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PAINEWEBBER LIFE
MILESTONES-SM-
For life's imortant
moments and the means
to afford them
[PHOTO]
Annual Report
December 31, 1996
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Dear Contract Owner,
We are pleased to present the December 31, 1996 annual report for
Milestones, offered exclusively through PaineWebber. This report contains
important information about the PaineWebber Series Trust, including financial
statements for the fiscal year ended December 31, 1996. As you know, the
PaineWebber Life Variable Annuity Account holds shares of the PaineWebber Series
Trust to fund the Milestones Variable Annuity.
INVESTMENT OVERVIEW--DOMESTIC
By the end of 1995, most investors were convinced that the Federal Reserve
Board had achieved a "soft landing" for the economy, which led to a general
consensus that the Fed would act again to cut short-term interest rates. By
early March, however, government reports showing higher-than-expected economic
growth prompted a shift in sentiment, which in turn caused a sharp drop in bond
prices and ensuing stock market volatility.
Several factors helped move stocks higher despite this volatility, including
an overall positive environment for corporate earnings and profit growth as well
as strong cash flows into equity mutual funds. Then, in July, a spate of
disappointing earnings announcements contributed to the first meaningful overall
stock market correction since 1994. This proved short-lived, however, and in
August the stock market retraced much of the ground it had lost. By
mid-September, as investor confidence returned, money returning to the equity
markets propelled the Standard & Poor's 500, a commonly used measure of stock
market performance, to record highs (a circumstance which underscores the
hazards of market timing).
Bonds did not fare as well, as ongoing uncertainty over the direction of
interest rates persistently unsettled the bond market. Toward the end of the
year, a moderating economy helped bolster the bond market for a short period of
time; however, this was fleeting as renewed fears of an overheating economy
quickly re-emerged.
INVESTMENT OVERVIEW--GLOBAL
December capped off a strong year for equity markets worldwide. The
performance of U.S. stocks was one of the more surprising developments of the
year. The S&P 500 rose 23%, following a 37% gain in 1995, the best back-to-back
performance since 1954-1955. U.S. investors were encouraged by the nation's
economic outlook, which included few inflationary pressures. Outside the U.S.,
markets also finished the year up substantially. European prices were driven
higher by progress towards the European Union, historically low interest rates
and a stronger dollar. Japan was the world's major underperformer, with stocks
declining 15.4% over the year. Despite the government's best efforts to
stimulate the economy, growth has not returned to the nation, leaving investors
pessimistic on that market's near-term outlook.
Following a back-up in U.S. Treasuries early in the fiscal period, foreign
bond markets performed strongly in 1996. In an environment characterized by
ample liquidity, low short-term interest rates, moderate growth and low
inflation, most markets rose to, or close to, historically high valuations,
while yields compressed everywhere. Higher yielding markets, in particular, did
well. Foreign fixed income markets were also helped by moves taken by
governments to achieve fiscal austerity--moves that seem to have spread across
all major markets independently of one another.
European governments, driven by the need to achieve a currency union under
terms specified in the Maastricht Treaty, decreased spending and/or increased
tax revenues. Japan's government, despite years of low growth, made a decision
to raise sales taxes next year. More recently, in the U.S., politicians finally
appear prepared to agree on a balanced budget. At the margin, of course, tighter
fiscal policies allow governments to pursue easier monetary and lower interest
rate policies. In our opinion, this combination strongly contributed to bond
performance this year.
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MONEY MARKET PORTFOLIO
During the year, the Fed maintained a federal funds rate of 5.25%, an
indication of the Fed's perception that the economic environment had assumed a
measure of stability. We anticipated this scenario and, as a result, kept the
Portfolio's average weighted maturity slightly longer than those of its peers.
As we enter the new year, the consensus seems to be for moderate gross
domestic product (GDP) growth and inflation. The economy is presently
characterized by slow growth and stable inflation, with interest rates varying
little. Inflation, currently at 3%, seems to be at a comfort level and should
persist. Overall, we expect short-term rates to remain stable for the first half
of 1997. As of December 31, 1996, the federal funds rate remained at 5.25%,
while commercial paper was approximately at a 5.30% discount level for the one
month product, with a yield ranging from 5.75% to 5.85% for the one-year
product.
For the seven days ended December 31, 1996, the Portfolio's current yield
was 4.0%, while its weighted average maturity was 41 days. Going forward, we
intend to keep the weighted average maturity approximately five days above the
IBC (Donaghue) average. Inflation is always a concern and, as such, will be
monitored closely as it seems to be a trigger for the Fed to move rates.
Investment decisions for the Fund will continue to be dominated by credit
quality and liquidity. Although we are interested in maintaining higher yields,
we will not do so by sacrificing the Portfolio's emphasis on security, quality
and liquidity.
GROWTH PORTFOLIO
Throughout 1996, investors' quest for liquidity continued to be a central
driver of the market. Therefore, the Portfolio was overweighted in larger
capitalization companies (over $1 billion stock market capitalization) for most
of the year.
With regard to sector weightings, we continued to invest the Portfolio in
areas of the market that we believe are well-positioned to benefit from ongoing
industry themes. Among the most notable of these themes is that of the
"Information Highway," particularly given the effect the passage of the
Telecommunications Bill--which effectively deregulated the communications
industry--has had on Information Highway securities. Therefore, a portion of the
Portfolio was invested in a number of competitive local exchange
carriers--companies that provide long-distance and telecommunications
services--including ICG Communications, MFS Communications (now Worldcom),
Intermedia Communications and Teleport Communications. We feel that these firms
have the ability to provide companies with the resources necessary to bypass
more costly long-distance and telecommunications services provided by telephone
companies. Wireless companies, including Omnipoint, should also benefit as they
become more increasingly accepted. In regions where they are available, these
companies generally offer more cost-effective and versatile services than those
provided by traditional wired competitors.
"Consolidation" was another theme that the Portfolio focused on throughout
the fiscal year. An ever-increasing number of companies are finding it more
economical to "buy" rather than to "build," with the results of acquisition
being a larger revenue base and more efficient operating expenses. The Portfolio
maintained positions in several industries that we believe may benefit from the
consolidation trend, including physician practice, hospital management
technology and banks.
Finally, as the overall outlook for consumer spending remained steady, the
Fund continued to invest in specialty retailers, including Staples and General
Nutrition Centers.
Going forward, we believe that a slow growth economy, a growing demand for
stocks--as evidenced by continued large inflows into mutual funds and 401(k)
retirement plans--and a more fiscally responsible Federal government will
continue to exert a positive influence over the stock market. In order to
achieve the Fund's investment objective in the current environment, we will
continue to invest the portfolio in companies that we believe offer
above-average earnings growth potential.
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GLOBAL GROWTH PORTFOLIO
During the first half of the fiscal year, the Portfolio's underweighted
position in the strong U.S. equity market was a primary reason for the
Portfolio's lackluster performance. The second half of the year was more
favorable for the Portfolio, as both our international and U.S.-based holdings
performed well. In Europe in particular, the stock selection process employed by
GE Investment Management's (GEIM, subadviser of the portfolio) global research
team--which entails searching the world for companies that are priced
inexpensively relative to their long-term growth rates--identified several
quality global companies based in Europe that should benefit from trends
occurring there. For example, many of these companies are restructuring their
operations with an increased focus on creating long-term shareholder value. The
combination of business restructuring and economic reform should lead to lower
long-term interest rates and higher equity valuations.
Going forward, as we look at other markets around the world, it is becoming
increasingly difficult to find bargains in the U.S. and Japan. Although we are
not negative on the competitive position of U.S. companies, valuations are
stretched and equities in Europe, Southeast Asia and Latin America are far more
attractive. We will continue to position the Portfolio to take advantage of
these compelling values and expect to benefit as many foreign-based companies
strive to attain the valuation levels of U.S. companies through enhanced
investor relations programs and U.S. listings.
By region, approximately 44.3% of the Portfolio was invested in Europe,
28.2% in North America, 11.5% in Japan, 10.1% in the Pacific Rim, 4.6% in Latin
America and 1.3% in South Africa.
GLOBAL INCOME PORTFOLIO
Early in the year, the Portfolio's U.S. holdings consisted primarily of
money market securities and shorter dated notes. However, we adopted a more
aggressive position toward the U.S. market early in the summer, at a time when
U.S. Treasuries significantly lagged other world markets. We believed U.S. bonds
would appreciate if the scenario of moderating growth and low inflation occurred
as outlined by Federal Reserve Board Chairman Alan Greenspan in his
Humphrey-Hawkins testimony. As domestic growth did begin to slow in autumn, the
Portfolio benefited from this more aggressive strategy.
In Europe, we maintained the Portfolio's holdings to take advantage of the
highly favorable bond environment which prevailed throughout the year in most
markets there. The Portfolio benefited from its Spanish and Italian bond
holdings as yields narrowed closer to those prevailing in traditional, low
inflation 'core' European countries like Germany and France. More recently, we
extended duration in UK gilts. The gilt market has lagged other markets this
year, largely because the UK economic cycle is further advanced than most other
economies; in fact, the UK Treasury recently had to increase its base lending
rate and may need to do so again. Nevertheless, we believe the Bank of
England/Treasury will conduct responsible monetary policies and will eventually
manage inflation towards a long-term target of 2.5%. With yields of over 7.25%,
UK bonds were among the highest yielding of the investment grade countries as of
December 31, 1996.
Present valuations in global fixed income markets point to a highly positive
scenario. Based on current inflation estimates and short-term interest rates,
such valuations appear justified. Yield curves in many markets, especially in
Europe, are steep and support these valuations. Furthermore, relative to price
levels in many equity markets, bond valuations don't appear extreme. However,
with yields worldwide at low levels, risks are greater. For this reason, our
most important goal in the coming year will be to identify and assess
prospective risks to current valuations.
By region, approximately 32.0% of the Portfolio was invested in Europe,
59.4% in North America, 6.0% in Australia and 2.6% in New Zealand.
STRATEGIC FIXED INCOME PORTFOLIO
Yields on U.S. Treasury notes and bonds fell 0.25% on average during the
fourth quarter of 1996, retracing some of their one percent rise in the first
half of 1996. This strong showing saved bond investors from the specter of
near-zero returns, though the full year's low single-digit results were a far
cry from the soaring numbers posted by the U.S. fixed income markets in 1995.
The interest rate declines were
3
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especially helpful to the Portfolio due to its greater-than-index duration. Also
aiding performance was the Portfolio's positions in mortgage-backed securities,
Treasury futures, hedged non-U.S. dollar denominated bonds and cash equivalent
instruments, which created returns that placed the Portfolio well above its
benchmark index, the Lehman Government/Corporate Bond Index, for 1996.
Mortgage-backed securities added to their strong year-to-date returns via
their yield premiums and relative price gains over Treasuries in the fourth
quarter. Fixed-rate pass-throughs continued to benefit from the range-bound
movement of Treasury yields, which drive borrowing rates for the pass-throughs'
underlying mortgage loans. While both the quarter and the full year saw
significant moves in rates, they were of far less magnitude than the gyrations
of the 1993-95 period which led the mortgage sector to underperform.
Adjustable-rate mortgage issues (ARMs) also performed strongly in 1996 as their
higher yields and tightening spreads led them to outperform other short-duration
instruments. As such, the Portfolio benefited from its exposure to ARMs, as well
as Z-tranche Collateralized Mortgage Obligations (CMOs). Credit exposure
continued to be limited as a result of PIMCO's (subadviser to the Portfolio)
view that the currently narrow yield spreads to Treasuries make their
risk/return profile unattractive.
In May, PIMCO reaffirmed its long-term or secular forecast of 5%-7% for
30-year U.S. Treasury bonds. Given the recent rise in long-term interest rates
to nearly 7%, PIMCO is very optimistic about the prospects for rate declines.
While recent data has shown some acceleration of economic activity, PIMCO
remains confident that the U.S. economy will grow less quickly than market
expectations. This, together with a very benign inflation outlook, creates a
backdrop for potentially attractive returns for 1997. As a result, PIMCO will
continue to position the Portfolio with a bias towards a longer average maturity
than its benchmark index. Security selection will remain concentrated in the
mortgage sector; within this sector, PIMCO believes ARMs and Z-tranche CMOs
possess the most relative value. Further declines in market volatility should
allow significant outperformance of Treasuries given mortgage yield advantages;
exposure to the Treasury market will continue to be realized through Treasury
bond futures contracts. In the corporate market, PIMCO remains defensive as
narrow yield spreads create the potential for low relative returns should the
economy slow as PIMCO expects.
BALANCED PORTFOLIO
During the 12-month period ended December 31, 1996, the expected return for
stocks generally declined based on market levels and an anticipated deceleration
in the momentum of earnings growth. However, the outlook for stocks continued to
provide a normal equity risk premium in view of lower expected levels of
short-term interest rates and a moderate pace of inflation. An ongoing sell-off
in the fixed income market elevated bonds to a more attractive level than cash,
prompting us to increase the Portfolio's bond allocation accordingly.
The equity portion of the Portfolio adopted a pro-cyclical tilt early in the
year, with positions in capital goods, technology and financials. In general,
these sectors benefited in an environment of lower interest rates, low inflation
and stable growth. Technology, in particular, experienced a sharp rebound as a
result of additional good news in the form of positive earnings reports issued
by several well-known companies. As the year came to a close, conflicting
signals as to accelerated growth versus slow growth continued to incite
volatility, prompting us to maintain a neutral stance in the Portfolio's
duration.
The bond market's volatility required us to position the Portfolio's fixed
income portion more defensively by slightly reducing the Portfolio's duration
and adding to its existing mortgage-backed holdings. As the fiscal year came to
a close, conflicting signals as to accelerated growth versus slow growth
continued to incite volatility, prompting us to maintain a neutral stance in the
Portfolio's duration. As always, we continued to selectively buy and sell
specific securities based on their valuations relative to the markets.
Going forward, we continue to forecast ongoing, slower growth and benign
inflation. In this environment, the portfolio will continue to seek higher
returns by pursuing investments in companies with above-average earnings growth
potential. In the event that equity prices do not advance as anticipated,
however, our value orientation should allow us to continue to identify stocks
that possess longer-term potential. As we see further evidence as to the
direction of the economy, we will adjust the fixed income sector accordingly.
4
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GROWTH AND INCOME PORTFOLIO
Early in the year, portfolio restructuring of the Portfolio was completed, a
move which proved beneficial to Portfolio performance. During this period, the
Portfolio's exposure to consumer-related stocks and interest-sensitive sectors
such as utilities was reduced. Additionally, in response to the market's ongoing
preference for liquidity, the Portfolio increased the average stock market
capitalization of its holdings.
With regard to sectors, the Portfolio has maintained a pro-cyclical tilt,
with overweighted positions in capital goods and financials. These sectors have
benefited in an environment of lower interest rates, low inflation and stable
growth--particularly toward the end of the year given the perception among
investors that the Fed would maintain a neutral stance.
Within technology, the Portfolio took some profits by selling Computer
Associates, Quantum Corporation and U.S. Robotics. This equal-weighted the
technology sector relative to the S&P 500. Conversely, we added to our capital
goods sector, adding issues that we believe are undervalued. These included
Ingersoll Rand and Caterpillar. We feel that in the current economic environment
this sector will, in general, report better-than-expected earnings and,
consequently, be a strong performer.
Going forward, the Portfolio will continue to seek higher returns in a
period of slow growth by pursuing investments in companies with above-average
earnings growth potential. In the event that equity prices do not advance as
anticipated, however, we believe that our value orientation should allow us to
continue to identify stocks with longer-term potential.
AGGRESSIVE GROWTH PORTFOLIO
The Portfolio performed well relative to its benchmark, the S&P Mid Cap
Growth Index, which returned 18.4% for the year. The S&P 500 and the Dow Jones
Industrial Average, both reflective of the large-cap stock market, returned
22.9% and 28.78%, respectively. The Russell 2000, a benchmark of small
companies, finished the year with a relatively "meager" 16.5% gain.
A friendly economic environment and continued strong demand for equities
propelled stocks through 1996, confounding the post-1995 bears and pushing
prices into record, albeit lofty, territory. For the first half of the year, the
market was fairly broad; that is, smaller and "mid-cap" stocks kept pace with
their mega-million-dollar-sized counterparts. A June-July correction, however,
hit smaller and technology-oriented issues particularly hard. The market took
this as a warning sign and focused on the largest, most liquid stocks for the
remainder of the year.
The longer term performance advantage of small- and mid-cap stocks over
large-cap stocks occurs over cycles--there tend to be extended periods of time
when small and mid-cap stocks enjoy much stronger performance than large-caps.
1996 marks the third year in a row wherein the largest companies were favored by
investors, while small and mid-sized companies were virtually ignored. Going
forward, however, there is every reason to believe that small- and mid-cap
stocks will enjoy renewed popularity. First and foremost, our analysis indicates
that the underlying earnings strength--the "engine" that drives stock prices--is
much greater among the small- and mid-cap stocks. Second, the valuation that has
been placed on this earnings strength is likewise much more attractive than that
of the S&P 500. Over the past two years, large-cap stock prices have been driven
up more by supply and demand factors than by fundamental strength or valuations.
The Portfolio's subadviser, Nicholas Applegate Capital Management, believes that
the market will ultimately seek and reward the compelling opportunities that
abound in smaller and mid-cap stocks.
The Portfolio was invested approximately 30% in technology, approximately 8%
in health care and approximately 10% to 12% each in financial services, energy,
producers/manufacturing and retail stocks.
HIGH GRADE FIXED INCOME PORTFOLIO
With strong economic fundamentals and a neutral-to-restrictive Federal
Reserve as backdrops, the bond market continued its price decline during the
first half of 1996. Latent fears of future inflation, based on above-trend
economic growth, pushed the yield on the 30-year Treasury bond to a high of
7.19% in mid-
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June. During the year, the Portfolio amended its investment policy to enable
greater flexibility in investing in investment grade corporates. While this
policy adjustment did lead us to increase our corporate debt holdings, we chose
to retain a significant allocation to mortgage-backed securities (MBS) given
extremely attractive valuations in this sector.
Going forward, we perceive a market that is largely range-bound; that is,
that will trade in a range between 6.35% and 7.25% on the 30-year U.S. Treasury
bond yield. This affirms our bias to continue to emphasize portfolio yield via
corporates, MBS and agencies versus Treasuries. We believe that the economy will
continue to expand, but moderately. We forecast that inflation will remain
subdued, creating a stable environment for interest rates. Furthermore, the
over-extension of consumers would suggest a slowing down in future spending.
However, the near-term picture is not so positive. Although economic growth is
moderate, the prospect of monetary tightening lurks given tightness in labor
markets and the upward creep in wages. Due to these near-term bearish
fundamentals and technicals, we remain somewhat defensive. However, as we see
evidence confirming our longer-term outlook, we will lengthen duration in an
effort to capture the next downward trend in interest rates.
CONCLUSION
1996 was marked by volatility in most financial markets. At times like
these, remember the importance of working with your Investment Executive to help
you find investments that are consistent with your risk tolerance and time
horizon.
Our ultimate objective in managing your investments is to help you
successfully meet your financial goals. We thank you for your continued support,
and welcome any comments or questions you may have.
Sincerely,
<TABLE>
<S> <C>
[SIG] [SIG]
DENNIS HESS MARGO ALEXANDER
Chairman and Chief Executive Officer, President,
PaineWebber Life Insurance Company Mitchell Hutchins Asset Management Inc.
</TABLE>
6
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GROWTH PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN THE PORTFOLIO AND THE S&P 500 STOCK INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
S&P 500 STOCK INDEX GROWTH PORTFOLIO
<S> <C> <C>
5/4/1987 10000 10000
12/31/1987 8,770 8,848
12/31/1988 10,216 10,484
12/31/1989 13,444 14,514
12/31/1990 13,025 13,331
12/31/1991 16,976 18,944
12/31/1992 18,268 20,044
12/31/1993 20,101 23,961
12/31/1994 20,374 21,186
12/31/1995 28,003 28,071
12/31/1996 34,418 33,319
</TABLE>
The graph depicts the performance of the Growth Portfolio versus the Standard &
Poor's 500 Stock Index. It is important to note that the Growth Portfolio 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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN
--------------------------
<S> <C>
Twelve Months Ended 12/31/96..................................... 18.70%
Five Years Ended 12/31/96........................................ 11.96%
Commencement of Operations (05/04/87) through
12/31/96....................................................... 13.27%
</TABLE>
Past performance is not predictive of future performance.
Performance relates to the Portfolio and does not reflect Separate Account
charges applicable to variable annuity contracts.
Return on investment based on dividends paid yearly.
The investment return and principal value of an investment in the Portfolio will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
Source: Towers Data Corp. and PaineWebber Inc.
7
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GLOBAL GROWTH PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
PORTFOLIO AND THE MORGAN STANLEY CAPITAL WORLD INTERNATIONAL INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MORGAN STANLEY CAPITAL WORLD INTERNATIONAL
GLOBAL GROWTH PORTFOLIO INDEX
<S> <C> <C>
5/4/1987 10,000 10,000
12/31/1987 8,458 8,991
12/31/1988 10,625 11,144
12/31/1989 12,663 13,062
12/31/1990 13,617 10,906
12/31/1991 14,289 12,975
12/31/1992 13,209 12,371
12/31/1993 18,497 15,234
12/31/1994 15,296 16,084
12/31/1995 15,719 19,510
12/31/1996 18,099 22,239
</TABLE>
The graph depicts the performance of the Global Growth Portfolio versus the
Morgan Stanley Capital World International Index. It is important to note that
the Global Growth Portfolio 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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN
--------------------------
<S> <C>
Twelve Months Ended 12/31/96..................................... 15.14%
Five Years Ended 12/31/96........................................ 4.84%
Commencement of Operations (05/04/87) through
12/31/96....................................................... 6.33%
</TABLE>
Past performance is not predictive of future performance.
Performance relates to the Portfolio and does not reflect Separate Account
charges applicable to variable annuity contracts.
Return on investment based on dividends paid yearly.
The investment return and principal value of an investment in the Portfolio will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
Source: Towers Data Corp. and PaineWebber Inc.
8
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GLOBAL INCOME PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
PORTFOLIO AND THE SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GLOBAL INCOME PORTFOLIO SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX
<S> <C> <C>
5/1/1988 10,000 10,000
12/31/1988 10,670 10,271
12/31/1989 11,296 10,715
12/31/1990 13,037 11,997
12/31/1991 14,446 13,894
12/31/1992 14,632 14,662
12/31/1993 17,068 16,607
12/31/1994 16,148 16,999
12/31/1995 18,340 20,235
12/31/1996 19,553 20,968
</TABLE>
The graph depicts the performance of the Global Income Portfolio versus the
Salomon Brothers World Government Bond Index. It is important to note that the
Global Income Portfolio 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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN
--------------------------
<S> <C>
Twelve Months Ended 12/31/96..................................... 6.62%
Five Years Ended 12/31/96........................................ 6.24%
Commencement of Operations (05/01/88) through
12/31/96....................................................... 8.04%
</TABLE>
Past performance is not predictive of future performance.
Performance relates to the Portfolio and does not reflect Separate Account
charges applicable to variable annuity contracts.
Return on investment based on dividends paid yearly.
The investment return and principal value of an investment in the Portfolio will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
Source: Towers Data Corp. and PaineWebber Inc.
9
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STRATEGIC FIXED INCOME PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
PORTFOLIO AND LEHMAN BROTHERS MORTGAGE BOND INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STRATEGIC FIXED INCOME
PORTFOLIO LEHMAN BROTHERS MORTGAGE BOND INDEX
<S> <C> <C>
7/5/89 10,000 10,000
12/31/89 10,270 10,571
12/31/90 11,047 11,705
12/31/91 12,716 13,544
12/31/92 13,580 14,486
12/31/93 15,164 15,478
12/31/94 14,354 15,230
12/31/95 17,011 17,788
12/31/96 17,655 18,741
</TABLE>
The graph depicts the performance of the Strategic Fixed Income Portfolio versus
the Lehman Brothers Mortgage Bond Index. It is important to note that the
Strategic Fixed Income Portfolio 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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN
--------------------------
<S> <C>
Twelve Months Ended 12/31/96..................................... 3.79%
Five Years Ended 12/31/96........................................ 6.78%
Commencement of Operations (07/05/89) through
12/31/96....................................................... 7.88%
</TABLE>
Past performance is not predictive of future performance.
Performance relates to the Portfolio and does not reflect Separate Account
charges applicable to variable annuity contracts.
Return on investment based on dividends paid yearly.
The investment return and principal value of an investment in the Portfolio will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
Source: Towers Data Corp. and PaineWebber Inc.
10
<PAGE>
BALANCED PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
PORTFOLIO AND THE S&P 500 STOCK INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BALANCED PORTFOLIO S&P 500 STOCK INDEX
<S> <C> <C>
6/1/1988 10,000 10,000
12/31/1988 10,540 10,885
12/31/1989 11,710 14,323
12/31/1990 12,018 13,877
12/31/1991 14,274 18,087
12/31/1992 15,012 19,463
12/31/1993 17,379 21,416
12/31/1994 15,712 21,707
12/31/1995 19,400 29,835
12/31/1996 22,628 36,496
</TABLE>
The graph depicts the performance of the Balanced Portfolio versus the Standard
& Poor's 500 Stock Index. It is important to note that the Balanced Portfolio 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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN
--------------------------
<S> <C>
Twelve Months Ended 12/31/96..................................... 16.82%
Five Years Ended 12/31/96........................................ 9.65%
Commencement of Operations (06/01/88) through
12/31/96....................................................... 9.98%
</TABLE>
Past performance is not predictive of future performance.
Performance relates to the Portfolio and does not reflect Separate Account
charges applicable to variable annuity contracts.
Return on investment based on dividends paid yearly.
The investment return and principal value of an investment in the Portfolio will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
Source: Towers Data Corp. and PaineWebber Inc.
11
<PAGE>
GROWTH AND INCOME PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
PORTFOLIO AND THE S&P 500 STOCK INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GROWTH AND INCOME PORTFOLIO S&P 500 STOCK INDEX
<S> <C> <C>
1/2/92 10,000 10,000
12/31/92 10,338 10,762
12/31/93 10,104 11,841
12/31/94 9,480 12,001
12/31/95 12,373 16,495
12/31/96 15,110 20,285
</TABLE>
The graph depicts the performance of the Growth and Income Portfolio versus the
Standard & Poor's 500 Stock Index. It is important to note that the Growth and
Income Portfolio 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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN
--------------------------
<S> <C>
Twelve Months Ended 12/31/96..................................... 22.12%
Five Years Ended 12/31/96........................................ N/A
Commencement of Operations (1/2/92) through
12/31/96....................................................... 8.62%
</TABLE>
Past performance is not predictive of future performance.
Performance relates to the Portfolio and does not reflect Separate Account
charges applicable to variable annuity contracts.
Return on investment based on dividends paid yearly.
The investment return and principal value of an investment in the Portfolio will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
Source: Towers Data Corp. and PaineWebber Inc.
12
<PAGE>
AGGRESSIVE GROWTH PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
PORTFOLIO AND THE S&P 500 STOCK INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH
PORTFOLIO S&P 500 STOCK INDEX
<S> <C> <C>
11/2/1992 10,000 10,000
12/31/1993 9,964 10,037
12/31/1994 9,675 10,173
12/31/1995 11,710 13,982
12/31/1996 14,665 17,168
</TABLE>
The graph depicts the performance of the Aggressive Growth Portfolio versus the
Standard & Poor's 500 Stock Index. It is important to note that the Aggressive
Growth Portfolio 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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN
--------------------------
<S> <C>
Twelve Months Ended 12/31/96..................................... 25.23%
Five Years Ended 12/31/96........................................ N/A
Commencement of Operations (11/02/93) through
12/31/96....................................................... 12.87%
</TABLE>
Past performance is not predictive of future performance.
Performance relates to the Portfolio and does not reflect Separate Account
charges applicable to variable annuity contracts.
Return on investment based on dividends paid yearly.
The investment return and principal value of an investment in the Portfolio will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
Source: Towers Data Corp. and PaineWebber Inc.
13
<PAGE>
HIGH GRADE FIXED INCOME PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
PORTFOLIO AND THE LEHMAN BROTHERS GOVERNMENT BOND INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HIGH GRADE RIXED INCOME LEHMAN BROTHERS GOVERNMENT BOND INDEX
<S> <C> <C>
11/8/93 10,000 10,000
12/31/93 9,939 9,929
12/31/94 6,996 9,593
12/31/95 10,384 11,352
12/31/96 10,531 11,666
</TABLE>
The graph depicts the performance of the High Grade Fixed Income Portfolio
versus the Lehman Brothers Government Bond Index. It is important to note that
the High Grade Fixed Income Portfolio 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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURN
--------------------------
<S> <C>
Twelve Months Ended 12/31/96..................................... 1.41%
Five Years Ended 12/31/96........................................ N/A
Commencement of Operations (11/8/93) through
12/31/96....................................................... 1.65%
</TABLE>
Past performance is not predictive of future performance.
Performance relates to the Portfolio and does not reflect Separate Account
charges applicable to variable annuity contracts.
Return on investment based on dividends paid yearly.
The investment return and principal value of an investment in the Portfolio will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
Source: Towers Data Corp. and PaineWebber Inc.
14
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Portfolios of Investments
December 31, 1996
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- ---------------- -----------
<C> <S> <C> <C> <C>
U.S. TREASURY & AGENCY OBLIGATIONS--2.44%
$ 300 Federal Home Loan Bank (cost--$300,000)..................... 10/16/97 to 11/04/97 5.810 to 5.900% $ 300,000
-----------
BANK NOTES (DOMESTIC)--7.73%
200 Bankamerica Corporation..................................... 07/15/97 6.000 199,949
250 FCC National Bank........................................... 04/17/97 5.640 249,924
500 Morgan Guaranty Trust Company............................... 01/15/97 5.250 500,017
-----------
Total Bank Notes (cost--$949,890)....................................... 949,890
-----------
CERTIFICATES OF DEPOSIT--2.03%
YANKEE--2.03%
250 Societe Generale (cost--$250,008)........................... 05/08/97 5.850 250,008
-----------
COMMERCIAL PAPER--73.60%
ASSET-BACKED--12.87%
300 Asset Securitization Co-op Corporation...................... 02/25/97 5.360 297,543
362 Delaware Funding Corporation................................ 01/21/97 5.750 360,844
500 New Center Asset Trust...................................... 01/29/97 5.420 497,892
426 Triple A One Funding Corporation............................ 01/07/97 5.720 425,594
-----------
1,581,873
-----------
AUTO-TRUCK--6.50%
500 PACCAR Financial Corporation................................ 01/10/97 5.380 499,328
300 Toyota Motor Credit Company................................. 01/02/97 6.450 299,946
-----------
799,274
-----------
BANKING--11.23%
400 B.B.V. Finance (Delaware) Incorporated...................... 01/22/97 5.310 398,761
400 Bankers Trust New York Corporation, FRN..................... 02/14/97 5.740@ 400,000
582 Unifunding.................................................. 01/06/97 5.450 581,559
-----------
1,380,320
-----------
BROKER-DEALER--3.65%
450 Merrill Lynch & Co., Incorporated........................... 01/16/97 to 02/05/97 5.330 to 5.450 448,539
-----------
CHEMICALS--4.00%
494 Air Products & Chemicals, Incorporated...................... 02/07/97 5.500 491,208
-----------
DRUGS & HEALTH CARE--3.22%
400 Bayer Corporation........................................... 03/25/97 5.350 395,066
-----------
ELECTRONICS--7.14%
500 Hitachi America, Limited.................................... 02/12/97 5.450 496,821
383 Toshiba America, Incorporated............................... 01/27/97 to 02/10/97 5.350 to 5.600 380,913
-----------
877,734
-----------
FINANCE-CONDUIT--6.50%
400 Commerzbank U.S. Finance.................................... 01/17/97 5.775 398,974
400 Svenska Handelsbanken Incorporated.......................... 01/16/97 5.530 399,078
-----------
798,052
-----------
FOOD, BEVERAGES & TOBACCO--4.07%
500 American Brands Incorporated................................ 01/07/97 5.420 499,548
-----------
GENERAL TRADE--1.62%
200 Mitsubishi International Corporation........................ 02/04/97 5.500 198,961
-----------
INSURANCE--5.67%
300 Prudential Funding Corporation.............................. 01/07/97 5.400 299,730
400 USAA Capital Corporation.................................... 02/14/97 5.400 397,360
-----------
697,090
-----------
MISCELLANEOUS--2.82%
350 Beta Finance Incorporated................................... 03/17/97 5.350 346,099
-----------
</TABLE>
15
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- ---------------- -----------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER--(CONCLUDED)
UTILITY-ELECTRIC--4.31%
$ 530 Florida Power Corporation................................... 01/06/97 to 01/08/97 5.790 to 5.580% $ 529,509
-----------
Total Commercial Paper (cost--$9,043,273)............................... 9,043,273
-----------
SHORT-TERM CORPORATE OBLIGATIONS--12.23%
500 American General Finance Corporation........................ 04/01/97 5.800 500,247
1,000 Norwest Corporation MTN..................................... 01/30/97 7.875 1,001,965
-----------
Total Short-Term Corporate Obligations (cost--$1,502,212)............... 1,502,212
-----------
REPURCHASE AGREEMENT--1.59%
Repurchase Agreement dated 12/31/96 with State Street Bank &
Trust Company, collateralized by $201,707 U.S. Treasury
Notes, 7.250%, due 08/15/22; proceeds: $195,051
195 (cost--$195,000).......................................... 01/02/97 4.750 195,000
-----------
Total Investments (cost--$12,240,383)--99.62%........................... 12,240,383
Other assets in excess of liabilities--0.38%............................ 46,778
-----------
Net Assets--100.00%..................................................... $12,287,161
-----------
-----------
</TABLE>
- ---------------
@ Variable rate security--maturity date reflects earlier of reset date or
maturity date. The interest rate shown is the current rate as of December
31, 1996 and resets periodically.
FRN Floating Rate Note--The interest rate shown is as of December 31, 1996.
MTN Medium Term Note
Weighted average maturity--41 days
See accompanying notes to financial statements
16
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--111.07%
AGRICULTURE, FOOD & BEVERAGE--1.74%
12,000 The Coca-Cola Company................................... $ 631,500
-----------
APPAREL, RETAIL--1.58%
25,000 Loehmanns Incorporated*................................. 575,000
-----------
APPAREL, TEXTILES--1.31%
8,000 Nike Incorporated....................................... 478,000
-----------
BANKS--4.96%
5,000 Bank of Boston Corporation.............................. 321,250
10,000 The Bank of New York Company Incorporated............... 337,500
10,000 CCB Financial Corporation............................... 682,500
5,200 Chase Manhattan Corporation............................. 464,100
-----------
1,805,350
-----------
CHEMICALS--3.34%
9,800 IMC Global Incorporated................................. 383,425
20,000 Sealed Air Corporation*................................. 832,500
-----------
1,215,925
-----------
COMPUTER HARDWARE--5.94%
6,500 3Com Corporation*....................................... 476,937
12,000 Cisco Systems Incorporated*............................. 763,500
20,000 EMC Corporation*........................................ 662,500
10,000 Sun Microsystems Incorporated*.......................... 256,875
-----------
2,159,812
-----------
COMPUTER SOFTWARE--5.11%
40,000 Excalibur Technologies Corporation*..................... 630,000
70,000 Playnet Technologies Incorporated* (2).................. 350,000
15,926 Sterling Commerce Incorporated*......................... 561,392
10,000 Sterling Software Incorporated*......................... 316,250
-----------
1,857,642
-----------
DEFENSE/AEROSPACE--1.62%
3,000 McDonnell Douglas Corporation........................... 192,000
6,000 United Technologies Corporation......................... 396,000
-----------
588,000
-----------
DRUGS & MEDICINE--9.75%
80,000 4Health Incorporated*................................... 440,000
18,200 Columbia Laboratories Incorporated...................... 263,900
14,000 Elan Corporation plc, ADS* (1).......................... 465,500
25,000 Entremed Incorporated*.................................. 406,250
5,000 R.P. Scherer Corporation*............................... 251,250
18,000 Teva Pharmaceutical Industries Limited, ADS............. 904,500
10,000 Triangle Pharmaceuticals Incorporated*.................. 228,750
13,000 Watson Pharmaceuticals, Incorporated*................... 584,187
-----------
3,544,337
-----------
ENTERTAINMENT--7.63%
25,000 Cinar Films Incorporated*............................... 650,000
50,000 Florida Panthers Holdings Incorporated* (1)............. 862,500
30,000 Ticketmaster Group Incorporated*........................ 363,750
20,000 Time Warner Incorporated................................ 750,000
5,000 Young Broadcasting Inc.*................................ 146,250
-----------
2,772,500
-----------
ENVIRONMENTAL SERVICES--4.67%
54,400 Republic Industries Incorporated*....................... 1,696,600
-----------
</TABLE>
17
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
FINANCIAL SERVICES--4.30%
2,000 Federal Home Loan Mortgage Corporation.................. $ 220,250
20,000 Federal National Mortgage Association................... 745,000
10,000 Moneygram Payment Systems Incorporated*................. 132,500
5,000 Student Loan Marketing Association...................... 465,625
-----------
1,563,375
-----------
FOOD RETAIL--0.59%
5,000 Safeway Incorporated*................................... 213,750
-----------
FOREST PRODUCTS, PAPER--1.37%
3,000 Fibreboard Corporation*................................. 101,250
30,000 Universal Forest Products Incorporated.................. 397,500
-----------
498,750
-----------
HOTELS--6.53%
40,000 Extended Stay America Incorporated*..................... 805,000
19,000 HFS Incorporated*....................................... 1,135,250
20,000 Mirage Resorts, Incorporated*........................... 432,500
-----------
2,372,750
-----------
HOUSEHOLD PRODUCTS--1.31%
3,000 Premark International Incorporated*..................... 66,750
3,000 Tupperware Corporation.................................. 160,875
15,000 Viad Corporation........................................ 247,500
-----------
475,125
-----------
INDUSTRIAL SERVICES/SUPPLIES--1.04%
7,650 Accustaff Incorporated.................................. 161,606
20,000 Data Documents Incorporated*............................ 217,500
-----------
379,106
-----------
INFORMATION & COMPUTER SERVICES--2.79%
10,000 First Data Corporation.................................. 365,000
7,500 Outdoor Systems Incorporated*........................... 210,938
12,500 Princeton Video Image Incorporated (2).................. 437,500
-----------
1,013,438
-----------
LEISURE--3.76%
15,000 Family Golf Centers Incorporated (1).................... 451,875
29,100 Norwood Promotional Products, Incorporated*............. 531,075
38,500 Rawlings Sporting Goods Company Incorporated*........... 385,000
-----------
1,367,950
-----------
LIFE INSURANCE--1.98%
20,000 PennCorp Financial Group, Incorporated.................. 720,000
-----------
LONG DISTANCE & PHONE COMPANIES--6.18%
5,000 Brooks Fiber Properties Incorporated*................... 127,500
2,500 Colt Telecom Group plc.................................. 48,125
38,461 ICG Communications Incorporated*........................ 677,875
2,500 McLeod Incorporated*.................................... 63,750
15,000 Teleport Communications*................................ 457,500
16,000 Worldcom Incorporated................................... 872,000
-----------
2,246,750
-----------
</TABLE>
18
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
MANUFACTURING--HIGH TECHNOLOGY--6.33%
17,000 Belden, Incorporated.................................... $ 629,000
2,200 Boston Communications Group*............................ 12,650
3,000 LCC International Incorporated*......................... 55,500
40,000 Noel Group, Incorporated*............................... 280,000
10,000 Superior Telecom Incorporated*.......................... 203,750
5,000 U.S. Robotics Corporation*.............................. 360,000
25,000 Waters Corporation*..................................... 759,375
-----------
2,300,275
-----------
MEDIA--7.09%
30,000 Ascent Entertainment Group Incorporated*................ 483,750
31,500 Comcast Corporation, Class A Special.................... 561,094
4,000 Cox Radio Incorporated*................................. 70,000
26,666 International CableTel Incorporated*.................... 673,316
15,000 Liberty Media Group, Series A*.......................... 428,438
7,500 Universal Outdoor Holdings Incorporated*................ 176,250
5,000 Univision Communications Incorporated*.................. 185,000
-----------
2,577,848
-----------
MEDICAL PRODUCTS--2.07%
75,000 Humascan Incorporated*.................................. 421,875
15,000 VISX, Incorporated*..................................... 331,875
-----------
753,750
-----------
MEDICAL PROVIDERS--4.06%
11,250 Columbia Healthcare Corporation......................... 458,438
10,000 Pharmaceutical Product Development Incorporated*........ 252,500
27,000 Phycor Incorporated*.................................... 766,125
-----------
1,477,063
-----------
MINING & METALS--1.75%
7,500 Potash Corporation of Saskatchewan Incorporated......... 637,500
-----------
MOTOR VEHICLES--0.08%
900 Lear Corporation*....................................... 30,713
-----------
OIL SERVICES--2.30%
10,000 Camco International Incorporated........................ 461,250
6,000 Transocean Offshore Incorporated........................ 375,750
-----------
837,000
-----------
OTHER INSURANCE--0.83%
5,000 ACE Limited............................................. 300,625
-----------
PUBLISHING--1.03%
25,000 Getty Communications plc*............................... 375,000
-----------
REAL PROPERTY--0.76%
5,000 Starwood Lodging Trust.................................. 275,625
-----------
SECURITIES & ASSET MANAGEMENT--0.74%
10,000 Amresco Incorporated*................................... 267,500
-----------
SPECIALTY RETAIL--5.70%
25,000 General Nutrition Companies Incorporated*............... 421,875
53,000 Staples, Incorporated*.................................. 957,312
26,000 Viking Office Products, Incorporated*................... 693,875
-----------
2,073,062
-----------
</TABLE>
19
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONCLUDED)
WIRELESS TELECOMMUNICATIONS--0.83%
5,000 APT Satellite Holdings Ltd*............................. $ 70,000
5,000 Omnipoint Corporation*.................................. 96,250
15,000 Viatel Incorporated*.................................... 135,000
-----------
301,250
-----------
Total Common Stocks (cost--$25,522,912)............................ 40,382,871
-----------
PREFERRED STOCK--0.49%
MEDIA--0.49%
10,000 The News Corporation Limited, ADR (1)
(cost--$176,850)...................................... 176,250
-----------
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED--5.03%
MONEY MARKET FUNDS--5.03%
1,413,200 Liquid Assets Portfolio................................. 1,413,200
415,800 TempCash Portfolio...................................... 415,800
-----------
Total Money Market Funds (cost--$1,829,000)........................ 1,829,000
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES
--------- -------------------- ---------------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--5.47%
$2,000 U.S. Treasury Bills (cost--$1,990,320)............ 02/06/97 4.840% 1,990,320
-----------
REPURCHASE AGREEMENT--2.31%
840 Repurchase Agreement dated 12/31/96 with State
Street Bank & Trust Company, collateralized
by $868,892 U.S. Treasury Notes, 7.250%,
due 08/15/22; proceeds: $840,222
(cost--$840,000)................................ 01/02/97 4.750 840,000
-----------
Total Investments (cost--$30,359,082)--124.37%................ 45,218,441
Liabilities in excess of other assets--(24.37)%............... (8,861,727)
-----------
Net Assets--100.00%........................................... $36,356,714
-----------
-----------
</TABLE>
- ---------------
* Non-income producing security
ADR American Depositary Receipts
ADS American Depositary Shares
(1) Security, or a portion thereof, was loaned at December 31, 1996.
(2) Illiquid securities represent 2.17% of Net Assets.
See accompanying notes to financial statements
20
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GLOBAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -----------
<C> <S> <C>
COMMON STOCKS--95.07%
AUSTRALIA--1.25%
FOOD--1.25%
179,829 Burns Philip & Company, Limited........................ $ 320,179
-----------
AUSTRIA--1.94%
ENGINEERING SERVICES--1.59%
2,606 VA Technologie AG...................................... 409,004
-----------
SERVICES--0.35%
1,775 Flughafen Wien AG...................................... 90,483
-----------
Total Austria Common Stocks........................................ 499,487
-----------
FINLAND--0.95%
MANUFACTURING--0.95%
14,032 Valmet Corporation..................................... 245,255
-----------
FRANCE--7.15%
AUTOMOTIVE--1.01%
4,200 Valeo SA............................................... 259,035
-----------
CAPITAL GOODS--0.75%
2,041 Technip SA/Compagnie Francaise......................... 191,571
-----------
ENERGY--1.84%
5,814 Total SA (Class B)..................................... 472,874
-----------
PRODUCERS' GOODS--1.46%
14,314 Coflexip SA ADR*....................................... 375,743
-----------
RETAIL--2.09%
826 Carrefour SA........................................... 537,453
-----------
Total France Common Stocks......................................... 1,836,676
-----------
GERMANY--4.60%
CHEMICALS--0.58%
3,875 BASF AG................................................ 149,279
-----------
ENERGY--1.30%
5,795 Veba AG................................................ 335,167
-----------
MACHINERY (DIVERSIFIED)--1.31%
774 Mannesmann AG.......................................... 335,494
-----------
MEDICAL EQUIPMENT--0.47%
1,425 Fresenius Medical AG................................... 121,960
-----------
PHARMACEUTICAL--0.94%
3,757 Gehe AG................................................ 240,488
-----------
Total Germany Common Stocks........................................ 1,182,388
-----------
HONG KONG--4.35%
BROADCASTING--0.48%
31,000 Television Broadcasting Limited........................ 123,848
-----------
FINANCIAL SERVICES--2.12%
25,393 HSBC Holdings.......................................... 543,350
-----------
RETAIL--1.03%
311,000 Giordano Holdings Limited.............................. 265,382
-----------
UTILITIES--0.72%
79,000 Consolidated Electric Power Asia....................... 185,384
-----------
Total Hong Kong Common Stocks...................................... 1,117,964
-----------
</TABLE>
21
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GLOBAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -----------
COMMON STOCKS--(CONTINUED)
<C> <S> <C>
INDONESIA--1.30%
AUTOMOTIVE--1.30%
72,000 Astra International.................................... $ 198,137
105,767 Steady Safe............................................ 135,455
-----------
333,592
-----------
ITALY--4.29%
BANKING--0.66%
15,445 IMI.................................................... 132,356
1,490 Istituto Mobiliare Italiano ADR........................ 38,554
-----------
170,910
-----------
ELECTRIC COMPANIES--0.52%
21,327 Edison................................................. 134,963
-----------
FURNITURE/HOME APPLIANCES--0.72%
7,992 Industrie Natuzzi SPA ADR.............................. 183,816
-----------
TELECOMMUNICATIONS--2.39%
242,685 Telecom Italia Mobilare................................ 613,512
-----------
Total Italy Common Stocks.......................................... 1,103,201
-----------
JAPAN--11.48%
AUTOMOTIVE--1.68%
9,000 Honda Motor Company.................................... 257,232
19,000 Suzuki Motor Corporation, Limited...................... 173,905
-----------
431,137
-----------
COMPUTER SOFTWARE & SERVICES--1.03%
9 NTT Data Corporation................................... 263,449
-----------
ELECTRONICS--2.45%
6,000 Murata Manufacturing Company, Limited.................. 199,465
9,000 Omron Corporation...................................... 169,415
4,000 Rohm Company........................................... 262,499
-----------
631,379
-----------
ENTERTAINMENT--0.50%
3,800 Sega Enterprises....................................... 127,968
-----------
FINANCIAL SERVICES--1.11%
12,800 Credit Saison Company.................................. 286,262
-----------
OFFICE EQUIPMENT--1.55%
18,000 Canon Incorporated..................................... 397,893
-----------
SECURITY SERVICES--1.41%
6,000 Secom Company, Limited................................. 363,181
-----------
TELECOMMUNICATIONS--1.75%
68 DDI Corporation........................................ 449,771
-----------
Total Japan Common Stocks.......................................... 2,951,040
-----------
MALAYSIA--1.00%
BANKING--1.00%
30,600 AMMB Holdings Berhad................................... 256,868
-----------
MEXICO--1.68%
BANKING--0.70%
22,149 Grupo Financiero Bancomer ADR*+........................ 179,407
-----------
MEDIA--0.36%
3,645 Grupo Televisa, S.A. de C.V. ADR....................... 93,403
-----------
</TABLE>
22
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GLOBAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -----------
COMMON STOCKS--(CONTINUED)
<C> <S> <C>
MEXICO--(CONCLUDED)
MULTI-INDUSTRY--0.62%
17,387 Grupo Carso, S.A. de C.V. (Series A)................... $ 92,103
6,289 Grupo Carso, S.A. de C.V. ADR+......................... 66,035
-----------
158,138
-----------
Total Mexico Common Stocks......................................... 430,948
-----------
NETHERLANDS--2.60%
ENTERTAINMENT--0.84%
4,232 Polygram............................................... 215,706
-----------
FINANCIAL SERVICES--1.76%
12,586 Internationale Nederlanden Groep N.V. ................. 453,431
-----------
Total Netherlands Common Stocks.................................... 669,137
-----------
NORWAY--1.79%
ENERGY SERVICES--1.79%
11,865 Petroleum Geo-Service (1).............................. 460,376
-----------
PANAMA--1.04%
AGRICULTURE, FOOD & BEVERAGES--0.55%
3,011 Panamerican Beverages, Incorporated ADR................ 141,141
-----------
BANKS--0.49%
2,492 Banco Latinoamericano De Expires ADR................... 126,469
-----------
Total Panama Common Stocks......................................... 267,610
-----------
PERU--0.80%
TELECOMMUNICATIONS--0.80%
10,949 Telefonica Del Peru S.A. ADR........................... 206,662
-----------
PHILIPPINES--1.77%
AGRICULTURE, FOOD & BEVERAGES--1.31%
76,320 San Miguel Corporation................................. 336,621
-----------
TELECOMMUNICATIONS--0.46%
138,900 Philippino Telephone................................... 117,510
-----------
Total Philippines Common Stocks.................................... 454,131
-----------
PORTUGAL--0.39%
TELECOMMUNICATIONS--0.39%
1,572 Telecel Comunicacoes Pessoai........................... 100,373
-----------
SOUTH AFRICA--1.26%
STEEL--1.26%
452,811 South African Iron & Steel/Iscor....................... 323,264
-----------
SPAIN--1.58%
BANKS--0.52%
677 Banco Popular, Espana.................................. 132,975
-----------
OIL & GAS--1.06%
7,091 Repsol S.A............................................. 272,006
-----------
Total Spain Common Stocks.......................................... 404,981
-----------
SWEDEN--1.69%
AUTOMOTIVE PARTS--1.69%
9,892 Autoliv Ab 'B' Free.................................... 433,688
-----------
SWITZERLAND--7.00%
DRUGS & MEDICINE--2.24%
502 Novartis AG............................................ 574,947
-----------
</TABLE>
23
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GLOBAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -----------
COMMON STOCKS--(CONTINUED)
<C> <S> <C>
SWITZERLAND--(CONCLUDED)
INSURANCE--1.15%
278 Schw Ruckversicher..................................... $ 296,796
-----------
MANUFACTURING--1.49%
307 ABB AG................................................. 381,887
-----------
PHARMACEUTICAL--1.00%
33 Roche Holdings AG...................................... 256,776
-----------
SPECIALTY RETAIL--1.12%
1,792 Tag Heuer.............................................. 289,183
-----------
Total Switzerland Common Stocks.................................... 1,799,589
-----------
THAILAND--0.44%
BANKING--0.44%
18,000 Thai Farmers Bank plc.................................. 112,298
-----------
UNITED KINGDOM--8.97%
BUILDING MATERIALS & PAPER PACKAGING--0.80%
31,349 BPB Industries......................................... 206,236
-----------
CAPITAL GOODS--2.40%
33,196 Siebe.................................................. 616,489
-----------
DRUGS--1.31%
77,389 Medeva plc............................................. 336,762
-----------
ENTERTAINMENT--2.28%
21,825 Granada Group.......................................... 322,683
60,602 Thorn EMI plc.......................................... 262,673
-----------
585,356
-----------
PUBLISHING--1.91%
26,107 Reed International..................................... 491,100
-----------
RAILROADS--0.27%
10,638 Railtrack Group........................................ 70,349
-----------
Total United Kingdom Common Stocks................................. 2,306,292
-----------
UNITED STATES--25.75%
BANKS--2.27%
5,660 Citicorp............................................... 582,980
-----------
CHEMICALS--3.93%
12,260 Airgas Incorporated*................................... 269,720
8,690 Allied Signal Incorporated............................. 582,230
4,496 Avery Dennison Corporation............................. 159,046
-----------
1,010,996
-----------
COMPUTER HARDWARE--0.44%
4,858 Zebra Technologies Corporation (Class A)............... 113,556
-----------
DRUGS & MEDICINE--1.42%
7,244 R.P. Scherer Corporation*.............................. 364,011
-----------
ELECTRONICS--2.94%
2,597 Intel Corporation...................................... 340,045
6,760 Motorola Incorporated.................................. 414,895
-----------
754,940
-----------
HOUSEHOLD PRODUCTS--1.52%
4,225 Colgate-Palmolive Company.............................. 389,756
-----------
</TABLE>
24
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GLOBAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -----------
COMMON STOCKS--(CONCLUDED)
<C> <S> <C>
UNITED STATES--(CONCLUDED)
INDUSTRIAL SERVICES & SUPPLIES--5.15%
12,973 Ecolab Incorporated.................................... $ 488,109
13,276 Sensormatic Electronics Corporation.................... 222,374
3,224 Tyco International Limited............................. 170,469
11,792 UCAR................................................... 443,674
-----------
1,324,626
-----------
INFORMATION & COMPUTER SERVICES--2.22%
15,619 First Data Corporation................................. 570,094
-----------
LIFE INSURANCE--1.63%
9,246 The Travelers Group, Incorporated...................... 419,537
-----------
MOTOR VEHICLES--0.74%
5,761 Chrysler Corporation................................... 190,113
-----------
RETAIL--1.32%
7,352 Sears Roebuck & Company................................ 339,111
-----------
SPECIALTY RETAIL--1.19%
4,075 General Nutrition Company Incorporated................. 68,766
7,943 Toys 'R' Us, Incorporated*............................. 238,290
-----------
307,056
-----------
WIRELESS TELECOMMUNICATIONS--0.98%
9,961 Airtouch Communications, Incorporated*................. 251,515
-----------
Total United States Common Stock................................... 6,618,291
-----------
Total Common Stock (cost--$20,954,205)............................. 24,434,290
-----------
PREFERRED STOCKS--2.44%
AUSTRIA--0.09%
BANKS--0.09%
532 Creditanstalt Bankverein............................... 24,565
-----------
BRAZIL--1.10%
APPLIANCES--0.74%
683,805 Brasmotor S.A.......................................... 189,854
-----------
FOOD--0.36%
10,642,998 Ceval Alimentos SA (2)................................. 93,207
-----------
Total Brazil Preferred Stocks...................................... 283,061
-----------
GERMANY--1.25%
MEDICAL EQUIPMENT--0.73%
2,327 Fresenius Medical AG................................... 187,439
-----------
SOFTWARE & SERVICES--0.52%
953 SAP AG................................................. 133,153
-----------
Total German Preferred Stocks...................................... 320,592
-----------
Total Preferred Stocks (cost--$701,693)............................ 628,218
-----------
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED--1.27%
MONEY MARKET FUNDS--1.27%
146,660 Liquid Assets Portfolio................................ 146,660
179,340 TempCash Portfolio..................................... 179,340
-----------
Total Money Market Funds (cost--$326,000).......................... 326,000
-----------
</TABLE>
25
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GLOBAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- -------------------- -----------
<C> <S> <C> <C> <C>
AGENCY BACKED OBLIGATIONS--1.55%
$400 Federal National Mortgage Association Discount
Notes (cost--$398,827).......................... 01/21/97 5.029%# $ 398,827
-----------
REPURCHASE AGREEEMENT--1.83%
470 Repurchase Agreement dated 12/31/96 with State
Street Bank & Trust Company, collateralized by
$483,600 U.S. Treasury Notes, 6.250% due
06/30/98; proceeds: $470,157 (cost--$470,000)... 01/02/97 6.000 470,000
-----------
Total Investments (cost--$22,850,725)--102.16%................ 26,257,335
Liabilities in excess of other assets--(2.16)%................ (556,073)
-----------
Net Assets--100.00%........................................... $25,701,262
-----------
-----------
</TABLE>
- ---------------
* Non-income producing security
+ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
# Yield to maturity at December 31, 1996.
ADR American Depositary Receipts
(1) Security, or a portion thereof, was loaned at December 31, 1996.
(2) Illiquid security represent 0.36% of Net Asssets.
See accompanying notes to financial statements
26
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GLOBAL INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000)* DATES RATES VALUE
- ---------- -------------------- ------------------ ------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES--78.53%
AUSTRALIA--3.70%
400 New South Wales Treasury Corporation+............. 12/01/01 12.000% $ 381,766
550 Queensland Treasury Corporation Global Issue...... 08/15/01 12.000 521,620
------------
903,386
------------
CANADA--5.81%
2,135 Ontario Hydro Global.............................. 04/11/08 to 04/11/11 8.605 to 10.551 @ 623,323
1,190 Province of British Columbia Residual............. 01/09/12 9.000 to 9.061 @ 286,721
U.S.$ 539 Province of Ontario............................... 02/21/06 6.000 510,018
------------
1,420,062
------------
DENMARK--1.96%
2,550 Government of Denmark............................. 05/13/03 8.000 480,020
------------
GERMANY--7.92%
2,626 Federal Republic of Germany....................... 07/22/02 to 12/20/02 7.125 to 8.000 1,935,243
------------
ITALY--4.47%
1,555,000 Republic of Italy................................. 07/15/98 to 04/01/04 8.500 to 10.500 1,092,798
------------
NEW ZEALAND--2.59%
815 Government of New Zealand......................... 02/15/01 to 03/15/02 8.000 to 10.000 633,370
------------
SPAIN--4.58%
123,700 Government of Spain............................... 03/25/00 to 02/28/01 10.100 to 12.250 1,119,651
------------
UNITED KINGDOM--9.68%
1,242 United Kingdom Gilt............................... 09/30/98 to 12/07/15 8.000 to 15.500 2,365,375
------------
UNITED STATES--37.82%
1,000 Clorox Corporation................................ 07/15/01 8.800 1,084,874
1,000 Ford Motor Capital Corporation.................... 07/01/01 9.500 1,106,258
433 U.S. Treasury Bonds............................... 11/15/26 6.500 424,881
6,552 U.S. Treasury Notes............................... 01/31/98 to 07/15/06 5.625 to 7.250 6,624,576
------------
9,240,589
------------
Total Long-Term Debt Securities (cost--$18,835,194)........... 19,190,494
------------
SHORT-TERM DEBT SECURITIES--25.11%
AUSTRALIA--2.31%
700 New South Wales Treasury Corporation.............. 04/01/97 12.500 565,069
------------
POLAND--3.36%
2,540 Republic of Poland Treasury Bills................. 02/05/97 to 11/26/97 18.640 to 20.906 @ 820,965
------------
UNITED STATES--19.44%
1,250 Chase Manhattan Corporation....................... 12/01/97 7.500 1,267,153
3,500 U.S. Treasury Bills............................... 01/30/97 to 02/06/97 4.715 to 4.907 3,483,605
------------
4,750,758
------------
Total Short-Term Debt Securities (cost--$6,163,663)........... 6,136,792
------------
REPURCHASE AGREEMENT--1.80%
$ 440 Repurchase Agreement dated 12/31/96 with Brown 01/02/97 5.000
Brothers Harriman & Company, collateralized by
$449,158 U.S. Treasury Notes, 6.125% due
03/31/98; proceeds: $440,122 (cost--$440,000)... 440,000
------------
Total Investments (cost--$25,438,857)--105.44%................ 25,767,286
Liabilities in excess of other assets--(5.44%)................ (1,331,121)
------------
Net Assets--100.00%........................................... $ 24,436,165
------------
------------
</TABLE>
- ------------
Note: The Portfolio of Investments is listed by the security issuer's country
of origin.
* In local currency unless otherwise indicated
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration; normally to qualified institutional buyers.
@ Yield to maturity
27
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GLOBAL INCOME PORTFOLIO
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
UNREALIZED
CONTRACT TO MATURITY APPRECIATION
DELIVER IN EXCHANGE FOR DATES (DEPRECIATION)
----------- --------------- ------------------ -------------
<S> <C> <C> <C> <C>
01/03/97 to
Australian Dollars.............................. 848,721 U.S.$ 672,811 04/01/97 $ (1,421)
Australian Dollars.............................. 804,497 U.S.$ 634,464 01/08/97 (4,860)
Australian Dollars.............................. 432,000 U.S.$ 342,010 01/13/97 (1,312)
Belgian Francs.................................. 20,000,000 U.S.$ 651,508 07/14/97 20,625
Belgian Francs.................................. 17,000,000 U.S.$ 557,377 09/30/97 12,970
British Pounds.................................. 183,500 U.S.$ 277,635 01/13/97 (36,718)
British Pounds.................................. 434,646 U.S.$ 724,555 01/24/97 (19,799)
British Pounds.................................. 505,063 U.S.$ 844,971 01/31/97 (19,903)
01/06/97 to
Canadian Dollars................................ 1,439,200 U.S.$1,058,735 03/24/97 7,516
Canadian Dollars................................ 644,700 U.S.$ 474,201 02/24/97 3,359
02/24/97 to
Finnish Markkas................................. 6,472,437 U.S.$1,420,478 03/24/97 12,559
Finnish Markkas................................. 2,565,955 U.S.$ 568,179 03/24/97 10,019
German Deutschemarks............................ 540,000 U.S.$ 349,334 01/21/97 (1,589)
01/13/97 to
Netherlands Guilders............................ 1,628,938 U.S.$ 955,967 01/15/97 13,648
01/15/97 to
New Zealand Dollars............................. 1,140,000 U.S.$ 786,536 01/31/97 (18,642)
New Zealand Dollars............................. 248,000 U.S.$ 171,108 01/21/97 (3,837)
Spanish Pesetas................................. 40,045,104 U.S.$ 309,468 01/10/97 873
01/10/97 to
Spanish Pesetas................................. 65,781,093 U.S.$ 506,852 10/15/97 868
U.S. Dollars.................................... 260,361 AUD 327,864 01/03/97 241
07/14/97 to
U.S. Dollars.................................... 771,596 BFR 23,764,670 09/30/97 (21,958)
U.S. Dollars.................................... 480,367 CAD 644,700 02/24/97 (9,525)
U.S. Dollars.................................... 713,734 CAD 964,000 03/24/97 (9,698)
U.S. Dollars.................................... 349,995 DEM 540,000 01/21/97 928
U.S. Dollars.................................... 293,109 GBP 180,578 01/13/97 16,239
U.S. Dollars.................................... 559,287 FIM 2,565,955 03/24/97 (1,127)
02/24/97 to
U.S. Dollars.................................... 1,393,557 FIM 6,472,437 03/24/97 14,361
U.S. Dollars.................................... 958,824 NLG 1,628,938 01/15/97 (16,505)
U.S. Dollars.................................... 339,106 NZD 484,000 01/15/97 3,058
-------------
$ (49,630)
-------------
-------------
</TABLE>
<TABLE>
<CAPTION>
FOREIGN CURRENCY TYPE ABBREVIATIONS:
<S> <C> <C> <C>
AUD --Australian Dollars GBP --British Pounds
BFR --Belgian Francs FIM --Finnish Markkas
CAD --Canadian Dollars NLG --Netherlands Guilders
DEM --German Deutschemarks NZD --New Zealand Dollars
</TABLE>
INVESTMENTS BY TYPE OF ISSUER
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS
------------------------
LONG-TERM SHORT-TERM
----------- -----------
<S> <C> <C>
Government and other public issuers.................................... 69.57% 19.93%
Financial institutions................................................. 4.52 0.00
Banks.................................................................. 0.00 5.18
Repurchase agreement................................................... 0.00 1.80
Other.................................................................. 4.44 0.00
----------- -----------
78.53% 26.91%
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements
28
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STRATEGIC FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- -------- -------------------- -------------------- -----------
<C> <S> <C> <C> <C>
MORTGAGE-BACKED SECURITIES--65.97%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
CERTIFICATES--12.58%
$603 GNMA ARM.......................................... 11/20/21 7.000% $ 616,737
709 GNMA ARM.......................................... 09/20/23 7.125 727,972
-----------
Total Government National Mortgage Association Certificates
(cost--$1,336,448 )........................................ 1,344,709
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS--53.21%
192 Chase Mortgage Finance Corporation REMIC
Series 1993-N, Class A1......................... 11/25/24 6.750 191,642
85 Countrywide Mortgage Backed Securities
Incorporated, Series 1993-E, Class A1........... 01/25/24 6.500 84,758
107 FHLMC REMIC Series 1614, Class QZ................. 11/15/23 6.500 86,319
137 FHLMC REMIC Series 1628, Class KZ................. 12/15/23 6.250 113,762
595 FHLMC REMIC Series 1628, Class LZ................. 12/15/23 6.500 497,102
786 FHLMC REMIC Series 1067, Class IZ................. 04/15/21 8.000 801,440
365 FHLMC REMIC Series 1541, Class KC, FRN............ 09/15/22 6.250 277,239
584 FNMA REMIC Series 1991-59, Class K................ 05/25/16 8.000 589,819
128 FNMA REMIC Series 1993-96, Class PZ............... 06/25/23 7.000 109,186
277 FNMA REMIC Series 1993-112, Class ZB.............. 07/25/23 7.000 231,224
87 FNMA REMIC Series 1993-163, Class ZA.............. 09/25/23 7.000 76,872
286 FNMA REMIC Series G92-40 Class ZC................. 07/25/22 7.000 266,708
175 FNMA REMIC Series 1991-57, Class Z................ 05/25/21 6.500 162,776
235 FNMA REMIC Series G93-16, Class K................. 04/25/23 5.000 183,960
117 Greenwich Capital Acceptance Incorporated,
Series 1991-B, Class A1, ARM.................... 01/25/22 7.620 119,109
357 Greenwich Capital Acceptance Incorporated,
Series 1992-LB6, Class A1, ARM.................. 10/25/22 7.150 363,418
500 Merrill Lynch Mortgage Investors Incorporated,
Series 1993--I, Class A3, FRN................... 11/15/23 6.245 498,750
360 Prudential Home Mortgage Securities Corporation
REMIC Series 1993-38, Class A7.................. 09/25/23 6.950 278,721
78 Residential Funding Mortgage Services, Series
1995, Class A1.................................. 04/25/25 7.650 78,629
63 Securitized Asset Sales Incorporated, Series 1995,
Class A......................................... 10/25/25 7.500 63,203
674 Westam Mortgage Financial Corporation, Series 14,
Class 14A....................................... 06/26/20 5.350 613,287
-----------
Total Collateralized Mortgage Obligations
(cost--$5,635,012)........................................... 5,687,924
-----------
STRIPPED COLLATERALIZED MORTGAGE OBLIGATIONS--0.18%
35 FNMA REMIC Series 1993-235, Class G*
(cost--$17,277)................................. 09/25/23 6.979+ 18,626
-----------
Total Mortgage-Backed Securities (cost--$6,988,737).......... 7,051,259
-----------
CORPORATE BONDS--29.63%
500 Ford Motor Credit Corporation, FRN................ 11/09/98 5.810 500,641
200 Gulf Canada Resources Limited..................... 08/15/99 9.000 203,472
500 K III Communications Incorporated................. 05/01/02 10.625 526,250
300 Lehman Brothers Holding Incorporated, FRN......... 01/12/99 6.000 299,810
500 Noranda Incorporated, FRN......................... 08/18/00 6.250 506,796
500 RJR Nabisco Incorporated.......................... 12/01/02 8.625 504,239
</TABLE>
29
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STRATEGIC FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- -------- -------------------- -------------------- -----------
<C> <S> <C> <C> <C>
CORPORATE BONDS--(CONCLUDED)
$500 United Airlines Equipment Trust Certificate 91B... 02/19/15 10.850% $ 625,604
-----------
Total Corporate Bonds (cost--$3,180,237)..................... 3,166,812
-----------
COMMERCIAL PAPER--8.38%
500 Gaz De France..................................... 01/17/97 5.400 498,800
400 KFW International Finance Incorporated............ 02/19/97 5.400 397,060
-----------
Total Commercial Paper (cost--$895,860)...................... 895,860
-----------
SHORT-TERM U.S. GOVERNMENT OBLIGATIONS--0.46%
50 U.S. Treasury Bills ++ (cost--$49,603)............ 01/23/97 to 03/13/97 4.660 to 4.960 49,603
-----------
REPURCHASE AGREEMENT--2.37%
253 Repurchase Agreement dated 12/31/96 with State
Street Bank & Trust Company, collateralized by
$263,175 U.S. Treasury Bonds, 7.250% due
08/15/22; proceeds: $253,067 (cost--$253,000)... 01/02/97 4.750 253,000
-----------
Total Investments (cost--$11,367,437)--106.81%............... 11,416,534
Liabilities in excess of other assets--(6.81)%............... (727,501)
-----------
Net Assets--100%............................................. $10,689,033
-----------
-----------
</TABLE>
- ------------
<TABLE>
<S> <C>
+ Estimated yield to maturity at December 31, 1996
++ Entire or partial amount pledged as collateral for futures transactions
* Principal Only--This security entitles the holder to receive principal payments from an underlying pool
of mortgages. High prepayments return principal faster than expected and cause the yield to increase. Low
prepayments return the principal more slowly than expected and cause the yield to decrease.
ARM Adjustable Rate Mortgage--The rate shown is the current rate as of December 31, 1996.
FRN Floating Rate Note--The interest rate shown is as of December 31, 1996.
REMIC Real Estate Mortgage Investment Conduit
</TABLE>
FUTURES CONTRACTS
<TABLE>
<CAPTION>
NUMBER OF IN EXPIRATION UNREALIZED
CONTRACTS CONTRACT TO RECEIVE EXCHANGE FOR DATE DEPRECIATION
- --------------- ------------------------------------------------------------- ------------ ----------- ------------
<C> <S> <C> <C> <C>
23 10 year U.S. Treasury Notes.................................. $2,526,406 March 97 $ (16,531)
4 30 year U.S. Treasury Bonds.................................. 453,250 March 97 (2,750)
------------
$ (19,281)
------------
------------
</TABLE>
See accompanying notes to financial statements
30
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--68.91%
AGRICULTURE, FOOD & BEVERAGE--0.77%
2,000 Phillip Morris Companies Incorporated................... $ 225,250
-----------
AIRLINES--0.18%
600 AMR Corporation*........................................ 52,875
-----------
APPAREL, TEXTILES--1.79%
4,000 Nike Incorporated....................................... 239,000
6,100 Nine West Group Incorporated*........................... 282,888
-----------
521,888
-----------
BANKS--6.85%
4,000 Bank of Boston Corporation.............................. 257,000
3,000 BankAmerica Corporation................................. 299,250
8,000 Barnett Banks Incorporated.............................. 329,000
3,000 CCB Financial Corporation............................... 204,750
3,000 Chase Manhattan Corporation............................. 267,750
3,000 Citicorp................................................ 309,000
2,000 First Union Corporation................................. 148,000
800 NationsBank Corporation................................. 78,200
3,000 Southern National Corporation........................... 108,750
-----------
2,001,700
-----------
CHEMICALS--2.10%
2,000 Allied-Signal Incorporated.............................. 134,000
3,000 DuPont (E.I.) deNemours & Company....................... 283,125
5,000 IMC Global Incorporated................................. 195,625
-----------
612,750
-----------
COMPUTER HARDWARE--3.47%
2,000 3Com Corporation*....................................... 146,750
2,500 Cisco Systems Incorporated*............................. 159,063
3,700 Compaq Computer Corporation*............................ 274,725
1,000 International Business Machines......................... 151,000
11,000 Sun Microsystems Incorporated*.......................... 282,562
-----------
1,014,100
-----------
COMPUTER SOFTWARE--1.91%
2,700 Cadence Design Systems Incorporated*.................... 107,325
3,750 Computer Associates International Incorporated.......... 186,562
4,777 Sterling Commerce Incorporated*......................... 168,389
3,000 Sterling Software Incorporated*......................... 94,875
-----------
557,151
-----------
DEFENSE/AEROSPACE--3.42%
37 Boeing Company.......................................... 3,936
3,000 General Dynamics Corporation............................ 211,500
2,000 Lockheed Martin Corporation............................. 183,000
5,250 McDonnell Douglas Corporation........................... 336,000
4,000 United Technologies Corporation......................... 264,000
-----------
998,436
-----------
DIVERSIFIED RETAIL--1.74%
6,900 Dayton Hudson Corporation............................... 270,825
7,000 Federated Department Stores Incorporated*............... 238,875
-----------
509,700
-----------
</TABLE>
31
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
DRUGS & MEDICINE--3.15%
2,000 Bergen Brunswig Corporation............................. $ 57,000
1,500 Bristol Myers Squibb Company............................ 163,125
2,500 Pfizer Incorporated..................................... 207,187
3,000 Rhone Poulenc Rorer Incorporated........................ 234,375
4,000 Schering-Plough Corporation............................. 259,000
-----------
920,687
-----------
ELECTRIC UTILITIES--1.14%
10,000 Public Service Company of New Mexico.................... 196,250
5,000 Unicom Corporation...................................... 135,625
-----------
331,875
-----------
ENERGY RESERVES & PRODUCTION--1.55%
2,500 Mobil Corporation....................................... 305,625
1,500 Texaco Incorporated..................................... 147,188
-----------
452,813
-----------
FINANCIAL SERVICES--1.43%
2,000 Household International Incorporated.................... 184,500
2,500 Student Loan Marketing Association...................... 232,813
-----------
417,313
-----------
FOOD RETAIL--1.02%
7,000 Safeway Incorporated*................................... 299,250
-----------
FOREST PRODUCTS, PAPER--1.62%
3,500 Champion International Corporation...................... 151,375
5,000 International Paper Company............................. 201,875
6,200 Shorewood Packaging Corporation*........................ 120,900
-----------
474,150
-----------
GAS UTILITIES--0.33%
1,500 Columbia Gas System Incorporated........................ 95,438
-----------
HEAVY MACHINERY--0.68%
2,625 Caterpillar Incorporated................................ 197,531
-----------
HOTELS--1.10%
6,000 Hilton Hotels Corporation............................... 156,750
3,000 Marriott International Incorporated..................... 165,750
-----------
322,500
-----------
HOUSEHOLD PRODUCTS--0.39%
7,000 Viad Corporation........................................ 115,500
-----------
INDUSTRIAL SERVICES/SUPPLIES--0.78%
10,000 ADT Limited*............................................ 228,750
-----------
LEISURE--0.68%
5,000 Philips Electronics N V................................. 200,000
-----------
LIFE INSURANCE--4.43%
3,500 Chubb Corporation....................................... 188,125
2,500 Equitable of Iowa Companies............................. 114,687
5,000 Reliastar Financial Corporation......................... 288,750
9,000 SunAmerica Incorporated................................. 399,375
6,666 The Travelers Group, Incorporated....................... 302,470
-----------
1,293,407
-----------
LONG DISTANCE & PHONE COMPANIES--0.68%
5,000 Sprint Corporation...................................... 199,375
-----------
</TABLE>
32
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
MANUFACTURING--GENERAL--1.66%
6,000 Crane Company........................................... $ 174,000
7,000 Ingersoll Rand Company.................................. 311,500
-----------
485,500
-----------
MANUFACTURING--HIGH TECHNOLOGY--1.60%
1,500 Johnson Controls Incorporated........................... 124,313
3,400 Lucasvarity plc, ADR.................................... 129,200
1,400 SCI Systems Incorporated*............................... 62,475
5,000 Waters Corporation*..................................... 151,875
-----------
467,863
-----------
MEDICAL PRODUCTS--1.86%
2,000 Johnson & Johnson....................................... 99,500
15,000 Mentor Corporation...................................... 442,500
-----------
542,000
-----------
MEDICAL PROVIDERS--2.88%
5,000 Healthsouth Corporation*................................ 193,125
10,000 Humana Incorporated*.................................... 191,250
5,800 Lincare Holdings Incorporated*.......................... 237,800
7,500 Ornda Healthcorp*....................................... 219,375
-----------
841,550
-----------
MINING & METALS--1.05%
5,000 Freeport-McMoran Copper & Gold Incorporated*............ 149,375
5,000 USX-US Steel Group Incorporated......................... 156,875
-----------
306,250
-----------
MOTOR VEHICLES--1.24%
5,000 Borg Warner Automotive Incorporated..................... 192,500
5,000 Lear Corporation*....................................... 170,625
-----------
363,125
-----------
OIL REFINING--3.78%
6,000 Coastal Corporation..................................... 293,250
7,000 Repsol SA, ADR.......................................... 266,875
8,000 Tejas Gas Corporation*.................................. 381,000
4,000 Unocal Corporation...................................... 162,500
-----------
1,103,625
-----------
OIL SERVICES--3.27%
4,000 Diamond Offshore Drilling Incorporated*................. 228,000
5,500 Halliburton Company..................................... 331,375
16,500 Nabors Industries Incorporated*......................... 317,625
3,000 Reading & Bates Corporation*............................ 79,500
-----------
956,500
-----------
OTHER INSURANCE--4.38%
2,500 ACE Limited............................................. 150,313
3,500 Allstate Corporation.................................... 202,562
3,000 Ambac Incorporated...................................... 199,125
2,500 American International Group Incorporated............... 270,625
8,000 ITT Industries Incorporated............................. 196,000
12,500 USF&G Corporation....................................... 260,937
-----------
1,279,562
-----------
PUBLISHING--0.65%
5,000 New York Times Company, Class A......................... 190,000
-----------
</TABLE>
33
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONCLUDED)
REAL PROPERTY--2.29%
2,500 Champion Enterprises Incorporated*...................... $ 48,750
4,000 Chelsea GCA Realty Incorporated......................... 138,500
4,000 Equity Residential Properties Trust..................... 165,000
5,000 Oakwood Homes Corporation............................... 114,375
1,500 Starwood Lodging Trust.................................. 82,688
5,000 Wellsford Residential Property Trust.................... 121,250
-----------
670,563
-----------
SECURITIES & ASSET MANAGEMENT--0.23%
2,500 Amresco Incorporated*................................... 66,875
-----------
SEMICONDUCTOR--0.69%
2,000 Applied Materials Incorporated*......................... 71,875
1,000 Intel Corporation....................................... 130,938
-----------
202,813
-----------
SPECIALTY RETAIL--2.12%
8,750 Consolidated Stores Corporation*........................ 281,094
5,000 Dollar General Corporation.............................. 160,000
5,000 Waban Incorporated*..................................... 130,000
2,500 Zale Corporation*....................................... 47,812
-----------
618,906
-----------
Total Common Stocks (cost--$16,970,108)............................. 20,137,571
-----------
PREFERRED STOCKS--4.83%
BANKS--0.88%
5,000 Banco Commercial Portugues International Limited........ 257,500
-----------
ENERGY RESERVES & PRODUCTION--1.12%
5,000 Devon Financing Trust+.................................. 327,500
-----------
LIFE INSURANCE--1.45%
10,000 Sunamerica Incorporated................................. 422,500
-----------
MEDIA--0.31%
1,000 TCI Pacific Communications Incorporated................. 91,375
-----------
MINING & METALS--0.19%
1,000 Timet Capital Trust+.................................... 54,500
-----------
OTHER INSURANCE--0.53%
3,000 Frontier Financing Trust+............................... 153,750
-----------
THRIFT--0.35%
2,000 Tosco Financing Trust+.................................. 103,000
-----------
Total Preferred Stocks (cost--$1,259,438)........................... 1,410,125
-----------
</TABLE>
34
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- --------------- -----------
<C> <S> <C> <C> <C>
MORTGAGE BACKED SECURITIES--9.37%
COLLATERALIZED MORTGAGE OBLIGATIONS--3.07%
$94 CS First Boston Mortgage Securities Corporation, 12/21/27 6.452%
Series 1995-WF1-A1.............................. $ 93,008
60 Donaldson, Lufkin & Jenrette Mortgage Acceptance 11/12/21 6.860
Corporation, Series 1996-CF2 Class A1A+......... 60,089
120 FDIC REMIC Trust 1996-C1 Class 1A................. 07/25/26 6.750 119,719
117 FNMA REMIC Series 1996-M6 Class E................. 09/17/19 7.750 119,353
169 FNMA REMIC Series 1996-M4 Class A................. 03/17/17 7.750 171,021
100 GMAC Commercial Mortgage Security, Series 1996-C1, 09/15/03 6.790
Class A2A....................................... 99,905
117 Merrill Lynch Mortgage Investments Incorporated, 04/25/28 7.150
Series 1996-C1, Class A1........................ 117,776
115 Mortgage Capital Funding Incorporated, Series 12/21/26 6.758
1996-MC2, Class A1.............................. 115,162
-----------
Total Collateralized Mortgage Obligations (cost--$897,350).... 896,033
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION CERTIFICATES--3.93%
575 FNMA ARM.......................................... 12/01/26 6.089 572,035
225 FNMA.............................................. 01/01/26 7.500 225,058
345 FNMA.............................................. 09/20/06 7.930 351,584
-----------
Total Federal National Mortgage Association Certificates
(cost--$1,147,324).......................................... 1,148,677
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION CERTIFICATES--2.37%
657 GNMA (cost--$691,355)............................. 11/15/17 8.500 692,766
-----------
Total Mortgage Backed Securities (cost--$2,736,029)........... 2,737,476
-----------
CONVERTIBLE BONDS--0.63%
50 Cirrus Logic Incorporated+........................ 12/15/03 6.000 45,500
100 Quantum Corporation+.............................. 03/01/03 5.000 138,875
-----------
Total Convertible Bonds (cost--$150,000)...................... 184,375
-----------
CORPORATE BONDS--8.14%
225 American Re Corporation+.......................... 12/15/26 7.450 225,306
225 Bear Stearns Companies Incorporated............... 05/01/01 6.750 225,292
225 Continental Cablevision Incorporated.............. 05/15/06 8.300 240,083
125 Equitable Life+................................... 12/01/05 6.950 122,458
250 Ford Motor Credit Corporation..................... 01/25/01 5.750 243,008
280 Lehman Brothers Holdings Incorporated............. 09/15/03 7.125 279,113
225 Loews Corporation................................. 12/15/06 6.750 218,433
225 Occidental Petroleum Corporation.................. 09/15/04 8.500 233,923
300 Prudential Insurance Company of America+.......... 07/01/25 8.300 307,306
290 Santander Finance Issuances....................... 07/15/05 6.800 284,544
-----------
Total Corporate Bonds (cost--$2,371,952)...................... 2,379,466
-----------
</TABLE>
35
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- ---------------- -----------
<C> <S> <C> <C> <C>
LONG-TERM U.S. GOVERNMENT OBLIGATIONS--20.49%
$1,510 U.S. Treasury Bonds.................................. 08/15/13 to 08/15/26 6.750 to 12.000% $1,698,974
4,177 U.S. Treasury Notes.................................. 09/30/99 to 10/15/06 6.375 to 7.750 4,289,957
-----------
Total Long-Term U.S. Government Obiligations (cost--$6,011,371).. 5,988,931
-----------
SHORT-TERM U.S. GOVERNMENT OBLIGATIONS--1.70%
500 U.S. Treasury Bills (cost--$497,580)................. 02/06/97 4.840 497,580
-----------
REPURCHASE AGREEMENT--1.13%
330 Repurchase Agreement dated 12/31/96, with State 01/02/97 4.750
Street Bank & Trust Company, collateralized by
$341,351 U.S. Treasury Notes, 7.250%, due 8/15/22;
proceeds: $330,087 (cost--$330,000)................ 330,000
-----------
Total Investments (cost--$30,326,478)--115.20%................... 33,665,524
Liabilities in excess of other assets--(15.20)%.................. (4,441,831)
-----------
Net Assets--100.00%.............................................. $29,223,693
-----------
-----------
</TABLE>
- ------------
* Non-income producing security
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
ADR American Depositary Receipt
ARM Adjustable Rate Mortgate -- The rate shown is the current rate as of
December 31, 1996.
See accompanying notes to financial statements
36
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--97.41%
AGRICULTURE, FOOD & BEVERAGE--1.01%
1,300 Phillip Morris Companies Incorporated................... $ 146,413
-----------
AIRLINES--2.00%
600 AMR Corporation*........................................ 52,875
4,000 Continental Airlines Incorporated*...................... 113,000
2,000 UAL Corporation*........................................ 125,000
-----------
290,875
-----------
APPAREL, TEXTILES--1.56%
2,000 Nike Incorporated....................................... 119,500
2,300 Nine West Group Incorporated*........................... 106,663
-----------
226,163
-----------
BANKS--11.80%
2,000 Bank of Boston Corporation.............................. 128,500
2,700 The Bank of New York Company Incorporated............... 91,125
1,500 BankAmerica Corporation................................. 149,625
10,000 Barnett Banks Incorporated.............................. 411,250
2,000 CCB Financial Corporation............................... 136,500
1,872 Chase Manhattan Corporation............................. 167,076
2,000 Citicorp................................................ 206,000
400 First Empire State Corporation.......................... 115,200
1,200 First Union Corporation................................. 88,800
1,500 NationsBank Corporation................................. 146,625
2,000 Southern National Corporation........................... 72,500
-----------
1,713,201
-----------
CHEMICALS--4.70%
1,500 Allied-Signal Incorporated.............................. 100,500
2,500 DuPont (E.I.) deNemours & Company....................... 235,937
5,000 IMC Global Incorporated................................. 195,625
4,000 Olin Corporation........................................ 150,500
-----------
682,562
-----------
COMPUTER HARDWARE--5.59%
1,500 3Com Corporation*....................................... 110,063
3,700 Cisco Systems Incorporated*............................. 235,412
2,500 Compaq Computer Corporation*............................ 185,625
500 International Business Machines......................... 75,500
8,000 Sun Microsystems Incorporated*.......................... 205,500
-----------
812,100
-----------
COMPUTER SOFTWARE--3.12%
1,200 Cadence Design Systems Incorporated*.................... 47,700
3,750 Computer Associates International Incorporated.......... 186,562
3,981 Sterling Commerce Incorporated*......................... 140,330
2,500 Sterling Software Incorporated*......................... 79,063
-----------
453,655
-----------
DEFENSE/AEROSPACE--7.49%
37 Boeing Company.......................................... 3,936
2,000 Lockheed Martin Corporation............................. 183,000
5,800 Loral Space & Communication*............................ 106,575
3,950 McDonnell Douglas Corporation........................... 252,800
4,400 Raytheon Company........................................ 211,750
5,000 United Technologies Corporation......................... 330,000
-----------
1,088,061
-----------
</TABLE>
37
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
DIVERSIFIED RETAIL--2.49%
6,600 Dayton Hudson Corporation............................... $ 259,050
3,000 Federated Department Stores Incorporated*............... 102,375
-----------
361,425
-----------
DRUGS & MEDICINE--3.83%
1,000 Bergen Brunswig Corporation............................. 28,500
700 Bristol Myers Squibb Company............................ 76,125
2,000 Pfizer Incorporated..................................... 165,750
2,000 Rhone Poulenc Rorer Incorporated........................ 156,250
2,000 Schering-Plough Corporation............................. 129,500
-----------
556,125
-----------
ELECTRIC UTILITIES--0.75%
4,000 Unicom Corporation...................................... 108,500
-----------
ENERGY RESERVES & PRODUCTION--2.02%
1,600 Mobil Corporation....................................... 195,600
1,000 Texaco Incorporated..................................... 98,125
-----------
293,725
-----------
FINANCIAL SERVICES--2.94%
3,500 American Express Company................................ 197,750
900 General Electric Company................................ 88,988
1,500 Student Loan Marketing Association...................... 139,687
-----------
426,425
-----------
FOOD RETAIL--1.62%
3,000 Albertson's, Inc........................................ 106,875
3,000 Safeway Incorporated*................................... 128,250
-----------
235,125
-----------
FOREST PRODUCTS, PAPER--0.51%
1,700 Champion International Corporation...................... 73,525
-----------
GAS UTILITIES--0.61%
1,400 Columbia Gas System, Incorporated....................... 89,075
-----------
HEAVY MACHINERY--0.71%
1,375 Caterpillar Incorporated................................ 103,469
-----------
HOTELS--1.12%
2,000 Hilton Hotels Corporation............................... 52,250
2,000 Marriott International Incorporated..................... 110,500
-----------
162,750
-----------
HOUSEHOLD PRODUCTS--0.40%
3,500 Viad Corporation........................................ 57,750
-----------
INDUSTRIAL SERVICES/SUPPLIES--1.18%
7,500 ADT Limited*............................................ 171,563
-----------
LEISURE--1.21%
4,400 Philips Electronics N V................................. 176,000
-----------
LIFE INSURANCE--4.97%
2,500 Chubb Corporation....................................... 134,375
2,500 Equitable of Iowa Companies............................. 114,687
2,500 Reliastar Financial Corporation......................... 144,375
4,000 SunAmerica Incorporated................................. 177,500
3,333 The Travelers Group, Incorporated....................... 151,235
-----------
722,172
-----------
</TABLE>
38
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
LONG DISTANCE & PHONE COMPANIES--0.55%
2,000 Sprint Corporation...................................... $ 79,750
-----------
MANUFACTURING--GENERAL--3.69%
3,900 Case Corporation........................................ 212,550
3,750 Crane Company........................................... 108,750
2,500 Ingersoll Rand Company.................................. 111,250
2,720 Lucasvarity plc ADR*.................................... 103,360
-----------
535,910
-----------
MANUFACTURING--HIGH TECHNOLOGY--1.55%
900 Johnson Controls Incorporated........................... 74,588
1,000 SCI Systems Incorporated*............................... 44,625
3,500 Waters Corporation*..................................... 106,312
-----------
225,525
-----------
MEDICAL PRODUCTS--0.58%
1,500 Johnson & Johnson....................................... 74,625
300 Mentor Corporation...................................... 8,850
-----------
83,475
-----------
MEDICAL PROVIDERS--3.18%
2,500 Healthsouth Corporation*................................ 96,562
5,000 Humana Incorporated*.................................... 95,625
3,000 Lincare Holdings Incorporated*.......................... 123,000
5,000 Ornda Healthcorp*....................................... 146,250
-----------
461,437
-----------
MINING & METALS--1.46%
5,000 Freeport-McMoran Copper & Gold Incorporated*............ 149,375
2,000 USX-US Steel Group Incorporated......................... 62,750
-----------
212,125
-----------
MOTOR VEHICLES--1.27%
3,000 Borg Warner Automotive Incorporated..................... 115,500
2,000 Lear Corporation*....................................... 68,250
-----------
183,750
-----------
OIL REFINING--3.60%
2,500 Coastal Corporation..................................... 122,187
5,000 Tejas Gas Corporation*.................................. 238,125
4,000 Unocal Corporation...................................... 162,500
-----------
522,812
-----------
OIL SERVICES--4.47%
3,500 Diamond Offshore Drilling Incorporated*................. 199,500
4,500 Halliburton Company..................................... 271,125
6,500 Nabors Industries Incorporated*......................... 125,125
2,000 Reading & Bates Corporation*............................ 53,000
-----------
648,750
-----------
OTHER INSURANCE--7.64%
2,500 ACE Limited............................................. 150,313
5,091 Allstate Corporation.................................... 294,642
2,500 Ambac Incorporated...................................... 165,937
2,250 American International Group Incorporated............... 243,562
4,000 ITT Industries Incorporated............................. 98,000
7,500 USF&G Corporation....................................... 156,563
-----------
1,109,017
-----------
</TABLE>
39
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONCLUDED)
PUBLISHING--0.52%
2,000 New York Times Company, Class A......................... $ 76,000
-----------
REAL PROPERTY--3.16%
2,500 Champion Enterprises Incorporated*...................... 48,750
2,000 Chelsea GCA Realty Incorporated......................... 69,250
2,000 Equity Residential Properties Trust..................... 82,500
5,000 Oakwood Homes Corporation............................... 114,375
1,500 Starwood Lodging Trust.................................. 82,687
2,500 Wellsford Residential Property Trust.................... 60,625
-----------
458,187
-----------
SECURITIES & ASSET MANAGEMENT--0.28%
1,500 Amresco Incorporated*................................... 40,125
-----------
SEMICONDUCTOR--1.07%
2,500 Applied Materials, Incorporated*........................ 89,844
500 Intel Corporation....................................... 65,469
-----------
155,313
-----------
SPECIALTY RETAIL--2.76%
3,750 Consolidated Stores Corporation*........................ 120,469
3,000 Dollar General Corporation.............................. 96,000
6,000 Waban Incorporated*..................................... 156,000
1,500 Zale Corporation*....................................... 28,687
-----------
401,156
-----------
Total Common Stocks (cost--$11,050,403)............................. 14,143,991
-----------
PREFERRED STOCKS--6.84%
BANKS--1.77%
5,000 Banco Commercial Portugues International Limited........ 257,500
-----------
ENERGY RESERVES & PRODUCTION--0.90%
2,000 Devon Financing Trust+.................................. 131,000
-----------
FOREST PRODUCTS, PAPER--0.95%
3,000 International Paper Capital Trust+...................... 137,250
-----------
LIFE INSURANCE--1.16%
4,000 Sunamerica Incorporated................................. 169,000
-----------
MEDIA--0.44%
700 TCI Pacific Communications Incorporated................. 63,962
-----------
MINING & METALS--0.38%
1,000 Timet Capital Trust+.................................... 54,500
-----------
OTHER INSURANCE--0.71%
2,000 Frontier Financing Trust+............................... 102,500
-----------
THRIFT--0.53%
1,500 Tosco Financing Trust+.................................. 77,250
-----------
Total Preferred Stocks (cost--$914,733)............................. 992,962
-----------
</TABLE>
40
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- --------------- -----------
<C> <S> <C> <C> <C>
CORPORATE BONDS--0.79%
COMPUTER HARDWARE--0.48%
$ 50 Quantum Corporation+.............................. 03/01/03 5.000% $ 69,438
SEMICONDUCTOR--0.31%
50 Cirrus Logic Incorporated+........................ 12/15/03 6.000 45,500
-----------
Total Corporate Bonds (cost--$100,000)........................ 114,938
-----------
SHORT-TERM U.S. GOVERNMENT OBLIGATIONS--10.28%
1,500 U.S. Treasury Bills (cost--$1,492,740)............ 02/06/97 4.840 1,492,740
-----------
REPURCHASE AGREEMENT--2.24%
Repurchase Agreement dated 12/31/96 with State
Street Bank & Trust Company, collateralized by
$336,179 U.S. Treasury Bond, 7.250%, due
325 08/15/22; proceeds: $325,086 (cost--$325,000)... 01/02/97 4.750 325,000
-----------
Total Investments (cost--$13,882,876)--117.56%................ 17,069,631
Liabilities in excess of other assets--(17.56)%............... (2,549,387)
-----------
Net Assets--100.00%........................................... $14,520,244
-----------
-----------
</TABLE>
- ------------
* Non-income producing security
+ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
ADR American Depositary Receipt
See accompanying notes to financial statements
41
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGGRESSIVE GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--107.44%
AGRICULTURE, FOOD & BEVERAGE--2.79%
5,400 Dekalb Genetics Corporation............................. $ 275,400
2,300 Phillip Morris Companies Incorporated................... 259,038
-----------
534,438
-----------
APPAREL, RETAIL--4.07%
4,700 Stein Mart Incorporated................................. 95,175
10,300 TJX Companies Incorporated New.......................... 487,962
9,000 Woolworth Corporation*.................................. 196,875
-----------
780,012
-----------
APPAREL, TEXTILES--2.31%
5,900 Liz Claiborne, Incorporated............................. 227,888
7,400 Wolverine World Wide Incorporated....................... 214,600
-----------
442,488
-----------
BANKS--0.14%
600 TCF Financial Corporation............................... 26,100
-----------
CHEMICALS--2.46%
2,000 Avery Dennison Corporation.............................. 70,750
11,900 Gencorp Incorporated.................................... 215,688
4,600 Tredegar Industries Incorporated........................ 184,575
-----------
471,013
-----------
COMPUTER HARDWARE--9.35%
5,800 Ascend Communications Incorporated*..................... 360,325
5,800 Cascade Communications Corporation*..................... 319,725
5,600 Cisco Systems Incorporated*............................. 356,300
12,800 Sun Microsystems Incorporated*.......................... 328,800
7,500 Western Digital Corporation*............................ 426,562
-----------
1,791,712
-----------
COMPUTER SOFTWARE--14.32%
7,200 BMC Software Incorporated*.............................. 297,900
6,900 Cadence Design Systems Incorporated*.................... 274,275
6,725 Computer Associates International Incorporated.......... 334,569
5,000 Compuware Corporation*.................................. 250,625
5,000 Fore Systems*........................................... 164,375
1,800 Microsoft Corporation*.................................. 148,725
6,500 National Instruments Corporation........................ 208,000
5,400 Parametric Technology Corporation*...................... 277,425
7,200 Peoplesoft Incorporated*................................ 345,150
6,400 Rational Software Corporation........................... 253,200
4,500 Videoserver Incorporated*............................... 191,250
-----------
2,745,494
-----------
CONSUMER DURABLES--1.12%
5,600 Ethan Allen Interiors Incorporated...................... 215,600
-----------
DRUGS & MEDICINE--4.25%
7,200 Dura Pharmaceuticals Incorporated....................... 343,800
11,700 Herbalife International Incorporated.................... 381,712
3,300 Rexall Sundown Incorporated............................. 89,719
-----------
815,231
-----------
ELECTRICAL POWER--1.08%
5,700 Zoltek Companies Incorporated (1)....................... 207,338
-----------
</TABLE>
42
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGGRESSIVE GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
ENERGY RESERVES & PRODUCTION--2.74%
5,100 Phillips Petroleum Company.............................. $ 225,675
5,800 United Meridian Corporation............................. 300,150
-----------
525,825
-----------
FINANCIAL SERVICES--4.42%
3,600 Aames Financial Corporation (1)......................... 129,150
10,700 Americredit Corporation................................. 219,350
6,300 Green Tree Financial Corporation........................ 243,337
4,400 MBNA Corporation........................................ 182,600
2,600 Money Store Incorporated................................ 71,825
-----------
846,262
-----------
FOOD RETAIL--3.76%
6,900 Safeway Incorporated*................................... 294,975
7,100 Vons Companies Incorporated*............................ 425,112
-----------
720,087
-----------
FREIGHT, AIR, SEA, LAND--1.83%
7,000 Expeditores International Washington Incorporated....... 161,000
4,200 Tidewater Incorporated.................................. 190,050
-----------
351,050
-----------
HEAVY MACHINERY--0.35%
4,200 JLG Industries, Incorporated............................ 67,200
-----------
HOTELS--3.15%
3,300 Anchor Gaming........................................... 132,825
4,400 HFS Incorporated*....................................... 262,900
8,000 Hilton Hotels Corporation............................... 209,000
-----------
604,725
-----------
INDUSTRIAL SERVICES/SUPPLIES--2.85%
4,500 Corrections Corporation of America*..................... 137,812
5,400 Devry Incorporated Delaware............................. 126,900
5,200 Envoy Corporation New................................... 195,000
2,500 Robert Half International Incorporated*................. 85,938
-----------
545,650
-----------
INFORMATION & COMPUTER SERVICES--3.48%
4,700 Gartner Group Incorporated*............................. 183,006
4,600 HBO & Company........................................... 273,125
4,100 Paychex, Incorporated................................... 210,894
-----------
667,025
-----------
LEISURE--1.32%
8,800 Callaway Golf Company................................... 253,000
-----------
LIFE INSURANCE--3.75%
6,000 Conseco Incorporated.................................... 382,500
7,600 SunAmerica Incorporated................................. 337,250
-----------
719,750
-----------
LONG DISTANCE & PHONE COMPANIES--0.19%
1,700 LCI International Incorporated*......................... 36,550
-----------
MANUFACTURING--GENERAL--2.52%
4,900 Kaydon Corporation...................................... 230,913
3,800 Quintiles Transnational Corporation*.................... 251,750
-----------
482,663
-----------
</TABLE>
43
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGGRESSIVE GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
MANUFACTURING--HIGH TECHNOLOGY--7.32%
1,000 Aspect Telecommunications Corporation*.................. $ 63,500
5,500 Comverse Technology Incorporated*....................... 207,969
5,100 Dynatech Corporation.................................... 225,675
7,300 Jabil Circuit Incorporated.............................. 292,000
8,000 Pairgain Technologies Incorporated*..................... 243,500
3,800 Sanmina Corporation..................................... 214,700
3,500 SCI Systems Incorporated*............................... 156,187
-----------
1,403,531
-----------
MEDICAL PROVIDERS--2.89%
2,250 Health Management Associates Incorporated New*.......... 50,625
4,900 Lincare Holdings Incorporated*.......................... 200,900
4,300 Oxford Health Plans Incorporated*....................... 251,819
1,750 Phycor Incorporated*.................................... 49,656
-----------
553,000
-----------
MINING & METALS--3.31%
5,500 Getchell Gold Corporation............................... 211,062
6,000 Oregon Metallurgical Corporation........................ 193,500
10,800 Zeigler Coal Holding Company............................ 230,850
-----------
635,412
-----------
MOTOR VEHICLES--1.99%
6,200 Chrysler Corporation.................................... 204,600
6,400 Fleetwood Enterprises Incorporated...................... 176,000
-----------
380,600
-----------
OIL SERVICES--4.42%
15,800 Global Marine Incorporated*............................. 325,875
13,700 Marine Drilling Companies Incorporated.................. 269,719
9,500 Reading & Bates Corporation*............................ 251,750
-----------
847,344
-----------
OTHER INSURANCE--0.83%
2,600 Orion Capital Corporation............................... 158,925
-----------
PUBLISHING--1.47%
6,800 Harland John H Company.................................. 224,400
1,100 Meredith Corporation.................................... 58,025
-----------
282,425
-----------
RAILROADS--0.47%
3,400 Canadian Pacific Limited................................ 90,100
-----------
REAL PROPERTY--3.34%
5,400 Apogee Enterprises Incorporated......................... 214,650
6,200 Medusa Corporation...................................... 213,125
6,800 Southdown, Incorporated*................................ 211,650
-----------
639,425
-----------
SECURITIES & ASSET MANAGEMENT--2.66%
4,305 Bear Stearns Company Incorporated....................... 120,002
7,200 Edwards AG Incorporated................................. 242,100
2,600 Morgan Stanley Group, Incorporated...................... 148,525
-----------
510,627
-----------
SEMICONDUCTOR--1.57%
6,600 Vitesse Semiconductor Corporation....................... 300,300
-----------
</TABLE>
44
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGGRESSIVE GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONCLUDED)
SPECIALTY RETAIL--3.97%
4,500 Bed, Bath & Beyond Incorporated*........................ $ 109,125
10,400 COMPUSA Incorporated*................................... 214,500
5,500 Dollar Tree Stores Incorporated......................... 210,375
8,700 MacFrugals Bargains Closeouts Incorporated*............. 227,287
-----------
761,287
-----------
THRIFT--0.95%
4,200 Washington Mutual Incorporated.......................... 181,913
-----------
Total Common Stocks (cost--$15,644,639)............................. 20,594,102
-----------
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED--1.63%
MONEY MARKET FUNDS--1.63%
308,100 Liquid Assets Portfolio................................. 308,100
4,100 TempCash Portfolio...................................... 4,100
-----------
Total Money Market Funds (cost--$312,200)........................... 312,200
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATE RATE
- --------- -------------------- ---------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER--1.04%
$199 Merrill Lynch & Co., Inc. (cost--$198,964)........ 01/02/97 6.500% 198,964
-----------
Total Investments (cost--$16,155,803)--110.11%................ 21,105,266
Liabilities in excess of other assets--(10.11)%............... (1,938,149)
-----------
Net Assets--100.00%........................................... $19,167,117
-----------
-----------
</TABLE>
- ------------
* Non-income producing security
(1) Security, or a portion thereof, was loaned at December 31, 1996.
See accompanying notes to financial statements
45
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HIGH GRADE FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- --------------- ----------
<C> <S> <C> <C> <C>
U. S. GOVERNMENT OBLIGATIONS--19.61%
$ 120 U.S. Treasury Bonds............................... 08/15/25 6.875% $ 122,287
200 U.S. Treasury Lincs............................... 08/15/09 6.000 186,731
1,224 U.S. Treasury Notes............................... 12/31/99 to 10/15/06 6.375 to 7.750 1,240,926
----------
Total U. S. Government Obligations (cost--$1,560,749)......... 1,549,944
----------
MORTGAGE BACKED SECURITIES--39.52%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION CERTIFICATES--7.79%
464 GNMA.............................................. 01/15/24 7.000 453,912
154 GNMA.............................................. 11/15/17 8.500 162,001
----------
Total Government National Mortgage Association Certificates
(cost--$596,166)............................................ 615,913
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION CERTIFICATES--23.56%
265 FNMA.............................................. 02/02/06 5.875 250,374
75 FNMA.............................................. 12/01/08 6.000 72,160
260 FNMA ARM.......................................... 12/01/26 6.089 258,659
200 FNMA.............................................. TBA 30 YR 7.000 195,687
560 FNMA.............................................. 04/01/09 to 10/01/23 7.000 550,217
372 FNMA.............................................. 07/01/09 7.500 377,424
154 FNMA.............................................. 09/01/11 8.000 156,999
----------
Total Federal National Mortgage Association Certificates
(cost--$1,861,728).......................................... 1,861,520
----------
COLLATERALIZED MORTGAGE OBLIGATIONS--8.17%
CS First Boston Mortgage Securities Corporation,
94 Series 1995-WF1-A1.............................. 12/21/27 6.452 93,008
174 FDIC REMIC Trust 1994-C1, Class 2A2............... 09/25/25 7.850 176,298
80 FDIC REMIC Trust 1996-C1, Class 1A................ 07/25/26 6.750 79,812
Merrill Lynch Mortgage Investments Incorporated,
195 Series 1996-C1, Class A1........................ 04/25/28 7.150 196,300
Mortgage Capital Funding Incorporated, Series
100 1996-MC2, Class A1.............................. 12/21/26 6.758 100,141
----------
Total Collateralized Mortgage Obligations (cost--$648,456).... 645,559
----------
Total Mortgage Backed Securities (cost--$3,106,350)........... 3,122,992
----------
CORPORATE BONDS--36.27%
BANKS--5.60%
200 BankAmerica Corporation........................... 06/15/04 7.625 207,547
225 JP Morgan & Company Incorporated.................. 09/15/04 7.625 235,046
----------
442,593
----------
DIVERSIFIED RETAIL--2.96%
250 Wal Mart Stores Incorporated...................... 10/15/05 5.875 234,207
----------
FINANCIAL SERVICES--3.82%
300 Commercial Credit Group Incorporated.............. 05/01/02 6.875 302,050
----------
FREIGHT, AIR, LAND, SEA--3.22%
225 United Parcel Service Incorporated................ 04/01/20 8.375 254,358
----------
HOUSEHOLD PRODUCTS--2.58%
225 Procter & Gamble Corporation...................... 01/15/26 6.450 204,018
----------
INSURANCE--12.21%
250 American Re Corporation+.......................... 12/15/26 7.450 250,340
250 Equitable Life+................................... 12/01/05 6.950 244,915
225 Loews Corporation................................. 12/15/06 6.750 218,433
250 Travelers Aetna Property Casualty Corporation..... 04/15/01 6.750 251,107
----------
964,795
----------
</TABLE>
46
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HIGH GRADE FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------------------- --------------- ----------
<C> <S> <C> <C> <C>
CORPORATE BONDS--(CONCLUDED)
MEDIA--3.04%
$ 225 Continental Cablevision Incorporated.............. 05/15/06 8.300% $ 240,083
----------
SECURITIES & ASSET MANAGEMENT--2.84%
225 Lehman Brothers Holdings Incorporated............. 09/15/03 7.125 224,288
----------
Total Corporate Bonds (cost--$2,812,527)...................... 2,866,392
----------
YANKEE BONDS--8.60%
225 ABN-AMRO Bank NV.................................. 05/15/23 7.750 231,293
225 Dresdner Bank AG.................................. 09/15/05 6.625 219,754
225 Societe Generale.................................. 06/01/06 7.400 228,902
250 Toronto Dominion Bank of Ontario.................. 08/15/08 6.500 238,475
----------
Total Yankee Bonds (cost--$895,551)........................... 918,424
----------
REPURCHASE AGREEMENT--3.42%
Repurchase Agreement dated 12/31/96 with State
Street Bank & Trust Company, collateralized by
$279,287 U.S. Treasury Notes, 7.250%, due
270 8/15/22; proceeds: $270,071 (cost--$270,000).... 01/02/97 4.750 270,000
----------
Total Investments (cost--$8,645,177)--110.45%................. 8,727,752
Liabilities in excess of other assets--(10.45)%............... (825,714)
----------
Net Assets--100.00%........................................... $7,902,038
----------
----------
</TABLE>
- ------------
<TABLE>
<S> <C>
+ 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.
ARM Adjustable Rate Mortgage -- The rate shown is the current rate as of December 31, 1996.
REMIC Real Estate Mortgage Investment Conduit
TBA To Be Assigned -- Securities are purchased on a forward commitment with an approximate (generally
+/-1.0%) principal amount and no definite maturity date. The actual principal amount and maturity date
will be determined upon settlement when the specific mortgage pools are assigned.
</TABLE>
See accompanying notes to financial statements
47
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY
MARKET GROWTH
PORTFOLIO PORTFOLIO
------------- -------------
<S> <C> <C>
ASSETS
Investments, at value (cost--$12,240,383; $30,359,082; $22,850,725; $25,438,857;
$11,367,437; $30,326,478; $13,882,876; $16,155,803 and $8,645,177,
respectively).................................................................. $ 12,240,383 $ 45,218,441
Cash (including cash denominated in foreign currencies).......................... 3,221 1,411
Dividends and interest receivable................................................ 108,197 16,202
Receivable for investments sold.................................................. -- 46,250
Unrealized appreciation of forward foreign currency contracts.................... -- --
Deferred organizational expenses and other assets................................ -- 225
------------- -------------
Total assets................................................................. 12,351,801 45,282,529
------------- -------------
LIABILITIES
Dividends payable to shareholders................................................ 43,099 6,886,404
Payable to investment adviser.................................................... 5,259 27,303
Payable for investments purchased................................................ -- 120,625
Collateral for securities loaned................................................. -- 1,829,000
Payable for shares of beneficial interest repurchased............................ -- --
Unrealized depreciation of forward foreign currency contracts.................... -- --
Accrued expenses and other liabilities........................................... 16,282 62,483
------------- -------------
Total liabilities............................................................ 64,640 8,925,815
------------- -------------
NET ASSETS
Beneficial interest shares of $0.001 par value outstanding--12,295,961;
2,079,982; 1,870,467; 2,194,139; 1,046,985; 2,669,194; 1,183,876; 1,464,332 and
868,486, respectively (unlimited amount authorized)............................ 12,297,572 21,647,772
Accumulated net investment income (loss)......................................... -- --
Accumulated net realized gains (losses) from investment transactions............. (10,411) (150,417)
Net unrealized appreciation (depreciation) of investments and other assets and
liabilities denominated in foreign currencies.................................. -- 14,859,359
------------- -------------
Net assets................................................................... $ 12,287,161 $ 36,356,714
------------- -------------
------------- -------------
Net asset value, offering price and redemption value per share..................... $1.00 $17.48
------------- -------------
------------- -------------
</TABLE>
48
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH GRADE
GLOBAL GLOBAL STRATEGIC GROWTH AGGRESSIVE FIXED
GROWTH INCOME FIXED INCOME BALANCED AND INCOME GROWTH INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ------------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value
(cost--$12,240,383; $30,359,082; $26,257,335 $25,767,286 $11,416,534 $33,665,524 $17,069,631 $21,105,266 $ 8,727,752
Cash (including cash denominated
in foreign currencies)........... -- 3,856 564 -- 4,275 9,120 2,525
Dividends and interest
receivable....................... 12,208 535,997 92,667 197,176 16,837 14,375 96,175
Receivable for investments
sold............................. 181,757 -- -- 83,758 29,586 -- --
Unrealized appreciation of
forward foreign currency
contracts........................ -- 121,364 -- -- -- -- --
Deferred organizational expenses
and other assets................. 22,124 -- 119 888 -- -- 5
----------- ----------- ------------- ----------- ------------ ----------- ------------
Total assets............... 26,473,424 26,428,503 11,509,884 33,947,346 17,120,329 21,128,761 8,826,457
----------- ----------- ------------- ----------- ------------ ----------- ------------
LIABILITIES
Dividends payable to
shareholders..................... 142,283 1,674,829 732,890 4,090,806 2,546,163 1,587,776 451,613
Payable to investment adviser.... 16,289 16,793 4,892 21,281 10,164 14,011 3,559
Payable for investments
purchased........................ 122,370 -- -- 572,575 -- -- 457,109
Collateral for securities
loaned........................... 326,000 -- -- -- -- 312,200 --
Payable for shares of beneficial
interest repurchased............. 23,119 45,547 -- -- -- -- --
Unrealized depreciation of
forward foreign currency
contracts........................ -- 170,994 -- -- -- -- --
Accrued expenses and other
liabilities...................... 142,101 84,175 83,069 38,991 43,758 47,657 12,138
----------- ----------- ------------- ----------- ------------ ----------- ------------
Total liabilities.......... 772,162 1,992,338 820,851 4,723,653 2,600,085 1,961,644 924,419
----------- ----------- ------------- ----------- ------------ ----------- ------------
NET ASSETS
Beneficial interest shares of
$0.001 par value 25,210,341 24,320,895 10,934,417 25,893,275 11,338,992 14,216,111 7,872,540
Accumulated net investment income
(loss)........................... (48,131) (163,460) (2,844) -- 3,226 (3,154) (5,293)
Accumulated net realized gains
(losses) from investment
transactions..................... (2,867,261) (98) (272,209) (8,628) (8,729) 4,697 (47,784)
Net unrealized appreciation
(depreciation) of investments and
other assets and liabilities
denominated in foreign
currencies....................... 3,406,313 278,828 29,669 3,339,046 3,186,755 4,949,463 82,575
----------- ----------- ------------- ----------- ------------ ----------- ------------
Net assets................. $25,701,262 $24,436,165 $10,689,033 $29,223,693 $14,520,244 $19,167,117 $ 7,902,038
----------- ----------- ------------- ----------- ------------ ----------- ------------
----------- ----------- ------------- ----------- ------------ ----------- ------------
Net asset value, offering price
and redemption value per
share.......................... $13.74 $11.14 $10.21 $10.95 $12.27 $13.09 $9.10
</TABLE>
See accompanying notes to financial statements
49
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Statement of Operations
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY
MARKET GROWTH
PORTFOLIO PORTFOLIO
---------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Interest (net of foreign withholding taxes, if any)................................. $ 861,749 $ 205,132
Dividends (net of foreign withholding taxes, if any)................................ -- 162,279
---------- ------------
861,749 367,411
---------- ------------
EXPENSES:
Investment advisory and administration.............................................. 79,283 325,065
Legal and audit..................................................................... 42,145 52,858
Custody and accounting.............................................................. 31,441 55,688
Reports and notices to shareholders................................................. 19,854 43,444
Trustees' fees and expenses......................................................... 8,750 8,750
Transfer agency fees and expenses................................................... 1,500 1,500
Amortization of organizational expenses............................................. -- --
Other expenses...................................................................... 1,976 6,165
---------- ------------
184,949 493,470
---------- ------------
Net investment income (loss)........................................................ 676,800 (126,059)
---------- ------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT TRANSACTIONS:
Net realized gains (losses) from:
Investment transactions............................................................. 5,435 6,920,115
Foreign currency transactions....................................................... -- --
Net change in unrealized appreciation/depreciation of:
Investments......................................................................... -- 492,510
Other assets, liabilities and forward contracts denominated in foreign
currencies...................................................................... -- --
---------- ------------
Net realized and unrealized gains (losses) from investment transactions............. 5,435 7,412,625
---------- ------------
Net increase in net assets resulting from operations................................ $ 682,235 $ 7,286,566
---------- ------------
---------- ------------
</TABLE>
50
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH GRADE
GLOBAL GLOBAL STRATEGIC GROWTH AGGRESSIVE FIXED
GROWTH INCOME FIXED INCOME BALANCED AND INCOME GROWTH INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest (net of foreign
withholding taxes, if
any)..................... $ 22,638 $2,493,510 $ 929,343 $ 804,838 $ 81,835 $ 18,065 $ 592,548
Dividends (net of foreign
withholding taxes, if
any)..................... 389,893 -- -- 371,557 247,151 132,891 --
---------- ---------- ------------- ----------- ----------- ------------ ------------
412,531 2,493,510 929,343 1,176,395 328,986 150,956 592,548
---------- ---------- ------------- ----------- ----------- ------------ ------------
EXPENSES:
Investment advisory and
administration........... 198,128 230,262 62,785 249,995 111,599 155,896 44,461
Legal and audit.......... 23,780 55,738 49,484 51,100 42,141 55,562 45,356
Custody and accounting... 30,711 121,386 39,228 58,826 38,655 42,943 26,462
Reports and notices to
shareholders............. 24,402 39,548 27,075 36,033 34,223 19,500 11,430
Trustees' fees and
expenses................. 8,750 8,750 8,750 8,750 8,750 8,750 8,750
Transfer agency fees and
expenses................. 1,500 1,500 1,500 1,500 1,500 1,500 1,500
Amortization of
organizational
expenses................. -- -- -- -- 10,614 -- --
Other expenses........... 2,801 23,270 2,555 6,888 3,885 11,376 6,002
---------- ---------- ------------- ----------- ----------- ------------ ------------
290,072 480,454 191,377 413,092 251,367 295,527 143,961
---------- ---------- ------------- ----------- ----------- ------------ ------------
Net investment income
(loss)................... 122,459 2,013,056 737,966 763,303 77,619 (144,571) 448,587
---------- ---------- ------------- ----------- ----------- ------------ ------------
REALIZED AND UNREALIZED
GAINS (LOSSES) FROM
INVESTMENT TRANSACTIONS:
Net realized gains
(losses) from:
Investment
transactions............. 1,324,543 552,474 (172,806) 3,319,346 2,474,005 1,629,658 13,605
Foreign currency
transactions.............
(28,307) (153,052) (921) -- -- -- --
Net change in unrealized
appreciation/depreciation
of:
Investments.............. 2,292,264 (601,324) (217,268) 970,372 572,936 2,835,132 (368,487)
(2,576) 21,138 9,255 -- -- -- --
---------- ---------- ------------- ----------- ----------- ------------ ------------
Net realized and
unrealized gains (losses)
from investment
transactions............. 3,585,924 (180,764) (381,740) 4,289,718 3,046,941 4,464,790 (354,882)
---------- ---------- ------------- ----------- ----------- ------------ ------------
Net increase in net
assets resulting from
operations............... $3,708,383 $1,832,292 $ 356,226 $ 5,053,021 $3,124,560 $4,320,219 $ 93,705
---------- ---------- ------------- ----------- ----------- ------------ ------------
---------- ---------- ------------- ----------- ----------- ------------ ------------
</TABLE>
See accompanying notes to financial statements
51
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
------------------------
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income.............................................................. $ 676,800 $ 1,346,538
Net realized gains from investment transactions.................................... 5,435 1,021
----------- -----------
Net increase in net assets resulting from operations............................... 682,235 1,347,559
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.............................................................. (676,800) (1,346,538)
----------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares............................................... 10,397,169 18,374,704
Cost of shares repurchased......................................................... (20,822,547) (22,800,127)
Proceeds from dividends reinvested................................................. 732,906 1,356,406
----------- -----------
Net decrease in net assets derived from beneficial interest transactions........... (9,692,472) (3,069,017)
----------- -----------
Net decrease in net assets......................................................... (9,687,037) (3,067,996)
NET ASSETS:
Beginning of period................................................................ 21,974,198 25,042,194
----------- -----------
End of period...................................................................... $12,287,161 $21,974,198
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements
52
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH PORTFOLIO
------------------------
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income (loss)....................................................... $ (126,059) $ 103,153
Net realized gains from investment transactions.................................... 6,920,115 4,013,576
Net change in unrealized appreciation/depreciation of investments.................. 492,510 8,506,699
----------- -----------
Net increase in net assets resulting from operations............................... 7,286,566 12,623,428
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.............................................................. -- (190,395)
Net realized gains from investments................................................ (6,898,716) (3,971,808)
----------- -----------
(6,898,716) (4,162,203)
----------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares............................................... 5,722,479 6,496,559
Cost of shares repurchased......................................................... (16,565,313) (14,453,279)
Proceeds from dividends reinvested................................................. 4,027,837 3,144,360
----------- -----------
Net decrease in net assets derived from beneficial interest transactions........... (6,814,997) (4,812,360)
----------- -----------
Net increase (decrease) in net assets.............................................. (6,427,147) 3,648,865
NET ASSETS:
Beginning of period................................................................ 42,783,861 39,134,996
----------- -----------
End of period...................................................................... $36,356,714 $42,783,861
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements
53
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL GROWTH PORTFOLIO
------------------------
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income.............................................................. $ 122,459 $ 34,469
Net realized gains (losses) from:
Investment transactions........................................................ 1,324,543 (3,970,722)
Foreign currency transactions.................................................. (28,307) (125,201)
Net change in unrealized appreciation/depreciation of:
Investments.................................................................... 2,292,264 2,259,000
Other assets and liabilities denominated in foreign currencies................. (2,576) 4,191
----------- -----------
Net increase (decrease) in net assets resulting from operations.................... 3,708,383 (1,798,263)
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.............................................................. (142,283) --
----------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares............................................... 2,414,636 2,842,004
Cost of shares repurchased......................................................... (8,786,727) (15,384,651)
Proceeds from dividends reinvested................................................. -- 2,355,062
----------- -----------
Net decrease in net assets derived from beneficial interest transactions........... (6,372,091) (10,187,585)
----------- -----------
Net decrease in net assets......................................................... (2,805,991) (11,985,848)
NET ASSETS:
Beginning of period................................................................ 28,507,253 40,493,101
----------- -----------
End of period...................................................................... $25,701,262 $28,507,253
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements
54
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL INCOME PORTFOLIO
------------------------
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income.............................................................. $ 2,013,056 $ 3,388,558
Net realized gains (losses) from:
Investment transactions........................................................ 552,474 654,621
Foreign currency transactions.................................................. (153,052) 530,557
Net change in unrealized appreciation/depreciation of:
Investments.................................................................... (601,324) 1,949,600
Other assets, liabilities and forward contracts denominated in foreign
currencies..................................................................... 21,138 (555,776)
----------- -----------
Net increase in net assets resulting from operations............................... 1,832,292 5,967,560
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.............................................................. (1,740,961) (3,743,994)
Net realized gains from investments................................................ (18,905) --
----------- -----------
(1,759,866) (3,743,994)
----------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares............................................... 1,111,951 1,301,569
Cost of shares repurchased......................................................... (15,880,673) (21,821,807)
Proceeds from dividends reinvested................................................. 3,432,887 1,307,800
----------- -----------
Net decrease in net assets derived from beneficial interest transactions........... (11,335,835) (19,212,438)
----------- -----------
Net decrease in net assets......................................................... (11,263,409) (16,988,872)
NET ASSETS:
Beginning of period................................................................ 35,699,574 52,688,446
----------- -----------
End of period...................................................................... $24,436,165 $35,699,574
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements
55
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
STRATEGIC FIXED INCOME
PORTFOLIO
---------------------------
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1996 1995
-------------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income........................................................ $ 737,966 $ 1,144,229
Net realized gains (losses) from:
Investment transactions.................................................. (172,806) 983,389
Foreign currency transactions............................................ (921) (8)
Net change in unrealized appreciation/depreciation of:
Investments.............................................................. (217,268) 936,088
Other assets and liabilities denominated in foreign currencies........... 9,255 (9,403)
-------------- -----------
Net increase in net assets resulting from operations......................... 356,226 3,054,295
-------------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................................................ (732,890) (1,139,505)
Net realized gains from investments.......................................... (99,878) (989,297)
-------------- -----------
(832,768) (2,128,802)
-------------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares......................................... 1,827,507 2,921,636
Cost of shares repurchased................................................... (6,631,576) (8,696,373)
Proceeds from dividends reinvested........................................... 2,228,680 1,570,233
-------------- -----------
Net decrease in net assets derived from beneficial interest transactions..... (2,575,389) (4,204,504)
-------------- -----------
Net decrease in net assets................................................... (3,051,931) (3,279,011)
NET ASSETS:
Beginning of period.......................................................... 13,740,964 17,019,975
-------------- -----------
End of period................................................................ $ 10,689,033 $13,740,964
-------------- -----------
-------------- -----------
</TABLE>
See accompanying notes to financial statements
56
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCED PORTFOLIO
---------------------------
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1996 1995
-------------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income.......................................................... $ 763,303 $ 761,674
Net realized gains from investment transactions................................ 3,319,346 1,787,409
Net change in unrealized appreciation/depreciation of investments.............. 970,372 2,985,937
-------------- -----------
Net increase in net assets resulting from operations........................... 5,053,021 5,535,020
-------------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.......................................................... (762,589) (761,194)
Net realized gains from investments............................................ (3,328,217) (1,568,321)
-------------- -----------
(4,090,806) (2,329,515)
-------------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares........................................... 13,793,963 3,408,739
Cost of shares repurchased..................................................... (11,275,286) (9,485,923)
Proceeds from dividends reinvested............................................. 2,329,515 3,021,779
-------------- -----------
Net increase (decrease) in net assets derived from beneficial interest
transactions.................................................................. 4,848,192 (3,055,405)
-------------- -----------
Net increase in net assets..................................................... 5,810,407 150,100
NET ASSETS:
Beginning of period............................................................ 23,413,286 23,263,186
-------------- -----------
End of period.................................................................. $ 29,223,693 $23,413,286
-------------- -----------
-------------- -----------
</TABLE>
See accompanying notes to financial statements
57
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH AND INCOME
PORTFOLIO
------------------------
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income........................................................... $ 77,619 $ 125,687
Net realized gains from investment transactions................................. 2,474,005 592,325
Net change in unrealized appreciation/depreciation of investments............... 572,936 2,818,337
----------- -----------
Net increase in net assets resulting from operations............................ 3,124,560 3,536,349
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................................................... (71,861) (125,999)
Net realized gains from investments............................................. (2,474,302) (31,656)
----------- -----------
(2,546,163) (157,655)
----------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares............................................ 3,555,574 5,263,538
Cost of shares repurchased...................................................... (4,567,939) (6,857,288)
Proceeds from dividends reinvested.............................................. 157,655 140,023
----------- -----------
Net decrease in net assets derived from beneficial interest transactions........ (854,710) (1,453,727)
----------- -----------
Net increase (decrease) in net assets........................................... (276,313) 1,924,967
NET ASSETS:
Beginning of period............................................................. 14,796,557 12,871,590
----------- -----------
End of period................................................................... $14,520,244 $14,796,557
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements
58
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH
PORTFOLIO
------------------------
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income (loss).................................................... $ (144,571) $ 38,977
Net realized gains from investment transactions................................. 1,629,658 1,186,424
Net change in unrealized appreciation/depreciation of investments............... 2,835,132 1,761,260
----------- -----------
Net increase in net assets resulting from operations............................ 4,320,219 2,986,661
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................................................... -- (37,374)
Net realized gains from investments............................................. (1,587,776) (495,199)
----------- -----------
(1,587,776) (532,573)
----------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares............................................ 2,195,993 3,941,115
Cost of shares repurchased...................................................... (3,954,371) (2,342,734)
Proceeds from dividends reinvested.............................................. 532,573 7,556
----------- -----------
Net increase (decrease) in net assets derived from beneficial interest
transactions................................................................... (1,225,805) 1,605,937
----------- -----------
Net increase in net assets...................................................... 1,506,638 4,060,025
NET ASSETS:
Beginning of period............................................................. 17,660,479 13,600,454
----------- -----------
End of period................................................................... $19,167,117 $17,660,479
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements
59
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH GRADE FIXED
INCOME PORTFOLIO
------------------------
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1996 1995
----------- -----------
FROM OPERATIONS:
<S> <C> <C>
Net investment income............................................................... $ 448,587 $ 543,112
Net realized gains from investment transactions..................................... 13,605 25,005
Net change in unrealized appreciation/depreciation of investments................... (368,487) 831,524
----------- -----------
Net increase in net assets resulting from operations................................ 93,705 1,399,641
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................................... (451,613) (544,295)
----------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares................................................ 1,586,211 3,145,013
Cost of shares repurchased.......................................................... (3,017,538) (2,711,457)
Proceeds from dividends reinvested.................................................. 544,295 220,084
----------- -----------
Net increase (decrease) in net assets derived from beneficial interest
transactions....................................................................... (887,032) 653,640
----------- -----------
Net increase (decrease) in net assets............................................... (1,244,940) 1,508,986
NET ASSETS:
Beginning of period................................................................. 9,146,978 7,637,992
----------- -----------
End of period....................................................................... $7,902,038 $9,146,978
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements
60
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Notes to Financial Statements
- ------------------------------------------------------------
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Series Trust (the "Fund") is organized under Massachusetts law
by a Declaration of Trust dated November 21, 1986 and is registered with the
Securities and Exchange Commission ("SEC") under the Investment Company Act of
1940, as amended, as an open-end management investment company. The Fund's board
of trustees has the authority to issue an unlimited number of shares of
beneficial interest, par value $0.001.
As of December 31, 1996, the Fund has nine series of shares available for
investment, each having its own investment objectives and policies: the Money
Market Portfolio, the Growth Portfolio, the Global Growth Portfolio, the Global
Income Portfolio, the Strategic Fixed Income Portfolio, the Balanced Portfolio,
the Growth and Income Portfolio, the Aggressive Growth Portfolio and the High
Grade Fixed Income Portfolio (collectively referred to as the "Portfolios"). At
the close of business on January 26, 1996, shares of the former Asset Allocation
Portfolio were substituted for all shares of the former Balanced Portfolio, the
sub-advisory agreement between Mitchell Hutchins and Provident Investment
Counsel, Inc. was terminated, and the former Asset Allocation Portfolio was
renamed the Balanced Portfolio.
All series of shares are diversified except Global Income Portfolio. Shares
of each series of the Fund are offered only to insurance company separate
accounts which fund certain variable contracts. Shares of each series of the
Fund are offered to separate accounts of PaineWebber Life Insurance Company
("PaineWebber Life"). PaineWebber Life is a wholly-owned subsidiary of
PaineWebber Life Holdings Inc., which in turn is a wholly-owned subsidiary of
PaineWebber Group Inc.
ORGANIZATIONAL MATTERS--The costs incurred by the Growth and Income
Portfolio in connection with its organization and registration of shares of the
Portfolio have been deferred and are being amortized using the straight-line
method over the period of benefit, not to exceed five years, beginning with the
commencement of operations of the Portfolio.
The preparation of financial statements in accordance with generally
accepted accounting principles requires the Trust's management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates. The
following is a summary of significant accounting policies:
VALUATION OF INVESTMENTS--Securities that are listed on U.S. and foreign
stock exchanges are valued at the last sale price on the day the securities are
being valued or, lacking any sales on such day, at the last available bid price.
In cases where securities are traded on more than one exchange, the securities
are generally valued on the exchange designated by Mitchell Hutchins Asset
Management Inc. ("Mitchell Hutchins"), a wholly owned subsidiary of PaineWebber
Incorporated ("PaineWebber"), or by the applicable sub-adviser, as the primary
market for each Portfolio. Securities traded in the over-the-counter ("OTC")
market and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") are valued at the
last trade price on Nasdaq prior to the time of valuation; other OTC securities
are valued at the last bid price available in the OTC market prior to the time
of valuation. The amortized cost method of valuation, which
61
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
approximates market value, is used to value debt obligations with sixty days or
less remaining to maturity, including the Money Market Portfolio which values
all of its investments at amortized cost, unless the Fund's board of trustees
determines that this does not represent fair value. Securities and assets for
which market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Fund's board of
trustees.
All investments quoted in foreign currencies are valued daily in U.S.
dollars on the basis of the foreign currency exchange rate prevailing at the
time such valuation is determined by the Fund's custodians, unless the board of
trustees determines that this does not represent fair value. Foreign currency
exchange rates are generally determined prior to the close of the New York Stock
Exchange ("NYSE"). Occasionally, events affecting the value of foreign
investments and such exchange rates occur between the time at which they are
determined and the close of the NYSE, which will not be reflected in a
computation of the Portfolios' net asset values. If events materially affecting
the value of such investments or currency exchange rates occurs during such time
period, the securities are valued at their fair value as determined in good
faith by or under the direction of the Fund's board of trustees.
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 basis. Dividend income and
other distributions are recorded on the ex-dividend date ("ex-date") (except for
certain dividends from foreign securities that are recorded as soon after the
ex-date as the respective Portfolios, using reasonable diligence, become aware
of such dividends). Interest income is recorded on an accrual basis. Discounts
are accreted and premiums are amortized as adjustments to interest income and
the identified cost of investments.
FOREIGN CURRENCY TRANSLATION--The books and records of the Portfolios are
maintained in U.S. dollars as follows: (1) the foreign currency market value of
investment securities and other assets and liabilities stated in foreign
currencies are translated at the exchange rates prevailing at the end of the
period; and (2) purchases, sales, income and expenses are translated at the rate
of exchange prevailing on the respective dates of such transactions. The
resulting exchange gains and losses are included in the Statement of Operations.
The Portfolios do not generally isolate the effect of fluctuations in
foreign exchange rates from the effects of fluctuations in the market price of
investment securities. However, the Portfolios do isolate the effect of
fluctuations in foreign exchange rates when determining the realized gain or
loss upon the sale or maturity of foreign currency-denominated debt obligations
pursuant to U.S. federal income tax regulations; such amount is categorized as
foreign exchange gain or loss for both financial reporting and income tax
purposes.
Net realized foreign currency gain (loss) is treated as ordinary income for
income tax reporting purposes.
FORWARD FOREIGN CURRENCY CONTRACTS--Certain Portfolios may enter into
forward foreign currency exchange contracts ("forward contracts") in connection
with planned purchases or sales of securities or to
62
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
hedge the U.S. dollar value of portfolio securities denominated in a particular
currency. These Portfolios may also engage in cross-hedging by using forward
contracts in one currency to hedge fluctuations in the value of securities
denominated in a different currency if Mitchell Hutchins, or the applicable
sub-adviser, anticipates that there is a correlation between the two currencies.
These Portfolios have no specific limitation on the percentage of assets
which may be committed to such contracts; however, the value of all forward
contracts will not exceed the total market value of a Portfolio's total assets.
The Portfolios may not enter into forward contracts or maintain a net exposure
to forward contracts only if (1) the consummation of the contracts would not
obligate the Portfolio to deliver an amount of foreign currency in excess of the
value of the positions being hedged by such contracts or (2) the Portfolios
maintain cash liquid securities in a segregated account in an amount not less
than the value of the Portfolio's total assets committed to the consummation of
the forward contracts and not covered as provided in (1) above, as
marked-to-market daily.
Risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts and from
unanticipated movements in the value of foreign currencies relative to the U.S.
dollar.
Fluctuations in the value of forward contracts are recorded for financial
reporting purposes as unrealized gains or losses by the Portfolios. Realized
gains and losses include net gains or losses recognized by the Portfolios on
contracts which have matured.
OPTION WRITING--Certain Portfolios may write (sell) put and call options in
order to gain exposure to or protect against changes in the market. When a
Portfolio writes a call or a put option, an amount equal to the premium received
by the Portfolio is included in the Portfolio'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 Portfolio has written either
expires on its stipulated expiration date or the Portfolio enters into a closing
purchase transaction, the Portfolio 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 Portfolio has written is exercised, the Portfolio 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 the Portfolio has written is exercised, the amount of the
premium originally received reduces the cost of the security which the Portfolio
purchases upon exercise of the option.
FUTURES CONTRACTS--Currently, Strategic Fixed Income Portfolio is the only
Portfolio currently engaged in future contracts as an alternative investment for
traditional treasury securities. Using financial futures contracts involves
various market risks. The maximum amount at risk from the purchase of a futures
contract is the contract value.
63
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
Upon entering into a financial futures contract, a Portfolio is required to
pledge to a broker an amount equal to a certain percentage of the contract
amount. This amount is known as the "initial margin." Subsequent payments known
as "variation margin," are made or received by the Portfolio each day, depending
on the daily fluctuations in the value of the underlying financial futures
contracts. Such variation margin is recorded for financial statement purposes on
a daily basis as an unrealized gain or loss until the financial futures contract
is closed, at which time the net gain or loss is reclassified to realized.
REPURCHASE AGREEMENTS--Each Portfolio's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, the Portfolios have the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligations. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. Each Portfolio occasionally
participates in joint repurchase agreement transactions with other funds managed
by Mitchell Hutchins.
REVERSE REPURCHASE AGREEMENTS--Each Portfolio may enter into reverse
repurchase agreements with banks and broker-dealers up to an aggregate value of
not more than 5% of its total assets (10% of total assets for the Global Income
and Balanced Portfolios). At December 31, 1996, the Portfolios had no reverse
repurchase agreements outstanding.
DIVIDENDS AND DISTRIBUTIONS-- Dividends and distributions to shareholders
are recorded on the ex-date. The amount of dividends and distributions are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized capital
gains. To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of paid-in-capital.
CONCENTRATION OF RISK
Investing in securities of foreign issuers and currency transactions may
involve certain considerations and risks not typically associated with
investments in the United States. These risks include revaluation of currencies,
adverse fluctuations in foreign currency values and possible adverse political,
social and economic developments, including those particular to a specific
industry, country or region, which could cause the securities and their markets
to be less liquid and prices more volatile than those of comparable U.S.
companies and U.S. government securities. These risks are greater with respect
to securities of issuers located in emerging market countries in which this Fund
is authorized to invest. The ability of the issuers of debt securities held by
the Fund to meet their obligations may be affected by economic and political
developments particular to a specific industry, country or region.
64
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
Small cap companies may be more vulnerable than larger companies to adverse
business or economic developments. Small cap companies may also have limited
product lines, markets or financial resources, and may be dependent on a
relatively small management group. Securities of such companies may be less
liquid and more volatile than securities of larger companies or the market
averages in general and, therefore, may involve greater risk investing in larger
companies. In addition, small cap companies may not be well-known to the
investing public, may not have institutional ownership and may have only
cyclical, static or moderate growth prospects.
The ability of the issuers of debt securities held by the Portfolios to meet
their obligations may be affected by economic and political developments
particular to a specific industry, country or region.
INVESTMENT ADVISER AND ADMINISTRATOR
The Fund's board of trustees has approved an investment advisory and
administration contract with Mitchell Hutchins, under which Mitchell Hutchins
serves as investment adviser and administrator of the Fund and each Portfolio.
Mitchell Hutchins receives compensation from the Fund, computed daily and
payable monthly, as follows:
<TABLE>
<CAPTION>
ANNUAL RATE
AS A PERCENTAGE
OF EACH PORTFOLIO'S
AVERAGE NET ASSETS
---------------------
<S> <C>
Money Market Portfolio..................................................... 0.50%
Growth Portfolio........................................................... 0.75
Global Growth Portfolio.................................................... 0.75
Global Income Portfolio.................................................... 0.75
Strategic Fixed Income Portfolio........................................... 0.50
Balanced Portfolio......................................................... 0.75
Growth and Income Portfolio................................................ 0.70
Aggressive Growth Portfolio................................................ 0.80
High Grade Fixed Income Portfolio.......................................... 0.50
</TABLE>
Under separate contracts, Mitchell Hutchins pays GE Investment Management
Incorporated, Pacific Investment Management Company and Nicholas Applegate
Capital Management, to serve as the respective sub-advisers of the Global Growth
Portfolio, the Strategic Fixed Income Portfolio and the Aggressive Growth
Portfolio. Mitchell Hutchins (not the Portfolios) pays the sub-advisers a fee,
computed daily and paid monthly, at an annual rate of 0.29%, 0.25% and 0.50%,
respectively, of each Portfolio's average net assets. Prior to January 26, 1996,
Provident Investment Counsel, Inc. served as the former Balanced Portfolio's
sub-adviser pursuant to a sub-advisory contract with Mitchell Hutchins. Mitchell
Hutchins (not the Portfolio) paid Provident Investment Counsel, Inc. a fee,
computed daily and paid monthly, at an annual rate of 0.45% of the Portfolio's
average net assets.
During the year ended December 31, 1996, the Growth Portfolio, the Balanced
Portfolio and the Growth and Income Portfolio paid $300, $1,320 and $852,
respectively, in brokerage commissions to PaineWebber for transactions executed
on behalf of these Portfolios.
65
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
SECURITIES LENDING
Each Portfolio may lend up to 33 1/3% of its total assets to qualified
institutions. The loans are secured at all times by cash or U.S. government
securities in an amount at least equal to the market value of the securities
loaned, plus accrued interest and dividends, determined on a daily basis and
adjusted accordingly. The Portfolios will regain record ownership of loaned
securities to exercise certain beneficial rights, however, the Portfolios may
bear the risk of delay in recovery of, or even loss of rights in, the securities
loaned should the borrower fail financially. The Portfolios receive
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. The Portfolio's lending agent is PaineWebber
Global Security Lending, a wholly owned subsidiary of PaineWebber, who received
no compensation from the Portfolios.
As of December 31, 1996, the Growth Portfolio's custodian held cash and cash
equivalents having an aggregate value of $1,829,000 as collateral for portfolio
securities loaned having a market value of $1,757,188.
As of December 31, 1996, the Global Growth Portfolio's custodian held cash
and cash equivalents having an aggregate value of $326,000 as collateral for
portfolio securities loaned having a market value of $310,410.
As of December 31, 1996, the Aggressive Growth Portfolio's custodian held
cash and cash equivalents having an aggregate value of $312,200 as collateral
for portfolio securities loaned having a market value of $300,313.
INVESTMENTS IN SECURITIES
For the year ended December 31, 1996, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------- -------------
<S> <C> <C>
Growth Portfolio............................................... $ 21,202,250 $ 28,537,874
Global Growth Portfolio........................................ $ 11,307,338 $ 16,874,010
Global Income Portfolio........................................ $ 31,405,682 $ 43,068,336
Strategic Fixed Income Portfolio............................... $ 38,121,542 $ 43,197,622
Balanced Portfolio............................................. $ 79,514,492 $ 75,169,024
Growth and Income Portfolio.................................... $ 14,480,588 $ 16,999,916
Aggressive Growth Portfolio.................................... $ 22,017,773 $ 23,650,400
High Grade Fixed Income Portfolio.............................. $ 23,878,670 $ 24,277,622
</TABLE>
66
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
At December 31, 1996, the components of net unrealized appreciation of
investments were as follows:
<TABLE>
<CAPTION>
NET
GROSS GROSS UNREALIZED
APPRECIATION DEPRECIATION APPRECIATION
------------- ------------ -------------
<S> <C> <C> <C>
Growth Portfolio..................................................... $ 15,323,017 $ 463,658 $ 14,859,359
Global Growth Portfolio.............................................. $ 4,477,673 $ 1,071,063 $ 3,406,610
Global Income Portfolio.............................................. $ 528,380 $ 199,951 $ 328,429
Strategic Fixed Income Portfolio..................................... $ 116,631 $ 67,534 $ 49,097
Balanced Portfolio................................................... $ 3,683,017 $ 343,971 $ 3,339,046
Growth and Income Portfolio.......................................... $ 3,314,775 $ 128,020 $ 3,186,755
Aggressive Growth Portfolio.......................................... $ 5,301,308 $ 351,845 $ 4,949,463
High Grade Fixed Income Portfolio.................................... $ 132,766 $ 50,191 $ 82,575
</TABLE>
For federal income tax purposes, the cost of securities owned at December
31, 1996 was substantially the same as the cost of securities for financial
statement purposes.
FEDERAL INCOME TAX STATUS
Each of the Portfolios intends to distribute all of its taxable income and
to comply with the other requirements of the Internal Revenue Code applicable to
regulated investment companies. Accordingly, no provision for federal income
taxes is required.
At December 31, 1996, the following Portfolios had net capital loss
carryforwards available as reductions, to the extent provided in the
regulations, of any future net gains realized before the end of the fiscal years
indicated below:
<TABLE>
<CAPTION>
STRATEGIC HIGH GRADE
MONEY GLOBAL FIXED FIXED
MARKET GROWTH INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
2002........................................................... $ 10,411 -- -- $ 11,786
2003........................................................... -- $ 2,822,246 -- --
2004........................................................... -- -- $ 291,490 --
--------- ------------ ---------- -----------
$ 10,411 $ 2,822,246 $ 291,490 $ 11,786
--------- ------------ ---------- -----------
--------- ------------ ---------- -----------
</TABLE>
To the extent that such losses are used to offset future capital gains, it
is probable that the gains so offset will not be distributed.
67
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
At December 31, 1996, the effect of permanent "book/tax" reclassifications
resulted in increases (decreases) to the components of net assets as follows:
<TABLE>
<CAPTION>
ACCUMULATED
ACCUMULATED NET
NET REALIZED
INVESTMENT GAINS BENEFICIAL
INCOME (LOSS) (LOSSES) INTEREST
------------- ----------- ----------
<S> <C> <C> <C>
Growth Portfolio....................................................... $ 127,379 $(127,379) --
Aggressive Growth Portfolio............................................ $ 145,600 -- $ (145,600)
</TABLE>
WRITTEN OPTION ACTIVITY
Written option activity for the year ended December 31, 1996 for the
Strategic Fixed Income Portfolio was as follows:
<TABLE>
<CAPTION>
AMOUNT OF
NUMBER OF PREMIUMS
OPTIONS RECEIVED
--------- ---------
<S> <C> <C>
Options outstanding at December 31, 1995.......... -- --
Options written during the year................... 31 $ 21,204
Options cancelled in closing purchase
transactions.................................... (13) (10,320)
Options expired prior to exercise................. (18) (10,884)
Options exercised................................. -- --
--- ---------
Options outstanding at December 31, 1996.......... -- --
--- ---------
--- ---------
</TABLE>
68
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
SHARES OF BENEFICIAL INTEREST
At December 31, 1996, there was an unlimited amount of $0.001 par value
shares of beneficial interest authorized. Transactions in shares of beneficial
interest for each of the Portfolios were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------------------------------------------------------------
STRATEGIC GROWTH HIGH GRADE
MONEY GLOBAL GLOBAL FIXED AND AGGRESSIVE FIXED
MARKET GROWTH GROWTH INCOME INCOME BALANCED INCOME GROWTH INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------- ---------- ---------- --------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold (1)..... 10,397,169 297,187 186,725 97,475 174,852 1,266,095 273,166 171,441 170,053
Shares redeemed..... (20,822,547) (883,234) (692,316) (1,397,542) (633,097) (1,000,938) (353,815) (311,017) (322,275)
Reinvestment of
dividends......... 732,906 230,902 -- 305,777 210,338 216,699 13,293 46,676 57,354
----------- --------- ---------- ---------- --------- ----------- --------- ---------- ----------
Net increase
(decrease) in
shares
outstanding....... (9,692,472) (355,145) (505,591) (994,290) (247,907) 481,856 (67,356) (92,900) (94,868)
----------- --------- ---------- ---------- --------- ----------- --------- ---------- ----------
----------- --------- ---------- ---------- --------- ----------- --------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------------------------------------------------------------------
STRATEGIC GROWTH HIGH GRADE
MONEY GLOBAL GLOBAL FIXED AND AGGRESSIVE FIXED
MARKET GROWTH GROWTH INCOME INCOME BALANCED INCOME GROWTH INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------- ---------- ---------- --------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold......... 18,374,704 395,367 241,937 112,665 263,966 313,446 490,246 358,840 346,367
Shares redeemed..... (22,800,127) (865,482) (1,313,670) (1,885,539) (767,469) (880,843) (660,141) (211,321) (284,797)
Reinvestment of
dividends......... 1,356,406 216,758 193,445 117,825 152,154 317,414 15,387 787 25,297
----------- --------- ---------- ---------- --------- ----------- --------- ---------- ----------
Net increase
(decrease) in
shares
outstanding....... (3,069,017) (253,357) (878,288) (1,655,049) (351,349) (249,983) (154,508) 148,306 86,867
----------- --------- ---------- ---------- --------- ----------- --------- ---------- ----------
----------- --------- ---------- ---------- --------- ----------- --------- ---------- ----------
</TABLE>
- -----------------
(1) For the Balanced Portfolio, includes 1,198,513 shares issued in connection
with the acquisition of the former Balanced Portfolio.
69
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Financial Highlights
- ------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
-----------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
Net investment income............................................ 0.04 0.05 0.03 0.02 0.03
--------- --------- --------- --------- ---------
Dividends from net investment income............................. (0.04) (0.05) (0.03) (0.02) (0.03)
--------- --------- --------- --------- ---------
Net asset value, end of period................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total investment return (1)...................................... 4.32% 5.22% 3.43% 2.45% 3.00%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Ratios/Supplemental Data:
Net assets, end of period (000's)................................ $ 12,287 $ 21,974 $ 25,042 $ 15,468 $ 19,383
Expenses to average net assets................................... 1.17% 0.79% 0.88% 0.86% 0.81%
Net investment income to average net assets...................... 4.27% 5.23% 3.56% 2.43% 3.13%
</TABLE>
- ---------------
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends 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 additional contract
level charges; results would be lower if such charges were included.
70
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Financial Highlights
- ------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
GROWTH PORTFOLIO
-----------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............................. $ 17.57 $ 14.56 $ 18.06 $ 15.68 $ 14.92
--------- --------- --------- --------- ---------
Net investment income (loss)..................................... (0.06) 0.04 0.01 0.00 0.11
Net realized and unrealized gains (losses) from investments...... 3.29 4.68 (2.13) 3.08 0.76
--------- --------- --------- --------- ---------
Total income (loss) from investment operations................... 3.23 4.72 (2.12) 3.08 0.87
--------- --------- --------- --------- ---------
Dividends from net investment income............................. -- (0.08) (0.01) -- (0.11)
Distributions from net realized gains from investments........... (3.32) (1.63) (1.37) (0.70) --
--------- --------- --------- --------- ---------
Total dividends and distributions................................ (3.32) (1.71) (1.38) (0.70) (0.11)
--------- --------- --------- --------- ---------
Net asset value, end of period................................... $ 17.48 $ 17.57 $ 14.56 $ 18.06 $ 15.68
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total investment return (1)...................................... 18.70% 32.50% (11.65)% 19.61% 5.83%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Ratios/Supplemental Data:
Net assets, end of period (000's)................................ $ 36,357 $ 42,784 $ 39,135 $ 51,696 $ 46,479
Expenses to average net assets................................... 1.14% 1.02% 1.00% 0.92% 0.94%
Net investment income (loss) to average net assets............... (0.29)% 0.23% 0.04% 0.00% 0.78%
Portfolio turnover............................................... 53% 41% 27% 35% 29%
Average commission rate paid per share of common stock
investments purchased/sold (2)................................. $ 0.0600 -- -- -- --
</TABLE>
- ---------------
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions, 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 additional contract level charges; results would be lower if such
charges were included.
(2) Disclosure effective for fiscal years beginning on or after September 1,
1995.
71
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Financial Highlights
- ------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
GLOBAL GROWTH PORTFOLIO
---------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 12.00 $ 12.44 $ 14.97 $ 11.10 $ 12.06
------- ------- ------- ------- -------
Net investment income (loss)...................... 0.14 0.01 (0.03) 0.03 0.10
Net realized and unrealized gains (losses) from
investments..................................... 1.68 (0.45) (1.76) 4.42 (1.01)
------- ------- ------- ------- -------
Total income (loss) from investment operations.... 1.82 (0.44) (1.79) 4.45 (0.91)
------- ------- ------- ------- -------
Dividends from net investment income.............. (0.08) -- (0.01) -- (0.05)
Distributions from net realized gains from
investments..................................... -- -- (0.73) (0.58) --
------- ------- ------- ------- -------
Total dividends and distributions................. (0.08) 0.00 (0.74) (0.58) (0.05)
------- ------- ------- ------- -------
Net asset value, end of period.................... $ 13.74 $ 12.00 $ 12.44 $ 14.97 $ 11.10
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total investment return (1)....................... 15.14% (3.54)% (11.94)% 40.02% (7.55)%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratios/Supplemental Data:
Net assets, end of period (000's)................. $25,701 $28,507 $40,493 $38,035 $21,493
Expenses to average net assets.................... 1.10% 1.96% 1.48% 1.40% 1.46%
Net investment income (loss) to average net
assets.......................................... 0.46% 0.10% (0.13)% 0.38% 0.82%
Portfolio turnover................................ 44% 157% 175% 267% 127%
Average commission rate paid per share of common
stock investments purchased/sold (2)............ $0.0110 -- -- -- --
</TABLE>
- ---------------
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions, 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 additional contract level charges; results would be lower if such
charges were included.
(2) Disclosure effective for fiscal years beginning on or after September 1,
1995.
72
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Financial Highlights
- ------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
GLOBAL INCOME PORTFOLIO
---------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 11.20 $ 10.88 $ 11.72 $ 11.17 $ 11.65
------- ------- ------- ------- -------
Net investment income (loss)...................... 0.87 (0.05) 0.97 0.96 0.80
Net realized and unrealized gains (losses) from
investments..................................... (0.13) 1.52 (1.60) 0.90 (0.65)
------- ------- ------- ------- -------
Total income (loss) from investment operations.... 0.74 1.47 (0.63) 1.86 0.15
------- ------- ------- ------- -------
Dividends from net investment income.............. (0.79) (1.15) (0.21) (0.94) (0.56)
Distributions in excess of net investment
income.......................................... -- -- -- (0.16) --
Distributions from net realized gains from
investments..................................... (0.01) -- -- (0.21) (0.07)
------- ------- ------- ------- -------
Total dividends and distributions................. (0.80) (1.15) (0.21) (1.31) (0.63)
------- ------- ------- ------- -------
Net asset value, end of period.................... $ 11.14 $ 11.20 $ 10.88 $ 11.72 $ 11.17
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total investment return (1)....................... 6.62% 13.58% (5.56)% 16.65% 1.29%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratios/Supplemental Data:
Net assets, end of period (000's)................. $24,436 $35,700 $52,688 $64,610 $63,172
Expenses to average net assets.................... 1.56% 1.19% 1.17% 0.98% 1.07%
Net investment income to average net assets....... 6.56% 7.21% 7.23% 7.47% 7.20%
Portfolio turnover................................ 134% 160% 97% 69% 75%
</TABLE>
- ---------------
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions, 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 additional contract level charges; results would be lower if such
charges were included.
73
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Financial Highlights
- ------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
STRATEGIC FIXED INCOME PORTFOLIO
---------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 10.61 $ 10.34 $ 11.93 $ 11.58 $ 11.61
------- ------- ------- ------- -------
Net investment income............................. 1.40 0.88 0.85 0.87 0.74
Net realized and unrealized gains (losses) from
investments..................................... (1.01) 1.03 (1.49) 0.48 0.05
------- ------- ------- ------- -------
Total income (loss) from investment operations.... 0.39 1.91 (0.64) 1.35 0.79
------- ------- ------- ------- -------
Dividends from net investment income.............. (0.70) (0.88) (0.85) (0.87) (0.74)
Distributions from net realized gains from
investments..................................... (0.09) (0.76) (0.10) (0.13) (0.08)
------- ------- ------- ------- -------
Total dividends and distributions................. (0.79) (1.64) (0.95) (1.00) (0.82)
------- ------- ------- ------- -------
Net asset value, end of period.................... $ 10.21 $ 10.61 $ 10.34 $ 11.93 $ 11.58
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total investment return (1)....................... 3.79% 18.51% (5.34)% 11.66% 6.76%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratios/Supplemental Data:
Net assets, end of period (000's)................. $10,689 $13,741 $17,020 $22,354 $24,103
Expenses to average net assets.................... 1.52% 0.99% 0.89% 0.79% 0.76%
Net investment income to average net assets....... 5.88% 6.35% 6.64% 6.13% 6.59%
Portfolio turnover................................ 317% 234% 54% 8% 23%
</TABLE>
- ---------------
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions, 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 additional contract level charges; results would be lower if such
charges were included.
74
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Financial Highlights
- ------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
BALANCED PORTFOLIO*
---------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 10.70 $ 9.54 $ 11.95 $ 11.63 $ 11.39
------- ------- ------- ------- -------
Net investment income............................. 0.57 0.35 0.30 0.33 0.35
Net realized and unrealized gains (losses) from
investments..................................... 1.21 1.88 (1.44) 1.48 0.24
------- ------- ------- ------- -------
Total income (loss) from investment operations.... 1.78 2.23 (1.14) 1.81 0.59
------- ------- ------- ------- -------
Dividends from net investment income.............. (0.28) (0.35) (0.30) (0.33) (0.35)
Distributions from net realized gains from
investments..................................... (1.25) (0.72) (0.97) (1.16) --
------- ------- ------- ------- -------
Total dividends and distributions................. (1.53) (1.07) (1.27) (1.49) (0.35)
------- ------- ------- ------- -------
Net asset value, end of period.................... $ 10.95 $ 10.70 $ 9.54 $ 11.95 $ 11.63
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total investment return (1)....................... 16.82% 23.27% (9.59)% 15.76% 5.18%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratios/Supplemental Data:
Net assets, end of period (000's)................. $29,224 $23,413 $23,263 $33,367 $38,583
Expenses to average net assets.................... 1.24% 1.09% 1.03% 0.95% 0.93%
Net investment income to average net assets....... 2.29% 2.88% 2.30% 2.27% 3.11%
Portfolio turnover................................ 235% 171% 112% 60% 31%
Average commission rate paid per share of common
stock investments purchased/sold (2)............ $0.0616 -- -- -- --
</TABLE>
- ---------------
* Prior to the close of business on January 26, 1996, the Balanced Portfolio
was known as the Asset Allocation Portfolio.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates and a sale at
net asset value on the last day of each period reported. The figures do not
include additional contract level charges; results would be lower if such
charges were included.
(2) Disclosure effective for fiscal years beginning on or after September 1,
1995.
75
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Financial Highlights
- ------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
GROWTH AND INCOME PORTFOLIO
-------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, FOR THE PERIOD
JANUARY 2, 1992+
---------------------------------------- TO DECEMBER 31,
1996 1995 1994 1993 1992
------- ------- ------- ------- -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 11.83 $ 9.16 $ 9.87 $ 10.26 $ 10.00
------- ------- ------- ------- -------
Net investment income............................. 0.13 0.10 0.10 0.16 0.08
Net realized and unrealized gains (losses) from
investments..................................... 2.46 2.70 (0.71) (0.39) 0.26
------- ------- ------- ------- -------
Total income (loss) from investment operations.... 2.59 2.80 (0.61) (0.23) 0.34
------- ------- ------- ------- -------
Dividends from net investment income.............. (0.06) (0.10) (0.10) (0.16) (0.08)
Distributions from net realized gains from
investments..................................... (2.09) (0.03) -- -- --
------- ------- ------- ------- -------
Total dividends and distributions................. (2.15) (0.13) (0.10) (0.16) (0.08)
------- ------- ------- ------- -------
Net asset value, end of period.................... $ 12.27 $ 11.83 $ 9.16 $ 9.87 $ 10.26
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total investment return (1)....................... 22.12% 30.52% (6.18)% (2.26)% 3.40%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratios/Supplemental Data:
Net assets, end of period (000's)................. $14,520 $14,797 $12,872 $16,281 $20,037
Expenses to average net assets.................... 1.58% 1.37% 1.35% 1.12% 1.29%*
Net investment income to average net assets....... 0.49% 0.94% 1.06% 1.37% 1.21%*
Portfolio turnover................................ 99% 134% 150% 52% 14%
Average commission rate paid per share of common
stock investments purchased/sold (2)............ $0.0598 -- -- -- --
</TABLE>
- ---------------
+ Commencement of operations
* Annualized
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions, 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 additional contract level charges; results would be lower if such
charges were included. Total investment return for periods of less than one
year have not been annualized.
(2) Disclosure effective for fiscal years beginning on or after September 1,
1995.
76
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Financial Highlights
- ------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH PORTFOLIO
-----------------------------------------------------
FOR THE YEARS ENDED
DECEMBER 31, FOR THE PERIOD
----------------------------- NOVEMBER 2, 1993+
1996 1995 1994 TO DECEMBER 31, 1993
------- ------- ------- --------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 11.34 $ 9.65 $ 9.95 $10.00
------- ------- ------- ------
Net investment income (loss)............ (0.10) 0.03 0.01 0.01
Net realized and unrealized gains
(losses) from investments............. 2.93 2.00 (0.30) (0.05)
------- ------- ------- ------
Total income (loss) from investment
operations............................ 2.83 2.03 (0.29) (0.04)
------- ------- ------- ------
Dividends from net investment income.... -- (0.02) (0.01) (0.01)
Distributions from net realized gains
from investments...................... (1.08) (0.32) -- --
------- ------- ------- ------
Total dividends and distributions....... (1.08) (0.34) (0.01) (0.01)
------- ------- ------- ------
Net asset value, end of period.......... $ 13.09 $ 11.34 $ 9.65 $ 9.95
------- ------- ------- ------
------- ------- ------- ------
Total investment return (1)............. 25.23% 21.04% (2.90)% (0.36)%
------- ------- ------- ------
------- ------- ------- ------
Ratios/Supplemental Data:
Net assets, end of period (000's)....... $19,167 $17,660 $13,600 $2,814
Expenses to average net assets**........ 1.52% 1.29% 1.59% 0.00%
Net investment income (loss) to average
net assets**.......................... (0.74)% 0.23% 0.07% 3.31%*
Portfolio turnover...................... 115% 119% 90% 0%
Average commission rate paid per share
of common stock investments
purchased/sold (2).................... $0.0593 -- -- --
</TABLE>
- ---------------
+ Commencement of operations
* Annualized
** During the period ended December 31, 1993, Mitchell Hutchins agreed to
reimburse the Portfolio for all of its operating expenses and waived all of
its advisory fees. If such reimbursements and waivers had not been made, the
annualized ratio of expenses to average net assets and the annualized ratio
of net investment income (loss) to average net assets would have been 12.28%
and (8.97)%, respectively.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates and a sale at
net asset value on the last day of each period reported. The figures do not
include additional contract level charges; results would be lower if such
charges were included. Total investment return for periods of less than one
year have not been annualized.
(2) Disclosure effective for fiscal years beginning on or after September 1,
1995.
77
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Financial Highlights
- ------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
HIGH GRADE FIXED INCOME PORTFOLIO
--------------------------------------------------
FOR THE YEARS ENDED
DECEMBER 31, FOR THE PERIOD
-------------------------- NOVEMBER 8, 1993+
1996 1995 1994 TO DECEMBER 31, 1993
------ ------ ------ --------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 9.49 $ 8.71 $ 9.61 $10.00
------ ------ ------ ------
Net investment income................... 1.04 0.56 0.26 0.02
Net realized and unrealized gains
(losses) from investments............. (0.91) 0.79 (0.89) (0.39)
------ ------ ------ ------
Total income (loss) from investment
operations............................ 0.13 1.35 (0.63) (0.37)
------ ------ ------ ------
Dividends from net investment income.... (0.52) (0.57) (0.27) (0.02)
------ ------ ------ ------
Net asset value, end of period.......... $ 9.10 $ 9.49 $ 8.71 $ 9.61
------ ------ ------ ------
------ ------ ------ ------
Total investment return (1)............. 1.41% 15.44% (6.56)% (3.73)%
------ ------ ------ ------
------ ------ ------ ------
Ratios/Supplemental Data:
Net assets, end of period (000's)....... $7,902 $9,147 $7,638 $1,480
Expenses to average net assets**........ 1.62% 1.01% 1.56% 0.00%
Net investment income to average net
assets**.............................. 5.04% 5.56% 4.61% 3.90%*
Portfolio turnover...................... 282% 136% 36% 0%
</TABLE>
- ---------------
+ Commencement of operations
* Annualized
** During the period ended December 31, 1993, Mitchell Hutchins agreed to
reimburse the Portfolio for all of its operating expenses and waived all of
its advisory fees. If such reimbursements and waivers had not been made, the
annualized ratio of expenses to average net assets and the annualized ratio
of net investment income (loss) to average net assets would have been 23.52%
and (19.62)%, respectively.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates and a sale at
net asset value on the last day of each period reported. The figures do not
include additional contract level charges; results would be lower if such
charges were included. Total investment return for periods of less than one
year have not been annualized.
78
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Report of Ernst & Young LLP
Independent Auditors
- ------------------------------------------------------------
The Board of Trustees and Shareholders
PaineWebber Series Trust
We have audited the accompanying statement of assets and liabilities,
including the portfolios of investments, of PaineWebber Series Trust
(comprising, respectively, the Money Market, Growth, Global Growth, Global
Income, Strategic Fixed Income, Balanced, Growth and Income, Aggressive Growth
and High Grade Fixed Income Portfolios) (the "Fund") as of December 31, 1996 and
the related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
investments owned as of December 31, 1996 by correspondence with the custodians
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective portfolios constituting the PaineWebber Series Trust at
December 31, 1996, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then ended,
and the financial highlights for each of the indicated periods, in conformity
with generally accepted accounting principles.
[LOGO]
New York, New York
February 6, 1997
79
<PAGE>
[LOGO]
- -C- 1997 PAINEWEBBER INCORPORATED
- -REGISTERED TRADEMARK- REGISTERED TRADEMARK OF PAINEWEBBER INCORPORATED
