<PAGE>
April 14, 1998
Dear Shareholder,
We are pleased to present you with the semiannual report for the PaineWebber
Growth and Income Fund and the PaineWebber Growth Fund for the six months ended
February 28, 1998.
GENERAL MARKET OVERVIEW
- --------------------------------------------------------------------------------
[GRAPHIC]
After an August selloff, the stock market quickly regained its footing in
September when inflation came in lower than expected. The Asian markets imploded
in October, causing a sharp selloff in equity markets worldwide. This event also
caused a "flight to quality" into the U.S. Treasury bond market, and bonds
rallied substantially. As events unfolded, investors refocused on the underlying
strength of the U.S. economy and caused the stock market to stage a comeback in
November.
Volatility returned to the stock market in December as earnings estimates were
revised downward. By the end of January, negative earnings reports stabilized
when it became evident that the long-expected slowdown in corporate earnings
growth would not be felt until later this year. The market hit a new high and
continued to advance in February. As investors scrambled to buy into the rising
market, they focused on the more liquid, large cap stocks.
Sectors that fared poorly at the end of 1997 turned in outstanding
performances in early 1998. Technology stocks, consumer cyclicals such as
department stores and auto supply companies, and certain transportation stocks
- -most notably airlines - all rebounded sharply from year-end slumps. Consumer
cyclicals responded to strong, steady consumer spending. Financials continued to
do reasonably well. Energy stocks performed the worst as weakening economies in
Asia drove down oil prices. Consumer nondurables, a traditional defensive
sector, continued to lag.
PORTFOLIO REVIEW
- --------------------------------------------------------------------------------
[GRAPHIC]
PAINEWEBBER GROWTH AND INCOME FUND
PERFORMANCE
PaineWebber Growth and Income Fund's total return (the net asset value change
with dividends reinvested) for the six-month period ended February 28, 1998,
without deducting sales charges, was 13.32% for Class A shares, 12.85% for Class
B shares, 12.87% for Class C shares and 13.48% for Class Y shares.
For shareowners who purchased or redeemed Fund
SEMIANNUAL REPORT
PAINEWEBBER GROWTH & INCOME FUND
FUND PROFILE
- --> GOAL:
Current income and capital growth
- --> PORTFOLIO MANAGER:
Mark Tincher,
Mitchell Hutchins
Asset Management Inc.
- --> TOTAL NET ASSETS:
$1.3 billion as of February 28, 1998
- --> DIVIDEND PAYMENTS:
Semiannually
PAINEWEBBER
GROWTH &
INCOME FUND
Top Five Sectors
(as percent of net assets,
as of February 28, 1998)*
Consumer Cyclicals
23.7%
Financial
Services 18.0%
Capital Goods
9.4%
Technology 9.0%
Healthcare 7.9%
*Allocations subject to change
1
<PAGE>
SEMIANNUAL REPORT
PAINEWEBBER GROWTH
FUND
FUND PROFILE
- --> GOAL:
Long-term capital appreciation
- --> PORTFOLIO MANAGER:
Ellen_R. Harris,
Mitchell Hutchins
Asset Management Inc.
- --> TOTAL NET ASSETS:
$391.5 million as of February 28, 1998
- --> DIVIDEND PAYMENTS:
Annually
PAINEWEBBER
GROWTH FUND
Top Five Sectors
(as percent of net assets,
as of February 28, 1998)*
Technology 22.9%
Financial Services 12.4%
Retail 9.1%
Media/Entertainment 10.5%
Healthcare 8.5%
*Allocations subject to change
shares during the period the Fund's total return may be lower; for example,
after deducting the maximum applicable sales charges, the Fund's total return
for the period was 8.22% for Class A shares, 7.85% for Class B shares, 11.87%
for Class C shares and 13.48% for Class Y shares.
PORTFOLIO HIGHLIGHTS
At the start of the six-month period, the Fund's top five sectors included
consumer cyclicals, technology, financial services, capital goods and energy.
Our overweightings in consumer cyclicals and technology stocks contributed to
the Fund's strong performance over the six-month period.
As of February 28, 1998, we had lowered the Fund's exposure to financial
services and to technology compared to their weightings at the start of the
period. Lower interest rates have shaved our earnings expectations for financial
services companies. We expect stable earnings for technology companies in the
latter half of 1998; after the price declines at the end of 1997 these stocks
look attractive. We continue to underweight defensive stocks such as utilities
and consumer nondurables.
PAINEWEBBER GROWTH FUND
PERFORMANCE
PaineWebber Growth Fund's total return (the net asset value change with
dividends reinvested) for the six-month period ended February 28, 1998, without
deducting sales charges, was 19.90% for Class A shares, 19.46% for Class B
shares, 19.47% for Class C shares and 20.00% for Class Y shares.
For shareowners who purchased or redeemed Fund shares during the period the
Fund's total return may be lower; for example, after deducting the maximum
applicable sales charges, the Fund's total return for the period was 14.51% for
Class A shares, 15.07% for Class B shares, 18.60% for Class C shares and 20.00%
for Class Y shares.
PORTFOLIO HIGHLIGHTS
In 1997 we repositioned the Growth Fund to reduce its exposure to smaller-cap
companies (less than $1 billion market capitalization). Whereas the Fund's
median market capitalization was around $2 billion in March, 1997, it reached
over $7 billion during the first quarter of 1998. The emphasis on larger
companies has improved the Fund's performance. The Fund's proprietary Growth
Model is used to identify companies with attractive earnings growth potential -
the kinds of companies we expect investors to focus on more sharply this year.
At August 31, 1997, the Fund's top five sectors were consumer cyclical,
technology, financial services, healthcare and energy. At February 28, 1998, the
top five sectors were technology, financial services, media/entertainment,
retail and healthcare. We expect these companies to benefit most from the
stable-growth, low-inflation, low-interest-rate environment we project for the
rest of 1998. As of February 28, 1998 the Fund's exposure to the basic
materials, consumer noncyclical and utility sectors was less than that of the
S&P 500 Index.
2
<PAGE>
SEMIANNUAL REPORT
OUTLOOK
- --------------------------------------------------------------------------------
- --> The market seems a bit ahead of itself going into April, as earnings
estimates have drifted lower. A decline in interest rates or an improved
earnings outlook could bring valuation into line. With inflation nearly absent,
we expect the Federal Reserve to remain on hold, and anticipate a fairly stable
interest rate environment.
Meanwhile, the extent of the economic turmoil in Asia and its ultimate impact
on corporate profits is unclear. A greater than normal number of decreased
earnings estimates is evidence that Asia's drag on the global economy remains a
concern. 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.
In addition, inflows from mutual funds could continue to heighten the stock
market's resilience. Consumer confidence, which has been at its highest level in
29 years, shows no signs of a downturn and could support the market. In this
environment, stock selection - particularly attempting to avoid companies that
may produce negative surprises - will be of critical importance.
Technology stocks are attractively valued and their earnings growth
expectations have firmed. High consumer confidence bodes well for consumer
cyclicals. Financial stocks, which we expect to benefit from low interest rates
and continuing consolidation, are also attractive. Less attractive are the
traditional defensive stocks - consumer nondurables and utilities - that benefit
from a recessionary environment, of which we see no sign on the horizon.
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 Growth and Income Fund or Growth Fund, or
another fund in the PaineWebber Family of Funds(1), please contact your
investment executive.
Sincerely,
/s/ MARGO N. ALEXANDER /s/ MARK A. TINCHER /s/ ELLEN R. HARRIS
MARGO N. ALEXANDER MARK A. TINCHER ELLEN R. HARRIS
President Managing Director and Chief Managing Director
Mitchell Hutchins Investment Officer--Equities Mitchell Hutchins
Asset Management Inc. Mitchell Hutchins Asset Management Inc.
Asset Management Inc. Portfolio Manager,
Portfolio Manager, PaineWebber
PaineWebber Growth Fund
Growth and Income Fund
This letter is intended to assist shareholders in understanding how the Funds
performed during the six-month period ended February 28, 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.
3
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
PERFORMANCE RESULTS(UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------------------------------- TOTAL RETURN(1)
12 MONTHS ENDED 6 MONTHS
02/28/98 08/31/97 02/28/97 02/28/98 ENDED 02/28/98
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Class A Shares $31.70 $30.60 $ 25.48 36.49% 13.32%
- ---------------------------------------------------------------------------------------------------------------
Class B Shares 31.56 30.46 25.39 35.40 12.85
- ---------------------------------------------------------------------------------------------------------------
Class C Shares 31.61 30.53 25.46 35.42 12.87
- ---------------------------------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS A SHARES
<CAPTION>
NET ASSET VALUE
---------------------- CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------------
1996 22.39 24.37 3.0247 0.2584 23.46
- ---------------------------------------------------------------------------------------------------------------
1997 24.37 29.29 2.6664 0.2064 31.86
- ---------------------------------------------------------------------------------------------------------------
01/01/98-02/28/98 29.29 31.70 -- -- 8.23
- ---------------------------------------------------------------------------------------------------------------
Totals: $ 12.2449 $ 6.4490
- ---------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/98: 567.68%
- ---------------------------------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS B SHARES
<CAPTION>
NET ASSET VALUE
---------------------- CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
07/01/91-12/31/91 $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
- ---------------------------------------------------------------------------------------------------------------
1996 22.35 24.32 3.0247 0.0643 22.55
- ---------------------------------------------------------------------------------------------------------------
1997 24.32 29.20 2.6508 0.0044 30.79
- ---------------------------------------------------------------------------------------------------------------
01/01/98-02/28/98 29.20 31.56 -- -- 8.08
- ---------------------------------------------------------------------------------------------------------------
Totals: $8.4261 $ 0.5429
- ---------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/98: 152.41%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Figures assume reinvestment of all dividends and other distributions at net
asset value on the payable dates and do not include sales charges; results would
be lower if sales charges were included.
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.
4
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
PERFORMANCE RESULTS(UNAUDITED) (CONCLUDED)
<TABLE>
<CAPTION>
PERFORMANCE SUMMARY CLASS C SHARES
NET ASSET VALUE
---------------------- CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/02/92-12/31/92 $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
- ---------------------------------------------------------------------------------------------------------------
1996 22.42 24.39 3.0247 0.0781 22.55
- ---------------------------------------------------------------------------------------------------------------
1997 24.39 29.24 2.6664 0.0318 30.77
- ---------------------------------------------------------------------------------------------------------------
01/01/98-02/28/98 29.24 31.61 -- -- 8.11
- ---------------------------------------------------------------------------------------------------------------
Totals: $8.4417 $ 0.5051
- ---------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/98: 126.66%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Figures assume reinvestment of all dividends and other distributions at net
asset value on the payable dates and do not include sales charges; results
would be lower if sales charges were included.
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
% RETURN WITHOUT DEDUCTING % RETURN AFTER DEDUCTING
MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
---------------------------------- ----------------------------------
CLASS A* B** C*** A* B** C***
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Twelve Months Ended 03/31/98 46.87% 45.73% 45.73% 40.29% 40.73% 44.73%
- ------------------------------------------------------------------------------------------------------
Five Years Ended 03/31/98 17.79 16.87 16.89 16.72 16.65 16.89
- ------------------------------------------------------------------------------------------------------
Ten Years Ended 03/31/98 15.60 N/A N/A 15.07 N/A N/A
- ------------------------------------------------------------------------------------------------------
Commencement of Operations
Through 03/31/98+ 14.55 15.41 16.13 14.18 15.41 16.13
- ------------------------------------------------------------------------------------------------------
</TABLE>
* Maximum sales charge for Class A shares is 4.5% of the public offering price.
Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5% and is
reduced to 0% after 6 years. Class B shares bear ongoing 12b-1 distribution
and service fees.
*** Maximum contingent deferred sales charge for Class C shares is 1% and is
reduced to 0% after 1 year. Class C shares bear ongoing 12b-1 distribution
and service fees.
+ Commencement of operations dates are December 20, 1983, July 1, 1991 and July
2, 1992 for Class A, Class B and Class C shares, respectively.
Note: The Fund offers Class Y shares to a limited group of investors, including
participants in certain investment programs that are sponsored by
PaineWebber and that may invest in PaineWebber mutual funds. For the six
months ended February 28, 1998, and since inception, February 12, 1992
through February 28, 1998, Class Y shares had a total return of 13.48% and
129.74%, respectively. For the year ended March 31, 1998 and since
inception through March 31, 1998, Class Y shares have an average annual
total return of 47.24% and 15.31%, 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.
5
<PAGE>
PAINEWEBBER GROWTH FUND
PERFORMANCE RESULTS(UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN(1)
---------------------------------------- -----------------------------------
12 MONTHS ENDED 6 MONTHS
02/28/98 08/31/97 02/28/97 02/28/98 ENDED 02/28/98
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Class A Shares $23.29 $25.94 $ 24.19 28.57% 19.90%
- ---------------------------------------------------------------------------------------------------------------
Class B Shares 21.48 24.51 22.94 27.63 19.46
- ---------------------------------------------------------------------------------------------------------------
Class C Shares 21.72 24.71 23.13 27.64 19.47
- ---------------------------------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS A SHARES
<CAPTION>
NET ASSET VALUE
---------------------- CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------------
1996 23.12 24.24 2.1056 -- 14.11
- ---------------------------------------------------------------------------------------------------------------
1997 24.24 21.24 6.7819 -- 17.01
- ---------------------------------------------------------------------------------------------------------------
01/01/98-02/28/98 21.24 23.29 -- -- 9.65
- ---------------------------------------------------------------------------------------------------------------
Totals: $ 16.4805 $ 0.5872
- ---------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/98: 531.10%
- ---------------------------------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS B SHARES
<CAPTION>
NET ASSET VALUE
---------------------- CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
07/01/91-12/31/91 $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
- ---------------------------------------------------------------------------------------------------------------
1996 22.22 23.02 2.1056 -- 13.24
- ---------------------------------------------------------------------------------------------------------------
1997 23.02 19.62 6.7819 -- 16.17
- ---------------------------------------------------------------------------------------------------------------
01/01/98-02/28/98 19.62 21.48 -- -- 9.48
- ---------------------------------------------------------------------------------------------------------------
Totals: $ 13.0545 $ 0.0037
- ---------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/98: 151.77%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Figures assume reinvestment of all dividends and other distributions at net
asset value on the payable dates and do not include sales charges; results would
be lower if sales charges were included.
The data above represents past performance of the Fund's shares which is no
guarantee of future results. The principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost.
6
<PAGE>
PAINEWEBBER GROWTH FUND
PERFORMANCE RESULTS(UNAUDITED) (CONCLUDED)
<TABLE>
<CAPTION>
PERFORMANCE SUMMARY CLASS C SHARES
NET ASSET VALUE
---------------------- CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/02/92-12/31/92 $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
- ---------------------------------------------------------------------------------------------------------------
1996 22.40 23.21 2.1056 -- 13.18
- ---------------------------------------------------------------------------------------------------------------
1997 23.21 19.83 6.7819 -- 16.13
- ---------------------------------------------------------------------------------------------------------------
01/01/98-02/28/98 19.83 21.72 -- -- 9.53
- ---------------------------------------------------------------------------------------------------------------
Totals: $ 12.4542 --
- ---------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/98: 123.86%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Figures assume reinvestment of all dividends and other distributions at net
asset value on the payable dates and do not include sales charges; results
would be lower if sales charges were included.
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
% RETURN WITHOUT DEDUCTING % RETURN AFTER DEDUCTING
MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
---------------------------------- ----------------------------------
CLASS A* B** C*** A* B** C***
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Twelve Months Ended 03/31/98 44.07 % 42.99 % 42.98 % 37.61 % 37.99 % 41.98 %
- ------------------------------------------------------------------------------------------------------
Five Years Ended 03/31/98 16.32 15.42 15.40 15.26 15.19 15.40
- ------------------------------------------------------------------------------------------------------
Ten Years Ended 03/31/98 16.59 N/A N/A 16.06 N/A N/A
- ------------------------------------------------------------------------------------------------------
Commencement of Operations
Through 03/31/98+ 15.56 15.41 15.93 15.16 15.41 15.93
- ------------------------------------------------------------------------------------------------------
</TABLE>
* Maximum sales charge for Class A shares is 4.5% of the public offering price.
Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5% and is
reduced to 0% after 6 years. Class B shares bear ongoing 12b-1 distribution
and service fees.
*** Maximum contingent deferred sales charge for Class C shares is 1% and is
reduced to 0% after 1 year. Class C shares bear ongoing 12b-1 distribution
and service fees.
+ Commencement of operations dates are March 18, 1985, July 1, 1991 and July 2,
1992 for Class A, Class B and Class C shares, respectively.
Note: The Fund offers Class Y shares to a limited group of investors, including
participants in certain investment programs that are sponsored by
PaineWebber and that may invest in PaineWebber mutual funds. For the six
months ended February 28, 1998 and since inception, August 26, 1991
through February 28, 1998, Class Y shares had a total return of 20.00% and
145.77%, respectively. For the year ended March 31, 1998 and since
inception through March 31, 1998, Class Y shares have an average annual
total return of 44.46% and 15.38%, respectively. Class Y shares do not
have initial or contingent deferred sales charges or ongoing distribution
and service fees.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost.
7
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1998(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
COMMON STOCKS--83.36%
AGRICULTURE, FOOD & BEVERAGE--0.50%
120,000 Quaker Oats Company........... $ 6,465,000
-------------
AIRLINES--1.93%
76,500 Alaska Air Group Incorporated*
(1)......................... 4,212,281
71,100 AMR Corporation*.............. 8,998,594
94,000 Continental Airlines
Incorporated*............... 4,723,500
110,800 US Airways Group,
Incorporated*............... 7,015,025
-------------
24,949,400
-------------
APPAREL, RETAIL--1.05%
350,000 TJX Companies, Incorporated... 13,518,750
-------------
APPAREL, TEXTILES--0.36%
88,000 Westpoint Stevens
Incorporated*............... 4,697,000
-------------
BANKS--5.22%
148,700 Bank of New York Company
Incorporated................ 8,708,244
145,000 BankAmerica Corporation....... 11,237,500
75,000 BB & T Corporation............ 4,654,688
193,000 First Union Corporation....... 10,168,687
51,500 Greenpoint Financial
Corporation................. 3,823,875
186,200 Norwest Corporation........... 7,622,563
170,600 The Chase Manhattan
Corporation................. 21,165,062
-------------
67,380,619
-------------
CHEMICALS--1.25%
99,000 Dow Chemical Company.......... 9,058,500
115,300 DuPont (E.I.) de Nemours &
Company..................... 7,069,331
-------------
16,127,831
-------------
COMPUTER HARDWARE--4.70%
88,500 CHS Electronics
Incorporated*............... 1,825,313
187,500 Cisco Systems,
Incorporated*............... 12,351,562
600,000 Compaq Computer Corporation... 19,237,500
135,000 Dell Computer Corporation*.... 18,883,125
80,000 International Business
Machines.................... 8,355,000
-------------
60,652,500
-------------
COMPUTER SOFTWARE--1.82%
273,200 Cadence Design Systems
Incorporated*............... 9,544,925
47,900 Computer Associates
International
Incorporated................ 2,257,288
74,500 Network Associates
Incorporated* (1)........... 4,814,562
130,000 Sterling Software
Incorporated*............... 6,849,375
-------------
23,466,150
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
CONSTRUCTION, REAL PROPERTY--2.97%
92,000 Cabot Industrial Trust*....... $ 1,966,500
65,000 Chelsea GCA Realty
Incorporated................ 2,429,375
161,500 Cornerstone Properties
Incorporated................ 2,886,813
160,000 Crescent Real Estate
Equities.................... 5,450,000
127,500 Equity Residential Properties
Trust....................... 6,112,031
98,000 Glimcher Reality Trust........ 2,205,000
161,000 Lafarge Corporation........... 5,403,562
134,525 Starwood Lodging
Corporation................. 7,609,070
107,500 Sunstone Hotel Investors
Incorporated................ 1,720,000
59,000 Vornado Realty Trust.......... 2,503,813
-------------
38,286,164
-------------
CONSUMER DURABLES--1.55%
157,700 Furniture Brands International
Incorporated*............... 4,317,037
94,000 HON Industries,
Incorporated................ 6,180,500
101,200 Interface Incorporated........ 3,870,900
92,900 Miller Herman Incorporated.... 5,690,125
-------------
20,058,562
-------------
DEFENSE/AEROSPACE--4.96%
194,350 AAR Corporation............... 5,903,381
200,000 Allied-Signal, Incorporated... 8,512,500
229,320 Boeing Company................ 12,440,610
130,000 Lockheed Martin Corporation... 15,169,375
268,200 Loral Space Communications*... 6,855,863
100,000 Precision Castparts
Corporation................. 5,543,750
74,000 Thiokol Corporation........... 7,076,250
80,000 Tracor Incorporated*.......... 2,450,000
-------------
63,951,729
-------------
DIVERSIFIED RETAIL--2.73%
172,625 Dayton Hudson Corporation..... 13,346,070
179,500 Federated Department Stores,
Incorporated*............... 8,414,062
179,400 Meyer (Fred) Incorporated*
(1)......................... 7,972,088
160,000 Proffitts Incorporated*....... 5,420,000
-------------
35,152,220
-------------
DRUGS & MEDICINE--4.74%
92,300 American Home Products
Corporation................. 8,653,125
43,700 Amerisource Health
Corporation*................ 2,556,450
111,000 Bergen Brunswig Corporation... 4,995,000
75,000 Bristol-Myers Squibb
Company..................... 7,514,062
125,500 ICN Pharmaceuticals
Incorporated................ 7,247,625
200,000 Schering-Plough Corporation... 15,212,500
55,000 Warner Lambert Company........ 8,043,750
</TABLE>
8
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS (CONTINUED)
DRUGS & MEDICINE (CONCLUDED)
<TABLE>
<C> <S> <C>
192,000 Watson Pharmaceuticals,
Incorporated*............... $ 6,888,000
-------------
61,110,512
-------------
ELECTRICAL EQUIPMENT--2.40%
175,000 Digital Microwave
Corporation*................ 3,215,625
75,000 Honeywell, Incorporated....... 5,943,750
126,000 Johnson Controls,
Incorporated................ 7,000,875
125,500 KLA Instruments
Incorporated*............... 5,792,609
200,000 SCI Systems Incorporated*..... 9,000,000
-------------
30,952,859
-------------
ELECTRICAL POWER--0.51%
84,800 General Electric Company...... 6,593,200
-------------
ENERGY RESERVES & PRODUCTION--2.14%
115,000 Mobil Corporation............. 8,330,312
148,800 Royal Dutch Petroleum
Company..................... 8,081,700
200,000 Texaco, Incorporated.......... 11,162,500
-------------
27,574,512
-------------
ENTERTAINMENT--0.36%
150,000 CBS Corporation............... 4,640,625
-------------
ENVIRONMENTAL SERVICES--0.37%
114,500 USA Waste Services
Incorporated*............... 4,766,063
-------------
FINANCIAL SERVICES--1.19%
43,800 American Express Company...... 3,944,738
95,000 CIT Group, Incorporated*...... 3,135,000
201,000 SLM Holding Corporation....... 8,303,812
-------------
15,383,550
-------------
FOREST PRODUCTS, PAPER--0.88%
250,000 Fort James Corporation........ 11,343,750
-------------
FOOD RETAIL--1.10%
175,000 Kroger Company*............... 7,393,750
196,000 Safeway Incorporated*......... 6,835,500
-------------
14,229,250
-------------
FREIGHT, AIR, SEA & LAND--0.84%
300,000 Airborne Freight
Corporation................. 10,856,250
-------------
GAS UTILITY--1.69%
125,000 Columbia Gas System,
Incorporated................ 9,539,062
111,800 MCN Corporation............... 4,115,638
110,500 New York State Electric & Gas
Corporation................. 4,150,656
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
GAS UTILITY (CONCLUDED)
<TABLE>
<C> <S> <C>
111,000 Utilicorp United
Incorporated................ $ 3,996,000
-------------
21,801,356
-------------
HEAVY MACHINERY--1.15%
128,000 Agco Corporation.............. 3,600,000
200,000 Deere & Company............... 11,225,000
-------------
14,825,000
-------------
HOTELS--0.89%
200,000 Hilton Hotels Corporation..... 5,962,500
195,000 Host Marriott Corporation*.... 3,863,438
90,000 Prime Hospitality
Corporation*................ 1,710,000
-------------
11,535,938
-------------
HOUSEHOLD PRODUCTS--0.28%
147,800 Viad Corporation.............. 3,574,913
-------------
INDUSTRIAL PARTS--5.12%
123,900 Aeroquip-Vickers
Incorporated................ 7,193,944
117,000 American Standard Companies,
Incorporated*............... 5,206,500
112,000 Black & Decker Corporation.... 5,642,000
146,000 Case Corporation.............. 9,499,125
150,000 Crane Company................. 7,350,000
69,000 Lucasvarity Plc, ADR.......... 2,596,125
250,000 Mettler-Toledo International
Incorporated*............... 4,875,000
170,400 Parker-Hannifin Corporation... 7,944,900
175,700 United Technologies
Corporation................. 15,692,206
-------------
65,999,800
-------------
INDUSTRIAL SERVICES/SUPPLIES--1.08%
110,900 Cendant Corporation*.......... 4,158,750
205,800 Ingersoll Rand Company........ 9,801,225
-------------
13,959,975
-------------
INFORMATION & COMPUTER SERVICES--0.29%
98,300 Valassis Communications
Incorporated*............... 3,747,688
-------------
LIFE INSURANCE--2.62%
35,500 CIGNA Corporation............. 6,780,500
150,000 Conseco Incorporated.......... 7,040,625
74,000 Protective Life Corporation... 5,115,250
200,000 Reliastar Financial
Corporation................. 9,512,500
118,200 SunAmerica Incorporated....... 5,355,937
-------------
33,804,812
-------------
</TABLE>
9
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS (CONTINUED)
<TABLE>
<C> <S> <C>
LONG DISTANCE & PHONE COMPANIES--1.28%
100,000 Bell Atlantic Corporation..... $ 8,975,000
100,000 SBC Communications,
Incorporated................ 7,562,500
-------------
16,537,500
-------------
MANUFACTURING--HIGH TECHNOLOGY--0.69%
95,600 ASM Lithography Holdings
N.V.*....................... 8,926,650
-------------
MEDICAL PRODUCTS--1.80%
202,500 Tenet Healthcare
Corporation*................ 7,555,781
308,050 Tyco International Limited.... 15,633,538
-------------
23,189,319
-------------
MEDICAL PROVIDERS--0.96%
100,000 Lincare Holdings
Incorporated*............... 6,490,625
100,000 Wellpoint Health Networks
Incorporated*............... 5,843,750
-------------
12,334,375
-------------
MINING & METALS--0.84%
132,500 Ispat International N.V.*..... 3,262,813
118,200 Martin Marietta Materials
Incorporated................ 4,498,987
152,900 Wyman Gordon Company*......... 3,058,000
-------------
10,819,800
-------------
MOTOR VEHICLES AND PARTS--2.99%
147,800 Borg Warner Automotive
Incorporated................ 8,664,775
238,500 Chrysler Corporation.......... 9,286,594
169,700 Ford Motor Company............ 9,598,656
125,000 Lear Corporation*............. 6,609,375
73,900 Magna International
Incorporated................ 4,470,950
-------------
38,630,350
-------------
OIL REFINING--1.87%
78,800 British Petroleum, Plc ADR.... 6,515,775
100,000 Coastal Corporation........... 6,362,500
185,900 USX-Marathon Group............ 6,425,169
152,000 YPF Sociedad Anonima, ADR..... 4,807,000
-------------
24,110,444
-------------
OIL SERVICES--1.42%
57,000 Camco International
Incorporated................ 3,334,500
96,000 Ensco International
Incorporated................ 2,796,000
100,000 Halliburton Company........... 4,650,000
100,000 Schlumberger Limited.......... 7,537,500
-------------
18,318,000
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
OTHER INSURANCE--5.17%
125,000 ACE Limited................... $ 12,359,375
200,971 Allstate Corporation.......... 18,740,546
85,500 American International Group
Incorporated................ 10,276,031
111,000 Everest Reinsurance Holdings
Incorporated................ 4,093,125
73,900 EXEL Limited.................. 4,891,256
73,900 Fremont General Corporation... 4,337,006
45,000 Loews Corporation............. 4,514,063
110,300 Old Republic International
Corporation................. 4,653,281
59,100 Orion Capital Corporation..... 2,884,819
-------------
66,749,502
-------------
PUBLISHING--0.88%
111,000 Meredith Corporation.......... 4,766,063
100,000 New York Times Company, Class
A........................... 6,543,750
-------------
11,309,813
-------------
RAILROADS--0.36%
93,500 Trinity Industries
Incorporated................ 4,698,375
-------------
SECURITIES & ASSET MANAGEMENT--1.98%
75,500 Lehman Brothers Holdings
Incorporated................ 4,761,219
168,000 Morgan Stanley, Dean Witter,
Discover & Company.......... 11,707,500
161,600 Travelers Group
Incorporated................ 9,009,200
-------------
25,477,919
-------------
SEMICONDUCTOR--1.53%
325,000 Applied Materials,
Incorporated*............... 11,964,063
164,900 Integrated Process Equipment
Corporation*................ 3,050,650
200,000 National Semiconductor
Corporation*................ 4,775,000
-------------
19,789,713
-------------
SPECIALTY, RETAIL--2.53%
224,700 Claire's Stores
Incorporated................ 4,044,600
219,335 Dollar General Corporation.... 10,116,827
100,000 Home Depot Incorporated....... 6,381,250
275,400 Office Depot Incorporated*.... 7,590,712
160,000 Zale Corporation*............. 4,450,000
-------------
32,583,389
-------------
THRIFT--0.57%
116,795 Ahmanson, H F & Company....... 7,292,388
-------------
</TABLE>
10
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
COMMON STOCKS (CONCLUDED)
TOBACCO--1.80%
375,000 Philip Morris Companies
Incorporated................ $ 16,289,062
200,000 RJR Nabisco Holdings
Corporation................. 6,912,500
-------------
23,201,562
-------------
Total Common Stocks (cost--$770,380,486)....... 1,075,375,077
-------------
PREFERRED STOCKS--3.27%
AGRICULTURE, FOOD & BEVERAGE--0.25%
49,000 Ralston Purina Company........ 3,148,250
-------------
BANKS--0.93%
108,800 Banco Commercial Portugues
International Limited....... 11,968,000
-------------
FINANCIAL SERVICES--0.26%
53,000 Devon Financing Trust#........ 3,385,375
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
FOREST PRODUCTS, PAPER--0.40%
102,000 International Paper Capital
Trust#...................... $ 5,202,000
-------------
INDUSTRIAL PARTS--0.71%
158,000 Federal Mogul Financing
Trust#...................... 9,124,500
-------------
OIL REFINING--0.29%
60,000 Tosco Financing Trust#........ 3,787,500
-------------
OIL SERVICES--0.21%
63,000 Evi Incorporated#............. 2,732,625
-------------
WIRELESS TELECOMMUNICATIONS--0.22%
37,500 ICG Communications#........... 2,817,188
-------------
Total Preferred Stocks (cost--$31,491,183)..... 42,165,438
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES
- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CONVERTIBLE BONDS--1.29%
COMPUTER SOFTWARE--0.01%
$ 200 HNC Software Incorporated..... 03/01/03 4.750% 200,000
-------------
FINANCIAL SERVICES--0.08%
980 Bell Atlantic Financial....... 04/01/03 5.750 1,010,625
-------------
LONG DISTANCE & PHONE COMPANIES--0.16%
Telephone Save Holdings
1,800 Incorporated#............... 09/15/02 4.500 2,144,250
-------------
MEDICAL PROVIDERS--0.42%
4,700 Omnicare, Incorporated#....... 12/01/07 5.000 5,399,125
-------------
SPECIALTY, RETAIL--0.45%
4,000 Home Depot Incorporated....... 10/01/01 3.250 5,795,000
-------------
WIRELESS TELECOMMUNICATIONS--0.17%
SmarTalk Teleservices
1,725 Incorporated#............... 09/15/04 5.750 2,147,625
-------------
Total Convertible Bonds (cost--$13,405,000).... 16,696,625
-------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--0.08%
1,000 United States Treasury Bills
(cost--$995,564)............ 04/02/98 4.990@ 995,564
-------------
</TABLE>
11
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL MATURITY INTEREST
AMOUNT (000) DATES RATES VALUE
- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS--11.89%
$ 38,346 Repurchase agreement dated
02/27/98 with Dresdner
Securities (U.S.A.),
Incorporated, collateralized
by $35,857,000 U.S. Treasury
Notes, 7.000% due 07/15/06
(value--$39,113,174);
proceeds $38,363,895........ 03/02/98 5.600% $ 38,346,000
38,346 Repurchase agreement dated
02/27/98 with First Chicago
National Bank,
collateralized by
$36,135,000 U.S. Treasury
Notes, 7.500% due 11/15/01
(value--$39,119,751);
proceeds: $38,363,959....... 03/02/98 5.620 38,346,000
38,347 Repurchase agreement dated
02/27/98 with State Street
Bank & Trust Company,
collateralized by
$35,160,000 U.S. Treasury
Bonds, 7.875% due 11/15/07
(value--$39,115,500);
proceeds: $38,364,799....... 03/02/98 5.570 38,347,000
38,346 Repurchase agreement dated
02/27/98 with Zions Bancorp,
collateralized by
$33,870,000
U.S. Treasury Bonds, 7.250%
due 05/15/16
(value--$39,041,949);
proceeds: $38,363,959....... 03/02/98 5.620 38,346,000
-------------
Total Repurchase Agreements (cost--$153,385,000)................................ 153,385,000
-------------
Total Investments (cost--$969,657,233)--99.89%.................................. 1,288,617,704
1,400,756
Other assets in excess of liabilities--0.11%....................................
-------------
Net Assets--100.00%............................................................. $1,290,018,460
-------------
-------------
</TABLE>
- -------------
* Non-Income producing security
# 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
(1) Security, or portion thereof was on loan at February 28, 1998
@ Interest rate shown are discount rates at date of purchase
ADR American Depositary Receipt
<TABLE>
<CAPTION>
WRITTEN OPTIONS
NUMBER OF UNDERLYING EXPIRATION EXERCISE
OPTIONS CONTRACT DATE PRICE VALUE
----------- ------------- ----------- ----------- ---------
CIGNA
Call......................................... 170 Corporation Mar 98 $ 180 $ 195,500
<S> <C> <C> <C> <C> <C>
Ford Motor
Call......................................... 850 Company Mar 98 50 541,875
---------
Total Written Options (Premiums
Received--$283,860)......................... $ 737,375
---------
---------
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
PAINEWEBBER GROWTH FUND
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1998(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
COMMON STOCKS--93.45%
AGRICULTURE, FOOD & BEVERAGE--0.42%
50,000 Coca Cola Enterprises......... $ 1,653,125
-------------
AIRLINES--1.81%
87,000 Alaska Air Group Incorporated*
(1)......................... 4,812,187
18,000 AMR Corporation*.............. 2,278,125
-------------
7,090,312
-------------
BANKS--0.99%
20,500 BankAmerica Corporation....... 1,588,750
75,000 Dime Bancorp Incorporated..... 2,287,500
-------------
3,876,250
-------------
CABLE--0.66%
50,000 USA Networks, Incorporated*... 2,575,000
-------------
CHEMICALS--2.54%
100,000 Cytec Industries
Incorporated*............... 4,893,750
75,000 Sealed Air Corporation* (1)... 5,048,437
-------------
9,942,187
-------------
COMPUTER HARDWARE--5.85%
40,000 Box Hill Systems
Corporation*................ 455,000
97,500 Cisco Systems,
Incorporated*............... 6,422,812
97,500 Compaq Computer Corporation... 3,126,094
52,000 Dell Computer Corporation*.... 7,270,250
100,000 EMC Corporation*.............. 3,825,000
37,500 Sun Microsystems
Incorporated*............... 1,785,938
-------------
22,885,094
-------------
COMPUTER SOFTWARE--6.78%
60,000 Baan Company, N.V.* (1)....... 2,700,000
15,000 BMC Software Incorporated*.... 1,147,500
100,000 Cadence Design Systems
Incorporated* (1)........... 3,493,750
29,500 Computer Associates
International
Incorporated................ 1,390,188
20,000 Compuware Corporation*........ 842,500
30,000 Microsoft Corporation*........ 2,542,500
40,300 Networks Associates
Incorporated* (1)........... 2,604,387
60,000 Oracle Systems Corporation*... 1,477,500
120,000 Peoplesoft Incorporated*...... 5,362,500
109,000 Sterling Commerce
Incorporated*............... 4,973,125
-------------
26,533,950
-------------
CONSTRUCTION, REAL PROPERTY--1.04%
70,500 Cornerstone Properties
Incorporated................ 1,260,188
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
CONSTRUCTION, REAL PROPERTY (CONCLUDED)
<TABLE>
<C> <S> <C>
50,000 Starwood Lodging
Corporation................. $ 2,828,125
-------------
4,088,313
-------------
CONSUMER DURABLES--0.25%
15,000 HON Industries,
Incorporated................ 990,000
-------------
DEFENSE/AEROSPACE--1.25%
100,000 Kellstrom Industries
Incorporated*............... 2,400,000
45,000 Precision Castparts
Corporation................. 2,494,688
-------------
4,894,688
-------------
DIVERSIFIED RETAIL--1.55%
25,000 Dayton Hudson Corporation..... 1,932,813
30,000 Federated Department Stores,
Incorporated*............... 1,408,125
80,000 Proffitts Incorporated*....... 2,710,000
-------------
6,050,938
-------------
DRUGS & MEDICINE--5.30%
60,000 Elan Corporation, plc, ADR*
(1)......................... 3,723,750
100,000 Pharmacyclics Incorporated*... 2,612,500
40,000 Schering-Plough Corporation... 3,042,500
80,000 Teva Pharmaceutical Industries
Limited, ADR................ 3,360,000
50,000 Triangle Pharmaceuticals
Incorporated*............... 825,000
200,000 Watson Pharmaceuticals,
Incorporated*............... 7,175,000
-------------
20,738,750
-------------
ELECTRICAL EQUIPMENT--1.45%
15,000 Lucent Technologies
Incorporated................ 1,625,625
50,000 SCI Systems Incorporated*..... 2,250,000
30,000 Tellabs, Incorporated* (1).... 1,811,250
-------------
5,686,875
-------------
ENTERTAINMENT--4.15%
50,000 Carnival Corporation.......... 2,943,750
125,000 Cinar Films Incorporated*..... 4,625,000
83,334 N2K Incorporated* (2)......... 1,921,689
100,000 Time Warner Incorporated...... 6,750,000
-------------
16,240,439
-------------
ENVIRONMENTAL SERVICES--1.33%
150,000 Republic Industries,
Incorporated*............... 3,543,750
40,000 USA Waste Services
Incorporated*............... 1,665,000
-------------
5,208,750
-------------
</TABLE>
13
<PAGE>
PAINEWEBBER GROWTH FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS (CONTINUED)
<TABLE>
<C> <S> <C>
FINANCIAL SERVICES--5.10%
40,000 American Express Company...... $ 3,602,500
61,000 CIT Group, Incorporated*...... 2,013,000
80,000 Federal Home Loan Mortgage
Corporation................. 3,780,000
30,000 Federal National Mortgage
Association................. 1,912,500
135,000 MBNA Corporation (1).......... 4,834,688
92,500 SLM Holding Corporation....... 3,821,406
-------------
19,964,094
-------------
FOOD RETAIL--1.70%
25,000 Kroger Company*............... 1,056,250
160,000 Safeway Incorporated*......... 5,580,000
-------------
6,636,250
-------------
FREIGHT, AIR, SEA & LAND--0.19%
32,500 C H Robinson Worldwide,
Incorporated................ 739,375
-------------
HOTELS--1.04%
150,000 Extended Stay America,
Incorporated*............... 2,100,000
100,000 Host Marriott Corporation*.... 1,981,250
-------------
4,081,250
-------------
INDUSTRIAL PARTS--1.60%
60,000 Illinois Tool Works,
Incorporated................ 3,596,250
30,000 United Technologies
Corporation................. 2,679,375
-------------
6,275,625
-------------
INDUSTRIAL SERVICES/SUPPLIES--2.77%
200,000 Cendant Corporation*.......... 7,500,000
45,000 Ingersoll Rand Company........ 2,143,125
200,000 Staffing Resources,
Incorporated* (2)........... 1,200,000
-------------
10,843,125
-------------
INFORMATION & COMPUTER SERVICES--5.13%
120,000 HBO & Company................. 6,495,000
130,000 Keane Incorporated*........... 6,045,000
110,000 Paychex, Incorporated......... 5,678,750
48,800 Valassis Communications
Incorporated*............... 1,860,500
-------------
20,079,250
-------------
LEISURE--1.06%
135,000 American Skiing Company*...... 2,025,000
50,000 Mattel Incorporated........... 2,115,625
-------------
4,140,625
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
LIFE INSURANCE--0.79%
30,000 Conseco Incorporated.......... $ 1,408,125
37,500 SunAmerica Incorporated....... 1,699,219
-------------
3,107,344
-------------
LONG DISTANCE & PHONE COMPANIES--3.12%
115,000 Teleport Communications*...... 6,281,875
155,000 WorldCom, Incorporated*....... 5,919,062
-------------
12,200,937
-------------
MANUFACTURING--GENERAL--0.37%
75,000 Mettler Toledo International
Incorporated*............... 1,462,500
-------------
MANUFACTURING--HIGH TECHNOLOGY--1.54%
35,000 ASM Lithography Holdings
N.V.*....................... 3,268,125
60,000 KLA-Tencor Corporation*....... 2,769,375
-------------
6,037,500
-------------
MEDIA--6.35%
76,000 Clear Channel
Communications*............. 6,887,500
105,000 Comcast Corporation, Class A
Special..................... 3,675,000
187,500 Liberty Media Group*.......... 5,132,812
187,500 Outdoor Systems
Incorporated*............... 5,589,844
122,715 Tele-Communications,
Incorporated Class A*....... 3,566,405
-------------
24,851,561
-------------
MEDICAL PRODUCTS--1.81%
30,000 Guidant Corporation........... 2,188,125
96,266 Tyco International Limited.... 4,885,499
-------------
7,073,624
-------------
MEDICAL PROVIDERS--1.41%
96,500 Phycor Incorporated*.......... 2,472,813
80,000 Service Corporation
International............... 3,030,000
-------------
5,502,813
-------------
MINING & METALS--0.83%
55,000 Ispat International N.V.*..... 1,354,375
30,000 Phelps Dodge Corporation...... 1,905,000
-------------
3,259,375
-------------
MOTOR VEHICLES AND PARTS--0.68%
50,000 Lear Corporation*............. 2,643,750
-------------
OIL REFINING--0.24%
15,000 Coastal Corporation........... 954,375
-------------
</TABLE>
14
<PAGE>
PAINEWEBBER GROWTH FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
COMMON STOCKS (CONCLUDED)
OIL SERVICES--5.35%
50,000 BJ Services Corporation*...... $ 1,718,750
45,000 Camco International
Incorporated................ 2,632,500
50,000 Dresser Industries,
Incorporated................ 2,234,375
50,000 Ensco International
Incorporated................ 1,456,250
60,000 EVI, Incorporated*............ 2,943,750
120,000 Global Industries Limited*.... 2,070,000
60,000 Global Marine Incorporated*... 1,391,250
75,000 Halliburton Company........... 3,487,500
40,000 Schlumberger Limited.......... 3,015,000
-------------
20,949,375
-------------
OTHER INSURANCE--2.93%
30,000 Allstate Corporation.......... 2,797,500
25,500 American International Group
Incorporated................ 3,066,375
50,000 Everest Reinsurance Holdings
Incorporated................ 1,843,750
27,500 MGIC Investment Corporation... 2,026,406
15,000 The Progressive Corporation... 1,738,125
-------------
11,472,156
-------------
PUBLISHING--1.13%
30,000 Gannett, Incorporated......... 1,936,875
100,000 Getty Images Incorporated*.... 2,500,000
-------------
4,436,875
-------------
SECURITIES & ASSET MANAGEMENT--2.18%
40,000 Franklin Resources
Incorporated................ 2,040,000
15,000 Morgan Stanley, Dean Witter,
Discover & Company (1)...... 1,045,312
97,500 Travelers Group
Incorporated................ 5,435,625
-------------
8,520,937
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
SEMICONDUCTOR--2.91%
60,000 Altera Corporation*........... $ 2,587,500
80,000 Applied Materials,
Incorporated* (1)........... 2,945,000
30,000 Intel Corporation............. 2,688,750
60,000 National Semiconductor
Corporation*................ 1,432,500
30,000 Texas Instruments,
Incorporated................ 1,736,250
-------------
11,390,000
-------------
SPECIALTY RETAIL--5.83%
30,000 CDW Computer Centers,
Incorporated* (1)........... 2,055,000
80,000 Costco Companies,
Incorporated*............... 3,910,000
125,000 General Nutrition Companies,
Incorporated*............... 4,968,750
75,000 Home Depot Incorporated....... 4,785,937
30,000 Rite Aid Corporation.......... 971,250
195,000 Staples, Incorporated*........ 4,119,375
55,000 Walgreen Company.............. 2,017,813
-------------
22,828,125
-------------
THRIFT--0.44%
27,900 Ahmanson, H F & Company....... 1,742,006
-------------
WIRELESS TELECOMMUNICATIONS--1.58%
25,000 Airtouch Communications,
Incorporated*............... 1,123,438
150,000 SmarTalk Teleservices,
Incorporated* (1)........... 5,043,750
-------------
6,167,188
-------------
Total Common Stocks (cost--$224,432,497)....... 365,814,706
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (000) MATURITY DATE INTEREST RATE
- ------------- ------------- -------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENTS--6.02%
$ 11,564 Repurchase agreement dated
2/27/98 with Salomon
Brothers, Inc.,
collateralized by
$11,608,000 U.S. Treasury
Notes, 9.250% due 8/15/98
(value--$11,800,809);
proceeds: $11,569,397....... 03/02/98 5.600% 11,564,000
</TABLE>
15
<PAGE>
PAINEWEBBER GROWTH FUND
<TABLE>
<CAPTION>
PRINCIPAL MATURITY INTEREST
AMOUNT (000) DATES RATES VALUE
- ------------- ------------- ------------- -------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENTS (CONCLUDED)
$ 12,000 Repurchase agreement dated
2/27/98 with Zions Bancorp
Securities, Inc.,
collateralized by
$11,260,000 U.S. Treasury
Notes, 7.000% due 7/15/06
(value--$12,248,628);
proceeds $12,005,620........ 03/02/98 5.620% $ 12,000,000
-------------
Total Repurchase Agreements
(cost--$23,564,000).......................... 23,564,000
-------------
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED--6.95%
REPURCHASE AGREEMENT--2.80%
10,959 Repurchase agreement dated
2/27/98 with Union Bank of
Switzerland Inc.,
collateralized by
$10,893,000 U.S. Treasury
Notes, 6.000% due 9/30/98
(value--$11,178,941);
proceeds $10,964,132
(cost--$10,959,000)......... 03/02/98 5.620 10,959,000
-------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES
- -------------
<C> <S> <C>
MONEY MARKET FUNDS--4.15%
8,154,427 Liquid Assets Portfolio....... 8,154,427
8,001,625 Prime Portfolio............... 8,001,625
101,696 TempCash Portfolio............ 101,696
1,060 TempFund Portfolio............ 1,060
-------------
Total Money Market Funds (cost $16,258,808).... 16,258,808
-------------
Total Investments of Cash Collateral for
Securities Loaned (cost--$27,217,808)........ 27,217,808
-------------
Total Investments
(cost--$275,214,305)--106.42%................ 416,596,514
(25,122,518)
Liabilities in excess of other
assets--(6.42)%..............................
-------------
Net Assets--100.00%............................ $ 391,473,996
-------------
-------------
</TABLE>
- -----------------
* Non-Income producing security
ADR American Depositary Receipt
(1) Security, or portion thereof, was on loan at February 28, 1998
(2) Illiquid security representing 0.80% of net assets
See accompanying notes to financial statements
16
<PAGE>
PAINEWEBBER
STATEMENTS OF ASSETS AND LIABILITIES FEBRUARY 28, 1998(UNAUDITED)
<TABLE>
<CAPTION>
GROWTH
& INCOME GROWTH
FUND FUND
------------- -------------
<S> <C> <C>
ASSETS
Investments in securities, at value
(cost--$816,272,233 and $224,432,497,
respectively)......................... $1,135,232,704 $ 365,814,706
Repurchase Agreements
(cost--$153,385,000 and $23,564,000,
respectively)......................... 153,385,000 23,564,000
Investments of Cash Collateral for
Securities Loaned (cost--$0 and
$27,217,808, respectively)............ -- 27,217,808
Cash.................................... 150,945 8,368
Receivable for shares of beneficial
interest sold......................... 6,762,375 227,481
Receivable for investments sold......... 2,772,827 3,030,269
Dividends and interest receivable....... 1,556,954 277,369
Deferred organizational expenses........ -- 23,095
Other assets............................ 127,148 127,557
------------- -------------
Total assets............................ 1,299,987,953 420,290,653
------------- -------------
LIABILITIES
Payable for investments purchased....... 5,149,315 --
Collateral for securities loaned........ -- 27,217,808
Payable to affiliate.................... 2,382,663 734,213
Payable for shares of beneficial
interest repurchased.................. 1,389,469 534,790
Outstanding options written............. 737,375 --
Accrued expenses and other
liabilities........................... 310,671 329,846
------------- -------------
Total liabilities....................... 9,969,493 28,816,657
------------- -------------
NET ASSETS
Beneficial interest--$0.001 par value
(unlimited amount authorized)......... 910,765,710 232,570,904
Accumulated net investment income
(loss)................................ 576,836 (1,046,042)
Accumulated net realized gains from
investment and options transactions... 60,168,958 18,566,925
Net unrealized appreciation of
investments and options............... 318,506,956 141,382,209
------------- -------------
Net assets.............................. $1,290,018,460 $ 391,473,996
------------- -------------
------------- -------------
CLASS A:
Net assets.............................. $ 662,969,716 $ 236,329,402
------------- -------------
Shares outstanding...................... 20,913,540 10,145,871
------------- -------------
Net asset value and redemption value per $31.70 $23.29
share................................. ------------- -------------
------------- -------------
Maximum offering price per share (net $33.19 $24.39
asset value plus sales charge of 4.50% ------------- -------------
of offering price).................... ------------- -------------
CLASS B:
Net assets.............................. $ 420,076,469 $ 105,101,420
------------- -------------
Shares outstanding...................... 13,308,313 4,892,525
------------- -------------
Net asset value and offering price per $31.56 $21.48
share................................. ------------- -------------
------------- -------------
CLASS C:
Net assets.............................. $ 141,074,562 $ 26,401,320
------------- -------------
Shares outstanding...................... 4,462,503 1,215,691
------------- -------------
Net asset value and offering price per $31.61 $21.72
share................................. ------------- -------------
------------- -------------
CLASS Y:
Net assets.............................. $ 65,897,713 $ 23,641,854
------------- -------------
Shares outstanding...................... 2,079,720 987,402
------------- -------------
Net asset value, offering price and $31.69 $23.94
redemption value per share............ ------------- -------------
------------- -------------
</TABLE>
See accompanying notes to financial statements
17
<PAGE>
PAINEWEBBER
STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED FEBRUARY 28, 1998(UNAUDITED)
<TABLE>
<CAPTION>
GROWTH &
INCOME FUND GROWTH FUND
------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends............................... $ 6,641,607 $ 718,504
Interest................................ 3,676,862 928,209
------------- -------------
10,318,469 1,646,713
------------- -------------
EXPENSES:
Investment advisory and
administration........................ 3,757,345 1,374,523
Service fees -- Class A................. 610,076 244,092
Service and distribution fees -- Class
B..................................... 1,913,126 541,486
Service and distribution fees -- Class
C..................................... 538,334 125,809
Transfer agency and service fees........ 300,803 134,505
Custody and accounting.................. 319,624 111,033
Reports and notices to shareholders..... 162,577 48,799
Legal and audit......................... 71,266 41,349
Federal and state registration.......... 46,428 38,565
Amortization of organizational
expenses.............................. -- 17,241
Trustees' fees.......................... 6,750 6,750
Other expenses.......................... 6,137 8,603
------------- -------------
7,732,466 2,692,755
------------- -------------
Net investment income (loss)............ 2,586,003 (1,046,042)
------------- -------------
REALIZED AND UNREALIZED GAINS (LOSSES)
FROM INVESTMENT ACTIVITIES:
Net realized gains from:
Investment transactions............. 71,233,689 36,879,594
Options written..................... 103,796 --
Net change in unrealized
appreciation/depreciation of:
Investments......................... 66,186,675 31,414,579
Options written..................... (453,515) --
------------- -------------
NET REALIZED AND UNREALIZED GAINS FROM
INVESTMENT ACTIVITIES................. 137,070,645 68,294,173
------------- -------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS....................... $ 139,656,648 $ 67,248,131
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to financial statements
18
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
FEBRUARY 28, ENDED
1998 AUGUST 31,
(UNAUDITED) 1997
------------- -------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income................... $ 2,586,003 $ 3,826,898
Net realized gains from investment and
options transactions.................. 71,337,485 91,716,177
Net change in unrealized
appreciation/depreciation of
investments and options............... 65,733,160 169,641,210
------------- -------------
Net increase in net assets resulting
from operations....................... 139,656,648 265,184,285
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income -- Class A........ (2,224,099) (3,008,034)
Net investment income -- Class B........ -- (590,718)
Net investment income -- Class C........ (62,373) (144,038)
Net investment income -- Class Y........ (290,643) (369,653)
Net realized gain from investment
transactions -- Class A............... (42,191,521) (34,230,420)
Net realized gain from investment
transactions -- Class B............... (32,083,048) (34,198,889)
Net realized gain from investment
transactions -- Class C............... (8,161,061) (5,668,031)
Net realized gain from investment
transactions -- Class Y............... (4,314,878) (3,062,641)
------------- -------------
Total dividends and distributions to
shareholders.......................... (89,327,623) (81,272,424)
------------- -------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares.... 294,714,949 213,997,367
Cost of shares repurchased.............. (88,932,307) (143,307,215)
Proceeds from dividends reinvested...... 83,700,123 75,746,185
------------- -------------
Net increase in net assets from
beneficial interest transactions...... 289,482,765 146,436,337
------------- -------------
Net increase in net assets.............. 339,811,790 330,348,198
NET ASSETS:
Beginning of period..................... 950,206,670 619,858,472
------------- -------------
End of period (including undistributed
net investment income of $576,836 and
$567,948, respectively)............... $1,290,018,460 $950,206,670
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to financial statements
19
<PAGE>
PAINEWEBBER GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
FEBRUARY 28, ENDED
1998 AUGUST 31,
(UNAUDITED) 1997
------------- -------------
<S> <C> <C>
FROM OPERATIONS:
Net investment loss..................... $ (1,046,042) $ (2,480,387)
Net realized gains from investment
transactions.......................... 36,879,594 77,089,105
Net change in unrealized
appreciation/depreciation of
investments........................... 31,414,579 (18,680,184)
------------- -------------
Net increase in net assets resulting
from operations....................... 67,248,131 55,928,534
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain from investment
transactions -- Class A............... (52,257,695) (17,185,494)
Net realized gain from investment
transactions -- Class B............... (28,007,650) (12,089,644)
Net realized gain from investment
transactions -- Class C............... (6,619,090) (2,625,574)
Net realized gain from investment
transactions -- Class Y............... (4,929,080) (1,819,441)
------------- -------------
Total distributions to shareholders..... (91,813,515) (33,720,153)
------------- -------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from sale of shares........ 23,297,930 41,330,087
Cost of shares repurchased.............. (55,853,769) (128,802,696)
Proceeds from dividends reinvested...... 86,299,181 31,795,483
------------- -------------
Net increase (decrease) in net assets
from beneficial interest
transactions.......................... 53,743,342 (55,677,126)
------------- -------------
Net increase (decrease) in net assets... 29,177,958 (33,468,745)
------------- -------------
NET ASSETS:
Beginning of period..................... 362,296,038 395,764,783
------------- -------------
End of period........................... $391,473,996 $362,296,038
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to financial statements
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS(UNAUDITED)
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. 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
Funds commenced operations.
Currently, 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 structures,
ongoing service and distribution charges and certain transfer agency expenses.
In addition, Class B shares and all corresponding reinvested dividend shares
automatically convert to Class A shares approximately six years after issuance.
All classes of shares have equal voting privileges except that each class has
exclusive voting rights with respect to its service and/or distribution plan.
The preparation of financial statements in accordance with generally accepted
accounting principles requires Fund management to make estimates and 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 by Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins"), an asset management 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, 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, each 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 each Trust's board of trustees determines that
this does not represent fair value.
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, each 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.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS(UNAUDITED)
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 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.
OPTION WRITING--When a Fund writes a call or a put option, an amount equal to
the premium received by the Fund is included in the Fund's Statement of Assets
and Liabilities as an asset and as an equivalent liability. The amount of the
liability is subsequently marked-to-market to reflect the current market value
of the option written. If an option which the Fund has written either expires on
its stipulated expiration date or the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or loss if the cost of a closing purchase
transaction exceeds the premium received when the option was written) without
regard to any unrealized gain or loss on the underlying security, and the
liability related to such option is extinguished. If a call option which the
Fund has written is exercised, the Fund realizes a capital gain or loss
(long-term or short-term, depending on the holding period of the underlying
security) from the sale of the underlying security and the proceeds from the
sale are increased by the premium originally received. If a put option which a
Fund has written is exercised, the amount of the premium originally received
reduces the cost of the security which the Fund purchases upon exercise of the
option.
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.
WRITTEN OPTION ACTIVITY
Transactions in options written for the six months ended February 28, 1998 for
the were as follows:
<TABLE>
<CAPTION>
GROWTH & INCOME
FUND
------------------------
NUMBER OF
OPTIONS PREMIUMS
----------- -----------
<S> <C> <C>
Options outstanding at August 31,
1997.................................. -- --
Options written......................... 1,020 $ 283,860
Options terminated in closing purchase
transactions.......................... -- --
Options expired......................... -- --
----- -----------
Options outstanding at February 28,
1998.................................. 1,020 $ 283,860
----- -----------
----- -----------
</TABLE>
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
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS(UNAUDITED)
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 February 28, 1998, Growth & Income Fund and Growth
Fund owed Mitchell Hutchins $1,325,698 and $446,890, respectively, in investment
advisory and administration fees.
For the six months ended February 28, 1998, Growth & Income Fund and Growth
Fund paid $19,200 and $21,330, 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 service and/or distribution pertaining to 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 February 28, 1998, Growth &
Income Fund and Growth Fund owed Mitchell Hutchins $1,056,965 and $287,323,
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 six months ended
February 28, 1998, it earned $2,001,880 and $95,636 in sales charges for the
Growth & Income Fund and Growth Fund, respectively.
SECURITY LENDING
Each Fund may lend securities up to 33 1/3% of its total assets to qualified
institutions. The loans are secured at all times by cash or U.S. government
securities in an amount at least equal to the market value of the securities
loaned, plus accrued interest, determined on a daily basis and adjusted
accordingly. Each Fund will regain record ownership of loaned securities to
exercise certain beneficial rights, however, each Fund may bear the risk of
delay in recovery of, or even loss of rights in, the securities loaned should
the borrower fail financially. Each 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. Each
Fund's lending agent is PaineWebber, who received $42,309 and $56,584 for Growth
& Income Fund and Growth Fund, respectively, in compensation from the Funds in
that capacity for the six months ended February 28, 1998. At February 28, 1998,
Growth & Income Fund and Growth Fund owed PaineWebber $8,115 and $9,105,
respectively, in compensation.
At February 28, 1998, the Growth & Income Fund held the following securities
having an aggregate value of $12,600,294 (as listed below) and the Growth Fund
held cash and/or cash equivalents having an aggregate value of $27,217,808 as
collateral for portfolio securities loaned having a market value of $10,900,400
and $27,267,513 for Growth & Income Fund and Growth Fund, respectively.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST MARKET
(000) DATES RATES VALUE
- ----------- ----------------- -------------- -----------
<C> <S> <C> <C> <C>
$ 8,700 U.S. Treasury Inflation Index Notes..... 07/15/02 3.625% $ 8,697,059
2,779 U.S. Treasury Bonds..................... 11/15/10-02/15/20 7.250-12.750% 3,903,235
-----------
$12,600,294
-----------
-----------
</TABLE>
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS(UNAUDITED)
BANK LINE OF CREDIT
Each Fund may participate with other funds managed by Mitchell Hutchins in a
$200 million committed credit facility ("Facility") to be utilized for temporary
financing until the settlement of sale or purchase of portfolio securities, the
repurchase or redemption of shares of each Fund at the request of the
shareholders and other temporary or emergency purposes. In connection therewith,
each Fund has agreed to pay a commitment fee, pro rata, based on the relative
asset size of the Funds in the Facility. Interest is charged to each Fund at
rates based on prevailing market rates in effect at the time of borrowings. For
the six months ended February 28, 1998, the Funds did not borrow under the
Facility.
TRANSFER AGENCY SERVICE FEES
PaineWebber provides transfer agency related services to the Funds pursuant to
a delegation of authority from PFPC, Inc., the Funds transfer agent, and is
compensated for these services by PFPC, Inc., not the Funds. For the six months
ended February 28, 1998, PaineWebber received approximately 57% and 58% of the
total transfer agency service fees collected by PFPC, Inc. from Growth & Income
Fund and Growth Fund, respectively.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at February 28,
1998 was substantially the same as the cost of securities for financial
statement purposes.
At February 28, 1998, 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)................... $ 325,247,359 $ 146,090,578
Gross depreciation (investments having an excess of cost over value)................... (6,286,888) (4,708,369)
------------- -------------
Net unrealized appreciation of investments............................................. $ 318,960,471 $ 141,382,209
------------- -------------
------------- -------------
</TABLE>
For the six months ended February 28, 1998, total aggregate purchases and
sales of portfolio securities, excluding short-term securities, were as follows:
<TABLE>
<CAPTION>
GROWTH &
INCOME FUND GROWTH FUND
------------- -------------
<S> <C> <C>
Purchases.............................................................................. $ 449,195,880 $ 103,739,869
Sales.................................................................................. $ 330,886,552 $ 135,981,886
</TABLE>
FEDERAL TAX STATUS
Each 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, each Fund intends not to be subject to any federal excise tax.
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS(UNAUDITED)
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
----------- ------------- ----------- ------------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
GROWTH & INCOME FUND
SIX MONTHS ENDED
FEBRUARY 28, 1998:
Shares sold.................. 3,250,316 $ 97,381,215 3,737,397 $ 111,852,810 1,872,331 $ 55,800,013 981,839
Shares repurchased........... (1,079,460) (32,406,087) (858,138) (25,641,542) (454,604) (13,381,240) (582,767)
Shares converted from Class B
to Class A................. 2,922,070 88,793,029 (2,936,104) (88,793,029) -- -- --
Dividends reinvested......... 1,383,918 41,526,371 991,533 29,715,205 262,925 7,880,006 152,682
----------- ------------- ----------- ------------- ----------- ------------ ----------
Net increase................. 6,476,844 $ 195,294,528 934,688 $ 27,133,444 1,680,652 $ 50,298,779 551,754
----------- ------------- ----------- ------------- ----------- ------------ ----------
----------- ------------- ----------- ------------- ----------- ------------ ----------
YEAR ENDED AUGUST 31, 1997:
Shares sold.................. 2,307,087 $ 63,242,666 2,807,435 $ 76,060,602 1,388,741 $ 37,797,944 1,382,504
Shares repurchased........... (1,745,153) (47,397,276) (2,056,896) (54,631,207) (603,592) (16,266,546) (935,476)
Shares converted from Class B
to Class A................. 1,132,783 32,163,441 (1,136,920) (32,163,441) -- -- --
Dividends reinvested......... 1,407,846 34,708,280 1,311,787 32,133,297 223,078 5,482,050 138,659
----------- ------------- ----------- ------------- ----------- ------------ ----------
Net Increase................. 3,102,563 $ 82,717,111 925,406 $ 21,399,251 1,008,227 $ 27,013,448 585,687
----------- ------------- ----------- ------------- ----------- ------------ ----------
----------- ------------- ----------- ------------- ----------- ------------ ----------
GROWTH FUND
SIX MONTHS ENDED
FEBRUARY 28, 1998:
Shares sold.................. 88,690 $ 2,236,318 91,643 $ 2,046,609 477,464 $ 11,986,143 275,283
Shares repurchased........... (813,819) (20,267,413) (595,828) (13,566,249) (589,786) (14,407,909) (291,698)
Shares converted from Class B
to Class A................. 667,505 16,361,244 (715,517) (16,361,244) -- -- --
Dividends reinvested......... 2,428,222 49,098,643 1,398,245 26,119,234 325,859 6,152,224 237,202
----------- ------------- ----------- ------------- ----------- ------------ ----------
Net increase (decrease)...... 2,370,598 $ 47,428,792 178,543 $ (1,761,650) 213,537 $ 3,730,458 220,787
----------- ------------- ----------- ------------- ----------- ------------ ----------
----------- ------------- ----------- ------------- ----------- ------------ ----------
YEAR ENDED AUGUST 31, 1997:
Shares sold.................. 284,051 $ 7,129,522 230,498 $ 5,496,399 729,264 $ 17,622,338 440,829
Shares repurchased........... (2,091,384) (51,703,276) (1,484,421) (34,935,483) (1,110,236) (26,634,743) (614,496)
Shares converted from Class B
to Class A................. 535,032 13,178,357 (563,869) (13,178,357) -- -- --
Dividends reinvested......... 679,736 16,198,119 499,211 11,302,141 108,492 2,475,783 74,998
----------- ------------- ----------- ------------- ----------- ------------ ----------
Net decrease................. (592,565) $ (15,197,278) (1,318,581) $ (31,315,300) (272,480) $ (6,536,622) (98,669)
----------- ------------- ----------- ------------- ----------- ------------ ----------
----------- ------------- ----------- ------------- ----------- ------------ ----------
<CAPTION>
AMOUNT
------------
<S> <C>
GROWTH & INCOME FUND
SIX MONTHS ENDED
FEBRUARY 28, 1998:
Shares sold.................. $ 29,680,911
Shares repurchased........... (17,503,438)
Shares converted from Class B
to Class A................. --
Dividends reinvested......... 4,578,541
------------
Net increase................. $ 16,756,014
------------
------------
YEAR ENDED AUGUST 31, 1997:
Shares sold.................. $ 36,896,155
Shares repurchased........... (25,012,186)
Shares converted from Class B
to Class A................. --
Dividends reinvested......... 3,422,558
------------
Net Increase................. $ 15,306,527
------------
------------
GROWTH FUND
SIX MONTHS ENDED
FEBRUARY 28, 1998:
Shares sold.................. $ 7,028,860
Shares repurchased........... (7,612,198)
Shares converted from Class B
to Class A................. --
Dividends reinvested......... 4,929,080
------------
Net increase (decrease)...... $ 4,345,742
------------
------------
YEAR ENDED AUGUST 31, 1997:
Shares sold.................. $ 11,081,828
Shares repurchased........... (15,529,194)
Shares converted from Class B
to Class A................. --
Dividends reinvested......... 1,819,440
------------
Net decrease................. $ (2,627,926)
------------
------------
</TABLE>
25
<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
SIX MONTHS
ENDED
FEBRUARY
28, FOR THE YEARS ENDED AUGUST 31,
1998 -----------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.......... $ 30.60 $ 24.35 $ 22.52 $ 20.43 $ 20.86 $ 20.48
---------- -------- -------- -------- -------- --------
Net investment income......................... 0.10 0.23 0.22 0.24 0.28 0.28
Net realized and unrealized gains (losses)
from investments and options................ 3.79 9.29 3.46 3.18 (0.41) 0.37
---------- -------- -------- -------- -------- --------
Total increase (decrease) from investment
operations.................................. 3.89 9.52 3.68 3.42 (0.13) 0.65
---------- -------- -------- -------- -------- --------
Dividends from net investment income.......... (0.12) (0.25) (0.34) (0.12) (0.27) (0.27)
Distributions from net realized gain from
investment transactions..................... (2.67) (3.02) (1.51) (1.21) (0.03) --
---------- -------- -------- -------- -------- --------
Total dividends and distributions to
shareholders................................ (2.79) (3.27) (1.85) (1.33) (0.30) (0.27)
---------- -------- -------- -------- -------- --------
Net asset value, end of period................ $ 31.70 $ 30.60 $ 24.35 $ 22.52 $ 20.43 $ 20.86
---------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- --------
Total investment return(1).................... 13.32% 42.42% 17.40% 18.30% (0.58)% 3.15%
---------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- --------
Ratios/Supplemental data:
Net assets, end of period (000's)............. $662,970 $441,699 $276,016 $187,057 $222,432 $359,073
Expenses to average net assets................ 1.09%* 1.15% 1.20%(2) 1.19% 1.20% 1.13%
Net investment income to average net assets... 0.83%* 0.88% 0.98%(2) 1.07% 1.29% 1.33%
Portfolio turnover rate....................... 34% 70% 112% 111% 94% 37%
Average commission rate paid(3)............... $0.0598 $0.0598 $0.0598 -- -- --
</TABLE>
- -----------------
* Annualized
(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 for periods of less than one
year has not been annualized.
(2) These ratios include non-recurring acquisition expenses of 0.04%.
(3) Effective for fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose the average commission rate paid per share of
common stock investments purchased or sold.
26
<PAGE>
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED
FEBRUARY
28, FOR THE YEARS ENDED AUGUST 31,
1998 -------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
---------- -------- ------------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.......... $ 30.46 $ 24.26 $ 22.37 $ 20.37 $ 20.78 $ 20.41
---------- -------- ------------ -------- -------- --------
Net investment income......................... -- 0.04 0.04 0.06 0.10 0.12
Net realized and unrealized gains (losses)
from investments and options................ 3.75 9.23 3.45 3.18 (0.37) 0.36
---------- -------- ------------ -------- -------- --------
Total increase (decrease) from investment
operations.................................. 3.75 9.27 3.49 3.24 (0.27) 0.48
---------- -------- ------------ -------- -------- --------
Dividends from net investment income.......... -- (0.05) (0.09) (0.03) (0.11) (0.11)
Distributions from net realized gain from
investment transactions..................... (2.65) (3.02) (1.51) (1.21) (0.03) --
---------- -------- ------------ -------- -------- --------
Total dividends and distributions to
shareholders................................ (2.65) (3.07) (1.60) (1.24) (0.14) (0.11)
---------- -------- ------------ -------- -------- --------
Net asset value, end of period................ $ 31.56 $ 30.46 $ 24.26 $ 22.37 $ 20.37 $ 20.78
---------- -------- ------------ -------- -------- --------
---------- -------- ------------ -------- -------- --------
Total investment return(1).................... 12.85% 41.33% 16.49% 17.38% (1.31)% 2.34%
---------- -------- ------------ -------- -------- --------
---------- -------- ------------ -------- -------- --------
Ratios/Supplemental data:
Net assets, end of period (000's)............. $420,076 $376,840 $ 277,753 $247,543 $289,290 $461,389
Expenses to average net assets................ 1.89%* 1.93% 1.99%(2) 1.97% 1.97% 1.90%
Net investment income to average net assets... 0.03%* 0.11% 0.17%(2) 0.29% 0.51% 0.57%
Portfolio turnover rate....................... 34% 70% %112 111% 94% 37%
Average commission rate paid(3)............... $0.0598 $0.0598 $0.0598 -- -- --
<CAPTION>
CLASS C
----------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED
FEBRUARY 28, FOR THE YEARS ENDED AUGUST 31,
1998 ------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.......... $ 30.53 $ 24.33 $ 22.43 $ 20.42 $ 20.83 $ 20.47
------------- ------- ------- -------- ------- -------
Net investment income......................... 0.02 0.05 0.05 0.06 0.11 0.11
Net realized and unrealized gains (losses)
from investments and options................ 3.75 9.24 3.46 3.19 (0.38) 0.37
------------- ------- ------- -------- ------- -------
Total increase (decrease) from investment
operations.................................. 3.77 9.29 3.51 3.25 (0.27) 0.48
------------- ------- ------- -------- ------- -------
Dividends from net investment income.......... (0.02) (0.07) (0.10) (0.03) (0.11) (0.12)
Distributions from net realized gain from
investment transactions..................... (2.67) (3.02) (1.51) (1.21) (0.03) --
------------- ------- ------- -------- ------- -------
Total dividends and distributions to
shareholders................................ (2.69) (3.09) (1.61) (1.24) (0.14) (0.12)
------------- ------- ------- -------- ------- -------
Net asset value, end of period................ $ 31.61 $ 30.53 $ 24.33 $ 22.43 $ 20.42 $ 20.83
------------- ------- ------- -------- ------- -------
------------- ------- ------- -------- ------- -------
Total investment return(1).................... 12.87% 41.30% 16.52% 17.37% (1.29)% 2.35%
------------- ------- ------- -------- ------- -------
------------- ------- ------- -------- ------- -------
Ratios/Supplemental data:
Net assets, end of period (000's)............. $141,075 $84,922 $43,148 $ 30,468 $37,287 $61,869
Expenses to average net assets................ 1.87%* 1.92% 1.99%(2) 1.98% 1.94% 1.87%
Net investment income to average net assets... 0.06%* 0.10% 0.18%(2) 0.28% 0.54% 0.61%
Portfolio turnover rate....................... 34% 70% 112% 111% 94% 37%
Average commission rate paid(3)............... $0.0598 $0.0598 $0.0598 -- -- --
</TABLE>
- -----------------
* Annualized
(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 for periods of less than one
year has not been annualized.
(2) These ratios include non-recurring acquisition expenses of 0.04%.
(3) Effective for fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose the average commission rate paid per share of
common stock investments purchased or sold.
27
<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
SIX MONTHS
ENDED
FEBRUARY 28, FOR THE YEARS ENDED AUGUST 31,
1998 ------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 30.59 $ 24.35 $ 22.54 $ 20.42 $ 20.86 $ 20.48
------------ -------- -------- -------- -------- --------
Net investment income............................. 0.15 0.32 0.30 0.30 0.33 0.33
Net realized and unrealized gains (losses) from
investments and options.......................... 3.78 9.26 3.45 3.18 (0.40) 0.37
------------ -------- -------- -------- -------- --------
Total increase (decrease) from investment
operations....................................... 3.93 9.58 3.75 3.48 (0.07) 0.70
------------ -------- -------- -------- -------- --------
Dividends from net investment income.............. (0.16) (0.32) (0.43) (0.15) (0.34) (0.32)
Distributions from net realized gain from
investment transactions.......................... (2.67) (3.02) (1.51) (1.21) (0.03) --
------------ -------- -------- -------- -------- --------
Total dividends and distributions to
shareholders..................................... (2.83) (3.34) (1.94) (1.36) (0.37) (0.32)
------------ -------- -------- -------- -------- --------
Net asset value, end of period.................... $ 31.69 $ 30.59 $ 24.35 $ 22.54 $ 20.42 $ 20.86
------------ -------- -------- -------- -------- --------
------------ -------- -------- -------- -------- --------
Total investment return(1)........................ 13.48% 42.74% 17.77% 18.66% (0.31)% 3.44%
------------ -------- -------- -------- -------- --------
------------ -------- -------- -------- -------- --------
Ratios/Supplemental data:
Net assets, end of period (000's)................. $ 65,898 $ 46,745 $ 22,942 $ 14,680 $ 14,690 $ 17,005
Expenses to average net assets.................... 0.82%* 0.88% 0.92%(2) 0.89% 0.90% 0.86%
Net investment income to average net assets....... 1.11%* 1.14% 1.26%(2) 1.39% 1.60% 1.62%
Portfolio turnover................................ 34% 70% 112% 111% 94% 37%
Average commission rate paid(3)................... $ 0.0598 $ 0.0598 $ 0.0598 -- -- --
</TABLE>
- -----------------
* Annualized
(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 for
periods of less than one year has not been annualized.
(2) These ratios include non-recurring acquisition expenses of 0.04%.
(3) Effective for fiscal years beginning on or after September 1, 1995, the Fund
is required to disclose the average commission rate paid per share of common
stock investments purchased or sold.
28
<PAGE>
(This Page Intentionally Left Blank.)
29
<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
SIX MONTHS
ENDED
FEBRUARY 28, FOR THE YEARS ENDED AUGUST 31,
1998 ------------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ 25.94 $ 24.37 $ 22.27 $ 20.04 $ 20.60 $ 16.78
------------ --------- --------- --------- --------- ---------
Net investment income (loss)....... (0.04)+ (0.08)+ (0.12) 0.01 -- 0.07
Net realized and unrealized gains
from investments................. 4.17+ 3.76+ 4.06 2.25 0.51 4.37
------------ --------- --------- --------- --------- ---------
Total increase from investment
operations....................... 4.13 3.68 3.94 2.26 0.51 4.44
------------ --------- --------- --------- --------- ---------
Distributions from net realized
gain from investment
transactions..................... (6.78) (2.11) (1.84) (0.03) (1.07) (0.62)
------------ --------- --------- --------- --------- ---------
Net asset value, end of period..... $ 23.29 $ 25.94 $ 24.37 $ 22.27 $ 20.04 $ 20.60
------------ --------- --------- --------- --------- ---------
------------ --------- --------- --------- --------- ---------
Total investment return(1)......... 19.90% 15.85% 18.43% 11.28% 2.33% 26.97%
------------ --------- --------- --------- --------- ---------
------------ --------- --------- --------- --------- ---------
Ratios/Supplemental data:
Net assets, end of period
(000's).......................... $236,329 $ 201,725 $ 203,882 $ 183,958 $ 141,342 $ 130,353
Expenses to average net assets..... 1.20%* 1.27% 1.28% 1.28%(2) 1.21% 1.22%
Net investment income (loss) to
average net assets............... (0.30)%* (0.32)% (0.49)% 0.19%(2) 0.06% 0.38%
Portfolio turnover rate............ 30% 86% 60% 36% 24% 36%
Average commission rate paid(3).... $0.0599 $0.0598 $0.0598 -- -- --
</TABLE>
- -----------------
* Annualized
+ Calculated using the average shares outstanding for the period
(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 for periods of less than one
year has not been annualized.
(2) These ratios include non-recurring acquisition expenses of 0.06%.
(3) Effective for fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose the average commission rate paid per share of
common stock investments purchased or sold.
30
<PAGE>
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED
FEBRUARY 28, FOR THE YEARS ENDED AUGUST 31,
1998 ------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
---------------- -------- -------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ 24.51 $ 23.30 $ 21.53 $ 19.53 $ 20.25 $ 16.64
-------- -------- -------- ------- ------- ----------
Net investment income (loss)....... (0.12)+ (0.26)+ (0.39) (0.02) (0.06) (0.05)
Net realized and unrealized gains
from investments................. 3.87+ 3.58+ 4.00 2.05 0.41 4.28
-------- -------- -------- ------- ------- ----------
Total increase from investment
operations....................... 3.75 3.32 3.61 2.03 0.35 4.23
-------- -------- -------- ------- ------- ----------
Distributions from net realized
gain from investment
transactions..................... (6.78) (2.11) (1.84) (0.03) (1.07) (0.62)
-------- -------- -------- ------- ------- ----------
Net asset value, end of period..... $ 21.48 $ 24.51 $ 23.30 $ 21.53 $ 19.53 $ 20.25
-------- -------- -------- ------- ------- ----------
-------- -------- -------- ------- ------- ----------
Total investment return(1)......... 19.46% 14.98% 17.48% 10.40% 1.55% 25.91%
-------- -------- -------- ------- ------- ----------
-------- -------- -------- ------- ------- ----------
Ratios/Supplemental data:
Net assets, end of period
(000's).......................... $105,101 $115,529 $140,551 $152,357 $97,272 $ 60,280
Expenses to average net assets..... 1.99%* 2.06% 2.06% 2.06%(2) 2.00% 2.02%
Net investment income (loss) to
average net assets............... (1.09)%* (1.12)% (1.27)% (0.60)%(2) (0.66)% (0.46)%
Portfolio turnover rate............ 30% 86% 60% 36% 24% %36
Average commission rate paid(3).... $0.0599 $0.0598 $0.0598 -- -- --
<CAPTION>
CLASS C
-------------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED
FEBRUARY 28, FOR THE YEARS ENDED AUGUST 31,
1998 ------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
---------------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ 24.71 $ 23.48 $ 21.68 $ 19.67 $ 20.38 $ 16.75
------- -------- -------- -------- -------- ----------
Net investment income (loss)....... (0.13)+ (0.27)+ (0.34) (0.10) (0.08) (0.06)
Net realized and unrealized gains
from investments................. 3.92+ 3.61+ 3.98 2.14 0.44 4.31
------- -------- -------- -------- -------- ----------
Total increase from investment
operations....................... 3.79 3.34 3.64 2.04 0.36 4.25
------- -------- -------- -------- -------- ----------
Distributions from net realized
gain from investment
transactions..................... (6.78) (2.11) (1.84) (0.03) (1.07) (0.62)
------- -------- -------- -------- -------- ----------
Net asset value, end of period..... $ 21.72 $ 24.71 $ 23.48 $ 21.68 $ 19.67 $ 20.38
------- -------- -------- -------- -------- ----------
------- -------- -------- -------- -------- ----------
Total investment return(1)......... 19.47% 14.95% 17.50% 10.37% 1.59% 25.86%
------- -------- -------- -------- -------- ----------
------- -------- -------- -------- -------- ----------
Ratios/Supplemental data:
Net assets, end of period
(000's).......................... $26,401 $ 24,760 $ 29,923 $ 30,608 $ 28,561 $ 16,474
Expenses to average net assets..... 2.00%* 2.07% 2.07% 2.05%(2) 1.98% 2.06%
Net investment income (loss) to
average net assets............... (1.10)%* (1.13)% (1.28)% (0.57)%(2) (0.65)% (0.69)%
Portfolio turnover rate............ 30% 86% 60% 36% 24% %36
Average commission rate paid(3).... $0.0599 $ 0.0598 $ 0.0598 -- -- --
</TABLE>
- -----------------
* Annualized
+ Calculated using the average shares outstanding for the period
(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 for periods of less than one
year has not been annualized.
(2) These ratios include non-recurring acquisition expenses of 0.06%.
(3) Effective for fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose the average commission rate paid per share of
common stock investments purchased or sold.
31
<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
SIX MONTHS
ENDED
FEBRUARY 28, FOR THE YEARS ENDED AUGUST 31,
1998 ------------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $26.46 $ 24.74 $ 22.53 $ 20.22 $ 20.71 $ 16.83
------------ --------- --------- --------- --------- ---------
Net investment income (loss)............ 0.00+ (0.01)+ (0.02) 0.24 0.03 0.08
Net realized and unrealized gains from
investments............................ 4.26+ 3.84+ 4.07 2.10 0.55 4.42
------------ --------- --------- --------- --------- ---------
Total increase from investment
operations............................. 4.26 3.83 4.05 2.34 0.58 4.50
------------ --------- --------- --------- --------- ---------
Distributions from net realized gain
from investment transactions........... (6.78) (2.11) (1.84) (0.03) (1.07) (0.62)
------------ --------- --------- --------- --------- ---------
Net asset value, end of period.......... $23.94 $ 26.46 $ 24.74 $ 22.53 $ 20.22 $ 20.71
------------ --------- --------- --------- --------- ---------
Total investment return(1).............. 20.00% 16.24% 18.72% 11.58% 2.67% 27.26%
------------ --------- --------- --------- --------- ---------
------------ --------- --------- --------- --------- ---------
Ratios/Supplemental data:
Net assets, end of period (000's)....... $23,642 $ 20,281 $ 21,409 $ 20,948 $ 30,521 $ 20,706
Expenses to average net assets.......... 0.92%* 1.00% 1.02% 0.97%(2) 0.94% 0.95%
Net investment income (loss) to average
net assets............................. (0.02)%* (0.05)% (0.23)% 0.53%(2) 0.40% 0.60%
Portfolio turnover rate................. 30% 86% 60% 36% 24% 36%
Average commission rate paid(3)......... $0.0599 $ 0.0598 $ 0.0598 -- -- --
</TABLE>
- -----------------
+ Calculated using the average shares outstanding for the period
(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 for
periods of less than one year has not been annualized.
(2) These ratios include non-recurring acquisition expenses of 0.05%.
(3) Effective for fiscal years beginning on or after September 1, 1995, the Fund
is required to disclose the average commission rate paid per share of common
stock investments purchased or sold.
32
<PAGE>
- --------------------------------------------------------------------------------
TRUSTEES
E. Garrett Bewkes, Jr. Mary C. Farrell
CHAIRMAN Meyer Feldberg
Margo N. Alexander George W. Gowen
Richard Q. Armstrong Frederic V. Malek
Richard R. Burt Carl W. Schafer
PRINCIPAL OFFICERS
Margo N. Alexander Paul H. Schubert
PRESIDENT VICE PRESIDENT AND TREASURER
Victoria E. Schonfeld Mark A. Tincher
VICE PRESIDENT VICE PRESIDENT
Dianne E. O'Donnell Ellen R. Harris
VICE PRESIDENT AND SECRETARY 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 CONNECTION WITH THE OFFERING OF SHARES OF THE
FUNDS UNLESS ACCOMPANIED OR PRECEDED BY AN EFFECTIVE PROSPECTUS.
THE FINANCIAL INFORMATION INCLUDED HEREIN IS TAKEN FROM THE RECORDS OF THE FUNDS
WITHOUT EXAMINATION BY INDEPENDENT AUDITORS WHO DO NOT EXPRESS AN OPINION
THEREON.
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
CORRESPONDENT 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
/ / High Income Fund
/ / Investment Grade Income Fund
/ / Low Duration U.S. Government Income Fund
/ / Strategic Income Fund
/ / U.S. Government Income Fund
TAX-FREE BOND FUNDS
/ / California Tax-Free Income Fund
/ / Municipal High Income Fund
/ / National Tax-Free Income Fund
/ / New York Tax-Free Income Fund
STOCK FUNDS
/ / Financial Services Growth Fund
/ / Growth Fund
/ / Growth & Income Fund
/ / Mid Cap Fund
/ / Small Cap Fund
/ / S&P 500 Index Fund
/ / Utility Income Fund
ASSET ALLOCATION FUNDS
/ / Balanced Fund
/ / Tactical Allocation Fund
GLOBAL FUNDS
/ / Asia Pacific Growth Fund
/ / Emerging Markets Equity Fund
/ / Global Equity Fund
/ / Global Income Fund
MITCHELL HUTCHINS PORTFOLIOS
/ / Aggressive Portfolio
/ / Moderate Portfolio
/ / Conservative Portfolio
PAINEWEBBER MONEY MARKET FUND
[LOGO]
- -C- 1998 PaineWebber Incorporated Member SIPC
PAINEWEBBER
- -------------------------
GROWTH &
INCOME FUND
GROWTH FUND
SEMIANNUAL REPORT
FEBRUARY 28, 1998
