PAINEWEBBER
ADVANTAGESM
AMERICAN BENEFIT
VARIABLE ANNUITY
ACCOUNT
ANNUAL REPORT
DECEMBER 31, 1995
INCLUDES
PAINEWEBBER SERIES TRUST
ANNUAL REPORT
DECEMBER 31, 1995
AMERICAN BENEFIT LIFE INSURANCE COMPANY . 421 NEW KARNER ROAD . ALBANY, NY 12205
714 0022 0296
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<PAGE>
Dear Contract Owner,
We are pleased to present the December 31, 1995 Annual Report for ADVANTAGE,
offered exclusively through PaineWebber. This report contains important
information about the American Benefit Variable Annuity Account and PaineWebber
Series Trust, including financial statements for the fiscal year ended December
31, 1995.
INVESTMENT OVERVIEW--DOMESTIC
It is widely recognized that the Federal Reserve Board achieved its goal of
a "soft landing" for the economy in 1995. In an effort to slow the pace of
economic growth, the Federal Reserve Board raised short-term interest rates
seven times between February 1994 and February 1995. However, on July 6, 1995,
the Federal Reserve Board cut the benchmark Federal funds rate by 0.25%. This
decrease, the first in nearly three years, signaled that the Federal Reserve
Board believed that inflationary pressures had eased enough to accommodate an
adjustment in monetary policy. Citing low inflation, the Federal Reserve Board
trimmed short-term interest rates by another 0.25% on December 19, 1995 and
January 31, 1996, bringing the Federal Funds rate down to 5.25%.
Although the pace of economic growth was lackluster during the year ended
December 31, 1995, the economic climate was favorable for investing. Stocks
achieved record-breaking highs and bonds far outperformed their historical
averages. The stock market, as measured by the Standard & Poor's 500 Index,
advanced 37.5% in 1995. The Dow Jones Industrial Average topped the 4,000 point
level in March and the 5,000 point level in November and posted its fourth best
advance since World War II. The bond market also rallied strongly during 1995,
as a declining interest rate environment prevailed for most of the year. Soaring
bond prices gave fixed income investors their third best year since the 1920s
and caused intermediate- and long-term interest rates to fall to their lowest
levels in two years. Rates on long-term U.S. Treasury bonds, for example,
declined nearly two full percentage points. Generally, as yields move lower,
bond prices increase. Coming after 1994, when the bond market had one of its
worst years on record and the Standard & Poor's 500 Index gained just 1.3%, 1995
was a strongly positive investment environment for most domestic investors.
INVESTMENT OVERVIEW--GLOBAL
There was a slowdown in worldwide economic growth during 1995, which
provided a benevolent interest rate environment. Efforts to reduce government
borrowing in the United States and Europe contributed to this positive
sentiment, driving bond valuations higher. World bond markets rallied during
this period, and yields began to approach levels prevailing in 1993.
In the stock market, 1995 will be remembered for the strong performance of
the U.S. market, which easily outdistanced most overseas markets. Many Asian
stock markets suffered in 1995, as tight monetary policies were enacted to curb
inflation, and several economies seem to have successfully avoided overheating.
Political problems also plagued several European markets, most notably France.
1996 will be a crucial year for France, as the government attempts to cut back
on welfare spending. While these measures may be unpopular in France, they are
also essential if the nation is to compete globally. In Germany, the stock
market performed well in 1995, due, in large part, to low inflation and falling
interest rates.
MONEY MARKET PORTFOLIO
After having a neutral weighted average maturity for the first half of 1995,
the Portfolio maintained a slightly longer weighted average maturity during the
second half of 1995. The Federal Reserve Board's consecutive increases in the
Federal Funds rate during 1994 and early 1995 were implemented to slow the pace
of economic growth and forestall inflation. By keeping short-term rates
relatively high, the Fed restrained economic growth and kept inflation almost
non-existent. During this time, money market investors enjoyed relatively high
inflation-adjusted returns. However, the Federal Reserve Board decreased the
Federal Funds rate by 0.25% on July 6, 1995 and again on December 19, 1995. On
January 31, 1996, the Federal Reserve Board once again lowered the Federal Funds
rate by 0.25%, reducing the rate to 5.25%.
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The Portfolio's money market instruments' seven-day average yield was 4.97%
as of December 31, 1995. On December 31, 1995, the Portfolio's weighted average
maturity was 25 days. Going forward, the Portfolio will maintain a slightly
longer weighted average maturity as short-term rates find stability. Although
Federal Reserve Board policy is being impacted by the stalemated budget
negotiations, it is still likely that the Fed will lower short-term interest
rates again in 1996. 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
During the year ended December 31, 1995, corporate profits continued to
exhibit strength, despite the slowdown in economic growth. The Portfolio
performed extremely well in the second half of the year, after a slow first five
months. Contributors to performance came from a variety of stocks in different
sectors.
During the year, the Portfolio's focus on "Information Highway" securities
changed slightly. The Portfolio's new focus in this sector is on technology
providers--companies that will enable the "highway" to function--particularly
those creating programming to facilitate the transportation of data. Nearly
every aspect of our lives has been changed by technology. Micro-chips are now
used not only in computers, but in common household products. Automobiles
utilize micro-chips, but so do microwave ovens and even irons! After ten years
of underperformance due to some fundamental trends, we believe that the
technology sector is going to exhibit growth with less cyclicality than in the
past. Despite some weakness in the technology sector during the last few months
of 1995, we continue to believe that the "Information Highway" is an area that
is going to offer a strong secular growth opportunity over the foreseeable
future.
In 1996, returns are likely to be uneven as investors adjust to lower growth
rates in earnings. However, we believe that multiple expansion is likely in the
context of lower interest rates. Our focus in 1996 is on companies that can show
growth in earnings per share and whose stock price presents value.
Net assets of the Portfolio totalled $42.8 million as of December 31, 1995.
As of that date, investments consisted of approximately 85.3% common stocks,
0.8% preferred stocks, 0.8% long-term debt securities and 13.1% short-term U.S.
government obligations and cash equivalents.
GLOBAL GROWTH PORTFOLIO
1995 will be remembered for the strong performance of the U.S. stock market,
which outdistanced most overseas markets. The Porfolio's cautious stance towards
the U.S. affected performance somewhat--yet the Portfolio manager, Ralph Layman
of GE Investment Management Inc. ("GEIM"), the Porfolio's sub-adviser, believes
that better value can be found abroad based on his valuation method. Japan
proved to be an underperformer for the period, despite efforts by the government
to stimulate the economy. The Portfolio will remain underweighted in Japan
(relative to the MSCI Index), although there are select pockets of growth to be
found in this country. Hong Kong emerged as the exception in Asia, as prices
climbed 12% during the year. Stocks in the colony were buoyed by signs that
China pulled off a soft landing, which is a good sign for Hong Kong firms with
interests in the mainland.
Political problems also plagued several European markets, most notably
France. 1996 will be a crucial year for France, as the government attempts to
cut back on welfare spending. While these measures may be unpopular in France,
they are also essential if the nation is to compete globally. From a bottom-up
perspective Mr. Layman is fairly positive on the market. In Germany, the market
performed well in 1995, due, in large part, to low inflation and falling
interest rates. In Mr. Layman's view, German shares remain attractive as we head
into 1996. After a difficult 1995, the outlook for Latin America is brighter in
the coming year. Mr. Layman's view is that the Mexican economy should improve in
the next year and he remains cautiously optimistic in his stance towards Brazil
and the rest of Latin America. After taking a back seat to the bull market in
the U.S., Mr. Layman expects international markets to perform better next year.
As of December 31, 1995, net assets of the Portfolio totalled $28.5 million.
Investments consisted of approximately 94.6% preferred and common stocks and
5.4% short-term obligations and cash equivalents. By region, approximately 42.7%
of the Portfolio was invested in Europe, 23.3% in Asia, and 30.1% in North
America.
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GLOBAL INCOME PORTFOLIO
During 1995, slowing economic growth, moderate inflation and declining
short-term interest rates provided conditions for strong bond market rallies in
the United States and Europe. In the early months of the fiscal year, we
invested some of the Portfolio's substantial cash position in
intermediate-maturity U.S. Treasuries, as we believed 1994's bond market
sell-off had provided attractive yield levels. Furthermore, we liquidated the
remaining positions in emerging market debt. Maturities on U.S. bond holdings
were extended further in July 1995, as stronger evidence emerged of a slowing
U.S. economy. This enabled the Portfolio to participate in the subsequent
Treasury market rally in the early fall of 1995. Recently, however, we reduced
the Portfolio's investments in longer-maturity bonds in the U.S., as we believe
risk premiums for holding U.S. bonds are low.
In Europe, the Portfolio extended maturities throughout the year. Our
European strategy was to invest one-half of the Fund's European holdings in
longer-maturity bonds in Germany,the Netherlands and France--traditionally low
inflation countries. The remaining half was invested in short- and
intermediate-maturity bonds in higher yielding markets like Spain and the United
Kingdom, where we believed bond prices were protected by the very steep yield
curves in an environment with little or no chance of an interest rate increase.
European bond markets generally benefited from restrictive fiscal policies and
easing monetary policies in low inflationary, modest growth environments
throughout 1995.
The Portfolio was conservatively managed in connection with currency risk
and, usually, less than one-third of its assets were exposed to currency risk.
This moderate exposure depressed Portfolio performance somewhat relative to
those funds that took more currency risk.
In the near-term, fundamentals appear highly positive in most global bond
markets. Interest rates are low in the major countries of the world. The major
central banks of the world have and continue to ease monetary policy; liquidity
has returned to world financial markets. Prospects for further interest rate
cuts appear reasonable in the United States and Europe. Aside from Japan,
governments in the major world economies are reducing budget deficits. With the
exception of Southeast Asia, most economies are running at moderate levels of
activity with low inflation. Indeed, in Europe and the United States, risks seem
to be on the side of a further slowdown in the pace of economic activity.
Net assets of the Portfolio totalled $35.7 million as of December 31, 1995.
The Portfolio's investments consisted of approximately 87.3% long-term debt
securities, 12.0% short-term debt securities and 0.7% repurchase agreements.
STRATEGIC FIXED INCOME PORTFOLIO
Much of the Portfolio's strong absolute performance can be attributed to the
general rise in the bond market during the year. With interest rates trending
lower during 1995 and the prospect of moderate economic growth in 1996, bond
market conditions remained favorable for the twelve months ended December 31,
1995. For example, the benchmark 30-year Treasury bond's yield declined from
7.87% on December 31, 1994 to 6.06% on December 31, 1995. When bond yields
decline, prices generally increase.
At a special meeting of shareholders of the Government Portfolio held
September 21, 1995, shareholders approved: (1) a sub-advisory agreement between
Mitchell Hutchins Asset Management Inc. (the Portfolio's investment manager and
administrator) and Pacific Investment Management Company ("PIMCO"), (2) changing
the Portfolio's investment objective from "high current income consistent with
the preservation of capital" to "total return consisting of capital appreciation
and income" and (3) an amendment to the Portfolio's fundamental investment
limitation governing borrowing to increase permissable borrowing from 10% to 33
1/3% of its assets and permitting the use of dollar rolls.
In addition, effective September 21, 1995, the name of the Portfolio was
changed from "Government Portfolio" to "Strategic Fixed Income Portfolio," and
the requirement that the Portfolio invest at least 65% of its total assets in
U.S. government securities was eliminated. Also, a number of investment policy
changes were implemented to permit the Portfolio to invest in a much broader
range of fixed income securities, establish a dollar-weighted average portfolio
duration of between three to eight years, permit investment of up to 20% of
Portfolio assets in securities rated below investment grade and increase the
Portfolio's authorization to invest in illiquid securities to 15% of its net
assets.
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PIMCO employs a top-down process that emphasizes a long-term outlook for the
bond markets and adjusts the Fund's duration, or sensitivity to changes in
interest rates, in accordance with that outlook. PIMCO's long-range outlook is
presently bullish, and the firm expects interest rates to decline gradually in
1996. Consequently, PIMCO is targeting a duration approximately three-quarters
of a year longer than that of the overall bond market as represented by the
Lehman Brothers Government/Corporate Bond Index. Domestically, PIMCO believes
the best investment opportunities lie in the mortgage securities sector and has
overweighted such investments in the Portfolio. Overseas, the firm has invested
a portion of the portfolio in German government bonds. With most of the currency
exposure of these bonds hedged back into U.S. dollars, German bonds appear to
offer a significant yield premium to U.S. Treasury investments of comparable
maturity. PIMCO expects German bonds to provide greater total return than
Treasuries given solid inflation fundamentals and the prospect of weak economic
growth in Germany.
Net assets of the Portfolio totalled $13.7 million as of December 31, 1995.
BALANCED PORTFOLIO
As of December 31, 1995 the Portfolio's asset allocation was 62.9% common
stocks, 28.3% U.S. government obligations. 7.0% long-term debt securities and
1.8% cash and cash equivalents. During the year ended December 31, 1995,
investors in both domestic equity and fixed income markets continued to be
rewarded, as the markets responded favorably to lower interest rates and the
resurgent strength in corporate earnings.
As of August 14, 1995, the Portfolio was restructured to operate as a
"balanced fund." It invests in a combination of equity securities, investment
grade debt obligations and money market instruments. Also effective August 14,
1995, a new team assumed management responsibility for the Portfolio, with an
asset allocator working with three senior investment managers who are
specialists in their respective investment areas. While the Portfolio could
previously invest any percentage of its assets in stocks, bonds or money market
securities, the investment parameters were modified to include, among other
things, a minimum 25% investment in fixed income investments. The Portfolio's
asset allocation is now based upon the balanced asset allocation strategy used
by Mitchell Hutchins Institutional Investors ("MHII") for institutional
accounts. The Portfolio's fundamental investment policies and investment
objective--to obtain high total return with low volatility--did not change. On
January 26, 1996, the name of the Portfolio was changed from "Asset Allocation
Portfolio" to "Balanced Portfolio". (Please note that the financial statements
refer to this Portfolio as Asset Allocation Portfolio.)
T. Kirkham Barneby, a Managing Director and Chief Investment
Officer--Quantitative Investments of Mitchell Hutchins, is responsible for the
asset allocation decisions for the Portfolio. As mentioned above, Mr. Barneby
allocates the Portfolio's assets based upon the balanced asset allocation
strategy used by MHII. We view the tactical asset allocation strategy as an
important decision in the effective management of this Portfolio. The relative
amount of funds committed to each asset class will have a significant impact on
the total return of the portfolio. The maximum potential benefit to the
Portfolio, as from any allocation strategy, will be realized over full market
cycles which include periods of declining as well as rising stock and bond
prices.
Portfolio allocations are based on Mitchell Hutchins' assessment of
consensus expectations for key economic variables, such as interest rates,
profit growth and inflation. Fundamental valuation techniques are then applied
to this data in an attempt to achieve an optimal asset allocation for the
Portfolio. The Portfolio's assets will be reallocated from time to time in an
effort to benefit from changes in economic conditions. Mr. Barneby will attempt
to adjust the Portfolio's allocations before changes in the consensus outlook
are fully discounted by the market.
Mark A. Tincher is responsible for the day-to-day management of the equity
portion of the Portfolio. Mr. Tincher is a Managing Director and Chief
Investment Officer of Equity Investments of Mitchell Hutchins, responsible for
overseeing the management of domestic equity investments. In selecting equity
securities, Mr. Tincher ranks equity securities from a universe of approximately
2,000 medium- to large-capitalization companies (generally at least $300
million) using quantitative measures of value, earnings and price momentum in
the context of Mitchell Hutchins' economic forecast. Stocks are then chosen
based on fundamental analysis of those with the highest rankings. In terms of
management style, Mr. Tincher strives for "value at the right growth."
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Dennis L. McCauley is responsible for the day-to-day management of the debt
securities portion of the Portfolio. Mr. McCauley is a Managing Director and
Chief Investment Officer of Fixed Income Investments of Mitchell Hutchins
responsible for overseeing all active fixed income investments, including
domestic and global taxable and tax-exempt mutual funds. Mr. McCauley's fixed
income strategy is a systematic, disciplined approach that centers on three
critical decisions: duration/yield curve positioning, sector allocation and
security selection.
Susan P. Messina, a senior vice president of Mitchell Hutchins, is
responsible for the day-to-day management of the portion of the Portfolio's
assets invested in money market instruments.
As of December 31, 1995, net assets of the Portfolio totalled $23.4 million.
GROWTH AND INCOME PORTFOLIO
The investment policies of this Portfolio were changed effective August 14,
1995, to provide the investment manager with more flexibility in selecting
stocks that meet the Portfolio's objectives. The new policy seeks to provide
current income and capital growth. To achieve this, the Portfolio invests
primarily in dividend-paying equity securities (common and preferred stocks)
believed to have the potential for rapid earnings growth. To better reflect this
change in investment policy, the name of this Portfolio was changed from
"Dividend Growth Portfolio" to "Growth and Income Portfolio."
Despite some slowing in the pace of economic growth during 1995, corporate
profits continued to exhibit strength. Since assuming management responsibility
of the Portfolio on April 3, 1995, Mark Tincher has been in the process of
restructuring the Portfolio. During the last several months, positions in
certain consumer related stocks (both durables and non-durables) as well as in
interest sensitive issues, such as those found in the utility sector, were
reduced or eliminated. Portfolio positions were increased in the capital goods
area. We continue to believe companies that focus on keeping costs low through
improved manufacturing efficiencies remain attractive. The Portfolio's strong
performance can be attributed to its pro-cyclical stance as well as holdings in
technology, health care and financial issues.
In 1996, we foresee slower economic growth, and a low inflation/low interest
rate environment. Therefore, the probability is increasing that earnings
estimates may be reduced farther. Given the corrections that have occurred in
certain groups, the valuations of capital goods and financial issues appear
especially favorable in light of the fundamental growth prospects that we see.
Although we are modestly optimistic about equity returns in the coming
months, we do not anticipate a repetition of 1995's phenomenal returns. Modest
economic growth should result in equity performance returning to more historical
norms. We remain confident that our disciplined stock selection process should
continue to provide favorable relative returns.
As of December 31, 1995, the Portfolio's net assets totalled $14.8 million.
The Portfolio's investments consisted of 97.7% equities, 0.7% corporate bonds
and 1.6% cash and cash equivalents.
Thank you for your continuing support. As always, we welcome any comments or
questions you may have.
Sincerely,
/s/ Watson Powell, Jr. /s/ Margo Alexander
WATSON POWELL, JR. MARGO ALEXANDER
Chief Executive Officer and President, President,
American Benefit Life Mitchell Hutchins
Insurance Company Asset Management Inc.
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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
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth
Portfolio $10,000 $28,003
[Plot points to follow]
S&P 500
Stock Index $10,000 $28,071
5/4/87 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
</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.
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Twelve Months Ended 12/31/95....................... 32.50%
Five Years Ended 12/31/95.......................... 16.06%
Commencement of Operations (05/04/87) through
12/31/95......................................... 12.66%
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 fund 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.
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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
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Global Growth
Portfolio $10,000 $15,719
[Plot points to follow]
Morgan Stanley
Capital World
International
Index $10,000 $19,503
5/4/87 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
</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.
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Twelve Months Ended 12/31/95....................... (3.54)%
Five Years Ended 12/31/95.......................... 2.91%
Commencement of Operations (05/04/87) through
12/31/95......................................... 5.36%
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 fund 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.
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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
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Global Income
Portfolio $10,000 $18,340
[Plot points to follow]
Salomon
Brothers World
Government
Bond Index $10,000 $20,237
5/1/88 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
</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.
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Twelve Months Ended 12/31/95....................... 13.58%
Five Years Ended 12/31/95.......................... 6.97%
Commencement of Operations (05/01/88) through
12/31/95......................................... 8.23%
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 fund 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.
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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
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Strategic
Fixed Income
Portfolio $10,000 $17,010
[Plot points to follow]
Lehman Brothers
Mortgage
Bond Index $10,000 $17,791
7/5/89 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
</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.
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Twelve Months Ended 12/31/95..................... 18.51%
Five Years Ended 12/31/95........................ 9.02%
Commencement of Operations (07/05/89) through
12/31/95....................................... 8.53%
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 fund 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
<PAGE>
BALANCED PORTFOLIO (FORMERLY ASSET ALLOCATION PORTFOLIO)
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
PORTFOLIO AND THE S&P 500 STOCK INDEX
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balanced
Portfolio $10,000 $19,370
[Plot points to follow]
S&P 500
Stock Index $10,000 $29,835
6/1/88 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
</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.
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Twelve Months Ended 12/31/95..................... 23.27%
Five Years Ended 12/31/95........................ 10.01%
Commencement of Operations (06/01/88) through
12/31/95....................................... 9.11%
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 fund will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than an original cost.
Source: Towers Data Corp. and PaineWebber Inc.
10
<PAGE>
GROWTH AND INCOME PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
PORTFOLIO AND THE S&P 500 STOCK INDEX
Growth and
Income
Portfolio $10,000 $12,373
[Plot points to follow]
S&P 500
Stock Index $10,000 $16,495
1/2/92 12/31/92 12/31/93 12/31/94 12/31/95
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.
AVERAGE ANNUAL TOTAL RETURN
---------------------------
Twelve Months Ended 12/31/95..................... 30.52%
Five Years Ended 12/31/95........................ N/A
Commencement of Operations
(01/02/92) through 12/31/95.................... 5.48%
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 fund 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>
American Benefit Variable Annuity Account
- --------------------------------------------------------------------------------
Statement of Net Assets
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY
MARKET
COMBINED DIVISION
------------ ----------
<S> <C> <C>
ASSETS
Investments at net asset value:
- -------------------------------
PaineWebber Series Trust Money Market Portfolio, 547,326 shares at
$1.00 per share (cost--$547,326).................................. $ 547,326 $ 547,326
PaineWebber Series Trust Growth Portfolio, 55,895 shares at $17.57
per share (cost--$788,438)........................................ 982,084 --
PaineWebber Series Trust Growth and Income Portfolio, 30,003 shares
at $11.83 per share (cost--$295,053).............................. 354,939 --
PaineWebber Series Trust Global Growth Portfolio, 40,009 shares at
$12.00 per share (cost--$495,619)................................. 480,103 --
PaineWebber Series Trust Global Income Portfolio, 102,012 shares at
$11.20 per share (cost--$1,137,987)............................... 1,142,534 --
PaineWebber Series Trust Strategic Fixed Income Portfolio, 59,094
shares at $10.61 per share (cost--$685,858)....................... 626,984 --
PaineWebber Series Trust Asset Allocation Portfolio, 57,547 shares
at $10.70 per share (cost--$633,501).............................. 615,748 --
------------ ----------
Total investments (cost--$4,583,782)............................. 4,749,718 547,326
Accrued investment income........................................... 362,367 --
------------ ----------
Total net assets................................................. $5,112,085 $ 547,326
------------ ----------
------------ ----------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
NET ASSETS REPRESENTED BY:
Currently payable annuity contracts:
- ------------------------------------
Strategic Fixed Income Division.................................................... $ 32,211
----------
</TABLE>
<TABLE>
<CAPTION>
Contracts in accumulation period:
- ---------------------------------
UNITS VALUE
-------------- --------------
<S> <C> <C> <C>
Money Market Division............................ 42,317 $12.93 547,326
Growth Division.................................. 39,822 26.98 1,074,444
Growth and Income Division....................... 30,639 11.71 358,727
Global Growth Division........................... 32,466 14.79 480,103
Global Income Division........................... 76,114 16.42 1,249,876
Strategic Fixed Income Division.................. 44,575 15.53 692,234
Asset Allocation Division........................ 39,662 17.07 677,164
----------
5,079,874
----------
$5,112,085
----------
----------
</TABLE>
See accompanying notes.
12
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH AND GLOBAL GLOBAL STRATEGIC ASSET
GROWTH INCOME GROWTH INCOME FIXED INCOME ALLOCATION
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
--
$ $ -- $ -- $ -- $ -- $ --
982,084 -- -- -- -- --
-- 354,939 -- -- -- --
-- -- 480,103 -- -- --
-- -- -- 1,142,534 -- --
-- -- -- -- 626,984 --
-- -- -- -- -- 615,748
------------- ------------- ------------- ------------- ------------- -------------
982,084 354,939 480,103 1,142,534 626,984 615,748
92,360 3,788 -- 107,342 97,461 61,416
------------- ------------- ------------- ------------- ------------- -------------
$ 1,074,444 $ 358,727 $ 480,103 $ 1,249,876 $ 724,445 $ 677,164
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
</TABLE>
13
<PAGE>
American Benefit Variable Annuity Account
- --------------------------------------------------------------------------------
Statement of Operations
Year Ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY
MARKET GROWTH
COMBINED DIVISION DIVISION
----------- ------------ ------------
<S> <C> <C> <C>
NET INVESTMENT INCOME (LOSS)
Income:
Dividends................................................ $ 254,058 $ 45,120 $ 4,579
Capital gains distributions.............................. 178,907 -- 91,507
Expenses (Note 2):
Administrative charges................................... (32,209) (900) (2,427)
Mortality, distribution, and expense risk................ (97,421) (12,110) (15,614)
----------- ------------ ------------
Net Investment Income (loss)......................... 303,335 32,110 78,045
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 4)
Net realized gain (loss) on investments.................. 195,599 -- 74,946
Change in net unrealized appreciation/ depreciation of
investments............................................ 389,614 -- 146,529
----------- ------------ ------------
Net increase (decrease) in net assets resulting from
operations............................................. $ 888,548 $ 32,110 $299,520
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
See accompanying notes.
14
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH AND GLOBAL GLOBAL STRATEGIC FIXED ASSET
INCOME GROWTH INCOME INCOME ALLOCATION
DIVISION DIVISION DIVISION DIVISION DIVISION
- ----------- ----------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
$ 3,028 $ -- $ 129,094 $ 52,169 $ 20,068
760 -- -- 45,292 41,348
(12,051) (5,568) (8,764) (1,252) (1,247)
(6,642) (10,193) (33,316) (10,857) (8,689)
- ----------- ----------- ----------- --------------- -----------
(14,905) (15,761) 87,014 85,352 51,480
34,665 (14,905) 93,673 (1,466) 8,686
93,976 (18,247) 72,238 39,426 55,692
- ----------- ----------- ----------- --------------- -----------
$ 113,736 $ (48,913) $ 252,925 $ 123,312 $ 115,858
- ----------- ----------- ----------- --------------- -----------
- ----------- ----------- ----------- --------------- -----------
</TABLE>
15
<PAGE>
American Benefit Variable Annuity Account
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
Years ended December 31, 1995 and 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY
MARKET GROWTH
COMBINED DIVISION DIVISION
------------- ------------- -------------
<S> <C> <C> <C>
NET ASSETS AT JANUARY 1, 1994.................... $ 8,716,963 $ 669,085 $ 1,512,363
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss).................... 204,407 5,715 69,837
Net realized gain (loss) on investments......... 80,560 -- 74,503
Change in net unrealized
appreciation/depreciation of investments...... (1,019,602) -- (323,648)
------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations................... (734,635) 5,715 (179,308)
Changes from principal transactions:
Purchase payments............................... 93,853 2,492 29,035
Contract distributions and terminations......... (1,039,009) (231,039) (219,362)
Transfer payments from (to) other divisions..... 386,774 473,502 (112,961)
Annuity payments................................ (4,419) -- --
Actuarial adjustment in reserves for currently
payable annuity contracts..................... 2,648 -- --
------------- ------------- -------------
Increase (decrease) in net assets derived
from principal transactions................. (560,153) 244,955 (303,288)
------------- ------------- -------------
Total increase (decrease)................... (1,294,788) 250,670 (482,596)
------------- ------------- -------------
Net assets at December 31, 1994............. 7,422,175 919,755 1,029,767
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss).................... 303,335 32,110 78,045
Net realized gain (loss) on investments......... 195,599 -- 74,946
Change in net unrealized
appreciation/depreciation of investments...... 389,614 -- 146,529
------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations................... 888,548 32,110 299,520
Changes from principal transactions:
Purchase payments............................... 18,920 -- 3
Contract distributions and terminations......... (3,276,011) (383,692) (323,389)
Transfer payments from (to) other divisions..... 62,885 (20,847) 68,543
Annuity payments................................ (4,552) -- --
Actuarial adjustment in reserves for currently
payable annuity contracts..................... 122 -- --
------------- ------------- -------------
Increase (decrease) in net assets derived
from principal transactions................. (3,198,636) (404,539) (254,843)
------------- ------------- -------------
Total increase (decrease)................... (2,310,088) (372,429) 44,677
------------- ------------- -------------
Net assets at December 31, 1995............. $ 5,112,085 $ 547,326 $ 1,074,444
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes.
16
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH AND GLOBAL GLOBAL STRATEGIC ASSET
INCOME GROWTH INCOME FIXED INCOME ALLOCATION
DIVISION DIVISION DIVISION DIVISION DIVISION
- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
$ 617,272 $ 1,096,059 $ 3,227,460 $ 905,283 $ 689,441
(5,642) 34,942 622 50,731 48,202
(2,308) 20,639 (3,326) (7,271) (1,677)
(40,132) (196,171) (223,215) (108,211) (128,225)
- ------------- ------------- ------------- ------------- -------------
(48,082) (140,590) (225,919) (64,751) (81,700)
-- 27,995 17,501 12,830 4,000
(41,306) (88,574) (311,997) (31,262) (115,469)
(11,605) 9,448 23,353 (29,901) 34,938
-- -- -- (4,419) --
-- -- -- 2,648 --
- ------------- ------------- ------------- ------------- -------------
(52,911) (51,131) (271,143) (50,104) (76,531)
- ------------- ------------- ------------- ------------- -------------
(100,993) (191,721) (497,062) (114,855) (158,231)
- ------------- ------------- ------------- ------------- -------------
516,279 904,338 2,730,398 790,428 531,210
(14,905) (15,761) 87,014 85,352 51,480
34,665 (14,905) 93,673 (1,466) 8,686
93,976 (18,247) 72,238 39,426 55,692
- ------------- ------------- ------------- ------------- -------------
113,736 (48,913) 252,925 123,312 115,858
271 558 (109) 13,968 4,237
(286,755) (365,243) (1,619,918) (103,851) (193,173)
15,196 (10,637) (113,420) (94,982) 219,032
-- -- -- (4,552) --
-- -- -- 122 --
- ------------- ------------- ------------- ------------- -------------
(271,288) (375,322) (1,733,447) (189,295) 30,096
- ------------- ------------- ------------- ------------- -------------
(157,552) (424,235) (1,480,522) (65,983) 145,954
- ------------- ------------- ------------- ------------- -------------
$ 358,727 $ 480,103 $ 1,249,876 $ 724,445 $ 677,164
- ------------- ------------- ------------- ------------- -------------
- ------------- ------------- ------------- ------------- -------------
</TABLE>
17
<PAGE>
American Benefit Variable Annuity Account
- --------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 1995
- --------------------------------------------------------------------------------
1. INVESTMENT AND ACCOUNTING POLICIES
American Benefit Variable Annuity Account was organized by American Benefit Life
Insurance Company (the Company) (a wholly-owned subsidiary of American Republic
Insurance Company) in accordance with the provisions of the New York Insurance
laws and is a part of the total operations of the Company. The assets and
liabilities of the American Benefit Variable Annuity Account are clearly
identified and distinguished from the other assets and liabilities of the
Company. The American Benefit Variable Annuity Account invests solely in
specified portfolios of PaineWebber Series Trust, an open-end management
investment company under the Investment Company Act of 1940, as directed by
eligible contract owners. All series of shares are diversified except Global
Income Portfolio. Investments are stated at the closing net asset values per
share on December 31, 1995.
Effective August 14, 1995, the name of the Dividend Growth Division changed to
Growth and Income Division. Effective September 21, 1995, the name of the
Government Division changed to the Strategic Fixed Income Division.
The average cost method is used to determine realized gains and losses.
Dividends are taken into income on an accrual basis as of the ex-dividend date.
Currently payable annuity contract reserves are computed according to the
Individual Annuity Valuation 1983 Table using an assumed interest rate of 4.0%.
If the amount paid to the contractholder is less than originally estimated,
charges paid for mortality and expense risks are reimbursed to the Company. If
additional amounts are required, the Company reimburses the American Benefit
Variable Annuity Account.
2. EXPENSES
The Company is compensated for certain expenses.Mortality, distribution, and
expense risks assumed by the Company are compensated for by a charge equivalent
to an annual rate of 1.40% of the total net assets of each division. These
charges amounted to $97,421 in 1995.
An annual contract administration charge of $30 is deducted on the last
valuation date of each calendar year, upon full withdrawal of a contract.s value
or upon commencement of annuity payments if such withdrawal is made or annuity
payments commence prior to the last valuation date of the year. A transfer
charge of $10 will be imposed on each transfer between divisions (portfolios) of
the account in excess of six in any one calendar year. However, the Company has
waived this charge until further notice. An early withdrawal charge may be
imposed in the event of withdrawal of any portion of the contract value or upon
annuitization. The early withdrawal charge is 5% of the amount withdrawn for
purchase payments made within six years prior to the date of withdrawal.
Purchase payments made after May 1, 1989 will have an early withdrawal charge
period of five years. A withdrawal transaction charge of $10 will be imposed on
each withdrawal in excess of three per calendar year. Total administrative
charges amounted to $32,209 in 1995.
3. FEDERAL INCOME TAXES
Operations of the American Benefit Variable Annuity Account are part of the
operations of the Company which is taxed as a life insurance company under the
Internal Revenue Code. Under current law, no federal income taxes are payable
with respect to operations of American Benefit Variable Annuity Account.
18
<PAGE>
American Benefit Variable Annuity Account
- --------------------------------------------------------------------------------
Notes to Financial Statements--(continued)
December 31, 1995
- --------------------------------------------------------------------------------
4. PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
-------------------------------------- --------------------------------------
PURCHASES SALES PURCHASES SALES
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Portfolio
Money Market.... $ 117,075 $ 485,616 $ 657,795 $ 409,911
Growth.......... 180,809 376,317 168,815 420,943
Growth and Income 27,936 312,351 10,821 65,537
Global Growth... 50,231 391,184 130,275 156,879
Global Income... 68,097 1,775,555 414,950 410,021
Strategic Fixed
Income........ 86,970 221,624 177,221 173,967
Asset Allocation 292,353 211,298 133,063 146,233
------- -------- -------- --------
$ 823,471 $ 3,773,945 $ 1,692,940 $ 1,783,491
======= ======== ======== ========
</TABLE>
5. SUMMARY OF CHANGES FROM UNIT TRANSACTIONS
Transactions in units were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
-------------------------------------- --------------------------------------
PURCHASED REDEEMED PURCHASED REDEEMED
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Division
Money Market.... 5,405 36,956 46,613 27,568
Growth.......... 4,542 14,600 6,006 19,918
Growth and Income 2,094 28,216 -- 6,034
Global Growth... 9 25,779 7,057 10,041
Global Income... 8 110,159 3,696 22,809
Strategic Fixed
Income........ 1,354 13,925 7,881 11,713
Asset Allocation 14,032 12,217 3,584 9,578
----- ------ ------ ------
27,444 241,852 74,837 107,661
===== ====== ====== ======
</TABLE>
6. NET ASSETS
Net assets at December 31, 1995 consisted of the following:
<TABLE>
<CAPTION>
MONEY
MARKET GROWTH GROWTH AND
COMBINED DIVISION DIVISION INCOME DIVISION
---------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
Unit transactions.............. $4,204,550 $525,973 $ 780,443 $ 306,316
Accumulated net investment
income (loss)................ 741,599 21,353 100,355 (7,475)
Net unrealized appreciation
(depreciation) of investments 165,936 -- 193,646 59,886
---------- -------- ------------ -------
$5,112,085 $547,326 $1,074,444 $ 358,727
========== ======== ============ ========
</TABLE>
<TABLE>
<CAPTION>
GLOBAL GLOBAL STRATEGIC ASSET
GROWTH INCOME FIXED INCOME ALLOCATION
DIVISION DIVISION DIVISION DIVISION
-------- ---------- ------------ ---------------
<S> <C> <C> <C> <C>
Unit transactions.............. $465,981 $1,021,125 $ 588,633 $ 516,079
Accumulated net investment
income....................... 29,638 224,204 194,686 178,838
Net unrealized appreciation
(depreciation) of investments (15,516) 4,547 (58,874) (17,753)
-------- ---------- ------------ -------
$480,103 $1,249,876 $ 724,445 $ 677,164
======== ========== ============ =======
</TABLE>
19
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
American Benefit Life Insurance Company
We have audited the accompanying statement of net assets of American Benefit
Variable Annuity Account [comprising, respectively, the Money Market, Growth,
Growth and Income (formerly Dividend Growth), Global Growth, Global Income,
Strategic Fixed Income (formerly Government), and Asset Allocation Divisions] as
of December 31, 1995, and the related statements of operations for the year then
ended and changes in net assets for each of the two years in the period then
ended. These financial statements are the responsibility of the Account's
management. Our responsibility is to express an opinion on these financial
statements 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 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 as of December 31, 1995 by correspondence with
the transfer agent. 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 referred to above present fairly, in
all material respects, the financial position of each of the respective
divisions constituting the American Benefit Variable Annuity Account at December
31, 1995, and the results of their operations for the year then ended and the
changes in their net assets for each of the two years in the period then ended
in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Des Moines, Iowa
January 26, 1996
20
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Portfolios of Investments
December 31, 1995
- --------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- --------------------- --------------- -----------
<C> <S> <C> <C> <C>
BANK NOTE (DOMESTIC)--2.28%
$ 500 NationsBank of Texas, N.A.
(cost--$500,013).......................... 01/26/96 7.300% $ 500,013
-----------
CERTIFICATES OF DEPOSIT--6.83%
DOMESTIC--2.28%
500 NBD Bank N.A.............................. 01/04/96 5.810 500,000
-----------
YANKEE--4.55%
1,000 Societe Generale.......................... 01/11/96 5.840 1,000,000
-----------
1,500,000
Total Certificates of Deposit (cost--$1,500,000)......
-----------
COMMERCIAL PAPER--91.06%
AEROSPACE-DEFENSE --6.81%
1,000 Raytheon Company.......................... 01/08/96 5.730 998,886
500 Rockwell International Corporation........ 02/08/96 5.660 497,013
-----------
1,495,899
-----------
AGRICULTURE--4.52%
1,000 Cargill Incorporated...................... 02/16/96 5.570 992,883
-----------
ASSET BACKED--14.06%
770 Assets Securitization Cooperative
Corporation............................... 01/11/96 5.750 768,770
1,000 Falcon Asset Securitization Corporation... 01/16/96 5.750 997,604
1,000 New Center Asset Trust.................... 01/02/96 6.030 999,833
325 Preferred Receivables Funding
Corporation............................... 01/24/96 5.850 323,785
-----------
3,089,992
-----------
BANKING--12.70%
1,000 BEX America Finance Incorporated.......... 01/19/96 5.730 997,135
800 Indosuez North America Incorporated....... 01/10/96 5.620 798,876
1,000 San Paolo U.S. Financial Company.......... 02/06/96 5.680 994,320
-----------
2,790,331
-----------
BROKER-DEALER--4.55%
1,000 Morgan Stanley Group Incorporated......... 01/04/96 6.000 999,500
-----------
BUSINESS SERVICES--4.54%
1,000 PHH Corporation........................... 01/17/96 5.680 997,476
-----------
CHEMICAL--4.55%
1,000 DuPont (E.I.) de Nemours & Company........ 01/05/96 5.710 999,366
-----------
COMPUTER--4.53%
1,000 International Business Machines
Corporation............................... 01/25/96 5.770 996,153
-----------
CONGLOMERATE--2.24%
500 BTR Dunlop Finance Incorporated........... 04/01/96 5.520 493,023
-----------
DRUGS & HEALTH CARE--3.19%
700 Bayer Corporation......................... 01/02/96 5.750 699,888
-----------
</TABLE>
21
<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)
ENERGY--5.93%
$ 810 Chevron Oil Finance Company............... 01/24/96 5.760% $ 807,019
500 Shell Oil................................. 02/07/96 5.670 497,086
-----------
1,304,105
-----------
FINANCE-CONDUIT--8.29%
1,000 MetLife Funding Incorporated.............. 01/30/96 5.650 995,449
830 Svenska Handelsbanken Incorporated........ 01/16/96 to 02/05/96 5.720 to 5.730 827,225
-----------
1,822,674
-----------
FINANCE-CREDIT UNION--4.54%
1,000 U.S. Central Credit Union................. 01/19/96 5.680 997,160
-----------
INSURANCE--3.86%
850 Prudential Funding Corporation............ 01/12/96 5.780 848,499
-----------
TELECOMMUNICATIONS--2.27%
500 BellSouth Telecommunications.............. 01/10/96 5.700 499,287
-----------
UTILITY-TELEPHONE--4.48%
1,000 American Telephone & Telegraph............ 04/10/96 5.485 984,764
-----------
Total Commercial Paper (cost--$20,011,000)............ 20,011,000
-----------
REPURCHASE AGREEMENT--0.09%
20 Repurchase Agreement dated 12/29/95 with
State Street Bank & Trust Company,
collateralized by $19,924 U.S. Treasury
Notes, 5.875%, due 07/31/97; proceeds:
$20,011 (cost--$20,000)................... 01/02/96 5.000 20,000
-----------
Total Investments (cost--$22,031,013)--100.26%........ 22,031,013
Liabilities in excess of other assets--(0.26%)........ (56,815)
-----------
Net Assets--100.00%................................... $21,974,198
-----------
-----------
</TABLE>
Weighted average maturity--25 days
See accompanying notes to financial statements
22
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--92.81%
APPAREL, TEXTILES--1.55%
39,100 Norwood Promotional Products, Incorporated*........................... $ 664,700
-----------
BANKS--3.22%
8,000 Bank of New York Company Incorporated................................. 390,000
6,500 Barnett Banks Incorporated............................................ 383,500
10,000 Chase Manhattan Corporation........................................... 606,250
-----------
1,379,750
-----------
BEVERAGES--1.22%
7,000 The Coca-Cola Company................................................. 519,750
-----------
BROADCASTING--1.50%
17,000 British Sky Broadcasting Group plc*................................... 639,625
-----------
BUSINESS MACHINES--5.48%
6,500 3Com Corporation*..................................................... 303,062
17,100 Bay Networks Incorporated*............................................ 703,237
7,500 Cisco Systems Incorporated*........................................... 559,688
20,000 Data Documents Incorporated*.......................................... 172,500
24,000 EMC Corporation*...................................................... 369,000
5,000 Seagate Technology Incorporated*...................................... 237,500
-----------
2,344,987
-----------
CHEMICALS--2.42%
5,000 IMC Global Incorporated............................................... 204,375
23,000 Sealed Air Corporation*............................................... 646,875
3,000 Vigoro Corporation.................................................... 185,250
-----------
1,036,500
-----------
DRUGS, MEDICINE--8.16%
13,000 Columbia Laboratories Incorporated*................................... 111,312
12,000 Elan Corporation, plc, ADS*........................................... 583,500
10,000 R.P. Scherer Corporation*............................................. 491,250
18,000 Teva Pharmaceutical Industries Ltd., ADS*............................. 834,750
30,000 Watson Pharmaceuticals, Incorporated*................................. 1,470,000
-----------
3,490,812
-----------
ELECTRONICS--3.42%
10,000 LSI Logic Corporation*................................................ 327,500
30,000 Lattice Semiconductor Corporation*.................................... 978,750
4,000 Micron Technology, Incorporated....................................... 158,500
-----------
1,464,750
-----------
ENTERTAINMENT--1.10%
30,000 Ascent Entertainment Group Incorporated*.............................. 472,500
-----------
ENVIRONMENTAL CONTROL--4.22%
50,000 Republic Industries Incorporated*..................................... 1,806,250
-----------
FOREST PRODUCTS--0.65%
30,000 Universal Forest Products Incorporated................................ 277,500
-----------
</TABLE>
23
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
COMMON STOCKS--(CONTINUED)
<C> <S> <C>
HEALTH (NON-DRUG)--7.41%
25,000 Humana Incorporated*.................................................. $ 684,374
15,000 OrNda Healthcorp*..................................................... 348,750
18,000 Phycor Incorporated*.................................................. 910,125
31,500 VISX, Incorporated*................................................... 1,228,500
-----------
3,171,749
-----------
HOTELS, RESTAURANTS--4.35%
35,000 BAB Holdings Incorporated*............................................ 205,625
16,000 HFS, Incorporated*.................................................... 1,308,000
10,000 Mirage Resorts, Incorporated*......................................... 345,000
-----------
1,858,625
-----------
IRON AND STEEL--1.17%
40,000 Northwestern Steel and Wire Company*.................................. 325,000
20,000 Olympic Steel Incorporated*........................................... 175,000
-----------
500,000
-----------
LEISURE, LUXURY--2.78%
10,000 Family Golf Centers, Incorporated*.................................... 182,500
15,000 Mattel Incorporated................................................... 461,250
30,000 Mountasia Entertainment International Incorporated*................... 144,375
20,000 Syratech Corporation*................................................. 402,500
-----------
1,190,625
-----------
MANUFACTURING--1.07%
25,000 Waters Corporation*................................................... 456,250
-----------
MEDIA--7.63%
15,000 Comcast Corporation, Class A.......................................... 264,375
31,500 Comcast Corporation, Class A Special.................................. 572,906
5,000 Liberty Media Group Series A.......................................... 134,375
40,000 Savoy Pictures Entertainment, Incorporated*........................... 252,500
20,000 TeleCommunications Incorporated Class A*.............................. 397,500
20,000 Time Warner Incorporated.............................................. 757,500
18,700 Viacom Incorporated, Class B*......................................... 885,913
-----------
3,265,069
-----------
MISCELLANEOUS--0.17%
5,000 ADE Corporation*...................................................... 72,500
-----------
MISCELLANEOUS MINING & METALS--2.27%
17,000 Belden, Incorporated*................................................. 437,750
7,500 Potash Corporation of Saskatchewan Incorporated....................... 531,563
-----------
969,313
-----------
MORTGAGE FINANCING--3.20%
4,500 Federal Home Loan Mortgage Corporation................................ 375,750
8,000 Federal National Mortgage Association................................. 993,000
-----------
1,368,750
-----------
</TABLE>
24
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
COMMON STOCKS--(CONCLUDED)
<C> <S> <C>
OTHER INSURANCE--2.90%
3,500 CIGNA Corporation..................................................... $ 361,375
27,500 PennCorp Financial Group, Incorporated................................ 807,813
3,000 Prudential Reinsurance Holdings Incorporated.......................... 70,125
-----------
1,239,313
-----------
PAPER--0.51%
15,000 Abitibi Price Incorporated............................................ 217,500
-----------
PHOTO, OPTICAL--1.06%
70,000 Noel Group, Incorporated*............................................. 455,000
-----------
PRODUCERS' GOODS--2.54%
10,000 Camco International Incorporated...................................... 280,000
20,000 Microcom Incorporated*................................................ 520,000
3,000 United Technologies Corporation....................................... 284,625
-----------
1,084,625
-----------
RAILROAD, TRANSIT--0.96%
19,600 Railtex Incorporated*................................................. 411,600
-----------
RETAIL (ALL OTHER)--5.15%
38,500 Rawlings Sporting Goods Company Incorporated*......................... 298,375
40,000 Staples, Incorporated*................................................ 975,000
20,000 Viking Office Products, Incorporated*................................. 930,000
-----------
2,203,375
-----------
RETAIL (DRUG STORE)--0.83%
8,000 Jack Eckerd Corporation*.............................................. 357,000
-----------
RETAIL (FOOD)--2.15%
40,000 General Nutrition Companies, Incorporated*............................ 920,000
-----------
SERVICES--7.64%
10,000 Ceridian Corporation*................................................. 412,500
50,000 Excalibur Technologies Corporation*................................... 1,825,000
5,000 First Data Corporation................................................ 334,375
30,000 Pediatric Services of America, Incorporated*.......................... 472,500
800,000 Quality Care Systems, Incorporated*................................... 224,000
-----------
3,268,375
-----------
TELEPHONE & TELECOMMUNICATIONS--6.08%
26,666 International CableTel Incorporated*.................................. 653,317
11,000 MFS Communications Company, Incorporated*............................. 585,750
22,500 Mobile Telecommunication Technologies Corporation*.................... 480,938
30,000 NYNEX Cablecomms Group plc, ADR*...................................... 521,250
15,000 TeleWest Communications plc, ADR*..................................... 361,875
-----------
2,603,130
-----------
Total Common Stocks (cost--$25,191,251)........................................... 39,709,923
-----------
PREFERRED STOCKS--0.90%
MEDIA--0.90%
20,000 The News Corporation Limited, ADR (cost--$348,452).................... 385,000
-----------
</TABLE>
25
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- --------------------- --------------- -----------
<C> <S> <C> <C> <C>
CORPORATE BONDS--0.91%
$ 580 IntelCom Group, Incorporated (cost--$580,000)....... 09/17/98 8.000% $ 391,094
-----------
U.S. GOVERNMENT OBLIGATIONS--11.64%
5,000 U.S. Treasury Bills (cost--$4,979,776).............. 01/11/96 to 02/29/96 4.900 to 5.360 4,980,311
-----------
REPURCHASE AGREEMENT--2.54%
1,085 Repurchase Agreement dated 12/29/95 with
State Street Bank & Trust Company, collateralized by
$1,080,880 U.S. Treasury Notes, 5.875%, due
07/31/97; proceeds: $1,085,603 (cost--$1,085,000)... 01/02/96 5.000 1,085,000
-----------
Total Investments (cost--$32,184,479)--108.80%................. 46,551,328
Liabilities in excess of other assets--(8.80%)................. (3,767,467)
-----------
Net Assets--100.00%............................................ $42,783,861
-----------
-----------
- ------------
* Non-income producing security
ADR American Depositary Receipt
ADS American Depositary Shares
See accompanying notes to financial statements
26
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GLOBAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -----------
<C> <S> <C>
COMMON STOCKS--92.30%
AUSTRALIA--1.77%
FOOD--1.77%
225,012 Burns Philp & Company, Ltd............................................ $ 503,409
-----------
AUSTRIA--3.80%
BANKING--0.69%
3,826 Creditanstalt Bankverein PFD.......................................... 196,643
-----------
CONSTRUCTION--0.51%
2,149 Flughafen Wein AG..................................................... 144,994
-----------
OIL & GAS--0.75%
2,456 OMV AG................................................................ 213,226
-----------
TECHNOLOGY--1.85%
4,156 VA Technologie AG..................................................... 527,825
-----------
Total Austria Common Stocks........................................................ 1,082,688
-----------
DENMARK--1.71%
SERVICES--0.69%
8,678 International SVS "B"................................................. 195,362
-----------
TELECOMMUNICATIONS--1.02%
5,348 Teledanmark AS Series B............................................... 291,840
-----------
Total Denmark Common Stocks........................................................ 487,202
-----------
FRANCE--9.51%
AUTOMOTIVE--1.55%
9,576 Valeo SA.............................................................. 443,504
-----------
BANKING--1.00%
6,304 Banque Nationale de Paris............................................. 284,369
-----------
CAPITAL GOODS--0.74%
3,055 Technip SA/Compagnie Francaise........................................ 210,238
-----------
ENERGY--2.74%
11,573 Total SA (Class B).................................................... 781,065
-----------
FOOD--1.91%
900 Carrefour SA.......................................................... 546,028
-----------
PRODUCERS' GOODS--1.57%
23,664 Coflexip SA ADR....................................................... 446,658
-----------
Total France Common Stocks......................................................... 2,711,862
-----------
GERMANY--3.27%
AUTO--2.12%
14,264 Veba AG............................................................... 605,561
-----------
</TABLE>
27
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GLOBAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
GERMANY--(CONCLUDED)
PHARMACEUTICAL--1.15%
544 Gehe AG............................................................... $ 276,835
101 Gehe (new) AG*........................................................ 50,025
-----------
326,860
-----------
Total German Common Stocks......................................................... 932,421
-----------
HONG KONG--5.83%
BROADCASTING--1.26%
101,000 Television Broadcasting Ltd........................................... 359,851
-----------
CONGLOMERATE--1.27%
59,500 Hutchison Whampoa Ltd................................................. 362,425
-----------
INSURANCE--0.75%
237,000 National Mutual Asia Ltd. ............................................ 214,549
-----------
RETAIL--1.52%
507,000 Giordano Holdings Ltd. ............................................... 432,745
-----------
UTILITIES--1.03%
161,700 Consolidated Electric Power Asia...................................... 293,810
-----------
Total Hong Kong Common Stocks...................................................... 1,663,380
-----------
INDONESIA--0.75%
AUTOMOTIVE--]0.75%
103,500 Astra International................................................... 215,012
-----------
ITALY--2.98%
BANKING--0.53%
18,395 IMI................................................................... 115,828
1,805 IMI ADR............................................................... 34,069
-----------
149,897
-----------
TELECOMMUNICATIONS--2.45%
235,744 Stet Di Risp Non-Convertible.......................................... 480,951
124,758 Telecom Italia Mobilare............................................... 219,566
-----------
700,517
-----------
Total Italy Common Stocks.......................................................... 850,414
-----------
JAPAN--13.58%
AUTOMOTIVE--2.11%
54,000 Suzuki Motor Corporation, Ltd......................................... 601,453
-----------
ELECTRONICS--6.46%
30,000 Canon Incorporated.................................................... 543,341
12,000 Murata Manufacturing Company, Ltd..................................... 441,646
7,000 Omron Corporation..................................................... 161,356
10,000 Secom Company......................................................... 695,399
-----------
1,841,742
-----------
</TABLE>
28
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GLOBAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
JAPAN--(CONCLUDED)
EQUIPMENT--1.78%
9,000 Rohm Company.......................................................... $ 508,184
-----------
FOOD--1.30%
6,000 Ito-Yokado............................................................ 369,588
-----------
TELECOMMUNICATIONS--1.93%
71 DDI Corporation....................................................... 550,121
-----------
Total Japan Common Stocks.......................................................... 3,871,088
-----------
KOREA--0.94%
ELECTRIC UTILITY--0.94%
6,741 Korea Electric Power Corporation...................................... 267,641
-----------
MALAYSIA--0.92%
BANKING--0.92%
23,000 AMMB Holdings Berhad.................................................. 262,629
-----------
MEXICO--2.21%
BANKING--0.36%
17,755 Grupo Financiero Bancomer, ADR*+...................................... 102,091
-----------
MEDIA--0.52%
6,539 Grupo Televisa S.A. de C.V., ADR...................................... 147,128
-----------
TELECOMMUNICATIONS--1.33%
43,791 Grupo Carso S.A. de C.V.*............................................. 236,125
13,411 Grupo Carso S.A. de C.V. ADR*+........................................ 145,778
-----------
381,903
-----------
Total Mexico Common Stocks......................................................... 631,122
-----------
NETHERLANDS--1.68%
FINANCIAL SERVICES--1.47%
6,277 Internationale Nederlanden Groep N.V.................................. 419,327
-----------
FOOD PROCESSING--0.21%
736 Nutricia Verenigde Bedrijven.......................................... 59,533
-----------
Total Netherlands Common Stocks.................................................... 478,860
-----------
NORWAY--1.68%
COMMERCIAL SERVICES--1.68%
19,296 Petroleum Geo-Service*................................................ 478,280
-----------
PHILIPPINES--0.56%
BREWERY--0.56%
46,500 San Miguel Corporation................................................ 158,664
-----------
SOUTH AFRICA--1.24%
MINING--1.24%
393,195 South African Iron & Steel/Iscor...................................... 353,773
-----------
</TABLE>
29
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GLOBAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
SPAIN--0.60%
UTILITIES--0.60%
22,043 Sevillana De Electricidad............................................. $ 171,183
-----------
SWEDEN--2.65%
APPLIANCES--0.69%
4,793 Electrolux Ab 'B' Free................................................ 196,710
-----------
AUTOMOTIVE MANUFACTURING--1.22%
5,937 Autoliv Ab 'B' Free................................................... 346,937
-----------
PHARMACEUTICAL--0.74%
5,307 Astra Ab 'B' Free..................................................... 210,211
-----------
Total Sweden Common Stocks......................................................... 753,858
-----------
SWITZERLAND--7.56%
EQUIPMENT--2.30%
564 BBC Brown Boveri Ltd.................................................. 655,189
-----------
FOOD--2.26%
584 Nestle SA--Registered................................................. 646,020
-----------
INSURANCE--1.09%
266 Schw Ruckversicher.................................................... 309,469
-----------
PHARMACEUTICAL--1.91%
69 Roche Holdings AG..................................................... 545,839
-----------
Total Switzerland Common Stocks.................................................... 2,156,517
-----------
THAILAND--0.77%
BANKING--0.77%
21,800 Thai Farmers Bank PCL................................................. 219,817
-----------
UNITED KINGDOM--5.77%
BROADCASTING--1.67%
31,337 Reed International.................................................... 477,671
-----------
BUILDING MATERIALS & PAPER PACKAGING--0.91%
55,803 BPB Industries........................................................ 259,126
-----------
DRUGS--1.17%
79,436 Medeva plc............................................................ 333,091
-----------
ENTERTAINMENT--1.14%
13,743 Thorn EMI plc......................................................... 323,672
-----------
HEALTHCARE--0.38%
39,359 Takare plc............................................................ 110,027
-----------
MINING--0.50%
32,218 Antofagasta Holdings.................................................. 142,602
-----------
Total United Kingdom Common Stocks................................................. 1,646,189
-----------
</TABLE>
30
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GLOBAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -----------
<C> <S> <C>
COMMON STOCKS--(CONCLUDED)
UNITED STATES--22.51%
BANKS--1.60%
6,794 Citicorp.............................................................. $ 456,896
-----------
BUSINESS MACHINES--0.59%
1,818 International Business Machines Corporation........................... 166,802
-----------
CHEMICALS--2.70%
6,944 Airgas, Incorporated*................................................. 230,888
11,388 Allied-Signal Incorporated............................................ 540,930
-----------
771,818
-----------
ELECTRONIC EQUIPMENT--0.63%
5,337 UCAR International, Incorporated...................................... 180,124
-----------
ELECTRONICS--2.30%
3,145 Intel Corporation..................................................... 178,479
6,438 Motorola Incorporated................................................. 366,966
6,267 Sensormatic Electronics Corporation................................... 108,889
-----------
654,334
-----------
HEALTH (NON-DRUG)--1.26%
19,374 Sunrise Medical Incorporated*......................................... 358,419
-----------
INSURANCE--1.49%
6,737 The Travelers Group, Incorporated..................................... 423,589
-----------
MORTGAGE FINANCING--0.81%
10,666 Countrywide Credit Industries, Incorporated........................... 231,986
-----------
MOTOR VEHICLES--0.79%
4,059 Chrysler Corporation.................................................. 224,767
-----------
PAPER--1.03%
7,732 International Paper Company........................................... 292,850
-----------
POLLUTION CONTROL--1.85%
31,506 Wheelabrator Technologies, Incorporated............................... 527,725
-----------
PRODUCERS' GOODS--0.50%
4,212 Zebra Technologies Corporation (Class A)*............................. 143,208
-----------
RETAIL (ALL OTHER)--0.69%
8,983 Toys 'R' Us, Incorporated*............................................ 195,380
-----------
SERVICES--3.98%
14,728 Ecolab Incorporated................................................... 441,840
6,794 First Data Corporation................................................ 454,349
6,430 Medaphis Corporation.................................................. 237,910
-----------
1,134,099
-----------
SOAPS, HARDWARES--2.29%
9,312 Colgate-Palmolive Company............................................. 654,168
-----------
Total United States Common Stocks.................................................. 6,416,165
-----------
Total Common Stocks (cost--$25,220,806)............................................ 26,312,174
-----------
</TABLE>
31
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GLOBAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- -----------
<C> <S> <C>
PREFERRED STOCKS--2.46%
BRAZIL--0.91%
FOOD--0.49%
12,296,547 Ceval Alimentos S.A................................................... $ 138,526
-----------
MACHINERY--0.42%
604,000 Brasmotor S.A......................................................... 119,930
-----------
TELEPHONE COMPANIES--0.00%
3,713 Telebras.............................................................. 179
-----------
Total Brazil Preferred Stocks...................................................... 258,635
-----------
GERMANY--1.55%
TECHNOLOGY--1.55%
2,919 SAP AG................................................................ 441,564
-----------
Total Preferred Stocks (cost--$677,220)............................................ 700,199
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES
- ---------- --------------------- ---------------
<C> <S> <C> <C> <C>
TIME DEPOSIT--0.53%
$ 150 State Street Cayman Islands Time Deposit
(cost--$150,000)........................... 01/02/96 5.875% 150,000
-----------
REPURCHASE AGREEMENT--4.87%
1,390 Repurchase Agreement dated 12/29/95 with
State Street Bank & Trust Company,
collateralized by $1,010,000 U.S. Treasury
Bonds, 9.250%, due 02/15/16; proceeds:
$1,390,888 (cost--$1,390,000)............... 01/02/96 5.750 1,390,000
-----------
Total Investments (cost--$27,438,026)--100.16%.......... 28,552,373
Liabilities in excess of other assets--(0.16)%.......... (45,120)
-----------
Net Assets--100.00%..................................... $28,507,253
-----------
-----------
- ------------
* Non-income producing security
+ Security exempt from registration under Rule 144A of the Securities Act of 1933. This
security may be resold in transactions exempt from registration, normally to qualified
institutional buyers.
ADR American Depositary Receipt
See accompanying notes to financial statements
32
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GLOBAL INCOME PORTFOLIO
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000)* DATES RATES VALUE
- ---------- --------------------- ------------------ -----------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES--91.37%
AUSTRALIA--7.55%
2,250 New South Wales Treasury
Corporation........................... 04/01/97 to 12/01/01 11.500 to 12.500% $ 1,861,085
950 Queensland Treasury Corporation Global
Issue................................. 08/15/01 12.000 834,440
-----------
2,695,525
-----------
CANADA--8.86%
2,135 Ontario Hydro Global Bonds............ 04/11/08 to 04/11/11 8.605 to 10.551@ 541,137
2,497 Government of Canada.................. 09/01/99 to 06/01/23 7.750 to 8.000 1,912,613
1,190 Province of British Columbia Residual
Bonds................................. 01/09/12 9.000 to 9.061@ 246,584
540 Province of Ontario................... 01/10/01 10.875 462,683
-----------
3,163,017
-----------
DENMARK--1.07%
2,000 Government of Denmark................. 05/15/03 8.000 383,453
-----------
FINLAND--1.47%
2,000 Government of Finland................. 03/15/04 9.500 524,574
-----------
FRANCE--3.08%
4,900 Government of France.................. 04/25/03 to 10/25/05 7.750 to 8.500 1,099,943
-----------
GERMANY--14.68%
7,027 Federal Republic of Germany........... 07/22/02 to 01/04/24 6.250 to 8.000 5,240,816
-----------
IRELAND--3.72%
745 Republic of Ireland................... 07/11/03 9.250 1,328,750
-----------
ITALY--2.48%
1,395 Government of Italy................... 07/15/98 10.500 884,282
-----------
NETHERLANDS--3.03%
1,480 Government of Netherlands............. 09/15/01 to 06/01/06 8.500 to 8.750 1,081,513
-----------
NEW ZEALAND--3.82%
1,560 Government of New Zealand............. 02/15/00 6.500 987,929
540 International Bank for Reconstruction
and Development (1).................. 07/25/97 12.500 375,329
-----------
1,363,258
-----------
SPAIN--11.24%
455,900 Government of Spain................... 08/30/98 to 03/25/00 11.450 to 12.250 4,011,009
-----------
UNITED KINGDOM--6.09%
1,135 United Kingdom Gilt................... 09/30/98 to 07/14/00 13.000 to 15.500 2,174,768
-----------
UNITED STATES--24.28%
1,250 Chase Manhattan Corporation........... 12/01/97 7.500 1,293,849
1,000 Clorox Corporation.................... 07/15/01 8.800 1,132,249
1,000 Ford Motor Capital Corporation........ 07/01/01 9.500 1,163,399
4,939 U.S. Treasury Notes................... 12/31/96 to 08/15/05 5.625 to 7.500 5,078,556
-----------
8,668,053
-----------
Total Long-Term Debt Securities (cost--$31,707,365).......................................... 32,618,961
-----------
</TABLE>
33
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GLOBAL INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000)* DATES RATES VALUE
- ---------- --------------------- ------------------ -----------
<C> <S> <C> <C> <C>
SHORT-TERM DEBT SECURITIES--12.60%
UNITED STATES--12.60%
1,000 General Motors Acceptance Corporation
MTN................................... 07/15/96 8.625% $ 1,014,922
3,500 U.S. Treasury Bills................... 01/25/96 to 03/07/96 5.200 to 6.173@ 3,482,674
-----------
Total Short-Term Debt Securities
(cost--$4,479,439).............................. 4,497,596
-----------
REPURCHASE AGREEMENT--0.74%
265 Repurchase Agreement dated 12/29/95
with Brown Brothers Harriman &
Company, collateralized by $265,000
U.S. Treasury Notes, 7.250%, due
11/30/96; proceeds: $265,151
(cost--$265,000)...................... 01/02/96 5.125 265,000
-----------
Total Investments (cost--$36,451,804)--104.71%.... 37,381,557
Liabilities in excess of other assets--(4.71%).... (1,681,983)
-----------
Net Assets--100.00%............................... $35,699,574
-----------
-----------
</TABLE>
- ------------
Note: The Portfolio of Investments is listed by the security issuer's country
of origin.
* In local currency unless otherwise indicated
@ Yield to maturity
MTN Medium Term Note
(1) "Supranational" security denominated in New Zealand dollars
34
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GLOBAL INCOME PORTFOLIO
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
UNREALIZED
CONTRACT TO MATURITY APPRECIATION
DELIVER IN EXCHANGE FOR DATES (DEPRECIATION)
------------- ----------------- --------------------- --------------
<S> <C> <C> <C> <C>
Australian Dollars............ 365,200 U.S.$ 277,698 01/16/96 $ 6,444
Australian Dollars............ 1,493,725 U.S.$ 1,100,203 02/20/96 (7,667)
Australian Dollars............ 536,400 U.S.$ 395,327 03/12/96 (2,045)
Belgian Francs................ 44,000,000 U.S.$ 1,459,107 01/03/96 to 09/30/96 (40,594)
Belgian Francs................ 28,879,180 U.S.$ 997,554 09/30/96 8,552
British Pounds................ 892,500 U.S.$ 1,405,331 01/12/96 19,013
British Pounds................ 256,550 U.S.$ 399,031 02/16/96 895
Finnish Markkas............... 2,865,844 U.S.$ 663,851 03/18/96 4,050
German Deutschemarks.......... 1,328,000 U.S.$ 935,936 01/18/96 9,952
German Deutschemarks.......... 2,859,000 U.S.$ 2,037,993 01/24/96 to 05/17/96 36,182
German Deutschemarks.......... 1,310,000 U.S.$ 910,196 02/08/96 (4,870)
German Deutschemarks.......... 636,000 U.S.$ 446,770 04/02/96 1,350
Italian Lira.................. 391,500,000 U.S.$ 239,706 01/10/96 (6,836)
Italian Lira.................. 1,622,350,000 U.S.$ 1,003,743 01/10/96 (17,912)
New Zealand Dollars........... 880,000 U.S.$ 569,536 02/05/96 (4,516)
Spanish Pesetas............... 330,358,200 U.S.$ 2,646,178 01/10/96 to 03/21/96 (61,302)
Spanish Pesetas............... 142,800,000 U.S.$ 1,157,869 01/23/96 (14,793)
U.S. Dollars.................. 753,554 BFR 22,000,000 01/03/96 (7,259)
U.S. Dollars.................. 944,980 DEM 1,328,000 01/18/96 (18,996)
U.S. Dollars.................. 240,441 ITL 391,500,000 01/10/96 6,102
U.S. Dollars.................. 996,071 ITL 1,622,350,000 01/10/96 25,584
U.S. Dollars.................. 277,546 FIM 1,199,000 03/18/96 (1,900)
U.S. Dollars.................. 735,395 GBP 475,000 01/12/96 2,517
-------
$(68,049)
-------
-------
</TABLE>
CURRENCY TYPE ABBREVIATIONS:
BFR --Belgian Francs
DEM --German Deutschemarks
ITL --Italian Lira
GBP --British Pounds
FIM --Finnish Markkas
INVESTMENTS BY TYPE OF ISSUER
- -----------------------------
PERCENTAGE OF NET ASSETS
------------------------
LONG-TERM SHORT-TERM
--------- ----------
Government and other public issuers................ 81.32% 9.76%
Banks.............................................. 3.62 0.00
Financial institutions............................. 3.26 2.84
Repurchase Agreement............................... 0.00 0.74
Other.............................................. 3.17 0.00
--------- -----
91.37% 13.34%
--------- -----
--------- -----
See accompanying notes to financial statements
35
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STRATEGIC FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ---------- --------------------- -------------- -----------
<C> <S> <C> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
CERTIFICATES--17.93%
$ 912 GNMA II ARM................................ 09/20/24 7.250% $ 934,804
1,500 GNMA II ARM TBA............................ TBA 6.500 1,528,594
-----------
Total Government National Mortgage Association
Certificates (cost--$2,456,996)...................... 2,463,398
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--7.36%
1,000 FNMA ARM TBA (cost--$1,006,875)............ TBA 6.366 1,011,250
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS--29.24%
314 Chase Mortgage Finance Corporation REMIC
Series 1993-N, Class A1................... 11/25/24 6.750 313,749
800 FNMA REMIC Series 1991-59, Class K......... 05/25/16 8.000 815,671
164 FNMA REMIC Series 1991-57, Class Z......... 05/25/21 6.500 157,280
179 FNMA REMIC Series 1991-126, Class ZB....... 09/25/21 7.500 181,985
55 FNMA REMIC Series G92-30, Class Z.......... 06/25/22 7.000 54,275
178 FNMA REMIC Series G92-40 Class ZC.......... 07/25/22 7.000 174,259
235 FNMA REMIC Series G93-16, Class K.......... 04/25/23 5.000 195,710
119 FNMA REMIC Series 1993-96, Class Z......... 06/25/23 7.000 112,363
85 FNMA REMIC Series 1993-112, Class ZB....... 07/25/23 7.000 76,813
81 FNMA REMIC Series 1993-163, Class ZA....... 09/25/23 7.000 75,184
169 FHLMC REMIC Series 1014, Class D........... 08/15/17 7.950 169,174
101 FHLMC REMIC Series 1614, Class QZ.......... 11/15/23 6.500 84,713
307 Prudential Home Mortgage Securities
Corporation REMIC Series 1993-38, Class A7 09/25/23 6.950 261,838
35 FNMA REMIC PO Series 1993-235, Class G..... 09/25/23 7.899+ 18,349
127 Countrywide Mortgage Backed Securities
Incorporated Series 1993-E, Class A1...... 01/25/24 6.500 127,493
159 Greenwich Capital Acceptance Incorporated,
Series 1991-B, Class A1................... 01/25/22 7.637 160,276
531 Greenwich Capital Acceptance Incorporated,
Series 1992-LB6, Class A1................. 10/25/22 7.358 533,795
500 Merrill Lynch Mortgage Investors
Incorporated, Series 1993-I, Class A3..... 11/15/23 6.495 504,530
-----------
Total Collateralized Mortgage Obligations
(cost--$3,904,908)................................... 4,017,457
-----------
CORPORATE BONDS--46.71%
500 Advanta Corporation MTN (1)................ 01/22/96 6.213 500,101
500 BankAmerica Corporation MTN (1)............ 10/01/98 6.113 500,647
500 Capital One Bank MTN....................... 01/15/97 8.625 514,705
600 Coastal Corporation........................ 06/15/06 11.750 637,900
1,000 Coleman Holding Incorporated............... 05/27/98 9.291++ 795,000
500 Ford Motor Credit Corporation (1).......... 11/09/98 5.540 496,991
500 G I Holdings Incorporated.................. 10/01/98 9.975++ 386,250
150 Lehman Brothers Holding Incorporated....... 06/15/96 5.500 149,777
300 Lehman Brothers Holding Incorporated (1)... 01/12/99 5.890 297,144
600 Long Island Lighting Company............... 05/01/96 8.750 604,736
500 Marine Midland Bank Euro (1)............... 09/23/96 5.930 499,500
500 Noranda Incorporated (1)................... 08/18/00 6.625 506,536
500 Occidental Petroleum Corporation........... 03/15/11 11.750 528,341
-----------
Total Corporate Bonds (cost--$6,426,220)............... 6,417,628
-----------
FOREIGN CURRENCY DENOMINATED ISSUES--10.63%
DM 2,250 Federal Republic of Germany (2)
(cost--$1,434,948)......................... 01/04/24 6.250 1,461,049
-----------
SHORT-TERM U.S. GOVERNMENT OBLIGATIONS--1.08%
150 U.S. Treasury Bills (3) (cost--$149,010)... 02/15/96 5.280 149,010
-----------
</TABLE>
36
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STRATEGIC FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ---------- --------------------- -------------- -----------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER--29.72%
$ 700 Abbott Laboratories........................ 01/09/96 5.620% $ 699,126
500 Commonwealth Bank of Australia............. 01/18/96 5.680 498,659
700 DuPont (E.I.) de Nemours & Company......... 01/18/96 5.700 698,116
700 Hewlett-Packard Company.................... 03/12/96 5.530 692,366
300 McDonalds Corporation...................... 01/04/96 5.630 299,859
600 National Rural Utilities Cooperative
Finance Corporation....................... 01/16/96 5.690 598,578
300 Northern Illinois Gas Company.............. 02/05/96 5.650 298,352
300 Wisconsin Electric Power Company........... 01/17/96 5.700 299,240
-----------
Total Commercial Paper (cost--$4,084,296).............. 4,084,296
-----------
REPURCHASE AGREEMENT--1.11%
152 Repurchase Agreement dated 12/29/95 with
State Street Bank & Trust Company,
collateralized by $155,000 U.S. Treasury
Notes, 5.875%, due 07/31/97; proceeds:
$152,084 (cost--$152,000).................. 01/02/96 5.000 152,000
-----------
Total Investments-(cost--$19,615,253)--143.78%......... 19,756,088
Liabilities in excess of other assets--(43.78)%........ (6,015,124)
-----------
Net Assets--100.00%.................................... $13,740,964
-----------
-----------
</TABLE>
- ------------
TBA To Be Assigned--Securities are purchased on a forward commitment with an
approximate (generally + / - 2.5%) 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.
ARM Adjustable Rate Mortgage
REMIC Real Estate Mortgage Investment Conduit
MTN Medium Term Note
PO 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.
+ Estimated yield to maturity at December 31, 1995.
++ Yield to maturity.
(1) Variable rate security, the rate shown is as of December 31, 1995.
(2) Principal amount denoted in indicated currency: DM--German Deutschemarks
(3) Entire or partial principal amount pledged as collateral for futures
transactions
FUTURES CONTRACTS
<TABLE>
<CAPTION>
NUMBER OF IN EXPIRATION UNREALIZED
CONTRACTS CONTRACT TO RECEIVE EXCHANGE FOR DATE APPRECIATION
- --------- ---------------------------------------------- ------------ ---------- --------------
<S> <C> <C> <C> <C>
58 10 year U.S. Treasury Notes................... $6,558,188 Mar 96 $ 88,250
12 20 year U.S. Treasury Bonds................... $1,439,625 Mar 96 18,000
-------
$106,250
-------
-------
</TABLE>
See accompanying notes to financial statements
37
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSET ALLOCATION PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--68.95%
AEROSPACE--2.88%
6,000 Allied-Signal Incorporated............................................ $ 285,000
3,200 Lockheed Martin Corporation........................................... 252,800
1,500 McDonnell Douglas Corporation......................................... 138,000
-----------
675,800
-----------
AGRICULTURE, FOOD--0.54%
2,500 IBP Incorporated...................................................... 126,250
-----------
AIR TRANSPORT--0.97%
2,500 AMR Corporation*...................................................... 185,625
2,500 Western Pac Airlines Incorporated*.................................... 41,875
-----------
227,500
-----------
ALUMINUM--0.79%
3,500 Aluminum Corporation of America....................................... 185,062
-----------
APPAREL, TEXTILES--0.25%
1,850 Wolverine World Wide Incorporated..................................... 58,275
-----------
BANKS--4.07%
4,000 Bank of New York Company Incorporated................................. 195,000
2,500 Barnett Banks Incorporated............................................ 147,500
2,500 Chase Manhattan Corporation........................................... 151,562
2,000 Chemical Banking Corporation.......................................... 117,500
1,500 Citicorp.............................................................. 100,875
2,500 Corestates Financial Corporation...................................... 94,687
800 Nationsbank Corporation............................................... 55,700
2,500 UJB Financial Corporation............................................. 89,375
-----------
952,199
-----------
BEVERAGES--1.67%
7,000 Pepsico Incorporated.................................................. 391,125
-----------
BUSINESS MACHINES--11.91%
2,500 3Com Corporation*..................................................... 116,563
5,000 Cabletron Systems, Incorporated....................................... 405,000
4,000 Cisco Systems Incorporated*........................................... 298,500
8,500 Compaq Computer Corporation*.......................................... 408,000
26,500 EMC Corporation*...................................................... 407,437
5,000 Hewlett-Packard Company............................................... 418,750
12,000 Seagate Technology Incorporated*...................................... 570,000
1,200 Xerox Corporation..................................................... 164,400
-----------
2,788,650
-----------
CHEMICALS--1.77%
1,500 DuPont (E.I.) de Nemours & Company.................................... 104,812
5,000 IMC Global Incorporated............................................... 204,375
2,300 PPG Industries Incorporated........................................... 105,225
-----------
414,412
-----------
CONSUMER DURABLES--0.43%
2,000 Premark International Incorporated.................................... 101,250
-----------
</TABLE>
38
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSET ALLOCATION PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
CONTAINERS--0.47%
2,500 Temple Inland Incorporated............................................ $ 110,312
-----------
DRUGS, MEDICINE--1.63%
1,700 Johnson & Johnson..................................................... 145,562
2,000 Pfizer Incorporated................................................... 126,000
2,000 Schering Plough Corporation........................................... 109,500
-----------
381,062
-----------
ELECTRIC UTILITIES--0.50%
2,500 FPL Group Incorporated................................................ 115,938
-----------
ELECTRONICS--1.71%
2,000 Avnet Incorporated.................................................... 89,500
3,000 Intel Corporation..................................................... 170,250
4,000 Loral Corporation..................................................... 141,500
-----------
401,250
-----------
FOREST PRODUCTS--0.38%
6,200 Shorewood Packaging Corporation*...................................... 88,350
-----------
HEALTH (NON-DRUG)--2.17%
1,800 Becton Dickinson & Company............................................ 135,000
2,500 Healthsouth Corporation*.............................................. 72,813
8,000 Mentor Corporation.................................................... 184,000
5,000 OrNda Healthcorp*..................................................... 116,250
-----------
508,063
-----------
HOTELS, RESTAURANTS--0.67%
1,000 ITT Corporation*...................................................... 53,000
3,000 Mirage Resorts Incorporated*.......................................... 103,500
-----------
156,500
-----------
INTERNATIONAL OIL--1.49%
2,000 Chevron Corporation................................................... 105,000
1,500 Exxon Corporation..................................................... 120,188
1,100 Mobil Corporation..................................................... 123,200
-----------
348,388
-----------
LEISURE, LUXURY--0.66%
5,000 Mattel Incorporated................................................... 153,750
-----------
LIFE INSURANCE--0.47%
2,500 Reliastar Financial Corporation....................................... 110,938
-----------
MISCELLANEOUS FINANCE--0.95%
2,500 American Express Company.............................................. 103,437
2,000 Household International Incorporated.................................. 118,250
-----------
221,687
-----------
</TABLE>
39
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSET ALLOCATION PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
MISCELLANEOUS MINING & METALS--2.13%
7,000 Belden, Incorporated*................................................. $ 180,250
5,000 Freeport McMoran Copper & Gold Incorporated........................... 140,625
2,500 Potash Corporation of Saskatchewan Incorporated....................... 177,187
-----------
498,062
-----------
MOTOR VEHICLES--0.59%
2,500 Chrysler Corporation.................................................. 138,438
-----------
OIL REFINING, DISTRIBUTION--2.39%
17,000 Repsol SA, ADR........................................................ 558,875
-----------
OIL SERVICES--0.76%
3,500 Halliburton Company................................................... 177,188
-----------
OTHER INSURANCE--4.39%
2,500 Ace Limited........................................................... 99,375
2,500 AFLAC Incorporated.................................................... 108,438
8,525 Allstate Corporation.................................................. 350,591
1,300 American International Group Incorporated............................. 120,250
1,500 CIGNA Corporation..................................................... 154,875
1,000 ITT Hartford Group Incorporated*...................................... 48,375
1,500 Prudential Reinsurance Holdings Incorporated.......................... 35,063
2,000 St. Paul Companies Incorporated....................................... 111,250
-----------
1,028,217
-----------
PAPER--1.91%
1,700 Champion International Corporation.................................... 71,400
2,400 International Paper Corporation....................................... 90,900
2,340 Kimberly Clark Corporation............................................ 193,635
3,300 Westvaco Corporation.................................................. 91,575
-----------
447,510
-----------
PRODUCERS' GOODS--6.29%
4,000 AGCO Corporation...................................................... 204,000
13,000 Albany International Corporation, Class A............................. 235,625
4,500 Deere & Company....................................................... 158,625
3,000 Dover Corporation..................................................... 110,625
1,000 ITT Industries Incorporated........................................... 24,000
5,100 Kulicke & Soffa Industries Incorporated*.............................. 118,575
1,300 TRW Incorporated...................................................... 100,750
1,700 Textron Incorporated.................................................. 114,750
2,700 United Technologies Corporation....................................... 256,163
4,000 Varity Corporation*................................................... 148,500
-----------
1,471,613
-----------
RAILROAD, TRANSIT--4.15%
8,000 Burlington Northern, Incorporated..................................... 624,000
1,500 Conrail Incorporated.................................................. 105,000
5,000 GATX Corporation...................................................... 243,125
-----------
972,125
-----------
</TABLE>
40
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSET ALLOCATION PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONCLUDED)
REAL PROPERTY--0.93%
7,500 U.S. Home Corporation*................................................ $ 218,438
-----------
RETAIL (ALL OTHER)--3.93%
18,000 Arbor Drugs Incorporated.............................................. 378,000
6,000 Consolidated Stores Corporation*...................................... 130,500
3,500 Rite Aid Corporation.................................................. 119,875
7,500 Sears Roebuck & Company............................................... 292,500
-----------
920,875
-----------
RETAIL (DRUG STORE)--0.95%
5,000 Jack Eckerd Corporation*.............................................. 223,125
-----------
RETAIL (FOOD)--0.48%
3,000 Kroger Company*....................................................... 112,500
-----------
SERVICES--3.34%
14,500 Ceridian Corporation*................................................. 598,125
12,000 Computervision Corporation*........................................... 184,500
-----------
782,625
-----------
TOBACCO--0.33%
850 Philip Morris Companies Incorporated.................................. 76,925
-----------
16,143,277
Total Common Stocks--(cost--$14,106,479)..........................................
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES
- --------- --------------------- ---------------
<C> <S> <C> <C> <C>
CORPORATE BONDS--7.69%
$ 80 Aetna Commercial Mortgage Trust............. 12/26/30 6.590% 80,500
200 Alltel Corporation.......................... 09/15/05 6.750 207,439
110 Associates Corporation of North America..... 11/01/97 7.750 114,267
90 Commercial Credit Corporation............... 03/15/02 7.375 96,432
200 Ford Motor Credit Corporation............... 02/26/98 6.250 202,770
150 General Motors Acceptance Corporation....... 10/01/02 6.625 154,260
200 Manufacturers & Traders Trust............... 07/01/05 7.000 208,984
200 News America Holdings Incorporated.......... 02/01/24 7.750 208,430
140 Santander Financial Issuances............... 07/15/05 6.800 143,916
125 Swiss Bank Corporation...................... 07/15/25 7.500 135,731
90 United Parcel Service of America
Incorporated................................ 04/01/20 8.375 110,394
130 U.S Bancorp................................. 03/15/03 7.000 136,204
-----------
Total Corporate Bonds (cost--$1,731,811)................ 1,799,327
-----------
LONG-TERM U.S. GOVERNMENT OBLIGATIONS--24.47%
4,350 U.S. Treasury Notes......................... 09/30/97 to 08/15/05 5.750 to 7.125 4,552,762
980 U.S. Treasury Bonds......................... 11/15/24 7.500 1,177,225
-----------
Total Long-Term U.S. Government Obligations
(cost--$5,466,038).................................... 5,729,987
-----------
</TABLE>
41
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
- --------------------------------------------------------------------------------
ASSET ALLOCATION PORTFOLIO
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- --------------------- --------------- -----------
<C> <S> <C> <C> <C>
SHORT-TERM U.S. GOVERNMENT OBLIGATIONS--6.53%
$ 1,000 U.S. Treasury Bills......................... 02/08/96 5.320% $ 994,140
525 U.S. Treasury Notes......................... 11/30/96 7.250 534,188
-----------
Total Short-Term U.S. Government Obligations
(cost--$1,527,917).................................... 1,528,328
-----------
REPURCHASE AGREEMENT--1.92%
450 Repurchase Agreement dated 12/29/95 with
State Street Bank & Trust Company,
collateralized by $448,291 U.S. Treasury
Notes, 5.875%, due 07/31/97; proceeds:
$450,250 (cost--$450,000)................... 01/02/96 5.000 450,000
-----------
Total Investments (cost--$23,282,245)--109.56%.......... 25,650,919
Liabilities in excess of other assets--(9.56%).......... (2,237,633)
-----------
Net Assets--100.00%..................................... $23,413,286
-----------
-----------
</TABLE>
- ------------
* Non-income producing security
ADR American Depositary Receipt
See accompanying notes to financial statements
42
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH & INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--97.89%
AEROSPACE--2.92%
3,600 Lockheed Martin Corporation............................................. $ 284,400
1,600 McDonnell Douglas Corporation........................................... 147,200
-----------
431,600
-----------
AGRICULTURE, FOOD--2.47%
5,800 Conagra Incorporated.................................................... 239,250
2,500 IBP Incorporated........................................................ 126,250
-----------
365,500
-----------
AIR TRANSPORTATION--1.79%
3,000 AMR Corporation*........................................................ 222,750
2,500 Western Pac Airlines Incorporated*...................................... 41,875
-----------
264,625
-----------
ALUMINUM--1.25%
3,500 Aluminum Corporation of America......................................... 185,062
-----------
APPAREL, TEXTILES--0.39%
1,850 Wolverine World Wide Incorporated....................................... 58,275
-----------
BANKS--9.50%
5,000 Bank of New York Company Incorporated................................... 243,750
2,500 Barnett Banks Incorporated.............................................. 147,500
4,500 Chase Manhattan Corporation............................................. 272,812
2,000 Citicorp................................................................ 134,500
2,500 Corestates Financial Corporation........................................ 94,687
800 First Empire State Corporation.......................................... 174,400
1,800 J.P. Morgan & Company................................................... 144,450
1,500 Nationsbank Corporation................................................. 104,438
2,500 UJB Financial Corporation............................................... 89,375
-----------
1,405,912
-----------
BEVERAGES--1.13%
3,000 Pepsico Incorporated.................................................... 167,625
-----------
BUSINESS MACHINES--11.57%
2,500 3Com Corporation*....................................................... 116,562
5,000 Cabletron Systems, Incorporated*........................................ 405,000
3,700 Cisco Systems Incorporated*............................................. 276,112
2,500 Compaq Computer Corporation*............................................ 120,000
7,700 EMC Corporation*........................................................ 118,387
5,000 Seagate Technology Incorporated*........................................ 237,500
6,000 Sun Microsystems Incorporated*.......................................... 273,750
1,200 Xerox Corporation....................................................... 164,400
-----------
1,711,711
-----------
CHEMICALS--3.56%
2,500 DuPont (E.I.) de Nemours & Company...................................... 174,688
5,000 IMC Global Incorporated................................................. 204,375
2,000 Olin Corporation........................................................ 148,500
-----------
527,563
-----------
CONSUMER DURABLES--2.22%
6,500 Premark International Incorporated...................................... 329,063
-----------
CONTAINERS--0.75%
2,500 Temple Inland Incorporated.............................................. 110,312
-----------
</TABLE>
43
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH & INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
DRUGS, MEDICINE--5.10%
1,400 Bristol Myers Squibb Company............................................ $ 120,225
2,500 Johnson & Johnson....................................................... 214,063
3,000 Pfizer Incorporated..................................................... 189,000
2,000 Schering Plough Corporation............................................. 109,500
2,200 Smithkline Beecham Corporation.......................................... 122,100
-----------
754,888
-----------
ELECTRIC UTILITIES--0.94%
3,000 FPL Group Incorporated.................................................. 139,125
-----------
ELECTRONICS--4.47%
3,000 Avnet Incorporated...................................................... 134,250
2,000 Intel Corporation....................................................... 113,500
5,800 Loral Corporation....................................................... 205,175
4,400 Raytheon Company........................................................ 207,900
-----------
660,825
-----------
HEALTH (NON-DRUG)--5.23%
1,100 Apria Healthcare Group Incorporated..................................... 31,075
2,100 Becton Dickinson & Company.............................................. 157,500
2,500 Healthsouth Corporation*................................................ 72,813
3,800 Medtronic Incorporated.................................................. 212,325
8,000 Mentor Corporation...................................................... 184,000
5,000 OrNda Healthcorp*....................................................... 116,250
-----------
773,963
-----------
HOTELS, RESTAURANTS--0.88%
500 ITT Corporation*........................................................ 26,500
3,000 Mirage Resorts Incorporated*............................................ 103,500
-----------
130,000
-----------
INTERNATIONAL OIL--2.70%
4,200 Chevron Corporation..................................................... 220,500
1,600 Mobil Corporation....................................................... 179,200
-----------
399,700
-----------
LEISURE, LUXURY--1.04%
5,000 Mattel Incorporated..................................................... 153,750
-----------
LIFE INSURANCE--1.36%
2,800 Equitable of Iowa Companies............................................. 89,950
2,500 Reliastar Financial Corporation......................................... 110,938
-----------
200,888
-----------
MISCELLANEOUS FINANCE--0.98%
3,500 American Express Company................................................ 144,813
-----------
MISCELLANEOUS MINING & METALS--1.43%
5,000 Freeport McMoran Copper & Gold Incorporated............................. 140,625
1,000 Potash Corporation of Saskatchewan Incorporated......................... 70,875
-----------
211,500
-----------
MOTOR VEHICLES--1.31%
3,500 Chrysler Corporation.................................................... 193,813
-----------
OIL SERVICES--1.20%
3,500 Halliburton Company..................................................... 177,188
-----------
</TABLE>
44
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH & INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONTINUED)
OTHER INSURANCE--8.57%
2,500 Ace Limited............................................................. $ 99,375
3,500 AFLAC Incorporated...................................................... 151,812
5,091 Allstate Corporation.................................................... 209,367
4,000 American Bankers Insurance Group........................................ 156,000
2,250 American International Group Incorporated............................... 208,125
1,500 CIGNA Corporation....................................................... 154,875
500 ITT Hartford Group Incorporated*........................................ 24,188
1,300 Prudential Reinsurance Holdings Incorporated............................ 30,388
4,200 St. Paul Companies Incorporated......................................... 233,625
-----------
1,267,755
-----------
PAPER--3.18%
1,700 Champion International Corporation...................................... 71,400
2,808 Kimberly Clark Corporation.............................................. 232,362
6,000 Westvaco Corporation.................................................... 166,500
-----------
470,262
-----------
PRODUCERS' GOODS--10.85%
4,000 AGCO Corporation........................................................ 204,000
6,000 Deere & Company......................................................... 211,500
3,000 Dover Corporation....................................................... 110,625
2,400 DSC Communications Corporation.......................................... 88,500
900 General Electric Company................................................ 64,800
500 ITT Industries Incorporated............................................. 12,000
5,100 Kulicke & Soffa Industries Incorporated*................................ 118,575
2,700 Pentair Incorporated.................................................... 134,325
2,000 Textron Incorporated.................................................... 135,000
1,600 United States Robotics Corporation*..................................... 140,400
2,500 United Technologies Corporation......................................... 237,188
4,000 Varity Corporation*..................................................... 148,500
-----------
1,605,413
-----------
PUBLISHING--1.02%
3,900 Reynolds & Reynolds Company............................................. 151,612
-----------
RAILROAD, TRANSIT--1.53%
1,500 Conrail Incorporated.................................................... 105,000
2,500 GATX Corporation........................................................ 121,562
-----------
226,562
-----------
REAL PROPERTY--1.48%
7,500 U.S. Home Corporation*.................................................. 218,438
-----------
RETAIL (ALL OTHER)--2.15%
6,000 Consolidated Stores Corporation*........................................ 130,500
4,796 Sears Roebuck & Company................................................. 187,043
-----------
317,543
-----------
RETAIL (DRUG STORE)--1.51%
5,000 Jack Eckerd Corporation*................................................ 223,125
-----------
</TABLE>
45
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH & INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS--(CONCLUDED)
SERVICES--2.62%
1,600 BMC Software Incorporated............................................... $ 68,400
2,400 Computer Associates International Incorporated.......................... 136,500
12,000 Computervision Corporation*............................................. 184,500
-----------
389,400
-----------
TOBACCO--0.79%
1,300 Philip Morris Companies Incorporated.................................... 117,650
-----------
Total Common Stocks (cost--$11,876,765)............................................. 14,485,461
-----------
PREFERRED STOCKS--0.92%
PAPER--0.92%
3,000 International Paper Capital Trust (cost--$130,627)...................... 135,750
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES
- --------- --------------------- ---------------
<C> <S> <C> <C> <C>
CORPORATE BONDS--0.70%
$ 100 Cooper Industries Incorporated
(cost--$103,000)............................ 01/01/15 7.050% 103,000
-----------
REPURCHASE AGREEMENT--1.59%
235 Repurchase Agreement dated 12/29/95 with
State Street Bank & Trust Company,
collateralized by $234,108 U.S. Treasury
Notes, 5.875%, due 07/31/97; proceeds:
$235,131 (cost--$235,000)................... 01/02/96 5.000 235,000
-----------
Total Investments (cost--$12,345,392)--101.10%.......... 14,959,211
Liabilities in excess of other assets--1.10%............ (162,654)
-----------
Net Assets--100.00%..................................... $14,796,557
-----------
-----------
</TABLE>
- ------------
* Non-income producing security
See accompanying notes to financial statements
46
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
47
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY
MARKET GROWTH
PORTFOLIO PORTFOLIO
----------- -----------
<S> <C> <C>
ASSETS
Investments, at value (cost--$22,031,013; $32,184,479;
$27,438,026; $36,451,804; $19,615,253; $23,282,245 and
$12,345,392, respectively)...................................... $22,031,013 $46,551,328
Cash.............................................................. 1,937 3,345
Cash denominated in foreign currencies, at value (cost--$0, $0,
$19,935, $1,156,276, $0, $0 and $0, respectively)............... -- --
Dividends and interest receivable................................. 42,175 32,189
Receivable for investments sold................................... -- 261,599
Receivable for shares of beneficial interest sold................. -- 46
Unrealized appreciation of forward foreign currency contracts..... -- --
Receivable for foreign taxes withheld............................. -- --
Variation margin receivable....................................... -- --
Deferred organizational expenses and other assets................. 14,323 15,775
----------- -----------
Total assets.................................................. 22,089,448 46,864,282
----------- -----------
LIABILITIES
Dividends payable to shareholders................................. 99,205 4,015,525
Payable to affiliates............................................. 9,993 28,870
Payable for investments purchased................................. -- --
Payable for shares of beneficial interest repurchased............. -- --
Unrealized depreciation of forward foreign currency contracts..... -- --
Accrued expenses and other liabilities............................ 6,052 36,026
----------- -----------
Total liabilities............................................. 115,250 4,080,421
----------- -----------
NET ASSETS
Beneficial interest shares of $0.001 par value
outstanding--21,988,433; 2,435,127; 2,376,058; 3,188,429;
1,294,892; 2,187,338 and 1,251,232, respectively (unlimited
amount authorized).............................................. 21,990,044 28,462,769
Undistributed (overdistributed) net investment income............. -- (1,320)
Accumulated net realized gains (losses) from investment
transactions.................................................... (15,846) (44,437)
Net unrealized appreciation of investments and assets and
liabilities denominated in foreign currencies................... -- 14,366,849
----------- -----------
Net assets.................................................... $21,974,198 $42,783,861
=========== ===========
Net asset value, offering price and redemption value per share..... $1.00 $17.57
===== ======
</TABLE>
See accompanying notes to financial statements
48
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL GLOBAL STRATEGIC ASSET GROWTH
GROWTH INCOME FIXED INCOME ALLOCATION AND INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
$28,552,373 $37,381,557 $ 19,756,088 $25,650,919 $14,959,211
8,111 3,468 1,623 3,119 834
20,179 1,152,254 -- -- --
15,983 1,158,505 94,766 159,205 26,440
314,825 900,583 -- -- 18,338
-- -- -- -- --
-- 120,641 -- -- --
22,326 4,602 -- -- --
-- -- 20,438 -- --
18,929 178 16,218 14,332 24,900
- ----------- ----------- ------------ ----------- -----------
28,952,726 40,721,788 19,889,133 25,827,575 15,029,723
- ----------- ----------- ------------ ----------- -----------
-- 3,347,850 2,128,802 2,329,515 157,655
18,299 25,254 6,802 16,507 8,808
242,382 1,426,520 3,978,641 42,688 42,688
-- -- -- -- --
-- 188,690 -- -- --
184,792 33,900 33,924 25,579 24,015
- ----------- ----------- ------------ ----------- -----------
445,473 5,022,214 6,148,169 2,414,289 233,166
- ----------- ----------- ------------ ----------- -----------
31,582,432 35,656,730 13,509,806 21,047,572 12,193,702
-- (282,503) (4,967) (1,903) (2,532)
(4,191,804) (533,667) (1,557) (1,057) (8,432)
1,116,625 859,014 237,682 2,368,674 2,613,819
- ----------- ----------- ------------ ----------- -----------
$28,507,253 $35,699,574 $ 13,740,964 $23,413,286 $14,796,557
=========== =========== ============ =========== ===========
$12.00 $11.20 $10.61 $10.70 $11.83
====== ====== ====== ====== ======
</TABLE>
49
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Statement of Operations
For the Year Ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY
MARKET GROWTH
PORTFOLIO PORTFOLIO
---------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Interest (net of foreign withholding taxes, if any)............... $1,549,965 $ 358,660
Dividends (net of foreign withholding taxes, if any).............. -- 200,099
---------- -----------
1,549,965 558,759
---------- -----------
EXPENSES:
Investment advisory and administration............................ 128,777 334,603
Custody and accounting............................................ 29,496 47,563
Legal and audit................................................... 21,727 32,809
Reports and notices to shareholders............................... 16,927 31,645
Trustees' fees and expenses....................................... 3,500 3,500
Transfer agency fees and expenses................................. 1,500 1,500
Amortization of organizational expenses........................... -- --
Other expenses.................................................... 1,500 3,986
---------- -----------
203,427 455,606
---------- -----------
Net investment income............................................. 1,346,538 103,153
---------- -----------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT TRANSACTIONS:
Net realized gains (losses) from:
Investment transactions......................................... 1,021 4,013,576
Futures contracts............................................... -- --
Foreign currency transactions................................... -- --
Net change in unrealized appreciation/depreciation of:
Investments..................................................... -- 8,506,699
Assets, liabilities and forward contracts denominated in foreign
currencies.................................................... -- --
---------- -----------
Net realized and unrealized gains (losses) from investment
transactions.................................................... 1,021 12,520,275
---------- -----------
Net increase (decrease) in net assets resulting from operations... $1,347,559 $12,623,428
---------- -----------
---------- -----------
</TABLE>
See accompanying notes to financial statements
50
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL GLOBAL STRATEGIC ASSET GROWTH
GROWTH INCOME FIXED INCOME ALLOCATION AND INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
$ 139,281 $3,947,536 $1,322,724 $ 898,418 $ 89,649
569,987 -- -- 150,652 221,089
- ----------- ---------- ------------ ---------- ----------
709,268 3,947,536 1,322,724 1,049,070 310,738
- ----------- ---------- ------------ ---------- ----------
257,692 351,681 90,046 198,377 94,315
285,014 116,301 27,660 36,441 38,119
75,946 35,500 37,518 26,671 24,557
46,803 32,506 16,332 18,959 10,893
3,500 3,500 3,500 3,500 3,500
1,500 1,500 1,500 1,500 1,500
-- -- -- -- 10,585
4,344 17,990 1,939 1,948 1,582
- ----------- ---------- ------------ ---------- ----------
674,799 558,978 178,495 287,396 185,051
- ----------- ---------- ------------ ---------- ----------
34,469 3,388,558 1,144,229 761,674 125,687
- ----------- ---------- ------------ ---------- ----------
(3,970,722) 654,621 881,108 1,787,409 592,325
-- -- 102,281 -- --
(125,201) 530,557 (8) -- --
2,259,000 1,949,600 936,088 2,985,937 2,818,337
4,191 (555,776) (9,403) -- --
- ----------- ---------- ------------ ---------- ----------
(1,832,732) 2,579,002 1,910,066 4,773,346 3,410,662
- ----------- ---------- ------------ ---------- ----------
$(1,798,263) $5,967,560 $3,054,295 $5,535,020 $3,536,349
=========== ========== ============ ========== ==========
</TABLE>
51
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
--------------------------
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income............................................. $ 1,346,538 $ 734,045
Net realized gains (losses) from investment transactions.......... 1,021 (15,083)
----------- -----------
Net increase in net assets resulting from operations.............. 1,347,559 718,962
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................. (1,346,538) (734,045)
----------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares.............................. 18,374,704 36,901,166
Cost of shares repurchased........................................ (22,800,127) (27,969,522)
Proceeds from dividends reinvested................................ 1,356,406 658,122
----------- -----------
Net increase (decrease) in net assets derived from beneficial
interest transactions........................................... (3,069,017) 9,589,766
----------- -----------
Net increase (decrease) in net assets............................. (3,067,996) 9,574,683
NET ASSETS:
Beginning of period............................................... 25,042,194 15,467,511
----------- -----------
End of period..................................................... $21,974,198 $25,042,194
----------- -----------
----------- -----------
</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,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income............................................. $ 103,153 $ 19,344
Net realized gains from investment transactions................... 4,013,576 2,975,347
Net change in unrealized appreciation/depreciation of
investments..................................................... 8,506,699 (9,049,293)
----------- -----------
Net increase (decrease) in net assets resulting from operations... 12,623,428 (6,054,602)
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................. (190,395) (22,235)
Net realized gains from investment transactions................... (3,971,808) (3,714,713)
----------- -----------
(4,162,203) (3,736,948)
----------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares.............................. 6,496,559 21,466,135
Cost of shares repurchased........................................ (14,453,279) (26,957,944)
Proceeds from dividends reinvested................................ 3,144,360 2,722,424
----------- -----------
Net decrease in net assets derived from beneficial interest
transactions.................................................... (4,812,360) (2,769,385)
----------- -----------
Net increase (decrease) in net assets............................. 3,648,865 (12,560,935)
NET ASSETS:
Beginning of period............................................... 39,134,996 51,695,931
----------- -----------
End of period..................................................... $42,783,861 $39,134,996
----------- -----------
----------- -----------
</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,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income (loss)...................................... $ 34,469 $ (55,523)
Net realized gains (losses) from investment transactions.......... (3,970,722) 4,058,510
Net realized losses from foreign currency transactions............ (125,201) (2,376,224)
Net change in unrealized appreciation/depreciation of:
Investments.................................................... 2,259,000 (7,325,051)
Assets, liabilities and forward contracts denominated in
foreign currencies........................................... 4,191 (101,917)
----------- -----------
Net decrease in net assets resulting from operations.............. (1,798,263) (5,800,205)
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................. -- (18,320)
Net realized gains from investment transactions................... -- (2,355,256)
----------- -----------
-- (2,373,576)
----------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares.............................. 2,842,004 22,436,105
Cost of shares repurchased........................................ (15,384,651) (13,265,659)
Proceeds from dividends reinvested................................ 2,355,062 1,461,895
----------- -----------
Net increase (decrease) in net assets derived from beneficial
interest transactions........................................... (10,187,585) 10,632,341
----------- -----------
Net increase (decrease) in net assets............................. (11,985,848) 2,458,560
NET ASSETS:
Beginning of period............................................... 40,493,101 38,034,541
----------- -----------
End of period..................................................... $28,507,253 $40,493,101
----------- -----------
----------- -----------
</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,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income............................................. $ 3,388,558 $ 4,574,255
Net realized gains (losses) from investment transactions.......... 654,621 (1,051,761)
Net realized gains (losses) from foreign currency transactions.... 530,557 (3,269,773)
Net change in unrealized appreciation/depreciation of:
Investments.................................................... 1,949,600 (4,218,170)
Assets, liabilities and forward contracts denominated in
foreign currencies........................................... (555,776) (77,672)
----------- -----------
Net increase (decrease) in net assets resulting from operations... 5,967,560 (4,043,121)
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................. (3,743,994) (1,029,860)
----------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares.............................. 1,301,569 16,258,202
Cost of shares repurchased........................................ (21,821,807) (30,366,903)
Proceeds from dividends reinvested................................ 1,307,800 7,259,738
----------- -----------
Net decrease in net assets derived from beneficial interest
transactions.................................................... (19,212,438) (6,848,963)
----------- -----------
Net decrease in net assets........................................ (16,988,872) (11,921,944)
NET ASSETS:
Beginning of period............................................... 52,688,446 64,610,390
----------- -----------
End of period..................................................... $35,699,574 $52,688,446
----------- -----------
----------- -----------
</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,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income............................................. $ 1,144,229 $ 1,405,206
Net realized gains from investment transactions................... 881,108 163,750
Net realized gains from futures contracts......................... 102,281 --
Net realized losses from foreign currency transactions............ (8) --
Net change in unrealized appreciation/depreciation of:............
Investments.................................................... 936,088 (2,805,179)
Assets, liabilities and forward contracts denominated in
foreign currencies........................................... (9,403) --
----------- -----------
Net increase (decrease) in net assets resulting from operations... 3,054,295 (1,236,223)
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................. (1,139,505) (1,407,083)
Net realized gains from investment transactions................... (989,297) (163,150)
----------- -----------
(2,128,802) (1,570,233)
----------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares.............................. 2,921,636 8,119,615
Cost of shares repurchased........................................ (8,696,373) (12,517,855)
Proceeds from dividends reinvested................................ 1,570,233 1,871,128
----------- -----------
Net decrease in net assets derived from beneficial interest
transactions.................................................... (4,204,504) (2,527,112)
----------- -----------
Net decrease in net assets........................................ (3,279,011) (5,333,568)
NET ASSETS:
Beginning of period............................................... 17,019,975 22,353,543
----------- -----------
End of period..................................................... $13,740,964 $17,019,975
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements
56
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSET ALLOCATION PORTFOLIO
--------------------------
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income............................................. $ 761,674 $ 723,629
Net realized gains from investment transactions................... 1,787,409 2,076,190
Net change in unrealized appreciation/depreciation of
investments..................................................... 2,985,937 (5,970,967)
----------- -----------
Net increase (decrease) in net assets resulting from operations... 5,535,020 (3,171,148)
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................. (761,194) (726,012)
Net realized gains from investment transactions................... (1,568,321) (2,382,107)
----------- -----------
(2,329,515) (3,108,119)
----------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares.............................. 3,408,739 7,251,661
Cost of shares repurchased........................................ (9,485,923) (15,327,061)
Proceeds from dividends reinvested................................ 3,021,779 4,250,712
----------- -----------
Net decrease in net assets derived from beneficial interest
transactions.................................................... (3,055,405) (3,824,688)
----------- -----------
Net increase (decrease) in net assets............................. 150,100 (10,103,955)
NET ASSETS:
Beginning of period............................................... 23,263,186 33,367,141
----------- -----------
End of period..................................................... $23,413,286 $23,263,186
----------- -----------
----------- -----------
</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,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income............................................. $ 125,687 $ 141,269
Net realized gains from investment transactions................... 592,325 213,925
Net change in unrealized appreciation/depreciation of
investments..................................................... 2,818,337 (1,235,102)
----------- -----------
Net increase (decrease) in net assets resulting from operations... 3,536,349 (879,908)
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................. (125,999) (140,023)
Net realized gains from investment transactions................... (31,656) --
----------- -----------
(157,655) (140,023)
----------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares.............................. 5,263,538 5,138,623
Cost of shares repurchased........................................ (6,857,288) (7,799,194)
Proceeds from dividends reinvested................................ 140,023 271,161
----------- -----------
Net decrease in net assets derived from beneficial interest
transactions.................................................... (1,453,727) (2,389,410)
----------- -----------
Net increase (decrease) in net assets............................. 1,924,967 (3,409,341)
NET ASSETS:
Beginning of period............................................... 12,871,590 16,280,931
----------- -----------
End of period..................................................... $14,796,557 $12,871,590
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements
58
<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 have the authority to issue an unlimited number of shares of
beneficial interest, par value $0.001.
As of December 31, 1995, the Fund had ten 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 (formerly the Government
Portfolio); the Asset Allocation Portfolio, the Growth and Income Portfolio
(formerly the Dividend Growth Portfolio); the Aggressive Growth Portfolio, the
Balanced Portfolio and the High Grade Fixed Income Portfolio (formerly the Fixed
Income Portfolio) (collectively referred to as the "Portfolios"). The financial
statements of the Aggressive Growth Portfolio, the Balanced Portfolio and the
High Grade Fixed Income Portfolio are not included herein.
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.
Valuation of Investments--Securities which 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 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, which approximates market value, is used to value debt obligations with
sixty days or less remaining to maturity 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
59
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
custodians. 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 on the identified cost basis. Dividend income is
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 become aware of such dividends). Interest income is recorded on an
accrual basis. Discounts are accreted 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 federal income tax regulations; such amount is categorized as
foreign exchange gain or loss for both financial reporting and income tax
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 to 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. Forward contracts may also be used to
shift a Portfolio's exposure to foreign currency fluctuations from one country
to another.
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 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, U.S. government securities or liquid, high-grade debt
60
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 book
purposes as unrealized gains or losses by the Portfolios. Realized gains and
losses include net gains or losses recognized by the Portfolio on contracts
which have matured.
Option Writing--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.
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 Global Income
Portfolio). At December 31, 1995, the Portfolios had no reverse repurchase
agreements outstanding.
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
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- --------------------------------------------------------------------------------
"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.
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:
ANNUAL RATE
AS A PERCENTAGE
OF EACH
PORTFOLIO'S
AVERAGE NET ASSETS
------------------
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
Asset Allocation Portfolio................................ 0.75
Growth and Income Portfolio............................... 0.70
Under separate contracts, Mitchell Hutchins pays GE Investment Management
Incorporated and Pacific Investment Management Company to serve as the
respective sub-advisers of Global Growth Portfolio and Strategic Fixed Income
Portfolio. Mitchell Hutchins (not the Portfolios) pays the sub-advisers a fee,
computed daily and paid monthly, at an annual rate of 0.29% and 0.25% of each
Portfolio's average net assets.
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- --------------------------------------------------------------------------------
During the fiscal year ended December 31, 1995, the Growth Portfolio paid
$900 in brokerage commissions to PaineWebber for transactions executed on behalf
of that Portfolio.
INVESTMENTS IN SECURITIES
For the year ended December 31, 1995, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were:
PURCHASES SALES
----------- -----------
Growth Portfolio................................ $15,917,383 $25,828,305
Global Growth Portfolio......................... $49,864,759 $61,013,325
Global Income Portfolio......................... $57,120,009 $59,903,239
Strategic Fixed Income Portfolio................ $38,414,756 $40,773,762
Asset Allocation Portfolio...................... $39,893,008 $43,742,349
Growth and Income Portfolio..................... $16,580,722 $16,323,093
At December 31, 1995, 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..................................... $ 15,935,283 $ 1,568,434 $ 14,366,849
Global Growth Portfolio.............................. $ 2,669,907 $ 1,555,560 $ 1,114,347
Global Income Portfolio.............................. $ 1,056,506 $ 126,753 $ 929,753
Strategic Fixed Income Portfolio..................... $ 158,158 $ 17,323 $ 140,835
Asset Allocation Portfolio........................... $ 2,604,844 $ 236,170 $ 2,368,674
Growth and Income Portfolio.......................... $ 2,791,053 $ 177,234 $ 2,613,819
</TABLE>
For federal income tax purposes, the cost of securities owned at December
31, 1995 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.
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At December 31, 1995, 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:
MONEY GLOBAL GLOBAL
MARKET GROWTH INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
--------- ---------- ---------
2001............................ $ 763 -- --
2002............................ 15,083 -- $ 526,312
2003............................ -- $4,171,198 --
--------- ---------- ---------
$ 15,846 $4,171,198 $ 526,312
--------- ---------- ---------
--------- ---------- ---------
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.
At December 31, 1995, the effect of permanent "book/tax" reclassifications
resulted in increases (decreases) to the components of net assets as follows:
<TABLE>
<CAPTION>
UNDISTRIBUTED
(OVERDISTRIBUTED) ACCUMULATED
NET NET REALIZED
INVESTMENT GAINS
INCOME (LOSSES) PAID-IN-CAPITAL
----------------- ------------- ---------------
<S> <C> <C> <C>
Growth Portfolio.................................... $ (3,846) $ 6,604 $ (2,758)
Global Growth Portfolio............................. $ (34,469) $ 111,367 $ (76,898)
Global Income Portfolio............................. $ 530,557 $(530,557) --
Strategic Fixed Income Portfolio.................... $ (4,507) $ 4,507 --
</TABLE>
WRITTEN OPTION ACTIVITY
Written option activity for the year ended December 31, 1995 for the
Strategic Fixed Income Portfolio were as follows:
NUMBER OF AMOUNT OF
OPTIONS PREMIUMS
--------- ---------
Options outstanding at December 31, 1994............... -- $ --
Options written during the year ended December 31, 1995 1 327
Options cancelled in closing purchase transactions..... -- --
Options expired prior to exercise...................... (1) (327)
Options exercised...................................... -- --
--- -------
Options outstanding at December 31, 1995............... 0 $ 0
=== =======
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- --------------------------------------------------------------------------------
Written option activity for the year ended December 31, 1995 for the Growth
and Income Portfolio were as follows:
NUMBER OF AMOUNT OF
OPTIONS PREMIUMS
--------- ---------
Options outstanding at December 31, 1994............... 3 $ 291
Options written during the year ended December 31, 1995 13 2,495
Options cancelled in closing purchase transactions..... (11) (1,983)
Options expired prior to exercise...................... (5) (803)
Options exercised...................................... -- --
--- --------
Options outstanding at December 31, 1995............... 0 $ 0
-- --
=== ========
SHARES OF BENEFICIAL INTEREST
At December 31, 1995, 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, 1995
-----------------------------------------------------------------------------------------------------
STRATEGIC
MONEY GLOBAL GLOBAL FIXED ASSET GROWTH AND
MARKET GROWTH GROWTH INCOME INCOME ALLOCATION INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares sold............... 18,374,704 395,367 241,937 112,665 263,966 313,446 490,246
Shares redeemed........... (22,800,127) (865,482) (1,313,670) (1,885,539) (767,469) (880,843) (660,141)
Reinvestment of
dividends............... 1,356,406 216,758 193,445 117,825 152,154 317,414 15,387
----------- ---------- ---------- ---------- ---------- ---------- ----------
Net decrease in shares
outstanding............. (3,069,017) (253,357) (878,288) (1,655,049) (351,349) (249,983) (154,508)
----------- ---------- ---------- ---------- ---------- ---------- ----------
----------- ---------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1994
-----------------------------------------------------------------------------------------------------
STRATEGIC
MONEY GLOBAL GLOBAL FIXED ASSET GROWTH AND
MARKET GROWTH GROWTH INCOME INCOME ALLOCATION INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares sold............... 36,901,166 1,273,859 1,580,027 1,420,486 706,654 634,690 545,528
Shares redeemed........... (27,969,522) (1,605,950) (963,682) (2,707,108) (1,092,356) (1,350,041) (817,625)
Reinvestment of
dividends............... 658,122 157,923 96,512 619,553 157,635 360,587 27,783
----------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in
shares outstanding...... 9,589,766 (174,168) 712,857 (667,069) (228,067) (354,764) (244,314)
----------- ---------- ---------- ---------- ---------- ---------- ----------
----------- ---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
SUBSEQUENT EVENTS
At the close of business on January 26, 1996, shares of Asset Allocation
Portfolio were substituted for all shares of Balanced Portfolio, the
sub-advisory agreement between Mitchell Hutchins and Provident Investment
Counsel, Inc. was terminated, and the Asset Allocation Portfolio was renamed the
"Balanced Portfolio." The former Balanced Portfolio was not offered to contract
owners of the American Benefit Variable Annuity Account.
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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,
---------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<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.............................. 0.05 0.03 0.02 0.03 0.05
------- ------- ------- ------- -------
Dividends from net investment income............... (0.05) (0.03) (0.02) (0.03) (0.05)
------- ------- ------- ------- -------
Net asset value, end of period..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total investment return (1)........................ 5.22% 3.43% 2.45% 3.00% 5.00%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratios/Supplemental Data:
Net assets, end of period (000's).................. $21,974 $25,042 $15,468 $19,383 $20,249
Expenses to average net assets..................... 0.79% 0.88% 0.86% 0.81% 1.00%
Net investment income to average net assets........ 5.23% 3.56% 2.43% 3.13% 4.92%
</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 date, and a sale at net asset value on the last
day of each period reported.
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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,
---------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 14.56 $ 18.06 $ 15.68 $ 14.92 $ 10.57
------- ------- ------- ------- -------
Net investment income.............................. 0.04 0.01 -- 0.11 0.10
Net realized and unrealized gains (losses) from
investment transactions........................... 4.68 (2.13) 3.08 0.76 4.35
------- ------- ------- ------- -------
Total income (loss) from investment operations..... 4.72 (2.12) 3.08 0.87 4.45
------- ------- ------- ------- -------
Dividends from net investment income............... (0.08) (0.01) -- (0.11) (0.10)
Distributions from net realized gains from
investments........................................ (1.63) (1.37) (0.70) -- --
------- ------- ------- ------- -------
Total dividends and distributions.................. (1.71) (1.38) (0.70) (0.11) (0.10)
------- ------- ------- ------- -------
Net asset value, end of period..................... $ 17.57 $ 14.56 $ 18.06 $ 15.68 $ 14.92
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total investment return (1)........................ 32.50% (11.65)% 19.61% 5.83% 42.10%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratios/Supplemental Data:
Net assets, end of period (000's).................. $42,784 $39,135 $51,696 $46,479 $37,470
Expenses to average net assets..................... 1.02% 1.00% 0.92% 0.94% 1.13%
Net investment income to average net assets........ 0.23% 0.04% 0.00% 0.78% 1.07%
Portfolio turnover................................. 41% 27% 35% 29% 28%
</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 capital
gain distributions at net asset value on the payable date, and a sale at net
asset value on the last day of each period reported.
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PaineWebber Series Trust
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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,
---------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 12.44 $ 14.97 $ 11.10 $ 12.06 $ 11.76
------- ------- ------- ------- -------
Net investment income (loss)....................... 0.01 (0.03) 0.03 0.10 0.23
Net realized and unrealized gains (losses) from
investment transactions.......................... (0.45) (1.76) 4.42 (1.01) 0.35
------- ------- ------- ------- -------
Total income (loss) from investment operations..... (0.44) (1.79) 4.45 (0.91) 0.58
------- ------- ------- ------- -------
Dividends from net investment income............... -- (0.01) -- (0.05) (0.23)
Distributions from net realized gains from
investments...................................... -- (0.73) (0.58) -- (0.05)
------- ------- ------- ------- -------
Total dividends and distributions.................. 0.00 (0.74) (0.58) (0.05) (0.28)
------- ------- ------- ------- -------
Net asset value, end of period..................... $ 12.00 $ 12.44 $ 14.97 $ 11.10 $ 12.06
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total investment return (1)........................ (3.54)% (11.94)% 40.02% (7.55)% 4.93%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratios/Supplemental Data:
Net assets, end of period (000's).................. $28,507 $40,493 $38,035 $21,493 $24,308
Expenses to average net assets..................... 1.96% 1.48% 1.40% 1.46% 1.53%
Net investment income (loss) to average net
assets........................................... 0.10% (0.13)% 0.38% 0.82% 2.12%
Portfolio turnover................................. 157% 175% 267% 127% 89%
</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 capital
gain distributions at net asset value on the payable date, and a sale at net
asset value on the last day of each period reported.
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PaineWebber Series Trust
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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,
--------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 10.88 $ 11.72 $ 11.17 $ 11.65 $ 11.16
-------- -------- -------- -------- --------
Net investment income (loss).................... (0.05) 0.97 0.96 0.80 0.75
Net realized and unrealized gains (losses) from
investment transactions....................... 1.52 (1.60) 0.90 (0.65) 0.40
-------- -------- -------- -------- --------
Total income (loss) from investment
operations.................................... 1.47 (0.63) 1.86 0.15 1.15
-------- -------- -------- -------- --------
Dividends from net investment income............ (1.15) (0.21) (0.94) (0.56) (0.65)
Distributions in excess of net investment
income........................................ -- -- (0.16) -- --
Distributions from net realized gains from
investments................................... -- -- (0.21) (0.07) (0.01)
-------- -------- -------- -------- --------
Total dividends and distributions............... (1.15) (0.21) (1.31) (0.63) (0.66)
-------- -------- -------- -------- --------
Net asset value, end of period.................. $ 11.20 $ 10.88 $ 11.72 $ 11.17 $ 11.65
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total investment return (1)..................... 13.58% (5.56)% 16.65% 1.29% 10.30%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratios/Supplemental Data:
Net assets, end of period (000's)............... $ 35,700 $ 52,688 $ 64,610 $ 63,172 $ 51,988
Expenses to average net assets.................. 1.19% 1.17% 0.98% 1.07% 1.20%
Net investment income to average net assets..... 7.21% 7.23% 7.47% 7.20% 7.59%
Portfolio turnover.............................. 160% 97% 69% 75% 14%
</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 capital
gain distributions at net asset value on the payable date, and a sale at net
asset value on the last day of each period reported.
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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,
---------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 10.34 $ 11.93 $ 11.58 $ 11.61 $ 10.49
------- ------- ------- ------- -------
Net investment income.............................. 0.88 0.85 0.87 0.74 0.47
Net realized and unrealized gains (losses) from
investment transactions.......................... 1.03 (1.49) 0.48 0.05 1.12
------- ------- ------- ------- -------
Total income (loss) from investment operations..... 1.91 (0.64) 1.35 0.79 1.59
------- ------- ------- ------- -------
Dividends from net investment income............... (0.88) (0.85) (0.87) (0.74) (0.47)
Distributions from net realized gains from
investments...................................... (0.76) (0.10) (0.13) (0.08) --
------- ------- ------- ------- -------
Total dividends and distributions.................. (1.64) (0.95) (1.00) (0.82) (0.47)
------- ------- ------- ------- -------
Net asset value, end of period..................... $ 10.61 $ 10.34 $ 11.93 $ 11.58 $ 11.61
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total investment return (1)........................ 18.51% (5.34)% 11.66% 6.76% 15.17%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratios/Supplemental Data:
Net assets, end of period (000's).................. $13,741 $17,020 $22,354 $24,103 $15,690
Expenses to average net assets*.................... 0.99% 0.89% 0.79% 0.76% 1.25%
Net investment income to average net assets*....... 6.35% 6.64% 6.13% 6.59% 6.43%
Portfolio turnover................................. 234% 54% 8% 23% 1%
</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 capital
gain distributions at net asset value on the payable date, and a sale at net
asset value on the last day of each period reported.
* During the year ended December 31, 1991, Mitchell Hutchins agreed to
reimburse the Portfolio for a portion of its operating expenses and waived
all or a portion 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 to average net assets would have
been 1.28% and 6.40%, respectively, for the year ended December 31, 1991.
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Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
ASSET ALLOCATION PORTFOLIO
---------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 9.54 $ 11.95 $ 11.63 $ 11.39 $ 9.99
------- ------- ------- ------- -------
Net investment income.............................. 0.35 0.30 0.33 0.35 0.47
Net realized and unrealized gains (losses) from
investment transactions.......................... 1.88 (1.44) 1.48 0.24 1.40
------- ------- ------- ------- -------
Total income (loss) from investment operations..... 2.23 (1.14) 1.81 0.59 1.87
------- ------- ------- ------- -------
Dividends from net investment income............... (0.35) (0.30) (0.33) (0.35) (0.47)
Distributions from net realized gains from
investments...................................... (0.72) (0.97) (1.16) -- --
------- ------- ------- ------- -------
Total dividends and distributions.................. (1.07) (1.27) (1.49) (0.35) (0.47)
------- ------- ------- ------- -------
Net asset value, end of period..................... $ 10.70 $ 9.54 $ 11.95 $ 11.63 $ 11.39
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total investment return (1)........................ 23.27% (9.59)% 15.76% 5.18% 18.73%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratios/Supplemental Data:
Net assets, end of period (000's).................. $23,413 $23,263 $33,367 $38,583 $33,327
Expenses to average net assets..................... 1.09% 1.03% 0.95% 0.93% 0.94%
Net investment income to average net assets........ 2.88% 2.30% 2.27% 3.11% 4.64%
Portfolio turnover................................. 171% 112% 60% 31% 101%
</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 capital
gains distributions at net asset value on the payable date, and a sale at
net asset value on the last day of each period reported.
71
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- --------------------------------------------------------------------------------
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 FOR THE PERIOD
31, JANUARY 2, 1992+
----------------------------- TO DECEMBER 31,
1995 1994 1993 1992
------- ------- ------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 9.16 $ 9.87 $ 10.26 $ 10.00
------- ------- ------- ------
Net investment income.............................. 0.10 0.10 0.16 0.08
Net realized and unrealized gains (losses) from
investment transactions.......................... 2.70 (0.71) (0.39) 0.26
------- ------- ------- ------
Total income (loss) from investment operations..... 2.80 (0.61) (0.23) 0.34
------- ------- ------- ------
Dividends from net investment income............... (0.10) (0.10) (0.16) (0.08)
Distributions from net realized gains from
investments...................................... (0.03) -- -- --
------- ------- ------- ------
Total dividends and distributions.................. (0.13) (0.10) (0.16) (0.08)
------- ------- ------- ------
Net asset value, end of period..................... $ 11.83 $ 9.16 $ 9.87 $ 10.26
------- ------- ------- ------
------- ------- ------- ------
Total investment return (1)........................ 30.52% (6.18)% (2.26)% 3.40%
------- ------- ------- ------
------- ------- ------- ------
Ratios/Supplemental Data:
Net assets, end of period (000's).................. $14,797 $12,872 $16,281 $20,037
Expenses to average net assets..................... 1.37% 1.35% 1.12% 1.29%*
Net investment income to average net assets........ 0.94% 1.06% 1.37% 1.21%*
Portfolio turnover................................. 134% 150% 52% 14%
</TABLE>
- ------------
+ Commencement of operations
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and capital
gain distributions at net asset value on the payable date, and a sale at net
asset value on the last day of each period reported. Total returns for
periods less than one year are not annualized.
* Annualized
72
<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, Asset Allocation and Growth and Income
Portfolios) (the "Fund") as of December 31, 1995 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. Our procedures included confirmation of investments owned as of
December 31, 1995 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, 1995, 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.
/s/ Ernst & Young LLP
New York, New York
February 7, 1996
73
<PAGE>
PaineWebber Series Trust
- --------------------------------------------------------------------------------
Shareholder Information
- --------------------------------------------------------------------------------
STRATEGIC FIXED INCOME PORTFOLIO
A special meeting of the shareholders of the Strategic Fixed Income
Portfolio was held on September 21, 1995. At the meeting, shareholders approved
the following actions:
1. A new sub-advisory agreement between Mitchell Hutchins and Pacific Investment
Management Company. The votes were as follows:
SHARES SHARES SHARES
VOTED FOR VOTED AGAINST WITHHOLD AUTHORITY
--------- ------------- ------------------
1,205,373 303,595 94,017
2. A change in the Portfolio's investment objective from "high current income
consistent with the preservation of capital and, secondarily, capital
appreciation" to "total return consisting of capital appreciation and
income." The votes were as follows:
SHARES SHARES SHARES
VOTED FOR VOTED AGAINST WITHHOLD AUTHORITY
--------- ------------- ------------------
1,244,584 302,867 55,534
3. An amendment to the Portfolio's fundamental investment limitation governing
borrowing to increase permissible borrowing from 10% to 33 1/3% of its assets
and to permit the use of dollar rolls. The votes were as follows:
SHARES SHARES SHARES
VOTED FOR VOTED AGAINST WITHHOLD AUTHORITY
--------- ------------- ------------------
1,084,818 394,858 123,309
Broker non-votes and abstentions are included within the "Shares Withhold
Authority" totals.
74
