<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND ANNUAL REPORT
PERFORMANCE AT A GLANCE
- -------------------------------------------------------------------------------
Comparison of the change of a $10,000 investment in PaineWebber Growth and
Income Fund (A) and the S&P 500 Index, from August 31, 1989 through August 31,
1999
(SIDEBAR)
The graph depicts the performance of PaineWebber Growth and Income Fund (A)
versus the S&P 500 Index. It is important to note PaineWebber Growth and Income
Fund is a professionally managed mutual fund while the Index is not available
for investment and is unmanaged. The comparison is shown for illustrative
purposes only.
[GRAPH]
<TABLE>
<CAPTION>
PAINEWEBBER
GROWTH &
INCOME S&P 500
FUND (A) INDEX
<S> <C> <C>
8/31/89 $ 9,549 $10,000
11/30/89 $ 9,809 $ 9,926
2/28/90 $ 9,187 $ 9,604
5/31/90 $ 9,916 $10,549
8/31/90 $ 9,486 $ 9,501
11/30/90 $ 9,287 $ 9,582
2/28/91 $10,781 $11,010
5/31/91 $11,386 $11,790
8/31/91 $11,727 $12,053
11/30/91 $11,378 $11,527
2/28/92 $12,705 $12,768
5/31/92 $12,314 $12,950
8/1/92 $12,639 $13,007
11/1/92 $13,428 $13,654
2/1/93 $13,183 $14,126
5/1/93 $12,731 $14,451
8/1/93 $13,038 $14,981
11/1/93 $12,795 $15,029
2/1/94 $13,194 $15,301
5/1/94 $12,441 $15,066
8/1/94 $12,962 $15,801
11/1/94 $12,268 $15,188
2/1/95 $13,039 $16,427
5/1/95 $14,087 $18,103
8/1/95 $15,333 $19,184
11/1/95 $16,390 $20,795
2/1/96 $17,505 $22,120
5/1/96 $18,315 $23,246
8/1/96 $18,001 $22,776
11/1/96 $20,507 $26,586
2/1/97 $21,284 $27,905
5/1/97 $22,997 $30,090
8/1/97 $25,637 $32,028
11/1/97 $26,484 $34,164
2/1/98 $29,052 $37,666
5/1/98 $29,840 $39,312
8/1/98 $24,738 $34,626
11/1/98 $29,415 $42,251
2/1/99 $30,400 $45,107
5/1/99 $31,200 $47,579
8/1/99 $31,287 $48,411
</TABLE>
Past performance is no guarantee of future performance. The performance of the
other classes will vary from the performance of the class shown because of
differences in sales charges and fees paid by shareholders investing in
different classes.
AVERAGE ANNUAL % TOTAL RETURN, PERIODS ENDED 8/31/99
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years Inception(0)
<S> <C> <C> <C> <C> <C>
CLASS A* 26.48 19.27 12.60 13.38
CLASS B** 25.51 18.35 N/A 12.78
Before Deducting
Maximum Sales Charge
CLASS C+ 25.49 18.36 N/A 13.08
CLASS Y++ 26.82 19.61 N/A 12.80
CLASS A* 20.78 18.18 12.08 13.05
After Deducting
Maximum Sales Charge
CLASS B** 20.51 18.14 N/A 12.78
CLASS C+ 24.49 18.36 N/A 13.08
</TABLE>
The investment return and 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.
(0) Inception: since commencement of issuance on December 20, 1983 for Class A,
July 1, 1991 for Class B, July 2, 1992 for Class C shares and February 12,
1992 for Class Y shares.
* 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 six 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 one year. Class C shares bear ongoing 12b-1 distribution
and service fees.
++ The Fund offers Class Y shares to a limited group of eligible investors,
including participants in certain investment programs that are sponsored by
PaineWebber and that may invest in PaineWebber mutual funds, as well as the
trustee of the PaineWebber 401(k) Plus Plan. Class Y shares do not bear
initial or contingent deferred sales charges or ongoing distribution and
service fees.
1
<PAGE>
PAINEWEBBER MID CAP FUND ANNUAL REPORT
PERFORMANCE AT A GLANCE
- ------------------------------------------------------------------------------
Comparison of the change of a $10,000 investment in PaineWebber Mid Cap Fund (A)
and the S&P Midcap 400 Index, from April 7, 1992 through August 31, 1999
(SIDEBAR)
The graph depicts the performance of PaineWebber Mid Cap Fund (A) versus the S&P
Midcap 400 Index. It is important to note PaineWebber Mid Cap Fund is a
professionally managed mutual fund while the Index is not available for
investment and is unmanaged. The comparison is shown for illustrative purposes
only.
[GRAPH]
<TABLE>
<CAPTION>
PAINEWEBBER MID PAINEWEBBER MID S&P MIDCAP
CAP FUND (A) CAP FUND (B) 400 INDEX
<S> <C> <C> <C>
4/7/92 $ 9,280 $ 9,710 $ 9,881
5/31/92 $ 9,280 $ 9,710 $ 9,975
6/30/92 $ 8,810 $ 9,210 $ 9,690
7/31/92 $ 9,240 $ 9,650 $10,170
8/31/92 $ 8,950 $ 9,340 $ 9,927
9/30/92 $ 9,160 $ 9,560 $10,066
10/31/92 $ 9,540 $ 9,940 $10,307
11/30/92 $10,100 $10,520 $10,883
12/31/92 $10,500 $10,930 $11,247
1/31/93 $10,610 $11,040 $11,388
2/28/93 $10,150 $10,560 $11,229
3/31/93 $10,530 $10,940 $11,616
4/30/93 $10,110 $10,500 $11,312
5/31/93 $10,780 $11,190 $11,827
6/30/93 $10,740 $11,150 $11,887
7/31/93 $10,870 $11,270 $11,864
8/31/93 $11,400 $11,810 $12,354
9/30/93 $11,860 $12,280 $12,485
10/31/93 $11,920 $12,340 $12,526
11/30/93 $11,560 $11,960 $12,249
12/31/93 $12,190 $12,590 $12,818
1/31/94 $12,550 $12,960 $13,116
2/28/94 $12,330 $12,730 $12,930
3/31/94 $11,650 $12,020 $12,331
4/30/94 $11,810 $12,170 $12,423
5/31/94 $11,640 $11,990 $12,305
6/30/94 $10,990 $11,320 $11,881
7/31/94 $11,270 $11,600 $12,284
8/31/94 $12,280 $12,630 $12,928
9/30/94 $12,220 $12,560 $12,686
10/31/94 $12,370 $12,700 $12,824
11/30/94 $11,710 $12,020 $12,246
12/31/94 $12,024 $12,334 $12,359
1/31/95 $11,974 $12,274 $12,488
2/28/95 $12,506 $12,816 $13,143
3/31/95 $12,857 $13,157 $13,358
4/30/95 $12,486 $12,775 $13,639
5/31/95 $12,857 $13,147 $13,968
6/30/95 $13,790 $14,090 $14,536
7/31/95 $14,694 $15,003 $15,292
8/31/95 $14,794 $15,094 $15,578
9/30/95 $15,316 $15,615 $15,955
10/31/95 $15,145 $15,435 $15,545
11/30/95 $15,577 $15,856 $16,224
12/31/95 $15,485 $15,754 $16,184
1/31/96 $15,538 $15,807 $16,418
2/29/96 $16,245 $16,513 $16,976
3/31/96 $16,478 $16,745 $17,180
4/30/96 $17,459 $17,726 $17,704
5/31/96 $18,008 $18,264 $17,943
6/30/96 $17,544 $17,789 $17,674
7/31/96 $15,897 $16,113 $16,477
8/31/96 $16,889 $17,104 $17,428
9/30/96 $18,135 $18,359 $18,188
10/31/96 $17,618 $17,821 $18,241
11/30/96 $18,430 $18,633 $19,268
12/31/96 $18,253 $18,434 $19,289
1/31/97 $18,559 $18,739 $20,012
2/28/97 $17,629 $17,788 $19,848
3/31/97 $16,443 $16,580 $19,003
4/30/97 $17,042 $17,178 $19,495
5/31/97 $19,097 $19,227 $21,199
6/30/97 $19,929 $20,057 $21,794
7/31/97 $21,520 $21,643 $23,952
8/31/97 $21,214 $21,326 $23,923
9/30/97 $22,768 $22,875 $25,299
10/31/97 $21,299 $21,387 $24,198
11/30/97 $20,749 $20,813 $24,557
12/31/97 $21,018 $21,067 $25,509
1/31/98 $20,599 $20,635 $25,025
2/28/98 $22,336 $22,365 $27,097
3/31/98 $23,267 $23,276 $28,319
4/30/98 $23,096 $23,106 $28,837
5/31/98 $21,778 $21,685 $27,539
6/30/98 $22,515 $22,419 $27,713
7/31/98 $21,199 $21,109 $26,638
8/31/98 $16,913 $16,841 $21,680
9/30/98 $18,440 $18,362 $23,703
10/31/98 $19,671 $19,588 $25,822
11/30/98 $20,987 $20,898 $27,111
12/31/98 $23,499 $23,399 $30,386
1/31/99 $23,476 $23,377 $29,204
2/28/99 $21,840 $21,747 $27,673
3/31/99 $22,544 $22,449 $28,448
4/30/99 $23,635 $23,535 $30,690
5/31/99 $24,272 $24,169 $30,825
6/30/99 $25,953 $25,843 $32,471
7/31/99 $24,999 $24,893 $31,783
8/31/99 $24,249 $24,146 $30,696
</TABLE>
Past performance is no guarantee of future performance.
The performance of the other classes will vary from the performance of the class
shown because of differences in sales charges and fees paid by shareholders
investing in different classes.
AVERAGE ANNUAL % TOTAL RETURN, PERIODS ENDED 8/31/99
<TABLE>
<CAPTION>
1 Year 5 Years Inception1(0)
<S> <C> <C> <C> <C>
CLASS A* 43.38 14.58 13.41
CLASS B** 41.95 13.64 12.64
Before Deducting
Maximum Sales Charge
Class C+ 42.17 13.66 14.13
CLASS Y++ 43.77 N/A 3.54
CLASS A* 36.85 13.52 12.71
After Deducting
Maximum Sales Charge
CLASS B** 36.95 13.44 12.64
CLASS C+ 41.17 13.66 14.13
</TABLE>
The investment return and 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.
(0) Inception: since commencement of issuance on April 7, 1992 for Class A and
Class B shares, July 2, 1992 for Class C shares and March 17, 1998 for
Class Y shares.
* 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 six 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 one year. Class C shares bear ongoing 12b-1 distribution
and service fees.
++ The Fund offers Class Y shares to a limited group of eligible investors,
including participants in certain investment programs that are sponsored by
PaineWebber and that may invest in PaineWebber mutual funds, as well as the
trustee of the PaineWebber 401(k) Plus Plan. Class Y shares do not bear
initial or contingent deferred sales charges or ongoing distribution and
service fees.
2
<PAGE>
PAINEWEBBER GROWTH FUND ANNUAL REPORT
PERFORMANCE AT A GLANCE
- -------------------------------------------------------------------------------
Comparison of the change of a $10,000 investment in PaineWebber Growth Fund (A)
and the S&P 500 Index, from August 31, 1989 through August 31, 1999
(SIDEBAR)
The graph depicts the performance of PaineWebber Growth Fund (A) versus the S&P
500 Index. It is important to note PaineWebber Growth Fund is a professionally
managed mutual fund while the Index is not available for investment and is
unmanaged. The comparison is shown for illustrative purposes only.
[GRAPH]
<TABLE>
<CAPTION>
PAINEWEBBER S&P 500
GROWTH FUND (A) INDEX
<S> <C> <C>
8/31/89 $10,000 $10,000
12/89 $ 9,552 $ 9,926
3/90 $ 9,812 $ 9,604
6/90 $ 9,315 $10,549
9/90 $10,115 $ 9,501
12/90 $ 8,879 $ 9,582
3/91 $ 8,641 $11,010
6/91 $10,713 $11,790
9/91 $11,317 $12,053
12/91 $12,165 $11,527
3/92 $12,103 $12,768
6/92 $13,463 $12,950
9/92 $12,529 $13,007
12/92 $12,062 $13,654
3/93 $13,470 $14,126
6/93 $13,545 $14,451
9/93 $14,140 $14,981
12/93 $15,315 $15,029
3/94 $16,029 $15,301
6/94 $16,438 $15,066
9/94 $15,101 $15,801
12/94 $15,672 $15,188
3/95 $14,960 $16,427
6/95 $15,044 $18,103
9/95 $15,662 $19,184
12/95 $17,440 $20,795
3/96 $19,022 $22,120
6/96 $20,044 $23,246
9/96 $22,002 $22,776
12/96 $20,654 $26,586
3/97 $22,443 $27,905
6/97 $22,313 $30,090
9/97 $21,981 $32,028
12/97 $23,927 $34,164
3/98 $25,366 $37,666
6/98 $28,689 $39,312
9/98 $28,775 $34,626
12/98 $24,735 $42,251
3/99 $30,339 $45,107
6/99 $34,375 $47,579
9/99 $35,858 $48,411
</TABLE>
Past performance is no guarantee of future performance. The performance of the
other classes will vary from the performance of the class shown because of
differences in sales charges and fees paid by shareholders investing in
different classes.
AVERAGE ANNUAL % TOTAL RETURN, PERIODS ENDED 8/31/99
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years Inception(0)
<S> <C> <C> <C> <C> <C>
CLASS A* 44.97 18.00 14.14 15.35
CLASS B** 43.75 17.06 N/A 15.05
Before Deducting
Maximum Sales Charge
CLASS C+ 43.74 17.06 N/A 15.23
CLASS Y++ 45.40 18.33 N/A 15.08
CLASS A* 38.42 16.93 13.62 14.98
After Deducting
Maximum Sales Charge
CLASS B** 38.75 16.85 N/A 15.05
CLASS C+ 42.74 17.06 N/A 15.23
</TABLE>
The investment return and 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.
(0) Inception: since commencement of issuance on March 18, 1985 for Class A,
July 1, 1991 for Class B, July 2, 1992 for Class C shares and August 26,
1991 for Class Y shares.
* 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 six 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 one year. Class C shares bear ongoing 12b-1 distribution
and service fees.
++ The Fund offers Class Y shares to a limited group of eligible investors,
including participants in certain investment programs that are sponsored by
PaineWebber and that may invest in PaineWebber mutual funds, as well as the
trustee of the PaineWebber 401(k) Plus Plan Class Y shares do not bear
initial or contingent deferred sales charges or ongoing distribution and
service fees.
3
<PAGE>
ANNUAL REPORT
Dear Shareholder, October 15, 1999
We are pleased to present you with the annual report for the PaineWebber Growth
and Income Fund, PaineWebber Mid Cap Fund and PaineWebber Growth Fund for the
fiscal year ended August 31, 1999.
MARKET REVIEW
- --------------------------------------------------------------------------------
For most of 1998 and the first quarter of 1999 the market was very narrow,
focused primarily on large-capitalization growth companies. This was a highly
unusual situation and we expected conditions to return to normal--i.e., near
parity between growth and value styles. The market did briefly turn around in
the second quarter, but only the most undervalued of the value stocks benefited
before investors got concerned about the surge in commodity prices, and
narrowness returned. For the 12 months ended August 31, 1999, the S&P 500 Index
gained 39.81%.
Despite gains in the broad market, individual stock performance varied
widely. About two thirds of the stocks traded on the New York Stock Exchange
have actually posted losses year to date. The market weakened at the end of the
Fund's fiscal year, as investors became concerned about the possibility of the
Federal Reserve again raising short-term interest rates. Technology and consumer
cyclicals were the strongest sectors; the weakest sectors included healthcare,
utilities and capital goods.
OUTLOOK
We expect gross domestic product growth of around 3.80% for 1999, and about
2.90% growth for 2000. Our outlook calls for 2.25% inflation for calendar year
1999, and about the same or slightly higher for calendar year 2000. We expect
the yield on the long bond (30-year Treasury) to stay close to 6.10% for the
rest of 1999, and to retreat below 6.00% in 2000. Overseas growth does not seem
strong enough to raise inflationary expectations to a great degree, but should
allow companies to maintain profitability.
4
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND, ANNUAL REPORT
PAINEWEBBER MID CAP FUND, PAINEWEBBER GROWTH FUND
(SIDEBAR)
PAINEWEBBER GROWTH AND INCOME FUND
PROFILE
as of August 31, 1999
INVESTMENT GOAL:
Current income and capital growth
PORTFOLIO MANAGER:
Mark Tincher, Mitchell Hutchins Asset Management Inc.
COMMENCEMENT:
December 20, 1983 (Class A); July 1, 1991 (Class B); July 2, 1992 (Class C);
February 12, 1992 (Class Y)
DIVIDEND PAYMENTS:
semiannually
(END SIDEBAR)
PAINEWEBBER GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
HIGHLIGHTS
For the twelve months ended August 31, 1999, Fund performance lagged the S&P 500
Index return of 39.81%. The Fund remained biased toward the smaller companies
within the large-capitalization sector and certain medium-cap companies as well.
The continued dominance of the largest of the large-cap stocks caused the Fund
to lag the S&P 500.
The Fund remains focused on consumer cyclicals (19.6%), technology (19.4%)
and financial services (12.9%), where earnings estimates are changing for the
better. Recently our model has had difficulty identifying attractive investment
opportunities--many securities are undervalued but offer no earnings momentum,
or have attractive earnings growth and momentum profiles but are expensive. We
believe this situation will improve if and when market breadth expands.
CHARACTERISTICS*
<TABLE>
<CAPTION>
8/31/99 2/28/99
- ---------------------------------------------------------------------------
<S> <C> <C>
Total Net Assets ($bln) $1.4 $1.5
Median Market Cap ($bln) $10.7 $8.0
Price/Earnings Ratio** 24.1x 20.3x
Dividend Yield 1.05% 0.99%
Number of Securities 110 120
Stocks 90.6% 90.5%
Bonds 2.9% 1.0%
Cash & Cash Equivalents 6.5% 8.5%
- ----------------------------------------------------------------------------
</TABLE>
** Based on projected fiscal year earnings from August 31, 1999 to August 31,
2000
TOP FIVE SECTORS*
<TABLE>
<CAPTION>
As of 8/31/99 As of 2/28/99
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consumer Cyclicals 19.6% Consumer Cyclicals 18.8%
Technology 19.4% Technology 17.4%
Financial Services 12.9% Financial Services 16.9%
Utilities 10.2% Utilities 11.4%
Healthcare 7.3% Healthcare 10.5%
- --------------------------------------------------------------------------------------
</TABLE>
We expect value stocks to rebound and believe the Fund's positions will
benefit as the market broadens. We plan to look selectively for buying
opportunities in financial services, as this sector is starting to look more
attractive. Earnings estimates for financial services companies are improving,
and we feel the sector is poised to rebound as investors put interest rate and
inflation fears behind them.
* Weightings represent percentages of portfolio assets as of the dates
indicated. The Fund's portfolio is actively managed and its composition will
vary over time.
5
<PAGE>
ANNUAL REPORT
TOP TEN HOLDINGS*
<TABLE>
<CAPTION>
As of 8/31/99 As of 2/28/99
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
United Technologies Corp. 2.4% United Technologies Corp. 2.1%
Tyco International Inc. 2.3% MCI Worldcom, Inc. 1.9%
IBM Corp. 1.9% Warner Lambert Co. 1.9%
The Chase Manhattan Corp. 1.8% Intel Corp. 1.7%
Applied Materials 1.8% Dayton Hudson Corp. 1.7%
Cisco Systems, Inc. 1.8% The Chase Manhattan Corp. 1.6%
Microsoft Corp. 1.8% SBC Communications, Inc. 1.6%
Dayton Hudson Corp. 1.7% Compaq Computer Co. 1.6%
Unisys Corp. 1.6% Tyco International Inc. 1.6%
SBC Communications, Inc. 1.6% Ford Motor Co. 1.4%
- --------------------------------------------------------------------------------------
</TABLE>
(SIDEBAR)
PAINEWEBBER MID CAP FUND
PROFILE
as of August 31, 1999
INVESTMENT GOAL:
Long-term capital appreciation
PORTFOLIO MANAGERS:
Mark A. Tincher, Christopher G. Altschul and Antony J. Scott,
Mitchell Hutchins Asset Management Inc.
COMMENCEMENT:
April 7, 1992 (Class A); April 7, 1992 (Class B); July 2, 1992 (Class C);
March 3, 1998 (Class Y)
DIVIDEND PAYMENTS:
annually
(END SIDEBAR)
PAINEWEBBER MID CAP FUND
- ------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
Larger, growth-oriented stocks continued to dominate the U.S. equity market in
general and outperformed the mid cap arena. For the 12 months ended August 31,
1999, Fund performance lagged the S&P Mid Cap 400 Index return of 41.59% after
deducting sales charges. Before deducting sales charges, however, the Fund
outperformed the Index (see table on page 2).
The Fund invests in mid-cap companies, which we define as those companies
with a market capitalization between $750 million and $6 billion. Earlier this
year, we shifted our focus to concentrate on the larger-cap companies within our
defined universe and increased the Fund's weighted average market capitalization
and liquidity in response to the emphasis the market has placed on larger, more
liquid companies. As of August 31, 1999, the median market cap of the Fund had
increased to $3.3 billion, from $3.0 billion six months earlier. All sectors of
the U.S. equity market have been dominated by the larger-cap names for most of
the latter half of the 1990s, and we believe our larger-cap focus within the
mid-cap market will benefit the Fund going forward.
CHARACTERISTICS*
<TABLE>
<CAPTION>
8/31/99 2/28/99
- ---------------------------------------------------------------------------
<S> <C> <C>
Total Net Assets ($mm) $158.1 $167.3
Price/Earnings Ratio** 34.0x 28.8x
Median Market Cap ($bln) $3.3 $3.0
Dividend Yield 0.58% 0.69%
Number of Securities 110 105
Stocks 97.4% 96.9%
Cash & Cash Equivalents 2.6% 3.1%
- ---------------------------------------------------------------------------
</TABLE>
** Based on projected fiscal year earnings from August 31, 1999 to August 31,
2000
* Weightings represent percentages of portfolio assets as of the dates
indicated. The Fund's portfolio is actively managed and its composition will
vary over time.
6
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND, ANNUAL REPORT
PAINEWEBBER MID CAP FUND, PAINEWEBBER GROWTH FUND
Within the mid-cap universe, we are looking for undervalued names that may be
little known due to lack of coverage by other investors. We also look for a
potential catalyst that could spark an acceleration of earnings growth, such as
new product introductions, management changes or increasing market share.
The Fund is still overweighted in consumer cyclicals (21.5%) compared to the
S&P Mid Cap 400 Index. We are emphasizing media companies (3.8%), which we
expect to benefit from continued economic growth, and specialty retailers
(2.5%), whose valuations have become attractive. The Fund remains underweighted
in healthcare (1.0%), which has helped performance.
We continue to emphasize stocks that are expected to benefit from continued
economic growth, overweighting technology (28.5%), consumer cyclicals (21.5%)
and energy (4.2%) relative to the benchmark S&P Mid Cap 400 Index.
TOP FIVE SECTORS*
<TABLE>
<CAPTION>
As of 8/31/99 As of 2/28/99
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Technology 28.5% Technology 22.7%
Consumer Cyclicals 21.5% Consumer Cyclicals 21.2%
Capital Goods 15.3% Financials 12.4%
Financials 13.1% Capital Goods 11.5%
Utilities 7.0% Utilities 6.9%
- --------------------------------------------------------------------------------------
</TABLE>
TOP TEN HOLDINGS*
<TABLE>
<CAPTION>
As of 8/31/99 As of 2/28/99
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
JDS Uniphase Corp. 4.1% Network Associates, Inc. 2.3%
Solectron Corp. 3.0% America Online Inc. 2.2%
SCI Systems Inc. 2.3% Ascend Communications, Inc. 1.9%
ASM Lithography Holdings N.V. 2.1% JDS Uniphase Corp. 1.7%
Maxim Integrated Productions, Inc. 1.8% Cadence Design Systems, Inc. 1.6%
America OnLine Inc. 1.8% Autodesk, Inc. 1.5%
Clarify, Inc. 1.7% Solectron Corp. 1.4%
BMC Software, Inc. 1.6% Mettler Toledo International Inc. 1.4%
Mettler Toledo International Inc. 1.6% Zions Bancorp 1.4%
Vitesse Semiconductor Corp. 1.6% Maytag Corp. 1.4%
- --------------------------------------------------------------------------------------
</TABLE>
In technology, we found values among software and semiconductor companies
that we believed had become cheap as investors shied away due to Y2K fears. As
fears subsided, some of those stocks appreciated. We may take advantage of this
appreciation and reduce our holdings in this sector as we move through the
fourth quarter. Large technology names held during the period include JDS
Uniphase Corp. (4.1%), a maker of optical components. We also added to our
energy holdings during the period, taking advantage of increasing oil prices.
Fund holdings in this sector included oil service companies such as Ensco
International, Inc. (1.4%).
* Weightings represent percentages of portfolio assets as of the dates
indicated. The Fund's portfolio is actively managed and its composition will
vary over time.
7
<PAGE>
ANNUAL REPORT
(SIDEBAR)
PAINEWEBBER GROWTH FUND
PROFILE
as of August 31, 1999
INVESTMENT GOAL:
Long-term capital appreciation
PORTFOLIO MANAGER:
Ellen R. Harris, Mitchell Hutchins Asset Management Inc.
COMMENCEMENT:
March 18, 1985 (Class A); July 1, 1991 (Class B); July 2, 1992 (Class C);
August 26, 1991 (Class Y)
DIVIDEND PAYMENTS:
annually
(END SIDEBAR)
PAINEWEBBER GROWTH FUND
- ------------------------------------------------------------------------------
HIGHLIGHTS
The Fund uses a proprietary quantitative model, which helps point us to what we
should and should not own, and provides a shopping list for us. We take that
shopping list and conduct fundamental analysis on the most attractive
candidates. The Fund seeks to invest in companies that are capable of sustained
or accelerating growth of at least 10% a year in each of the next three years.
The Fund turned in a solid performance for the fiscal year ended August 31,
1999, but nonetheless slightly lagged its peers. Our model excluded basic
industries such as paper, chemicals and automakers, where consensus estimates
fell below 10% in some of the out years. The Fund lagged its peers when those
companies outperformed.
CHARACTERISTICS*
<TABLE>
<CAPTION>
8/31/99 2/28/99
- ------------------------------------------------------------------------------
<S> <C> <C>
Total Net Assets ($mm) $450.7 $429.5
Price/Earnings Ratio** 29.9x 29.0x
Beta(1) 1.1 1.1
Number of Securities 120 112
Stocks 89.7% 94.7%
Cash & Cash Equivalents 10.3% 5.3%
- ------------------------------------------------------------------------------
</TABLE>
** Based on projected fiscal year earnings from August 31, 1999 to August 31,
2000
We are overweighted in three key areas: consumer cyclicals, technology and
telecommunications--what we call utilities. These three broad sectors are where
we expect to see continued growth. Within each of these sectors we are very
selective, applying our fundamental analysis to determine what we want to own
and how much we want to own. We seek to invest in companies that we consider to
be "best in class"; that is, good products or services with good growth
potential, excellent managements and strong financials.
TOP FIVE SECTORS*
<TABLE>
<CAPTION>
As of 8/31/99 As of 2/28/99
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consumer Cyclicals 30.7% Consumer Cyclicals 37.6%
Technology 28.8% Technology 23.1%
Financials 15.7% Healthcare 10.2%
Utilities (Telecom) 9.0% Financials 8.0%
Healthcare 4.5% Utilities (Telecom) 5.3%
- --------------------------------------------------------------------------------------
</TABLE>
* Weightings represent percentages of portfolio assets as of the dates
indicated. The Fund's portfolio is actively managed and its composition will
vary over time.
(1) Beta is a measure of a stock portfolio's risk relative to the overall
market, as measured by the S&P 500 Index. The market has a Beta of 1.
If a portfolio has a Beta greater than 1, it is riskier than the market;
if it has a Beta less than 1, it is less risky than the market.
8
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND, ANNUAL REPORT
PAINEWEBBER MID CAP FUND, PAINEWEBBER GROWTH FUND
Our top ten holdings have not changed very much in the past year. Cisco
Systems, Inc. (2.7%) has been a top-ten holding for more than five years. Cisco
has consistently grown its earnings about 30% a year. The company's management
always looks forward. Five years ago they described themselves as "the
networking company." Today they call themselves "the worldwide leader in
networking for the Internet." Management has set a clear strategy and pursued it
through internal development and well chosen acquisitions, making adjustments to
their business as they see opportunities expand.
TOP TEN HOLDINGS*
<TABLE>
<CAPTION>
As of 8/31/99 As of 2/28/99
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dell Computer Corp. 3.0% Dell Computer Corp. 2.9%
Cisco Systems, Inc. 2.7% Cisco Systems, Inc. 2.8%
MCI WorldCom, Inc. 2.4% MCI WorldCom, Inc. 2.8%
EMC Corp. 2.2% Time Warner, Inc. 2.7%
Tyco International Ltd. 2.1% TeleCommunications, Inc. 2.7%
Time Warner, Inc. 2.0% EMC Corp. 2.1%
Outdoor Systems, Inc. 2.0% Watson Pharmaceuticals, Inc. 2.0%
AT&T Corp. 1.9% Home Depot, Inc. 1.9%
Home Depot, Inc. 1.9% Clear Channel Communications 1.9%
JDS Uniphase Corp. 1.9% America Online Inc. 1.9%
- --------------------------------------------------------------------------------------
</TABLE>
With Y2K coming up, Cisco could experience a slight slowdown. A dilemma
portfolio managers face is whether to sell the stock in anticipation of a price
decline because of Y2K worries and try and buy it back later, or sit tight with
it and accept that there will be volatility in the stock price. What if
technology booms in the first half of 2000 and we cannot buy it back? We have
decided to hold companies like Cisco, Dell and Sun Microsystems, because we
really do not know what investors will do over the next 90 days. But we do
believe that six to nine months from now we will be very happy to own all of
these companies.
In a period of relatively low interest rates, such as we have seen in the
past year, high-growth companies tend to have relatively high price-earnings
ratios. Small changes in perception about interest rates can lead to stock price
volatility. Because of the environment, we have become less concerned about
volatility and are striving to make sure we are on target with our earnings
growth rates, since this is what is most important in the long run. The Fund
holds companies whose earnings growth rates are about 1.6 times that of the S&P
500 and whose multiples are about 1.2 times that of the S&P 500.
* Weightings represent percentages of portfolio assets as of the dates
indicated. The Fund's portfolio is actively managed and its composition will
vary over time.
9
<PAGE>
ANNUAL REPORT
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 REVIEW on PaineWebber Growth and Income Fund, Growth Fund or
Mid Cap Fund, or another fund in the PaineWebber Family of Funds,(2) please
contact your Financial Advisor.
Sincerely,
/s/ Margo Alexander
MARGO ALEXANDER
Chairman and
Chief Executive Officer
Mitchell Hutchins
Asset Management Inc.
/s/ Christopher G. Altschul
CHRISTOPHER G. ALTSCHUL
Portfolio Manager/
Research Analyst
PaineWebber Mid Cap Fund
/s/ Brian M. Storms
BRIAN M. STORMS
President and
Chief Operating Officer
Mitchell Hutchins
Asset Management Inc.
/s/ Ellen R. Harris
ELLEN R. HARRIS
Portfolio Manager
PaineWebber Growth Fund
/s/ Mark A. Tincher
MARK A. TINCHER
Managing Director and
Chief Investment Officer - Equities
Portfolio Manager, PaineWebber Growth and
Income Fund and PaineWebber Mid Cap Fund
/s/ Antony J. Scott
ANTONY J. SCOTT
Portfolio Manager/Research Analyst
PaineWebber Mid Cap Fund
This letter is intended to assist shareholders in understanding how the funds
performed during the fiscal year ended August 31, 1999, and reflects our views
at the time of its writing. Of course, these views may change in response to
changing circumstances. We encourage you to consult your Financial Advisor
regarding your personal investment program.
(2) 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.
10
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN(1)
-------------------------------- ------------------------------
12 MONTHS 6 MONTHS
08/31/99 02/28/99 08/31/98 ENDED 08/31/99 ENDED 08/31/99
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Class A Shares $32.07 $31.16 $26.92 26.48% 2.92%
- ----------------------------------------------------------------------------------------------------------
Class B Shares 31.72 30.94 26.77 25.51 2.52
- ----------------------------------------------------------------------------------------------------------
Class C Shares 31.78 30.99 26.82 25.49 2.55
- ----------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------
1998 29.29 32.46 1.7755 0.1707 17.97
- ------------------------------------------------------------------------------------------------------------
01/01/99-08/31/99 32.46 32.07 -- -- (1.20)
- ------------------------------------------------------------------------------------------------------------
Totals: $ 14.0204 $ 6.6197
- ------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/99: 619.07%
- ------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------
1998 29.20 32.26 1.7755 -- 17.02
- ------------------------------------------------------------------------------------------------------------
01/01/99-08/31/99 32.26 31.72 -- -- (1.67)
- ------------------------------------------------------------------------------------------------------------
Totals: $10.2016 $ 0.5429
- ------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/99: 167.40%
- ------------------------------------------------------------------------------------------------------------
</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. Total investment return for periods of
less than one year has not been annualized.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost.
11
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND
PERFORMANCE RESULTS (UNAUDITED) (CONCLUDED)
PERFORMANCE SUMMARY CLASS C SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------ CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
07/02/92-12/31/92 $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
- --------------------------------------------------------------------------------------------------------
1998 29.24 32.32 1.7755 -- 17.06
- --------------------------------------------------------------------------------------------------------
01/01/99-08/31/99 32.32 31.78 -- -- (1.67)
- --------------------------------------------------------------------------------------------------------
Totals: $10.2172 $0.5051
- --------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/99: 141.34%
- --------------------------------------------------------------------------------------------------------
</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. Total investment return for periods of
less than one year has not been annualized.
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 year
ended August 31, 1999, and since inception, February 12, 1992 through
August 31, 1999, Class Y shares had a total return of 26.82% and 148.43%,
respectively. Class Y shares do not have initial or contingent deferred
sales charges or ongoing distribution or 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.
12
<PAGE>
PAINEWEBBER MID CAP FUND
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN(1)
-------------------------------- ------------------------------
12 MONTHS 6 MONTHS
08/31/99 02/28/99 08/31/98 ENDED 08/31/99 ENDED 08/31/99
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Class A Shares $10.67 $ 9.61 $ 7.97 43.38% 11.03%
- ----------------------------------------------------------------------------------------------------------
Class B Shares 10.59 9.59 7.99 41.95 10.43
- ----------------------------------------------------------------------------------------------------------
Class C Shares 9.57 8.66 7.26 42.17 10.51
- ----------------------------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS A SHARES
<CAPTION>
NET ASSET VALUE
------------------- CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
04/07/92-12/31/92 $ 9.55 $10.50 -- -- 9.95%
- ------------------------------------------------------------------------------------------------------------
1993 10.50 12.19 -- -- 16.10
- ------------------------------------------------------------------------------------------------------------
1994 12.19 11.98 $ 0.0433 -- (1.36)
- ------------------------------------------------------------------------------------------------------------
1995 11.98 14.67 0.7480 -- 28.79
- ------------------------------------------------------------------------------------------------------------
1996 14.67 14.92 2.3244 -- 17.87
- ------------------------------------------------------------------------------------------------------------
1997 14.92 13.55 3.4608 -- 15.14
- ------------------------------------------------------------------------------------------------------------
1998 13.55 10.34 4.5107 -- 11.81
- ------------------------------------------------------------------------------------------------------------
01/01/99-08/31/99 10.34 10.67 -- -- 3.19
- ------------------------------------------------------------------------------------------------------------
Total: $ 11.0872 $ 0.0000
- ------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/99: 153.91%
- ------------------------------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS B SHARES
<CAPTION>
NET ASSET VALUE
------------------- CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
04/07/92-12/31/92 $10.00 $10.93 -- -- 9.30%
- ------------------------------------------------------------------------------------------------------------
1993 10.93 12.59 -- -- 15.19
- ------------------------------------------------------------------------------------------------------------
1994 12.59 12.28 $ 0.0433 -- (2.03)
- ------------------------------------------------------------------------------------------------------------
1995 12.28 14.94 0.7480 -- 27.73
- ------------------------------------------------------------------------------------------------------------
1996 14.94 15.11 2.3244 -- 17.01
- ------------------------------------------------------------------------------------------------------------
1997 15.11 13.64 3.4608 -- 14.28
- ------------------------------------------------------------------------------------------------------------
1998 13.64 10.33 4.5107 -- 10.85
- ------------------------------------------------------------------------------------------------------------
01/01/99-08/31/99 10.33 10.59 -- -- 2.52
- ------------------------------------------------------------------------------------------------------------
Total: $11.0872 $ 0.0000
- ------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/99: 141.46%
- ------------------------------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS C SHARES
<CAPTION>
NET ASSET VALUE
------------------- CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/02/92-12/31/92 $ 8.89 $10.46 -- -- 17.66%
- ------------------------------------------------------------------------------------------------------------
1993 10.46 12.05 -- -- 15.20
- ------------------------------------------------------------------------------------------------------------
1994 12.05 11.75 $ 0.0433 -- (2.13)
- ------------------------------------------------------------------------------------------------------------
1995 11.75 14.26 0.7480 -- 27.82
- ------------------------------------------------------------------------------------------------------------
1996 14.26 14.31 2.3244 -- 16.98
- ------------------------------------------------------------------------------------------------------------
1997 14.31 12.74 3.4608 -- 14.39
- ------------------------------------------------------------------------------------------------------------
1998 12.74 9.33 4.5107 -- 10.82
- ------------------------------------------------------------------------------------------------------------
01/01/99-08/31/99 9.33 9.57 -- -- 2.57
- ------------------------------------------------------------------------------------------------------------
Total: $11.0872 $ 0.0000
- ------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/99: 158.01%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Figures assume reinvestment of all dividends and distributions, if any, at
net asset value on the payable dates and do not include sales charges; results
for each class would be lower if sales charges were included. Total investment
return for periods of less than one year has not been annualized.
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 year
ended August 31, 1999, and from March 17, 1998 (commencement of issuance)
through August 31, 1999, Class Y Shares had a total return of 43.77% and
5.21%, respectively. Class Y Shares do not have initial or contingent
deferred sales charges or ongoing distribution or 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.
13
<PAGE>
PAINEWEBBER GROWTH FUND
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN(1)
-------------------------------- ------------------------------
12 MONTHS 6 MONTHS
08/31/99 02/28/99 08/31/98 ENDED 08/31/99 ENDED 08/31/99
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Class A Shares $26.85 $25.74 $20.08 44.97% 4.31%
- ----------------------------------------------------------------------------------------------------------
Class B Shares 24.26 23.35 18.44 43.75 3.90
- ----------------------------------------------------------------------------------------------------------
Class C Shares 24.56 23.64 18.65 43.74 3.89
- ----------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------
1998 21.24 25.85 2.0057 -- 31.95
- ------------------------------------------------------------------------------------------------------------
01/01/99-08/31/99 25.85 26.85 -- -- 3.87
- ------------------------------------------------------------------------------------------------------------
Totals: $ 18.4862 $ 0.5872
- ------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/99: 688.80%
- ------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------
1998 19.62 23.48 2.0057 -- 30.76
- ------------------------------------------------------------------------------------------------------------
01/01/99-08/31/99 23.48 24.26 -- -- 3.32
- ------------------------------------------------------------------------------------------------------------
Totals: $ 15.0602 $ 0.0037
- ------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/99: 214.69%
- ------------------------------------------------------------------------------------------------------------
</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. Total investment return for periods of
less than one year has not been annualized.
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.
14
<PAGE>
PAINEWEBBER GROWTH FUND
PERFORMANCE RESULTS (UNAUDITED) (CONCLUDED)
PERFORMANCE SUMMARY CLASS C SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------ CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
07/02/92-12/31/92 $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
- --------------------------------------------------------------------------------------------------------
1998 19.83 23.77 2.0057 -- 30.84
- --------------------------------------------------------------------------------------------------------
01/01/99-08/31/99 23.77 24.56 -- -- 3.32
- --------------------------------------------------------------------------------------------------------
Totals: $ 14.4599 $0.0000
- --------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/99: 176.29%
- --------------------------------------------------------------------------------------------------------
</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. Total investment return for periods of
less than one year has not been annualized.
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 year
ended August 31, 1999 and since inception, August 26, 1991 through
August 31, 1999, Class Y shares had a total return of 45.40% and 208.54%,
respectively. Class Y shares do not have initial or contingent deferred
sales charges or ongoing distribution or 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.
15
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 1999
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------ --------------
<C> <S> <C>
COMMON STOCKS--89.84%
AIRLINES--0.67%
183,600 Delta Air Lines, Inc.............................. $ 9,329,175
--------------
ALCOHOL--0.42%
76,000 Anheuser-Busch Companies, Inc..................... 5,852,000
--------------
APPAREL, RETAIL--1.46%
700,000 TJX Companies, Inc................................ 20,212,500
--------------
APPAREL, TEXTILES--0.68%
151,702 Tommy Hilfiger Corp.*............................. 5,148,387
176,000 Westpoint Stevens Inc............................. 4,224,000
--------------
9,372,387
--------------
BANKS--4.64%
560,109 Bank of New York Co. Inc.......................... 20,023,897
298,700 The Chase Manhattan Corp.......................... 24,997,456
573,600 Mellon Bank Corp.................................. 19,143,900
--------------
64,165,253
--------------
BEVERAGES & TOBACCO--0.36%
261,000 Pepsi Bottling Group Inc.......................... 4,942,688
--------------
BROADCASTING & PUBLISHING--0.27%
140,000 Infinity Broadcasting Corp.*...................... 3,788,750
--------------
CHEMICALS--0.52%
63,569 Dow Chemical Co................................... 7,223,028
--------------
COMPUTER HARDWARE--6.41%
300,000 Apple Computer, Inc.*............................. 19,575,000
360,000 Cisco Systems, Inc.*.............................. 24,412,500
389,000 Dell Computer Corp.*.............................. 18,988,062
206,000 IBM Corp.......................................... 25,659,875
--------------
88,635,437
--------------
COMPUTER SOFTWARE--4.74%
238,300 Autodesk, Inc..................................... 5,480,900
75,000 BMC Software, Inc.*............................... 4,035,938
150,000 Compuware Corp.*.................................. 4,528,125
264,425 Microsoft Corp.*.................................. 24,475,839
260,000 Sterling Software Inc.*........................... 5,232,500
506,000 Unisys Corp.*..................................... 21,758,000
--------------
65,511,302
--------------
CONSTRUCTION, REAL PROPERTY--0.32%
161,000 Lafarge Corp...................................... 4,427,500
--------------
CONSUMER DURABLES--0.56%
123,700 Maytag Corp....................................... 7,746,713
--------------
DEFENSE/AEROSPACE--1.36%
306,200 Allied-Signal, Inc................................ 18,754,750
--------------
DIVERSIFIED RETAIL--3.82%
399,250 Dayton Hudson Corp................................ 23,156,500
412,300 Family Dollar Stores Inc.......................... 8,117,156
327,500 Federated Department Stores, Inc.*................ 15,065,000
146,850 Wal Mart Stores, Inc.............................. 6,507,291
--------------
52,845,947
--------------
DRUGS & MEDICINE--5.35%
412,600 Amerisource Health Corp.*......................... 10,650,237
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------ --------------
<C> <S> <C>
DRUGS & MEDICINE--(CONCLUDED)
277,000 Biogen Inc.*...................................... $ 21,259,750
21,200 Elan Corp. PLC, ADR*(1)........................... 679,725
141,000 Pharmacia & Upjohn, Inc........................... 7,367,250
268,000 Schering-Plough Corp.............................. 14,086,750
300,000 Warner Lambert Co................................. 19,875,000
--------------
73,918,712
--------------
ELECTRIC UTILITIES--2.29%
170,000 Consolidated Edison Co. of
New York, Inc................................... 7,480,000
123,600 Duke Energy Corp.................................. 7,107,000
221,000 Energy East Corp.................................. 5,525,000
197,200 Unicom Corp....................................... 7,616,850
166,500 Utilicorp United Inc.............................. 3,860,719
--------------
31,589,569
--------------
ELECTRICAL EQUIPMENT--0.67%
206,000 Jabil Circuit Inc.*............................... 9,231,375
--------------
ENERGY RESERVES & PRODUCTION--3.32%
107,000 Atlantic Richfield Co............................. 9,409,313
150,000 Mobil Corp........................................ 15,356,250
341,500 Royal Dutch Petroleum Co. ADR..................... 21,130,312
--------------
45,895,875
--------------
ENTERTAINMENT--0.80%
263,000 Viacom, Inc., Class B*............................ 11,062,438
--------------
FINANCIAL SERVICES--1.99%
204,396 Associates First Capital Corp..................... 7,013,338
84,800 General Electric Co............................... 9,524,100
150,000 Marsh & McLennan Cos., Inc........................ 10,921,875
--------------
27,459,313
--------------
FOOD RETAIL--1.44%
295,000 Food Lion Inc..................................... 2,332,344
758,800 Kroger Co.*....................................... 17,547,250
--------------
19,879,594
--------------
FOREST PRODUCTS, PAPER--3.02%
114,046 Champion International Corp....................... 6,272,530
350,000 Fort James Corp................................... 11,287,500
214,000 Georgia-Pacific Corp.............................. 8,854,250
147,500 Georgia Pacific Corp. PEPS........................ 6,692,813
155,000 Weyerhaeuser Co................................... 8,718,750
--------------
41,825,843
--------------
GAS UTILITY--0.80%
187,500 Columbia Energy Group............................. 11,074,219
--------------
HOUSEHOLD PRODUCTS--0.70%
220,200 Avon Products, Inc................................ 9,661,275
--------------
INDUSTRIAL PARTS--1.38%
117,000 American Standard Companies Inc.*................. 4,797,000
358,700 Mettler-Toledo International Inc.*................ 9,550,388
56,411 SPX Corp.*........................................ 4,780,832
--------------
19,128,220
--------------
</TABLE>
16
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------ --------------
<C> <S> <C>
COMMON STOCKS--(CONCLUDED)
INDUSTRIAL SERVICES/SUPPLIES--2.40%
107,635 Delphi Automotive Systems Corp.................... $ 2,018,156
308,050 Tyco International Ltd............................ 31,209,316
--------------
33,227,472
--------------
INFORMATION & COMPUTER SERVICES--0.97%
100,000 Computer Sciences Corp.*.......................... 6,918,750
147,450 Valassis Communications Inc.*..................... 6,450,937
--------------
13,369,687
--------------
LEISURE--1.27%
114,955 Eastman Kodak Co.................................. 8,442,008
372,360 Hasbro, Inc....................................... 9,099,547
--------------
17,541,555
--------------
LIFE INSURANCE--2.29%
155,300 American General Corp............................. 11,026,300
151,909 Equitable Co., Inc................................ 9,380,381
130,000 Lincoln National Corp............................. 6,093,750
175,000 Protective Life Corp.............................. 5,206,250
--------------
31,706,681
--------------
LONG DISTANCE & PHONE COMPANIES--7.36%
393,750 AT&T Corp......................................... 17,718,750
400,600 BellSouth Corp.................................... 18,127,150
259,700 Century Telephone Enterprises, Inc................ 10,209,456
250,000 GTE Corp.......................................... 17,156,250
223,000 MCI WorldCom, Inc.*............................... 16,892,250
450,000 SBC Communications, Inc........................... 21,600,000
--------------
101,703,856
--------------
MANUFACTURING--GENERAL--3.81%
305,800 Ingersoll Rand Co................................. 19,456,525
501,400 United Technologies Corp.......................... 33,155,075
--------------
52,611,600
--------------
MEDIA--1.06%
450,000 Comcast Corp., Class A............................ 14,681,250
--------------
MEDICAL PRODUCTS--1.44%
266,300 Boston Scientific Corp.*.......................... 9,037,556
300,000 St. Jude Medical, Inc.*........................... 10,875,000
--------------
19,912,556
--------------
MEDICAL PROVIDERS--0.53%
100,000 Wellpoint Health Networks, Inc.*.................. 7,287,500
--------------
MINING & METALS--1.10%
151,702 Alcoa, Inc........................................ 9,794,260
118,200 Martin Marietta Materials Inc..................... 5,392,875
--------------
15,187,135
--------------
MOTOR VEHICLES--2.54%
142,600 Borg Warner Automotive, Inc....................... 6,755,675
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------ --------------
<C> <S> <C>
MOTOR VEHICLES--(CONCLUDED)
348,000 Ford Motor Co..................................... $ 18,139,500
154,000 General Motors Corp............................... 10,183,250
--------------
35,078,425
--------------
OIL REFINING--1.35%
276,011 Coastal Corp...................................... 11,954,726
213,900 USX-Marathon Group................................ 6,657,638
--------------
18,612,364
--------------
OTHER INSURANCE--2.51%
252,532 ACE Ltd........................................... 5,413,655
127,500 Ambac Financial Group Inc......................... 6,733,594
145,000 American International Group, Inc................. 13,439,687
255,000 Travelers Property Casualty Corp.................. 9,052,500
--------------
34,639,436
--------------
PUBLISHING--1.15%
294,461 Knight Ridder, Inc................................ 15,882,490
--------------
RESTAURANTS--0.88%
230,000 Brinker International Inc.*....................... 5,520,000
225,000 Outback Steakhouse Inc.*.......................... 6,665,625
--------------
12,185,625
--------------
SECURITIES & ASSET MANAGEMENT--0.93%
150,000 Morgan Stanley Dean Witter Co..................... 12,871,875
--------------
SEMICONDUCTOR--5.99%
350,000 Applied Materials, Inc.*.......................... 24,871,875
189,810 Atmel Corp.*...................................... 7,461,905
75,200 Fairchild Semiconductor
International, Inc.*............................ 2,039,800
210,500 Intel Corp........................................ 17,300,469
170,000 JDS Uniphase Corp.*............................... 18,030,625
192,000 Vitesse Semiconductor Corp.*...................... 13,056,000
--------------
82,760,674
--------------
SPECIALTY RETAIL--2.78%
225,000 Home Depot, Inc................................... 13,753,125
625,600 Office Depot Inc.*................................ 6,529,700
260,550 Staples Inc.*..................................... 5,666,962
247,000 Williams Sonoma Inc.*............................. 9,633,000
80,000 Zale Corp.*....................................... 2,775,000
--------------
38,357,787
--------------
THRIFT--0.47%
250,000 Greenpoint Financial Corp......................... 6,468,750
--------------
TOBACCO--1.02%
375,000 Philip Morris Co., Inc............................ 14,039,062
--------------
Total Common Stocks (cost--$929,292,693)......................... 1,241,659,643
--------------
</TABLE>
17
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- ---------------------- --------------- --------------
<C> <S> <C> <C> <C>
CONVERTIBLE BONDS--2.91%
COMPUTER HARDWARE--0.76%
$ 7,800 Nextel Communications Inc.#.................... 07/01/07 4.750% $ 10,510,500
--------------
FINANCIAL SERVICES--1.24%
16,100 Bell Atlantic Financial Services Inc.# ........ 09/15/05 4.250 17,106,250
--------------
LONG DISTANCE & PHONE COMPANIES--0.13%
1,900 Telefonos De Mexico SA......................... 06/15/04 4.250 1,847,750
--------------
SPECIALTY RETAIL--0.78%
4,000 Home Depot Inc................................. 10/01/01 3.250 10,730,000
--------------
40,194,500
Total Convertible Bonds (cost--$29,667,770)...............
--------------
SHORT TERM U.S. GOVERNMENT AGENCY OBLIGATIONS--6.15%
30,000 Federal Home Loan Bank Discount Notes.......... 09/03/99 4.980@ 29,991,700
4.950 to
55,000 Federal Home Loan Mortgage Discount Notes...... 09/03/99 to 09/17/99 5.080@ 54,955,133
--------------
84,946,833
Total Short Term U.S. Government Agency Obligations
(cost--$84,946,833).......................................
--------------
MONEY MARKET FUNDS--0.00%
2,654 Liquid Assets Portfolio (cost--$2,654)......... 2,654
--------------
REPURCHASE AGREEMENT--0.27%
3,795 Repurchase agreement dated 08/31/99 with SG
Warburg, collateralized by $3,327,000 U.S.
Treasury Bonds 7.625% due 11/15/22 (value--
$3,871,796); proceeds: $3,795,571
(cost--$3,795,000)........................... 09/01/99 5.420 3,795,000
--------------
1,370,598,630
Total Investments (cost--$1,047,704,950)--99.17%..........
11,425,829
Other assets in excess of liabilities--0.83%..............
--------------
Net Assets--100.00%....................................... $1,382,024,459
==============
</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.
@ Interest rate reflects yield to maturity at date of purchase.
ADR American Depositary Receipt.
PEPS Premium Equity Participating Securities.
(1) Security, or portion thereof, was on loan at August 31, 1999.
See accompanying notes to financial statements
18
<PAGE>
PAINEWEBBER MID CAP FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 1999
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
COMMON STOCKS--94.89%
AIRLINES--0.82%
20,000 UAL Corp.* ................... $ 1,296,250
------------
APPAREL, RETAIL--1.63%
44,000 Abercrombie and Fitch Co.*.... 1,534,500
25,000 Ross Stores Inc............... 1,040,625
------------
2,575,125
------------
APPAREL, TEXTILES--0.49%
30,000 Jones Apparel Group Inc.*..... 778,125
------------
BANKS--5.60%
52,500 Commerce Bancorp, Inc......... 2,257,500
20,000 First Security Corp........... 433,750
4,000 M & T Bank Corp.*............. 1,856,000
60,000 Unionbancal Corp.............. 2,302,500
24,000 Westamerica BanCorp........... 766,500
25,000 Zions Bancorporation.......... 1,243,750
------------
8,860,000
------------
BEVERAGES & TOBACCO--0.72%
60,000 Pepsi Bottling Group Inc...... 1,136,250
------------
BROADCASTING & PUBLISHING--1.89%
35,000 Amfm Inc.* (1)................ 1,723,750
46,500 Infinity Broadcasting Corp.*
(1)......................... 1,258,406
------------
2,982,156
------------
CHEMICALS--1.63%
60,000 Crompton & Knowles Corp....... 1,050,000
80,000 W.R. Grace & Co.*............. 1,530,000
------------
2,580,000
------------
COMPUTER-BUSINESS SERVICES--0.93%
3,000 Ebay Inc.*.................... 376,688
12,000 GoTo.com, Inc.*............... 435,000
2,000 Redback Networks Inc.*........ 215,000
3,000 Yahoo! Inc.*.................. 442,500
------------
1,469,188
------------
COMPUTER HARDWARE--1.40%
37,000 EMC Corp.*.................... 2,220,000
------------
COMPUTER SOFTWARE--7.45%
42,700 Autodesk, Inc................. 982,100
45,000 BMC Software, Inc.*........... 2,421,562
110,000 Cadence Design Systems
Inc.*....................... 1,498,750
60,000 Clarify, Inc.*................ 2,640,000
50,000 Compuware Corp.*.............. 1,509,375
10,000 Marimba Inc.* (1)............. 274,375
<CAPTION>
NUMBER OF
SHARES VALUE
-------- ------------
<C> <S> <C>
</TABLE>
COMPUTER SOFTWARE--(CONCLUDED)
<TABLE>
<C> <S> <C>
26,000 New Era of Networks Inc.*..... $ 435,500
6,000 Priceline.com Inc.* (1)....... 408,750
80,000 Sterling Software Inc.*....... 1,610,000
------------
11,780,412
------------
CONSUMER DURABLES--2.71%
30,000 Black & Decker Corp........... 1,578,750
40,000 Masco Corp.................... 1,132,500
25,000 Maytag Corp................... 1,565,625
------------
4,276,875
------------
DEFENSE/AEROSPACE--3.07%
35,000 General Dynamics Corp......... 2,205,000
20,000 Litton Industries Inc.*....... 1,280,000
25,000 TRW, Inc...................... 1,362,500
------------
4,847,500
------------
DIVERSIFIED RETAIL--0.75%
60,000 Family Dollar Stores Inc...... 1,181,250
------------
DRUGS & MEDICINE--0.97%
20,000 Biogen Inc.* (1).............. 1,535,000
------------
ELECTRIC UTILITIES--3.69%
80,000 Energy East Corp.............. 2,000,000
110,000 Minnesota Power & Light Co.... 1,959,375
100,000 Public Service Co. of New
Mexico...................... 1,881,250
------------
5,840,625
------------
ELECTRICAL EQUIPMENT--9.53%
40,000 DSP Communications, Inc.*..... 940,000
20,000 Gemstar Group Ltd.*........... 1,380,000
40,000 Jabil Circuit Inc.*........... 1,792,500
11,385 Lucent Technologies, Inc...... 729,352
70,000 SCI Systems Inc.* (1)......... 3,486,875
60,000 Solectron Corp.*.............. 4,695,000
30,000 Teradyne Inc.*................ 2,041,875
------------
15,065,602
------------
ENVIRONMENTAL SERVICES--0.81%
100,000 Allied Waste Industries
Inc.*....................... 1,275,000
------------
FINANCIAL SERVICES--2.42%
30,000 Comdisco Inc.................. 631,875
25,000 Marsh & McLennan
Companies, Inc.............. 1,820,312
50,000 Mutual Risk Management Ltd.
(1)......................... 1,375,000
------------
3,827,187
------------
</TABLE>
19
<PAGE>
PAINEWEBBER MID CAP FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
-------- ------------
<C> <S> <C>
</TABLE>
COMMON STOCKS--(CONTINUED)
<TABLE>
<C> <S> <C>
FOOD RETAIL--1.57%
200,000 Food Lion Inc. (1)............ $ 1,581,250
30,000 Keebler Foods Co.*............ 894,375
------------
2,475,625
------------
FOREST PRODUCTS, PAPER--0.64%
55,000 Louisiana Pacific Corp........ 1,017,500
------------
INDUSTRIAL PARTS--2.44%
60,000 Helix Technology Corp......... 1,695,000
75,500 PRI Automation Inc.* (1)...... 2,161,187
------------
3,856,187
------------
INDUSTRIAL SERVICES/SUPPLIES--0.71%
60,000 Delphi Automotive Systems
Corp........................ 1,125,000
------------
INFORMATION & COMPUTER SERVICES--4.48%
22,500 A.C. Nielson Corp.*........... 562,500
30,000 America Online Inc.*.......... 2,739,375
3,800 Ariba Inc..................... 528,200
9,000 Careinsite Inc................ 429,750
18,300 Computer Sciences Corp.*...... 1,266,131
50,775 Fiserv Inc.* (1).............. 1,564,505
------------
7,090,461
------------
LIFE INSURANCE--1.79%
25,000 Equitable Co., Inc............ 1,543,750
40,000 Reinsurance Group of
America, Inc................ 1,280,000
------------
2,823,750
------------
LONG DISTANCE & PHONE COMPANIES--0.65%
13,500 MCI WorldCom, Inc.*........... 1,022,625
------------
MANUFACTURING-GENERAL--1.52%
90,000 Mettler Toledo International
Inc.*....................... 2,396,250
------------
MANUFACTURING-HIGH TECHNOLOGY--2.00%
50,000 ASM Lithography Holdings
N.V.*....................... 3,156,250
------------
MEDIA--3.72%
20,600 Adelphia Communications Corp.*
(1)......................... 1,277,200
25,000 Cablevision Systems Corp.*
(1)......................... 1,750,000
62,400 Comcast Corp. Class A......... 2,035,800
60,000 Penton Media Inc.............. 825,000
------------
5,888,000
------------
MINING & METALS--1.26%
15,000 Ball Corp..................... 674,063
29,000 Martin Marietta Materials
Inc......................... 1,323,125
------------
1,997,188
------------
<CAPTION>
NUMBER OF
SHARES VALUE
-------- ------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
MOTOR VEHICLES--2.84%
20,000 Borg Warner
Automotive, Inc............. $ 947,500
20,000 Lear Corp.*................... 803,750
40,000 Navistar International
Corp.*...................... 1,945,000
40,000 Tower Automotive Inc.* (1).... 800,000
------------
4,496,250
------------
OIL REFINING--0.79%
40,000 USX-Marathon Group............ 1,245,000
------------
OIL SERVICES--3.30%
40,000 Cooper Cameron Corp.*......... 1,665,000
100,000 Ensco International Inc....... 2,131,250
40,000 Weatherford International,
Inc.* (1)................... 1,425,000
------------
5,221,250
------------
OTHER INSURANCE--1.07%
32,000 Ambac Financial
Group, Inc.................. 1,690,000
------------
RESTAURANTS--1.38%
60,000 Bob Evans Farms Inc........... 1,222,500
40,000 Brinker International Inc.*... 960,000
------------
2,182,500
------------
SECURITIES & ASSET MANAGEMENT--1.83%
9,800 DLJ Direct Inc.* (1).......... 167,213
30,000 Lehman Brothers
Holdings, Inc............... 1,612,500
15,000 Merrill Lynch &
Company, Inc................ 1,119,375
------------
2,899,088
------------
SEMICONDUCTOR--11.49%
35,000 Atmel Corp.*.................. 1,375,938
76,500 Fairchild Semiconductor
International, Inc.*........ 2,075,062
60,000 JDS Uniphase Corp.* (1)....... 6,363,750
41,300 Maxim Integrated Productions
Inc.*....................... 2,780,006
41,800 MMC Networks Inc.*............ 1,290,575
35,000 Novellus Systems Inc.*........ 1,887,813
35,000 Vitesse Semiconductor Corp.*
(1)......................... 2,380,000
------------
18,153,144
------------
SPECIALTY RETAIL--2.40%
35,000 Bed, Bath & Beyond Inc.*...... 962,500
20,000 Lowe's Companies Inc.......... 905,000
85,000 Office Depot Inc.*............ 887,187
30,000 Zale Corp.*................... 1,040,625
------------
3,795,312
------------
</TABLE>
20
<PAGE>
PAINEWEBBER MID CAP FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
-------- ------------
<C> <S> <C>
</TABLE>
COMMON STOCKS--(CONCLUDED)
<TABLE>
<C> <S> <C>
TELECOMMUNICATIONS--2.50%
65,000 Advanced Fibre
Communications*............. $ 1,060,312
3,500 Copper Mountain Networks Inc.*
(1)......................... 409,500
3,750 Covad Communications Group
Inc.*....................... 172,969
32,749 Global Crossing Ltd.* (1)..... 847,380
25,000 Global Telesystems Group Inc.*
(1)......................... 807,813
<CAPTION>
NUMBER OF
SHARES VALUE
-------- ------------
<C> <S> <C>
</TABLE>
TELECOMMUNICATIONS--(CONCLUDED)
<TABLE>
<C> <S> <C>
10,000 Northpoint Communications
Holding*.................... $ 264,375
10,000 Rhythms Netconnections
Inc.*....................... 382,500
------------
3,944,849
------------
Total Common Stocks (cost--$120,241,104)....... 150,002,774
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST
AMOUNT (000) MATURITY DATE RATES VALUE
-------- ------------ ------------ ------------
<C> <S> <C> <C> <C>
SHORT TERM U.S. GOVERNMENT AGENCY OBLIGATION--2.52%
$ 4,000 Federal National Mortgage
Association Discount Notes
(cost--$3,985,296).......... 09/27/99 5.090%@ 3,985,296
------------
Total Investments
(cost--$124,226,400)--97.41%................. 153,988,070
Other assets in excess of liabilities--2.59%... 4,098,701
------------
Net Assets--100.00%............................ $158,086,771
============
</TABLE>
- -----------------
* Non-Income producing security.
@ Interest rate reflects yield to maturity at date of purchase.
(1) Security, or portion thereof, was on loan at August 31, 1999.
See accompanying notes to financial statements
21
<PAGE>
PAINEWEBBER GROWTH FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 1999
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCKS--91.01%
AIRLINES--0.72%
80,000 Continental Airlines Inc.*..................................... $ 3,265,000
------------
ALCOHOL--0.60%
35,000 Anheuser-Busch Companies, Inc.................................. 2,695,000
------------
APPAREL, RETAIL--0.97%
63,000 Abercrombie and Fitch Co.* (1)................................. 2,197,125
76,000 TJX Companies, Inc............................................. 2,194,500
------------
4,391,625
------------
APPAREL, TEXTILES--0.77%
75,000 Nike Inc....................................................... 3,468,750
------------
BANKS--1.35%
35,000 Bank of New York, Inc.......................................... 1,251,250
40,000 The Chase Manhattan Corp....................................... 3,347,500
55,000 Firstar Corp................................................... 1,474,687
------------
6,073,437
------------
BEVERAGES & TOBACCO--0.76%
181,500 Pepsi Bottling Group, Inc...................................... 3,437,156
------------
BROADCASTING & PUBLISHING--0.61%
55,743 Amfm Inc.*(1).................................................. 2,745,343
------------
CABLE--0.27%
44,000 Insight Communications Inc..................................... 1,199,000
------------
CHEMICALS--0.68%
45,000 Hoechst AG, ADR................................................ 1,892,813
20,000 Sealed Air Corp................................................ 1,175,000
------------
3,067,813
------------
COMPUTER-BUSINESS SERVICES--0.65%
30,000 CMG Information Services Inc.*(1).............................. 2,518,125
6,000 Priceline.com Inc.* (1)........................................ 408,750
------------
2,926,875
------------
COMPUTER HARDWARE--11.28%
54,000 Apple Computer, Inc.* (1)...................................... 3,523,500
180,000 Cisco Systems, Inc.*........................................... 12,206,250
280,000 Dell Computer Corp.*........................................... 13,667,500
166,000 EMC Corp.* (1)................................................. 9,960,000
20,000 IBM Corp....................................................... 2,491,250
35,000 Network Appliance, Inc.*....................................... 2,299,063
84,000 Sun Microsystems Inc.*......................................... 6,678,000
------------
50,825,563
------------
COMPUTER SOFTWARE--3.25%
50,000 Autodesk, Inc. (1)............................................. 1,150,000
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ------------
<C> <S> <C>
</TABLE>
COMPUTER SOFTWARE--(CONCLUDED)
<TABLE>
<C> <S> <C>
60,000 BMC Software, Inc.*............................................ $ 3,228,750
100,000 Cadence Design Systems, Inc.*.................................. 1,362,500
72,000 Compuware Corp.*............................................... 2,173,500
54,000 Microsoft Corp.*............................................... 4,998,375
90,000 Sterling Commerce Inc.* (1).................................... 1,721,250
------------
14,634,375
------------
CONSUMER DURABLES--0.80%
40,000 Avery Dennison Corp............................................ 2,195,000
50,000 Masco Corp..................................................... 1,415,625
------------
3,610,625
------------
DIVERSIFIED RETAIL--4.20%
80,000 Costco Wholesale Corp.*........................................ 5,980,000
50,000 Dayton Hudson Corp............................................. 2,900,000
50,000 Federated Department Stores, Inc.*............................. 2,300,000
40,000 Kohl's Corp.*.................................................. 2,850,000
110,000 Wal-Mart Stores, Inc........................................... 4,874,375
------------
18,904,375
------------
DRUGS & MEDICINE--3.37%
49,312 Cardinal Health, Inc........................................... 3,143,640
90,000 Elan Corp. PLC, ADR* (1)....................................... 2,885,625
7,000 Genetech Inc................................................... 1,149,750
65,000 Pharmacyclics Inc.*............................................ 1,836,250
80,000 Schering-Plough Corp........................................... 4,205,000
30,000 Warner Lambert Co.............................................. 1,987,500
------------
15,207,765
------------
ELECTRICAL EQUIPMENT--5.73%
37,000 Jabil Circuit Inc.*............................................ 1,658,062
17,000 KLA-Tencor Corp. *............................................. 1,067,813
110,000 Level 3 Communications Inc. (1)................................ 6,572,500
54,000 Lucent Technologies, Inc. (1).................................. 3,459,375
25,000 Motorola, Inc.................................................. 2,306,250
50,000 SCI Systems Inc.*.............................................. 2,490,625
70,000 Tellabs, Inc.*................................................. 4,169,375
60,000 Teradyne Inc.*................................................. 4,083,750
------------
25,807,750
------------
ENERGY RESERVES & PRODUCTION--0.45%
20,000 Mobil Corp..................................................... 2,047,500
------------
ENTERTAINMENT--5.72%
125,000 Carnival Corp.................................................. 5,585,937
200,000 Cinar Films Inc.*.............................................. 5,000,000
90,000 Fox Entertainment Group Inc.*.................................. 2,075,625
240,000 Liberty Media Group............................................ 7,680,000
</TABLE>
22
<PAGE>
PAINEWEBBER GROWTH FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ------------
<C> <S> <C>
</TABLE>
COMMON STOCKS--(CONTINUED)
ENTERTAINMENT--(CONCLUDED)
<TABLE>
<C> <S> <C>
130,000 Viacom Inc.*................................................... $ 5,468,125
------------
25,809,687
------------
ENVIRONMENTAL SERVICES--0.73%
303,300 Republic Services Inc.*........................................ 3,298,388
------------
FINANCIAL SERVICES--2.18%
80,000 Federal Home Loan Mortgage Corp................................ 4,120,000
50,000 Federal National Mortgage Association.......................... 3,106,250
105,000 MBNA Corp...................................................... 2,592,187
------------
9,818,437
------------
FOOD RETAIL--1.68%
126,000 Kroger Co.* (1)................................................ 2,913,750
100,000 Safeway, Inc.*................................................. 4,656,250
------------
7,570,000
------------
FOREST PRODUCTS, PAPER--0.43%
105,000 Louisiana Pacific Corp......................................... 1,942,500
------------
HOTELS--0.25%
125,000 Extended Stay America Inc.*.................................... 1,125,000
------------
HOUSEHOLD PRODUCTS--0.24%
24,000 Estee Lauder, Inc. (1)......................................... 1,102,500
------------
INDUSTRIAL PARTS--0.53%
90,000 Mettler Toledo International Inc.*............................. 2,396,250
------------
INDUSTRIAL SERVICES/SUPPLIES--2.52%
50,500 Cendant Corp.* (1)............................................. 905,844
200,000 Staffing Resources, Inc.* (2).................................. 700,000
96,266 Tyco International Ltd......................................... 9,752,949
------------
11,358,793
------------
INFORMATION & COMPUTER SERVICES--7.71%
85,000 America Online Inc.*........................................... 7,761,562
30,000 Computer Sciences Corp.*....................................... 2,075,625
15,000 Media Metrix Inc............................................... 719,531
40,000 Omnicom Group Inc.............................................. 3,015,000
281,250 Outdoor Systems Inc.* (1)...................................... 9,087,891
150,000 Paychex, Inc. (1).............................................. 4,415,625
73,200 Valassis Communications Inc.*.................................. 3,202,500
100,000 Young & Rubicam Inc.*.......................................... 4,462,500
------------
34,740,234
------------
LIFE INSURANCE--1.94%
30,000 American General Corp.......................................... 2,130,000
55,000 Equitable Co., Inc............................................. 3,396,250
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ------------
<C> <S> <C>
</TABLE>
LIFE INSURANCE--(CONCLUDED)
<TABLE>
<C> <S> <C>
32,000 Hartford Life Inc.............................................. $ 1,390,000
50,000 Nationwide Financial Services Inc.*............................ 1,825,000
------------
8,741,250
------------
LONG DISTANCE & PHONE COMPANIES--5.40%
192,695 AT&T Corp. (1)................................................. 8,671,275
35,000 France Telecom, ADR............................................ 2,747,500
145,000 MCI WorldCom, Inc.*............................................ 10,983,750
40,000 SBC Communications, Inc........................................ 1,920,000
------------
24,322,525
------------
MANUFACTURING-GENERAL--1.52%
45,000 Ingersoll Rand Co.............................................. 2,863,125
60,000 United Technologies Corp....................................... 3,967,500
------------
6,830,625
------------
MEDIA--6.10%
25,000 Cablevision Systems Corp.* (1)................................. 1,750,000
60,000 Clear Channel Communications* (1).............................. 4,203,750
160,000 Comcast Corp................................................... 5,220,000
40,000 MediaOne Group, Inc.* (1)...................................... 2,630,000
155,000 Time Warner, Inc............................................... 9,193,437
100,000 USA Networks, Inc.*............................................ 4,487,500
------------
27,484,687
------------
MEDICAL PRODUCTS--0.93%
36,500 Boston Scientific Corp.*....................................... 1,238,719
50,000 Guidant Corp................................................... 2,934,375
------------
4,173,094
------------
OIL REFINING--0.49%
105,000 Repsol S.A., ADR............................................... 2,191,875
------------
OTHER INSURANCE--1.32%
35,000 Ambac Financial Group Inc...................................... 1,848,437
44,187 American International Group Inc............................... 4,095,583
------------
5,944,020
------------
PUBLISHING--0.73%
125,000 News Corp. Ltd., ADR (1)....................................... 3,304,688
------------
RESTAURANTS--0.46%
50,000 McDonalds Corp................................................. 2,068,750
------------
SECURITIES & ASSET MANAGEMENT--0.44%
50,000 Charles Schwab Corp............................................ 1,975,000
------------
SEMICONDUCTOR--4.63%
30,000 Altera Corp.*.................................................. 1,263,750
</TABLE>
23
<PAGE>
PAINEWEBBER GROWTH FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ------------
<C> <S> <C>
</TABLE>
COMMON STOCKS--(CONCLUDED)
SEMICONDUCTOR--(CONCLUDED)
<TABLE>
<C> <S> <C>
30,000 Applied Materials, Inc.*....................................... $ 2,131,875
20,000 Broadcom Corp.................................................. 2,575,000
67,500 Fairchild Semiconductor
International, Inc.*......................................... 1,830,937
30,000 Intel Corp..................................................... 2,465,625
80,000 JDS Uniphase Corp.* (1)........................................ 8,485,000
30,000 Xilinx Inc.*................................................... 2,098,125
------------
20,850,312
------------
SPECIALTY RETAIL--7.40%
300,000 Autonation Inc. (1)............................................ 3,881,250
140,000 Home Depot, Inc................................................ 8,557,500
58,500 Lowe's Companies, Inc.......................................... 2,647,125
62,500 99 Cents Only Stores*.......................................... 2,250,000
52,500 Office Depot Inc.*............................................. 547,969
270,000 Staples Inc.*.................................................. 5,872,500
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ------------
<C> <S> <C>
</TABLE>
SPECIALTY RETAIL--(CONCLUDED)
<TABLE>
<C> <S> <C>
120,000 Tiffany & Co................................................... $ 6,345,000
140,000 Walgreen Co.................................................... 3,246,250
------------
33,347,594
------------
TELECOMMUNICATION--0.87%
13,800 Covad Communications Group Inc.* (1)........................... 636,525
67,135 Global Crossing Ltd.* (1)...................................... 1,737,118
10,800 Global Telesystems Group Inc. (1).............................. 348,975
25,700 Northpoint Communications Holding*............................. 679,444
13,800 Rhythms Netconnections Inc..................................... 527,850
------------
3,929,912
------------
WIRELESS TELECOMMUNICATIONS--0.33%
7,500 Vodafone Group PLC............................................. 1,504,219
------------
Total Common Stocks (cost--$233,736,920)..................................... 410,138,292
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- ---------- -------- ------------
<C> <S> <C> <C> <C>
SHORT TERM U.S. GOVERNMENT AGENCY OBLIGATIONS--7.75%
$15,000 Federal Home Loan Bank Discount Notes........ 09/15/99 5.080%@ 14,970,367
20,000 Federal National Mortgage Association
Discount Notes............................. 09/24/99 5.090@ 19,934,961
------------
Total Short Term U.S. Government Agency Obligations
(cost--$34,905,328).................................. 34,905,328
------------
REPURCHASE AGREEMENT--2.65%
11,962 Repurchase Agreement dated 08/31/99 with SG
Warburg, collateralized by $9,636,000 U.S.
Treasury Bonds, 8.875% due 02/15/19
(value--$12,201,585);
proceeds: $11,963,801
(cost--$11,962,000)........................ 09/01/99 5.420 11,962,000
------------
Total Investments (cost--$280,604,248)--101.41%.............................. 457,005,620
Liabilities in excess of other assets--(1.41)%............................... (6,347,767)
------------
Net Assets--100.00%.......................................................... $450,657,853
============
</TABLE>
- -------------
* Non-Income producing security.
@ Interest rate reflects yield to maturity at date of purchase.
ADR American Depositary Receipt.
(1) Security, or portion thereof, was on loan at August 31, 1999.
(2) Illiquid securities representing 0.16% of net assets.
See accompanying notes to financial statements
24
<PAGE>
PAINEWEBBER
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999
<TABLE>
<CAPTION>
GROWTH
AND INCOME MID CAP GROWTH
FUND FUND FUND
-------------- ------------ ------------
<S> <C> <C> <C>
ASSETS
Investments in securities, at value (cost--$1,047,704,950,
$124,226,400, and $280,604,248, respectively)............. $1,370,598,630 $153,988,070 $457,005,620
Investments of cash collateral received for securities
loaned, at value (cost--$0, $23,412,676, and $53,437,152,
respectively)............................................. -- 23,412,676 53,437,152
Cash........................................................ 7,960,431 4,070,186 677
Receivable for investments sold............................. 13,535,459 1,919,620 10,874,184
Receivable for shares of beneficial interest sold........... 210,035 23,580 197,336
Dividends and interest receivable........................... 2,348,255 93,504 179,348
Other assets................................................ 228,949 11,341 111,004
-------------- ------------ ------------
Total assets................................................ 1,394,881,759 183,518,977 521,805,321
-------------- ------------ ------------
LIABILITIES
Payable for investments purchased........................... 8,131,101 1,046,088 16,594,153
Collateral for securities loaned............................ -- 23,412,676 53,437,152
Payable to affiliates....................................... 1,440,952 202,414 463,423
Payable for shares of beneficial interest repurchased....... 3,268,434 598,165 501,919
Accrued expenses and other liabilities...................... 16,813 172,863 150,821
-------------- ------------ ------------
Total liabilities........................................... 12,857,300 25,432,206 71,147,468
-------------- ------------ ------------
NET ASSETS
Beneficial interest--$0.001 par value (unlimited amount
authorized)............................................... 1,008,440,899 115,612,047 241,001,462
Undistributed net investment income......................... 316,785 -- --
Accumulated net realized gains from investment
transactions.............................................. 50,373,095 12,713,054 33,255,019
Net unrealized appreciation of investments.................. 322,893,680 29,761,670 176,401,372
-------------- ------------ ------------
Net assets.................................................. $1,382,024,459 $158,086,771 $450,657,853
============== ============ ============
CLASS A:
Net assets.................................................. $ 844,414,990 $113,125,937 $295,906,224
-------------- ------------ ------------
Shares outstanding.......................................... 26,328,530 10,603,293 11,021,361
-------------- ------------ ------------
Net asset value and redemption value per share.............. $32.07 $10.67 $26.85
============== ============ ============
Maximum offering price per share (net asset value plus sales
charge of 4.50% of offering price)........................ $33.58 $11.17 $28.12
============== ============ ============
CLASS B:
Net assets.................................................. $ 306,557,008 $ 28,077,019 $ 85,575,726
-------------- ------------ ------------
Shares outstanding.......................................... 9,665,215 2,651,241 3,527,473
-------------- ------------ ------------
Net asset value and offering price per share................ $31.72 $10.59 $24.26
============== ============ ============
CLASS C:
Net assets.................................................. $ 165,948,055 $ 16,593,560 $ 35,792,793
-------------- ------------ ------------
Shares outstanding.......................................... 5,222,080 1,733,542 1,457,345
-------------- ------------ ------------
Net asset value and offering price per share................ $31.78 $9.57 $24.56
============== ============ ============
CLASS Y:
Net assets.................................................. $ 65,104,406 $ 290,255 $ 33,383,110
-------------- ------------ ------------
Shares outstanding.......................................... 2,026,750 27,134 1,201,407
-------------- ------------ ------------
Net asset value, offering price and redemption value per
share..................................................... $32.12 $10.70 $27.79
============== ============ ============
</TABLE>
See accompanying notes to financial statements
25
<PAGE>
PAINEWEBBER
STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 1999
<TABLE>
<CAPTION>
GROWTH AND MID CAP
INCOME FUND FUND GROWTH FUND
------------ ----------- ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $135,640,
$7,947 and $16,677, respectively)......................... $ 14,442,814 $ 1,048,210 $ 1,334,413
Interest.................................................... 7,167,755 606,387 1,816,748
------------ ----------- ------------
21,610,569 1,654,597 3,151,161
------------ ----------- ------------
EXPENSES:
Investment advisory and administration...................... 10,130,336 1,733,828 3,177,112
Service fees -- Class A..................................... 2,101,282 274,562 630,894
Service and distribution fees -- Class B.................... 3,597,748 452,325 874,272
Service and distribution fees -- Class C.................... 1,758,886 181,436 315,698
Custody and accounting...................................... 819,343 110,977 252,674
Transfer agency and service fees............................ 763,629 196,645 253,641
Reports and notices to shareholders......................... 190,860 108,150 79,478
Federal and state registration.............................. 111,260 85,129 50,970
Legal and audit............................................. 83,750 114,392 83,604
Trustees' fees.............................................. 13,500 13,500 13,500
Other expenses.............................................. 10,439 86,416 14,180
------------ ----------- ------------
19,581,033 3,357,360 5,746,023
------------ ----------- ------------
Less: Fee waivers from adviser.............................. -- (1,818) (3,744)
------------ ----------- ------------
Net expenses................................................ 19,581,033 3,355,542 5,742,279
------------ ----------- ------------
Net investment income (loss)................................ 2,029,536 (1,700,945) (2,591,118)
------------ ----------- ------------
REALIZED AND UNREALIZED GAINS FROM INVESTMENT TRANSACTIONS:
Net realized gains from Investment transactions............. 50,934,437 12,767,655 38,329,110
Net change in unrealized appreciation/depreciation of
Investments............................................... 268,667,623 52,006,931 103,470,683
------------ ----------- ------------
NET REALIZED AND UNREALIZED GAINS FROM INVESTMENT
TRANSACTIONS.............................................. 319,602,060 64,774,586 141,799,793
------------ ----------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $321,631,596 $63,073,641 $139,208,675
============ =========== ============
</TABLE>
See accompanying notes to financial statements
26
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED AUGUST 31,
-------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income....................................... $ 2,029,536 $ 4,845,333
Net realized gains from investment transactions............. 50,934,437 109,163,741
Net change in unrealized appreciation/depreciation of
investments............................................... 268,667,623 (198,547,739)
-------------- --------------
Net increase (decrease) in net assets resulting from
operations................................................ 321,631,596 (84,538,665)
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- Class A............................ (2,152,840) (4,317,455)
Net investment income -- Class B............................ -- --
Net investment income -- Class C............................ -- (62,373)
Net investment income -- Class Y............................ (274,465) (565,972)
Net realized gains from investment transactions -- Class
A......................................................... (45,342,437) (42,191,521)
Net realized gains from investment transactions -- Class
B......................................................... (21,458,879) (32,083,048)
Net realized gains from investment transactions -- Class
C......................................................... (9,905,709) (8,161,061)
Net realized gains from investment transactions -- Class
Y......................................................... (4,000,922) (4,314,878)
-------------- --------------
Total dividends and distributions to shareholders........... (83,135,252) (91,696,308)
-------------- --------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares........................ 412,392,338 784,608,161
Cost of shares repurchased.................................. (585,691,639) (405,755,914)
Proceeds from dividends reinvested.......................... 78,095,718 85,907,754
-------------- --------------
Net increase/(decrease) in net assets from beneficial
interest transactions..................................... (95,203,583) 464,760,001
-------------- --------------
Net increase in net assets.................................. 143,292,761 288,525,028
NET ASSETS:
Beginning of year........................................... 1,238,731,698 950,206,670
-------------- --------------
End of year (including undistributed net investment income
of $316,785 and $442,229, respectively)................... $1,382,024,459 $1,238,731,698
============== ==============
</TABLE>
See accompanying notes to financial statements
27
<PAGE>
PAINEWEBBER MID CAP FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE FIVE FOR THE
YEAR ENDED MONTHS ENDED YEAR ENDED
AUGUST 31, AUGUST 31, MARCH 31,
1999 1998 1998
-------------- -------------- --------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment loss......................................... $ (1,700,945) $ (964,427) $ (4,452,123)
Net realized gains from investment transactions............. 12,767,655 50,055,407 58,100,065
Net change in unrealized appreciation/depreciation of
investments............................................... 52,006,931 (113,176,825) 35,069,089
-------------- -------------- --------------
Net increase (decrease) in net assets resulting from
operations................................................ 63,073,641 (64,085,845) 88,717,031
-------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gains from investment transactions -- Class
A......................................................... (7,165,732) (33,325,298) (19,367,061)
Net realized gains from investment transactions -- Class
B......................................................... (3,684,717) (21,180,778) (29,491,494)
Net realized gains from investment transactions -- Class
C......................................................... (1,501,190) (6,615,466) (5,842,338)
Net realized gains from investment transactions -- Class
Y......................................................... (6,732) (10,624) --
-------------- -------------- --------------
Total distributions to shareholders......................... (12,358,371) (61,132,166) (54,700,893)
-------------- -------------- --------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares........................ 103,937,783 32,729,553 37,895,804
Cost of shares repurchased.................................. (170,753,908) (75,586,995) (87,095,316)
Proceeds from dividends reinvested.......................... 11,619,786 58,037,907 51,574,852
-------------- -------------- --------------
Net increase (decrease) in net assets from beneficial
interest transactions..................................... (55,196,339) 15,180,465 2,375,340
-------------- -------------- --------------
Net increase (decrease) in net assets....................... (4,481,069) (110,037,546) 36,391,478
NET ASSETS:
Beginning of period......................................... 162,567,840 272,605,386 236,213,908
-------------- -------------- --------------
End of period............................................... $ 158,086,771 $ 162,567,840 $ 272,605,386
============== ============== ==============
</TABLE>
See accompanying notes to financial statements
28
<PAGE>
PAINEWEBBER GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED AUGUST 31,
-----------------------------
1999 1998
------------- -------------
<S> <C> <C>
FROM OPERATIONS:
Net investment loss......................................... $ (2,591,118) $ (2,449,774)
Net realized gains from investment transactions............. 38,329,110 55,757,294
Net change in unrealized appreciation/depreciation of
investments............................................... 103,470,683 (37,036,941)
------------- -------------
Net increase in net assets resulting from operations........ 139,208,675 16,270,579
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gains from investment transactions -- Class
A......................................................... (19,967,578) (52,257,695)
Net realized gains from investment transactions -- Class
B......................................................... (7,360,795) (28,007,650)
Net realized gains from investment transactions -- Class
C......................................................... (2,428,166) (6,619,090)
Net realized gains from investment transactions -- Class
Y......................................................... (2,076,520) (4,929,080)
------------- -------------
Total distributions to shareholders......................... (31,833,059) (91,813,515)
------------- -------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from sale of shares............................ 150,769,416 49,298,324
Cost of shares repurchased.................................. (157,148,972) (102,850,579)
Proceeds from dividends reinvested.......................... 30,161,764 86,299,182
------------- -------------
Net increase in net assets from beneficial interest
transactions.............................................. 23,782,208 32,746,927
------------- -------------
Net increase (decrease) in net assets....................... 131,157,824 (42,796,009)
NET ASSETS:
Beginning of year........................................... 319,500,029 362,296,038
------------- -------------
End of year................................................. $ 450,657,853 $ 319,500,029
============= =============
</TABLE>
See accompanying notes to financial statements
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Growth and Income Fund ("Growth and Income Fund"), PaineWebber Mid
Cap Fund ("Mid Cap Fund") and PaineWebber Growth Fund ("Growth Fund")
(collectively, the "Funds") are diversified series of PaineWebber America Fund,
PaineWebber Managed Assets Trust and PaineWebber Olympus Fund (the "Trusts"),
respectively. The 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.
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--The Funds calculate net asset values based on the
current market value for its portfolio's securities. The Funds normally obtain
market values for its securities from independent pricing sources. Independent
pricing sources may use reported last sale prices, current market quotations or
valuations from computerized "matrix" systems that derive values based on
comparable securities. Securities traded in the over-the-counter ("OTC") market
and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") normally are valued at
the last sale price on Nasdaq prior to valuation. Other OTC securities are
valued at the last bid price available prior to valuation. Securities which are
listed on U.S. and foreign stock exchanges normally are valued at the last sale
price on the day the securities are valued or, lacking any sales on such day, at
the last available bid price. In cases where securities are traded on more than
one exchange, the securities are valued on the exchange designated as the
primary market by Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"),
a wholly owned asset management subsidiary of PaineWebber Incorporated
("PaineWebber"), and investment adviser and administrator of the Funds. If a
market value is not available from an independent pricing source for a
particular security, that security is valued at fair value as determined in good
faith by or under the direction of each Trust's board of trustees (the "board").
The amortized cost method of valuation, which approximates market value,
generally is used to value short-term debt instruments with sixty days or less
remaining to maturity, unless each Trust's board 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.
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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. There were no options written for the Funds during the year ended
August 31, 1999.
DIVIDENDS AND DISTRIBUTIONS--Dividends and distributions to shareholders are
recorded on the ex-dividend date. The amount of dividends and distributions are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification.
INVESTMENT ADVISER AND ADMINISTRATOR
Each Trust's board 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 and Income Fund, Mid Cap Fund and
Growth Fund pay Mitchell Hutchins an investment advisory and administration fee,
which is accrued daily and paid monthly, at the annual rate of 0.70%, 1.00% and
0.75%, respectively, of each Funds' average daily net assets. At August 31,
1999, Growth and Income Fund, Mid Cap Fund and Growth Fund owed Mitchell
Hutchins $842,048, $135,575 and $289,639, respectively, in investment advisory
and administration fees. Mitchell Hutchins waived a portion of its investment
advisory and administration fees in connection with the Mid Cap Fund's and
Growth Fund's investment of cash collateral from security lending in the
Mitchell Hutchins Private Money Market Fund LLC. For the year ended August 31,
1999, Mitchell Hutchins waived $1,818 and $3,744, respectively.
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS
For the year ended August 31, 1999, Growth and Income Fund, Mid Cap Fund and
Growth Fund paid $124,174, $22,902, and $34,416, respectively, in brokerage
commissions to PaineWebber for transactions executed on behalf of the Funds.
SERVICING AGREEMENT
The board of Growth and Income Fund and Growth Fund have approved a Servicing
Agreement ("Servicing Agreement") with Mitchell Hutchins and the Mitchell
Hutchins Portfolios (comprising, respectively, the Aggressive Portfolio,
Moderate Portfolio and the Conservative Portfolio) (each a "Portfolio") pursuant
to an exemptive order from the Securities and Exchange Commission that permits
the Funds to reimburse each Portfolio for certain expenses to the extent a Fund
realizes savings from each Portfolio. The savings to a Fund result from the
elimination of separate shareholder accounts for each Portfolio's investors, who
otherwise might invest directly in the Fund. For the year ended August 31, 1999,
the Growth and Income Fund and Growth Fund incurred $7,457 and $6,821,
respectively, under the Servicing Agreement, which is included in other expenses
on the Statement of Operations. At August 31, 1999, Growth and Income Fund and
Growth Fund owed the Portfolios $2,800 and $2,453 respectively, under the
Servicing Agreement.
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 August 31, 1999, Growth and
Income Fund, Mid Cap Fund and Growth Fund owed Mitchell Hutchins $595,634,
$63,563 and $165,847, respectively, in service and distribution fees.
Mitchell Hutchins also receives the proceeds of the initial sales charges paid
upon the purchase of Class A shares and the contingent deferred sales charges
paid by shareholders upon certain redemptions of Class A, Class B and Class C
shares, Mitchell Hutchins has informed each Fund that for the year ended
August 31, 1999, it earned $1,829,471, $133,029, and $315,365 in sales charges
for the Growth and Income Fund, Mid Cap 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. For the
year ended August 31, 1999, the Growth and Income Fund, Mid Cap Fund and Growth
Fund, earned $41,680, $92,639 and $144,147, respectively, for lending
securities. Each Fund's lending agent is PaineWebber, who received $13,888,
$31,282, and $48,764 for Growth and Income Fund, Mid Cap Fund and Growth Fund,
respectively, in compensation from the Funds in that capacity for the year ended
August 31, 1999. At August 31, 1999, Growth and Income Fund, Mid Cap Fund and
Growth Fund owed PaineWebber $470, $3,276, and $5,484, respectively, in
compensation.
32
<PAGE>
NOTES TO FINANCIAL STATEMENTS
As of August 31, 1999, the Growth and Income Fund held the following
securities having an aggregate value of $9,992,392 (as listed below) as
collateral for portfolio securities loaned having a market value of $9,682,875.
Included in this amount is $8,899,390 of proceeds from the sale of a loaned
security at 8/31/99.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST MARKET
(000) DATES RATES VALUE
- --------------------- --------- -------- -----------
<S> <C> <C> <C> <C>
GROWTH AND INCOME FUND
$ 20 U.S. Treasury Notes......................................... 02/15/00 8.500% $ 20,281
5,549 U.S. Treasury Notes......................................... 11/15/00 5.750 5,557,670
4,445 U.S. Treasury Notes......................................... 08/15/03 5.750 4,414,441
-----------
Total securities held as collateral for securities loaned (cost--$9,992,392)........ $ 9,992,392
===========
</TABLE>
As of August 31, 1999 the Mid Cap Fund and Growth Fund held cash as collateral
for market value of securities loaned as follows:
<TABLE>
<CAPTION>
COLLATERAL MARKET VALUE
FOR SECURITIES OF SECURITIES
LOANED LOANED
-------------- -------------
<S> <C> <C>
Mid Cap Fund................................................ $23,412,676 $22,703,549
Growth...................................................... $53,437,152 $52,415,952
</TABLE>
Included in the market value of securities loaned for the Mid Cap Fund is
$368,574 of proceeds from the sale of a loaned security at 8/31/99.
As of August 31, 1999 the Mid Cap Fund and Growth Fund invested the cash
collateral in the following money market funds and time of deposits:
<TABLE>
<CAPTION>
NUMBER OF
SHARES/
PRINCIPLE MARKET
AMOUNT VALUE
- --------------------- -----------
<C> <S> <C>
MID CAP FUND
4,000,000 Cayman Island Bank Time Deposit 5.500% due 09/01/99......... $ 4,000,000
2,450 Janus Money Market Institutional Shares..................... 2,450
418,079 Liquid Assets Portfolio..................................... 418,079
18,628,145 Mitchell Hutchins Private Money Market Fund LLC............. 18,628,145
364,002 Prime Portfolio............................................. 364,002
-----------
Total investments of cash collateral for securities loaned (cost--$23,412,676)...... $23,412,676
===========
GROWTH FUND
6,000,000 Cayman Island Bank Time Deposit 5.563% due 09/01/99......... $ 6,000,000
5,095 Janus Money Market Institutional Shares..................... 5,095
6,026,977 Liquid Assets Portfolio..................................... 6,026,977
41,405,080 Mitchell Hutchins Private Money Market Fund LLC............. 41,405,080
-----------
Total investments of cash collateral for securities loaned (cost--$53,437,152)...... $53,437,152
===========
</TABLE>
33
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 year ended August 31, 1999, 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 year ended
August 31, 1999, PaineWebber received approximately 54%, 51% and 55% of the
total transfer agency and service fees collected by PFPC, Inc. from Growth and
Income Fund, Mid Cap Fund and Growth Fund, respectively.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at August 31,
1999 was substantially the same as the cost of securities for financial
statement purposes.
At August 31, 1999, the components of net unrealized appreciation of
investments were as follows:
<TABLE>
<CAPTION>
GROWTH AND
INCOME FUND MID CAP FUND GROWTH FUND
------------- ------------- -------------
<S> <C> <C> <C>
Gross appreciation (investments having an excess of value
over cost)................................................ $ 360,333,118 $ 38,968,190 $ 188,918,392
Gross depreciation (investments having an excess of cost
over value)............................................... (37,439,438) (9,206,520) (12,517,020)
------------- ------------- -------------
Net unrealized appreciation of investments.................. $ 322,893,680 $ 29,761,670 $ 176,401,372
============= ============= =============
</TABLE>
For the year ended August 31, 1999, total aggregate purchases and sales of
portfolio securities, excluding short-term securities, were as follows:
<TABLE>
<CAPTION>
GROWTH AND
INCOME FUND MID CAP FUND GROWTH FUND
-------------- -------------- --------------
<S> <C> <C> <C>
Purchases.............................................. $ 755,908,567 $ 128,658,150 $ 149,409,032
Sales.................................................. $ 927,370,172 $ 196,122,037 $ 167,010,824
</TABLE>
34
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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.
To reflect reclassifications for the Growth and Income Fund arising from
permanent "book/tax" differences for the year ended August 31,1999,
undistributed net investment income was increased by $272,325, accumulated net
realized gains from investment transactions were decreased by $17,873,784, and
beneficial interest was increased by $17,601,459.
To reflect reclassifications arising for the Mid Cap Fund permanent "book/tax"
differences for the year ended August 31,1999, undistributed net investment loss
was reduced by $1,700,945 and beneficial interest was reduced by $1,700,945.
To reflect reclassifications for the Growth Fund arising from permanent
"book/tax" differences for the year ended August 31, 1999, undistributed net
investment loss was reduced by $2,591,118, accumulated net realized gains from
investment transactions were decreased by $8,487,627, and beneficial interest
was increased by $5,896,509.
35
<PAGE>
NOTES TO FINANCIAL STATEMENTS
BENEFICIAL INTEREST
There was an unlimited amount of $0.001 par value shares of beneficial
interest authorized. Transactions in shares of benefical interest were as
follows:
<TABLE>
<CAPTION>
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A CLASS B CLASS C
-------------------------- -------------------------- -------------------------
GROWTH AND INCOME FUND
FOR THE YEAR ENDED
AUGUST 31, 1999
Shares sold............. 8,747,051 $ 271,868,943 1,794,624 $ 55,174,611 1,553,969 $ 48,502,553
Shares repurchased...... (11,983,913) (374,902,084) (2,776,809) (86,739,484) (2,221,720) (69,944,686)
Shares converted from
Class B to
Class A............... 3,179,259 99,263,662 (3,202,455) (99,263,662) -- --
Dividends reinvested.... 1,477,072 44,548,497 659,253 19,770,993 316,470 9,509,920
----------- ------------- ----------- ------------- ----------- ------------
Net increase
(decrease)............ 1,419,469 $ 40,779,018 (3,525,387) $(111,057,542) (351,281) $(11,932,213)
=========== ============= =========== ============= =========== ============
FOR THE YEAR ENDED
AUGUST 31, 1998:
Shares sold............. 12,026,995 $ 384,579,894 7,040,942 $ 219,400,226 3,720,225 $116,019,841
Shares repurchased...... (8,401,975) (271,585,856) (1,741,560) (55,665,850) (1,191,640) (37,412,993)
Shares converted from
Class B to
Class A............... 5,402,974 170,099,068 (5,473,938) (170,099,068) -- --
Dividends reinvested.... 1,444,371 43,459,036 991,533 29,715,205 262,925 7,880,006
----------- ------------- ----------- ------------- ----------- ------------
Net increase............ 10,472,365 $ 326,552,142 816,977 $ 23,350,513 2,791,510 $ 86,486,854
=========== ============= =========== ============= =========== ============
MID CAP FUND
FOR THE YEAR ENDED
AUGUST 31, 1999
Shares sold............. 9,301,918 $ 96,532,568 274,754 $ 2,735,524 474,530 $ 4,399,409
Shares repurchased...... (13,574,300) (138,990,018) (2,115,404) (20,745,827) (1,220,947) (10,928,751)
Shares converted from
Class B to
Class A............... 2,761,639 27,666,645 (2,765,975) (27,666,645) -- --
Dividends reinvested.... 735,220 6,844,897 372,644 3,469,313 154,440 1,298,844
----------- ------------- ----------- ------------- ----------- ------------
Net increase
(decrease)............ (775,523) $ (7,945,908) (4,233,981) $ (42,207,635) (591,977) $ (5,230,498)
=========== ============= =========== ============= =========== ============
FOR THE FIVE MONTHS
ENDED
AUGUST 31, 1998
Shares sold............. 2,182,101 $ 24,315,812 354,492 $ 3,832,818 383,808 $ 4,499,817
Shares repurchased...... (4,267,087) (50,849,996) (1,267,833) (16,289,937) (687,258) (8,417,661)
Shares converted from
Class B to
Class A............... 3,641,925 52,669,649 (3,596,252) (52,669,649) -- --
Dividends reinvested.... 3,041,806 31,817,286 1,903,180 19,983,663 652,656 6,226,334
----------- ------------- ----------- ------------- ----------- ------------
Net increase
(decrease)............ 4,598,745 $ 57,952,751 (2,606,413) $ (45,143,105) 349,206 $ 2,308,490
=========== ============= =========== ============= =========== ============
<CAPTION>
SHARES AMOUNT
---------- ------------
<S> <C> <C>
CLASS Y
------------------------
GROWTH AND INCOME FUND
FOR THE YEAR ENDED
AUGUST 31, 1999
Shares sold............. 1,177,699 $ 36,846,231
Shares repurchased...... (1,726,359) (54,105,385)
Shares converted from
Class B to
Class A............... -- --
Dividends reinvested.... 141,503 4,266,308
---------- ------------
Net increase
(decrease)............ (407,157) $(12,992,846)
========== ============
FOR THE YEAR ENDED
AUGUST 31, 1998:
Shares sold............. 2,051,111 $ 64,608,200
Shares repurchased...... (1,306,458) (41,091,215)
Shares converted from
Class B to
Class A............... -- --
Dividends reinvested.... 161,288 4,853,507
---------- ------------
Net increase............ 905,941 $ 28,370,492
========== ============
MID CAP FUND
FOR THE YEAR ENDED
AUGUST 31, 1999
Shares sold............. 26,630 $ 270,282
Shares repurchased...... (8,406) (89,312)
Shares converted from
Class B to
Class A............... -- --
Dividends reinvested.... 722 6,732
---------- ------------
Net increase
(decrease)............ 18,946 $ 187,702
========== ============
FOR THE FIVE MONTHS
ENDED
AUGUST 31, 1998
Shares sold............. 7,738 $ 81,106
Shares repurchased...... (2,894) (29,401)
Shares converted from
Class B to
Class A............... -- --
Dividends reinvested.... 1,016 10,624
---------- ------------
Net increase
(decrease)............ 5,860 $ 62,329
========== ============
</TABLE>
36
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A CLASS B CLASS C
-------------------------- -------------------------- -------------------------
MID CAP FUND
FOR THE YEAR ENDED
MARCH 31, 1998
Shares sold............. 1,152,078 $ 18,144,195 435,394 $ 7,043,465 876,575 $ 12,661,915
Shares repurchased...... (2,175,121) (33,257,452) (2,312,967) (35,407,408) (1,284,257) (18,418,905)
Shares converted from
Class B to
Class A............... 658,362 10,279,880 (653,737) (10,279,880) -- --
Dividends reinvested.... 1,422,364 18,376,942 2,125,930 27,658,352 455,931 5,539,558
----------- ------------- ----------- ------------- ----------- ------------
Net increase
(decrease)............ 1,057,683 $ 13,543,565 (405,380) $ (10,985,471) 48,249 $ (217,432)
=========== ============= =========== ============= =========== ============
GROWTH FUND
FOR THE YEAR ENDED
AUGUST 31, 1999
Shares sold............. 2,603,107 $ 70,761,120 757,665 $ 18,400,169 1,839,539 $ 43,921,544
Shares repurchased...... (3,329,890) (88,510,215) (756,225) (13,932,593) (1,649,567) (39,233,924)
Shares converted from
Class B to
Class A............... 882,439 22,682,778 (809,713) (22,682,778) -- --
Dividends reinvested.... 794,422 18,931,080 318,639 6,898,545 102,903 2,255,619
----------- ------------- ----------- ------------- ----------- ------------
Net increase
(decrease)............ 950,078 $ 23,864,763 (489,634) $ (11,316,657) 292,875 $ 6,943,239
=========== ============= =========== ============= =========== ============
FOR THE YEAR ENDED
AUGUST 31, 1998
Shares sold............. 250,025 $ 6,168,232 293,191 $ 6,570,230 932,368 $ 22,361,890
Shares repurchased...... (1,634,676) (40,028,657) (1,037,642) (23,385,942) (1,095,911) (25,896,378)
Shares converted from
Class B to
Class A............... 1,252,439 30,472,358 (1,350,669) (30,472,358) -- --
Dividends reinvested.... 2,428,222 49,098,643 1,398,245 26,119,234 325,859 6,152,224
----------- ------------- ----------- ------------- ----------- ------------
Net increase
(decrease)............ 2,296,010 $ 45,710,576 (696,875) $ (21,168,836) 162,316 $ 2,617,736
=========== ============= =========== ============= =========== ============
<CAPTION>
SHARES AMOUNT
---------- ------------
<S> <C> <C>
CLASS Y
------------------------
MID CAP FUND
FOR THE YEAR ENDED
MARCH 31, 1998
Shares sold............. 3,103 $ 46,229
Shares repurchased...... (775) (11,551)
Shares converted from
Class B to
Class A............... -- --
Dividends reinvested.... -- --
---------- ------------
Net increase
(decrease)............ 2,328 $ 34,678
========== ============
GROWTH FUND
FOR THE YEAR ENDED
AUGUST 31, 1999
Shares sold............. 662,614 $ 17,686,583
Shares repurchased...... (582,735) (15,472,240)
Shares converted from
Class B to
Class A............... -- --
Dividends reinvested.... 84,377 2,076,520
---------- ------------
Net increase
(decrease)............ 164,256 $ 4,290,863
========== ============
FOR THE YEAR ENDED
AUGUST 31, 1998
Shares sold............. 564,489 $ 14,197,972
Shares repurchased...... (531,157) (13,539,602)
Shares converted from
Class B to
Class A............... -- --
Dividends reinvested.... 237,204 4,929,081
---------- ------------
Net increase
(decrease)............ 270,536 $ 5,587,451
========== ============
</TABLE>
37
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
year is presented below:
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.... $ 26.92 $ 30.60 $ 24.35 $ 22.52 $ 20.43
-------- -------- -------- -------- --------
Net investment income................. 0.13 0.19 0.23 0.22 0.24
Net realized and unrealized gains
(losses) from investments and
options............................. 6.88 (0.99) 9.29 3.46 3.18
-------- -------- -------- -------- --------
Total increase (decrease) from
investment operations............... 7.01 (0.80) 9.52 3.68 3.42
-------- -------- -------- -------- --------
Dividends from net investment
income.............................. (0.08) (0.21) (0.25) (0.34) (0.12)
Distributions from net realized gains
from investment transactions........ (1.78) (2.67) (3.02) (1.51) (1.21)
-------- -------- -------- -------- --------
Total dividends and distributions to
shareholders........................ (1.86) (2.88) (3.27) (1.85) (1.33)
-------- -------- -------- -------- --------
Net asset value, end of year.......... $ 32.07 $ 26.92 $ 30.60 $ 24.35 $ 22.52
======== ======== ======== ======== ========
Total investment return (1)........... 26.48% (3.51)% 42.42% 17.40% 18.30%
======== ======== ======== ======== ========
Ratios/Supplemental data:
Net assets, end of year (000's)....... $844,415 $670,606 $441,699 $276,016 $187,057
Expenses to average net assets........ 1.08% 1.07% 1.15% 1.20%(2) 1.19%
Net investment income (loss) to
average net assets.................. 0.41% 0.71% 0.88% 0.98%(2) 1.07%
Portfolio turnover.................... 57% 62% 70% 112% 111%
</TABLE>
- -----------------
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each year 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 year reported. The figures do not
include sales charges; results for each class would be lower if sales
charges were included.
(2) These ratios include non-recurring acquisition expenses of 0.04%.
38
<PAGE>
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
----------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.... $ 26.77 $ 30.46 $ 24.26 $ 22.37 $ 20.37
-------- -------- -------- -------- --------
Net investment income................. (0.15) (0.02) 0.04 0.04 0.06
Net realized and unrealized gains
(losses) from investments and
options............................. 6.88 (1.02) 9.23 3.45 3.18
-------- -------- -------- -------- --------
Total increase (decrease) from
investment operations............... 6.73 (1.04) 9.27 3.49 3.24
-------- -------- -------- -------- --------
Dividends from net investment
income.............................. -- -- (0.05) (0.09) (0.03)
Distributions from net realized gains
from investment transactions........ (1.78) (2.65) (3.02) (1.51) (1.21)
-------- -------- -------- -------- --------
Total dividends and distributions to
shareholders........................ (1.78) (2.65) (3.07) (1.60) (1.24)
-------- -------- -------- -------- --------
Net asset value, end of year.......... $ 31.72 $ 26.77 $ 30.46 $ 24.26 $ 22.37
======== ======== ======== ======== ========
Total investment return (1)........... 25.51% (4.28)% 41.33% 16.49% 17.38%
======== ======== ======== ======== ========
Ratios/Supplemental data:
Net assets, end of year (000's)....... $306,557 $353,150 $376,840 $277,753 $247,543
Expenses to average net assets........ 1.86% 1.87% 1.93% 1.99%(2) 1.97%
Net investment income (loss) to
average net assets.................. (0.37)% (0.08)% 0.11% 0.17%(2) 0.29%
Portfolio turnover.................... 57% 62% 70% 112% 111%
<CAPTION>
CLASS C
------------------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.... $ 26.82 $ 30.53 $ 24.33 $ 22.43 $ 20.42
-------- -------- -------- -------- --------
Net investment income................. (0.12) 0.01 0.05 0.05 0.06
Net realized and unrealized gains
(losses) from investments and
options............................. 6.86 (1.03) 9.24 3.46 3.19
-------- -------- -------- -------- --------
Total increase (decrease) from
investment operations............... 6.74 (1.02) 9.29 3.51 3.25
-------- -------- -------- -------- --------
Dividends from net investment
income.............................. -- (0.02) (0.07) (0.10) (0.03)
Distributions from net realized gains
from investment transactions........ (1.78) (2.67) (3.02) (1.51) (1.21)
-------- -------- -------- -------- --------
Total dividends and distributions to
shareholders........................ (1.78) (2.69) (3.09) (1.61) (1.24)
-------- -------- -------- -------- --------
Net asset value, end of year.......... $ 31.78 $ 26.82 $ 30.53 $ 24.33 $ 22.43
======== ======== ======== ======== ========
Total investment return (1)........... 25.49% (4.23)% 41.30% 16.52% 17.37%
======== ======== ======== ======== ========
Ratios/Supplemental data:
Net assets, end of year (000's)....... $165,948 $149,458 $ 84,922 $ 43,148 $ 30,468
Expenses to average net assets........ 1.85% 1.85% 1.92% 1.99%(2) 1.98%
Net investment income (loss) to
average net assets.................. (0.36)% (0.07)% 0.10% 0.18%(2) 0.28%
Portfolio turnover.................... 57% 62% 70% 112% 111%
</TABLE>
- -----------------
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each year 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 year reported. The figures do not
include sales charges; results for each class would be lower if sales
charges were included.
(2) These ratios include non-recurring acquisition expenses of 0.04%.
39
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
year is presented below:
<TABLE>
<CAPTION>
CLASS Y
----------------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
----------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year................ $ 26.92 $ 30.59 $ 24.35 $ 22.54 $ 20.42
-------- -------- -------- -------- --------
Net investment income............................. 0.24 0.30 0.32 0.30 0.30
Net realized and unrealized gains (losses) from
investments and options.......................... 6.86 (1.02) 9.26 3.45 3.18
-------- -------- -------- -------- --------
Total increase (decrease) from investment
operations....................................... 7.10 (0.72) 9.58 3.75 3.48
-------- -------- -------- -------- --------
Dividends from net investment income.............. (0.12) (0.28) (0.32) (0.43) (0.15)
Distributions from net realized gains from
investment transactions.......................... (1.78) (2.67) (3.02) (1.51) (1.21)
-------- -------- -------- -------- --------
Total dividends and distributions to
shareholders..................................... (1.90) (2.95) (3.34) (1.94) (1.36)
-------- -------- -------- -------- --------
Net asset value, end of year...................... $ 32.12 $ 26.92 $ 30.59 $ 24.35 $ 22.54
======== ======== ======== ======== ========
Total investment return (1)....................... 26.82% (3.24)% 42.74% 17.77% 18.66%
======== ======== ======== ======== ========
Ratios/Supplemental data:
Net assets, end of year (000's)................... $ 65,104 $ 65,518 $ 46,745 $ 22,942 $ 14,680
Expenses to average net assets.................... 0.79% 0.80% 0.88% 0.92%(2) 0.89%
Net investment income to average net assets....... 0.70% 0.99% 1.14% 1.26%(2) 1.39%
Portfolio turnover................................ 57% 62% 70% 112% 111%
</TABLE>
- -----------------
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each year 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 year reported. The figures do not include
program fees; results would be lower if program fees were included.
(2) These ratios include non-recurring acquisition expenses of 0.04%.
40
<PAGE>
PAINEWEBBER MID CAP FUND
FINANCIAL HIGHLIGHTS
Selected data for a beneficial interest outstanding throughout each period is
presented below:
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------
FOR THE
FOR THE FIVE
YEAR MONTHS
ENDED ENDED FOR THE YEARS ENDED MARCH 31,
AUGUST 31, AUGUST 31, ---------------------------------
1999 1998# 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 7.97 $ 15.00 $ 13.44 $ 15.61
-------------- -------------- -------------- --------------
Net investment loss..................... (0.07) (0.03) (0.13) (0.17)
Net realized unrealized gains (losses)
from investments....................... 3.43 (3.15) 5.15 0.32
-------------- -------------- -------------- --------------
Net increase (decrease) from
investment operations.................. 3.36 (3.18) 5.02 0.15
-------------- -------------- -------------- --------------
Distributions from net realized gains
from investments....................... (0.66) (3.85) (3.46) (2.32)
-------------- -------------- -------------- --------------
Net asset value, end of period.......... $ 10.67 $ 7.97 $ 15.00 $ 13.44
============== ============== ============== ==============
Total investment return (1)............. 43.38% (27.31)% 41.50% (0.21)%
============== ============== ============== ==============
Ratios/Supplemental Data:
Net assets, end of period (000's)....... $ 113,126 $ 90,650 $ 101,698 $ 76,909
Expenses to average net assets, net of
waivers from adviser (3)............... 1.60% 1.48%* 1.51% 1.60%
Net investment loss to average net
assets, net of waivers from adviser
(3).................................... (0.64)% (0.61)%* (1.16)% (1.20)%
Portfolio turnover...................... 79% 80% 64% 56%
<CAPTION>
CLASS A
---------------------------------
FOR THE YEARS ENDED MARCH 31,
---------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
Net asset value, beginning of period.... $ 12.81 $ 11.65
-------------- --------------
Net investment loss..................... (0.16) (0.09)
Net realized unrealized gains (losses)
from investments....................... 3.71 1.29
-------------- --------------
Net increase (decrease) from
investment operations.................. 3.55 1.20
-------------- --------------
Distributions from net realized gains
from investments....................... (0.75) (0.04)
-------------- --------------
Net asset value, end of period.......... $ 15.61 $ 12.81
============== ==============
Total investment return (1)............. 28.16% 10.36%
============== ==============
Ratios/Supplemental Data:
Net assets, end of period (000's)....... 76,558 $ 62,673
Expenses to average net assets, net of
waivers from adviser (3)............... 1.58% 1.58%
Net investment loss to average net
assets, net of waivers from adviser
(3).................................... (1.11)% (0.79)%
Portfolio turnover...................... 57% 42%
</TABLE>
- -----------------
* Annualized.
# Effective May 1, 1998, Mitchell Hutchins took over day-to-day management of
the Fund's assets.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates, and a sale at
net asset value on the last day of each period reported. The figures do not
include sales charges, results would be lower if sales charges were included.
Total investment return for period of less than one year has not been
annualized.
(3) During the year ended August 31, 1999 Mitchell Hutchins waived a portion of
its advisory and administration fees. The ratios excluding the waiver are the
same since the fee waiver represents less than 0.005%.
41
<PAGE>
PAINEWEBBER MID CAP FUND
FINANCIAL HIGHLIGHTS
Selected data for a beneficial interest outstanding throughout each period is
presented below:
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------------
FOR THE
FOR THE FIVE
YEAR MONTHS
ENDED ENDED FOR THE YEARS ENDED MARCH 31,
AUGUST 31, AUGUST 31, -----------------------------------------
1999 1998# 1998 1997 1996 1995
----------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 7.99 $ 15.07 $ 13.59 $ 15.88 $ 13.11 $ 12.02
------- -------- -------- -------- -------- --------
Net investment loss................................. (0.27) (0.07) (0.31) (0.31) (0.29) (0.20)
Net realized and unrealized gains (losses) from
investments........................................ 3.53 (3.16) 5.25 0.34 3.81 1.33
------- -------- -------- -------- -------- --------
Net increase (decrease) from investment
operations......................................... 3.26 (3.23) 4.94 0.03 3.52 1.13
------- -------- -------- -------- -------- --------
Distributions from net realized gains from
investments........................................ (0.66) (3.85) (3.46) (2.32) (0.75) (0.04)
------- -------- -------- -------- -------- --------
Net asset value, end of period...................... $ 10.59 $ 7.99 $ 15.07 $ 13.59 $ 15.88 $ 13.11
======= ======== ======== ======== ======== ========
Total investment return (1)......................... 41.95% (27.54)% 40.39% (0.99)% 27.28% 9.46%
======= ======== ======== ======== ======== ========
Ratios/Supplemental Data:
Net assets, end of period (000's)................... $28,077 $ 54,978 $143,058 $134,495 $157,021 $139,302
Expenses to average net assets, net of waivers from
adviser (3)........................................ 2.55% 2.32%* 2.28% 2.36% 2.34% 2.34%
Net investment income (loss) to average net assets,
net of waivers from adviser (3).................... (1.61)% (1.48)%* (1.92)% (1.95)% (1.87)% (1.56)%
Portfolio turnover.................................. 79% 80% 64% 56% 57% 42%
</TABLE>
- -----------------
* Annualized.
# Effective May 1, 1998, Mitchell Hutchins took over day-to-day management of
the Fund's assets.
+ Commencement of issuance of shares.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates, and a sale at
net asset value on the last day of each period reported. The figures do not
include sales charges or program fees; results would be lower if sales
charges or program fees were included. Total investment return for period of
less than one year has not been annualized.
(3) During the year ended August 31, 1999 Mitchell Hutchins waived a portion of
its advisory and administration fees. The ratios excluding the waiver are the
same since the fee waiver represents less than 0.005%.
42
<PAGE>
<TABLE>
<CAPTION>
CLASS C CLASS Y
- ------------------------------------------------------------------------------ ------------------------------------
FOR THE FOR THE FOR THE
FOR THE FIVE FOR THE FIVE PERIOD
YEAR MONTHS YEAR MONTHS MARCH 17,
ENDED ENDED FOR THE YEARS ENDED MARCH 31, ENDED ENDED 1998+ TO
AUGUST 31, AUGUST 31, ----------------------------------------- AUGUST 31, AUGUST 31, MARCH 31,
1999 1998# 1998 1997 1996 1995 1999 1998# 1998
- --------------------- ---------- -------- -------- -------- -------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 7.26 $ 14.07 $ 12.87 $ 15.14 $ 12.54 $ 11.50 $ 7.97 $ 15.00 $ 14.90
-------- -------- -------- -------- -------- -------- ------- ------- -------
(0.15) (0.06) (0.26) (0.29) (0.27) (0.19) (0.02) (0.01) 0.00
3.12 (2.90) 4.92 0.34 3.62 1.27 3.41 (3.17) 0.10
-------- -------- -------- -------- -------- -------- ------- ------- -------
2.97 (2.96) 4.66 0.05 3.35 1.08 3.39 (3.18) 0.10
-------- -------- -------- -------- -------- -------- ------- ------- -------
(0.66) (3.85) (3.46) (2.32) (0.75) (0.04) (0.66) (3.85) --
-------- -------- -------- -------- -------- -------- ------- ------- -------
$ 9.57 $ 7.26 $ 14.07 $ 12.87 $ 15.14 $ 12.54 $ 10.70 $ 7.97 $ 15.00
======== ======== ======== ======== ======== ======== ======= ======= =======
42.17% (27.58)% 40.46% (0.91)% 27.16% 9.45% 43.77% (27.31)% 0.67%
======== ======== ======== ======== ======== ======== ======= ======= =======
$ 16,594 $ 16,875 $ 27,814 $ 24,810 $ 27,601 $ 24,993 $ 290 $ 65 $ 35
2.43% 2.28%* 2.29% 2.37% 2.36% 2.35% 1.36% 1.23%* 1.22%*
(1.47)% (1.42)%* (1.94)% (1.97)% (1.89)% (1.57)% (0.36)% (0.29)%* 0.00%*
79% 80% 64% 56% 57% 42% 79% 80% 64%
</TABLE>
43
<PAGE>
PAINEWEBBER GROWTH FUND
FINANCIAL HIGHLIGHTS
Selected data for a beneficial interest outstanding throughout each year is
presented below:
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.... $ 20.08 $ 25.94 $ 24.37 $ 22.27 $ 20.04
-------- -------- -------- -------- --------
Net investment income (loss).......... (0.10) (0.09) (0.08)+ (0.12) 0.01
Net realized and unrealized gains from
investments......................... 8.88 1.01 3.76 + 4.06 2.25
-------- -------- -------- -------- --------
Total increase from investment
operations.......................... 8.78 0.92 3.68 3.94 2.26
-------- -------- -------- -------- --------
Distributions from net realized gains
from investment transactions........ (2.01) (6.78) (2.11) (1.84) (0.03)
-------- -------- -------- -------- --------
Net asset value, end of year.......... $ 26.85 $ 20.08 $ 25.94 $ 24.37 $ 22.27
======== ======== ======== ======== ========
Total investment return (1)........... 44.97% 3.37% 15.85% 18.43% 11.28%
======== ======== ======== ======== ========
Ratios/Supplemental data:
Net assets, end of year (000's)....... $295,906 $202,253 $201,725 $203,882 $183,958
Expenses to average net assets, net of
waivers from adviser (3)............ 1.15% 1.19% 1.27% 1.28% 1.28%(2)
Net investment income (loss) to
average net assets, net of waivers
from adviser (3).................... (0.41)% (0.39)% (0.32)% (0.49)% 0.19%(2)
Portfolio turnover.................... 38% 52% 86% 60% 36%
</TABLE>
- -----------------
+ Calculated using the average shares outstanding for the year.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each year 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 year reported. The figures do not
include sales charges: results for each class would be lower if sales
charges were included.
(2) These ratios include non-recurring acquisition expenses of 0.06%.
(3) During the year ended August 31, 1999 Mitchell Hutchins waived a portion of
its advisory and administration fees. The ratios excluding the waiver are
the same since the fee waiver represents less than 0.005%.
44
<PAGE>
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
-------------------------------------------------------------
1999 1998 1997 1996 1995
------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.... $ 18.44 $ 24.51 $ 23.30 $ 21.53 $ 19.53
-------- -------- -------- -------- --------
Net investment income (loss).......... (0.30) (0.30) (0.26)+ (0.39) (0.02)
Net realized and unrealized gains from
investments......................... 8.13 1.01 3.58 + 4.00 2.05
-------- -------- -------- -------- --------
Total increase from investment
operations.......................... 7.83 0.71 3.32 3.61 2.03
-------- -------- -------- -------- --------
Distributions from net realized gains
from investment transactions........ (2.01) (6.78) (2.11) (1.84) (0.03)
-------- -------- -------- -------- --------
Net asset value, end of year.......... $ 24.26 $ 18.44 $ 24.51 $ 23.30 $ 21.53
======== ======== ======== ======== ========
Total investment return (1)........... 43.75% 2.55% 14.98% 17.48% 10.40%
======== ======== ======== ======== ========
Ratios/Supplemental data:
Net assets, end of year (000's)....... $ 85,576 $ 74,094 $115,529 $140,551 $152,357
Expenses to average net assets, net of
waivers from adviser (3)............ 1.96% 1.99% 2.06% 2.06% 2.06%(2)
Net investment income (loss) to
average net assets, net of waivers
from adviser (3).................... (1.22)% (1.18)% (1.12)% (1.27)% (0.60)%(2)
Portfolio turnover.................... 38% 52% 86% 60% 36%
<CAPTION>
CLASS C
-----------------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
-----------------------------------------------------------
1999 1998 1997 1996 1995
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.... $ 18.65 $ 24.71 $ 23.48 $ 21.68 $ 19.67
-------- -------- -------- -------- --------
Net investment income (loss).......... (0.26) (0.27) (0.27)+ (0.34) (0.10)
Net realized and unrealized gains from
investments......................... 8.18 0.99 3.61 + 3.98 2.14
-------- -------- -------- -------- --------
Total increase from investment
operations.......................... 7.92 0.72 3.34 3.64 2.04
-------- -------- -------- -------- --------
Distributions from net realized gains
from investment transactions........ (2.01) (6.78) (2.11) (1.84) (0.03)
-------- -------- -------- -------- --------
Net asset value, end of year.......... $ 24.56 $ 18.65 $ 24.71 $ 23.48 $ 21.68
======== ======== ======== ======== ========
Total investment return (1)........... 43.74% 2.59% 14.95% 17.50% 10.37%
======== ======== ======== ======== ========
Ratios/Supplemental data:
Net assets, end of year (000's)....... $ 35,793 $ 21,714 $ 24,760 $ 29,923 $ 30,608
Expenses to average net assets, net of
waivers from adviser (3)............ 1.94% 1.99% 2.07% 2.07% 2.05%(2)
Net investment income (loss) to
average net assets, net of waivers
from adviser (3).................... (1.20)% (1.19)% (1.13)% (1.28)% (0.57)%(2)
Portfolio turnover.................... 38% 52% 86% 60% 36%
</TABLE>
- -----------------
+ Calculated using the average shares outstanding for the year.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each year 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 year reported. The figures do not
include sales charges: results for each class would be lower if sales
charges were included.
(2) These ratios include non-recurring acquisition expenses of 0.06%.
(3) During the year ended August 31, 1999 Mitchell Hutchins waived a portion of
its advisory and administration fees. The ratios excluding the waiver are
the same since the fee waiver represents less than 0.005%.
45
<PAGE>
PAINEWEBBER GROWTH FUND
FINANCIAL HIGHLIGHTS
Selected data for a beneficial interest outstanding throughout each year is
presented below:
<TABLE>
<CAPTION>
CLASS Y
---------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
---------------------------------------------------
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $ 20.67 $ 26.46 $ 24.74 $ 22.53 $ 20.22
------- ------- ------- ------- -------
Net investment income (loss)................................ (0.03) (0.03) (0.01)+ (0.02) 0.24
Net realized and unrealized gains from investments.......... 9.16 1.02 3.84 + 4.07 2.10
------- ------- ------- ------- -------
Total increase from investment operations................... 9.13 0.99 3.83 4.05 2.34
------- ------- ------- ------- -------
Distributions from net realized gain from investment
transactions............................................... (2.01) (6.78) (2.11) (1.84) (0.03)
------- ------- ------- ------- -------
Net asset value, end of year................................ $ 27.79 $ 20.67 $ 26.46 $ 24.74 $ 22.53
======= ======= ======= ======= =======
Total investment return (1)................................. 45.40% 3.61% 16.24% 18.72% 11.58%
======= ======= ======= ======= =======
Ratios/Supplemental data:
Net assets, end of year (000's)............................. $33,383 $21,440 $20,281 $21,409 $20,948
Expenses to average net assets, net of waivers from adviser
(3)........................................................ 0.86% 0.91% 1.00% 1.02% 0.97%(2)
Net investment income (loss) to average net assets, net of
waivers from adviser (3)................................... (0.12)% (0.12)% (0.05)% (0.23)% 0.53%(2)
Portfolio turnover.......................................... 38% 52% 86% 60% 36%
</TABLE>
- -----------------
+ Calculated using the average shares outstanding for the year.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each year reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates, and a sale at
net asset value on the last day of each year reported. The figures do not
include program fees; results would be lower if program fees were included.
(2) These ratios include non-recurring acquisition expenses of 0.05%.
(3) During the year ended August 31, 1999 Mitchell Hutchins waived a portion of
its advisory and administration fees. The ratio excluding the waiver are the
same since the fee waiver represents less than 0.005%.
46
<PAGE>
PAINEWEBBER
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
PaineWebber Growth and Income Fund
PaineWebber Mid Cap Fund
PaineWebber Growth Fund
We have audited the accompanying statement of assets and liabilities,
including the portfolios of investments, of the PaineWebber Growth and Income
Fund, PaineWebber Mid Cap Fund and PaineWebber Growth Fund (the "Funds") as of
August 31, 1999, and the related statement of operations for the year then
ended, the statements of changes in net assets, and the financial highlights for
each of the periods indicated therein. These financial statement and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We have conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned at August 31, 1999, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
PaineWebber Growth and Income Fund, PaineWebber Mid Cap Fund and PaineWebber
Growth Fund at August 31, 1999, and the results of their operations for the year
then ended, and the changes in their net assets and their financial highlights
for each of the indicated periods, in conformity with generally accepted
accounting principles.
[SIGNATURE]
/s/ Ernst & Young LLP
New York, New York
October 14, 1999
47
<PAGE>
PAINEWEBBER
TAX INFORMATION (UNAUDITED)
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of each Fund's fiscal year end
(August 31, 1999) as to the federal tax status of distributions received by
shareholders during such fiscal year. Accordingly, we are advising you that the
following distributions paid during the fiscal year by the Funds were derived
from the following sources:
<TABLE>
<CAPTION>
GROWTH AND
INCOME MID CAP GROWTH
PER SHARE DATA: FUND FUND FUND
- --------------- ---------- -------- --------
<S> <C> <C> <C>
Net investment income
Class A................................................. $0.0843 -- --
Class B................................................. $0.0000 -- --
Class C................................................. $0.0000 -- --
Class Y................................................. $0.1218 -- --
Long-term capital gains................................. $1.7755 $0.6607 $2.0057
Percentage of ordinary income dividends qualifying for
the dividends received deduction available to corporate
shareholders........................................... 100% 0% 0%
</TABLE>
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need not
be reported as taxable income. Some retirement trusts (e.g., corporate, Keogh
and 403(b)(7) plans) may need this information for their annual information
reporting.
Since each Fund's fiscal year is not the calendar year, another notification
will be sent with respect to calendar year 1999. Such notifications, which will
reflect the amount to be used by calendar year taxpayers on their federal income
tax returns, will be made in conjunction with Form 1099 DIV and will be mailed
in January 2000. Shareholders are advised to consult their own tax advisers with
respect to the tax consequences of their investment in each of the Funds.
48
<PAGE>
- -----------------------------------------------------------------------------
TRUSTEES
E. Garrett Bewkes, Jr.
CHAIRMAN
Margo N. Alexander
Richard Q. Armstrong
Richard R. Burt
Mary C. Farrell
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
Brian M. Storms
PRINCIPAL OFFICERS
Margo N. Alexander
PRESIDENT
Victoria E. Schonfeld
VICE PRESIDENT
Dianne E. O'Donnell
VICE PRESIDENT AND SECRETARY
Paul H. Schubert
VICE PRESIDENT AND TREASURER
Mark A. Tincher
VICE PRESIDENT
Ellen R. Harris
VICE PRESIDENT
INVESTMENT ADVISER,
ADMINISTRATOR AND DISTRIBUTOR
Mitchell Hutchins Asset Management Inc.
51 West 52nd Street
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.
A PROSPECTUS CONTAINING MORE COMPLETE INFORMATION FOR ANY OF THE FUNDS LISTED ON
THE BACK COVER CAN BE OBTAINED FROM A PAINEWEBBER FINANCIAL ADVISOR OR
CORRESPONDENT FIRM. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
<PAGE>
- -----
PaineWebber offers a family of 28 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 and Income Fund
- - Mid Cap Fund
- - Small Cap Fund
- - S&P 500 Index Fund
- - Strategy Fund
- - Tax-Managed Equity 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
PAINEWEBBER
-C-1999 PaineWebber Incorporated
Member SIPC
PAINEWEBBER
- -----------------------------------------------------------------------------
ANNUAL REPORT
GROWTH AND INCOME FUND
MID CAP FUND
GROWTH FUND
August 31, 1999
