
COMMON STOCKS-(CONTINUED)
Heavy Machinery--0.55%
200 Brunswick Corp. ................................ $ 6,287
100 Case Corp. ..................................... 5,788
600 Caterpillar, Inc. .............................. 32,962
100 Cummins Engine Co., Inc. ....................... 5,200
400 Deere & Co. .................................... 20,750
100 McDermott International, Inc. .................. 3,819
------------
74,806
------------
Hotels--0.28%
200 Harrah's Entertainment Inc.* ................... 5,000
400 Hilton Hotels Corp. ............................ 12,575
400 Marriott International Inc. New ................ 13,900
300 Mirage Resorts, Inc.* .......................... 6,244
------------
37,719
------------
Household Products--2.93%
200 Avon Products Inc. ............................. 16,363
200 Clorox Co. ..................................... 16,700
500 Colgate-Palmolive Co. .......................... 43,500
300 Fortune Brands Inc. ............................ 11,531
900 Gillette Co. ................................... 105,413
200 Newell Co. ..................................... 9,650
100 Owens-Corning Fiberglass ....................... 3,750
2,200 Procter & Gamble Co. ........................... 184,662
200 Rubbermaid, Inc. ............................... 6,525
100 Tupperware Corp. ............................... 2,700
------------
400,794
------------
Industrial Parts--1.03%
200 Black & Decker Corp. ........................... 11,675
100 Crane Co. ...................................... 5,269
300 Dover Corp. .................................... 11,250
300 Genuine Parts Co. .............................. 10,181
400 Illinois Tool Works, Inc. ...................... 26,400
300 Ingersoll Rand Co. ............................. 13,519
200 Pall Corp. ..................................... 3,963
200 Parker-Hannifin Corp. .......................... 8,212
100 Snap-On, Inc. .................................. 4,387
100 Stanley Works .................................. 4,750
100 Timken Co. ..................................... 3,763
400 United Technologies Corp. ...................... 37,600
------------
140,969
------------
Industrial Services/Supplies--0.28%
1,300 Cendant Corp.* ................................. 28,194
200 Ecolab, Inc. ................................... 6,175
100 Ryder Systems, Inc. ............................ 3,406
------------
37,775
------------
Information & Computer Services--1.19%
500 Automatic Data Processing, Inc. ................ 31,812
200 Block, H&R, Inc. ............................... 8,800
100 Ceridian Corp.* ................................ 5,400
300 Cognizant Corp. ................................ 15,975
200 Computer Sciences Corp.* ....................... 10,388
Information & Computer Services (concluded)
200 Dow Jones & Co., Inc. .......................... $ 9,625
200 Dun & Bradstreet Corp. ......................... 6,750
200 Equifax Inc. ................................... 7,275
700 First Data Corp. ............................... 23,275
300 HBO & Co. ...................................... 17,316
200 Interpublic Group Companies, Inc. .............. 11,862
300 Omnicom Group .................................. 14,044
------------
162,522
------------
Leisure--0.48%
500 Eastman Kodak Co. .............................. 35,687
200 Hasbro, Inc. ................................... 7,650
500 Mattel Inc. .................................... 18,938
100 Polaroid Corp. ................................. 4,056
------------
66,331
------------
Life Insurance--0.99%
200 Aetna Life & Casualty Co. ...................... 15,637
400 American General Corp. ......................... 26,850
300 Conseco Inc. ................................... 13,987
150 Jefferson-Pilot Corp. .......................... 8,588
200 Lincoln National Corp. ......................... 17,975
100 Providian Corp. ................................ 6,363
300 SunAmerica Inc. ................................ 14,587
200 Torchmark, Inc. ................................ 8,575
100 Transamerica Corp. ............................. 11,500
200 UNUM Corp. ..................................... 11,113
------------
135,175
------------
Long Distance & Phone Companies--6.61%
300 Alltel Corp. ................................... 11,831
1,800 Ameritech Corp. ................................ 76,388
2,600 AT&T Corp. ..................................... 158,275
1,300 Bell Atlantic Corp. ............................ 119,112
1,600 BellSouth Corp. ................................ 103,200
300 Frontier Corp. ................................. 9,131
1,500 GTE Corp. ...................................... 87,469
1,100 MCI Communications Corp. ....................... 58,816
3,000 SBC Communications, Inc. ....................... 116,625
700 Sprint Corp. ................................... 50,225
800 US West Communications Group ................... 40,600
1,600 WorldCom, Inc.* ................................ 72,800
------------
904,472
------------
Media--0.61%
200 Clear Channel Communications* .................. 19,175
600 Comcast Corp., Class A ......................... 20,569
100 Scientific-Atlanta, Inc. ....................... 2,206
800 Tele-Communications, Inc. Class A* ............. 27,450
200 Tribune Co. .................................... 13,375
------------
82,775
------------
Medical Products--3.61%
1,200 Abbott Laboratories ............................ 89,025
100 Bard, C.R. Inc. ................................ 3,469
100 Bausch & Lomb, Inc. ............................ 4,981
6
<PAGE>
PAINEWEBBER S&P 500 INDEX FUND
Number of
Shares Value
- --------- -----------------
COMMON STOCKS-(CONTINUED)
Medical Products (concluded)
400 Baxter International, Inc. ..................... $ 22,875
200 Becton, Dickinson & Co. ........................ 14,150
200 Biomet, Inc. ................................... 5,775
300 Boston Scientific Corp.* ....................... 19,125
200 Guidant Corp. .................................. 12,888
2,200 Johnson & Johnson .............................. 151,937
100 Mallinckrodt Group, Inc. ....................... 3,081
800 Medtronic, Inc. ................................ 44,500
700 Minnesota Mining & Manufacturing Co. ........... 64,837
100 St. Jude Medical, Inc. ......................... 3,575
900 Tyco International Ltd. ........................ 49,838
100 U.S. Surgical Corp. ............................ 3,975
------------
494,031
------------
Medical Providers--0.96%
1,000 Columbia/HCA Healthcare Corp. .................. 32,688
400 Corning, Inc. .................................. 15,775
600 HEALTHSOUTH Corp.* ............................. 17,025
300 Humana Inc.* ................................... 9,319
100 Manor Care, Inc. ............................... 3,156
400 Service Corp. International .................... 16,350
500 Tenet Healthcare Corp.* ........................ 17,500
300 United Healthcare Corp. ........................ 19,200
------------
131,013
------------
Mining & Metals--0.64%
400 Alcan Aluminum Ltd. ............................ 11,400
300 Aluminum Co. of America ........................ 20,812
200 Bethleham Steel Corp.* ......................... 2,450
200 Crown Cork & Seal, Inc. ........................ 10,375
300 Freeport-McMoran Copper & Gold, Inc. ........... 5,025
300 Inco Ltd. ...................................... 4,313
100 Nucor Corp. .................................... 5,150
200 Owens Illinois Inc.* ........................... 8,988
100 Phelps Dodge Corp. ............................. 6,100
100 Reynolds Metals Co. ............................ 5,800
200 USX-U.S. Steel Group, Inc. ..................... 7,175
------------
87,588
------------
Motor Vehicles and Parts--2.21%
1,100 Chrysler Corp. ................................. 61,187
100 Cooper Tire & Rubber Co. ....................... 2,369
200 DANA Corp. ..................................... 10,425
100 Echlin, Inc. ................................... 4,750
2,000 Ford Motor Co. ................................. 103,750
1,100 General Motors Corp. ........................... 79,131
200 Goodyear Tire & Rubber Co. ..................... 14,375
200 ITT Industries Inc. ............................ 7,375
100 Navistar International Corp.* .................. 3,019
100 PACCAR, Inc. ................................... 5,522
200 TRW, Inc. ...................................... 10,713
------------
302,616
------------
Oil Refining--0.71%
100 Amerada Hess Corp. ............................. $ 5,406
200 Coastal Corp. .................................. 14,100
500 Enron Corp. .................................... 25,063
100 Sun Co., Inc. .................................. 4,250
500 USX-Marathon Group ............................. 17,500
100 Western Atlas, Inc.* ........................... 8,656
700 Williams Companies, Inc. ....................... 22,706
------------
97,681
------------
Oil Services--0.79%
300 Baker Hughes, Inc. ............................. 10,800
300 Dresser Industries, Inc. ....................... 13,969
400 Halliburton Co. ................................ 18,950
100 Rowan Companies, Inc.* ......................... 2,556
800 Schlumberger Ltd. .............................. 62,450
------------
108,725
------------
Other Insurance--2.76%
700 Allstate Corp. ................................. 65,887
1,100 American International Group Inc. .............. 136,194
300 Chubb Corp. .................................... 23,869
300 CIGNA Corp. .................................... 20,550
300 Cincinnati Financial Corp. ..................... 12,600
100 General Re Corp. ............................... 21,987
200 Hartford Financial Services Group Inc. ......... 22,012
200 Loews Corp. .................................... 18,150
100 MBIA Inc. ...................................... 7,456
200 MGIC Investment Corp. .......................... 11,988
200 SAFECO Corp. ................................... 9,300
312 St. Paul Companies, Inc. ....................... 13,845
100 The Progressive Corp. .......................... 13,788
------------
377,626
------------
Precious Metals--0.22%
600 Barrick Gold Corp. ............................. 11,550
400 Battle Mountain Gold Co.* ...................... 2,125
300 Homestake Mining Co. ........................... 3,263
300 Newmont Mining Corp. ........................... 7,481
400 Placer Dome, Inc. .............................. 4,975
------------
29,394
------------
Publishing--0.70%
100 American Greetings Corp., Class A .............. 4,750
100 Deluxe Corp. ................................... 3,356
200 Donnelley, R.R. & Sons Co. ..................... 9,000
500 Gannett Inc. ................................... 32,969
100 Knight Ridder, Inc. ............................ 5,706
200 McGraw-Hill Companies, Inc. .................... 15,638
100 Meredith Corp. ................................. 3,975
200 New York Times Co., Class A .................... 14,100
100 Times Mirror Co. ............................... 6,400
------------
95,894
------------
7
<PAGE>
PAINEWEBBER S&P 500 INDEX FUND
Number of
Shares Value
- --------- -----------------
COMMON STOCKS-(concluded)
Railroads--0.53%
200 Burlington Northern Santa Fe, Inc. ............. $ 19,900
300 CSX Corp. ...................................... 14,288
600 Norfolk Southern Corp. ......................... 18,787
400 Union Pacific Corp. ............................ 19,350
------------
72,325
------------
Restaurants--0.63%
200 Darden Restaurants, Inc. ....................... 3,088
1,100 McDonalds Corp. ................................ 72,187
200 Tricon Global Restaurants Inc.* ................ 6,212
200 Wendy's International, Inc. .................... 4,938
------------
86,425
------------
Securities & Asset Management--2.09%
400 Charles Schwab Corp. ........................... 13,200
400 Franklin Resources Inc. ........................ 19,550
200 Lehman Brothers Holdings Inc. .................. 14,188
500 Merrill Lynch & Co., Inc. ...................... 44,750
1,000 Morgan Stanley, Dean Witter, Discover & Co. .... 78,062
1,900 Travelers Group Inc. ........................... 115,900
------------
285,650
------------
Semiconductor--1.97%
200 Advanced Micro Devices, Inc.* .................. 3,900
300 Allegheny Teldyne, Inc. ........................ 6,975
600 Applied Materials Inc.* ........................ 19,200
2,700 Intel Corp. .................................... 192,881
200 LSI Logic Corp.* ............................... 4,262
300 Micron Technology, Inc. ........................ 7,069
300 National Semiconductor Corp.* .................. 4,875
600 Texas Instruments, Inc. ........................ 30,825
------------
269,987
------------
Specialty Retail--1.78%
200 Autozone Inc.* ................................. 6,650
200 Circuit City Stores, Inc. ...................... 8,475
200 Consolidated Stores Corp.* ..................... 7,638
300 Costco, Companies Inc.* ........................ 17,362
300 CVS Corp. ...................................... 21,056
1,200 Home Depot, Inc. ............................... 94,275
300 Lowe's Companies Inc. .......................... 23,756
100 Pep Boys-Manny, Moe & Jack ..................... 2,225
400 Rite Aid Corp. ................................. 14,325
200 Tandy Corp. .................................... 8,850
400 Toys R Us, Inc.* ............................... 10,600
800 Walgreen Co. ................................... 28,150
------------
243,362
------------
Thrift--0.40%
200 Ahmanson, H F & Co. ............................ $ 15,250
100 Golden West Financial Corp. .................... 10,800
400 Washington Mutual, Inc. ........................ 28,250
------------
54,300
------------
Tobacco--1.12%
3,900 Phillip Morris Companies Inc. .................. 145,762
300 UST, Inc. ...................................... 7,988
------------
153,750
------------
Wireless Telecommunications--0.69%
900 Airtouch Communications, Inc.* ................. 42,862
200 General Instrument Corp.* ...................... 4,763
400 Nextel Communications Inc.* .................... 9,425
1,000 US West Media Group* ........................... 37,063
------------
94,113
------------
Total Common Stocks (cost--$12,505,170) ........ 13,711,086
------------
PREFERRED STOCK--0.02%
Chemicals--0.02%
47 Sealed Air Corporation (cost--$2,695) .......... 2,617
------------
Total Investments (cost--$12,507,865)--100.24% .............. 13,713,703
Liabilities in excess of other assets--(0.24)% .............. (32,655)
------------
Net Assets--100.00% ......................................... $ 13,681,048
============
- --------------
* Non-Income producing security
See accompanying notes to financial statements
8
<PAGE>
PAINEWEBBER S&P 500 INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES MAY 31, 1998
<TABLE>
<S> <C>
Assets
Investments in securities, at value (cost--$12,507,865) ............................. $13,713,703
Receivable for shares of beneficial interest sold ................................... 53,854
Dividends receivable ................................................................ 24,138
Deferred organizational expenses .................................................... 69,063
Other assets ........................................................................ 1,874
-----------
Total assets ........................................................................ 13,862,632
-----------
Liabilities
Due to custodian .................................................................... 82,843
Payable to affiliate ................................................................ 31,130
Accrued expenses and other liabilities .............................................. 67,611
-----------
Total liabilities ................................................................... 181,584
-----------
Net Assets
Beneficial interest--$0.001 par value (unlimited amount authorized) ................. 12,396,221
Undistributed net investment income ................................................. 59,019
Accumulated net realized gains from investment and futures transactions ............. 19,970
Net unrealized appreciation of investments .......................................... 1,205,838
-----------
Net assets .......................................................................... $13,681,048
===========
Class A:
Net assets .......................................................................... $ 788,875
-----------
Shares outstanding .................................................................. 55,913
-----------
Net asset value, offering price and redemption value per share ...................... $ 14.11
===========
Class Y:
Net assets .......................................................................... $12,892,173
-----------
Shares outstanding .................................................................. 913,325
-----------
Net asset value, offering price and redemption value per share ...................... $ 14.12
===========
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
PAINEWEBBER S&P 500 INDEX FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Period
December 31,
1997+ through
May 31, 1998
--------------
<S> <C>
Investment income:
Dividends ................................................................. $ 73,873
-----------
Expenses:
Investment advisory and administration .................................... 8,340
Service fees--Class A ..................................................... 70
Legal and audit ........................................................... 48,087
Reports and notices to shareholders ....................................... 15,720
Amortization of organizational expense .................................... 6,227
Trustees' fees ............................................................ 4,344
Federal and state registration ............................................ 3,916
Custody and accounting .................................................... 2,532
Transfer agency ........................................................... 108
Other expenses ............................................................ 3,890
-----------
93,234
Less: Fee waivers and expense reimbursements from adviser ................. (78,380)
-----------
Net expenses .............................................................. 14,854
-----------
Net investment income ..................................................... 59,019
-----------
Realized and unrealized gains (losses) from investment activities:
Net realized gains (losses) from:
Investment transactions ................................................ 20,111
Futures contracts ...................................................... (141)
Net change in unrealized appreciation/depreciation of investments ......... 1,205,838
-----------
Net realized and unrealized gains from investment activities .............. 1,225,808
-----------
Net increase in net assets resulting from operations ...................... $ 1,284,827
===========
</TABLE>
- -------------
+ Commencement of operations
See accompanying notes to financial statements
10
<PAGE>
PAINEWEBBER S&P 500 INDEX FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Period
December 31,
1997+ through
May 31, 1998
-------------
<S> <C>
From operations:
Net investment income .............................................................. $ 59,019
Net realized gains from investment and futures transactions ........................ 19,970
Net change in unrealized appreciation/depreciation of investments .................. 1,205,838
------------
Net increase in net assets resulting from operations ............................... 1,284,827
------------
From beneficial interest transactions:
Net proceeds from the sale of shares ............................................... 12,314,605
Cost of shares repurchased ......................................................... (18,384)
------------
Net increase in net assets from beneficial interest transactions ................... 12,296,221
------------
Net increase in net assets ......................................................... 13,581,048
Net Assets:
Beginning of period ................................................................ 100,000
------------
End of period (including undistributed net investment income of $59,019)............ $ 13,681,048
============
</TABLE>
- --------------
+ Commencement of operations
See accompanying notes to financial statements
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber S&P 500 Index Fund (the "Fund") is a series of PaineWebber
Index Trust (the "Trust") and is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, as an
open-end, diversified management investment company. Organizational costs have
been deferred and have been amortized using the straight line method over a
period not to exceed 60 months from the date the Fund commenced operations.
Prior to the commencement of operations, December 31, 1997, the Fund had no
activity other than the sale of 4,000 Class A shares and 4,000 Class Y shares
for a total amount of $100,000, on October 6, 1997 to Mitchell Hutchins Asset
Management Inc. ("Mitchell Hutchins"), the investment adviser, administrator
and distributor, and an asset management subsidiary of PaineWebber
Incorporated ("PaineWebber").
Currently, the Fund offers Class A and Class Y shares. Each class
represents interests in the same assets of the Fund, and the classes are
identical except for differences in ongoing service charges and certain
transfer agency expenses. All classes of shares have equal voting privileges
except that Class A shares have exclusive voting rights with respect to its
service and/or distribution plan. Class Y shares have no service or
distribution plan.
The preparation of financial statements in accordance with generally
accepted accounting principles requires Fund management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates. The following is
a summary of significant accounting policies:
Valuation of Investments--Securities that are listed on stock exchanges
are valued at the last sale 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 by Mitchell Hutchins. Securities traded in
the over-the-counter ("OTC") market and listed on the Nasdaq Stock Market,
Inc. ("Nasdaq") are valued at the last available sale 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 value of the securities
in the judgment of Mitchell Hutchins. When market quotations are not readily
available, securities are valued based upon appraisals derived from
information concerning those securities or similar securities received from
recognized dealers in those securities. All other securities are valued at
fair value as determined in good faith by, or under the direction of, the
Trust's board of trustees. The amortized cost method of valuation is used to
value short-term debt securities with sixty days or less remaining to
maturity, unless the Trust's board of trustees determines that this does not
represent fair value.
Repurchase Agreements--The Fund's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. The Fund occasionally
participates in joint repurchase agreement transactions with other funds
managed by Mitchell Hutchins.
Investment Transactions and Investment Income--Investment transactions
are recorded on the trade date. Realized gains and losses from investment
transactions are calculated using the identified cost method. Interest income
is recorded on an accrual basis. Dividend income is recorded on the
ex-dividend date. Discounts are accreted and premiums are amortized as
adjustments to interest income and the identified cost of investments.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Income, expenses (excluding class-specific expenses) and
realized/unrealized gains/losses are allocated proportionately to each class
of shares based upon the relative net asset value of outstanding shares (or
the value of dividend-eligible shares, as appropriate) of each class at the
beginning of the day (after adjusting for current capital share activity of
the respective classes). Class-specific expenses are charged directly to the
applicable class of shares.
Futures Contracts--Upon entering into a financial futures contract, the
Fund is required to pledge to a broker an amount of cash and/or U.S.
securities equal to a certain percentage of the contract amount. This amount
is known as the "initial margin." Subsequently, payments, known as "variation
margin," are made or received by the Funds each day, depending on the daily
fluctuations in the value of the underlying financial futures contracts. Such
variation margin is recorded for financial statement purposes on a daily basis
as unrealized gain or loss until the financial futures contract is closed, at
which time the net gain or loss is reclassified to realized.
Using financial futures contracts involves various market risks. The
maximum amount at risk from the purchase of a futures contract is the contract
value. The Fund uses financial futures contracts in strategies intended to
enhance income or for hedging purposes. However, imperfect correlations
between futures contracts and the portfolio securities being hedged or, market
disruptions, do not normally permit full control of these risks at all times.
There were no open futures contracts at the period ended May 31, 1998.
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" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification.
INVESTMENT ADVISER AND ADMINISTRATOR
The Trust's board of trustees has approved an Investment Advisory and
Administration Contract ("Advisory Contract") with Mitchell Hutchins, under
which Mitchell Hutchins serves as investment adviser and administrator of the
Fund. In accordance with the Advisory Contract, the Fund pays Mitchell
Hutchins an investment advisory and administration fee, which is accrued daily
and paid monthly, at an annual rate of 0.20% of the Fund's average daily net
assets. For the period ended May 31, 1998, Mitchell Hutchins has voluntarily
undertaken to waive all advisory fees and reimburse a portion of expenses to
maintain the Fund's total annual operating expenses at a level not exceeding
0.40% and 0.35% of the Fund's average daily net assets for Class A shares and
Class Y shares, respectively.
DISTRIBUTION PLANS
Mitchell Hutchins is the distributor of the Fund's shares and has
appointed PaineWebber as the exclusive dealer for the sale of those shares.
There is no distribution plan with respect to the Fund's Y shares. Under the
distribution plan for Class A shares ("Class A Plan"), the Fund pays Mitchell
Hutchins monthly service fees at the annual rate of 0.05% of the average daily
net assets of Class A shares. For the period ended May 31, 1998, PaineWebber
has voluntarily undertaken to waive all service fees for Class A shares.
TRANSFER AGENCY SERVICE FEES
PaineWebber provides transfer agency related services to the Fund
pursuant to a delegation of authority from PFPC, Inc., the Fund's transfer
agent, and is compensated for the services by PFPC, Inc., not the Fund.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
SECURITY LENDING
The Fund may lend securities up to 33 1/3% of its total assets to
qualified institutions. The loans are secured at all times by cash, U.S.
government securities or irrevocable letters of credit that meet certain
guidelines established by Mitchell Hutchins, in an amount at least equal to
the market value of the securities loaned, plus accrued interest, determined
on a daily basis and adjusted accordingly. The Fund will regain record
ownership of loaned securities to exercise certain beneficial rights, however,
the Fund may bear the risk of delay in recovery of, or even loss of rights in,
the securities loaned should the borrower fail financially. The Fund receives
compensation, which is included in interest income, for lending its securities
from interest earned on the cash or U.S. government securities held as
collateral, net of fee rebates paid to the borrower plus reasonable
administrative and custody fees. During the period ended May 31, 1998, the
Fund did not participate in the Securities Lending Program.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at May 31,
1998 was substantially the same as the cost of securities for financial
statement purposes.
At May 31, 1998, the components of net unrealized appreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value over cost)........... $ 1,404,248
Gross depreciation (investments having an excess of cost over value)........... (198,410)
------------
Net unrealized appreciation of investments..................................... $ 1,205,838
============
</TABLE>
For the period ended May 31, 1998, total aggregate purchases and sales of
portfolio securities, excluding short-term securities, were as follows:
<TABLE>
<S> <C>
Purchases...................................................................... $ 12,637,132
Sales.......................................................................... $ 149,378
</TABLE>
FEDERAL TAX STATUS
The Fund intends to distribute substantially all of its taxable income
and to comply with the other requirements of the Internal Revenue Code
applicable to regulated investment companies. Accordingly, no provision for
federal income taxes is required. In addition, by distributing during each
calendar year, substantially all of its net investment income, capital gains
and certain other amounts, if any, the Fund intends not to be subject to a
federal excise tax.
BENEFICIAL INTEREST
There is an unlimited number of $0.001 par value shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
Class A Class Y
---------------------------- ----------------------------
Shares Amount Shares Amount
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
For the period December 31, 1997+ through May 31, 1998:
Shares sold ................................................ 51,913 $ 725,507 910,607 $ 11,589,098
Shares repurchased ......................................... -- -- (1,282) (18,384)
------------ --------- ------- ------------
Net increase ............................................... 51,913 $ 725,507 909,325 $ 11,570,714
============ ========= ======= ============
</TABLE>
- --------------
+ Commencement of operations
14
<PAGE>
PAINEWEBBER S&P 500 INDEX FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period is presented below:
<TABLE>
<CAPTION>
For the Period December 31,
1997+ through May 31, 1998
--------------------------
Class A Class Y
--------- ---------
<S> <C> <C>
Net asset value, beginning of period ..................................................... $ 12.50 $ 12.50
--------- ---------
Net investment income .................................................................... 0.03 0.06
Net realized and unrealized gains from investments and futures ........................... 1.58 1.56
--------- ---------
Net increase from investment operations .................................................. 1.61 1.62
--------- ---------
Net asset value, end of period ........................................................... $ 14.11 $ 14.12
========= =========
Total investment return (1) .............................................................. 12.88% 12.96%
========= =========
Ratios/Supplemental Data:
Net assets, end of period (000's) ........................................................ $ 789 $ 12,892
Expenses to average net assets net of waivers and reimbursements from adviser ............ 0.40%* 0.35%*
Expenses to average net assets before waivers and reimbursements from adviser ............ 2.25%* 2.22%*
Net investment income to average net assets net of waivers and reimbursements from adviser 1.26%* 1.41%*
Net investment loss to average net assets before waivers and reimbursements from adviser. (0.60)%* (0.46)%*
Portfolio turnover rate .................................................................. 1% 1%
</TABLE>
- -----------
* Annualized
+ Commencement of issuance of shares
(1) Total investment return is calculated assuming a $1,000 investment on
the first day of the 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 the period reported. Total
investment return for the period has not been annualized.
15
<PAGE>
PAINEWEBBER S&P 500 INDEX FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Trustees and Shareholders of
PaineWebber S&P 500 Index Fund
We have audited the accompanying statement of assets and liabilities of
the PaineWebber S&P 500 Index Fund (the "Fund"), including the portfolio of
investments, as of May 31, 1998, and the related statements of operations,
changes in net assets and the financial highlights for the period December 31,
1997 (commencement of operations) through May 31, 1998. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of investments owned at May 31, 1998 by correspondence with the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Fund at May 31, 1998, the results of its operations, the
changes in its net assets, and the financial highlights for the period
December 31, 1997 to May 31, 1998, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
New York, New York
July 24, 1998
16
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
TRUSTEES
E. Garrett Bewkes, Jr.
Chairman
Margo N. Alexander
Richard Q. Armstrong
Richard R. Burt
Mary C. Farrell
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
PRINCIPAL OFFICERS
Margo N. Alexander
President
Victoria E. Schonfeld
Vice President
Dianne E. O'Donnell
Vice President and Secretary
Paul H. Schubert
Vice President and Treasurer
T. Kirkham Barneby
Vice President
INVESTMENT ADVISER,
ADMINISTRATOR AND DISTRIBUTOR
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
This report is not to be used in conjunction with the offering of shares of
the Fund unless accompanied or preceded by an effective prospectus.
A prospectus containing more complete information for any of the Funds listed
on the back cover can be obtained from a PaineWebber investment executive or
corresponding firm. Read the prospectus carefully before investing.
<PAGE>
PaineWebber offers a family of 26 funds which encompass a diversified range of
investment goals.
BOND FUNDS
o High Income Fund
o Investment Grade Income Fund
o Low Duration U.S. Government Income Fund
o Strategic Income Fund
o U.S. Government Income Fund
TAX-FREE BOND FUNDS
o California Tax-Free Income Fund
o Municipal High Income Fund
o National Tax-Free Income Fund
o New York Tax-Free Income Fund
STOCK FUNDS
o Financial Services Growth Fund
o Growth Fund
o Growth and Income Fund
o Mid Cap Fund
o Small Cap Fund
o S&P 500 Index Fund
o Utility Income Fund
ASSET ALLOCATION FUNDS
o Balanced Fund
o Tactical Allocation Fund
GLOBAL FUNDS
o Asia Pacific Growth Fund
o Emerging Markets Equity Fund
o Global Equity Fund
o Global Income Fund
MITCHELL HUTCHINS PORTFOLIOS
o Aggressive Portfolio
o Moderate Portfolio
o Conservative Portfolio
PAINEWEBBER MONEY MARKET FUND
PaineWebber
(c)1998 PaineWebber Incorporated
Member SIPC
PaineWebber
S&P 500
INDEX
FUND
May 31, 1998
ANNUAL REPORT
