<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------- -----------------------------
12 MONTHS 6 MONTHS
08/31/96 02/29/96 08/31/95 ENDED 08/31/96 ENDED 08/31/96
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $24.35 $23.77 $22.52 17.40% 2.83%
- ------------------------------------------------------------------------
Class B Shares 24.26 23.70 22.37 16.49 2.43
- ------------------------------------------------------------------------
Class C Shares 24.33 23.77 22.43 16.52 2.45
- ------------------------------------------------------------------------
</TABLE>
Performance Summary Class A Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12/20/83 - 12/31/84 $12.65 $13.21 -- $1.0800 13.72%
- ----------------------------------------------------------------------------
1985 13.21 14.97 $0.1950 0.8850 22.36
- ----------------------------------------------------------------------------
1986 14.97 15.04 1.1380 0.6830 12.68
- ----------------------------------------------------------------------------
1987 15.04 12.05 2.3027 0.7366 (3.16)
- ----------------------------------------------------------------------------
1988 12.05 13.67 -- 0.5120 17.83
- ----------------------------------------------------------------------------
1989 13.67 16.32 0.1675 0.5178 24.59
- ----------------------------------------------------------------------------
1990 16.32 15.85 -- 0.3030 (1.01)
- ----------------------------------------------------------------------------
1991 15.85 21.17 -- 0.2526 35.34
- ----------------------------------------------------------------------------
1992 21.17 21.74 -- 0.2432 3.90
- ----------------------------------------------------------------------------
1993 21.74 20.86 0.0310 0.2818 (2.59)
- ----------------------------------------------------------------------------
1994 20.86 18.18 1.2111 0.2417 (5.87)
- ----------------------------------------------------------------------------
1995 18.18 22.39 1.5085 0.2475 33.21
- ----------------------------------------------------------------------------
01/01/96 - 08/31/96 22.39 24.35 -- 0.0942 9.17
- ----------------------------------------------------------------------------
Totals: $6.5538 $6.0784
- ----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/96: 313.72%
- ----------------------------------------------------------------------------
Performance Summary Class B Shares
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/01/91 - 12/31/91 $18.04 $21.14 -- $0.1074 17.85%
- ----------------------------------------------------------------------------
1992 21.14 21.69 -- 0.0992 3.09
- ----------------------------------------------------------------------------
1993 21.69 20.82 $0.0310 0.1193 (3.31)
- ----------------------------------------------------------------------------
1994 20.82 18.15 1.2111 0.0768 (6.62)
- ----------------------------------------------------------------------------
1995 18.15 22.35 1.5085 0.0715 32.18
- ----------------------------------------------------------------------------
01/01/96 - 08/31/96 22.35 24.26 -- 0.0170 8.62
- ----------------------------------------------------------------------------
Totals: $2.7506 $0.4912
- ----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/96: 57.49%
- ----------------------------------------------------------------------------
Performance Summary Class C Shares
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/02/92 - 12/31/92 $19.96 $21.75 -- $0.1160 9.58%
- ----------------------------------------------------------------------------
1993 21.75 20.87 $0.0310 0.1308 (3.30)
- ----------------------------------------------------------------------------
1994 20.87 18.20 1.2111 0.0756 (6.61)
- ----------------------------------------------------------------------------
1995 18.20 22.42 1.5085 0.0728 32.21
- ----------------------------------------------------------------------------
01/01/96 - 08/31/96 22.42 24.33 -- 0.0225 8.62
- ----------------------------------------------------------------------------
Totals: $2.7506 $0.4177
- ----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/96: 42.11%
- ----------------------------------------------------------------------------
</TABLE>
/1/
Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the payable dates, and do not include sales charges;
results would be lower for each class if sales charges were included.
Note: The Fund offers Class Y shares to the trustee of the PaineWebber Savings
Investment Plan and INSIGHT Investment Advisory Program participants. For
the year ended August 31, 1996 and since inception, February 12, 1992
through August 31, 1996, Class Y shares had a total return of 17.77% and
41.83%, respectively. Class Y shares do not have initial or contingent de-
ferred sales charges or ongoing distribution and service fees.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost.
1
<PAGE>
PAINEWEBBER GROWTH FUND
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------- -----------------------------
12 MONTHS 6 MONTHS
08/31/96 02/29/96 08/31/95 ENDED 08/31/96 ENDED 08/31/96
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $24.37 $23.65 $22.27 18.43% 3.04%
- ------------------------------------------------------------------------
Class B Shares 23.30 22.70 21.53 17.48 2.64
- ------------------------------------------------------------------------
Class C Shares 23.48 22.88 21.68 17.50 2.62
- ------------------------------------------------------------------------
</TABLE>
Performance Summary Class A Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
03/18/85 - 12/31/85 $ 9.15 $10.55 -- $0.1275 16.87%
- ----------------------------------------------------------------------------
1986 10.55 10.86 $0.4064 0.1042 7.64
- ----------------------------------------------------------------------------
1987 10.86 9.81 1.4051 0.0847 4.34
- ----------------------------------------------------------------------------
1988 9.81 11.87 -- 0.1011 22.05
- ----------------------------------------------------------------------------
1989 11.87 14.79 1.1520 -- 34.27
- ----------------------------------------------------------------------------
1990 14.79 12.98 0.4625 0.1625 (7.72)
- ----------------------------------------------------------------------------
1991 12.98 18.53 0.6003 0.0072 47.61
- ----------------------------------------------------------------------------
1992 18.53 18.66 0.6235 -- 4.15
- ----------------------------------------------------------------------------
1993 18.66 21.14 1.0734 -- 19.17
- ----------------------------------------------------------------------------
1994 21.14 18.81 0.0258 -- (10.90)
- ----------------------------------------------------------------------------
1995 18.81 23.12 1.8440 -- 33.02
- ----------------------------------------------------------------------------
01/01/96 - 08/31/96 23.12 24.37 -- -- 5.41
- ----------------------------------------------------------------------------
Totals: $7.5930 $0.5872
- ----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/96: 354.34%
- ----------------------------------------------------------------------------
Performance Summary Class B Shares
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/01/91 - 12/31/91 $15.63 $18.47 $0.6003 $0.0037 22.18%
- ----------------------------------------------------------------------------
1992 18.47 18.44 0.6235 -- 3.30
- ----------------------------------------------------------------------------
1993 18.44 20.71 1.0734 -- 18.26
- ----------------------------------------------------------------------------
1994 20.71 18.28 0.0258 -- (11.61)
- ----------------------------------------------------------------------------
1995 18.28 22.22 1.8440 -- 31.95
- ----------------------------------------------------------------------------
01/01/96 - 08/31/96 22.22 23.30 -- -- 4.86
- ----------------------------------------------------------------------------
Totals: $4.1670 $0.0037
- ----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/96: 82.54%
- ----------------------------------------------------------------------------
Performance Summary Class C Shares
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/02/92 - 12/31/92 $17.04 $18.57 $0.6235 -- 12.73%
- ----------------------------------------------------------------------------
1993 18.57 20.85 1.0734 -- 18.19
- ----------------------------------------------------------------------------
1994 20.85 18.41 0.0258 -- (11.58)
- ----------------------------------------------------------------------------
1995 18.41 22.40 1.8440 -- 32.00
- ----------------------------------------------------------------------------
01/01/96 - 08/31/96 22.40 23.48 -- -- 4.82
- ----------------------------------------------------------------------------
Totals: $3.5667 --
- ----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/96: 63.00%
- ----------------------------------------------------------------------------
</TABLE>
/1/
Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the payable dates, and do not include sales charges;
results would be lower for each class if sales charges were included.
Note: The Fund offers Class Y shares to the trustee of the PaineWebber Savings
Investment Plan and INSIGHT Investment Advisory Program participants. For
the year ended August 31, 1996, and since inception, August 26, 1991 through
August 31, 1996, Class Y shares have a total return of 18.72% and 76.19%,
respectively. Class Y shares do not have initial or contingent deferred
sales charges or ongoing distribution and service fees.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost.
2
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<S> <C>
COMMON STOCKS - 81.54%
Agriculture, Food & Beverage - 1.96%
70,000 IBP, Incorporated...................................... $ 1,636,250
116,850 Phillip Morris Companies Incorporated.................. 10,487,288
-----------
12,123,538
-----------
Airlines - 2.86%
100,000 America West Airlines Incorporated*.................... 1,337,500
131,645 AMR Corporation*....................................... 10,794,890
100,000 Continental Airlines Incorporated...................... 2,262,500
70,000 UAL Corporation........................................ 3,360,000
-----------
17,754,890
-----------
Apparel, Retail - 0.77%
150,000 TJX Companies, Incorporated............................ 4,800,000
-----------
Apparel, Textiles - 0.26%
15,000 Nike Incorporated...................................... 1,620,000
-----------
Banks - 8.08%
400,000 The Bank of New York Company Incorporated.............. 11,150,000
60,000 BankAmerica Corporation................................ 4,650,000
100,000 Barnett Banks Incorporated............................. 6,562,500
75,000 CCB Financial Corporation.............................. 3,993,750
93,600 The Chase Manhattan Corporation........................ 6,961,500
101,800 Citicorp............................................... 8,474,850
10,000 First Empire State Corporation......................... 2,545,000
67,500 NationsBank Corporation................................ 5,745,938
-----------
50,083,538
-----------
Chemicals - 2.56%
30,000 Dow Chemical Company................................... 2,392,500
100,000 Freeport-McMoran Copper & Gold, Incorporated........... 2,937,500
50,000 IMC Global Incorporated................................ 2,150,000
28,000 Norsk Hydro A.S. ADR*.................................. 1,277,500
50,000 Occidental Petroleum Corporation....................... 1,162,500
75,000 Olin Corporation....................................... 5,943,750
-----------
15,863,750
-----------
Computer Hardware - 5.30%
62,500 3Com Corporation*...................................... 2,921,875
107,500 Cisco Systems Incorporated*............................ 5,670,625
100,000 Compaq Computer Corporation*........................... 5,662,500
50,000 Dell Computer Corporation*............................. 3,356,250
100,000 Sun Microsystems Incorporated*......................... 5,437,500
125,000 Western Digital Corporation*........................... 4,390,625
98,100 Xerox Corporation...................................... 5,383,238
-----------
32,822,613
-----------
Computer Software - 2.26%
50,000 Cadence Design Systems Incorporated*................... 1,481,250
150,075 Computer Associates International Incorporated......... 7,878,938
7,200 Microsoft Corporation*................................. 882,000
</TABLE>
3
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<S> <C>
COMMON STOCKS - (CONTINUED)
Computer Software - (concluded)
13,000 Sterling Commerce Incorporated*........................ $ 403,000
50,000 Sterling Software Incorporated*........................ 3,393,750
-----------
14,038,938
-----------
Defense/Aerospace - 7.33%
117,000 ITT Industries Incorporated............................ 2,676,375
130,000 Lockheed Martin Corporation............................ 10,936,250
268,200 Loral Corporation*..................................... 3,754,800
136,400 McDonnell Douglas Corporation.......................... 6,837,050
168,600 Raytheon Company....................................... 8,682,900
125,000 Rockwell International Corporation..................... 6,500,000
53,800 United Technologies Corporation........................ 6,065,950
-----------
45,453,325
-----------
Diversified Retail - 2.00%
234,000 Dayton Hudson Corporation.............................. 8,073,000
125,000 Federated Department Stores, Incorporated.............. 4,328,125
-----------
12,401,125
-----------
Drugs & Medicine - 5.63%
83,400 Bristol-Myers Squibb Company........................... 7,318,350
40,000 Cardinal Health Incorporated........................... 2,935,000
107,800 Pfizer, Incorporated................................... 7,653,800
100,000 Rhone-Poulenc Rorer Incorporated....................... 7,037,500
100,000 Schering-Plough Corporation............................ 5,587,500
75,000 Smithkline Beecham, plc, ADS........................... 4,368,750
-----------
34,900,900
-----------
Electric Utilities - 1.18%
100,000 FPL Group, Incorporated................................ 4,425,000
125,000 Unicom Corporation..................................... 2,875,000
-----------
7,300,000
-----------
Energy Reserves & Production - 3.46%
125,000 Louisiana Land & Exploration Company................... 7,109,375
66,200 Mobil Corporation...................................... 7,464,050
125,000 Panenergy Corporation.................................. 4,140,625
18,500 Royal Dutch Petroleum Company.......................... 2,763,438
-----------
21,477,488
-----------
Financial Services - 2.52%
43,800 American Express Company............................... 1,916,250
42,400 General Electric Company............................... 3,524,500
100,000 Irvine Apartment Communities Incorporated.............. 2,250,000
100,000 Oasis Residential Incorporated......................... 2,187,500
67,000 Textron Incorporated................................... 5,720,125
-----------
15,598,375
-----------
Forest Products, Paper - 0.49%
70,100 Champion International Corporation..................... 3,014,300
-----------
</TABLE>
4
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<S> <C>
COMMON STOCKS - (CONTINUED)
Food Retail - 0.94%
160,000 Safeway Incorporated*.................................. $ 5,800,000
-----------
Hotels - 1.19%
120,000 Bally Entertainment Group*............................. 3,270,000
75,000 Marriott International, Incorporated................... 4,115,625
-----------
7,385,625
-----------
Household Products - 0.66%
159,800 Dial Corporation....................................... 1,837,700
159,800 Viad Corporation....................................... 2,277,150
-----------
4,114,850
-----------
Information & Computer Services - 1.05%
123,100 Computervision Corporation* ........................... 861,700
125,000 Omnicom Group.......................................... 5,671,875
-----------
6,533,575
-----------
Leisure - 0.43%
100,000 Mattel, Incorporated................................... 2,637,500
-----------
Life Insurance - 1.96%
55,000 Reliastar Financial Corporation........................ 2,426,875
78,800 SunAmerica Incorporated................................ 5,368,250
100,000 Travelers Group Incorporated........................... 4,337,500
-----------
12,132,625
-----------
Long Distance & Phone Companies - 1.31%
200,000 Sprint Corporation..................................... 8,125,000
-----------
Manufacturing - General - 3.61%
150,000 ADT Limited*........................................... 2,943,750
146,000 Case Corporation....................................... 6,643,000
100,000 Ingersoll Rand Company................................. 4,275,000
127,000 Pentair Incorporated................................... 3,460,750
100,000 Varity Corporation*.................................... 5,025,000
-----------
22,347,500
-----------
Manufacturing - High Technology - 0.92%
108,200 United States Robotics Corporation*.................... 5,680,500
-----------
Medical Products - 2.55%
100,000 Johnson & Johnson...................................... 4,925,000
195,000 Mentor Corporation..................................... 6,166,875
130,000 U.S. Surgical Corporation.............................. 4,745,000
-----------
15,836,875
-----------
Medical Providers - 2.05%
200,000 HEALTHSOUTH Corporation*............................... 6,475,000
125,000 Humana Incorporated*................................... 2,343,750
150,000 Ornda Healthcorp*...................................... 3,862,500
-----------
12,681,250
-----------
Mining & Metals - 0.44%
100,000 USX-U.S. Steel Group, Incorporated..................... 2,750,000
-----------
</TABLE>
5
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<S> <C>
COMMON STOCKS - (CONCLUDED)
Motor Vehicles - 1.87%
100,000 Borg Warner Automotive Incorporated.................... $ 3,750,000
149,400 Breed Technologies Incorporated........................ 3,977,775
100,000 Lear Corporation*...................................... 3,837,500
-----------
11,565,275
-----------
Oil Refining - 3.14%
13,138 British Petroleum plc.................................. 1,547,000
100,000 Coastal Corporation.................................... 3,962,500
90,500 DuPont (E.I.) de Nemours & Company..................... 7,432,312
38,000 Repsol S.A., ADR....................................... 1,239,750
15,000 Shell Transport & Trading plc.......................... 1,312,500
77,500 Tejas Gas Corporation*................................. 2,693,124
35,000 Total S.A. ............................................ 1,299,375
-----------
19,486,561
-----------
Oil Services - 3.75%
50,000 Camco International Incorporated....................... 1,693,750
100,000 Diamond Offshore Drilling Incorporated*................ 5,100,000
430,000 Forest Oil Corporation*................................ 6,073,750
150,000 Halliburton Company.................................... 7,893,750
165,000 Nabors Industries Incorporated*........................ 2,454,375
-----------
23,215,625
-----------
Other Insurance - 3.69%
125,000 ACE Limited............................................ 5,828,125
200,971 Allstate Corporation................................... 8,968,330
85,200 American International Group Incorporated.............. 8,094,000
-----------
22,890,455
-----------
Publishing - 0.51%
100,000 New York Times Company, Class A........................ 3,125,000
-----------
Railroads - 0.55%
50,000 Consolidated Rail, Incorporated........................ 3,406,250
-----------
Real Property - 1.76%
100,000 Avalon Properties Incorporated......................... 2,287,500
65,000 Chelsea GCA Realty Incorporated........................ 1,893,125
65,000 Equity Residential Properties Trust.................... 2,299,375
60,000 Starwood Lodging Corporation........................... 2,280,000
100,000 Wellsford Residential Property......................... 2,162,500
-----------
10,922,500
-----------
Specialty Retail - 2.50%
100,000 Consolidated Stores Corporation*....................... 3,800,000
120,375 Dollar General Corporation............................. 3,882,093
190,000 Eckerd Corporation*.................................... 4,655,000
150,000 Waban Incorporated..................................... 3,187,500
-----------
15,524,593
-----------
Total Common Stocks (cost - $422,014,825)......................... 505,414,339
-----------
</TABLE>
6
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<C> <S> <C>
PREFERRED STOCKS - 3.17%
Apparel, Retail - 0.51%
17,450 TJX Companies, Incorporated............................ $ 3,175,900
-----------
Financial Services - 0.42%
53,000 Devon Financing Trust#................................. 2,597,000
-----------
Forest Products, Paper - 0.76%
102,000 International Paper Capital Trust#..................... 4,692,000
-----------
Media - 0.21%
25,000 American Radio Systems Corporation*#................... 1,325,000
-----------
Miscellaneous - 0.87%
108,800 BCP International Limited.............................. 5,412,800
-----------
Precious Metals - 0.40%
144,000 Coeur d'Alene Mines Corporation........................ 2,484,000
-----------
Total Preferred Stocks (cost - $19,831,128)....................... 19,686,700
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES
--------- -------------------- --------------
CONVERTIBLE BONDS - 1.17%
<C> <S> <C> <C> <C>
Computer Hardware - 0.52%
$ 3,500 Quantum Corporation#.... 03/01/03 5.000% 3,255,000
------------
Drugs & Medicine - 0.17%
1,000 North American Vaccine
Incorporated#.......... 05/01/03 6.500 1,037,500
------------
Environmental Services - 0.48%
3,000 Molten Metal Technology
Incorporated#.......... 05/01/06 5.500 2,970,000
------------
Total Convertible Bonds (cost -
$7,385,000)........................ 7,262,500
------------
U.S. GOVERNMENT OBLIGATIONS - 3.22%
20,000 United States Treasury
Bills (cost -
$19,959,028)........... 09/12/96 to 09/19/96 5.080 to 5.090@ 19,959,028
------------
REPURCHASE AGREEMENTS - 8.54%
26,915 Repurchase agreement
dated 08/30/96, with
Daiwa Securities
America, Inc.,
collateralized by
$23,925,000 U.S.
Treasury Bond, 8.500%
due 02/15/20; proceeds:
$26,930,611............ 09/03/96 5.220 26,915,000
26,000 Repurchase agreement
dated 08/30/96, with
Dresdner Securities
(USA), Inc.,
collateralized by
$26,222,000
U.S. Treasury Note,
6.500% due 05/31/01;
proceeds: $26,015,167.. 09/03/96 5.250 26,000,000
------------
Total Repurchase Agreements (cost -
$52,915,000)....................... 52,915,000
------------
Total Investments (cost -
$522,104,981) - 97.64%............ 605,237,567
Other assets in excess of
liabilities - 2.36%................ 14,620,905
------------
Net Assets - 100.00%............... $619,858,472
============
</TABLE>
- -------
* Non-income producing
# Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
@ Yield to maturity at date of purchase
ADR--American Depositary Receipts
ADS--American Depositary Shares
See accompanying notes to financial statements
7
<PAGE>
PAINEWEBBER GROWTH FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<C> <S> <C>
COMMON STOCKS - 93.90%
Agriculture, Food & Beverage - 1.26%
100,000 The Coca-Cola Company.................................. $ 5,000,000
-----------
Banks - 3.02%
70,000 The Bank of New York Company Incorporated.............. 1,951,250
80,000 CCB Financial Corporation.............................. 4,260,000
43,680 The Chase Manhattan Corporation........................ 3,248,700
10,000 Wells Fargo and Company................................ 2,487,500
-----------
11,947,450
-----------
Chemicals - 3.37%
98,000 IMC Global Incorporated................................ 4,214,000
115,762 Mark IV Industries Incorporated........................ 2,488,883
175,000 Sealed Air Corporation*................................ 6,628,125
-----------
13,331,008
-----------
Computer Hardware - 5.13%
60,000 3Com Corporation*...................................... 2,805,000
80,000 Business Objects S.A.*................................. 1,420,000
180,000 Cisco Systems Incorporated*............................ 9,495,000
200,000 EMC Corporation*....................................... 3,850,000
50,000 Sun Microsystems Incorporated*......................... 2,718,750
-----------
20,288,750
-----------
Computer Software - 4.49%
80,000 Epic Design Technology, Incorporated*.................. 1,540,000
430,000 Excalibur Technologies Corporation*.................... 6,503,750
100,000 Hummingbird Communications Limited*.................... 2,950,000
100,000 Sterling Software Incorporated*........................ 6,787,500
-----------
17,781,250
-----------
Consumer Durables - 0.15%
30,000 Watsco Incorporated.................................... 585,000
-----------
Defense/Aerospace - 1.11%
125,000 Kellstrom Industries Incorporated*..................... 1,000,000
30,000 United Technologies Corporation........................ 3,382,500
-----------
4,382,500
-----------
Drugs & Medicine - 5.51%
141,300 Columbia Laboratories, Incorporated*................... 1,801,575
60,000 Elan Corporation, plc, ADS*............................ 1,882,500
230,000 Entremed, Incorporated*................................ 3,507,500
</TABLE>
8
<PAGE>
PAINEWEBBER GROWTH FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<C> <S> <C>
COMMON STOCKS - (CONTINUED)
Drugs & Medicine - (concluded)
120,000 Global Pharmaceutical Corporation*..................... $ 1,005,000
130,000 Pharmacyclics Incorporated*............................ 1,641,250
40,000 R.P. Scherer Corporation*.............................. 1,925,000
172,000 Teva Pharmaceutical Industries Limited, ADS............ 6,267,250
130,000 Watson Pharmaceuticals, Incorporated*.................. 3,770,000
-----------
21,800,075
-----------
Entertainment - 3.16%
220,000 Cinar Films Incorporated*.............................. 5,252,500
333,334 N2K Incorporated*...................................... 1,000,002
188,000 Time Warner Incorporated............................... 6,274,500
-----------
12,527,002
-----------
Environmental Services - 3.70%
560,000 Republic Industries, Incorporated*..................... 14,630,000
-----------
Financial Services - 3.00%
39,500 Federal Home Loan Mortgage Corporation................. 3,490,812
270,000 Federal National Mortgage Association.................. 8,370,000
-----------
11,860,812
-----------
Forest Products, Paper - 0.65%
195,000 Universal Forest Products, Incorporated................ 2,559,375
-----------
Food Retail - 1.14%
125,000 Safeway Incorporated*.................................. 4,531,250
-----------
Heavy Machinery - 0.40%
37,500 Corestaff Incorporated*................................ 1,575,000
-----------
Hotels - 5.49%
500,000 Extended Stay America, Incorporated*................... 7,625,000
150,000 HFS, Incorporated*..................................... 8,981,250
220,000 Mirage Resorts, Incorporated*.......................... 5,115,000
-----------
21,721,250
-----------
Household Products - 1.71%
120,000 Dial Corporation....................................... 1,380,000
30,000 Premark International, Incorporated.................... 547,500
80,000 Syratech Corporation*.................................. 1,830,000
30,000 Tupperware Corporation................................. 1,312,500
120,000 Viad Corporation....................................... 1,710,000
-----------
6,780,000
-----------
Industrial Services/Supplies - 1.94%
45,000 Career Horizons, Incorporated*......................... 1,569,375
230,000 Data Documents Incorporated*........................... 2,530,000
200,000 Staffing Resources, Incorporated*...................... 3,600,000
-----------
7,699,375
-----------
</TABLE>
9
<PAGE>
PAINEWEBBER GROWTH FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<S> <C>
COMMON STOCKS - (CONTINUED)
Information & Computer Services - 3.27%
66,900 Ceridian Corporation*.................................. $ 2,851,612
78,000 Computervision Corporation*............................ 546,000
40,000 First Data Corporation................................. 3,120,000
45,000 Outdoor Systems Incorporated*.......................... 1,901,250
84,375 Paychex, Incorporated.................................. 4,514,062
-----------
12,932,924
-----------
Leisure - 3.73%
250,000 Activision, Incorporated*.............................. 3,000,000
400,000 Marker International*.................................. 2,850,000
131,500 Mattel, Incorporated................................... 3,468,312
225,000 Norwood Promotional Products, Incorporated*............ 3,262,500
229,500 Rawlings Sporting Goods Company, Incorporated*......... 2,194,594
-----------
14,775,406
-----------
Life Insurance - 1.48%
35,000 Equitable of Iowa Companies............................ 1,286,250
150,000 PennCorp Financial Group, Incorporated................. 4,575,000
-----------
5,861,250
-----------
Long Distance & Phone Companies - 5.82%
45,000 Brooks Fiber Properties, Incorporated*................. 1,350,000
345,096 ICG Communications, Incorporated*...................... 7,592,112
77,000 Intermedia Communications of Florida, Incorporated*.... 2,387,000
75,000 International CableTel Incorporated*................... 1,818,750
22,500 McLeod Incorporated*................................... 649,688
144,000 MFS Communications Company, Incorporated*.............. 6,102,000
135,000 Teleport Communications Group*......................... 3,122,550
-----------
23,022,100
-----------
Manufacturing - High Technology - 6.22%
100,000 Amphenol Corporation, Class A*......................... 1,962,500
183,500 Belden, Incorporated................................... 4,977,437
45,000 Boston Communications Group, Incorporated*............. 776,250
45,000 Glenayre Technologies, Incorporated*................... 1,653,750
150,000 Microcom Incorporated*................................. 1,275,000
430,000 Noel Group, Incorporated*.............................. 3,386,250
56,250 Thermo Instrument Systems Incorporated*................ 2,179,688
268,000 Waters Corporation*.................................... 8,408,500
-----------
24,619,375
-----------
Media - 9.53%
277,500 Ascent Entertainment Group Incorporated*............... 5,341,875
125,000 Bell CableMedia plc*................................... 1,839,844
160,000 British Sky Broadcasting Group plc..................... 8,580,000
257,500 Comcast Corporation, Class A Special................... 4,152,188
125,000 Comcast UK Cable Partners Limited*..................... 1,343,750
91,500 Infinity Broadcasting Corporation, Class A*............ 2,504,812
131,250 Liberty Media Group*................................... 3,461,719
</TABLE>
10
<PAGE>
PAINEWEBBER GROWTH FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<C> <S> <C>
COMMON STOCKS - (CONTINUED)
Media - (concluded)
100,000 Metromedia International Group, Incorporated*......... $ 1,125,000
90,000 NYNEX Cablecomms Group plc, ADR*...................... 1,462,500
100,000 Tele-Communications International, Incorporated....... 1,662,500
225,000 Tele-Communications, Incorporated, Class A*........... 3,346,875
70,000 TeleWest Communications plc, ADR*..................... 1,513,750
100,000 United International Holdings, Incorporated, Class A*. 1,375,000
-----------
37,709,813
-----------
Medical Products - 0.83%
170,000 VISX, Incorporated*................................... 3,293,750
-----------
Medical Providers - 5.01%
75,000 Columbia/HCA Healthcare Corporation................... 4,228,125
25,000 Lanvision Systems, Incorporated*...................... 315,625
155,000 Ornda Healthcorp*..................................... 3,991,250
198,000 Phycor Incorporated*.................................. 6,484,500
85,500 Service Corporation International..................... 4,820,063
-----------
19,839,563
-----------
Mining & Metals - 0.96%
50,000 Potash Corporation of Saskatchewan Incorporated....... 3,800,000
-----------
Motor Vehicles - 0.13%
28,000 Dura Automotive Systems, Incorporated*................ 518,000
-----------
Oil Services - 0.60%
70,000 Camco International Incorporated...................... 2,371,250
-----------
Other Insurance - 1.08%
60,000 ACE Limited .......................................... 2,797,500
61,400 Everest Reinsurance Holdings Incorporated............. 1,496,625
-----------
4,294,125
-----------
Publishing - 0.72%
205,000 Getty Communications Systems Incorporated............. 2,844,375
-----------
Real Property - 0.48%
50,000 Starwood Lodging Corporation.......................... 1,900,000
-----------
Specialty Retail - 7.35%
100,000 Corporate Express, Incorporated*...................... 3,750,000
120,000 Eckerd Corporation*................................... 2,940,000
300,000 General Nutrition Companies, Incorporated*............ 4,425,000
40,000 Gucci Group N.V. ..................................... 2,660,000
460,405 Staples, Incorporated*................................ 9,092,999
240,000 Viking Office Products, Incorporated*................. 6,210,000
-----------
29,077,999
-----------
</TABLE>
11
<PAGE>
PAINEWEBBER GROWTH FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<C> <S> <C>
COMMON STOCKS - (CONCLUDED)
Wireless Telecommunications - 1.46%
32,000 Millicom International Cellular, S.A.*................. $ 1,272,000
90,000 Omnipoint Corporation*................................. 2,452,500
70,000 Paging Network, Incorporated*.......................... 1,233,750
47,000 Western Wireless Corporation*.......................... 822,500
-----------
5,780,750
-----------
Total Common Stocks (cost - $242,999,138)......................... 371,640,777
-----------
PREFERRED STOCK - 0.43%
Media - 0.43%
95,000 The News Corporation Limited (cost - $1,680,075)....... 1,686,250
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES
--------- -------- --------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENTS - 5.65%
$11,000 Repurchase agreement dated
08/30/96, with Citicorp
Securities, Inc., collateralized
by $9,025,000 U.S. Treasury
Bonds, 11.125%, due 08/15/03;
proceeds: $11,006,392............ 09/03/96 5.230% 11,000,000
11,342 Repurchase agreement dated
08/30/96, with State Street Bank
and Trust Company,
collateralized by $11,310,000
U.S. Treasury Notes, 6.125%, due
03/31/98; proceeds: $11,348,566.. 09/03/96 5.210 11,342,000
------------
Total Repurchase Agreements (cost -
$22,342,000)................................. 22,342,000
------------
Total Investments (cost - $267,021,213) -
99.98%....................................... 395,669,027
Other assets in excess of liabilities -
0.02%........................................ 95,756
------------
Net Assets - 100.00%......................... $395,764,783
============
</TABLE>
- -------
* Non-income producing
# Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
ADR--American Depositary Receipts
ADS--American Depositary Shares
See accompanying notes to financial statements
12
<PAGE>
PAINEWEBBER
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996
<TABLE>
<CAPTION>
GROWTH
& INCOME GROWTH
FUND FUND
------------ ------------
<S> <C> <C>
Assets
Investments in securities, at value (cost--
$522,104,981 and $267,021,213, respectively)........ $605,237,567 $395,669,027
Cash................................................. 660 263,854
Receivable for investments sold...................... 14,772,306 522,990
Dividends and interest receivable.................... 986,069 142,755
Receivable for shares of beneficial interest sold.... 625,892 93,090
Deferred organizational expenses..................... 29,726 74,818
Other assets......................................... 51,714 121,538
------------ ------------
Total assets......................................... 621,703,934 396,888,072
------------ ------------
Liabilities
Payable for shares of beneficial interest
repurchased......................................... 900,632 450,011
Payable to affiliate................................. 709,005 442,236
Accrued expenses and other liabilities............... 235,825 231,042
------------ ------------
Total liabilities.................................... 1,845,462 1,123,289
------------ ------------
Net Assets
Beneficial interest--$0.001 par value (unlimited
amount authorized).................................. 474,846,608 234,504,688
Accumulated undistributed net investment income...... 853,493 --
Accumulated net realized gains from investment
transactions........................................ 61,025,785 32,612,281
Net unrealized appreciation of investments........... 83,132,586 128,647,814
------------ ------------
Net assets........................................... $619,858,472 $395,764,783
============ ============
Class A:
Net assets........................................... $276,015,697 $203,882,380
------------ ------------
Shares outstanding................................... 11,334,133 8,367,838
------------ ------------
Net asset value and redemption value per share....... $24.35 $24.37
============ ============
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price)....... $25.50 $25.51
============ ============
Class B:
Net assets........................................... $277,752,763 $140,550,595
------------ ------------
Shares outstanding................................... 11,448,219 6,032,563
------------ ------------
Net asset value and offering price per share......... $24.26 $23.30
============ ============
Class C:
Net assets........................................... $ 43,147,752 $ 29,923,167
------------ ------------
Shares outstanding................................... 1,773,624 1,274,634
------------ ------------
Net asset value and offering price per share......... $24.33 $23.48
============ ============
Class Y:
Net assets........................................... $ 22,942,260 $ 21,408,641
------------ ------------
Shares outstanding................................... 942,279 865,284
------------ ------------
Net asset value, offering price and redemption value
per share........................................... $24.35 $24.74
============ ============
</TABLE>
See accompanying notes to financial statements
13
<PAGE>
PAINEWEBBER
STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 1996
<TABLE>
<CAPTION>
GROWTH
& INCOME GROWTH
FUND FUND
----------- -----------
<S> <C> <C>
Investment income:
Dividends............................................ $ 9,050,237 $ 1,697,485
Interest............................................. 3,577,821 1,441,701
----------- -----------
12,628,058 3,139,186
----------- -----------
Expenses:
Investment advisory and administration............... 4,075,174 2,985,925
Service fees--Class A................................ 591,662 457,184
Service and distribution fees--Class B............... 2,676,820 1,475,760
Service and distribution fees--Class C............... 376,394 306,286
Transfer agency and service fees..................... 545,777 340,899
Reports and notices to shareholders.................. 289,618 237,799
Custody and accounting............................... 244,550 177,418
Fund acquisition expenses............................ 215,034 --
Legal and audit...................................... 165,303 153,653
Federal and state registration....................... 113,406 211,028
Trustees' fees....................................... 15,750 15,681
Amortization of organizational expenses.............. 18,435 34,576
Other expenses....................................... 28,070 27,103
----------- -----------
9,355,993 6,423,312
----------- -----------
Net investment income (loss)......................... 3,272,065 (3,284,126)
----------- -----------
Realized and unrealized gains (losses) from invest-
ment activities:
Net realized gains from investment transactions...... 86,725,439 53,608,241
Net change in unrealized appreciation/depreciation of
investments......................................... (1,953,419) 15,049,708
----------- -----------
Net realized and unrealized gains from investment ac-
tivities............................................ 84,772,020 68,657,949
----------- -----------
Net increase in net assets resulting from operations. $88,044,085 $65,373,823
=========== ===========
</TABLE>
See accompanying notes to financial statements
14
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED AUGUST 31,
---------------------------
1996 1995
------------ -------------
<S> <C> <C>
From operations:
Net investment income............................. $ 3,272,065 $ 3,038,055
Net realized gains from investment transactions... 86,725,439 17,636,364
Net change in unrealized appreciation/depreciation
of investments................................... (1,953,419) 52,701,413
------------ -------------
Net increase in net assets resulting from
operations....................................... 88,044,085 73,375,832
------------ -------------
Dividends and distributions to shareholders from:
Net investment income--Class A.................... (3,309,904) (1,163,754)
Net investment income--Class B.................... (985,947) (457,553)
Net investment income--Class C.................... (142,026) (53,897)
Net investment income--Class Y.................... (323,508) (102,452)
Net realized gains from investment transactions--
Class A.......................................... (14,113,535) (11,701,555)
Net realized gains from investment transactions--
Class B.......................................... (16,674,335) (15,518,597)
Net realized gains from investment transactions--
Class C.......................................... (2,139,119) (1,953,255)
Net realized gains from investment transactions--
Class Y.......................................... (1,066,345) (828,242)
------------ -------------
Total dividends and distributions to shareholders. (38,754,719) (31,779,305)
------------ -------------
From beneficial interest transactions:
Net proceeds from the sale of shares.............. 86,569,299 30,582,369
Proceeds from the issuance of shares from the
acquisition of Mitchell Hutchins/Kidder, Peabody
Equity Income Fund............................... 60,522,138 --
Proceeds from the issuance of shares from the
acquisition of PaineWebber Global Energy Fund.... 17,163,198 --
Cost of shares repurchased........................ (109,425,591) (185,758,645)
Proceeds from dividends reinvested................ 35,992,186 29,628,162
------------ -------------
Net increase (decrease) in net assets from
beneficial interest transactions................. 90,821,230 (125,548,114)
------------ -------------
Net increase (decrease) in net assets............. 140,110,596 (83,951,587)
Net assets:
Beginning of year................................. 479,747,876 563,699,463
------------ -------------
End of year (including undistributed net
investment income of $853,493 and
$2,077,243, respectively)........................ $619,858,472 $ 479,747,876
============ =============
</TABLE>
See accompanying notes to financial statements
15
<PAGE>
PAINEWEBBER GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED AUGUST 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
From operations:
Net investment loss................................ $ (3,284,126) $ (331,823)
Net realized gains from investment transactions.... 53,608,241 17,051,928
Net change in unrealized appreciation/depreciation
of investments.................................... 15,049,708 7,109,490
------------ ------------
Net increase in net assets resulting from
operations........................................ 65,373,823 23,829,595
------------ ------------
Distributions to shareholders from:
Net realized gains from investment transactions--
Class A........................................... (14,736,470) (170,322)
Net realized gains from investment transactions--
Class B........................................... (11,773,021) (120,995)
Net realized gains from investment transactions--
Class C........................................... (2,425,155) (33,706)
Net realized gains from investment transactions--
Class Y........................................... (1,487,963) (37,136)
------------ ------------
Total distributions to shareholders................ (30,422,609) (362,159)
------------ ------------
From beneficial interest transactions:
Net proceeds from sale of shares................... 33,439,586 29,210,160
Proceeds from the issuance of shares from the
acquisition of PaineWebber Communications &
Technology Growth Fund............................ -- 62,703,777
Proceeds from the issuance of shares from the
acquisition of PaineWebber Blue Chip Growth Fund.. -- 86,500,222
Cost of shares repurchased......................... (89,217,437) (112,053,043)
Proceeds from dividends reinvested................. 28,720,783 345,390
------------ ------------
Net increase (decrease) in net assets from
beneficial interest transactions.................. (27,057,068) 66,706,506
------------ ------------
Net increase in net assets......................... 7,894,146 90,173,942
Net assets:
Beginning of year.................................. 387,870,637 297,696,695
------------ ------------
End of year........................................ $395,764,783 $387,870,637
============ ============
</TABLE>
See accompanying notes to financial statements
16
<PAGE>
PAINEWEBBER NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Growth & Income Fund ("Growth & Income Fund") and PaineWebber
Growth Fund ("Growth Fund") (collectively, the "Funds") are diversified series
of PaineWebber America Fund and PaineWebber Olympus Fund (the "Trusts"),
respectively. The two Trusts were organized under separate Declarations of
Trust and are registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended, as diversified open-end investment
companies.
Each Fund offers Class A, Class B, Class C and Class Y shares. Each class
represents interests in the same assets of the applicable Fund, and the classes
are identical except for differences in their sales charge structure, ongoing
service/distribution charges and certain transfer agency expenses. In addition,
Class B shares and all corresponding dividend reinvested shares automatically
convert to Class A shares approximately six years after initial issuance. All
classes of shares have equal voting privileges, except that Class A, Class B,
and Class C shares have exclusive voting rights with respect to their
distribution plans. Organizational costs have been deferred and are being
amortized using the straight line method over a period not to exceed 60 months
from the date the costs were incurred.
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 which 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 as the primary market by Mitchell Hutchins Asset
Management Inc. ("Mitchell Hutchins"), an affiliate and wholly owned subsidiary
of PaineWebber Incorporated ("PaineWebber") and investment adviser,
administrator and distributor of the Funds. Securities traded in the over-the-
counter ("OTC") market and listed on the Nasdaq Stock Market ("Nasdaq") are
valued at the last sale price on Nasdaq prior to the time of valuation; other
OTC securities are valued at the last bid price available in the OTC market
prior to the time of valuation. 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 quotations are not readily available
(including restricted securities subject to limitations as to their sale) are
valued at fair value as determined in good faith by a management committee
under the direction of each Trust's Board of Trustees.
17
<PAGE>
PAINEWEBBER
Repurchase Agreements - Each 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. Each 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 trade date. Realized gains and losses from investment transactions
are calculated using the identified cost method. Interest income is recorded on
an accrual basis and dividend income is recorded on the ex-dividend date.
Premiums are amortized and discounts are accreted as adjustments to interest
income and identified cost of investments.
Income, expenses (excluding class-specific expenses) and realized/unrealized
gains/losses are allocated proportionately to each class of shares based upon
the relative net asset value of outstanding shares (or the value of dividend-
eligible shares, as appropriate) of each class at the beginning of the day
(after adjusting for current capital share activity of the respective classes).
Class specific expenses are charged directly to the applicable class of shares.
Dividends and Distributions - Dividends and distributions to shareholders are
recorded on the ex-dividend date. The amount of dividends and distributions 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 reclassifications.
ACQUISITIONS
Effective October 13, 1995, Growth & Income Fund acquired all of the net assets
of PaineWebber Global Energy Fund ("Global Energy Fund") in a tax-free exchange
for shares of Growth & Income Fund. The acquisition was accomplished by a tax-
free exchange of 338,423 Class A, 414,593 Class B and 24,548 Class C shares of
Growth & Income Fund for 680,852 Class A, 832,585 Class B and 50,070 Class C
shares, respectively, of Global Energy Fund outstanding. Global Energy Fund's
net assets at that date, valued at $17,163,198 including accumulated net
realized losses of $2,079,189 and net unrealized appreciation of investments of
$653,059, were combined with those of Growth & Income Fund.
18
<PAGE>
PAINEWEBBER
Effective October 13, 1995, Growth & Income Fund acquired all of the net assets
of Mitchell Hutchins/Kidder, Peabody Equity Income Fund ("MH/KP Equity Income
Fund") in a tax free exchange for shares of Growth & Income Fund. The
acquisition was accomplished by a tax-free exchange of 2,533,885 Class A,
137,926 Class Y and 67,543 Class C shares of Growth & Income Fund for 2,816,987
Class A, 153,429 Class Y and 75,614 Class B shares, respectively, of MH/KP
Equity Income Fund outstanding. MH/KP Equity Income Fund's net assets at that
date, valued at $60,522,138 including net unrealized appreciation of
investments of $5,986,801 were combined with those of Growth & Income Fund.
INVESTMENT ADVISER AND ADMINISTRATOR
Each 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
Funds. In accordance with the Advisory Contracts, Growth & Income Fund and
Growth Fund pay Mitchell Hutchins an investment advisory and administration
fee, which is accrued daily and paid monthly, at the annual rate of 0.70% and
0.75%, respectively, of each Funds average daily net assets. At August 31,
1996, Growth & Income Fund and Growth Fund owed Mitchell Hutchins $367,024 and
$249,031, respectively, in investment advisory and administration fees.
For the year ended August 31, 1996, Growth & Income Fund and Growth Fund paid
$32,465 and $10,104, respectively, in brokerage commissions to PaineWebber for
transactions executed on behalf of the Funds.
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
separate plans of distribution pertaining to the Class A, Class B and Class C
shares, the Funds pay Mitchell Hutchins monthly service fees at the annual rate
of up to 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 on Class B and Class C shares. At August 31, 1996, Growth &
Income Fund and Growth Fund owed Mitchell Hutchins $324,858 and $182,531,
respectively, in service and distribution fees.
Mitchell Hutchins also receives the proceeds of the initial sales charges paid
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 year ended August
31, 1996, it earned $979,512 and $579,350 in sales charges for the Growth &
Income Fund and Growth Fund, respectively.
19
<PAGE>
PAINEWEBBER
TRANSFER AGENCY SERVICE FEES
Each Fund pays 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 year ended August 31, 1996, PaineWebber
earned $206,622 and $134,864 from Growth & Income Fund and Growth Fund,
respectively. At August 31, 1996, Growth & Income Fund and Growth Fund owed
PaineWebber $17,123 and $10,674, respectively, for transfer agency service
fees.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at August 31,
1996, was substantially the same as the cost of securities for financial
statement purposes.
At August 31, 1996, the components of net unrealized appreciation of
investments were as follows:
<TABLE>
<CAPTION>
GROWTH &
INCOME FUND GROWTH FUND
------------ ------------
<S> <C> <C>
Gross appreciation (investments having an excess of
value over cost).................................. $ 92,723,365 $135,027,196
Gross depreciation (investments having an excess of
cost over value).................................. (9,590,779) (6,379,382)
------------ ------------
Net unrealized appreciation of investments......... $ 83,132,586 $128,647,814
============ ============
For the year ended August 31, 1996, total aggregate purchases and sales of
portfolio securities, excluding short-term securities, were as follows:
<CAPTION>
GROWTH &
INCOME FUND GROWTH FUND
------------ ------------
<S> <C> <C>
Purchases.......................................... $586,303,031 $225,553,349
Sales.............................................. $619,085,974 $270,210,453
</TABLE>
FEDERAL TAX STATUS
Each Fund intends to distribute 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, each Fund intends not to be subject to any federal excise tax.
To reflect reclassifications for the Growth & Income Fund arising from
permanent "book/tax" differences for the year ended August 31, 1996,
accumulated undistributed net investment income was increased by $265,570,
accumulated net realized gains from investment transactions were increased by
$383,609 and beneficial interest was decreased by $649,179.
To reflect reclassifications for the Growth Fund arising from permanent
"book/tax" differences for the year ended August 31, 1996, accumulated
undistributed net investment income was increased by $3,479,461, accumulated
net realized gains from investment transactions were decreased by $3,445,252
and beneficial interest was decreased by $34,209.
20
<PAGE>
PAINEWEBBER
BENEFICIAL INTEREST
There is an unlimited amount of $0.001 par value shares of beneficial interest
authorized. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------------------------ ------------------------ --------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ -------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROWTH & INCOME FUND
YEAR ENDED
AUGUST 31,
1996:
Shares sold..... 1,129,631 $ 26,796,965 1,730,871 $ 40,860,505 586,203 $13,785,499 215,504 $ 5,126,330
Shares issued in
connection with
the acquisition
of:
MH/KP Equity
Income Fund... 2,533,885 55,983,774 -- -- 67,543 1,493,701 137,926 3,044,663
PaineWebber
Global Energy
Fund.......... 338,423 7,478,321 414,593 9,142,000 24,548 542,877 -- --
Shares
repurchased.... (1,907,414) (44,519,365) (2,302,787) (53,544,909) (361,631) (8,422,118) (125,157) (2,939,199)
Shares converted
from Class B to
Class A........ 204,193 4,892,665 (204,905) (4,892,665) -- -- -- --
Dividends
reinvested..... 728,678 16,107,474 744,676 16,323,941 98,756 2,173,217 62,781 1,387,554
---------- ------------ ---------- ------------ -------- ----------- -------- ------------
Net increase ... 3,027,396 $ 66,739,834 382,448 $ 7,888,872 415,419 $ 9,573,176 291,054 $ 6,619,348
========== ============ ========== ============ ======== =========== ======== ============
YEAR ENDED
AUGUST 31,
1995:
Shares sold..... 406,738 $ 8,281,477 791,571 $ 16,018,352 142,739 $ 2,898,240 169,458 $ 3,384,300
Shares
repurchased.... (3,712,415) (73,393,874) (4,676,193) (92,319,141) (715,856) (14,159,528) (288,614) (5,886,102)
Shares converted
from Class B to
Class A........ 72,134 1,428,360 (72,367) (1,428,360) -- -- -- --
Dividends
reinvested..... 653,877 11,890,156 821,955 14,887,430 105,724 1,919,882 51,195 930,694
---------- ------------ ---------- ------------ -------- ----------- -------- ------------
Net decrease.... (2,579,666) $(51,793,881) (3,135,034) $(62,841,719) (467,393) $(9,341,406) (67,961) $ (1,571,108)
========== ============ ========== ============ ======== =========== ======== ============
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------------------------ ------------------------ --------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ -------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROWTH FUND
YEAR ENDED
AUGUST 31,
1996:
Shares sold..... 514,293 $ 12,445,673 548,531 $ 12,529,149 189,909 $ 4,324,908 172,505 $ 4,139,856
Shares
repurchased.... (1,557,212) (36,779,779) (1,643,121) (35,301,053) (434,895) (9,869,571) (302,302) (7,267,034)
Shares converted
from Class B to
Class A........ 527,377 12,303,931 (454,796) (12,303,931) -- -- -- --
Dividends
reinvested..... 623,918 13,988,235 505,415 10,896,749 108,096 2,347,836 65,491 1,487,963
---------- ------------ ---------- ------------ -------- ----------- -------- ------------
Net increase
(decrease)..... 108,376 $ 1,958,060 (1,043,971) $(24,179,086) (136,890) $(3,196,827) (64,306) $ (1,639,215)
========== ============ ========== ============ ======== =========== ======== ============
YEAR ENDED
AUGUST 31,
1995:
Shares sold..... 343,756 $ 6,797,998 593,500 $ 11,354,188 184,507 $ 3,593,377 373,860 $ 7,464,597
Shares issued in
connection with
the acquisition
of:
PaineWebber Communications
& Technology
Growth Fund.... 533,772 11,895,983 2,011,998 43,342,827 343,927 7,464,967 -- --
PaineWebber
Blue Chip
Growth Fund... 2,348,128 52,326,034 1,425,501 30,724,310 159,005 3,449,878 -- --
Shares
repurchased.... (2,089,914) (41,666,293) (1,875,647) (36,501,877) (729,746) (14,263,697) (955,791) (19,621,176)
Shares converted
from Class B to
Class A........ 63,558 1,245,674 (65,425) (1,245,674) -- -- -- --
Dividends
reinvested..... 8,698 161,962 6,276 113,599 1,793 32,693 1,975 37,136
---------- ------------ ---------- ------------ -------- ----------- -------- ------------
Net increase
(decrease)..... 1,207,998 $ 30,761,358 2,096,203 $ 47,787,373 (40,514) $ 277,218 (579,956) $(12,119,443)
========== ============ ========== ============ ======== =========== ======== ============
</TABLE>
21
<PAGE>
PAINEWEBBER GROWTH & 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 YEARS ENDED AUGUST 31,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period..... $ 22.52 $ 20.43 $ 20.86 $ 20.48 $ 19.26
-------- -------- -------- -------- --------
Net investment income.... 0.22 0.24 0.28 0.28 0.24
Net realized and
unrealized gains
(losses) from investment
transactions............ 3.46 3.18 (0.41) 0.37 1.25
-------- -------- -------- -------- --------
Total increase (decrease)
from investment
operations.............. 3.68 3.42 (0.13) 0.65 1.49
-------- -------- -------- -------- --------
Dividends from investment
income.................. (0.34) (0.12) (0.27) (0.27) (0.27)
Distributions from net
realized gains on
investment transactions. (1.51) (1.21) (0.03) -- --
-------- -------- -------- -------- --------
Total dividends and
distributions to
shareholders............ (1.85) (1.33) (0.30) (0.27) (0.27)
-------- -------- -------- -------- --------
Net asset value, end of
period.................. $ 24.35 $ 22.52 $ 20.43 $ 20.86 $ 20.48
======== ======== ======== ======== ========
Total investment
return(1)............... 17.40% 18.30% (0.58)% 3.15% 7.78%
======== ======== ======== ======== ========
Ratios/Supplemental Data:
Net assets, end of period
(000's)................. $276,016 $187,057 $222,432 $359,073 $358,643
Expenses to average net
assets.................. 1.20%(2) 1.19% 1.20% 1.13% 1.22%
Net investment income to
average net assets...... 0.98%(2) 1.07% 1.29% 1.33% 1.26%
Portfolio turnover....... 112% 111% 94% 37% 16%
Average commission rate
paid per share of common
stock investments
purchased/sold(3)....... $ 0.0598 -- -- -- --
</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 information for periods of less than one
year has not been annualized.
(2) These ratios include non-recurring acquisition expenses of 0.04%.
(3) Disclosure effective for fiscal years beginning on or after September 1,
1995.
22
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
<TABLE>
<CAPTION>
CLASS B CLASS C
- ---------------------------------------------------- --------------------------------------------------
FOR THE
PERIOD
JULY 2,
FOR THE YEARS ENDED AUGUST 31, FOR THE YEARS ENDED AUGUST 31, 1992+ TO
- ---------------------------------------------------- -------------------------------------- AUGUST 31,
1996 1995 1994 1993 1992 1996 1995 1994 1993 1992
- -------- -------- -------- -------- -------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 22.37 $ 20.37 $ 20.78 $ 20.41 $ 19.23 $ 22.43 $ 20.42 $ 20.83 $ 20.47 $ 20.95
- -------- -------- -------- -------- -------- ------- ------- ------- ------- -------
0.04 0.06 0.10 0.12 0.13 0.05 0.06 0.11 0.11 0.02
3.45 3.18 (0.37) 0.36 1.20 3.46 3.19 (0.38) 0.37 (0.44)
- -------- -------- -------- -------- -------- ------- ------- ------- ------- -------
3.49 3.24 (0.27) 0.48 1.33 3.51 3.25 (0.27) 0.48 (0.42)
- -------- -------- -------- -------- -------- ------- ------- ------- ------- -------
(0.09) (0.03) (0.11) (0.11) (0.15) (0.10) (0.03) (0.11) (0.12) (0.06)
(1.51) (1.21) (0.03) -- -- (1.51) (1.21) (0.03) -- --
- -------- -------- -------- -------- -------- ------- ------- ------- ------- -------
(1.60) (1.24) (0.14) (0.11) (0.15) (1.61) (1.24) (0.14) (0.12) (0.06)
- -------- -------- -------- -------- -------- ------- ------- ------- ------- -------
$ 24.26 $ 22.37 $ 20.37 $ 20.78 $ 20.41 $ 24.33 $ 22.43 $ 20.42 $ 20.83 $ 20.47
======== ======== ======== ======== ======== ======= ======= ======= ======= =======
16.49% 17.38% (1.31)% 2.34% 6.99% 16.52% 17.37% (1.29)% 2.35% 2.85%
======== ======== ======== ======== ======== ======= ======= ======= ======= =======
$277,753 $247,543 $289,290 $461,389 $386,275 $43,148 $30,468 $37,287 $61,869 $13,019
1.99%(2) 1.97% 1.97% 1.90% 1.97% 1.99%(2) 1.98% 1.94% 1.87% 1.73%*
0.17%(2) 0.29% 0.51% 0.57% 4.90% 0.18%(2) 0.28% 0.54% 0.61% 0.94%*
112% 111% 94% 37% 16% 112% 111% 94% 37% 16%
$ 0.0598 -- -- -- -- $0.0598 -- -- -- --
</TABLE>
23
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT EACH PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS Y
--------------------------------------------------
FOR THE
PERIOD
FOR THE YEARS FEBRUARY
ENDED 12,
AUGUST 31, 1992+ TO
-------------------------------------- AUGUST 31,
1996 1995 1994 1993 1992
------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................. $ 22.54 $ 20.42 $ 20.86 $ 20.48 $ 20.95
------- ------- ------- ------- -------
Net investment income....... 0.30 0.30 0.33 0.33 0.16
Net realized and unrealized
gains (losses) from
investment transactions.... 3.45 3.18 (0.40) 0.37 (0.49)
------- ------- ------- ------- -------
Total increase (decrease)
from investment operations. 3.75 3.48 (0.07) 0.70 (0.33)
------- ------- ------- ------- -------
Dividends from investment
income..................... (0.43) (0.15) (0.34) (0.32) (0.14)
Distributions from net
realized gains on
investment transactions.... (1.51) (1.21) (0.03) -- --
------- ------- ------- ------- -------
Total dividends and
distributions to
shareholders............... (1.94) (1.36) (0.37) (0.32) (0.14)
------- ------- ------- ------- -------
Net asset value, end of
period..................... $ 24.35 $ 22.54 $ 20.42 $ 20.86 $ 20.48
======= ======= ======= ======= =======
Total investment return(1).. 17.77% 18.66% (0.31)% 3.44% (1.15)%
======= ======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period
(000's).................... $22,942 $14,680 $14,690 $17,005 $10,560
Expenses to average net
assets..................... 0.92%(2) 0.89% 0.90% 0.86% 0.93%*
Net investment income to
average net assets......... 1.26%(2) 1.39% 1.60% 1.62% 1.56%*
Portfolio turnover.......... 112% 111% 94% 37% 16%
Average commission rate paid
per share of common stock
investments
purchased/sold(3).......... $0.0598 -- -- -- --
</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. Total investment
return information for periods of less than one year has not been
annualized.
(2) These ratios include non-recurring acquisition expenses of 0.04%.
(3) Disclosure effective for fiscal years beginning on or after September 1,
1995.
24
<PAGE>
[This Page Intentionally Left Blank]
25
<PAGE>
PAINEWEBBER GROWTH FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT EACH PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $22.27 $ 20.04 $ 20.60 $ 16.78 $ 17.50
-------- -------- -------- -------- --------
Net investment income
(loss)................. (0.12) 0.01 -- 0.07 --
Net realized and
unrealized gains
(losses) from
investment
transactions........... 4.06 2.25 0.51 4.37 (0.11)
-------- -------- -------- -------- --------
Net increase (decrease)
from investment
operations............. 3.94 2.26 0.51 4.44 (0.11)
-------- -------- -------- -------- --------
Dividends from
investment income...... -- -- -- -- (0.01)
Distributions from net
realized gains from
investment
transactions........... (1.84) (0.03) (1.07) (0.62) (0.60)
-------- -------- -------- -------- --------
Total dividends and
distributions to
shareholders........... (1.84) (0.03) (1.07) (0.62) (0.61)
-------- -------- -------- -------- --------
Net asset value, end of
period................. $ 24.37 $ 22.27 $ 20.04 $ 20.60 $ 16.78
======== ======== ======== ======== ========
Total investment
return(1).............. 18.43% 11.28% 2.33% 26.97% (0.85)%
======== ======== ======== ======== ========
Ratios/supplemental
data:
Net assets, end of
period (000's)......... $203,882 $183,958 $141,342 $130,353 $102,640
Expenses to average net
assets................. 1.28% 1.28%(2) 1.21% 1.22% 1.43%
Net investment income
(loss) to average net
assets................. (0.49)% 0.19%(2) 0.06% 0.38% 0.00%
Portfolio turnover rate. 60% 36% 24% 36% 32%
Average commission rate
paid per share on
common stock
investments
purchased/sold(3)...... $ 0.0598 -- -- -- --
</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 for each class would be lower if sales
charges were included. Total investment return information for periods of
less than one year has not been annualized.
(2) These ratios include non-recurring acquisition expenses of 0.06%.
(3) Disclosure effective for fiscal years beginning on or after September 1,
1995.
26
<PAGE>
PAINEWEBBER GROWTH FUND
<TABLE>
<CAPTION>
CLASS B CLASS C
- ---------------------------------------------------- -----------------------------------------------------
FOR THE
PERIOD
JULY 2,
FOR THE YEARS ENDED AUGUST 31, FOR THE YEARS ENDED AUGUST 31, 1992+ TO
- ---------------------------------------------------- ---------------------------------------- AUGUST 31,
1996 1995 1994 1993 1992 1996 1995 1994 1993 1992
- -------- -------- ------- ------- ------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 21.53 $ 19.53 $ 20.25 $ 16.64 $ 17.48 $ 21.68 $ 19.67 $ 20.38 $ 16.75 $17.04
- -------- -------- ------- ------- ------- ------- ------- ------- ------- ------
(0.39) (0.02) (0.06) (0.05) (0.06) (0.34) (0.10) (0.08) (0.06) (0.01)
4.00 2.05 0.41 4.28 (0.18) 3.98 2.14 0.44 4.31 (0.28)
- -------- -------- ------- ------- ------- ------- ------- ------- ------- ------
3.61 2.03 0.35 4.23 (0.24) 3.64 2.04 0.36 4.25 (0.29)
- -------- -------- ------- ------- ------- ------- ------- ------- ------- ------
-- -- -- -- -- -- -- -- -- --
(1.84) (0.03) (1.07) (0.62) (0.60) (1.84) (0.03) (1.07) (0.62) --
- -------- -------- ------- ------- ------- ------- ------- ------- ------- ------
(1.84) (0.03) (1.07) (0.62) (0.60) (1.84) (0.03) (1.07) (0.62) --
- -------- -------- ------- ------- ------- ------- ------- ------- ------- ------
$ 23.30 $ 21.53 $ 19.53 $ 20.25 $ 16.64 $ 23.48 $ 21.68 $ 19.67 $ 20.38 $16.75
======== ======== ======= ======= ======= ======= ======= ======= ======= ======
17.48% 10.40% 1.55% 25.91% (1.58)% 17.50% 10.37% 1.59% 25.86% (2.95)%
======== ======== ======= ======= ======= ======= ======= ======= ======= ======
$140,551 $152,357 $97,272 $60,280 $35,867 $29,923 $30,608 $28,561 $16,474 $2,275
2.06% 2.06%(2) 2.00% 2.02% 2.20% 2.07% 2.05%(2) 1.98% 2.06% 1.98%*
(1.27)% (0.60)%(2) (0.66)% (0.46)% (0.70)% (1.28)% (0.57)%(2) (0.65)% (0.69)% (0.65)%*
60% 36% 24% 36% 32% 60% 36% 24% 36% 32%
$ 0.0598 -- -- -- -- $0.0598 -- -- -- --
</TABLE>
27
<PAGE>
PAINEWEBBER GROWTH FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT EACH PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS Y
-----------------------------------------------
FOR THE YEARS
ENDED
AUGUST 31,
-----------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 22.53 $ 20.22 $ 20.71 $ 16.83 $ 17.50
------- ------- ------- ------- -------
Net investment income (loss). (0.02) 0.24 0.03 0.08 0.05
Net realized and unrealized
gains (losses) from
investment transactions..... 4.07 2.10 0.55 4.42 (0.11)
------- ------- ------- ------- -------
Net increase (decrease) from
investment operations....... 4.05 2.34 0.58 4.50 (0.06)
------- ------- ------- ------- -------
Dividends from investment
income...................... -- -- -- -- (0.01)
Distributions from net
realized gains from
investment transactions..... (1.84) (0.03) (1.07) (0.62) (0.60)
------- ------- ------- ------- -------
Total dividends and
distributions to
shareholders................ (1.84) (0.03) (1.07) (0.62) (0.61)
------- ------- ------- ------- -------
Net asset value, end of
period...................... $ 24.74 $ 22.53 $ 20.22 $ 20.71 $ 16.83
======= ======= ======= ======= =======
Total investment return(1)... 18.72% 11.58% 2.67% 27.26% (0.52)%
======= ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period
(000's)..................... $21,409 $20,948 $30,521 $20,706 $11,581
Expenses to average net
assets...................... 1.02% 0.97%(2) 0.94% 0.95% 1.12%
Net investment income (loss)
to average net assets....... (0.23)% 0.53%(2) 0.40% 0.60% 0.38%
Portfolio turnover rate...... 60% 36% 24% 36% 32%
Average commission rate paid
per share on common stock
investments
purchased/sold(3)........... $0.0598 -- -- -- --
</TABLE>
- -------
(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.
(2) These ratios include non-recurring acquisition expenses of 0.05%.
(3) Disclosure effective for fiscal years beginning on or after September 1,
1995.
28
<PAGE>
PAINEWEBBER REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
PaineWebber Growth & Income Fund
PaineWebber Growth Fund
We have audited the accompanying statement of assets and liabilities,
including the portfolios of investments, of the PaineWebber Growth & Income
Fund and PaineWebber Growth Fund as of August 31, 1996, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the
financial highlights for each of the periods indicated therein. These financial
statements and financial highlights are the responsibility of each Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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. Our procedures included confirmation of securities
owned at August 31, 1996 by correspondence with the custodians and brokers. 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 audits provide 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
PaineWebber Growth & Income Fund and PaineWebber Growth Fund at August 31, 1996
and the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended, and their
financial highlights for each of the indicated periods, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
October 21, 1996
29
<PAGE>
PAINEWEBBER TAX INFORMATION (UNAUDITED)
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of each Fund's fiscal year end (August
31, 1996) as to the federal tax status of distributions received by
shareholders during such fiscal year. Accordingly, we are advising you that the
following distributions paid during the fiscal year by the Funds were derived
from the following sources:
<TABLE>
<CAPTION>
GROWTH &
INCOME GROWTH
PER SHARE DATA: FUND FUND
- --------------- -------- -------
<S> <C> <C>
Net investment income
Class A..................................................... $0.3417 --
Class B..................................................... $0.0885 --
Class C..................................................... $0.0953 --
Class Y..................................................... $0.4344 --
Short-term capital gains*..................................... $1.1221 --
Long-term capital gains....................................... $0.3864 $1.8442
Percentage of ordinary income dividends qualifying for the
dividends received deduction available to corporate
shareholders................................................. 100% --
</TABLE>
- -------
* Taxable as ordinary income
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need not
be reported as taxable income. Some retirement trusts (e.g., corporate, Keogh
and 403(b)(7) plans) may need this information for their annual information
reporting.
Since each Fund's fiscal year is not the calendar year, another notification
will be sent with respect of calendar year 1996. Such notifications, which will
reflect the amount to be used by calendar year taxpayers on their federal
income tax returns, will be made in conjunction with Form 1099 DIV and will be
mailed in January 1997. Shareholders are advised to consult their own tax
advisers with respect to the tax consequences of their investment in each of
the Funds.
30
<PAGE>
PAINEWEBBER
SHAREHOLDER INFORMATION
A special meeting of shareholders of the Growth & Income Fund and
of the Growth Fund was held on April 15, 1996. At the meetings the
following proposals were approved:
<TABLE>
<CAPTION>
SHARES
SHARES VOTED WITHHOLD
FOR AUTHORITY
PROPOSAL 1 ------------ ---------
<S> <C> <C>
To elect ten members of its Board of Trustees:
Margo N. Alexander
Growth & Income Fund.................................. 11,991,556 716,426
Growth Fund........................................... 8,257,283 515,477
Richard Q. Armstrong
Growth & Income Fund.................................. 11,993,852 714,130
Growth Fund........................................... 8,261,031 511,729
E. Garrett Bewkes, Jr.
Growth & Income Fund.................................. 11,992,689 715,293
Growth Fund........................................... 8,250,423 522,337
Richard Burt
Growth & Income Fund.................................. 11,999,584 708,398
Growth Fund........................................... 8,257,316 515,444
Mary C. Farrell
Growth & Income Fund.................................. 11,995,665 712,317
Growth Fund........................................... 8,261,546 511,214
Meyer Feldberg
Growth & Income Fund.................................. 11,987,752 720,230
Growth Fund........................................... 8,257,597 515,163
George W. Gowen
Growth & Income Fund.................................. 11,988,990 718,992
Growth Fund........................................... 8,250,757 522,003
Frederic V. Malek
Growth & Income Fund.................................. 11,985,923 722,059
Growth Fund........................................... 8,256,460 516,300
Carl W. Schafer
Growth & Income Fund.................................. 11,990,091 717,891
Growth Fund........................................... 8,254,201 518,559
John R. Torell III
Growth & Income Fund.................................. 11,992,895 715,087
Growth Fund........................................... 8,261,277 511,483
</TABLE>
PROPOSAL 2
Ratification of the selection of Ernst & Young LLP as the independent auditors
for its current fiscal year:
<TABLE>
<CAPTION>
SHARES VOTED
FOR SHARES AGAINST SHARES ABSTAIN
------------ -------------- --------------
<S> <C> <C> <C>
Growth & Income Fund................. 11,972,892 41,681 693,409
Growth Fund.......................... 8,245,442 39,455 487,863
</TABLE>
31
<PAGE>
PAINEWEBBER
SHAREHOLDER INFORMATION (CONCLUDED)
PROPOSAL 3
Approval of the proposed changes to the Fund's fundamental investment
restrictions and policies:
Modification of fundamental restriction on portfolio diversification;
Modification of fundamental restriction on concentration;
Modification of fundamental restriction on senior securities and borrowing;
Modification of fundamental restriction on making loans;
Modification of fundamental restriction on underwriting securities;
Modification of fundamental restriction on real estate investments;
Modification of fundamental restriction on investing in commodities;
Elimination of fundamental restriction on margin transactions;
Elimination of fundamental restriction on short sales;
Elimination of fundamental restriction on investments in oil, gas and mineral
leases and programs;
Elimination of fundamental restriction on investments in other investment
companies;
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED
FOR AGAINST SHARES ABSTAIN
------------ ------------ --------------
<S> <C> <C> <C>
Growth & Income Fund................... 11,733,361 153,852 820,769
Growth Fund............................ 8,099,595 111,418 561,747
</TABLE>
Elimination of fundamental restriction relating to purchases of securities not
permitted under investment objective:
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED
FOR AGAINST SHARES ABSTAIN
------------ ------------ --------------
<S> <C> <C> <C>
Growth & Income Fund................... 11,733,361 153,852 820,769
</TABLE>
- -------
(Broker non-votes and abstentions are included within the "Shares Withhold
Authority" or "Shares Abstain" totals.)
32
