<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------------- ---------------------------------
12 MONTHS 6 MONTHS
08/31/97 02/28/97 08/31/96 ENDED 08/31/97 ENDED 08/31/97
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES $30.60 $25.48 $24.35 42.42% 20.45%
- ---------------------------------------------------------------------------------------
CLASS B SHARES 30.46 25.39 24.26 41.33 19.99
- ---------------------------------------------------------------------------------------
CLASS C SHARES 30.53 25.46 24.33 41.30 19.98
- ---------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS A SHARES
<CAPTION>
NET ASSET VALUE
------------------ CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN/1/
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
12/20/83 - 12/31/84 $12.65 $13.21 -- $1.0800 13.72%
- ---------------------------------------------------------------------------------------
1985 13.21 14.97 $0.1950 0.8850 22.36
- ---------------------------------------------------------------------------------------
1986 14.97 15.04 1.1380 0.6830 12.68
- ---------------------------------------------------------------------------------------
1987 15.04 12.05 2.3027 0.7366 (3.16)
- ---------------------------------------------------------------------------------------
1988 12.05 13.67 -- 0.5120 17.83
- ---------------------------------------------------------------------------------------
1989 13.67 16.32 0.1675 0.5178 24.59
- ---------------------------------------------------------------------------------------
1990 16.32 15.85 -- 0.3030 (1.01)
- ---------------------------------------------------------------------------------------
1991 15.85 21.17 -- 0.2526 35.34
- ---------------------------------------------------------------------------------------
1992 21.17 21.74 -- 0.2432 3.90
- ---------------------------------------------------------------------------------------
1993 21.74 20.86 0.0310 0.2818 (2.59)
- ---------------------------------------------------------------------------------------
1994 20.86 18.18 1.2111 0.2417 (5.87)
- ---------------------------------------------------------------------------------------
1995 18.18 22.39 1.5085 0.2475 33.21
- ---------------------------------------------------------------------------------------
1996 22.39 24.37 3.0247 0.2584 23.46
- ---------------------------------------------------------------------------------------
01/01/97 - 08/31/97 24.37 30.60 -- 0.0858 25.94
- ---------------------------------------------------------------------------------------
TOTALS: $9.5785 $6.3284
- ---------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/97: 489.22%
- ---------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS B SHARES
<CAPTION>
NET ASSET VALUE
------------------ CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN/1/
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
07/01/91 - 12/31/91 $18.04 $21.14 -- $0.1074 17.85%
- ---------------------------------------------------------------------------------------
1992 21.14 21.69 -- 0.0992 3.09
- ---------------------------------------------------------------------------------------
1993 21.69 20.82 $0.0310 0.1193 (3.31)
- ---------------------------------------------------------------------------------------
1994 20.82 18.15 1.2111 0.0768 (6.62)
- ---------------------------------------------------------------------------------------
1995 18.15 22.35 1.5085 0.0715 32.18
- ---------------------------------------------------------------------------------------
1996 22.35 24.32 3.0247 0.0643 22.55
- ---------------------------------------------------------------------------------------
01/01/97 - 08/31/97 24.32 30.46 -- 0.0044 25.27
- ---------------------------------------------------------------------------------------
TOTALS: $5.7753 $0.5429
- ---------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/97: 122.75%
- ---------------------------------------------------------------------------------------
</TABLE>
/1/FIGURES ASSUME REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS AT NET
ASSET VALUE ON THE PAYABLE DATES AND DO NOT INCLUDE SALES CHARGES; RESULTS
WOULD BE LOWER IF SALES CHARGES WERE INCLUDED.
THE DATA ABOVE REPRESENTS PAST PERFORMANCE OF THE FUND'S SHARES, WHICH IS NO
GUARANTEE OF FUTURE RESULTS. THE PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND
WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST.
8
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
PERFORMANCE RESULTS (UNAUDITED) (CONCLUDED)
PERFORMANCE SUMMARY CLASS C SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN/1/
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/02/92 - 12/31/92 $19.96 $21.75 -- $0.1160 9.58%
- -----------------------------------------------------------------------
1993 21.75 20.87 $0.0310 0.1308 (3.30)
- -----------------------------------------------------------------------
1994 20.87 18.20 1.2111 0.0756 (6.61)
- -----------------------------------------------------------------------
1995 18.20 22.42 1.5085 0.0728 32.21
- -----------------------------------------------------------------------
1996 22.42 24.39 3.0247 0.0781 22.55
- -----------------------------------------------------------------------
01/01/97 - 08/31/97 24.39 30.53 -- 0.0156 25.24
- -----------------------------------------------------------------------
TOTALS: $5.7753 $0.4889
- -----------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/97: 100.81%
- -----------------------------------------------------------------------
</TABLE>
/1/FIGURES ASSUME REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS AT NET
ASSET VALUE ON THE PAYABLE DATES AND DO NOT INCLUDE SALES CHARGES; RESULTS
WOULD BE LOWER IF SALES CHARGES WERE INCLUDED.
NOTE: THE FUND OFFERS CLASS Y SHARES TO A LIMITED GROUP OF ELIGIBLE INVESTORS,
INCLUDING THE TRUSTEES OF THE PAINEWEBBER SAVINGS INVESTMENT PLAN AND INSIGHT
INVESTMENT ADVISORY PROGRAM PARTICIPANTS. FOR THE YEAR ENDED AUGUST 31, 1997,
AND SINCE INCEPTION, FEBRUARY 12, 1992 THROUGH AUGUST 31, 1997, CLASS Y
SHARES HAD A TOTAL RETURN OF 42.74% AND 102.45%, RESPECTIVELY. CLASS Y SHARES
DO NOT HAVE INITIAL OR CONTINGENT DEFERRED SALES CHARGES OR ONGOING
DISTRIBUTION AND SERVICE FEES.
THE DATA ABOVE REPRESENTS PAST PERFORMANCE OF THE FUND'S SHARES, WHICH IS NO
GUARANTEE OF FUTURE RESULTS. THE PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND
WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST.
9
<PAGE>
PAINEWEBBER GROWTH FUND
PERFORMANCE RESULTS(UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------------- ---------------------------------
12 MONTHS 6 MONTHS
08/31/97 02/28/97 08/31/96 ENDED 08/31/97 ENDED 08/31/97
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES $25.94 $24.19 $24.37 15.85% 7.23%
- ---------------------------------------------------------------------------------------
CLASS B SHARES 24.51 22.94 23.30 14.98 6.84
- ---------------------------------------------------------------------------------------
CLASS C SHARES 24.71 23.13 23.48 14.95 6.83
- ---------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS A SHARES
<CAPTION>
NET ASSET VALUE
------------------ CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN/1/
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
03/18/85 - 12/31/85 $ 9.15 $10.55 -- $0.1275 16.87%
- ---------------------------------------------------------------------------------------
1986 10.55 10.86 $0.4064 0.1042 7.64
- ---------------------------------------------------------------------------------------
1987 10.86 9.81 1.4051 0.0847 4.34
- ---------------------------------------------------------------------------------------
1988 9.81 11.87 -- 0.1011 22.05
- ---------------------------------------------------------------------------------------
1989 11.87 14.79 1.1520 -- 34.27
- ---------------------------------------------------------------------------------------
1990 14.79 12.98 0.4625 0.1625 (7.72)
- ---------------------------------------------------------------------------------------
1991 12.98 18.53 0.6003 0.0072 47.61
- ---------------------------------------------------------------------------------------
1992 18.53 18.66 0.6235 -- 4.15
- ---------------------------------------------------------------------------------------
1993 18.66 21.14 1.0734 -- 19.17
- ---------------------------------------------------------------------------------------
1994 21.14 18.81 0.0258 -- (10.90)
- ---------------------------------------------------------------------------------------
1995 18.81 23.12 1.8440 -- 33.02
- ---------------------------------------------------------------------------------------
1996 23.12 24.24 2.1056 -- 14.11
- ---------------------------------------------------------------------------------------
01/01/97 - 08/31/97 24.24 25.94 -- -- 7.01
- ---------------------------------------------------------------------------------------
TOTALS: $9.6986 $0.5872
- ---------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/97: 426.36%
- ---------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS B SHARES
<CAPTION>
NET ASSET VALUE
------------------ CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN/1/
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
07/01/91 - 12/31/91 $15.63 $18.47 $0.6003 $0.0037 22.18%
- ---------------------------------------------------------------------------------------
1992 18.47 18.44 0.6235 -- 3.30
- ---------------------------------------------------------------------------------------
1993 18.44 20.71 1.0734 -- 18.26
- ---------------------------------------------------------------------------------------
1994 20.71 18.28 0.0258 -- (11.61)
- ---------------------------------------------------------------------------------------
1995 18.28 22.22 1.8440 -- 31.95
- ---------------------------------------------------------------------------------------
1996 22.22 23.02 2.1056 -- 13.24
- ---------------------------------------------------------------------------------------
01/01/97 - 08/31/97 23.02 24.51 -- -- 6.47
- ---------------------------------------------------------------------------------------
TOTALS: $6.2726 $0.0037
- ---------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/97: 109.99%
- ---------------------------------------------------------------------------------------
</TABLE>
/1/FIGURES ASSUME REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS AT NET
ASSET VALUE ON THE PAYABLE DATES AND DO NOT INCLUDE SALES CHARGES; RESULTS
WOULD BE LOWER IF SALES CHARGES WERE INCLUDED.
THE DATA ABOVE REPRESENTS PAST PERFORMANCE OF THE FUND'S SHARES, WHICH IS NO
GUARANTEE OF FUTURE RESULTS. THE PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND
WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST.
10
<PAGE>
PAINEWEBBER GROWTH FUND
PERFORMANCE RESULTS (UNAUDITED) (CONCLUDED)
PERFORMANCE SUMMARY CLASS C SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN/1/
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
07/02/92 - 12/31/92 $17.04 $18.57 $0.6235 -- 12.73%
- ---------------------------------------------------------------------------
1993 18.57 20.85 1.0734 -- 18.19
- ---------------------------------------------------------------------------
1994 20.85 18.41 0.0258 -- (11.58)
- ---------------------------------------------------------------------------
1995 18.41 22.40 1.8440 -- 32.00
- ---------------------------------------------------------------------------
1996 22.40 23.21 2.1056 -- 13.18
- ---------------------------------------------------------------------------
01/01/97 - 08/31/97 23.21 24.71 -- -- 6.46
- ---------------------------------------------------------------------------
TOTALS: $5.6723 --
- ---------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/97: 87.37%
- ---------------------------------------------------------------------------
</TABLE>
/1/FIGURES ASSUME REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS AT NET
ASSET VALUE ON THE PAYABLE DATES AND DO NOT INCLUDE SALES CHARGES; RESULTS
WOULD BE LOWER IF SALES CHARGES WERE INCLUDED.
NOTE: THE FUND OFFERS CLASS Y SHARES TO A LIMITED GROUP OF ELIGIBLE INVESTORS,
INCLUDING THE TRUSTEES OF THE PAINEWEBBER SAVINGS INVESTMENT PLAN AND INSIGHT
INVESTMENT ADVISORY PROGRAM PARTICIPANTS. FOR THE YEAR ENDED AUGUST 31, 1997,
AND SINCE INCEPTION, AUGUST 26, 1991 THROUGH AUGUST 31, 1997, CLASS Y SHARES
HAD A TOTAL RETURN OF 16.24% AND 104.80%, RESPECTIVELY. CLASS Y SHARES DO NOT
HAVE INITIAL OR CONTINGENT DEFERRED SALES CHARGES OR ONGOING DISTRIBUTION AND
SERVICE FEES.
THE DATA ABOVE REPRESENTS PAST PERFORMANCE OF THE FUND'S SHARES, WHICH IS NO
GUARANTEE OF FUTURE RESULTS. THE PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND
WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST.
11
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- --------------
<C> <S> <C>
COMMON STOCKS -- 88.46%
AIRLINES -- 1.60%
52,500 AMR CORPORATION*.................................... $ 5,289,375
125,000 CONTINENTAL AIRLINES INCORPORATED*(1)............... 4,578,125
70,000 UAL CORPORATION*.................................... 5,333,125
--------------
15,200,625
--------------
APPAREL, RETAIL -- 1.22%
300,000 TJX COMPANIES, INCORPORATED......................... 8,250,000
150,000 WOOLWORTH CORPORATION*.............................. 3,356,250
--------------
11,606,250
--------------
APPAREL, TEXTILES -- 0.90%
120,000 NINE WEST GROUP, INCORPORATED*...................... 5,070,000
88,000 WESTPOINT STEVENS INCORPORATED*(1).................. 3,520,000
--------------
8,590,000
--------------
BANKS -- 5.25%
148,700 BANK OF NEW YORK COMPANY INCORPORATED............... 6,635,737
131,000 BANKAMERICA CORPORATION............................. 8,621,437
75,000 BB & T CORPORATION.................................. 3,881,250
113,500 CHARTER ONE FINANCIAL, INCORPORATED................. 6,171,563
128,000 FIRST UNION CORPORATION............................. 6,152,000
135,000 NATIONSBANK CORPORATION............................. 8,015,625
93,600 THE CHASE MANHATTAN CORPORATION..................... 10,407,150
--------------
49,884,762
--------------
CHEMICALS -- 3.48%
99,000 DOW CHEMICAL COMPANY................................ 8,761,500
230,600 DUPONT (E.I.) DE NEMOURS & COMPANY.................. 14,369,262
65,000 KERR-MCGEE CORPORATION.............................. 4,038,125
133,500 OLIN CORPORATION.................................... 5,940,750
--------------
33,109,637
--------------
COMPUTER HARDWARE -- 5.15%
125,000 CISCO SYSTEMS, INCORPORATED*........................ 9,421,875
262,500 COMPAQ COMPUTER CORPORATION*........................ 17,193,750
135,000 DELL COMPUTER CORPORATION*.......................... 11,078,437
70,000 INTERNATIONAL BUSINESS MACHINES..................... 7,061,250
53,000 SEAGATE TECHNOLOGY, INCORPORATED*................... 2,023,938
45,000 SUN MICROSYSTEMS INCORPORATED*...................... 2,160,000
--------------
48,939,250
--------------
</TABLE>
12
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- --------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
COMPUTER SOFTWARE -- 1.68%
136,600 CADENCE DESIGN SYSTEMS INCORPORATED*(1)............. $ 6,497,038
75,000 COMPUTER ASSOCIATES INTERNATIONAL INCORPORATED...... 5,015,625
130,000 STERLING SOFTWARE INCORPORATED*..................... 4,460,625
--------------
15,973,288
--------------
CONSTRUCTION, REAL PROPERTY -- 2.30%
65,000 CHELSEA GCA REALTY INCORPORATED..................... 2,441,563
16,000 CRESCENT OPERATING INCORPORATED*.................... 258,000
160,000 CRESCENT REAL ESTATE EQUITIES....................... 5,060,000
127,500 EQUITY RESIDENTIAL PROPERTIES TRUST................. 6,207,656
45,000 SPIEKER PROPERTIES INCORPORATED..................... 1,673,438
134,525 STARWOOD LODGING CORPORATION........................ 6,213,373
--------------
21,854,030
--------------
CONSUMER DURABLES -- 0.22%
98,700 FURNITURE BRANDS INTERNATIONAL INCORPORATED*........ 1,739,588
12,200 INTERFACE INCORPORATED*............................. 341,600
--------------
2,081,188
--------------
DEFENSE/AEROSPACE -- 5.99%
147,800 AAR CORPORATION..................................... 4,960,538
150,000 ALLIED-SIGNAL, INCORPORATED......................... 12,384,375
229,320 BOEING COMPANY...................................... 12,483,607
130,000 LOCKHEED MARTIN CORPORATION(1)...................... 13,479,375
268,200 LORAL SPACE COMMUNICATIONS*(1)...................... 4,693,500
100,000 PRECISION CASTPARTS CORPORATION..................... 6,462,500
80,000 TRACOR INCORPORATED*................................ 2,410,000
--------------
56,873,895
--------------
DIVERSIFIED RETAIL -- 1.55%
131,625 DAYTON HUDSON CORPORATION........................... 7,502,625
125,000 FEDERATED DEPARTMENT STORES, INCORPORATED*.......... 5,250,000
38,000 MEYER (FRED) INCORPORATED*(1)....................... 1,976,000
--------------
14,728,625
--------------
DRUGS & MEDICINE -- 3.36%
43,700 AMERISOURCE HEALTH CORPORATION*..................... 2,187,731
111,000 BERGEN BRUNSWIG CORPORATION......................... 4,662,000
83,400 BRISTOL-MYERS SQUIBB COMPANY........................ 6,338,400
73,600 PFIZER, INCORPORATED................................ 4,075,600
200,000 SCHERING-PLOUGH CORPORATION......................... 9,600,000
96,000 WATSON PHARMACEUTICALS, INCORPORATED*............... 5,046,000
--------------
31,909,731
--------------
</TABLE>
13
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- --------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
ELECTRICAL EQUIPMENT -- 2.68%
126,000 JOHNSON CONTROLS, INCORPORATED...................... $ 6,008,625
120,000 KLA INSTRUMENTS INCORPORATED*....................... 8,505,000
160,000 SCI SYSTEMS INCORPORATED*........................... 6,290,000
73,900 ULTRATECH STEPPER, INCORPORATED*.................... 2,124,625
75,000 WATERS CORPORATION*................................. 2,498,437
--------------
25,426,687
--------------
ELECTRICAL POWER -- 0.86%
84,800 GENERAL ELECTRIC COMPANY............................ 5,300,000
113,000 WESTINGHOUSE ELECTRIC CORPORATION................... 2,909,750
--------------
8,209,750
--------------
ENERGY RESERVES & PRODUCTION -- 5.00%
75,000 AMOCO CORPORATION................................... 7,092,187
110,000 BURLINGTON RESOURCES, INCORPORATED(1)............... 5,568,750
115,000 MOBIL CORPORATION................................... 8,366,250
148,800 ROYAL DUTCH PETROLEUM COMPANY....................... 7,551,600
100,000 TEXACO, INCORPORATED................................ 11,525,000
189,500 UNOCAL CORPORATION.................................. 7,402,344
--------------
47,506,131
--------------
FINANCIAL SERVICES -- 1.19%
43,800 AMERICAN EXPRESS COMPANY............................ 3,405,450
75,000 COUNTRYWIDE CREDIT INDUSTRIES, INCORPORATED......... 2,526,563
40,000 SLM HOLDINGS CORPORATION............................ 5,420,000
--------------
11,352,013
--------------
FOREST PRODUCTS, PAPER -- 0.88%
200,000 FORT JAMES CORPORATION(1)........................... 8,400,000
--------------
FOOD RETAIL -- 0.75%
140,000 SAFEWAY INCORPORATED*(1)............................ 7,131,250
--------------
GAS UTILITY -- 1.23%
125,000 COLUMBIA GAS SYSTEM, INCORPORATED................... 8,250,000
111,800 MCN CORPORATION..................................... 3,430,863
--------------
11,680,863
--------------
HEAVY MACHINERY -- 2.27%
128,000 AGCO CORPORATION.................................... 4,160,000
300,000 CATERPILLAR, INCORPORATED........................... 17,418,750
--------------
21,578,750
--------------
</TABLE>
14
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- --------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
HOTELS -- 1.75%
200,000 HILTON HOTELS CORPORATION........................... $ 6,137,500
195,000 HOST MARRIOTT CORPORATION*.......................... 3,802,500
75,000 MARRIOTT INTERNATIONAL, INCORPORATED................ 4,992,187
90,000 PRIME HOSPITALITY CORPORATION*...................... 1,710,000
--------------
16,642,187
--------------
INDUSTRIAL PARTS -- 4.07%
80,000 AMERICAN STANDARD COMPANIES, INCORPORATED*(1)....... 3,760,000
146,000 CASE CORPORATION(1)................................. 9,791,125
150,000 CRANE COMPANY....................................... 6,618,750
125,000 INGERSOLL RAND COMPANY.............................. 7,515,625
69,000 LUCASVARITY PLC, ADR................................ 2,186,437
84,000 UNITED TECHNOLOGIES CORPORATION..................... 6,557,250
50,000 YORK INTERNATIONAL CORPORATION...................... 2,243,750
--------------
38,672,937
--------------
INFORMATION & COMPUTER SERVICES -- 0.31%
98,300 VALASSIS COMMUNICATIONS INCORPORATED*............... 2,985,863
--------------
LEISURE -- 0.57%
75,000 PHILIPS ELECTRONICS N.V............................. 5,371,875
--------------
LIFE INSURANCE -- 3.63%
48,000 CIGNA CORPORATION................................... 8,802,000
225,000 CONSECO INCORPORATED................................ 9,675,000
100,000 RELIASTAR FINANCIAL CORPORATION..................... 7,475,000
157,600 SUNAMERICA INCORPORATED(1).......................... 8,490,700
--------------
34,442,700
--------------
LONG DISTANCE & PHONE COMPANIES -- 0.85%
73,900 BELL ATLANTIC CORPORATION........................... 5,348,513
50,000 SBC COMMUNICATIONS, INCORPORATED.................... 2,718,750
--------------
8,067,263
--------------
MANUFACTURING - HIGH TECHNOLOGY -- 0.42%
46,500 ASM LITHOGRAPHY HOLDINGS N.V.*...................... 3,952,500
--------------
MEDICAL PRODUCTS -- 2.44%
75,000 JOHNSON & JOHNSON................................... 4,251,562
44,000 MENTOR CORPORATION.................................. 1,353,000
202,500 TENET HEALTHCARE CORPORATION*....................... 5,518,125
154,025 TYCO INTERNATIONAL LIMITED.......................... 12,081,336
--------------
23,204,023
--------------
</TABLE>
15
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- --------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MEDICAL PROVIDERS -- 1.42%
200,000 HEALTHSOUTH CORPORATION*(1)......................... $ 4,987,500
100,000 LINCARE HOLDINGS INCORPORATED*(1)................... 4,768,750
93,000 VENCOR INCORPORATED*................................ 3,731,625
--------------
13,487,875
--------------
MINING & METALS -- 1.86%
100,000 FREEPORT-MCMORAN COPPER & GOLD, INCORPORATED........ 2,800,000
132,500 ISPAT INTERNATIONAL N.V.*........................... 3,552,656
100,000 PHELPS DODGE CORPORATION............................ 8,043,750
88,000 STEEL DYNAMICS INCORPORATED*........................ 2,222,000
36,900 WYMAN GORDON COMPANY*............................... 1,007,831
--------------
17,626,237
--------------
MOTOR VEHICLES -- 0.90%
113,500 CHRYSLER CORPORATION................................ 3,986,688
100,000 LEAR CORPORATION*................................... 4,581,250
--------------
8,567,938
--------------
OIL REFINING -- 3.16%
78,800 BRITISH PETROLEUM, PLC ADR.......................... 6,668,450
100,000 COASTAL CORPORATION................................. 5,775,000
38,000 REPSOL S.A., ADR.................................... 1,496,250
137,500 TEJAS GAS CORPORATION*.............................. 6,531,250
141,500 USX-MARATHON GROUP.................................. 4,607,594
152,000 YPF SOCIEDAD ANONIMA, ADR........................... 4,949,500
--------------
30,028,044
--------------
OIL SERVICES -- 3.93%
114,000 CAMCO INTERNATIONAL INCORPORATED.................... 7,851,750
134,000 DIAMOND OFFSHORE DRILLING INCORPORATED.............. 7,319,750
96,000 ENSCO INTERNATIONAL INCORPORATED.................... 6,096,000
72,000 GLOBAL MARINE INCORPORATED*......................... 2,047,500
294,000 HALLIBURTON COMPANY(1).............................. 14,038,500
--------------
37,353,500
--------------
OTHER INSURANCE -- 4.81%
125,000 ACE LIMITED......................................... 10,390,625
200,971 ALLSTATE CORPORATION................................ 14,683,444
85,500 AMERICAN INTERNATIONAL GROUP INCORPORATED........... 8,069,062
45,000 LOEWS CORPORATION................................... 4,587,188
54,800 MID OCEAN LIMITED................................... 3,109,900
120,000 TRAVELERS AETNA PROPERTY CASUALTY CORPORATION....... 4,830,000
--------------
45,670,219
--------------
</TABLE>
16
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------- --------------
<C> <S> <C> <C> <C>
COMMON STOCKS (CONCLUDED)
PUBLISHING --
0.85%
111,000 MEREDITH
CORPORATION...... $ 3,330,000
100,000 NEW YORK TIMES
COMPANY, CLASS
A................ 4,725,000
--------------
8,055,000
--------------
RAILROADS --
1.09%
100,000 CANADIAN PACIFIC
LIMITED.......... 2,918,750
187,500 TRINITY
INDUSTRIES
INCORPORATED..... 7,453,125
--------------
10,371,875
--------------
SECURITIES &
ASSET
MANAGEMENT --
2.99%
168,000 MORGAN STANLEY,
DEAN WITTER,
DISCOVER &
COMPANY.......... 8,085,000
320,000 TRAVELERS GROUP
INCORPORATED..... 20,320,000
--------------
28,405,000
--------------
SEMICONDUCTOR --
1.83%
102,000 APPLIED
MATERIALS,
INCORPORATED*.... 9,626,250
36,900 INTEGRATED
PROCESS
EQUIPMENT
CORPORATION*..... 1,217,700
37,000 INTEL
CORPORATION...... 3,408,625
92,000 NATIONAL
SEMICONDUCTOR
CORPORATION*..... 3,151,000
--------------
17,403,575
--------------
SPECIALTY
RETAIL -- 1.17%
175,468 DOLLAR GENERAL
CORPORATION(1)... 7,270,955
75,000 GENERAL NUTRITION
COMPANIES,
INCORPORATED*.... 2,081,250
80,000 ZALE
CORPORATION*(1).. 1,720,000
--------------
11,072,205
--------------
THRIFT -- 0.40%
75,000 AHMANSON, H F &
COMPANY.......... 3,806,250
--------------
TOBACCO -- 2.45%
375,000 PHILIP MORRIS
COMPANIES
INCORPORATED..... 16,359,375
200,000 RJR NABISCO
HOLDINGS
CORPORATION...... 6,962,500
--------------
23,321,875
--------------
TOTAL COMMON STOCKS (COST --
$596,531,024)............... 840,545,666
--------------
PREFERRED STOCKS -- 3.19%
AGRICULTURE, FOOD
& BEVERAGE --
0.31%
49,000 RALSTON PURINA
COMPANY.......... 2,918,562
--------------
BANKS -- 0.79%
108,800 BANCO COMMERCIAL
PORTUGUES
INTERNATIONAL
LIMITED ADR...... 7,534,400
--------------
FINANCIAL
SERVICES -- 0.44%
53,000 DEVON FINANCING
TRUST#........... 4,153,875
--------------
FOREST PRODUCTS,
PAPER -- 0.59%
102,000 INTERNATIONAL
PAPER CAPITAL
TRUST#........... 5,622,750
--------------
</TABLE>
17
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------- --------------
PREFERRED STOCKS (CONCLUDED)
<C> <S> <C> <C> <C>
OIL REFINING -- 0.38%
60,000 TOSCO FINANCING TRUST#............................ $ 3,592,500
--------------
OTHER INSURANCE -- 0.68%
80,000 FRONTIER FINANCING TRUST#......................... 6,460,000
--------------
TOTAL PREFERRED STOCKS (COST -- $22,566,183)................. 30,282,087
--------------
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES
---------- -------- --------
<C> <S> <C> <C> <C>
CONVERTIBLE BONDS -- 0.81%
COMPUTER SOFTWARE -- 0.09%
$ 775 TECNOMATIX TECHNOLOGIES
LIMITED#...................... 08/15/04 5.250% 821,500
--------------
INDUSTRIAL PARTS -- 0.23%
1,900 CYMER INCORPORATED#............ 08/06/04 3.500 2,246,750
--------------
SPECIALTY RETAIL -- 0.49%
4,000 HOME DEPOT INCORPORATED........ 10/01/01 3.250 4,650,000
--------------
TOTAL CONVERTIBLE BONDS (COST --
$6,675,000)............................... 7,718,250
--------------
REPURCHASE AGREEMENTS -- 7.42%
20,503 REPURCHASE AGREEMENT DATED
08/29/97, WITH DAIWA
SECURITIES AMERICA, INC.,
COLLATERALIZED BY $18,508,000
U.S. TREASURY BOND, 7.625% DUE
11/15/22; PROCEEDS:
$20,515,666................... 09/02/97 5.560 20,503,000
50,000 REPURCHASE AGREEMENT DATED
08/29/97, WITH STATE STREET
BANK & TRUST COMPANY,
COLLATERALIZED BY $49,640,000
U.S. TREASURY NOTE, 6.125% DUE
03/31/98; PROCEEDS:
$50,030,278................... 09/02/97 5.450 50,000,000
--------------
TOTAL REPURCHASE AGREEMENTS (COST --
$70,503,000).............................. 70,503,000
--------------
<CAPTION>
NUMBER OF
SHARES
----------
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED -- 6.42%
<C> <S> <C> <C> <C>
MONEY MARKET FUNDS -- 6.42%
377,071 PRIME PORTFOLIO................................... 377,071
42,685,582 LIQUID ASSETS PORTFOLIO........................... 42,685,582
18,004,947 TEMPFUND PORTFOLIO................................ 18,004,947
--------------
TOTAL INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED
(COST -- $61,067,600)........................................ 61,067,600
--------------
TOTAL INVESTMENTS (COST -- $757,342,807) -- 106.30%.......... 1,010,116,603
LIABILITIES IN EXCESS OF OTHER ASSETS -- (6.30)%............. (59,909,933)
--------------
NET ASSETS -- 100.00%........................................ $ 950,206,670
==============
</TABLE>
- ---------
* NON-INCOME PRODUCING SECURITY
# SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF
1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION, NORMALLY TO QUALIFIED INSTITUTIONAL BUYERS.
(1) SECURITY, OR PORTION THEREOF, WAS ON LOAN AT AUGUST 31, 1997.
ADR AMERICAN DEPOSITARY RECEIPT
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
PAINEWEBBER GROWTH FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
<C> <S> <C>
COMMON STOCKS -- 91.02%
AGRICULTURE, FOOD & BEVERAGE -- 2.18%
60,000 PEPSICO, INCORPORATED................................. $ 2,160,000
100,000 THE COCA-COLA COMPANY................................. 5,731,250
------------
7,891,250
------------
AIRLINES -- 0.50%
18,000 AMR CORPORATION*...................................... 1,813,500
------------
APPAREL, RETAIL -- 0.43%
70,000 WOOLWORTH CORPORATION*................................ 1,566,250
------------
BANKS -- 0.53%
35,000 CHARTER ONE FINANCIAL, INCORPORATED................... 1,903,125
------------
CHEMICALS -- 4.13%
45,000 AIR PRODUCTS & CHEMICALS, INCORPORATED................ 3,670,313
125,000 CYTEC INDUSTRIES INCORPORATED*........................ 6,101,562
100,000 SEALED AIR CORPORATION*(1)............................ 5,187,500
------------
14,959,375
------------
COMPUTER HARDWARE -- 5.22%
70,000 CISCO SYSTEMS, INCORPORATED*.......................... 5,276,250
48,750 COMPAQ COMPUTER CORPORATION*.......................... 3,193,125
52,000 DELL COMPUTER CORPORATION*............................ 4,267,250
50,000 EMC CORPORATION*...................................... 2,565,625
75,000 SUN MICROSYSTEMS INCORPORATED*........................ 3,600,000
------------
18,902,250
------------
COMPUTER SOFTWARE -- 4.96%
50,000 CADENCE DESIGN SYSTEMS INCORPORATED*.................. 2,378,125
40,000 COMPUTER ASSOCIATES INTERNATIONAL INCORPORATED........ 2,675,000
15,000 MICROSOFT CORPORATION*................................ 1,982,812
60,000 ORACLE SYSTEMS CORPORATION*........................... 2,287,500
60,000 PEOPLESOFT INCORPORATED*.............................. 3,375,000
159,260 STERLING COMMERCE INCORPORATED*....................... 5,265,534
------------
17,963,971
------------
CONSTRUCTION, REAL PROPERTY -- 1.83%
100,000 CRESCENT REAL ESTATE EQUITIES......................... 3,162,500
75,000 STARWOOD LODGING CORPORATION.......................... 3,450,000
------------
6,612,500
------------
</TABLE>
19
<PAGE>
PAINEWEBBER GROWTH FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
DEFENSE/AEROSPACE -- 1.33%
125,000 KELLSTROM INDUSTRIES INCORPORATED*.................... $ 1,921,875
45,000 PRECISION CASTPARTS CORPORATION....................... 2,908,125
------------
4,830,000
------------
DRUGS & MEDICINE -- 5.08%
60,000 ELAN CORPORATION, PLC, ADR*(1)........................ 2,730,000
130,000 PHARMACYCLICS INCORPORATED*........................... 2,177,500
122,000 TEVA PHARMACEUTICAL INDUSTRIES LIMITED, ADR(1)........ 6,405,000
50,000 TRIANGLE PHARMACEUTICALS INCORPORATED*................ 1,037,500
115,000 WATSON PHARMACEUTICALS, INCORPORATED*................. 6,044,687
------------
18,394,687
------------
ELECTRICAL EQUIPMENT -- 1.65%
50,000 SCI SYSTEMS INCORPORATED*............................. 1,965,625
30,000 TELLABS, INCORPORATED*(1)............................. 1,790,625
67,000 WATERS CORPORATION*................................... 2,231,938
------------
5,988,188
------------
ENERGY RESERVES & PRODUCTION -- 1.17%
50,000 BRITISH PETROLEUM, PLC, ADR........................... 4,231,250
------------
ENTERTAINMENT -- 4.59%
175,500 CINAR FILMS INCORPORATED*............................. 5,572,125
200,000 FLORIDA PANTHERS HOLDINGS INCORPORATED*............... 4,125,000
333,334 N2K INCORPORATED*(2).................................. 1,000,002
115,000 TIME WARNER INCORPORATED(1)........................... 5,922,500
------------
16,619,627
------------
ENVIRONMENTAL SERVICES -- 1.01%
150,000 REPUBLIC INDUSTRIES, INCORPORATED*.................... 3,675,000
------------
FINANCIAL SERVICES -- 5.36%
40,000 AMERICAN EXPRESS COMPANY.............................. 3,110,000
80,000 FEDERAL HOME LOAN MORTGAGE CORPORATION................ 2,605,000
125,000 FEDERAL NATIONAL MORTGAGE ASSOCIATION................. 5,500,000
90,000 MBNA CORPORATION...................................... 3,459,375
35,000 SLM HOLDING CORPORATION............................... 4,742,500
------------
19,416,875
------------
FOREST PRODUCTS, PAPER -- 0.93%
80,000 FORT JAMES CORPORATION................................ 3,360,000
------------
FOOD RETAIL -- 1.13%
80,000 SAFEWAY INCORPORATED*(1).............................. 4,075,000
------------
</TABLE>
20
<PAGE>
PAINEWEBBER GROWTH FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
GAS UTILITY -- 0.38%
45,200 MCN CORPORATION....................................... $ 1,387,075
------------
HOTELS -- 3.12%
200,000 EXTENDED STAY AMERICA, INCORPORATED*.................. 2,675,000
120,000 HFS, INCORPORATED*(1)................................. 6,682,500
100,000 HOST MARRIOTT CORPORATION*............................ 1,950,000
------------
11,307,500
------------
INDUSTRIAL PARTS -- 1.78%
60,000 ILLINOIS TOOL WORKS, INCORPORATED..................... 2,902,500
30,000 UNITED TECHNOLOGIES CORPORATION....................... 2,341,875
45,000 WATSCO INCORPORATED................................... 1,220,625
------------
6,465,000
------------
INDUSTRIAL SERVICES/SUPPLIES -- 0.44%
200,000 STAFFING RESOURCES, INCORPORATED*(2).................. 1,600,000
------------
INFORMATION & COMPUTER SERVICES -- 3.85%
60,000 HBO & COMPANY......................................... 4,320,000
65,000 KEANE INCORPORATED*................................... 3,818,750
126,562 PAYCHEX, INCORPORATED................................. 4,334,748
48,800 VALASSIS COMMUNICATIONS INCORPORATED*................. 1,482,300
------------
13,955,798
------------
LIFE INSURANCE -- 0.74%
50,000 SUNAMERICA INCORPORATED............................... 2,693,750
------------
LONG DISTANCE & PHONE COMPANIES -- 2.97%
135,000 TELEPORT COMMUNICATIONS*.............................. 4,910,625
195,000 WORLDCOM, INCORPORATED*(1)............................ 5,837,813
------------
10,748,438
------------
MANUFACTURING - HIGH TECHNOLOGY -- 1.13%
15,000 ASM LITHOGRAPHY HOLDINGS N.V.*........................ 1,275,000
40,000 KLA-TENCOR CORPORATION*............................... 2,835,000
------------
4,110,000
------------
MEDIA -- 5.37%
76,000 CLEAR CHANNEL COMMUNICATIONS*......................... 5,163,250
125,000 COMCAST CORPORATION, CLASS A SPECIAL.................. 2,929,687
175,000 LIBERTY MEDIA GROUP*.................................. 4,615,625
155,250 OUTDOOR SYSTEMS INCORPORATED*......................... 4,104,422
150,000 TELE-COMMUNICATIONS, INCORPORATED CLASS A*............ 2,625,000
------------
19,437,984
------------
</TABLE>
21
<PAGE>
PAINEWEBBER GROWTH FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MEDICAL PRODUCTS -- 1.04%
48,133 TYCO INTERNATIONAL LIMITED........................... $ 3,775,432
------------
MEDICAL PROVIDERS -- 3.12%
198,000 PHYCOR INCORPORATED*................................. 5,828,625
171,000 SERVICE CORPORATION INTERNATIONAL.................... 5,472,000
------------
11,300,625
------------
MINING & METALS -- 1.46%
55,000 ISPAT INTERNATIONAL N.V.*............................ 1,474,688
33,500 POTASH CORPORATION OF SASKATCHEWAN INCORPORATED...... 2,476,906
52,500 STEEL DYNAMICS INCORPORATED*......................... 1,325,625
------------
5,277,219
------------
MOTOR VEHICLES AND PARTS -- 0.63%
50,000 LEAR CORPORATION*.................................... 2,290,625
------------
OIL SERVICES -- 7.20%
70,000 CAMCO INTERNATIONAL INCORPORATED..................... 4,821,250
65,000 DRESSER INDUSTRIES, INCORPORATED..................... 2,717,812
35,000 ENSCO INTERNATIONAL INCORPORATED..................... 2,222,500
80,000 EVI, INCORPORATED*................................... 4,205,000
45,000 GLOBAL INDUSTRIES LIMITED*........................... 1,639,688
60,000 GLOBAL MARINE INCORPORATED*.......................... 1,706,250
100,000 HALLIBURTON COMPANY.................................. 4,775,000
52,500 SCHLUMBERGER LIMITED................................. 3,999,844
------------
26,087,344
------------
OTHER INSURANCE -- 1.65%
30,000 ALLSTATE CORPORATION................................. 2,191,875
25,500 AMERICAN INTERNATIONAL GROUP INCORPORATED............ 2,406,562
27,500 MGIC INVESTMENT CORPORATION.......................... 1,383,594
------------
5,982,031
------------
PUBLISHING -- 1.49%
15,000 GANNETT, INCORPORATED................................ 1,461,563
175,000 GETTY COMMUNICATIONS SYSTEMS INCORPORATED, PLC, ADR*. 2,056,250
40,000 NEW YORK TIMES COMPANY, CLASS A...................... 1,890,000
------------
5,407,813
------------
RAILROADS -- 0.93%
115,000 CANADIAN PACIFIC LIMITED............................. 3,356,563
------------
SECURITIES & ASSET MANAGEMENT -- 0.96%
55,000 TRAVELERS GROUP INCORPORATED......................... 3,492,500
------------
</TABLE>
22
<PAGE>
PAINEWEBBER GROWTH FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
<C> <S> <C> <C> <C>
COMMON STOCKS (CONCLUDED)
SEMICONDUCTOR -- 4.03%
35,000 ALTERA CORPORATION*(1)............................... $ 1,863,750
40,000 APPLIED MATERIALS, INCORPORATED*..................... 3,775,000
30,000 INTEL CORPORATION.................................... 2,763,750
55,000 MICRON TECHNOLOGY, INCORPORATED(1)................... 2,450,937
60,000 NATIONAL SEMICONDUCTOR CORPORATION*.................. 2,055,000
15,000 TEXAS INSTRUMENTS, INCORPORATED...................... 1,704,375
------------
14,612,812
------------
SPECIALTY RETAIL -- 4.67%
165,000 GENERAL NUTRITION COMPANIES, INCORPORATED*........... 4,578,750
75,000 HOME DEPOT, INCORPORATED............................. 3,539,062
60,000 COSTCO COMPANIES, INCORPORATED*(1)................... 2,163,750
148,000 STAPLES, INCORPORATED*............................... 3,478,000
35,000 TIFFANY & COMPANY.................................... 1,583,750
75,000 VIKING OFFICE PRODUCTS, INCORPORATED*................ 1,584,375
------------
16,927,687
------------
THRIFT -- 0.84%
51,000 WASHINGTON MUTUAL INCORPORATED....................... 3,053,625
------------
WIRELESS TELECOMMUNICATIONS -- 1.19%
25,000 AIRTOUCH COMMUNICATIONS, INCORPORATED*............... 845,313
150,000 SMARTALK TELESERVICES, INCORPORATED*................. 3,450,000
------------
4,295,313
------------
TOTAL COMMON STOCKS (COST -- $219,800,352)..................... 329,767,982
------------
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES
--------- ------------ --------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENTS -- 6.19%
$11,443 REPURCHASE AGREEMENT DATED
8/29/97 WITH DAIWA SECURITIES
AMERICA, INC., COLLATERALIZED
BY $10,261,000 U.S. TREASURY
BONDS, 7.875% DUE 2/15/21;
PROCEEDS: $11,450,069........ 09/02/97 5.560% 11,443,000
11,000 REPURCHASE AGREEMENT DATED
8/29/97 WITH DRESDNER
SECURITIES (USA), INC.,
COLLATERALIZED BY $10,577,000
U.S. TREASURY NOTES, 8.875%
DUE 11/15/98; PROCEEDS:
$11,006,759.................. 09/02/97 5.530 11,000,000
------------
TOTAL REPURCHASE AGREEMENTS (COST --
$22,443,000)............................ 22,443,000
------------
</TABLE>
23
<PAGE>
PAINEWEBBER GROWTH FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------- ------------
<C> <S> <C> <C> <C>
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES
LOANED -- 11.61%
MONEY MARKET FUNDS -- 8.01%
16,058,117 LIQUID ASSETS PORTFOLIO........................... $ 16,058,117
1,368 PRIME PORTFOLIO................................... 1,368
6,533,791 TEMPCASH PORTFOLIO................................ 6,533,791
6,411,138 TEMPFUND PORTFOLIO................................ 6,411,138
------------
TOTAL MONEY MARKET FUNDS (COST -- $29,004,414)............... 29,004,414
------------
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATE RATE
---------- -------- --------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT -- 3.60%
$ 13,059 REPURCHASE AGREEMENT DATED
8/29/97 WITH BANKERS TRUST
SECURITIES, INC.,
COLLATERALIZED BY $10,305,000
U.S. TREASURY BONDS, 9.125%
DUE 5/15/18; PROCEEDS:
$13,067,024 (COST --
$13,059,000)................. 09/02/97 5.530% 13,059,000
------------
TOTAL INVESTMENTS OF CASH COLLATERAL FOR 42,063,414
SECURITIES LOANED (COST -- $42,063,414)....
------------
TOTAL INVESTMENTS (COST -- $284,306,766) -- 394,274,396
108.82%...................................
LIABILITIES IN EXCESS OF OTHER ASSETS -- (31,978,358)
(8.82)%...................................
------------
NET ASSETS -- 100.00%...................... $362,296,038
============
</TABLE>
- ---------
* NON-INCOME PRODUCING SECURITY
ADR AMERICAN DEPOSITARY RECEIPT
(1) SECURITY, OR PORTION THEREOF, WAS ON LOAN AT AUGUST 31, 1997
(2) ILLIQUID SECURITY REPRESENTING 0.72% OF NET ASSETS
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
24
<PAGE>
PAINEWEBBER
STATEMENTS OF ASSETS AND LIABILITIES AUGUST 31, 1997
<TABLE>
<CAPTION>
GROWTH
& INCOME GROWTH
FUND FUND
-------------- ------------
<S> <C> <C>
ASSETS
INVESTMENTS IN SECURITIES, AT VALUE (COST -
$757,342,807 AND $284,306,766, RESPECTIVELY)..... $1,010,116,603 $394,274,396
RECEIVABLE FOR INVESTMENTS SOLD................... 5,297,355 11,102,343
RECEIVABLE FOR SHARES OF BENEFICIAL INTEREST
SOLD............................................. 2,752,825 116,898
DIVIDENDS AND INTEREST RECEIVABLE................. 1,398,895 312,529
DEFERRED ORGANIZATIONAL EXPENSES.................. -- 40,336
OTHER ASSETS...................................... 80,007 34,602
-------------- ------------
TOTAL ASSETS...................................... 1,019,645,685 405,881,104
-------------- ------------
LIABILITIES
COLLATERAL FOR SECURITIES LOANED.................. 61,067,600 42,063,414
DUE TO CUSTODIAN.................................. 3,230,785 --
PAYABLE FOR INVESTMENTS PURCHASED................. 2,543,644 --
PAYABLE TO AFFILIATE.............................. 1,043,722 399,407
PAYABLE FOR SHARES OF BENEFICIAL INTEREST
REPURCHASED...................................... 941,660 757,144
ACCRUED EXPENSES AND OTHER LIABILITIES............ 611,604 365,101
-------------- ------------
TOTAL LIABILITIES................................. 69,439,015 43,585,066
-------------- ------------
NET ASSETS
BENEFICIAL INTEREST - $0.001 PAR VALUE (UNLIMITED
AMOUNT AUTHORIZED)............................... 621,282,945 178,827,562
UNDISTRIBUTED NET INVESTMENT INCOME............... 567,948 --
ACCUMULATED NET REALIZED GAINS FROM INVESTMENT
TRANSACTIONS..................................... 75,581,981 73,500,846
NET UNREALIZED APPRECIATION OF INVESTMENTS........ 252,773,796 109,967,630
-------------- ------------
NET ASSETS........................................ $ 950,206,670 $362,296,038
============== ============
CLASS A:
NET ASSETS........................................ $ 441,699,101 $201,725,324
-------------- ------------
SHARES OUTSTANDING................................ 14,436,696 7,775,273
-------------- ------------
NET ASSET VALUE AND REDEMPTION VALUE PER SHARE.... $30.60 $25.94
====== ======
MAXIMUM OFFERING PRICE PER SHARE (NET ASSET VALUE
PLUS SALES CHARGE OF 4.50% OF OFFERING PRICE).... $32.04 $27.16
====== ======
CLASS B:
NET ASSETS........................................ $ 376,840,314 $115,529,360
-------------- ------------
SHARES OUTSTANDING................................ 12,373,625 4,713,982
-------------- ------------
NET ASSET VALUE AND OFFERING PRICE PER SHARE...... $30.46 $24.51
====== ======
CLASS C:
NET ASSETS........................................ $ 84,921,978 $ 24,760,127
-------------- ------------
SHARES OUTSTANDING................................ 2,781,851 1,002,154
-------------- ------------
NET ASSET VALUE AND OFFERING PRICE PER SHARE...... $30.53 $24.71
====== ======
CLASS Y:
NET ASSETS........................................ $ 46,745,277 $ 20,281,227
-------------- ------------
SHARES OUTSTANDING................................ 1,527,966 766,615
-------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
VALUE PER SHARE.................................. $30.59 $26.46
====== ======
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
25
<PAGE>
PAINEWEBBER
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 1997
<TABLE>
<CAPTION>
GROWTH
& INCOME GROWTH
FUND FUND
------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
DIVIDENDS........................................... $ 10,922,323 $ 1,523,054
INTEREST............................................ 4,526,054 2,177,222
------------ ------------
15,448,377 3,700,276
------------ ------------
EXPENSES:
INVESTMENT ADVISORY AND ADMINISTRATION.............. 5,312,189 2,934,644
SERVICE FEES -- CLASS A............................. 784,677 478,075
SERVICE AND DISTRIBUTION FEES -- CLASS B............ 3,245,358 1,326,859
SERVICE AND DISTRIBUTION FEES -- CLASS C............ 596,262 287,127
TRANSFER AGENCY AND SERVICE FEES.................... 571,538 349,642
CUSTODY AND ACCOUNTING.............................. 446,425 240,633
REPORTS AND NOTICES TO SHAREHOLDERS................. 355,134 232,741
LEGAL AND AUDIT..................................... 158,885 121,221
FEDERAL AND STATE REGISTRATION...................... 114,192 95,725
AMORTIZATION OF ORGANIZATIONAL EXPENSES............. 11,291 34,482
TRUSTEES' FEES...................................... 15,750 15,750
OTHER EXPENSES...................................... 9,778 63,764
------------ ------------
11,621,479 6,180,663
------------ ------------
NET INVESTMENT INCOME (LOSS)........................ 3,826,898 (2,480,387)
------------ ------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM
INVESTMENT ACTIVITIES:
NET REALIZED GAINS FROM INVESTMENT TRANSACTIONS..... 91,716,177 77,089,105
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
OF INVESTMENTS..................................... 169,641,210 (18,680,184)
------------ ------------
NET REALIZED AND UNREALIZED GAINS FROM INVESTMENT
ACTIVITIES......................................... 261,357,387 58,408,921
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS......................................... $265,184,285 $ 55,928,534
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
26
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED AUGUST 31,
---------------------------
1997 1996
------------- ------------
<S> <C> <C>
FROM OPERATIONS:
NET INVESTMENT INCOME............................. $ 3,826,898 $ 3,272,065
NET REALIZED GAINS FROM INVESTMENT TRANSACTIONS... 91,716,177 86,725,439
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
OF INVESTMENTS................................... 169,641,210 (1,953,419)
------------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS....................................... 265,184,285 88,044,085
------------- ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
NET INVESTMENT INCOME -- CLASS A.................. (3,008,034) (3,309,904)
NET INVESTMENT INCOME -- CLASS B.................. (590,718) (985,947)
NET INVESTMENT INCOME -- CLASS C.................. (144,038) (142,026)
NET INVESTMENT INCOME -- CLASS Y.................. (369,653) (323,508)
NET REALIZED GAINS FROM INVESTMENT TRANSACTIONS --
CLASS A......................................... (34,230,420) (14,113,535)
NET REALIZED GAINS FROM INVESTMENT TRANSACTIONS --
CLASS B......................................... (34,198,889) (16,674,335)
NET REALIZED GAINS FROM INVESTMENT TRANSACTIONS --
CLASS C......................................... (5,668,031) (2,139,119)
NET REALIZED GAINS FROM INVESTMENT TRANSACTIONS --
CLASS Y......................................... (3,062,641) (1,066,345)
------------- ------------
TOTAL DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. (81,272,424) (38,754,719)
------------- ------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
NET PROCEEDS FROM THE SALE OF SHARES.............. 213,997,367 86,569,299
PROCEEDS FROM THE ISSUANCE OF SHARES FROM THE
ACQUISITION OF MITCHELL HUTCHINS/KIDDER, PEABODY
EQUITY INCOME FUND............................... -- 60,522,138
PROCEEDS FROM THE ISSUANCE OF SHARES FROM THE
ACQUISITION OF PAINEWEBBER GLOBAL ENERGY FUND.... -- 17,163,198
COST OF SHARES REPURCHASED........................ (143,307,215) (109,425,591)
PROCEEDS FROM DIVIDENDS REINVESTED................ 75,746,185 35,992,186
------------- ------------
NET INCREASE IN NET ASSETS FROM BENEFICIAL
INTEREST TRANSACTIONS............................ 146,436,337 90,821,230
------------- ------------
NET INCREASE IN NET ASSETS........................ 330,348,198 140,110,596
NET ASSETS:
BEGINNING OF YEAR................................. 619,858,472 479,747,876
------------- ------------
END OF YEAR (INCLUDING UNDISTRIBUTED NET
INVESTMENT INCOME OF $567,948 AND $853,493,
RESPECTIVELY).................................... $ 950,206,670 $619,858,472
============= ============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
27
<PAGE>
PAINEWEBBER GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED AUGUST 31,
---------------------------
1997 1996
------------- ------------
<S> <C> <C>
FROM OPERATIONS:
NET INVESTMENT LOSS............................... $ (2,480,387) $ (3,284,126)
NET REALIZED GAINS FROM INVESTMENT TRANSACTIONS... 77,089,105 53,608,241
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
OF INVESTMENTS................................... (18,680,184) 15,049,708
------------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS....................................... 55,928,534 65,373,823
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
NET REALIZED GAINS FROM INVESTMENT TRANSACTIONS --
CLASS A......................................... (17,185,494) (14,736,470)
NET REALIZED GAINS FROM INVESTMENT TRANSACTIONS --
CLASS B......................................... (12,089,644) (11,773,021)
NET REALIZED GAINS FROM INVESTMENT TRANSACTIONS --
CLASS C......................................... (2,625,574) (2,425,155)
NET REALIZED GAINS FROM INVESTMENT TRANSACTIONS --
CLASS Y......................................... (1,819,441) (1,487,963)
------------- ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS............... (33,720,153) (30,422,609)
------------- ------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
NET PROCEEDS FROM SALE OF SHARES.................. 41,330,087 33,439,586
COST OF SHARES REPURCHASED........................ (128,802,696) (89,217,437)
PROCEEDS FROM DIVIDENDS REINVESTED................ 31,795,483 28,720,783
------------- ------------
NET DECREASE IN NET ASSETS FROM BENEFICIAL
INTEREST TRANSACTIONS............................ (55,677,126) (27,057,068)
------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS............. (33,468,745) 7,894,146
NET ASSETS:
BEGINNING OF YEAR................................. 395,764,783 387,870,637
------------- ------------
END OF YEAR....................................... $ 362,296,038 $395,764,783
============= ============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Growth & Income Fund ("Growth & Income Fund") and PaineWebber
Growth Fund ("Growth Fund") (collectively, the "Funds") are diversified series
of PaineWebber America Fund and PaineWebber Olympus Fund (the "Trusts"), re-
spectively. The two Trusts were organized under separate Declarations of Trust
and are registered with the Securities and Exchange Commission under the In-
vestment Company Act of 1940, as amended, as diversified open-end investment
companies. Organizational costs have been deferred and are being amortized us-
ing the straight line method over a period not to exceed 60 months from the
date the Funds commenced operations.
Currently, each Fund offers Class A, Class B, Class C and Class Y shares. Each
class represents interests in the same assets of the applicable Fund, and the
classes are identical except for differences in their sales charge structures,
ongoing service and distribution charges and certain transfer agency expenses.
In addition, Class B shares and all corresponding reinvested dividend shares
automatically convert to Class A shares approximately six years after issuance.
All classes of shares have equal voting privileges except that each class has
exclusive voting rights with respect to its service and/or distribution plan.
The preparation of financial statements in accordance with generally accepted
accounting principles requires Fund management to make estimates and assump-
tions that affect the reported amounts and disclosures in the financial state-
ments. Actual results could differ from those estimates. The following is a
summary of significant accounting policies:
Valuation of Investments -- Securities which are listed on stock exchanges are
valued at the last sale price on the day the securities are being valued or,
lacking any sales on such day, at the last available bid price. In cases where
securities are traded on more than one exchange, the securities are valued on
the exchange designated by Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins"), a wholly owned subsidiary of PaineWebber Incorporated
("PaineWebber") and investment adviser, administrator and distributor of the
Funds. Securities traded in the over-the-counter ("OTC") market and listed on
the Nasdaq Stock Market, Inc. ("Nasdaq") are valued at the last available sale
price, or last bid price available if no sale occurs, on Nasdaq prior to the
time of valuation. Where market quotations are readily available, debt securi-
ties are valued thereon, provided such quotations adequately reflect the fair
value of the securities in the judgment of Mitchell Hutchins. When market quo-
tations are not readily available, securities are valued based upon appraisals
derived from information concerning those securities or similar securities re-
ceived from recognized dealers in those securities. All other securities are
valued at fair value as determined in good faith by, or under the direction of,
each Trust's board of trustees. The amortized cost method of valuation is used
to value short-term debt instruments with sixty days or less remaining to matu-
rity, unless each Trust's board of trustees determines that this does not rep-
resent fair value.
Repurchase Agreements -- Each Fund's custodian takes possession of the collat-
eral pledged for investments in repurchase agreements. The underlying collat-
eral is valued daily on a mark-to-market basis to ensure that the value, in-
cluding accrued interest, is at least equal to the repurchase price. In the
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS
event of default of the obligation to repurchase, each Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the obliga-
tion. Under certain circumstances, in the event of default or bankruptcy by the
other party to the agreement, realization and/or retention of the collateral
may be subject to legal proceedings. Each Fund occasionally participates in
joint repurchase agreement transactions with other funds managed by Mitchell
Hutchins.
Investment Transactions and Investment Income -- Investment transactions are
recorded on the trade date. Realized gains and losses from investment transac-
tions are calculated using the identified cost method. Interest income is re-
corded on an accrual basis. Dividend income is recorded on the ex-dividend
date. Discounts are accreted and premiums are amortized as adjustments to in-
terest income and identified cost of investments.
Income, expenses (excluding class-specific expenses) and realized/unrealized
gains/losses are allocated proportionately to each class of shares based upon
the relative net asset value of outstanding shares (or the value of dividend-
eligible shares, as appropriate) of each class at the beginning of the day (af-
ter adjusting for current capital share activity of the respective classes).
Class specific expenses are charged directly to the applicable class of shares.
Dividends and Distributions -- Dividends and distributions to shareholders are
recorded on the ex-dividend date. The amount of dividends and distributions are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these differ-
ences 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.
ACQUISITIONS
Effective October 13, 1995, Growth & Income Fund acquired all of the net as-
sets of PaineWebber Global Energy Fund ("Global Energy Fund") in a tax-free ex-
change for shares of Growth & Income Fund. The acquisition was accomplished by
a tax-free exchange of 338,423 Class A, 414,593 Class B and 24,548 Class C
shares of Growth & Income Fund for 680,852 Class A, 832,585 Class B and 50,070
Class C shares, respectively, of Global Energy Fund outstanding. Global Energy
Fund's net assets at that date, valued at $17,163,198 including accumulated net
realized losses of $2,079,189 and net unrealized appreciation of investments of
$653,059, were combined with those of Growth & Income Fund.
Effective October 13, 1995, Growth & Income Fund acquired all of the net as-
sets of Mitchell Hutchins/Kidder, Peabody Equity Income Fund ("MH/KP Equity In-
come Fund") in a tax free exchange for shares of Growth & Income Fund. The ac-
quisition was accomplished by a tax-free exchange of 2,533,885 Class A, 137,926
Class Y and 67,543 Class C shares of Growth & Income Fund for 2,816,987
Class A, 153,429 Class Y and 75,614 Class B shares, respectively, of MH/KP Eq-
uity Income Fund outstanding. MH/KP Equity Income Fund's net assets at that
date, valued at $60,522,138 including net unrealized appreciation of invest-
ments of $5,986,801 were combined with those of Growth & Income Fund.
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS
INVESTMENT ADVISER AND ADMINISTRATOR
Each Trust's board of trustees has approved an Investment Advisory and Admin-
istration Contract ("Advisory Contract") with Mitchell Hutchins, under which
Mitchell Hutchins serves as investment adviser and administrator of the Funds.
In accordance with the Advisory Contracts, Growth & Income Fund and Growth Fund
pay Mitchell Hutchins an investment advisory and administration fee, which is
accrued daily and paid monthly, at the annual rate of 0.70% and 0.75%, respec-
tively, of each Funds' average daily net assets. At August 31, 1997, Growth &
Income Fund and Growth Fund owed Mitchell Hutchins $565,053 and $236,439, re-
spectively, in investment advisory and administration fees.
For the year ended August 31, 1997, Growth & Income Fund and Growth Fund paid
$43,440 and $32,130, respectively, in brokerage commissions to PaineWebber for
transactions executed on behalf of the Funds.
DISTRIBUTION PLANS
Mitchell Hutchins is the distributor of each Fund's shares and has appointed
PaineWebber as the exclusive dealer for the sale of those shares. Under sepa-
rate plans of service and/or distribution pertaining to Class A, Class B and
Class C shares, the Funds pay Mitchell Hutchins monthly service fees at the an-
nual rate of up to 0.25% of the average daily net assets of Class A, Class B
and Class C shares and monthly distribution fees at the annual rate of 0.75% of
the average daily net assets on Class B and Class C shares. At August 31, 1997,
Growth & Income Fund and Growth Fund owed Mitchell Hutchins $478,669 and
$162,968, respectively, in service and distribution fees.
Mitchell Hutchins also receives the proceeds of the initial sales charges paid
upon the purchase of Class A shares and the contingent deferred sales charges
paid by shareholders upon certain redemptions of Class A, Class B and Class C
shares. Mitchell Hutchins has informed each Fund that for the year ended August
31, 1997, it earned $1,432,458 and $364,727 in sales charges for the Growth &
Income Fund and Growth Fund, respectively.
SECURITY LENDING
Each Fund may lend up to 33 1/3% of its total assets to qualified institu-
tions. The loans are secured at all times by cash or U.S. government securities
in an amount at least equal to the market value of the securities loaned, plus
accrued interest, determined on a daily basis and adjusted accordingly. Each
Fund will regain record ownership of loaned securities to exercise certain ben-
eficial rights, however, each Fund may bear the risk of delay in recovery of,
or even loss of rights in, the securities loaned should the borrower fail fi-
nancially. Each Fund receives compensation, which is included in interest in-
come, for lending its securities from interest earned on the cash or U.S. gov-
ernment securities held as collateral, net of fee rebates paid to the borrower
plus reasonable administrative and custody fees. Each Fund's lending agent is
PaineWebber, who received $10,718 and $44,947 for Growth & Income Fund and
Growth Fund, respectively, in compensation from the Funds in that capacity for
the year ended August 31, 1997.
As of August 31, 1997, each Fund held cash and/or cash equivalents having an
aggregate value of $61,067,600 and $42,063,414 as collateral for portfolio se-
curities loaned having a market value of $59,056,188 and $39,903,404 for Growth
& Income Fund and Growth Fund, respectively.
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS
BANK LINE OF CREDIT
Each Fund may participate with other funds managed by Mitchell Hutchins in a
$200 million committed credit facility ("Facility") to be utilized for tempo-
rary financing until the settlement of sale or purchase of portfolio securi-
ties, the repurchase or redemption of shares of each Fund at the request of the
shareholders and other temporary or emergency purposes. In connection there-
with, each Fund has agreed to pay a commitment fee, pro rata, based on the rel-
ative asset size of the Funds in the Facility. Interest is charged to each Fund
at rates based on prevailing market rates in effect at the time of borrowings.
For the year ended August 31, 1997, the Funds did not borrow under the Facili-
ty.
TRANSFER AGENCY SERVICE FEES
Prior to August 1, 1997, each Fund paid PaineWebber an annual fee of $4.00 per
active PaineWebber shareholder account for certain services not provided by the
Fund's transfer agent. For these services for the year ended August 31, 1997,
PaineWebber earned $191,744 and $110,890 from Growth & Income Fund and Growth
Fund, respectively.
Subsequent to August 1, 1997, PaineWebber provides transfer agency related
services to the Funds pursuant to a delegation of authority from PFPC, Inc.,
the Fund's transfer agent. For the period August 1, 1997 to August 31, 1997,
PFPC, Inc., not the Funds. For the month of August 1997, PFPC, Inc. paid
PaineWebber $30,998 and $14,698 for Growth & Income Fund and Growth Fund, re-
spectively, for these services.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at August 31,
1997 was substantially the same as the cost of securities for financial state-
ment purposes.
At August 31, 1997, the components of net unrealized appreciation of invest-
ments were as follows:
<TABLE>
<CAPTION>
GROWTH &
INCOME FUND GROWTH FUND
------------ ------------
<S> <C> <C>
GROSS APPRECIATION (INVESTMENTS HAVING AN EXCESS OF
VALUE OVER COST).................................. $257,301,387 $115,187,316
GROSS DEPRECIATION (INVESTMENTS HAVING AN EXCESS OF
COST OVER VALUE).................................. (4,527,591) (5,219,686)
------------ ------------
NET UNREALIZED APPRECIATION OF INVESTMENTS......... $252,773,796 $109,967,630
============ ============
</TABLE>
For the year ended August 31, 1997, total aggregate purchases and sales of
portfolio securities, excluding short-term securities, were as follows:
<TABLE>
<CAPTION>
GROWTH &
INCOME FUND GROWTH FUND
------------ ------------
<S> <C> <C>
PURCHASES............................................. $565,319,731 $308,884,674
SALES................................................. $479,728,259 $410,556,100
</TABLE>
FEDERAL TAX STATUS
Each Fund intends to distribute substantially all of its taxable income and to
comply with the other requirements of the Internal Revenue Code applicable to
regulated investment companies. Accordingly, no provision for federal income
taxes is required. In addition, by distributing during each calendar year, sub-
stantially all of its net investment income, capital gains and certain other
amounts, if any, each Fund intends not to be subject to any federal excise tax.
32
<PAGE>
NOTES TO FINANCIAL STATEMENTS
To reflect reclassifications for the Growth Fund arising from permanent
"book/tax" differences for the year ended August 31, 1997, undistributed net
investment income was increased by $2,480,387, accumulated net realized gains
from investment transactions were decreased by $2,480,387.
BENEFICIAL INTEREST
There is an unlimited amount of $0.001 par value shares of beneficial interest
authorized. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------------------------ ------------------------ ------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ---------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROWTH & INCOME
FUND
YEAR ENDED AUGUST
31, 1997:
SHARES SOLD....... 2,307,087 $ 63,242,666 2,807,435 $ 76,060,602 1,388,741 $ 37,797,944 1,382,504 $ 36,896,155
SHARES
REPURCHASED...... (1,745,153) (47,397,276) (2,056,896) (54,631,207) (603,592) (16,266,546) (935,476) (25,012,186)
SHARES CONVERTED
FROM CLASS B TO
CLASS A.......... 1,132,783 32,163,441 (1,136,920) (32,163,441) -- -- -- --
DIVIDENDS
REINVESTED....... 1,407,846 34,708,280 1,311,787 32,133,297 223,078 5,482,050 138,659 3,422,558
---------- ------------ ---------- ------------ ---------- ------------ --------- ------------
NET INCREASE...... 3,102,563 $82,717,111 925,406 $ 21,399,251 1,008,227 $ 27,013,448 585,687 $ 15,306,527
========== ============ ========== ============ ========== ============ ========= ============
YEAR ENDED AUGUST
31, 1996:
SHARES SOLD....... 1,129,631 $ 26,796,965 1,730,871 $ 40,860,505 586,203 $ 13,785,499 215,504 $ 5,126,330
SHARES ISSUED IN
CONNECTION WITH
THE ACQUISITION
OF:
MH/KP EQUITY
INCOME FUND..... 2,533,885 55,983,774 -- -- 67,543 1,493,701 137,926 3,044,663
PAINEWEBBER
GLOBAL ENERGY
FUND............ 338,423 7,478,321 414,593 9,142,000 24,548 542,877 -- --
SHARES
REPURCHASED...... (1,907,414) (44,519,365) (2,302,787) (53,544,909) (361,631) (8,422,118) (125,157) (2,939,199)
SHARES CONVERTED
FROM CLASS B TO
CLASS A.......... 204,193 4,892,665 (204,905) (4,892,665) -- -- -- --
DIVIDENDS
REINVESTED....... 728,678 16,107,474 744,676 16,323,941 98,756 2,173,217 62,781 1,387,554
---------- ------------ ---------- ------------ ---------- ------------ --------- ------------
NET INCREASE ..... 3,027,396 $ 66,739,834 382,448 $ 7,888,872 415,419 $ 9,573,176 291,054 $ 6,619,348
========== ============ ========== ============ ========== ============ ========= ============
GROWTH FUND
YEAR ENDED AUGUST
31, 1997:
SHARES SOLD....... 284,051 $ 7,129,522 230,498 $ 5,496,399 729,264 $ 17,622,338 440,829 $ 11,081,828
SHARES
REPURCHASED...... (2,091,384) (51,703,276) (1,484,421) (34,935,483) (1,110,236) (26,634,743) (614,496) (15,529,194)
SHARES CONVERTED
FROM CLASS B TO
CLASS A.......... 535,032 13,178,357 (563,869) (13,178,357) -- -- -- --
DIVIDENDS
REINVESTED....... 679,736 16,198,119 499,211 11,302,141 108,492 2,475,783 74,998 1,819,440
---------- ------------ ---------- ------------ ---------- ------------ --------- ------------
NET DECREASE...... (592,565) $(15,197,278) (1,318,581) $(31,315,300) (272,480) $ (6,536,622) (98,669) $ (2,627,926)
========== ============ ========== ============ ========== ============ ========= ============
YEAR ENDED AUGUST
31, 1996:
SHARES SOLD....... 514,293 $ 12,445,673 548,531 $ 12,529,149 189,909 $ 4,324,908 172,505 $ 4,139,856
SHARES
REPURCHASED...... (1,557,212) (36,779,779) (1,643,121) (35,301,053) (434,895) (9,869,571) (302,302) (7,267,034)
SHARES CONVERTED
FROM CLASS B TO
CLASS A.......... 527,377 12,303,931 (454,796) (12,303,931) -- -- -- --
DIVIDENDS
REINVESTED....... 623,918 13,988,235 505,415 10,896,749 108,096 2,347,836 65,491 1,487,963
---------- ------------ ---------- ------------ ---------- ------------ --------- ------------
NET INCREASE
(DECREASE)....... 108,376 $ 1,958,060 (1,043,971) $(24,179,086) (136,890) $ (3,196,827) (64,306) $ (1,639,215)
========== ============ ========== ============ ========== ============ ========= ============
</TABLE>
33
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
----------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR....... $24.35 $22.52 $20.43 $20.86 $20.48
------ ------ ------ ------ ------
NET INVESTMENT INCOME.... 0.23 0.22 0.24 0.28 0.28
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) FROM
INVESTMENTS............. 9.29 3.46 3.18 (0.41) 0.37
------ ------ ------ ------ ------
TOTAL INCREASE (DECREASE)
FROM INVESTMENT
OPERATIONS.............. 9.52 3.68 3.42 (0.13) 0.65
------ ------ ------ ------ ------
DIVIDENDS FROM INVESTMENT
INCOME.................. (0.25) (0.34) (0.12) (0.27) (0.27)
DISTRIBUTIONS FROM NET
REALIZED GAINS ON
INVESTMENT TRANSACTIONS. (3.02) (1.51) (1.21) (0.03) --
------ ------ ------ ------ ------
TOTAL DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS............ (3.27) (1.85) (1.33) (0.30) (0.27)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF
YEAR.................... $30.60 $24.35 $22.52 $20.43 $20.86
====== ====== ====== ====== ======
TOTAL INVESTMENT
RETURN(1)............... 42.42% 17.40% 18.30% (0.58)% 3.15%
====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF YEAR
(000'S)................. $441,699 $276,016 $187,057 $222,432 $359,073
EXPENSES TO AVERAGE NET
ASSETS.................. 1.15% 1.20%(2) 1.19% 1.20% 1.13%
NET INVESTMENT INCOME TO
AVERAGE NET ASSETS...... 0.88% 0.98%(2) 1.07% 1.29% 1.33%
PORTFOLIO TURNOVER RATE.. 70% 112% 111% 94% 37%
AVERAGE COMMISSION RATE
PAID(3)................. $0.0598 $0.0598 -- -- --
</TABLE>
- ---------
(1) TOTAL INVESTMENT RETURN IS CALCULATED ASSUMING A $1,000 INVESTMENT ON THE
FIRST DAY OF EACH YEAR REPORTED, REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS AT NET ASSET VALUE ON THE PAYABLE DATES AND A SALE AT NET
ASSET VALUE ON THE LAST DAY OF EACH YEAR REPORTED. THE FIGURES DO NOT
INCLUDE SALES CHARGES; RESULTS FOR EACH CLASS WOULD BE LOWER IF SALES
CHARGES WERE INCLUDED.
(2) THESE RATIOS INCLUDE NON-RECURRING ACQUISITION EXPENSES OF 0.04%.
(3) EFFECTIVE FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, THE
FUND IS REQUIRED TO DISCLOSE THE AVERAGE COMMISSION RATE PAID PER SHARE OF
COMMON STOCK INVESTMENTS PURCHASED OR SOLD.
34
<PAGE>
<TABLE>
<CAPTION>
CLASS B CLASS C
- ---------------------------------------------------- -----------------------------------------------
FOR THE YEARS ENDED AUGUST 31, FOR THE YEARS ENDED AUGUST 31,
- ---------------------------------------------------- -----------------------------------------------
1997 1996 1995 1994 1993 1997 1996 1995 1994 1993
- -------- -------- -------- -------- -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$24.26 $22.37 $20.37 $20.78 $20.41 $24.33 $22.43 $20.42 $20.83 $20.47
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
0.04 0.04 0.06 0.10 0.12 0.05 0.05 0.06 0.11 0.11
9.23 3.45 3.18 (0.37) 0.36 9.24 3.46 3.19 (0.38) 0.37
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
9.27 3.49 3.24 (0.27) 0.48 9.29 3.51 3.25 (0.27) 0.48
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(0.05) (0.09) (0.03) (0.11) (0.11) (0.07) (0.10) (0.03) (0.11) (0.12)
(3.02) (1.51) (1.21) (0.03) -- (3.02) (1.51) (1.21) (0.03) --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(3.07) (1.60) (1.24) (0.14) (0.11) (3.09) (1.61) (1.24) (0.14) (0.12)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$30.46 $24.26 $22.37 $20.37 $20.78 $30.53 $24.33 $22.43 $20.42 $20.83
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
41.33% 16.49% 17.38% (1.31)% 2.34% 41.30% 16.52% 17.37% (1.29)% 2.35%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
$376,840 $277,753 $247,543 $289,290 $461,389 $84,922 $43,148 $30,468 $37,287 $61,869
1.93% 1.99%(2) 1.97% 1.97% 1.90% 1.92% 1.99%(2) 1.98% 1.94% 1.87%
0.11% 0.17%(2) 0.29% 0.51% 0.57% 0.10% 0.18%(2) 0.28% 0.54% 0.61%
70% 112% 111% 94% 37% 70% 112% 111% 94% 37%
$0.0598 $0.0598 -- -- -- $0.0598 $0.0598 -- -- --
</TABLE>
35
<PAGE>
PAINEWEBBER GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS Y
-----------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
-----------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR......................... $24.35 $22.54 $20.42 $20.86 $20.48
------ ------ ------ ------ ------
NET INVESTMENT INCOME......... 0.32 0.30 0.30 0.33 0.33
NET REALIZED AND UNREALIZED
GAINS (LOSSES) FROM
INVESTMENTS.................. 9.26 3.45 3.18 (0.40) 0.37
------ ------ ------ ------ ------
TOTAL INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS........ 9.58 3.75 3.48 (0.07) 0.70
------ ------ ------ ------ ------
DIVIDENDS FROM INVESTMENT
INCOME....................... (0.32) (0.43) (0.15) (0.34) (0.32)
DISTRIBUTIONS FROM NET
REALIZED GAINS ON INVESTMENT
TRANSACTIONS................. (3.02) (1.51) (1.21) (0.03) --
------ ------ ------ ------ ------
TOTAL DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS................. (3.34) (1.94) (1.36) (0.37) (0.32)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR.. $30.59 $24.35 $22.54 $20.42 $20.86
====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(1).... 42.74% 17.77% 18.66% (0.31)% 3.44%
====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF YEAR
(000'S)...................... $46,745 $22,942 $14,680 $14,690 $17,005
EXPENSES TO AVERAGE NET
ASSETS....................... 0.88% 0.92%(2) 0.89% 0.90% 0.86%
NET INVESTMENT INCOME TO
AVERAGE NET ASSETS........... 1.14% 1.26%(2) 1.39% 1.60% 1.62%
PORTFOLIO TURNOVER............ 70% 112% 111% 94% 37%
AVERAGE COMMISSION RATE
PAID(3)...................... $0.0598 $0.0598 -- -- --
</TABLE>
- ---------
(1) TOTAL INVESTMENT RETURN IS CALCULATED ASSUMING A $1,000 INVESTMENT ON THE
FIRST DAY OF EACH YEAR REPORTED, REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS AT NET ASSET VALUE ON THE PAYABLE DATES AND A SALE AT NET
ASSET VALUE ON THE LAST DAY OF EACH YEAR REPORTED.
(2) THESE RATIOS INCLUDE NON-RECURRING ACQUISITION EXPENSES OF 0.04%.
(3) EFFECTIVE FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, THE
FUND IS REQUIRED TO DISCLOSE THE AVERAGE COMMISSION RATE PAID PER SHARE OF
COMMON STOCK INVESTMENTS PURCHASED OR SOLD.
36
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
37
<PAGE>
PAINEWEBBER GROWTH FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR...... $24.37 $22.27 $20.04 $20.60 $16.78
------ ------ ------ ------ ------
NET INVESTMENT INCOME
(LOSS)................. (0.08)+ (0.12) 0.01 -- 0.07
NET REALIZED AND
UNREALIZED GAINS FROM
INVESTMENTS............ 3.76+ 4.06 2.25 0.51 4.37
------ ------ ------ ------ ------
TOTAL INCREASE FROM
INVESTMENT OPERATIONS.. 3.68 3.94 2.26 0.51 4.44
------ ------ ------ ------ ------
DISTRIBUTIONS FROM NET
REALIZED GAINS FROM
INVESTMENT TRANSACTIONS
TO SHAREHOLDERS........ (2.11) (1.84) (0.03) (1.07) (0.62)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF
YEAR................... $25.94 $24.37 $22.27 $20.04 $20.60
====== ====== ====== ====== ======
TOTAL INVESTMENT
RETURN(1).............. 15.85% 18.43% 11.28% 2.33% 26.97%
====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL
DATA:
NET ASSETS, END OF YEAR
(000'S)................ $201,725 $203,882 $183,958 $141,342 $130,353
EXPENSES TO AVERAGE NET
ASSETS................. 1.27% 1.28% 1.28%(2) 1.21% 1.22%
NET INVESTMENT INCOME
(LOSS) TO AVERAGE NET
ASSETS................. (0.32)% (0.49)% 0.19%(2) 0.06% 0.38%
PORTFOLIO TURNOVER RATE. 86% 60% 36% 24% 36%
AVERAGE COMMISSION RATE
PAID(3)................ $0.0598 $0.0598 -- -- --
</TABLE>
- ---------
+ CALCULATED USING THE AVERAGE SHARES OUTSTANDING FOR THE YEAR.
(1) TOTAL INVESTMENT RETURN IS CALCULATED ASSUMING A $1,000 INVESTMENT ON THE
FIRST DAY OF EACH YEAR REPORTED, REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS AT NET ASSET VALUE ON THE PAYABLE DATES AND A SALE AT NET
ASSET VALUE ON THE LAST DAY OF EACH YEAR REPORTED. THE FIGURES DO NOT
INCLUDE SALES CHARGES; RESULTS FOR EACH CLASS WOULD BE LOWER IF SALES
CHARGES WERE INCLUDED.
(2) THESE RATIOS INCLUDE NON-RECURRING ACQUISITION EXPENSES OF 0.06%.
(3) EFFECTIVE FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, THE
FUND IS REQUIRED TO DISCLOSE THE AVERAGE COMMISSION RATE PAID PER SHARE OF
COMMON STOCK INVESTMENTS PURCHASED OR SOLD.
38
<PAGE>
<TABLE>
<CAPTION>
CLASS B CLASS C
- ----------------------------------------------------- --------------------------------------------------
FOR THE YEARS ENDED AUGUST 31, FOR THE YEARS ENDED AUGUST 31,
- ----------------------------------------------------- --------------------------------------------------
1997 1996 1995 1994 1993 1997 1996 1995 1994 1993
- -------- -------- -------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$23.30 $21.53 $19.53 $20.25 $16.64 $23.48 $21.68 $19.67 $20.38 $16.75
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(0.26)+ (0.39) (0.02) (0.06) (0.05) (0.27)+ (0.34) (0.10) (0.08) (0.06)
3.58 + 4.00 2.05 0.41 4.28 3.61 + 3.98 2.14 0.44 4.31
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
3.32 3.61 2.03 0.35 4.23 3.34 3.64 2.04 0.36 4.25
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(2.11) (1.84) (0.03) (1.07) (0.62) (2.11) (1.84) (0.03) (1.07) (0.62)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$24.51 $23.30 $21.53 $19.53 $20.25 $24.71 $23.48 $21.68 $19.67 $20.38
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
14.98% 17.48% 10.40% 1.55% 25.91% 14.95% 17.50% 10.37% 1.59% 25.86%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
$115,529 $140,551 $152,357 $97,272 $60,280 $24,760 $29,923 $30,608 $28,561 $16,474
2.06% 2.06% 2.06%(2) 2.00% 2.02% 2.07% 2.07% 2.05%(2) 1.98% 2.06%
(1.12)% (1.27)% (0.60)%(2) (0.66)% (0.46)% (1.13)% (1.28)% (0.57)%(2) (0.65)% (0.69)%
86% 60% 36% 24% 36% 86% 60% 36% 24% 36%
$0.0598 $0.0598 -- -- -- $0.0598 $0.0598 -- -- --
</TABLE>
39
<PAGE>
PAINEWEBBER GROWTH FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS Y
------------------------------------------------
FOR THE YEARS ENDED AUGUST 31,
------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR........................ $ 24.74 $ 22.53 $ 20.22 $ 20.71 $ 16.83
------- ------- ------- ------- -------
NET INVESTMENT INCOME (LOSS). (0.01)+ (0.02) 0.24 0.03 0.08
NET REALIZED AND UNREALIZED
GAINS FROM INVESTMENTS...... 3.84 + 4.07 2.10 0.55 4.42
------- ------- ------- ------- -------
TOTAL INCREASE FROM
INVESTMENT OPERATIONS....... 3.83 4.05 2.34 0.58 4.50
------- ------- ------- ------- -------
DISTRIBUTIONS FROM NET
REALIZED GAINS FROM
INVESTMENT TRANSACTIONS TO
SHAREHOLDERS................ (2.11) (1.84) (0.03) (1.07) (0.62)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF YEAR. $ 26.46 $ 24.74 $ 22.53 $ 20.22 $ 20.71
------- ------- ------- ------- -------
TOTAL INVESTMENT RETURN(1)... 16.24% 18.72% 11.58% 2.67% 27.26%
------- ------- ------- ------- -------
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF YEAR
(000'S)..................... $20,281 $21,409 $20,948 $30,521 $20,706
EXPENSES TO AVERAGE NET
ASSETS...................... 1.00% 1.02% 0.97%(2) 0.94% 0.95%
NET INVESTMENT INCOME (LOSS)
TO AVERAGE NET ASSETS....... (0.05)% (0.23)% 0.53%(2) 0.40% 0.60%
PORTFOLIO TURNOVER RATE...... 86% 60% 36% 24% 36%
AVERAGE COMMISSION RATE
PAID(3)..................... $0.0598 $0.0598 -- -- --
</TABLE>
- ---------
+ CALCULATED USING THE AVERAGE SHARES OUTSTANDING FOR THE YEAR
(1) TOTAL INVESTMENT RETURN IS CALCULATED ASSUMING A $1,000 INVESTMENT ON THE
FIRST DAY OF EACH YEAR REPORTED, REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS AT NET ASSET VALUE ON THE PAYABLE DATES AND A SALE AT NET
ASSET VALUE ON THE LAST DAY OF EACH YEAR REPORTED.
(2) THESE RATIOS INCLUDE NON-RECURRING ACQUISITION EXPENSES OF 0.05%.
(3) EFFECTIVE FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, THE
FUND IS REQUIRED TO DISCLOSE THE AVERAGE COMMISSION RATE PAID PER SHARE OF
COMMON STOCK INVESTMENTS PURCHASED OR SOLD.
40
<PAGE>
PAINEWEBBER
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
PaineWebber Growth & Income Fund
PaineWebber Growth Fund
We have audited the accompanying statements of assets and liabilities, includ-
ing the portfolios of investments, of the PaineWebber Growth & Income Fund and
PaineWebber Growth Fund as of August 31, 1997, and the related statements 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 fi-
nancial highlights are the responsibility of each Fund's management. Our re-
sponsibility is to express an opinion on these financial statements and finan-
cial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial high-
lights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at August
31, 1997 by correspondence with the custodians and brokers. An audit also in-
cludes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presenta-
tion. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
PaineWebber Growth & Income Fund and PaineWebber Growth Fund at August 31, 1997
and the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended, and their
financial highlights for each of the indicated periods, in conformity with gen-
erally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
October 14, 1997
41
<PAGE>
PAINEWEBBER
TAX INFORMATION (UNAUDITED)
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of each Fund's fiscal year end (August
31, 1997) as to the federal tax status of distributions received by sharehold-
ers during such fiscal year. Accordingly, we are advising you that the follow-
ing distributions paid during the fiscal year by the Funds were derived from
the following sources:
<TABLE>
<CAPTION>
GROWTH &
INCOME GROWTH
PER SHARE DATA: FUND FUND
- --------------- -------- -------
<S> <C> <C>
NET INVESTMENT INCOME
CLASS A..................................................... $0.2500 --
CLASS B..................................................... $0.0517 --
CLASS C..................................................... $0.0712 --
CLASS Y..................................................... $0.3191 --
SHORT-TERM CAPITAL GAINS*................................... $0.6779 $0.1909
LONG-TERM CAPITAL GAINS..................................... $2.3468 $1.9147
PERCENTAGE OF ORDINARY INCOME DIVIDENDS QUALIFYING FOR THE
DIVIDENDS RECEIVED DEDUCTION AVAILABLE TO CORPORATE SHARE-
HOLDERS.................................................... 100% 100%
</TABLE>
* TAXABLE AS ORDINARY INCOME
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need not
be reported as taxable income. Some retirement trusts (e.g., corporate, Keogh
and 403(b)(7) plans) may need this information for their annual information re-
porting.
Since each Fund's fiscal year is not the calendar year, another notification
will be sent with respect to calendar year 1997. Such notifications, which will
reflect the amount to be used by calendar year taxpayers on their federal in-
come tax returns, will be made in conjunction with Form 1099 DIV and will be
mailed in January 1998. Shareholders are advised to consult their own tax ad-
visers with respect to the tax consequences of their investment in each of the
Funds.
42
