<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 (Class A) and the S&P 500 Index from August 31, 1990 through August
31, 2000.
[LINE GRAPH]
<TABLE>
<S> <C> <C>
8/31/1990 $10,000 $10,000
9/30/1990 $ 9,622 $ 9,097
10/31/1990 $ 9,523 $ 8,655
11/30/1990 $ 9,790 $ 8,619
12/31/1990 $10,120 $ 9,174
1/31/1991 $10,714 $ 9,429
2/28/1991 $11,365 $ 9,839
3/31/1991 $11,768 $10,541
4/30/1991 $11,738 $10,796
5/31/1991 $12,003 $10,822
6/30/1991 $11,579 $11,288
7/31/1991 $12,067 $10,771
8/31/1991 $12,362 $11,273
9/30/1991 $12,092 $11,539
10/31/1991 $12,285 $11,346
11/30/1991 $11,995 $11,498
12/31/1991 $13,697 $11,036
1/31/1992 $13,328 $12,296
2/29/1992 $13,393 $12,067
3/31/1992 $12,921 $12,223
4/30/1992 $13,013 $11,986
5/31/1992 $12,981 $12,337
6/30/1992 $12,812 $12,397
7/31/1992 $13,350 $12,213
8/31/1992 $13,324 $12,711
9/30/1992 $13,480 $12,452
10/31/1992 $13,679 $12,599
11/30/1992 $14,156 $12,641
12/31/1992 $14,231 $13,071
1/31/1993 $14,035 $13,232
2/28/1993 $13,897 $13,343
3/31/1993 $14,094 $13,525
4/30/1993 $13,270 $13,810
5/31/1993 $13,421 $13,476
6/30/1993 $13,414 $13,836
7/31/1993 $13,381 $13,876
8/31/1993 $13,744 $13,820
9/30/1993 $13,605 $14,344
10/31/1993 $13,719 $14,234
11/30/1993 $13,488 $14,528
12/31/1993 $13,862 $14,390
1/31/1994 $14,002 $14,564
2/28/1994 $13,909 $15,059
3/31/1994 $13,238 $14,651
4/30/1994 $13,181 $14,014
5/31/1994 $13,115 $14,193
6/30/1994 $12,794 $14,425
7/31/1994 $13,035 $14,071
8/31/1994 $13,664 $14,533
9/30/1994 $13,242 $15,127
10/31/1994 $13,448 $14,758
11/30/1994 $12,932 $15,089
12/31/1994 $13,049 $14,540
1/31/1995 $13,250 $14,755
2/28/1995 $13,745 $15,137
3/31/1995 $14,183 $15,726
4/30/1995 $14,499 $16,190
5/31/1995 $14,850 $16,666
6/30/1995 $15,266 $17,331
7/31/1995 $15,934 $17,733
8/31/1995 $16,164 $18,320
9/30/1995 $16,695 $18,365
10/31/1995 $16,562 $19,140
11/30/1995 $17,278 $19,071
12/31/1995 $17,382 $19,907
1/31/1996 $18,065 $20,291
2/29/1996 $18,453 $20,981
3/31/1996 $18,546 $21,176
4/30/1996 $18,857 $21,379
5/31/1996 $19,307 $21,694
6/30/1996 $19,179 $22,251
7/31/1996 $18,244 $22,336
8/31/1996 $18,976 $21,348
9/30/1996 $19,849 $21,799
10/31/1996 $20,394 $23,024
11/30/1996 $21,618 $23,659
12/31/1996 $21,460 $25,446
1/31/1997 $22,508 $24,942
2/28/1997 $22,437 $26,498
3/31/1997 $21,759 $26,708
4/30/1997 $22,666 $25,613
5/31/1997 $24,242 $27,139
6/30/1997 $25,295 $28,797
7/31/1997 $27,644 $30,079
8/31/1997 $27,026 $32,470
9/30/1997 $28,713 $30,652
10/31/1997 $27,557 $32,328
11/30/1997 $27,918 $31,249
12/31/1997 $28,297 $32,695
1/31/1998 $28,471 $33,258
2/28/1998 $30,625 $33,624
3/31/1998 $31,958 $36,048
4/30/1998 $32,267 $37,894
5/31/1998 $31,456 $38,280
6/30/1998 $32,074 $37,622
7/31/1998 $31,163 $39,149
8/31/1998 $26,077 $38,734
9/30/1998 $27,598 $33,137
10/31/1998 $29,507 $35,261
11/30/1998 $31,008 $38,124
12/31/1998 $33,383 $40,435
1/31/1999 $33,342 $42,764
2/28/1999 $32,046 $44,551
3/31/1999 $32,324 $43,166
4/30/1999 $32,972 $44,892
5/31/1999 $32,889 $46,630
6/30/1999 $34,411 $45,529
7/31/1999 $33,681 $48,056
8/31/1999 $32,982 $46,557
9/30/1999 $32,200 $46,324
10/31/1999 $33,393 $45,055
11/30/1999 $34,216 $47,907
12/31/1999 $36,398 $48,879
1/31/2000 $34,506 $51,753
2/29/2000 $34,623 $49,155
3/31/2000 $37,852 $48,226
4/30/2000 $36,259 $52,943
5/31/2000 $35,136 $51,349
6/30/2000 $35,158 $50,296
7/31/2000 $34,805 $51,534
8/31/2000 $35,320 $53,880
</TABLE>
PAINEWEBBER GROWTH & INCOME FUND (CLASS A) S&P 500 INDEX
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.
The graph depicts the performance of PaineWebber Growth and Income Fund (Class
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.
AVERAGE ANNUAL TOTAL RETURN, PERIODS ENDED 8/31/00
<TABLE>
<CAPTION>
6 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION(0)
<S> <C> <C> <C> <C> <C> <C>
CLASS A* 6.83% 12.15% 18.01% 13.97% 13.30%
BEFORE DEDUCTING
MAXIMUM SALES CHARGE CLASS B** 6.43 11.27 17.09 N/A 12.91
CLASS C+ 6.41 11.28 17.10 N/A 12.85
CLASS Y++ 7.00 12.48 18.34 N/A 12.76
CLASS A* 2.01 7.11 16.93 13.45 12.99
AFTER DEDUCTING
MAXIMUM SALES CHARGE CLASS B** 1.43 6.27 16.87 N/A 12.91
CLASS C+ 5.41 10.28 17.10 N/A 12.85
S&P 500 INDEX 11.72 16.31 24.03 19.47 17.57
LIPPER MULTI-CAP
CORE FUNDS MEDIAN 11.11 20.24 18.82 16.78 15.62
</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. Six-month and one-year returns are cumulative.
(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. Index and Lipper Median inception returns are as
of oldest share class inception.
* 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 12b-1 distribution
and service fees.
1
<PAGE>
ANNUAL REPORT PAINEWEBBER MID CAP FUND
PERFORMANCE AT A GLANCE
Comparison of the change of a $10,000 investment in PaineWebber Mid Cap Fund
(Classes A and B) and the S&P 400 MidCap Index from April 7, 1992 through August
31, 2000.
[LINE GRAPH]
PAINEWEBBER MID CAP FUND (CLASS A) PAINEWEBBER MID CAP FUND (CLASS B) S&P
400 MIDCAP INDEX
<TABLE>
<S> <C> <C> <C>
4/7/1992 $ 9,550 $10,000 $10,000
4/30/1992 $ 9,280 $ 9,710 $ 9,881
5/31/1992 $ 9,280 $ 9,710 $ 9,975
6/30/1992 $ 8,810 $ 9,210 $ 9,690
7/31/1992 $ 9,240 $ 9,650 $10,170
8/31/1992 $ 8,950 $ 9,340 $ 9,927
9/30/1992 $ 9,160 $ 9,560 $10,066
10/31/1992 $ 9,540 $ 9,940 $10,307
11/30/1992 $10,100 $10,520 $10,883
12/31/1992 $10,500 $10,930 $11,247
1/31/1993 $10,610 $11,040 $11,388
2/28/1993 $10,150 $10,560 $11,229
3/31/1993 $10,530 $10,940 $11,616
4/30/1993 $10,110 $10,500 $11,312
5/31/1993 $10,780 $11,190 $11,827
6/30/1993 $10,740 $11,150 $11,887
7/31/1993 $10,870 $11,270 $11,864
8/31/1993 $11,400 $11,810 $12,354
9/30/1993 $11,860 $12,280 $12,485
10/31/1993 $11,920 $12,340 $12,526
11/30/1993 $11,560 $11,960 $12,249
12/31/1993 $12,190 $12,590 $12,818
1/31/1994 $12,550 $12,960 $13,116
2/28/1994 $12,330 $12,730 $12,930
3/31/1994 $11,650 $12,020 $12,331
4/30/1994 $11,810 $12,170 $12,423
5/31/1994 $11,640 $11,990 $12,305
6/30/1994 $10,990 $11,320 $11,881
7/31/1994 $11,270 $11,600 $12,284
8/31/1994 $12,280 $12,630 $12,928
9/30/1994 $12,220 $12,560 $12,686
10/31/1994 $12,370 $12,700 $12,824
11/30/1994 $11,710 $12,020 $12,246
12/31/1994 $12,024 $12,334 $12,359
1/31/1995 $11,974 $12,274 $12,488
2/28/1995 $12,506 $12,816 $13,143
3/31/1995 $12,857 $13,157 $13,358
4/30/1995 $12,486 $12,775 $13,639
5/31/1995 $12,857 $13,147 $13,968
6/30/1995 $13,790 $14,090 $14,536
7/31/1995 $14,694 $15,003 $15,292
8/31/1995 $14,794 $15,094 $15,578
9/30/1995 $15,316 $15,616 $15,955
10/31/1995 $15,145 $15,435 $15,545
11/30/1995 $15,577 $15,856 $16,224
12/31/1995 $15,485 $15,754 $16,184
1/31/1996 $15,538 $15,807 $16,418
2/29/1996 $16,245 $16,513 $16,976
3/31/1996 $16,478 $16,745 $17,180
4/30/1996 $17,459 $17,726 $17,704
5/31/1996 $18,008 $18,264 $17,943
6/30/1996 $17,544 $17,789 $17,674
7/31/1996 $15,897 $16,113 $16,477
8/31/1996 $16,889 $17,104 $17,428
9/30/1996 $18,135 $18,359 $18,188
10/31/1996 $17,618 $17,821 $18,241
11/30/1996 $18,430 $18,633 $19,268
12/31/1996 $18,253 $18,434 $19,289
1/31/1997 $18,559 $18,739 $20,012
2/28/1997 $17,629 $17,788 $19,848
3/31/1997 $16,443 $16,580 $19,003
4/30/1997 $17,042 $17,178 $19,495
5/31/1997 $19,097 $19,227 $21,199
6/30/1997 $19,929 $20,057 $21,794
7/31/1997 $21,520 $21,643 $23,952
8/31/1997 $21,214 $21,326 $23,923
9/30/1997 $22,768 $22,875 $25,299
10/31/1997 $21,299 $21,387 $24,198
11/30/1997 $20,749 $20,813 $24,557
12/31/1997 $21,018 $21,067 $25,509
1/31/1998 $20,599 $20,635 $25,025
2/28/1998 $22,336 $22,365 $27,097
3/31/1998 $23,267 $23,276 $28,319
4/30/1998 $23,096 $23,106 $28,837
5/31/1998 $21,778 $21,685 $27,539
6/30/1998 $22,515 $22,419 $27,713
7/31/1998 $21,199 $21,109 $26,638
8/31/1998 $16,913 $16,841 $21,680
9/30/1998 $18,440 $18,362 $23,703
10/31/1998 $19,671 $19,588 $25,822
11/30/1998 $20,987 $20,898 $27,111
12/31/1998 $23,499 $23,399 $30,386
1/31/1999 $23,476 $23,377 $29,204
2/28/1999 $21,840 $21,747 $27,673
3/31/1999 $22,544 $22,449 $28,448
4/30/1999 $23,635 $23,535 $30,690
5/31/1999 $24,272 $24,169 $30,825
6/30/1999 $25,953 $25,843 $32,471
7/31/1999 $24,999 $24,893 $31,783
8/31/1999 $24,249 $24,146 $30,696
9/30/1999 $24,567 $24,463 $29,747
10/31/1999 $27,180 $27,065 $31,264
11/30/1999 $29,953 $29,826 $32,906
12/31/1999 $34,864 $34,716 $34,860
1/31/2000 $33,840 $33,696 $33,877
2/29/2000 $40,842 $40,669 $36,249
3/31/2000 $40,305 $40,134 $39,283
4/30/2000 $36,255 $36,101 $37,912
5/31/2000 $33,181 $33,040 $37,438
6/30/2000 $36,865 $36,709 $37,988
7/31/2000 $35,450 $35,300 $38,588
8/31/2000 $41,061 $40,887 $42,887
</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.
The graph depicts the performance of PaineWebber Mid Cap Fund (Classes A and B)
versus the S&P 400 MidCap 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.
AVERAGE ANNUAL TOTAL RETURN, PERIODS ENDED 8/31/00
<TABLE>
<CAPTION>
6 MONTHS 1 YEAR 5 YEARS INCEPTION(0)
<S> <C> <C> <C> <C> <C>
CLASS A* 0.54% 69.33% 22.65% 18.94%
CLASS B** 0.24 68.00 21.66 18.23
BEFORE DEDUCTING
MAXIMUM SALES CHARGE CLASS C+ 0.20 68.14 21.71 19.67
CLASS Y++ 0.65 69.72 N/A 26.54
CLASS A* -3.99 61.75 21.53 18.29
CLASS B** -4.76 63.00 21.47 18.23
AFTER DEDUCTING
MAXIMUM SALES CHARGE CLASS C+ -0.80 67.14 21.71 19.67
18.34 39.75 22.46 18.88
S&P MIDCAP 400 INDEX
0.92 61.07 25.87 20.86
LIPPER MULTI-CAP
GROWTH FUNDS MEDIAN
</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. Six-month and one-year returns are cumulative.
(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. Index and Lipper Median inception returns are as of oldest
share class inception.
* 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 12b-1 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
(Class A) and the S&P 500 Index from August 31, 1990 through August 31, 2000.
[LINE GRAPH]
PAINEWEBBER GROWTH FUND (CLASS A) S&P 500 INDEX
<TABLE>
<S> <C> <C>
Aug-90 $10,000 $10,000
Sep-90 $ 9,315 $ 9,097
Oct-90 $ 9,131 $ 8,655
Nov-90 $ 9,733 $ 8,619
Dec-90 $10,163 $ 9,174
Jan-91 $11,001 $ 9,429
Feb-91 $12,065 $ 9,839
Mar-91 $12,567 $10,541
Apr-91 $12,520 $10,796
May-91 $12,747 $10,822
Jun-91 $12,238 $11,288
Jul-91 $13,263 $10,771
Aug-91 $13,702 $11,273
Sep-91 $13,952 $11,539
Oct-91 $14,305 $11,346
Nov-91 $13,631 $11,498
Dec-91 $15,002 $11,036
Jan-92 $15,050 $12,296
Feb-92 $15,163 $12,067
Mar-92 $14,459 $12,223
Apr-92 $14,046 $11,986
May-92 $14,111 $12,337
Jun-92 $13,706 $12,397
Jul-92 $13,973 $12,213
Aug-92 $13,585 $12,711
Sep-92 $13,585 $12,452
Oct-92 $14,127 $12,599
Nov-92 $15,172 $12,641
Dec-92 $15,625 $13,071
Jan-93 $15,909 $13,232
Feb-93 $15,256 $13,343
Mar-93 $15,867 $13,525
Apr-93 $15,281 $13,810
May-93 $15,926 $13,476
Jun-93 $16,219 $13,836
Jul-93 $16,286 $13,876
Aug-93 $17,249 $13,820
Sep-93 $17,961 $14,344
Oct-93 $18,472 $14,234
Nov-93 $18,053 $14,528
Dec-93 $18,620 $14,390
Jan-94 $18,937 $14,564
Feb-94 $18,514 $15,059
Mar-94 $17,316 $14,651
Apr-94 $17,175 $14,014
May-94 $17,008 $14,193
Jun-94 $16,339 $14,425
Jul-94 $16,753 $14,071
Aug-94 $17,651 $14,533
Sep-94 $17,589 $15,127
Oct-94 $17,396 $14,758
Nov-94 $16,850 $15,089
Dec-94 $16,591 $14,540
Jan-95 $16,705 $14,755
Feb-95 $16,943 $15,137
Mar-95 $17,446 $15,726
Apr-95 $17,464 $16,190
May-95 $17,640 $16,666
Jun-95 $18,337 $17,331
Jul-95 $19,625 $17,733
Aug-95 $19,642 $18,320
Sep-95 $20,383 $18,365
Oct-95 $20,251 $19,140
Nov-95 $21,424 $19,071
Dec-95 $22,070 $19,907
Jan-96 $21,898 $20,291
Feb-96 $22,575 $20,981
Mar-96 $22,766 $21,176
Apr-96 $23,788 $21,379
May-96 $24,780 $21,694
Jun-96 $24,704 $22,251
Jul-96 $22,050 $22,336
Aug-96 $23,263 $21,348
Sep-96 $25,229 $21,799
Oct-96 $24,504 $23,024
Nov-96 $25,277 $23,659
Dec-96 $25,183 $25,446
Jan-97 $26,440 $24,942
Feb-97 $25,131 $26,498
Mar-97 $23,459 $26,708
Apr-97 $23,261 $25,613
May-97 $24,757 $27,139
Jun-97 $25,931 $28,797
Jul-97 $27,853 $30,079
Aug-97 $26,949 $32,470
Sep-97 $29,224 $30,652
Oct-97 $28,549 $32,328
Nov-97 $28,570 $31,249
Dec-97 $29,468 $32,695
Jan-98 $29,676 $33,258
Feb-98 $32,312 $33,624
Mar-98 $33,796 $36,048
Apr-98 $33,616 $37,894
May-98 $32,409 $38,280
Jun-98 $34,670 $37,622
Jul-98 $33,921 $39,149
Aug-98 $27,858 $38,734
Sep-98 $29,912 $33,137
Oct-98 $31,784 $35,261
Nov-98 $34,171 $38,124
Dec-98 $38,882 $40,435
Jan-99 $40,988 $42,764
Feb-99 $38,716 $44,551
Mar-99 $40,837 $43,166
Apr-99 $41,168 $44,892
May-99 $40,401 $46,630
Jun-99 $42,853 $45,529
Jul-99 $41,770 $48,056
Aug-99 $40,386 $46,557
Sep-99 $40,852 $46,324
Oct-99 $43,199 $45,055
Nov-99 $45,876 $47,907
Dec-99 $51,491 $48,879
Jan-00 $49,490 $51,753
Feb-00 $51,987 $49,155
Mar-00 $54,964 $48,226
Apr-00 $52,099 $52,943
May-00 $47,905 $51,349
Jun-00 $51,202 $50,296
Jul-00 $50,418 $51,534
Aug-00 $53,880 $51,706
</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.
The graph depicts the performance of PaineWebber Growth Fund (Class 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.
AVERAGE ANNUAL TOTAL RETURN, PERIODS ENDED 8/31/00
<TABLE>
<CAPTION>
6 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION(0)
<S> <C> <C> <C> <C> <C> <C>
CLASS A* 4.13% 34.04% 22.48% 18.40% 16.47%
CLASS B** 3.72 32.96 21.50 N/A 16.98
BEFORE DEDUCTING
MAXIMUM SALES CHARGE CLASS C+ 3.74 33.01 21.51 N/A 17.26
CLASS Y++ 4.30 34.52 22.84 N/A 17.08
CLASS A* -0.56 27.98 21.35 17.86 16.12
AFTER DEDUCTING
MAXIMUM SALES CHARGE CLASS B** -1.28 27.96 21.31 N/A 16.98
CLASS C+ 2.74 32.01 21.51 N/A 17.26
S&P 500 INDEX 11.72 16.31 24.03 19.47 17.98
LIPPER LARGE CAP 6.88 35.62 25.82 20.26 17.57
GROWTH FUNDS MEDIAN
</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. Six-month and one-year returns are cumulative.
(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. Index and Lipper Median inception returns are as
of oldest share class inception.
* 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 12b-1 distribution
and service fees.
3
<PAGE>
ANNUAL REPORT
Dear Shareholder, October 16, 2000
We are pleased to present you with the annual report for PaineWebber Growth and
Income Fund, PaineWebber Mid Cap Fund and PaineWebber Growth Fund for the fiscal
year ended August 31, 2000.
MARKET REVIEW
[ICON] The 12-month period ended August 31, 2000 was marked by turbulence in the
equity markets. At the beginning of the period, demand for technology stocks
dominated the market, and the performance of "new economy" stocks, that is,
those in the technology area, far outpaced that of "old economy" stocks, those
in more traditional industries.
Around mid-March, market sentiment changed, as investors began to question
the sustainability of the high valuations of technology stocks. Investors also
grew increasingly concerned that higher interest rates and a slowdown in the
pace of economic growth would have a negative effect on corporate profits and,
ultimately, on stock prices. This uncertainty led to a broad-based stock market
decline.
As the fiscal year progressed, market volatility was the order of the day.
A rotation out of technology stocks and into more traditional companies would
push the Dow Jones Industrial Average and the S&P 500 Index higher for a short
time; but then investors would reverse course and technology stocks, as measured
by the NASDAQ Composite Index, would advance and other sectors of the market
would decline. Despite the turbulence, stocks made relatively strong gains
during the final weeks of the fiscal year, and most major stock indexes ended
the period with gains. The S&P 500 Index rose 16.31% and the NASDAQ Composite
Index gained 53.55% for the fiscal year ended August 31, 2000.
OUTLOOK
There is some preliminary evidence that the Federal Reserve Board's (the
"Fed") efforts of slowing the pace of economic growth and containing inflation
may be working. This good news, however, has been tempered by concerns about
rising energy prices, declining corporate profits and a weaker euro (Europe's
single currency) in relation to the U.S. dollar.
As we move toward the end of 2000 and into 2001, the news for the equity
markets may improve. The Fed left rates unchanged at its October meeting. Oil
prices have declined, and although oil prices have been sustained at far higher
levels than many expected just six months ago, we may have seen the highs. The
euro's weakness persists, but support may have been established with recent
coordinated central bank intervention.
Clearly, there is much to preoccupy the markets, but the weight of the
evidence suggests to us a cautiously optimistic posture. The underpinnings of
the economy remain solid, productivity continues to be strong and inflation
remains in check. Such positive economic factors are generally good for the
financial markets.
4
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND, PAINEWEBBER MID CAP FUND, ANNUAL REPORT
PAINEWEBBER GROWTH FUND
PAINEWEBBER GROWTH AND
INCOME FUND
During the fiscal year ended August 31, 2000, we continued to strive to
maintain a diversified portfolio that has the potential to benefit from global
economic expansion over the long term. As a result, the technology, financial
and energy areas of the economy accounted for almost 60% of portfolio assets.
Early in the period, technology stocks, which were market leaders, were
significant contributors to the Fund's return. While technology stocks continue
to be an important part of the portfolio, we reduced the Fund's weighting in
this area when we believed valuations became unrealistically high. During the
latter half of the fiscal year, the Fund's technology weighting declined from
31.0% on February 29, 2000 to 25.4% on August 31, 2000. The Fund's technology
investments were generally geared toward some of the bigger, more
well-established companies, which should derive a significant portion of their
earnings from foreign sales. At 4.3%, Cisco Systems continues to be the Fund's
largest holding.
Increased worldwide demand for oil and rising oil prices boosted the
performance of the large energy companies in the portfolio. Energy companies
were significant contributors to Fund performance. On August 31, 2000, energy
stocks accounted for 11.3% of net assets.
A significant amount of economic data has indicated that the Federal
Reserve Board's monetary policy of raising short-term interest rates may have
achieved its goal of slowing the pace of economic growth and containing
inflation. Therefore, it is likely that the Fed has ended or is near the end of
its tightening cycle. Because we believe we may be heading into a more favorable
interest-rate environment, we increased the portfolio's allocation to financial
stocks. Financial stocks tend to perform well in an environment of moderate
growth, contained inflation and relatively stable interest rates. In selecting
financial stocks for the portfolio, we emphasized large, diversified companies
that we believe have the potential to produce relatively strong earnings. Chase
Manhattan and Citigroup are two such companies. Each accounted for 2.2% of
portfolio assets and both were among the Fund's top 10 holdings on August 31,
2000.
Consumer cyclical stocks and capital goods companies were among the Fund's
top five sectors. In the consumer cyclical area, retail companies were hurt
somewhat by rising interest rates, but should interest rates stabilize, we
believe retailers could benefit from increased consumer spending. A more
positive interest-rate environment should also benefit capital goods companies,
particularly those with exposure to foreign markets.
While we expect some sectors and individual companies to thrive going
forward, relatively weak earnings forecasts may increase market volatility in
the short term. However, we believe that the companies we hold in the portfolio
have the potential to generate strong returns over the long term.
[SIDE NOTE]
PAINEWEBBER GROWTH AND
INCOME FUND
INVESTMENT GOAL:
Current income and
capital growth
COMMENCEMENT:
December 20, 1983
(Class A)
July 1, 1991 (Class B)
July 2, 1992 (Class C)
February 12, 1992
(Class Y)
DIVIDEND PAYMENTS:
Semiannually
5
<PAGE>
ANNUAL REPORT
PROPOSED MERGER AND NEW FUND
MANAGEMENT
On October 6, 2000, the board of trustees unanimously approved the merger
of the PaineWebber Growth and Income Fund into the PACE Large Company Value
Equity Investments. The proposed merger will be submitted to shareholders at
meetings expected to be held in February 2001. If approved by the PaineWebber
fund's shareholders, the merger is expected to become effective no later than
early March 2001.
On October 6, 2000, the board of trustees for the PaineWebber fund
terminated the existing Investment Advisory and Administration Contract with
Mitchell Hutchins relating to the PaineWebber fund and approved new interim
investment management arrangements that became effective on October 10, 2000,
including new interim sub-advisory contracts with Institutional Capital
Corporation, Westwood Management Corporation, and State Street Global Advisors
who took over day-to-day portfolio management of the fund effective October 10,
2000.
More information about the proposed merger for the PaineWebber fund and the
new investment management arrangements and the related investment strategy
changes is set out in the October 10, 2000 supplement to the prospectus dated
December 1, 1999 and additional information will be provided to shareholders in
proxy solicitation materials that are expected to be mailed in December 2000.
6
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND, PAINEWEBBER MID CAP FUND, ANNUAL REPORT
PAINEWEBBER GROWTH FUND
PAINEWEBBER GROWTH AND INCOME
FUND -- PORTFOLIO STATISTICS
<TABLE>
<CAPTION>
CHARACTERISTICS* 8/31/00 2/29/00
--------------------------------------------------------------------------------
<S> <C> <C>
Net Assets ($bln) $1.16 $1.20
Price/Earnings Ratio(1) 22x 31.1x
Dividend Yield 1.10% 1.04%
Number of Securities 70 98
Stocks 87.8% 87.6%
Bonds 1.7% 3.7%
Cash & Equivalents 10.5% 8.7%
--------------------------------------------------------------------------------
<CAPTION>
TOP FIVE SECTORS* 8/31/00 2/29/00
--------------------------------------------------------------------------------
<S> <C> <C>
Financial Services 26.5% Technology 31.0%
Technology 25.4 Consumer Cyclicals 14.5
Energy 11.3 Financial Services 11.7
Consumer Cyclicals 9.0 Utilities 8.4
Capital Goods 8.2 Capital Goods 7.0
--------------------------------------------------------------------------------
Total 80.4 Total 72.6
<CAPTION>
TOP TEN EQUITY HOLDINGS* 8/31/00 2/29/00
--------------------------------------------------------------------------------
<S> <C> <C>
Cisco Systems 4.3% Cisco Systems 3.8%
Morgan Stanley Dean Witter 2.8 JDS Uniphase 3.6
United Technologies 2.7 Apple Computer 2.8
Jabil Circuit 2.3 Applied Materials 2.7
Exxon Mobil 2.2 United Technologies 2.1
IBM 2.2 Microsoft 1.9
Pfizer 2.2 Chase Manhattan 1.9
Citigroup 2.2 Exxon Mobil 1.9
Chase Manhattan 2.2 Target 1.9
Intel 2.0 WorldCom 1.8
--------------------------------------------------------------------------------
Total 25.1 Total 24.4
</TABLE>
* Weightings represent percentages of net assets as of the dates indicated.
The Fund's portfolio is actively managed and its composition will vary over
time.
(1) Based on projected forward fiscal year earnings.
7
<PAGE>
ANNUAL REPORT
PAINEWEBBER MID CAP FUND
The Fund outperformed its index and Lipper peer group for the twelve months
ended August 31, 2000. It did well in large part because of its significant
exposure to telecommunications and technology, and because of its underweighting
in healthcare.
The Fund's growth focus also led us to underweight utility stocks. Worry
over increasing interest rates kept the Fund out of the retail sector and kept
weightings down in financial services.
We added to the Fund's technology exposure early in the reporting period
and again in January. Exposure increased again in February, largely through
capital appreciation. We continue to watch for slowing in the demand for
technology, a development that would lead us to shift into less volatile, more
value-oriented sectors.
Our emphasis on technology followed a decision to place greater emphasis on
growth stocks, which we think will continue to lead the market. Even so, we
continue to make opportunistic trades in value-oriented stocks. We look for
catalysts--such as new product introductions, management changes or increasing
market shares--that could set off earnings growth acceleration.
PROPOSED MERGER AND NEW FUND MANAGEMENT
On October 6, 2000 the board of trustees unanimously approved the merger of the
PaineWebber Mid Cap Fund into the PACE Small/Medium Company Growth Equity
Investments. The proposed merger will be submitted to shareholders at meetings
expected to be held in February 2001. If approved by the PaineWebber fund's
shareholders, the merger is expected to become effective no later than early
March 2001.
On October 6, 2000, the board of trustees for the PaineWebber fund
terminated the existing Investment Advisory and Administration Contract with
Mitchell Hutchins relating to the PaineWebber fund and approved new interim
investment management arrangements that became effective on October 10, 2000,
including a new interim sub-advisory contract with Delaware Management Company
who took over day-to-day portfolio management of the fund effective October 10,
2000.
More information about the proposed merger for the PaineWebber fund and the
new investment management arrangements and the related investment strategy
changes is set out in the October 10, 2000 supplement to the prospectus dated
December 1, 1999 and additional information will be provided to shareholders in
proxy solicitation materials that are expected to be mailed in December 2000.
[SIDENOTE]
PAINEWEBBER MID CAP FUND
INVESTMENT GOAL:
Long-term capital appreciation
COMMENCEMENT:
April 7, 1992 (Class A)
April 7, 1992 (Class B)
July 2, 1992 (Class C)
March 17, 1998 (Class Y)
DIVIDEND PAYMENTS:
Annually
[/SIDENOTE]
8
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND, PAINEWEBBER MID CAP FUND, ANNUAL REPORT
PAINEWEBBER GROWTH FUND
PAINEWEBBER MID CAP FUND -- PORTFOLIO
STATISTICS
<TABLE>
<CAPTION>
CHARACTERISTICS* 8/31/00 2/29/00
--------------------------------------------------------------------------------
<S> <C> <C>
Total Net Assets ($mm) $247.9 $250.0
Price/Earnings Ratio(2) 38x 124.9x
Dividend Yield 0.20% 0.20%
Number of Securities 95 120
Stocks 93.6% 93.1%
Cash & Equivalents 6.4% 6.9%
<CAPTION>
TOP TEN HOLDINGS* 8/31/00 2/29/00
-------------------------------------------------------------------------------------
<S> <C> <C>
SDL 6.7% JDS Uniphase 6.7%
JDS Uniphase 3.5 SDL 2.6
Calpine 2.6 Maxim Integrated Products 2.2
SCI Systems 2.5 Lam Research 2.0
EMC 2.4 Peregrine Systems 2.0
Jabil Circuit 2.3 Advanced Fibre Communications 1.8
Gemstar - TV Guide International 2.2 Comverse Technology 1.8
Intuit 2.2 ASM Lithography Holdings 1.7
Siebel Systems 2.2 EMC 1.7
Ciena 2.0 Teradyne 1.7
-------------------------------------------------------------------------------------
Total 28.6 Total 24.2
<CAPTION>
TOP FIVE SECTORS* 8/31/00 2/29/00
-------------------------------------------------------------------------------------
<S> <C> <C>
Technology/Telecommunications 53.7% Technology 55.2%
Utilities 14.9 Telecommunications 11.2
Consumer Cyclicals 8.8 Consumer Cyclicals 7.9
Energy 7.7 Financial Services 4.7
Capital Goods 6.1 Capital Goods 4.3
-------------------------------------------------------------------------------------
Total 91.2 Total 83.3
</TABLE>
* Weightings represent percentages of net assets as of the dates indicated.
The Fund's portfolio is actively managed and its composition will vary over
time.
(2) Forward fiscal year earnings.
9
<PAGE>
ANNUAL REPORT
PAINEWEBBER GROWTH FUND
The Fund sought to achieve its objective of long-term capital appreciation
largely by investing in companies that we believed had dominant industry
positions, strong management and good financial health. Using a proprietary
quantitative model, we looked for companies that could provide sustained or
accelerated earnings or cash flow growth of at least 10% annually in each of the
next three years.
During the fiscal year ended August 31, 2000, we found most of our best
picks in the technology sector. We also had some strong performing consumer
cyclical and telecommunications stocks such as Tiffany & Co. (1.6%) and Level 3
Communications (1.6%), but overall, these sectors hurt the Fund's performance.
Our bias toward larger-cap securities continued to be positive for the Fund.
Even so, performance trailed the Fund's peer group.
Fund holdings were selected through a fundamental, bottom-up process, yet
they tended to reflect broad investment themes: that technological evolution
will continue to have a profound impact on all businesses and lives, and that
strong brands and the ability to establish and maintain a global presence are
critically important. Accordingly, the Portfolio's top holdings for the period
reflected the importance of technology companies in today's business landscape.
PROPOSED MERGER AND NEW FUND MANAGEMENT
On October 6, 2000 the board of trustees unanimously approved the merger of the
PaineWebber Growth Fund into the PACE Large Company Growth Equity Investments.
The proposed merger will be submitted to shareholders at meetings expected to be
held in February 2001. If approved by the PaineWebber fund's shareholders, the
merger is expected to become effective no later than early March 2001.
On October 6, 2000, the board of trustees for the PaineWebber fund
terminated the existing Investment Advisory and Administration Contract with
Mitchell Hutchins relating to that PaineWebber fund and approved new interim
investment management arrangements that became effective on October 10, 2000,
including new interim sub-advisory contracts with Alliance Capital Management
L.P. and State Street Global Advisors who took over day-to-day portfolio
management of the fund effective October 10, 2000.
More information about the proposed merger for the PaineWebber fund and the
new investment management arrangements and the related investment strategy
changes is set out in the October 10, 2000 supplement to the prospectus dated
December 1, 1999 and additional information will be provided to shareholders in
proxy solicitation materials that are expected to be mailed in December 2000.
[SIDENOTE]
PAINEWEBBER GROWTH FUND
INVESTMENT GOAL:
Long-term capital appreciation
COMMENCEMENT:
March 18, 1985 (Class A)
July 1, 1991 (Class B)
July 2, 1992 (Class C)
August 28, 1991 (Class Y)
DIVIDEND PAYMENTS:
Annually
[/SIDENOTE]
10
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND, PAINEWEBBER MID CAP FUND, ANNUAL REPORT
PAINEWEBBER GROWTH FUND
PAINEWEBBER GROWTH FUND--
PORTFOLIO STATISTICS
<TABLE>
<CAPTION>
CHARACTERISTICS* 8/31/00 2/29/00
--------------------------------------------------------------------------------
<S> <C> <C>
Total Net Assets ($mm) $619.7 $585.0
Median Market Cap ($bln) $19.4 $31.0
Number of Securities 118 118
Stocks 89.0% 89.5%
Cash & Equivalents 11.0% 10.5%
--------------------------------------------------------------------------------
<CAPTION>
TOP FIVE SECTORS* 8/31/00 2/29/00
--------------------------------------------------------------------------------
<S> <C> <C>
Technology 42.6% Technology 42.9%
Consumer Cyclicals 21.8 Consumer Cyclicals 26.0
Financial Services 11.5 Utilities 5.9
Utilities 5.8 Financial Services 4.3
Healthcare 4.8 Healthcare 3.6
--------------------------------------------------------------------------------
Total 86.5 Total 82.7
<CAPTION>
TOP TEN HOLDINGS* 8/31/00 2/29/00
--------------------------------------------------------------------------------
<S> <C> <C>
EMC 4.1% JDS Uniphase 4.9%
Cisco Systems 4.0 Cisco Systems 3.9
JDS Uniphase 3.8 EMC 3.3
Sun Microsystems 3.4 Sun Microsystems 2.7
Network Appliance 2.6 Network Appliance 2.2
Time Warner 2.1 Time Warner 2.2
Dell Computer 2.0 Level 3 Communications 2.1
Infinity Broadcasting 1.8 Liberty Media Group 2.1
Tyco International 1.8 Home Depot 2.0
Viacom 1.8 Dell Computer 1.9
--------------------------------------------------------------------------------
Total 27.4 Total 27.3
</TABLE>
* Weightings represent percentages of net assets as of the dates indicated. The
Fund's portfolio is actively managed and its composition will vary over
time.
11
<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, Mid Cap Fund or Growth Fund, or another fund
in the PaineWebber Family of Funds,(3) please contact your Financial Advisor.
Sincerely,
/s/ Margo Alexander /s/ Brian M. Storms
MARGO ALEXANDER BRIAN M. STORMS
Chairman Chief Executive Officer
Mitchell Hutchins and President
Asset Management Inc. Mitchell Hutchins
Asset Management Inc.
This letter is intended to assist shareholders in understanding how the
funds performed during the fiscal year ended August 31, 2000, 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.
(3) 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.
12
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN(1)
----------------------------------------- -----------------------------------
12 MONTHS 6 MONTHS
08/31/00 02/29/00 08/31/99 ENDED 08/31/00 ENDED 08/31/00
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $34.55 $32.39 $32.07 12.15% 6.83%
---------------------------------------------------------------------------------------------------------------------------
Class B Shares 33.95 31.90 31.72 11.27 6.43
---------------------------------------------------------------------------------------------------------------------------
Class C Shares 34.02 31.97 31.78 11.28 6.41
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS A SHARE
<TABLE>
<CAPTION>
NET ASSET VALUE
----------------------------
CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL 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
---------------------------------------------------------------------------------------------------------------------------
1999 32.46 34.05 1.2696 0.0112 9.03
---------------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 34.05 34.55 -- 0.0502 1.62
---------------------------------------------------------------------------------------------------------------------------
Totals: $15.2900 $6.6811
---------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 706.43%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS B SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------------------
CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL 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
---------------------------------------------------------------------------------------------------------------------------
1999 32.26 33.58 1.2696 -- 8.21
---------------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 33.58 33.95 -- -- 1.10
---------------------------------------------------------------------------------------------------------------------------
Totals: $11.4712 $0.5429
---------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 204.86%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Figures assume reinvestment of all dividends and other distributions at
net asset value on the payable dates and do not include sales charges;
results would be lower if sales charges were included. Total investment
return for periods 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.
13
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND
PERFORMANCE RESULTS (UNAUDITED) (CONCLUDED)
PERFORMANCE SUMMARY CLASS C SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
--------------------------
CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL 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
---------------------------------------------------------------------------------------------------------------------------
1999 32.32 33.65 1.2696 -- 8.23
---------------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 33.65 34.02 -- -- 1.10
---------------------------------------------------------------------------------------------------------------------------
Totals: $11.4868 $0.5051
---------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 168.56%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURN(1)
<TABLE>
<CAPTION>
% RETURN WITHOUT DEDUCTING % RETURN AFTER DEDUCTING
MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
------------------------------ -----------------------------
CLASS CLASS
------------------------------ -----------------------------
A* B** C*** A* B** C***
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Twelve Months Ended 09/30/00 7.52% 6.68% 6.70% 2.67% 1.68% 5.70%
---------------------------------------------------------------------------------------------------------------------
Five Years Ended 09/30/00 15.71 14.80 14.81 14.64 14.57 14.81
---------------------------------------------------------------------------------------------------------------------
Ten Years Ended 09/30/00 13.66 N/A N/A 13.14 N/A N/A
---------------------------------------------------------------------------------------------------------------------
Commencement of Operations Through 09/30/00+ 12.79 11.99 11.80 12.48 11.99 11.80
---------------------------------------------------------------------------------------------------------------------
</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 less than one year has not been annualized.
* Maximum sales charge for Class A shares is 4.5% of the public offering
price. Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5% and is
reduced to 0% after 6 years. Class B shares bear ongoing 12b-1
distribution and service fees.
*** Maximum contingent deferred sales charge for Class C shares is 1% and is
reduced to 0% after 1 year. Class C shares bear ongoing 12b-1 distribution
and service fees.
+ Commencement of operation dates are December 20, 1983, July 1, 1991 and
July 2, 1992 for Class A, Class B and Class C shares, respectively.
Note: The Fund offers Class Y shares to a limited group of investors, including
participants in certain investment programs that are sponsored by PaineWebber
and that may invest in PaineWebber mutual funds. For the year ended August 31,
2000 and since inception, February 12, 1992, through August 31, 2000, Class Y
shares had a total return of 12.48% and 179.45%, respectively. For the one year
and five year periods ended September 30, 2000 and since inception, February 12,
1992 through September 30, 2000, Class Y shares have an average annual total
return of 7.83%, 16.02% and 11.78%, respectively. Class Y shares do not have
initial or contingent deferred sales charges or ongoing 12b-1 distribution and
service fees.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
14
<PAGE>
PAINEWEBBER MID CAP FUND
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN(1)
------------------------------------------- -----------------------------------
12 MONTHS 6 MONTHS
08/31/00 02/29/00 08/31/99 ENDED 08/31/00 ENDED 08/31/00
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $16.83 $16.74 $10.67 69.33% 0.54%
---------------------------------------------------------------------------------------------------------------------------
Class B Shares 16.56 16.52 10.59 68.00 0.24
---------------------------------------------------------------------------------------------------------------------------
Class C Shares 14.86 14.83 9.57 68.14 0.20
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS A SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
-------------------------
CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL 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
---------------------------------------------------------------------------------------------------------------------------
1999 10.34 14.29 0.9297 -- 48.37
---------------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 14.29 16.83 -- 17.77
---------------------------------------------------------------------------------------------------------------------------
Totals: $12.0169 $0.0000
---------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 329.96%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS B SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
-------------------------
CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL 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
---------------------------------------------------------------------------------------------------------------------------
1999 10.33 14.13 0.9297 -- 46.96
---------------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 14.13 16.56 -- -- 17.20
---------------------------------------------------------------------------------------------------------------------------
Totals: $12.0169 $0.0000
---------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 308.87%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Figures assume reinvestment of all dividends and other 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 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.
15
<PAGE>
PAINEWEBBER MID CAP FUND
PERFORMANCE RESULTS (UNAUDITED) (CONCLUDED)
PERFORMANCE SUMMARY CLASS C SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
--------------------------- CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL 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
--------------------------------------------------------------------------------------------------------------------
1999 9.33 12.68 0.9297 -- 47.17
--------------------------------------------------------------------------------------------------------------------
01/01/99-08/31/00 12.68 14.86 -- -- 17.19
--------------------------------------------------------------------------------------------------------------------
Totals: $12.0169 $0.0000
--------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 333.83%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURN(1)
<TABLE>
<CAPTION>
% RETURN WITHOUT DEDUCTING % RETURN AFTER DEDUCTING
MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
------------------------------- ------------------------------------
CLASS CLASS
------------------------------- ------------------------------------
A* B** C*** A* B** C***
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Twelve Months Ended 09/30/00 48.57% 47.53% 47.51% 41.88% 42.53% 46.51%
----------------------------------------------------------------------------------------------------------------------
Five Years Ended 09/30/00 18.97 18.02 18.05 17.88 17.82 18.05
----------------------------------------------------------------------------------------------------------------------
Commencement of Operations Through 09/30/00+ 17.11 16.41 17.75 16.47 16.41 17.75
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Figures assume reinvestment of all dividends and other 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 less than one year has not
been annualized.
* Maximum sales charge for Class A shares is 4.5% of the public offering
price. Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5% and is
reduced to 0% after 6 years. Class B shares bear ongoing 12b-1
distribution and service fees.
*** Maximum contingent deferred sales charge for Class C shares is 1% and is
reduced to 0% after 1 year. Class C shares bear ongoing 12b-1
distribution and service fees.
+ Commencement of operations dates are April 7, 1992 for Class A and Class B
shares and July 2, 1992 for Class C shares.
Note: The Fund offers Class Y shares to 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, 2000 and since inception March 17, 1998 through
August 31, 2000, Class Y shares had a total return of 69.72% and 78.56%,
respectively. For the year ended September 30, 2000 and since inception
March 17, 1998 through September 30, 2000, Class Y shares have an
average annual total return of 49.01% and 19.93%, respectively. Class Y
shares do not have initial or contingent deferred sales charges or
ongoing distribution and service fees.
The data above represents past performance of the Fund's shares, which
is no guarantee of future results. The principal value of an investment
in the Fund will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
16
<PAGE>
PAINEWEBBER GROWTH FUND
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN(1)
-------------------------------------------- ----------------------------------------------
12 MONTHS 6 MONTHS
08/31/00 02/29/00 08/31/99 ENDED 08/31/00 ENDED 08/31/00
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $33.82 $32.48 $26.85 34.04% 4.13%
---------------------------------------------------------------------------------------------------------------------------
Class B Shares 30.10 29.02 24.26 32.96 3.72
---------------------------------------------------------------------------------------------------------------------------
Class C Shares 30.51 29.41 24.56 33.01 3.74
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS A SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------------------- CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL 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
---------------------------------------------------------------------------------------------------------------------------
1999 25.85 32.17 1.9441 -- 32.43
---------------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 32.17 33.82 -- -- 5.13
---------------------------------------------------------------------------------------------------------------------------
Totals: $20.4303 $0.5872
---------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 957.28%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS B SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
----------------------------- CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL 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
---------------------------------------------------------------------------------------------------------------------------
1999 23.48 28.78 1.9441 -- 31.35
---------------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 28.78 30.10 -- -- 4.59
---------------------------------------------------------------------------------------------------------------------------
Totals: $17.0043 $0.0037
---------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 321.79%
---------------------------------------------------------------------------------------------------------------------------
</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 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.
17
<PAGE>
PAINEWEBBER GROWTH FUND
PERFORMANCE RESULTS (UNAUDITED) (CONCLUDED)
PERFORMANCE SUMMARY CLASS C SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
----------------------------- CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL 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
---------------------------------------------------------------------------------------------------------------------------
1999 23.77 29.17 1.9441 -- 31.39
---------------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 29.17 30.51 -- -- 4.59
---------------------------------------------------------------------------------------------------------------------------
Totals: $16.4040 $0.0000
---------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 267.49%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURN(1)
<TABLE>
<CAPTION>
% RETURN WITHOUT DEDUCTING % RETURN AFTER DEDUCTING
MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
------------------------------ ----------------------------------
CLASS CLASS
------------------------------ ----------------------------------
A* B** C*** A* B** C***
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Twelve Months Ended 09/30/00 23.10% 22.06% 22.12% 17.56% 17.06% 21.12%
------------------------------------------------------------------------------------------------------------------
Five Years Ended 09/30/00 19.80 18.83 18.85 18.70 18.63 18.85
------------------------------------------------------------------------------------------------------------------
Ten Years Ended 09/30/00 18.37 N/A N/A 17.82 N/A N/A
------------------------------------------------------------------------------------------------------------------
Commencement of Operations Through 09/30/00+ 15.83 15.89 16.03 15.48 15.89 16.03
------------------------------------------------------------------------------------------------------------------
</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 less than one year has not been annualized.
* Maximum sales charge for Class A shares is 4.5% of the public offering
price. Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5% and
is reduced to 0% after 6 years. Class B shares bear ongoing 12b-1
distribution and service fees.
*** Maximum contingent deferred sales charge for Class C shares is 1% and
is reduced to 0% after 1 year. Class C shares bear ongoing 12b-1
distribution and service fees.
+ Commencement of operations dates are March 18, 1985, July 1, 1991 and
July 2, 1992 for Class A, Class B and Class C shares, respectively.
Note: The Fund offers Class Y shares to a limited group of investors,
including participants in certain investment programs that are sponsored
by PaineWebber and that may invest in PaineWebber mutual funds. For the
year ended August 31, 2000 and since inception, August 26, 1991 through
August 31, 2000, Class Y shares had a total return of 34.52% and
315.06%, respectively. For the one year and five year periods ended
September 30, 2000 and since inception through September 30, 2000, Class
Y shares have an average annual total return of 23.54%, 20.16% and
15.98%, respectively. Class Y shares do not have initial or contingent
deferred sales charges or ongoing distribution and service fees.
The data above represents past performance of the Fund's shares, which
is no guarantee of future results. The principal value of an investment
in the Fund will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
18
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 2000
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------- -------
<S> <C>
COMMON STOCKS--87.75%
AIRLINES--1.37%
211,300 AMR Corp.* ................................. $ 6,933,281
183,600 Delta Air Lines, Inc. ...................... 9,088,200
-------------
16,021,481
-------------
BANKS--3.32%
448,050 Chase Manhattan Corp. ...................... 25,034,793
317,300 FleetBoston Financial Corp. ................ 13,544,744
-------------
38,579,537
-------------
CHEMICALS--0.95%
423,354 Dow Chemical Co. ........................... 11,086,583
-------------
COMPUTER HARDWARE--7.35%
313,280 Apple Computer, Inc.* ...................... 19,090,500
720,000 Cisco Systems, Inc.* ....................... 49,410,000
389,000 Dell Computer Corp.* ....................... 16,970,125
-------------
85,470,625
-------------
COMPUTER SOFTWARE--3.83%
197,600 IBM Corp.. ................................. 26,083,200
264,425 Microsoft Corp.* ........................... 18,460,170
-------------
44,543,370
-------------
DEFENSE & AEROSPACE--2.07%
316,500 Boeing Co. ................................. 16,972,312
155,847 TRW, Inc. .................................. 7,120,260
-------------
24,092,572
-------------
DIVERSIFIED RETAIL--2.38%
327,500 Federated Department Stores, Inc.* ......... 9,047,187
798,500 Target Corp. ............................... 18,565,125
-------------
27,612,312
-------------
DRUGS & MEDICINE--5.52%
297,700 American Home Products Corp. ............... 16,131,619
594,390 Pfizer, Inc. ............................... 25,707,367
556,100 Schering-Plough Corp. ...................... 22,313,513
-------------
64,152,499
-------------
ELECTRIC UTILITIES--2.37%
181,467 Duke Energy Corp. .......................... 13,576,000
221,000 Energy East Corp. .......................... 5,013,937
197,200 Unicom Corp. ............................... 9,009,575
-------------
27,599,512
-------------
ELECTRICAL EQUIPMENT--5.07%
152,553 Honeywell, Inc. ............................ 5,882,825
412,000 Jabil Circuit, Inc.* ....................... 26,290,750
118,400 Johnson Controls, Inc. ..................... 6,327,000
565,728 Motorola, Inc. ............................. 20,401,566
-------------
58,902,141
-------------
ELECTRICAL POWER--0.79%
138,233 Emerson Electric Co. ....................... $ 9,149,297
-------------
ENERGY RESERVES & PRODUCTION--8.98%
246,831 Chevron Corp. .............................. 20,857,220
314,385 El Paso Energy Corp. ....................... 18,312,926
319,922 Exxon Mobil Corp. .......................... 26,113,633
186,261 Phillips Petroleum Co. ..................... 11,524,900
341,500 Royal Dutch Petroleum Co., ADR ............. 20,895,531
219,790 Tosco Corp. ................................ 6,703,595
-------------
104,407,805
-------------
ENTERTAINMENT--1.52%
263,000 Viacom, Inc., Class B* ..................... 17,703,188
-------------
FINANCIAL SERVICES--6.09%
439,384 Citigroup, Inc. ............................ 25,649,041
215,400 Federal Home Loan Mortgage Corp. ........... 9,073,725
254,400 General Electric Co. ....................... 14,930,100
295,543 MBNA Corp. ................................. 10,436,362
93,275 Providian Financial Corp. .................. 10,720,795
-------------
70,810,023
-------------
FOREST PRODUCTS & PAPER--1.59%
133,000 International Paper Co. .................... 4,239,375
307,814 Weyerhaeuser Co. ........................... 14,255,636
-------------
18,495,011
-------------
INDUSTRIAL PARTS--3.81%
156,666 Ingersoll Rand Co. ......................... 7,138,095
122,500 Mettler-Toledo International Inc., ADR ..... 5,795,781
501,400 United Technologies Corp. .................. 31,306,162
-------------
44,240,038
-------------
INDUSTRIAL SERVICES & SUPPLIES--1.51%
307,400 Tyco International, Ltd. ................... 17,521,800
-------------
INFORMATION & COMPUTER SERVICES--1.28%
253,500 America Online Inc.* ....................... 14,861,438
-------------
LIFE INSURANCE--1.70%
381,218 AXA Financial Inc. ......................... 19,728,031
-------------
LONG DISTANCE & PHONE COMPANIES--2.04%
334,500 Worldcom Inc.* ............................. 12,209,250
262,800 Verizon Communications ..................... 11,464,650
-------------
23,673,900
-------------
MEDIA--0.87%
271,858 Comcast Corp., Class A* .................... 10,126,711
-------------
MEDICAL PRODUCTS--1.08%
150,275 Baxter International, Inc. ................. 12,510,394
-------------
MINING & METALS--1.31%
456,204 Alcoa, Inc. ................................ 15,168,783
-------------
19
<PAGE>
NUMBER OF
SHARES VALUE
---------- -----
COMMON STOCKS--(CONCLUDED)
MOTOR VEHICLES--0.57%
142,600 Borg Warner Automotive, Inc. .............. $ 4,901,875
107,635 Delphi Automotive Systems Corp. ........... 1,769,250
-------------
6,671,125
-------------
OIL REFINING--0.52%
233,500 Conoco, Inc. .............................. 6,100,188
-------------
OIL SERVICES--2.30%
374,886 Halliburton Co. ........................... 19,868,958
115,800 Transocean Sedco Forex, Inc. .............. 6,919,050
-------------
26,788,008
-------------
OTHER INSURANCE--1.14%
205,032 Ambac Financial Group Inc. ................ 13,250,193
-------------
PUBLISHING--2.04%
294,461 Knight Ridder, Inc. ....................... 16,084,932
193,711 New York Times Co., Class A ............... 7,591,050
-------------
23,675,982
-------------
SECURITIES & ASSET MANAGEMENT--4.63%
149,000 Merrill Lynch & Co., Inc. .................$ 21,605,000
300,000 Morgan Stanley Dean Witter & Co. .......... 32,268,750
-------------
53,873,750
-------------
SEMICONDUCTOR--7.25%
257,048 Applied Materials, Inc.* .................. 22,186,456
303,958 Intel Corp. ............................... 22,758,855
173,977 JDS Uniphase Corp.* ....................... 21,657,418
263,700 Texas Instruments, Inc. ................... 17,651,419
-------------
84,254,148
-------------
SPECIALTY RETAIL--1.57%
221,903 Circuit City Stores, Inc. ................. 5,755,609
260,397 Home Depot, Inc. .......................... 12,515,331
-------------
18,270,940
-------------
WIRELESS TELECOMMUNICATIONS--0.93%
196,000 Nextel Communications, Inc.* .............. 10,865,750
-------------
Total Common Stocks (cost--$705,797,613) ............. 1,020,207,135
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES
--------- -------- --------
CONVERTIBLE BOND--1.66%
FINANCIAL SERVICES--1.66%
<S> <C> <C> <C>
$ 16,100 Verizon Financial Services Inc.# (cost--$15,987,161) 09/15/05 4.250% 19,320,000
--------------
U.S. AGENCY OBLIGATION--8.59%
100,000 Federal Home Loan Mortgage Corp. Discount Notes (cost--$99,893,000).. 09/07/00 6.420 99,893,000
--------------
REPURCHASE AGREEMENT--1.79%
20,755 Repurchase agreement dated 08/31/00 with SG Warburg,
collateralized by $16,819,000 U.S. Treasury Bonds 8.125%
due 08/15/21 (value--$21,170,916); proceeds: $20,758,805
(cost--$20,755,000) ................................................ 09/01/00 6.600 20,755,000
--------------
Total Investments (cost--$842,432,774)--99.79%................................. 1,160,175,135
Other assets in excess of liabilities--0.21%................................... 2,438,388
--------------
Net Assets--100.00%............................................................ $1,162,613,523
==============
</TABLE>
----------------------
* Non-Income producing security.
@ Interest rate reflects yield to maturity at date of purchase.
# Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
ADR American Depositary Receipt.
See accompanying notes to financial statements
20
<PAGE>
PAINEWEBBER MID CAP FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 2000
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------- -----------
<S> <C>
COMMON STOCKS--93.58%
AIRLINES--0.29%
50,000 America West Holding Corp.*(1) ............................. $ 731,250
----------
COMPUTER-BUSINESS SERVICES--0.38%
6,000 Ebay Inc.* ................................................. 372,000
12,000 Priceline.com Inc.*(1) ..................................... 326,250
2,000 Yahoo!, Inc.* .............................................. 243,000
----------
941,250
----------
COMPUTER HARDWARE--2.92%
60,000 EMC Corp.* ................................................. 5,880,000
1,700 McDATA Corp.* .............................................. 182,856
10,000 Network Appliance, Inc.* ................................... 1,170,000
----------
7,232,856
----------
COMPUTER SOFTWARE--11.39%
35,000 BMC Software, Inc.* ........................................ 945,000
10,000 Broadbase Software Inc.* ................................... 209,375
7,800 Cacheflow Inc.* ............................................ 853,125
162,000 Cadence Design Systems Inc.* ............................... 3,442,500
20,000 E Piphany Inc.*(1) ......................................... 2,080,000
19,250 i2 Technologies, Inc.*(1) .................................. 3,256,859
90,000 Intuit* .................................................... 5,388,750
10,000 Marimba Inc.* .............................................. 168,750
40,000 New Era of Networks Inc.* .................................. 1,402,500
125,000 Peregrine Systems Inc.* .................................... 3,992,188
27,000 Siebel Systems Inc.* ....................................... 5,340,937
30,000 Vignette Corp. ............................................. 1,143,750
----------
28,223,734
----------
CONSUMER DURABLES--1.03%
35,000 Black & Decker Corp. ....................................... 1,402,188
30,000 Whirlpool Corp. ............................................ 1,140,000
----------
2,542,188
----------
DEFENSE & AEROSPACE--1.38%
75,000 TRW, Inc.(1) ............................................... 3,426,562
----------
DIVERSIFIED RETAIL--0.45%
40,000 Federated Department Stores, Inc.* ......................... 1,105,000
----------
DRUGS & MEDICINE--0.70%
25,000 Biogen Inc.* ............................................... 1,728,125
----------
ELECTRIC UTILITIES--2.64%
66,000 Calpine Corp.* ............................................. 6,534,000
----------
ELECTRICAL EQUIPMENT--10.64%
8,700 Epcos AG ................................................... 890,663
51,270 Flextronics International Ltd.* ............................ 4,271,432
90,000 Jabil Circuit Inc.* ........................................ 5,743,125
75,000 Sawtek Inc.* ............................................... 3,782,812
ELECTRICAL EQUIPMENT--(CONCLUDED)
100,000 SCI Systems Inc.*(1) ....................................... $6,175,000
50,000 Solectron Corp.*(1) ........................................ 2,265,625
50,000 Teradyne, Inc.* ............................................ 3,240,625
----------
26,369,282
----------
GAS UTILITY--0.57%
25,000 Equitable Resources Inc. ................................... 1,407,813
----------
INDUSTRIAL PARTS--2.15%
75,000 Helix Technology Corp. ..................................... 2,840,625
48,000 PRI Automation Inc.*(1) .................................... 2,478,000
----------
5,318,625
----------
INFORMATION & COMPUTER SERVICES--3.25%
2,700 Akamai Technologies, Inc.* ................................. 204,019
60,000 America Online Inc.* ....................................... 3,517,500
20,000 Ariba Inc.*(1) ............................................. 3,147,500
50,000 Comdisco Inc. .............................................. 1,200,000
----------
8,069,019
----------
MANUFACTURING-GENERAL--0.95%
50,000 Mettler-Toledo International Inc., ADR ..................... 2,365,625
----------
MANUFACTURING-HIGH TECHNOLOGY--1.61%
105,000 ASM Lithography Holdings N.V.* ............................. 4,003,125
----------
MEDIA--6.65%
25,000 Cablevision Systems Corp.*(1) .............................. 1,681,250
32,900 Clear Channel Communications* .............................. 2,381,137
62,400 Comcast Corp., Class A* .................................... 2,324,400
32,500 Emmis Communications Corp.*(1) ............................. 1,066,406
59,859 Gemstar-TV Guide International, Inc.* ...................... 5,402,275
46,500 Infinity Broadcasting Corp.* ............................... 1,761,188
60,000 Penton Media Inc. .......................................... 1,878,750
----------
16,495,406
----------
MEDICAL PROVIDERS--0.67%
65,000 Lincare Holdings Inc.*(1) .................................. 1,657,500
----------
MOTOR VEHICLES--1.66%
110,000 Navistar International Corp.* .............................. 4,125,000
----------
OIL REFINING--1.98%
65,000 Conoco, Inc. ............................................... 1,698,125
25,000 Smith International Inc. * ................................. 1,987,500
40,000 Tosco Corp. ................................................ 1,220,000
----------
4,905,625
----------
OIL SERVICES--5.73%
45,000 Cooper Cameron Corp.*(1) ................................... 3,501,562
65,000 Diamond Offshore Drilling, Inc.*(1) ........................ 2,912,813
</TABLE>
21
<PAGE>
PAINEWEBBER MID CAP FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------- ------------
COMMON STOCKS--(CONCLUDED)
OIL SERVICES--(CONCLUDED)
<S> <C>
95,000 Ensco International Inc. ................................... $ 3,788,125
40,000 Grant Prideco, Inc.* ....................................... 940,000
65,000 Weatherford International, Inc.*(1) ........................ 3,050,937
------------
14,193,437
------------
OTHER INSURANCE--0.83%
32,000 Ambac Financial Group, Inc. ................................ 2,068,000
------------
SEMICONDUCTOR--22.80%
39,000 Alpha Industries, Inc.* .................................... 1,967,062
25,000 Altera Corp.* .............................................. 1,620,313
14,000 Applied Micro Circuits Corp.* .............................. 2,841,125
70,000 Atmel Corp.* ............................................... 1,400,000
35,000 Bookham Technology Plc* .................................... 2,161,250
30,000 Chartered Semiconductor
Manufacturing Ltd.* ..................................... 2,546,250
50,000 Fairchild Semiconductor
International,Inc* ...................................... 1,987,500
70,000 JDS Uniphase Corp.* ........................................ 8,713,906
140,000 Lam Research Corp.* ........................................ 4,217,500
52,600 Maxim Integrated Productions Inc.* ......................... 4,612,362
60,000 Novellus Systems Inc.* ..................................... 3,693,750
26,000 RF Micro Devices Inc.* ..................................... 1,160,250
42,000 SDL Inc.* .................................................. 16,687,125
32,700 Vitesse Semiconductor Corp.*(1) ............................ 2,904,169
------------
56,512,562
------------
SPECIALTY RETAIL--1.18%
90,000 Bed, Bath & Beyond Inc.* ................................... $ 1,580,625
30,000 Lowe's Companies Inc. ...................................... 1,344,375
------------
2,925,000
------------
WIRELESS TELECOMMUNICATIONS--11.73%
92,000 Advanced Fibre Communications* ............................. 4,863,062
180,000 Aspect Communications Inc.* ................................ 4,061,250
4,300 Avanex Corp.*(1) ........................................... 651,316
4,000 Avici Systems Inc.* ........................................ 599,250
22,000 Ciena Corp.* ............................................... 4,877,125
49,000 Comverse Technology, Inc.* ................................. 4,504,937
8,000 Corvis Corporation*(1) ..................................... 830,500
35,000 Foundry Networks, Inc.*(1) ................................. 3,257,188
32,749 Global Crossing Ltd.* ...................................... 984,517
20,250 Worldcom Inc.* ............................................. 739,125
10,000 Polycom, Inc.* ............................................. 1,123,750
4,000 Redback Networks Inc.* ..................................... 597,500
14,400 Sycamore Networks, Inc.*(1) ................................ 1,980,000
------------
29,069,520
------------
Total Common Stocks (cost--$130,515,489) ................... 231,950,504
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES
--------- -------- ---------
<S> <C> <C> <C>
U.S. AGENCY OBLIGATION--2.82%
$7,000 Federal Home Loan Mortgage Corp. Discount Notes (cost--$6,991,262) ... 09/08/00 6.420%@ 6,991,262
------------
REPURCHASE AGREEMENT--3.86%
9,579 Repurchase Agreement dated 08/31/00 with Dresdner Bank,
collateralized by $9,715,000 U.S. Treasury Notes, 5.500%
due 12/31/00 (value--$9,771,153); proceeds: $9,580,756
(cost--$9,579,000) .................................................. 09/01/00 6.600 9,579,000
------------
Total Investments (cost--$147,085,751)--100.26% ................................ 248,520,766
Liabilities in excess of other assets--(0.26)% ................................. (645,586)
------------
Net Assets--100.00% ............................................................ $247,875,180
============
</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, 2000.
ADR American Depositary Receipt.
See accompanying notes to financial statements
22
<PAGE>
PAINEWEBBER GROWTH FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 2000
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------- -----
<S> <C>
COMMON STOCKS--89.03%
AGRICULTURE, FOOD & BEVERAGE--0.38%
55,300 Sysco Corp. ................................................ $ 2,339,881
-----------
AIRLINES--0.71%
195,000 Southwest Airlines Co. ..................................... 4,411,875
-----------
ALCOHOL--0.51%
40,000 Anheuser-Busch Companies, Inc. ............................. 3,152,500
-----------
APPAREL & RETAIL--0.27%
75,000 Gap, Inc. .................................................. 1,682,813
-----------
APPAREL & TEXTILES--0.48%
75,600 Nike, Inc., Class B ........................................ 2,990,925
-----------
BANKS--0.54%
60,000 Chase Manhattan Corp. ...................................... 3,352,500
-----------
CHEMICALS--0.66%
80,200 Sealed Air Corp.*(1) ....................................... 4,115,263
-----------
COMPUTER-BUSINESS SERVICES--0.99%
60,000 CMG Information Services, Inc.*(1) ......................... 2,685,000
26,100 Priceline.com Inc.*(1) ..................................... 709,594
22,500 Yahoo!, Inc.* .............................................. 2,733,750
-----------
6,128,344
-----------
COMPUTER HARDWARE--17.15%
108,000 Apple Computer, Inc.* ...................................... 6,581,250
360,000 Cisco Systems, Inc.* ....................................... 24,705,000
280,000 Dell Computer Corp.* ....................................... 12,215,000
256,000 EMC Corp.* ................................................. 25,088,000
140,000 Network Appliance, Inc.* ................................... 16,380,000
168,000 Sun Microsystems, Inc.*(1) ................................. 21,325,500
-----------
106,294,750
-----------
COMPUTER SOFTWARE--2.95%
31,400 Adobe Systems, Inc. ........................................ 4,082,000
100,000 Cadence Design Systems, Inc.* .............................. 2,125,000
40,100 IBM Corp. .................................................. 5,293,200
50,000 Intuit ..................................................... 2,993,750
54,300 Microsoft Corp.* ........................................... 3,790,819
-----------
18,284,769
-----------
CONSUMER DURABLES--0.77%
70,000 Avery Dennison Corp. ....................................... 3,784,375
50,000 Masco Corp. ................................................ 975,000
-----------
4,759,375
-----------
DIVERSIFIED RETAIL--2.93%
160,900 Costco Companies, Inc.* .................................... 5,540,994
91,000 Kohl's Corp.* .............................................. 5,096,000
100,000 Target Corp.* .............................................. 2,325,000
110,000 Wal-Mart Stores, Inc. ...................................... 5,218,125
-----------
18,180,119
-----------
DRUGS & MEDICINE--3.39%
49,312 Cardinal Health, Inc. ...................................... 4,034,338
90,000 Elan Corp. PLC, ADR*(1) .................................... 5,248,125
14,000 Genetech, Inc.* ............................................ 2,667,000
60,000 Pfizer, Inc. ............................................... 2,595,000
65,000 Pharmacyclics, Inc.*(1) .................................... 3,258,125
80,000 Schering-Plough Corp.* ..................................... 3,210,000
-----------
21,012,588
-----------
ELECTRIC UTILITIES--0.89%
56,000 Calpine Corp. .............................................. 5,544,000
-----------
ELECTRICAL EQUIPMENT--7.45%
15,000 Comverse Technology, Inc.* ................................. 1,379,063
23,000 Corning, Inc. .............................................. 7,542,562
74,400 Jabil Circuit, Inc.* ....................................... 4,747,650
34,200 KLA-Tencor Corp. * ......................................... 2,244,375
110,600 Level 3 Communications, Inc. ............................... 9,648,122
75,400 Motorola, Inc. ............................................. 2,719,112
100,000 SCI Systems, Inc.* ......................................... 6,175,000
70,000 Tellabs, Inc.* ............................................. 3,933,125
120,000 Teradyne, Inc.* ............................................ 7,777,500
-----------
46,166,509
-----------
ENERGY RESERVES & PRODUCTION--0.72%
54,403 Exxon Mobil Corp. .......................................... 4,440,645
-----------
ENTERTAINMENT--3.82%
125,000 Carnival Corp. ............................................. 2,492,187
480,000 Liberty Media Group ........................................ 10,260,000
162,649 Viacom, Inc.* .............................................. 10,948,311
-----------
23,700,498
-----------
ENVIRONMENTAL SERVICES--0.35%
150,000 Republic Services, Inc.* ................................... 2,193,750
-----------
FINANCIAL SERVICES--2.86%
72,000 Citigroup, Inc. ............................................ 4,203,000
80,000 Federal Home Loan Mortgage Corp. ........................... 3,370,000
50,300 Federal National Mortgage Association ...................... 2,703,625
64,200 General Electric Co. ....................................... 3,767,737
105,000 MBNA Corp. ................................................. 3,707,813
-----------
17,752,175
-----------
FOOD RETAIL--0.60%
75,000 Safeway, Inc.* ............................................. 3,698,438
-----------
FREIGHT, AIR, SEA & LAND--0.45%
50,000 United Parcel Service, Inc. ................................ 2,771,875
-----------
INDUSTRIAL PARTS--0.33%
45,000 Ingersoll Rand Co. ......................................... 2,050,313
-----------
</TABLE>
23
<PAGE>
PAINEWEBBER GROWTH FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------- -----
COMMON STOCKS--(CONCLUDED)
INDUSTRIAL SERVICES & SUPPLIES--1.77%
<S> <C>
49,905 Capesuccess LLC* ........................................... $ 16,932
13,056 Immedient Corp.* ........................................... 4,308
192,532 Tyco International, Ltd., ADR .............................. 10,974,324
-----------
10,995,564
-----------
INFORMATION & COMPUTER SERVICES--4.62%
145,000 America Online, Inc.* ...................................... 8,500,625
30,000 Computer Sciences Corp.* ................................... 2,371,875
40,000 Omnicom Group, Inc. ........................................ 3,337,500
225,000 Paychex, Inc.(1) ........................................... 10,040,625
50,000 Valassis Communications, Inc.* ............................. 1,443,750
50,000 Young & Rubicam, Inc.* ..................................... 2,925,000
-----------
28,619,375
-----------
LIFE INSURANCE--0.92%
110,000 AXA Financial, Inc. ........................................ 5,692,500
-----------
LONG DISTANCE & PHONE COMPANIES--2.34%
35,000 France Telecom, ADR ........................................ 4,035,937
217,500 Worldcom Inc.* ............................................. 7,938,750
50,000 Sprint Corp.*(1) ........................................... 2,509,375
-----------
14,484,062
-----------
MANUFACTURING-GENERAL--0.61%
60,300 United Technologies Corp. .................................. 3,764,981
-----------
MANUFACTURING-HIGH TECHNOLOGY--0.51%
61,000 ASM Lithography Holdings N.V.* ............................. 2,325,625
20,000 TyCom, Ltd. ................................................ 832,500
-----------
3,158,125
-----------
MEDIA--6.71%
25,000 Cablevision Systems Corp.*(1) .............................. 1,681,250
52,398 Clear Channel Communications, Inc.* ........................ 3,792,336
160,000 Comcast Corp. .............................................. 5,960,000
90,000 Fox Entertainment Group, Inc.* ............................. 2,604,375
291,250 Infinity Broadcasting Corp.* ............................... 11,031,094
155,000 Time Warner, Inc. .......................................... 13,252,500
135,000 USA Networks, Inc.* ........................................ 3,248,437
-----------
41,569,992
-----------
MEDICAL PRODUCTS--1.44%
50,000 Guidant Corp.* ............................................. 3,365,625
30,000 Johnson & Johnson .......................................... 2,758,125
30,200 Minnesota Mining & Manufacturing Co. ....................... 2,808,600
-----------
8,932,350
-----------
OIL REFINING--0.81%
191,000 Conoco, Inc. ............................................... 4,989,875
-----------
OIL SERVICES--0.78%
50,300 Halliburton Co. .......................................... $ 2,665,900
25,100 Schlumberger Ltd.(1) ..................................... 2,141,344
-----------
4,807,244
-----------
PUBLISHING--0.99%
62,000 New York Times Co. ....................................... 2,429,625
83,000 News Corp. Ltd., ADR(1) .................................. 3,672,750
-----------
6,102,375
-----------
RESTAURANTS--0.24%
50,000 McDonalds Corp. .......................................... 1,493,750
-----------
SECURITIES & ASSET MANAGEMENT--0.77%
75,000 Charles Schwab Corp. ..................................... 2,864,062
50,000 Franklin Resources, Inc. ................................. 1,900,000
-----------
4,764,062
-----------
SEMICONDUCTOR--9.47%
60,000 Altera Corp.* ............................................ 3,888,750
60,000 Applied Materials, Inc.* ................................. 5,178,750
37,500 Broadcom Corp.(1) ........................................ 9,375,000
68,000 Fairchild Semiconductor
International, Inc. ...................................... 2,703,000
60,600 Intel Corp. .............................................. 4,537,425
190,000 JDS Uniphase Corp.* ...................................... 23,652,031
60,000 Texas Instruments, Inc. .................................. 4,016,250
60,000 Xilinx, Inc.* ............................................ 5,332,500
-----------
58,683,706
-----------
SPECIALTY RETAIL--5.27%
160,000 Bed, Bath & Beyond, Inc.* ................................ 2,810,000
75,000 Circuit City Stores, Inc. ................................ 1,945,312
210,000 Home Depot, Inc. ......................................... 10,093,125
82,400 Lowe's Companies, Inc. ................................... 3,692,550
270,000 Staples, Inc.* ........................................... 4,151,250
240,000 Tiffany & Co.*(1) ........................................ 9,990,000
-----------
32,682,237
-----------
UTILITIES--0.80%
110,400 Dynegy Inc. .............................................. 4,968,000
-----------
WIRELESS TELECOMMUNICATIONS--1.78%
148,000 AT&T Wireless(1) ......................................... 3,875,750
67,135 Global Crossing Ltd.* .................................... 2,018,246
55,100 Nokia Corp. ADR .......................................... 2,476,056
37,700 Vodafone Group PLC ....................................... 1,543,344
37,000 Williams Communications Group*(1) ........................ 1,086,875
-----------
11,000,271
-----------
Total Common Stocks (cost--$247,062,382) ................. 551,732,374
-----------
</TABLE>
24
<PAGE>
PAINEWEBBER GROWTH FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
----------- -------- -------- -------
<S> <C> <C> <C>
U.S. AGENCY OBLIGATION--6.45%
$40,000 Federal Home Loan Bank Discount Notes
(cost--$39,950,378) ...................................... 09/08/00 6.380%@ $39,950,378
------------
REPURCHASE AGREEMENT--4.92%
30,514 Repurchase Agreement dated 08/31/00 with SG Cowen Securities
Corp., collateralized by $32,506,000 U.S. Treasury Notes,
4.250% due 11/15/03 (value--$31,124,495); proceeds:
$30,519,594 (cost--$30,514,000) ............................ 09/01/00 6.600 30,514,000
------------
Total Investments (cost--$317,526,760)--100.40% ....................... 622,196,752
Liabilities in excess of other assets--(0.40)% ........................ (2,505,203)
------------
Net Assets--100.00% ................................................... $619,691,549
============
</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, 2000.
ADR American Depositary Receipt.
See accompanying notes to financial statements
25
<PAGE>
PAINEWEBBER
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2000
<TABLE>
<CAPTION>
GROWTH AND MID CAP GROWTH
INCOME FUND FUND FUND
-------------- ------------ ------------
<S> <C> <C> <C>
ASSETS
Investments in securities, at value (cost--$842,432,774, $147,085,751, and
$317,526,760, respectively)............................................. $1,160,175,135 $248,520,766 $622,196,752
Investments of cash collateral received for securities loaned, at value
(cost--$0, $30,120,700, and $39,875,600, respectively).................. -- 30,120,700 39,875,600
Cash...................................................................... 295 809 --
Receivable for investments sold........................................... 4,214,912 -- 2,785,519
Receivable for shares of beneficial interest sold......................... 97,560 147,666 481,847
Dividends and interest receivable......................................... 2,154,517 88,333 224,425
Other assets.............................................................. 213,628 13,176 151,725
-------------- ------------ ------------
Total assets.............................................................. 1,166,856,047 278,891,450 665,715,868
-------------- ------------ ------------
LIABILITIES
Payable for investments purchased......................................... -- -- 4,782,359
Collateral for securities loaned.......................................... -- 30,120,700 39,875,600
Payable to affiliates..................................................... 1,135,229 278,456 572,768
Payable for shares of beneficial interest repurchased..................... 2,796,974 410,204 681,413
Accrued expenses and other liabilities.................................... 310,321 206,910 112,179
-------------- ------------ ------------
Total liabilities......................................................... 4,242,524 31,016,270 46,024,319
-------------- ------------ ------------
NET ASSETS
Beneficial interest--$0.001 par value (unlimited amount authorized)....... 698,480,970 118,381,666 288,378,108
Accumulated undistributed net investment income........................... 1,041,250 -- --
Accumulated net realized gains from investment transactions............... 145,348,942 28,058,499 26,643,449
Net unrealized appreciation of investments................................ 317,742,361 101,435,015 304,669,992
-------------- ------------ ------------
Net assets................................................................ $1,162,613,523 $247,875,180 $619,691,549
============== ============ ============
CLASS A:
Net assets................................................................ $ 760,385,649 $184,432,646 $448,959,844
-------------- ------------ ------------
Shares outstanding........................................................ 22,006,570 10,959,924 13,275,547
-------------- ------------ ------------
Net asset value and redemption value per share............................ $34.55 $16.83 $33.82
====== ====== ======
Maximum offering price per share (net asset value plus sales charge of
4.50% of offering price)................................................ $36.18 $17.62 $35.41
====== ====== ======
CLASS B:
Net assets................................................................ $ 223,415,726 $ 35,135,806 $ 72,768,634
-------------- ------------ ------------
Shares outstanding........................................................ 6,581,685 2,121,453 2,417,894
-------------- ------------ ------------
Net asset value and offering price per share.............................. $33.95 $16.56 $30.10
====== ====== ======
CLASS C:
Net assets................................................................ $ 130,866,415 $ 27,560,507 $ 52,716,212
-------------- ------------ ------------
Shares outstanding........................................................ 3,847,290 1,854,920 1,727,997
-------------- ------------ ------------
Net asset value and offering price per share.............................. $34.02 $14.86 $30.51
====== ====== ======
CLASS Y:
Net assets............................................................... $ 47,945,733 $ 746,221 $ 45,246,859
-------------- ------------ ------------
Shares outstanding....................................................... 1,383,308 44,102 1,285,228
-------------- ------------ ------------
Net asset value, offering price and redemption value per share........... $34.66 $16.92 $35.21
====== ====== ======
</TABLE>
See accompanying notes to financial statements
26
<PAGE>
PAINEWEBBER
STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2000
<TABLE>
<CAPTION>
GROWTH AND MID CAP GROWTH
INCOME FUND FUND FUND
------------ ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $69,358, $0 and $4,076,
respectively)............................................................... $ 12,327,825 $ 554,357 $ 1,650,239
Interest...................................................................... 7,517,906 736,491 3,207,310
------------ ------------ ------------
19,845,731 1,290,848 4,857,549
------------ ------------ ------------
EXPENSES:
Investment advisory and administration........................................ 8,827,941 2,074,009 4,123,898
Service fees--Class A......................................................... 2,015,278 378,960 911,457
Service and distribution fees--Class B........................................ 2,557,149 324,346 682,790
Service and distribution fees--Class C........................................ 1,451,285 228,446 455,314
Transfer agency and service fees.............................................. 968,259 190,587 375,499
Custody and accounting........................................................ 970,023 122,502 332,226
Reports and notices to shareholders........................................... 250,381 60,294 93,989
Federal and state registration................................................ 172,407 40,277 74,636
Legal and audit............................................................... 125,838 88,731 96,959
Trustees' fees................................................................ 13,500 13,500 13,500
Other expenses................................................................ 170,315 13,998 14,869
------------ ------------ ------------
17,522,376 3,535,650 7,175,137
Less: Fee waivers from adviser................................................ -- (12,585) (33,480)
------------ ------------ ------------
Net expenses.................................................................. 17,522,376 3,523,065 7,141,657
------------ ------------ ------------
Net investment income (loss).................................................. 2,323,355 (2,232,217) (2,284,108)
------------ ------------ ------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT ACTIVITIES:
Net realized gains from investment transactions............................... 145,640,081 30,818,339 26,646,514
Net change in unrealized appreciation (depreciation) of investments........... (5,151,319) 71,673,345 128,268,620
------------ ------------ ------------
NET REALIZED AND UNREALIZED GAINS FROM INVESTMENT ACTIVITIES.................. 140,488,762 102,491,684 154,915,134
------------ ------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......................... $142,812,117 $100,259,467 $152,631,026
============ ============ ============
</TABLE>
See accompanying notes to financial statements
27
<PAGE>
PAINEWEBBER GROWTH AND INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED AUGUST 31,
------------------------------------
2000 1999
-------------- --------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income.......................................................... $ 2,323,355 $ 2,029,536
Net realized gains from investment transactions................................ 145,640,081 50,934,437
Net change in unrealized appreciation (depreciation) of investments............ (5,151,319) 268,667,623
-------------- --------------
Net increase in net assets resulting from operations........................... 142,812,117 321,631,596
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class A................................................. (1,433,595) (2,152,840)
Net investment income--Class Y................................................. (165,295) (274,465)
Net realized gains from investment transactions--Class A....................... (31,968,129) (45,342,437)
Net realized gains from investment transactions--Class B....................... (10,629,639) (21,458,879)
Net realized gains from investment transactions--Class C....................... (5,950,335) (9,905,709)
Net realized gains from investment transactions--Class Y....................... (2,116,131) (4,000,922)
-------------- --------------
Total dividends and distributions to shareholders.............................. (52,263,124) (83,135,252)
-------------- --------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares........................................... 108,492,107 412,392,338
Cost of shares repurchased..................................................... (467,299,286) (585,691,639)
Proceeds from dividends reinvested............................................. 48,847,250 78,095,718
-------------- --------------
Net decrease in net assets from beneficial interest transactions............... (309,959,929) (95,203,583)
-------------- --------------
Net increase (decrease) in net assets.......................................... (219,410,936) 143,292,761
NET ASSETS:
Beginning of year.............................................................. 1,382,024,459 1,238,731,698
-------------- --------------
End of year (including undistributed net investment income of $1,041,250
and $316,785, respectively)................................................ $1,162,613,523 $1,382,024,459
============== ==============
</TABLE>
See accompanying notes to financial statements
28
<PAGE>
PAINEWEBBER MID CAP FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED AUGUST 31,
----------------------------------
2000 1999
------------- -------------
<S> <C> <C>
FROM OPERATIONS:
Net investment loss............................................................ $ (2,232,217) $ (1,700,945)
Net realized gains from investment transactions................................ 30,818,339 12,767,655
Net change in unrealized appreciation of investments........................... 71,673,345 52,006,931
------------- -------------
Net increase in net assets resulting from operations........................... 100,259,467 63,073,641
------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net realized gains from investment transactions--Class A....................... (9,495,627) (7,165,732)
Net realized gains from investment transactions--Class B....................... (2,079,691) (3,684,717)
Net realized gains from investment transactions--Class C....................... (1,631,919) (1,501,190)
Net realized gains from investment transactions--Class Y....................... (33,440) (6,732)
------------- -------------
Total distributions to shareholders............................................ (13,240,677) (12,358,371)
------------- -------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares........................................... 137,361,006 103,937,783
Cost of shares repurchased..................................................... (147,193,508) (170,753,908)
Proceeds from dividends reinvested............................................. 12,602,121 11,619,786
------------- -------------
Net increase (decrease) in net assets from beneficial interest transactions ... 2,769,619 (55,196,339)
------------- -------------
Net increase (decrease) in net assets.......................................... 89,788,409 (4,481,069)
NET ASSETS:
Beginning of year.............................................................. 158,086,771 162,567,840
------------- -------------
End of year.................................................................... $ 247,875,180 $ 158,086,771
============= =============
</TABLE>
See accompanying notes to financial statements
29
<PAGE>
PAINEWEBBER GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED AUGUST 31,
--------------------------------
2000 1999
------------- -------------
<S> <C> <C>
FROM OPERATIONS:
Net investment loss.............................................................. $ (2,284,108) $ (2,591,118)
Net realized gains from investment transactions.................................. 26,646,514 38,329,110
Net change in unrealized appreciation of investments............................. 128,268,620 103,470,683
------------- -------------
Net increase in net assets resulting from operations............................. 152,631,026 139,208,675
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gains from investment transactions--Class A......................... (23,651,246) (19,967,578)
Net realized gains from investment transactions--Class B......................... (4,422,756) (7,360,795)
Net realized gains from investment transactions--Class C......................... (2,923,743) (2,428,166)
Net realized gains from investment transactions--Class Y......................... (2,260,339) (2,076,520)
------------- -------------
Total distributions to shareholders.............................................. (33,258,084) (31,833,059)
------------- -------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares............................................. 201,995,053 150,769,416
Cost of shares repurchased....................................................... (183,525,199) (157,148,972)
Proceeds from dividends reinvested............................................... 31,190,900 30,161,764
------------- -------------
Net increase in net assets from beneficial interest transactions................. 49,660,754 23,782,208
------------- -------------
Net increase in net assets....................................................... 169,033,696 131,157,824
NET ASSETS:
Beginning of year................................................................ 450,657,853 319,500,029
------------- -------------
End of year...................................................................... $ 619,691,549 $ 450,657,853
============= =============
</TABLE>
See accompanying notes to financial statements
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Growth and Income Fund ("Growth and Income Fund"), PaineWebber
MidCap 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 accounting
principles generally accepted in the United States 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 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"),
the investment adviser and administrator of the Funds. Mitchell Hutchins is a
wholly owned asset management subsidiary of PaineWebber Incorporated
("PaineWebber"), a wholly owned subsidiary of Paine Webber Group Inc. ("PW
Group"). If a market value is not available from an independent pricing source
for a particular security, that security is valued at fair market 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 parts 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.
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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, 2000.
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 accounting principles generally accepted in the United States. 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,
2000, Growth and Income Fund, Mid Cap Fund and Growth Fund owed Mitchell
Hutchins $680,517, $191,605 and $376,548, 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,
2000, Mitchell Hutchins waived $12,585 and $33,480, respectively.
32
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For the year ended August 31, 2000, Growth and Income Fund, Mid Cap Fund
and Growth Fund paid $89,988, $13,140, and $19,170, respectively, in brokerage
commissions to PaineWebber for transactions executed on behalf of the Funds.
On July 12, 2000, PW Group and UBS AG ("UBS") announced that they had
entered into an agreement and plan of merger under which PW Group will merge
into a wholly owned subsidiary of UBS. If all required approvals are obtained
and the required conditions are satisfied, PW Group and UBS expect to complete
the transaction in the fourth quarter of 2000. UBS, with headquarteres in
Zurich, Switzerland, is an internationally diversified organization with
operations in many areas of the financial services industry.
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,
2000, Growth and Income Fund, Mid Cap Fund and Growth Fund owed Mitchell
Hutchins $454,712, $84,598 and $193,445, 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, 2000, it earned $1,371,805, $102,718, and $371,065 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 1/2% 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, 2000, the Growth and Income Fund,
Mid Cap Fund and Growth Fund, earned $14,183, $82,317 and $144,695,
respectively, for lending securities. Each Fund's lending agent is
PaineWebber, who received $4,727, $29,113 and $52,343 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, 2000. At August 31,
2000, Mid Cap Fund and Growth Fund owed PaineWebber $2,253 and $2,775,
respectively, in compensation.
33
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
As of August 31, 2000 the Mid Cap Fund and Growth Fund held cash as
collateral for market value of securities loaned as follows:
<TABLE>
<CAPTION>
MARKET
COLLATERAL FOR VALUE OF
SECURITIES SECURITIES
LOANED LOANED
-------------- -----------
<S> <C> <C>
Mid Cap Fund ...................................................... $30,120,700 $29,880,180
Growth Fund ....................................................... 39,875,600 38,987,706
As of August 31, 2000 the Mid Cap Fund and Growth Fund invested the cash collateral in the following money
market funds:
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
----------- -----------
<S> <C> <C> <C>
Mid Cap Fund
2,622,037 AIM Liquid Assets Portfolio .................................................... $ 2,622,037
48,534 AIM Prime Portfolio ............................................................ 48,534
19,586,587 Mitchell Hutchins Private Money Market Fund LLC ................................ 19,586,587
7,632,651 Provident Temporary Cash Fund .................................................. 7,632,651
230,891 Scudder Institutional Fund, Inc ................................................ 230,891
-----------
Total investments of cash collateral for securities loaned (cost--$30,120,700).. $30,120,700
===========
Growth Fund
529,371 AIM Liquid Assets Portfolio .................................................... 529,371
246,261 AIM Prime Portfolio ............................................................ 246,261
22,197,307 Mitchell Hutchins Private Money Market Fund LLC ................................ 22,197,307
16,746,251 Provident Temporary Cash Fund .................................................. 16,746,251
156,410 Scudder Institutional Fund, Inc ................................................ 156,410
----------
Total investments of cash collateral for securities loaned (cost--$39,875,600).. $39,875,600
===========
</TABLE>
BANK LINE OF CREDIT
Each Fund may participate with other funds managed by Mitchell Hutchins in
a $200 million committed credit facility ("Facility") to be utilized for
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, 2000, 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, 2000, PaineWebber received approximately 48%, 50% 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.
34
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at August 31,
2000 was substantially the same as the cost of securities for financial
statement purposes.
At August 31, 2000, 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) ..... $350,243,478 $108,201,007 $313,279,014
Gross depreciation (investments having an excess of cost over value) ..... (32,501,117) (6,765,992) (8,609,022)
------------ ------------ ------------
Net unrealized appreciation of investments ............................... $317,742,361 $101,435,015 $304,669,992
============ ============ ============
For the year ended August 31, 2000, total aggregate purchases and sales of portfolio securities, excluding short-term
securities, were as follows:
<CAPTION>
GROWTH AND
INCOME FUND MID CAP FUND GROWTH FUND
------------ ------------ ------------
<S> <C> <C> <C>
Purchases ................................................................ $577,201,623 $140,052,588 $114,108,405
Sales .................................................................... 960,036,943 160,596,736 127,427,698
</TABLE>
FEDERAL TAX STATUS
Each Fund intends to distribute substantially all of its taxable income and
to comply with the 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 arising for the Mid Cap Fund permanent
"book/tax" differences for the year ended August 31, 2000, undistributed net
investment loss was reduced by $2,232,217 and accumulated net realized gains
from investment transactions was reduced by $2,232,217.
To reflect reclassifications for the Growth Fund arising from permanent
"book/tax" differences for the year ended August 31, 2000, undistributed net
investment loss was reduced by $2,284,108 and beneficial interest was reduced by
$2,284,108.
35
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
SHARES OF BENEFICIAL INTEREST
There is an unlimited amount of $0.001 par value shares of beneficial
interest authorized. Transactions in shares of benefical interest were as
follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------------------------- ------------------------- ------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------------- ---------- ------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROWTH AND INCOME FUND
FOR THE YEAR ENDED AUGUST 31, 2000:
Shares sold ............. 1,798,962 $ 59,181,740 338,645 $ 11,004,342 848,716 $ 27,738,125 321,847 $ 10,567,900
Shares repurchased ...... (7,962,318) (263,045,824) (2,830,882) (91,613,191) (2,400,036) (78,395,395) (1,034,804) (34,244,876)
Shares converted from
Class B to Class A .... 880,764 28,986,829 (892,939) (28,986,829) -- -- -- --
Dividends reinvested .... 960,632 31,236,023 301,646 9,673,799 176,530 5,671,889 69,515 2,265,539
----------- ------------- ---------- ------------- ---------- ------------ ---------- ------------
Net decrease ............ (4,321,960) $(143,641,232) (3,083,530) $ (99,921,879) (1,374,790) $(44,985,381) (643,442) $(21,411,437)
=========== ============= ========== ============= ========== ============ ========== ============
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 1,177,699 $ 36,846,231
Shares repurchased ...... (11,983,913) (374,902,084) (2,776,809) (86,739,484) (2,221,720) (69,944,686) (1,726,359) (54,105,385)
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 9,509,920 141,503 4,266,308
----------- ------------- ---------- ------------- ---------- ------------ ---------- ------------
Net increase (decrease) . 1,419,469 $ 40,779,018 (3,525,387) $(111,057,542) (351,281) $(11,932,213) (407,157) $(12,992,846)
=========== ============= ========== ============= ========== ============ ========== ============
MID CAP FUND
FOR THE YEAR ENDED AUGUST 31, 2000:
Shares sold ............. 7,679,479 $ 105,423,702 1,018,928 $ 15,413,142 1,224,032 $ 16,054,787 33,078 $ 469,375
Shares repurchased ...... (9,090,842) (122,349,643) (643,397) (8,851,943) (1,238,609) (15,697,604) (18,746) (294,318)
Shares converted from
Class B to Class A .... 1,048,576 14,655,104 (1,061,306) (14,655,104) -- -- -- --
Dividends reinvested .... 719,418 9,093,433 155,987 1,949,836 135,955 1,525,412 2,636 33,440
----------- ------------- ---------- ------------- ---------- ------------ ---------- ------------
Net increase (decrease) . 356,631 $ 6,822,596 (529,788) $ (6,144,069) 121,378 $ 1,882,595 16,968 $ 208,497
=========== ============= ========== ============= ========== ============ ========== ============
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 26,630 $ 270,282
Shares repurchased ...... (13,574,300) (138,990,018) (2,115,404) (20,745,827) (1,220,947) (10,928,751) (8,406) (89,312)
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 1,298,844 722 6,732
----------- ------------- ---------- ------------- ---------- ------------ ---------- ------------
Net increase (decrease) . (775,523) $ (7,945,908) (4,233,981) $ (42,207,635) (591,977) $ (5,230,498) 18,946 $ 187,702
=========== ============= ========== ============= ========== ============ ========== ============
GROWTH FUND
FOR THE YEAR ENDED AUGUST 31, 2000:
Shares sold ............. 3,699,640 $ 114,207,194 1,304,640 $ 36,786,992 1,411,864 $ 40,389,796 325,002 $ 10,611,071
Shares repurchased ...... (4,088,992) (126,010,188) (433,303) (12,021,643) (1,241,092) (35,412,903) (312,983) (10,080,465)
Shares converted from
Class B to Class A .... 1,915,248 56,632,817 (2,132,064) (56,632,817) -- -- -- --
Dividends reinvested .... 728,290 22,081,739 151,148 4,102,146 99,880 2,746,676 71,802 2,260,339
----------- ------------- ---------- ------------- ---------- ------------ ---------- ------------
Net increase (decrease) . 2,254,186 $ 66,911,562 (1,109,579) $ (27,765,322) 270,652 $ 7,723,569 83,821 $ 2,790,945
=========== ============= ========== ============= ========== ============ ========== ============
FOR THE YEAR ENDED AUGUST 31, 1999:
Shares sold ............. 2,603,107 $ 70,761,120 757,665 $ 18,400,169 1,839,539 $ 43,921,544 662,614 $ 17,686,583
Shares repurchased ...... (3,329,890) (88,510,215) (756,225) (13,932,593) (1,649,567) (39,233,924) (582,735) (15,472,240)
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 84,377 2,076,520
----------- ------------- ---------- ------------- ---------- ------------ ---------- ------------
Net increase (decrease) . 950,078 $ 23,864,763 (489,634) $ (11,316,657) 292,875 $ 6,943,239 164,256 $ 4,290,863
=========== ============= ========== ============= ========== ============ ========== ============
</TABLE>
36
<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,
---------------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........................ $32.07 $26.92 $30.60 $24.35 $22.52
------ ------ ------ ------ ------
Net investment income (loss) .............................. 0.14@ 0.13 0.19 0.23 0.22
Net realized and unrealized gains (losses) from investments 3.67@ 6.88 (0.99) 9.29 3.46
------ ------ ------ ------ ------
Total increase (decrease) from investment operations ...... 3.81 7.01 (0.80) 9.52 3.68
------ ------ ------ ------ ------
Dividends from net investment income ...................... (0.06) (0.08) (0.21) (0.25) (0.34)
Distributions from net realized gains from investment
transactions .......................................... (1.27) (1.78) (2.67) (3.02) (1.51)
------ ------ ------ ------ ------
Total dividends and distributions to shareholders ......... (1.33) (1.86) (2.88) (3.27) (1.85)
------ ------ ------ ------ ------
Net asset value, end of year .............................. $34.55 $32.07 $26.92 $30.60 $24.35
====== ====== ====== ====== ======
Total investment return (1) ............................... 12.15% 26.48% (3.51)% 42.42% 17.40%
====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of year (000's) ........................... $760,386 $844,415 $670,606 $441,699 $276,016
Expenses to average net assets ............................ 1.15% 1.08% 1.07% 1.15% 1.20%(2)
Net investment income (loss) to average net assets ........ 0.43% 0.41% 0.71% 0.88% 0.98%(2)
Portfolio turnover ........................................ 50% 57% 62% 70% 112%
</TABLE>
------------------------
@ Calculated using the average shares outstanding for the year.
(1) Total investment return is calculated assuming a $10,000 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 they 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,
------------------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........................ $31.72 $26.77 $30.46 $24.26 $22.37
------ ------ ------ ------ ------
Net investment income (loss) .............................. (0.12)@ (0.15) (0.02) 0.04 0.04
Net realized and unrealized gains (losses) from investments 3.62@ 6.88 (1.02) 9.23 3.45
------ ------ ------ ------ ------
Total increase (decrease) from investment operations ...... 3.50 6.73 (1.04) 9.27 3.49
------ ------ ------ ------ ------
Dividends from net investment income ...................... -- -- -- (0.05) (0.09)
Distributions from net realized gains from investment
transactions .......................................... (1.27) (1.78) (2.65) (3.02) (1.51)
------ ------ ------ ------ ------
Total dividends and distributions to shareholders ......... (1.27) (1.78) (2.65) (3.07) (1.60)
------ ------ ------ ------ ------
Net asset value, end of year .............................. $33.95 $31.72 $26.77 $30.46 $24.26
====== ====== ====== ====== ======
Total investment return (1) ............................... 11.27% 25.51% (4.28)% 41.33% 16.49%
====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of year (000's) ........................... $223,416 $306,557 $353,150 $376,840 $277,753
Expenses to average net assets ............................ 1.95% 1.86% 1.87% 1.93% 1.99%(2)
Net investment income (loss) to average net assets ........ (0.39)% (0.37)% (0.08)% 0.11% 0.17%(2)
Portfolio turnover ........................................ 50% 57% 62% 70% 112%
<CAPTION>
CLASS C
----------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
----------------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........................ $31.78 $26.82 $30.53 $24.33 $22.43
------ ------ ------ ------ ------
Net investment income (loss) .............................. (0.12)@ (0.12) 0.01 0.05 0.05
Net realized and unrealized gains (losses) from investments 3.63@ 6.86 (1.03) 9.24 3.46
------ ------ ------ ------ ------
Total increase (decrease) from investment operations ...... 3.51 6.74 (1.02) 9.29 3.51
------ ------ ------ ------ ------
Dividends from net investment income ...................... -- -- (0.02) (0.07) (0.10)
Distributions from net realized gains from investment
transactions .......................................... (1.27) (1.78) (2.67) (3.02) (1.51)
------ ------ ------ ------ ------
Total dividends and distributions to shareholders ......... (1.27) (1.78) (2.69) (3.09) (1.61)
------ ------ ------ ------ ------
Net asset value, end of year .............................. $34.02 $31.78 $26.82 $30.53 $24.33
====== ====== ====== ====== ======
Total investment return (1) ............................... 11.28% 25.49% (4.23)% 41.30% 16.52%
====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of year (000's) ........................... $130,866 $165,948 $149,458 $84,922 $43,148
Expenses to average net assets ............................ 1.94% 1.85% 1.85% 1.92% 1.99%(2)
Net investment income (loss) to average net assets ........ (0.37)% (0.36)% (0.07)% 0.10% 0.18%(2)
Portfolio turnover ........................................ 50% 57% 62% 70% 112%
</TABLE>
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,
---------------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........................ $32.12 $26.92 $30.59 $24.35 $22.54
------ ------ ------ ------ ------
Net investment income ..................................... 0.24@ 0.24 0.30 0.32 0.30
Net realized and unrealized gains (losses) from investments 3.68@ 6.86 (1.02) 9.26 3.45
------ ------ ------ ------ ------
Total increase (decrease) from investment operations ...... 3.92 7.10 (0.72) 9.58 3.75
------ ------ ------ ------ ------
Dividends from net investment income ...................... (0.11) (0.12) (0.28) (0.32) (0.43)
Distributions from net realized gains from investment
transactions ....................................... (1.27) (1.78) (2.67) (3.02) (1.51)
------ ------ ------ ------ ------
Total dividends and distributions to shareholders ......... (1.38) (1.90) (2.95) (3.34) (1.94)
------ ------ ------ ------ ------
Net asset value, end of year .............................. $34.66 $32.12 $26.92 $30.59 $24.35
====== ====== ====== ====== ======
Total investment return (1) ............................... 12.48% 26.82% (3.24)% 42.74% 17.77%
====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of year (000's) ........................... $47,946 $65,104 $65,518 $46,745 $22,942
Expenses to average net assets ............................ 0.85% 0.79% 0.80% 0.88% 0.92%(2)
Net investment income to average net assets ............... 0.71% 0.70% 0.99% 1.14% 1.26%(2)
Portfolio turnover ........................................ 50% 57% 62% 70% 112%
</TABLE>
------------------------
@ Calculated using the average shares outstanding for the year.
(1) Total investment return is calculated assuming a $10,000 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 they 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
YEARS FIVE
ENDED MONTHS
AUGUST 31, ENDED FOR THE YEARS ENDED MARCH 31,
----------------- AUGUST 31, -----------------------------
2000 1999 1998# 1998 1997 1996
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............. $10.67 $ 7.97 $15.00 $13.44 $15.61 $12.81
------ ------ ------ ------ ------ ------
Net investment loss .............................. (0.12) (0.07) (0.03) (0.13) (0.17) (0.16)
Net realized and unrealized gains (losses) from
investments .................................... 7.21 3.43 (3.15) 5.15 0.32 3.71
------ ------ ------ ------ ------ ------
Net increase (decrease) from investment operations 7.09 3.36 (3.18) 5.02 0.15 3.55
------ ------ ------ ------ ------ ------
Distributions from net realized gains from
investment transactions ........................ (0.93) (0.66) (3.85) (3.46) (2.32) (0.75)
------ ------ ------ ------ ------ ------
Net asset value, end of period ................... $16.83 $10.67 $ 7.97 $15.00 $13.44 $15.61
====== ====== ====== ====== ====== ======
Total investment return (1) ...................... 69.33% 43.38% (27.31)% 41.50% (0.21)% 28.16%
====== ====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of period (000's) ................ $184,433 $113,126 $90,650 $101,698 $76,909 $76,558
Expenses to average net assets, net of waivers
from adivser ................................... 1.49% 1.60% 1.48%* 1.51% 1.60% 1.58%
Expenses to average net assets, before fee waivers
from adviser ................................... 1.50% 1.60% 1.48%* 1.51% 1.60% 1.58%
Net investment loss to average net assets, net
of waivers from adviser ........................ (0.87)% (0.64)% (0.61)%* (1.16)% (1.20)% (1.11)%
Net investment loss to average net assets, before
fee waiver from adviser ........................ (0.88)% (0.64)% (0.61)%* (1.16)% (1.20)% (1.11)%
Portfolio turnover ............................... 71% 79% 80% 64% 56% 57%
</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 $10,000 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 they
were included. Total investment return for periods of less than one year
has not been annualized.
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
YEARS FIVE
ENDED MONTHS
AUGUST 31, ENDED FOR THE YEARS ENDED MARCH 31,
----------------- AUGUST 31, -----------------------------
2000 1999 1998# 1998 1997 1996
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............. $10.59 $ 7.99 $15.07 $13.59 $15.88 $13.11
------ ------ ------ ------ ------ ------
Net investment loss .............................. (0.25) (0.27) (0.07) (0.31) (0.31) (0.29)
Net realized and unrealized gains (losses)
from investments ............................ 7.15 3.53 (3.16) 5.25 0.34 3.81
------ ------ ------ ------ ------ ------
Net increase (decrease) from investment operations 6.90 3.26 (3.23) 4.94 0.03 3.52
------ ------ ------ ------ ------ ------
Distributions from net realized gains from
investment transactions ..................... (0.93) (0.66) (3.85) (3.46) (2.32) (0.75)
------ ------ ------ ------ ------ ------
Net asset value, end of period ................... $16.56 $10.59 $ 7.99 $15.07 $13.59 $15.88
====== ====== ====== ====== ====== ======
Total investment return (1) ...................... 68.00% 41.95% (27.54)% 40.39% (0.99)% 27.28%
====== ====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of period (000's) ................ $35,136 $28,077 $54,978 $143,058 $134,495 $157,021
Expenses to average net assets, net of waivers
from adviser ................................ 2.28% 2.55% 2.32%* 2.28% 2.36% 2.34%
Expenses to average net assets, before fee
waivers from adviser ........................ 2.29% 2.55% 2.32%* 2.28% 2.36% 2.34%
Net investment loss to average net assets,
net of waivers from adviser ................. (1.66)% (1.61)% (1.48)%* (1.92)% (1.95)% (1.87)%
Net investment loss to average net assets,
before fee waivers from adviser ............. (1.67)% (1.61)% (1.48)%* (1.92)% (1.95)% (1.87)%
Portfolio turnover ............................... 71% 79% 80% 64% 56% 57%
</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 $10,000 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 they
were included. Total investment return for period of less than one year has
not been annualized.
42
<PAGE>
<TABLE>
<CAPTION>
CLASS C
-----------------------------------------------------------------------
FOR THE
YEARS FIVE
ENDED MONTHS
AUGUST 31, ENDED FOR THE YEARS ENDED MARCH 31,
--------------------- AUGUST 31, --------------------------------
2000 1999 1998# 1998 1997 1996
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............. $ 9.57 $ 7.26 $14.07 $12.87 $15.14 $12.54
------ ------ ------ ------ ------ ------
Net investment loss .............................. (0.20) (0.15) (0.06) (0.26) (0.29) (0.27)
Net realized and unrealized gains (losses)
from investments ............................ 6.42 3.12 (2.90) 4.92 0.34 3.62
------ ------ ------ ------ ------ ------
Net increase (decrease) from investment operations 6.22 2.97 (2.96) 4.66 0.05 3.35
------ ------ ------ ------ ------ ------
Distributions from net realized gains from
investment transactions ..................... (0.93) (0.66) (3.85) (3.46) (2.32) (0.75)
------ ------ ------ ------ ------ ------
Net asset value, end of period ................... $14.86 $ 9.57 $ 7.26 $14.07 $12.87 $15.14
====== ====== ====== ====== ====== ======
Total investment return (1) ...................... 68.14% 42.17% (27.58)% 40.46% (0.91)% 27.16%
====== ====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of period (000's) ................ $27,561 $16,594 $16,875 $27,814 $24,810 $27,601
Expenses to average net assets, net of waivers
from adviser ................................ 2.25% 2.43% 2.28%* 2.29% 2.37% 2.36%
Expenses to average net assets, before fee
waivers from adviser ........................ 2.26% 2.43% 2.28%* 2.29% 2.37% 2.36%
Net investment loss to average net assets,
net of waivers from adviser ................. (1.63)% (1.47)% (1.42)%* (1.94)% (1.97)% (1.89)%
Net investment loss to average net assets,
before fee waivers from adviser ............. (1.64)% (1.47)% (1.42)%* (1.94)% (1.97)% (1.89)%
Portfolio turnover ............................... 71% 79% 80% 64% 56% 57%
<CAPTION>
CLASS Y
--------------------------------------------
FOR THE PERIOD
YEARS FIVE MARCH 17,
ENDED MONTHS 1998 TO
AUGUST 31, ENDED MARCH 31,
---------------------- AUGUST 31, --------
2000 1999 1998# 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................ $10.70 $ 7.97 $15.00 $14.90
------ ------ ------ ------
Net investment loss ................................. (0.07) (0.02) (0.01) --
Net realized and unrealized gains (losses)
from investments ............................... 7.22 3.41 (3.17) 0.10
------ ------ ------ ------
Net increase (decrease) from investment operations .. 7.15 3.39 (3.18) 0.10
------ ------ ------ ------
Distributions from net realized gains from
investment transactions ........................ (0.93) (0.66) (3.85) --
------ ------ ------ ------
Net asset value, end of period ...................... $16.92 $10.70 $ 7.97 $15.00
====== ====== ====== ======
Total investment return (1) ......................... 69.72% 43.77% (27.31)% 0.67%
====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of period (000's) ................... $746 $290 $65 $35
Expenses to average net assets, net of waivers
from adviser ................................... 1.23% 1.36% 1.23%* 1.22%*
Expenses to average net assets, before fee
waivers from adviser ........................... 1.24% 1.36% 1.23%* 1.22%*
Net investment loss to average net assets,
net of waivers from adviser .................... (0.60)% (0.36)% (0.29)%* 0.00%*
Net investment loss to average net assets,
before fee waivers from adviser ................ (0.61)% (0.36)% (0.29)%* 0.00%*
Portfolio turnover .................................. 71% 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,
------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........................ $26.85 $20.08 $25.94 $24.37 $22.27
------ ------ ------ ------ ------
Net investment income (loss).............................. (0.08) (0.10) (0.09) (0.08)@ (0.12)
Net realized and unrealized gains from investments........ 8.99 8.88 1.01 3.76@ 4.06
------ ------ ------ ------ ------
Total increase from investment operations................. 8.91 8.78 0.92 3.68 3.94
------ ------ ------ ------ ------
Distributions from net realized gains from investment
transactions............................................ (1.94) (2.01) (6.78) (2.11) (1.84)
------ ------ ------ ------ ------
Net asset value, end of year.............................. $33.82 $26.85 $20.08 $25.94 $24.37
====== ====== ====== ====== ======
Total investment return (1)............................... 34.04% 44.97% 3.37% 15.85% 18.43%
====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of year (000's)........................... $448,960 $295,906 $202,253 $201,725 $203,882
Expenses to average net assets, net of waivers from
adviser................................................. 1.15% 1.15% 1.19% 1.27% 1.28%
Expenses to average net assets, before fee waivers
from adviser............................................ 1.16% 1.15% 1.19% 1.27% 1.28%
Net investment loss to average net assets, net of
waivers from adviser.................................... (0.27)% (0.41)% (0.39)% (0.32)% (0.49)%
Net investment loss to average net assets before
fee waivers from adviser................................ (0.28)% (0.41)% (0.39)% (0.32)% (0.49)%
Portfolio turnover........................................ 23% 38% 52% 86% 60%
</TABLE>
-------------------
@ Calculated using the average shares outstanding for the year.
(1) Total investment return is calculated assuming a $10,000 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 they were
included.
44
<PAGE>
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........................ $24.26 $18.44 $24.51 $23.30 $21.53
------ ------ ------ ------ ------
Net investment income (loss).............................. (0.31) (0.30) (0.30) (0.26)@ (0.39)
Net realized and unrealized gains from investments........ 8.09 8.13 1.01 3.58@ 4.00
------ ------ ------ ------ ------
Total increase from investment operations................. 7.78 7.83 0.71 3.32 3.61
------ ------ ------ ------ ------
Distributions from net realized gains from investment
transactions............................................ (1.94) (2.01) (6.78) (2.11) (1.84)
------ ------ ------ ------ ------
Net asset value, end of year.............................. $30.10 $24.26 $18.44 $24.51 $23.30
====== ====== ====== ====== ======
Total investment return (1)............................... 32.96% 43.75% 2.55% 14.98% 17.48%
====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of year (000's)........................... $72,769 $85,576 $74,094 $115,529 $140,551
Expenses to average net assets, net of waivers from
adviser................................................. 1.96% 1.96% 1.99% 2.06% 2.06%
Expenses to average net assets, before fee waivers
from adviser............................................ 1.97% 1.96% 1.99% 2.06% 2.06%
Net investment loss to average net assets, net of
waivers from adviser.................................... (1.08)% (1.22)% (1.18)% (1.12)% (1.27)%
Net investment loss to average net assets before
fee waivers from adviser................................ (1.09)% (1.22)% (1.18)% (1.12)% (1.27)%
Portfolio turnover........................................ 23% 38% 52% 86% 60%
</TABLE>
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........................ $24.56 $18.65 $24.71 $23.48 $21.68
------ ------ ------ ------ ------
Net investment income (loss).............................. (0.28) (0.26) (0.27) (0.27)@ (0.34)
Net realized and unrealized gains from investments........ 8.17 8.18 0.99 3.61@ 3.98
------ ------ ------ ------ ------
Total increase from investment operations................. 7.89 7.92 0.72 3.34 3.64
------ ------ ------ ------ ------
Distributions from net realized gains from investment
transactions............................................ (1.94) (2.01) (6.78) (2.11) (1.84)
------ ------ ------ ------ ------
Net asset value, end of year.............................. $30.51 $24.56 $18.65 $24.71 $23.48
====== ====== ====== ====== ======
Total investment return (1)............................... 33.01% 43.74% 2.59% 14.95% 17.50%
====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of year (000's)........................... $52,716 $35,793 $21,714 $24,760 $29,923
Expenses to average net assets, net of waivers from
adviser................................................. 1.93% 1.94% 1.99% 2.07% 2.07%
Expenses to average net assets, before fee waivers
from adviser............................................ 1.94% 1.94% 1.99% 2.07% 2.07%
Net investment loss to average net assets, net of
waivers from adviser.................................... (1.05)% (1.20)% (1.19)% (1.13)% (1.28)%
Net investment loss to average net assets before
fee waivers from adviser................................ (1.06)% (1.20)% (1.19)% (1.13)% (1.28)%
Portfolio turnover........................................ 23% 38% 52% 86% 60%
</TABLE>
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,
------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........................ $27.79 $20.67 $26.46 $24.74 $22.53
------ ------ ------ ------ ------
Net investment income (loss).............................. 0.01 (0.03) (0.03) (0.01)@ (0.02)
Net realized and unrealized gains from investments........ 9.35 9.16 1.02 3.84@ 4.07
------ ------ ------ ------ ------
Total increase from investment operations................. 9.36 9.13 0.99 3.83 4.05
------ ------ ------ ------ ------
Distributions from net realized gains from investment
transactions............................................ (1.94) (2.01) (6.78) (2.11) (1.84)
------ ------ ------ ------ ------
Net asset value, end of year.............................. $35.21 $27.79 $20.67 $26.46 $24.74
====== ====== ====== ====== ======
Total investment return (1)............................... 34.52% 45.40% 3.61% 16.24% 18.72%
====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of year (000's)........................... $45,247 $33,383 $21,440 $20,281 $21,409
Expenses to average net assets, net of waivers from
adviser................................................. 0.85% 0.86% 0.91% 1.00% 1.02%
Expenses to average net assets, before fee waivers
from adviser............................................ 0.86% 0.86% 0.91% 1.00% 1.02%
Net investment income (loss) to average net assets,
net of waivers from adviser............................. 0.03% (0.12)% (0.12)% (0.05)% (0.23)%
Net investment income (loss) to average net assets,
before fee waivers from adviser......................... 0.02% (0.12)% (0.12)% (0.05)% (0.23)%
Portfolio turnover........................................ 23% 38% 52% 86% 60%
</TABLE>
-------------------
@ Calculated using the average shares outstanding for the year.
(1) Total investment return is calculated assuming a $10,000 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 they were included.
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, 2000, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years then
ended, and the financial highlights for each of the periods indicated therein.
These financial statements 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 auditing standards generally
accepted in the United States. 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, 2000, 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, 2000, and the results of their operations for the year
then ended, the changes in their net assets for each of the two years then ended
and their financial highlights for each of the indicated periods, in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
New York, New York
October 17, 2000
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,
2000) 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............................................................ $0.0614 -- --
Class B............................................................ -- -- --
Class C............................................................ -- -- --
Class Y............................................................ $0.1093 -- --
Long-term capital gains............................................ $1.2696 $0.9297 $1.9441
Percentage of ordinary income dividends qualifying
for the dividends received deduction available
to corporate shareholders........................................ 100% N/A N/A
</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 2000. 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 2001. 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
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
Brian M. Storms
PRINCIPAL OFFICERS
Margo N. Alexander
PRESIDENT
Amy Doberman
VICE PRESIDENT
Dianne E. O'Donnell
VICE PRESIDENT AND SECRETARY
Paul H. Schubert
VICE PRESIDENT AND TREASURER
INVESTMENT ADVISER,
ADMINISTRATOR AND DISTRIBUTOR
Mitchell Hutchins Asset Management Inc.
51 West 52nd Street
New York, New York 10019-6114
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
ANNUAL REPORT
------------------------
GROWTH AND
INCOME FUND
MID CAP FUND
GROWTH FUND
AUGUST 31, 2000
----------
PaineWebber offers a family of 26 funds which encompass a diversified range of
investment goals.
BOND FUNDS
- High Income Fund
- Investment Grade Income Fund
- Low Duration U.S. Government Income Fund
- Strategic Income Fund
- U.S. Government Income Fund
TAX-FREE BOND FUNDS
- California Tax-Free Income Fund
- Municipal High Income Fund
- National Tax-Free Income Fund
- New York Tax-Free Income Fund
STOCK FUNDS
- Enhanced S&P 500 Fund
- Enhanced Nasdaq-100 Fund
- 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
ASSET ALLOCATION FUNDS
- Balanced Fund
- Tactical Allocation Fund
GLOBAL FUNDS
- Asia Pacific Growth Fund
- Emerging Markets Equity Fund
- Global Equity Fund
- Global Income Fund
PAINEWEBBER MONEY MARKET FUND
PAINEWEBBER
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