PAINEWEBBER ENHANCED S&P 500 FUND
PAINEWEBBER ENHANCED NASDAQ-100 FUND ANNUAL REPORT
November 15, 2000
Dear Shareholder,
We are pleased to present you with the first annual report for PaineWebber
Enhanced S&P 500 Fund and PaineWebber Enhanced Nasdaq-100 Fund for the fiscal
period from April 26, 2000 through September 30, 2000.
MARKET REVIEW
================================================================================
During the fiscal year ended September 30, 2000, stocks in general and
technology stocks in particular had to endure the "perfect storm," as a variety
of factors combined to help batter equities. Inflationary fears, which prompted
the Federal Reserve (the "Fed") to raise Fed Fund interest rates another
half-percentage point to 6.5%, dominated the markets early in the period. Since
then, oil prices have risen, oil reserves were released in the U.S. with the
hopes of offsetting the price increases, and the Euro continued to falter in
comparison to the dollar.
These factors, in addition to continued warnings from the Fed that
inflationary pressures may yet re-enter the picture, filled the air with
uncertainty during this time, while finally beginning to take a toll on many
companies' bottom lines. Moreover, earnings reports that were just pennies off
expectations spurred investors to punish these stocks, while formerly
high-flying technology darlings were also hurt. The equity markets generally
suffered near the fiscal period-end as investors began to sell and seek
relatively safe havens for their gains. If there is a bright side to the violent
fluctuations of the market, it could be that the market has neared or reached
its bottom, perhaps clearing out weaker equities in which prices were not
supported by valuations or performance.
The Dow Jones Industrial Average declined 2.69% and the Standard & Poor's
500 Index fell 1.68% during the period. Despite their characteristic volatility,
the technology-driven Nasdaq 100 Index advanced 1.85% and the Nasdaq Composite
trailed it slightly but also advanced 1.18% during the Fund's fiscal period,
April 26, 2000 through September 30, 2000.
1
<PAGE>
PAINEWEBBER ENHANCED S&P 500 FUND ANNUAL REPORT
PAINEWEBBER ENHANCED
S&P 500 FUND
INVESTMENT GOAL:
Higher total return over the long term
than the S&P 500 Index
PORTFOLIO MANAGER:
DSI Team
DSI International Management, Inc.
COMMENCEMENT:
April 26, 2000
(Classes A, B, C and Y)
DIVIDEND PAYMENTS:
Annually
PORTFOLIO REVIEW
================================================================================
ENHANCED S&P 500 FUND - TOTAL RETURNS, PERIODS ENDED 9/30/00
3 Months Inception(o)
--------------------------------------------------------------------------------
Before Deducting Class A* -1.22% -3.10%
Maximum Sales Charge Class B** -1.33 -3.20
Class C+ -1.33 -3.20
Class Y++ -1.12 -2.90
--------------------------------------------------------------------------------
After Deducting Class A* -4.15 -6.01
Maximum Sales Charge Class B** -4.29 -6.10
Class C+ -1.97 -3.83
--------------------------------------------------------------------------------
S&P 500 Index -1.24 -1.68
Lipper S&P 500 Index Objective Funds Median -1.04 -1.63
--------------------------------------------------------------------------------
Past performance is no guarantee of future performance. Performance results for
the Fund assume reinvestment of all dividends and capital gains. The investment
return and the principal value of an investment in the Fund will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
(o) Inception: since commencement of issuance on April 26, 2000 for share
classes A, B, C and Y. Inception return for the Lipper Median is as of the
nearest Thursday: April 27, 2000. Inception return for the S&P 500 Index is
as of April 26, 2000.
* Maximum sales charge for Class A shares is 3.0% of the public offering
price. Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 3.0% and is
reduced to 0% after six years. Class B shares bear ongoing 12b-1
distribution and service fees.
+ Maximum contingent deferred sales charge for Class C shares is 0.65% and is
reduced to 0% after one year. Class C shares bear ongoing 12b-1
distribution and service fees.
++ The Fund offers Class Y shares to a limited group of eligible investors.
Class Y shares do not bear initial or contingent deferred sales charges or
ongoing 12b-1distribution and service fees.
PORTFOLIO HIGHLIGHTS
The Fund's annual return lagged behind the Lipper S&P 500 Index Objective
Funds Median, declining 3.10% for Class A shares and 3.20% for Class B shares,
compared to a 1.63% decrease for the peer group. The market return in the months
since the Fund's inception was a wild ride. Total returns for the fund declined
in three months and increased in two months, mirroring the overall markets.
General Electric Company (4.6%)* has remained the Fund's top holding during
this period, while the percentages of other household names, including Cisco
Systems (3.1%),* Intel (2.3%),* Microsoft (2.6%),* and Exxon Mobil (2.6%)* have
shifted rankings among the top ten holdings. Violent investor reaction to
shortfalls in earnings among many of these companies temporarily shook many of
these holdings. But intermittent rallies suggest that investors will likely
continue to flock back to companies exhibiting strong fundamentals, a ready
market and strong financials.
Although technology remains the top-weighted sector, the Fund has
diversified among major holdings by also focusing on sector champions such as
Pfizer (2.3%)* and Wal-Mart (1.8%).*
* Weightings represent percentages of net assets as of September 30, 2000.
The Fund's portfolio is actively managed and its composition will vary over
time.
2
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PAINEWEBBER ENHANCED S&P 500 FUND ANNUAL REPORT
PORTFOLIO STATISTICS
CHARACTERISTICS* 9/30/00
--------------------------------------------------------------------------------
Median Market Capitalization ($bln) 10.9
Wtd. Price/Earnings Ratio 20.1x
Wtd. Price/Book Ratio 12.0x
Net Assets ($mm) $ 20.5
Number of Securities 407
Stocks 100%
Cash 0%
--------------------------------------------------------------------------------
TOP FIVE SECTORS* 9/30/00
--------------------------------------------------------------------------------
Technology 31.3%
Financial 20.8
Healthcare 10.9
Consumer Cyclical 9.7
Energy 6.8
--------------------------------------------------------------------------------
Total 79.5
TOP TEN HOLDINGS* 9/30/00
--------------------------------------------------------------------------------
General Electric 4.6%
Cisco Systems 3.1
Exxon Mobil 2.6
Microsoft 2.6
Pfizer 2.3
Intel 2.3
Citigroup 1.9
EMC 1.9
Oracle Systems 1.8
Wal-Mart Stores 1.8
--------------------------------------------------------------------------------
Total 24.9
* Weightings represent percentages of net assets as of the dates indicated.
The Fund's portfolio is actively managed and its composition will vary over
time.
3
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PAINEWEBBER ENHANCED
NASDAQ-100 FUND ANNUAL REPORT
PAINEWEBBER ENHANCED
NASDAQ-100 FUND
INVESTMENT GOAL:
Higher total return over the long term
than the Nasdaq 100 Index
PORTFOLIO MANAGER:
DSITeam
DSI International Management, Inc.
COMMENCEMENT:
April 26, 2000
(Classes A, B, C and Y)
DIVIDEND PAYMENTS:
Annually
ENHANCED NASDAQ-100 FUND - TOTAL RETURNS, PERIODS ENDED 9/30/00
3 Months Inception(o)
--------------------------------------------------------------------------------
Before Deducting Class A* -5.21% -1.70%
Maximum Sales Charge Class B** -5.31 -2.00
Class C+ -5.31 -2.00
Class Y++ -5.11 -1.60
--------------------------------------------------------------------------------
After Deducting Class A* -9.48 -6.11
Maximum Sales Charge Class B** -10.05 -6.90
Class C+ -6.26 -2.98
--------------------------------------------------------------------------------
Nasdaq 100 Index -5.13 1.85
Lipper Sector/Miscellaneous Funds Median 1.64 -1.74
--------------------------------------------------------------------------------
Past performance is no guarantee of future performance. Performance results for
the Fund assume reinvestment of all dividends and capital gains. The investment
return and the principal value of an investment in the Fund will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
(o) Inception: since commencement of issuance on April 26, 2000 for share
classes A, B, C and Y. Inception return for the Lipper Median is as of the
nearest Thursday, April 27, 2000. Inception return for the S&P 500 Index is
as of April 26, 2000.
* Maximum sales charge for Class A shares is 4.5% of the public offering
price. Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5% and is
reduced to 0% after six years. Class B shares bear ongoing 12b-1
distribution and service fees.
+ Maximum contingent deferred sales charge for Class C shares is 1% and is
reduced to 0% after one year. Class C shares bear ongoing 12b-1
distribution and service fees.
++ The Fund offers Class Y shares to a limited group of eligible investors.
Class Y shares do not bear initial or contingent deferred sales charges or
ongoing 12b-1 distribution and service fees.
PORTFOLIO HIGHLIGHTS
While stocks in general endured a particularly rough ride during the
reporting period, technology stocks were particularly hard hit, and the holdings
in the Fund were no exception. During the period, the Fund's Class A shares
declined 1.7% and Class B shares were down 2.0%. This return mirrored the Lipper
Sector/Miscellaneous Funds Median, which was down 1.74%. The Fund underperformed
the Nasdaq 100 Index, which gained 1.85% for the period.
The Fund's underperformance in the earlier part of the period can be
partially attributed early on to its overweight in technology, where turmoil was
the rule rather than the exception during the period. Later in the period,
investors' largely negative reaction to earnings announcements shook up the
share prices of even the best performing stocks.
Staying the course, we continue to include Cisco Systems (6.7%),* Microsoft
(5.1%),* Intel (4.7%),* Oracle Systems (4.6%)* and JDS Uniphase (4.1%)* among
our top five holdings. In late October, investors began their flight back to
relative quality and the stock prices of these quality companies once again
began to increase. Technology and communications services remain our two top
sectors, as technology continues to dominate the Nasdaq 100 Index and we expect
technology spending to benefit these sector leaders.
* Weightings represent percentages of net assets as of September 30, 2000.
The Fund's portfolio is actively managed and its composition will vary over
time.
4
<PAGE>
PAINEWEBBER ENHANCED NASDAQ-100 FUND ANNUAL REPORT
PORTFOLIO STATISTICS
CHARACTERISTICS* 9/30/00
--------------------------------------------------------------------------------
Median Market Capitalization ($bln) 11.6
Wtd. Price/Earnings Ratio 50.2x
Wtd. Price/Book Ratio 49.2x
Net Assets ($mm) $88.8
Number of Securities 100
Stocks 100%
Cash 0%
--------------------------------------------------------------------------------
TOP FIVE SECTORS* 9/30/00
--------------------------------------------------------------------------------
Technology 81.3%
Communication Services 7.2
Healthcare 6.0
Consumer Cyclical 4.9
Financial 0.6
--------------------------------------------------------------------------------
Total 100.0
TOP TEN HOLDINGS* 9/30/00
--------------------------------------------------------------------------------
Cisco Systems 6.7%
Microsoft 5.1
Intel 4.7
Oracle 4.6
JDS Uniphase 4.1
Sun Microsystems 4.0
Qualcomm 2.9
Veritas 2.8
Siebel Systems 2.6
Juniper Networks 2.2
--------------------------------------------------------------------------------
Total 39.7
* Weightings represent percentages of net assets as of the dates indicated.
The Fund's portfolio is actively managed and its composition will vary over
time.
5
<PAGE>
PAINEWEBBER ENHANCED S&P 500 FUND
PAINEWEBBER ENHANCED NASDAQ-100 FUND ANNUAL REPORT
OUTLOOK
================================================================================
Signs of the long-anticipated slowdown in the economy are emerging with
increasing regularity. Moreover, there exists the potential for oil prices to
disrupt company profits, as well as the performance of the Euro, particularly
for multinational companies that compete or export heavily overseas.
However, we expect technology spending will continue to be robust as we
enter 2001; new products and a surge in high-tech patents continue the need for
such spending. With productivity continuing its impressive gains, we expect real
wages in 2001 to grow and be accompanied by productivity gains, while the
markets are expected to have absorbed the majority of the double-barreled shock
of rising interest rates and oil prices by then. Declining delivery lead times
indicate that demand is also no longer exceeding supply, which may also help to
suppress inflation fears.
Although the Federal Reserve is expected to keep interest rates at their
current level throughout the next year, rates could rise if inflation once again
becomes a concern. If post-election fiscal policy doesn't produce an expected
stimulus, there is potential for an interest rate decrease.
Our ultimate objective in managing your investments is to help you
successfully meet your financial goals. We thank you for your continued support
and welcome any comments or questions you may have. For a Quarterly Review of
PaineWebber Enhanced S&P 500 Fund or PaineWebber Enhanced Nasdaq-100 Fund or
another fund in the PaineWebber Family of Funds,(1) please contact your
Financial Advisor. For additional information, visit us at www.painewebber.com.
Sincerely,
/s/ Brian M. Storms
-------------------
Brian M. Storms
Chief Executive Officer and President
Mitchell Hutchins Asset Management Inc.
This letter is intended to assist shareholders in understanding how the Fund
performed during the fiscal period ended September 30, 2000, and reflects our
views at the time of its writing. Of course, these views may change in response
to changing circumstances. We encourage you to consult your Financial Advisor
regarding your personal investment program.
(1) Mutual funds are sold by prospectus only. The prospectuses for the funds
contain more complete information regarding risks, charges and expenses,
and should be read carefully before investing.
6
<PAGE>
PAINEWEBBER ENHANCED S&P 500 FUND
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000
NUMBER OF
SHARES VALUE
-------- ----------
COMMON STOCKS--99.87%
AGRICULTURE, FOOD & Beverage--3.24%
500 Bestfoods Co. ........................................... $ 36,375
900 Campbell Soup Co. ....................................... 23,287
4,200 Coca-Cola Co. ........................................... 231,525
800 Coca-Cola Enterprises, Inc. ............................. 12,750
900 Conagra, Inc. ........................................... 18,056
600 General Mills, Inc. ..................................... 21,300
700 Heinz, H. J. and Co. .................................... 25,944
300 Hershey Foods Corp. ..................................... 16,237
900 Kellogg Co. ............................................. 21,769
2,100 PepsiCo, Inc. ........................................... 96,600
100 Quaker Oats Co. ......................................... 7,913
500 RJR Nabisco Group Holdings Corp. ........................ 14,250
1,700 Sara Lee Corp. .......................................... 34,531
200 Supervalue, Inc. ........................................ 3,013
700 Sysco Corp. ............................................. 32,419
1,100 Unilever N.V ............................................ 53,075
200 Wrigley, Wm. Jr. Co. .................................... 14,975
-----------
664,019
-----------
AIRLINES--0.26%
200 AMR Corp.* .............................................. 6,538
500 Delta Air Lines, Inc. ................................... 22,187
1,000 Southwest Airlines Co. .................................. 24,250
-----------
52,975
-----------
ALCOHOL--0.50%
1,600 Anheuser-Busch Companies, Inc. .......................... 67,700
600 Seagram Co. Ltd. ........................................ 34,463
-----------
102,163
-----------
APPAREL, RETAIL--0.28%
1,300 Gap, Inc. ............................................... 26,163
800 Limited, Inc. ........................................... 17,650
100 Liz Claiborne, Inc. ..................................... 3,850
100 Nordstrom, Inc. ......................................... 1,556
400 TJX Companies, Inc. ..................................... 9,000
-----------
58,219
-----------
APPAREL, TEXTILES--0.11%
400 Nike, Inc. Class B ...................................... 16,025
300 V. F. Corp. ............................................. 7,406
-----------
23,431
-----------
BANKS--7.76%
500 Amsouth Bancorporation .................................. 6,250
1,200 Bank of New York Company, Inc. .......................... 67,275
1,700 Bank One Corp. .......................................... 65,662
3,100 BankAmerica Corp. ....................................... 162,362
800 BB&T Corp. .............................................. 24,100
315 Charter One Financial, Inc. ............................. 7,678
2,250 Chase Manhattan Corp. ................................... 103,922
7,366 Citigroup, Inc. ......................................... 398,224
400 Comerica, Inc. .......................................... 23,375
900 Fifth Third Bancorp ..................................... 48,488
1,500 First Union Corp. ....................................... 48,281
1,800 Firstar Corp. ........................................... 40,275
1,900 FleetBoston Financial Corp. ............................. 74,100
330 Huntington Bancshares, Inc. ............................. 4,847
300 J.P. Morgan & Company, Inc. ............................. 49,013
1,200 KeyCorp ................................................. 30,375
1,100 Mellon Financial Corp. .................................. 51,012
1,500 National City Corp. ..................................... 33,188
400 Northern Trust Corp. .................................... 35,550
105 Old Kent Financial Corp. ................................ 3,038
500 PNC Bank Corp. .......................................... 32,500
400 Regions Financial Corp. ................................. 9,075
300 SouthTrust Corp. ........................................ 9,431
300 State Street Corp. ...................................... 39,000
400 Summit Bancorp, Inc. .................................... 13,800
600 Suntrust Banks, Inc. .................................... 29,888
500 Synovus Financial Corp. ................................. 10,594
100 Union Planters Corp. .................................... 3,306
1,300 US Bancorp, Inc. ........................................ 29,575
400 Wachovia Corp. .......................................... 22,675
2,500 Wells Fargo and Co. ..................................... 114,844
-----------
1,591,703
-----------
CHEMICALS--1.68%
200 Air Products & Chemicals, Inc. .......................... 7,200
400 Avery Dennison Corp. .................................... 18,550
1,000 Dow Chemical Co. ........................................ 24,937
1,600 DuPont (E.I.) de Nemours & Co. .......................... 66,300
400 Ecolab, Inc. ............................................ 14,425
100 Engelhard Corp. ......................................... 1,625
600 Minnesota Mining & Manufacturing Co. .................... 54,675
1,800 Pharmacia Corp. ......................................... 108,337
200 PPG Industries, Inc. .................................... 7,938
500 Praxair, Inc. ........................................... 18,687
200 Rohm & Haas Co. ......................................... 5,813
200 Sealed Air Corp.* ....................................... 9,050
100 Union Carbide Corp. ..................................... 3,775
100 Vulcan Materials Co. .................................... 4,019
-----------
345,331
-----------
COMPUTER HARDWARE--9.40%
100 Adaptec, Inc.* .......................................... 2,000
500 Apple Computer, Inc.* ................................... 12,875
200 Cabletron Systems, Inc.* ................................ 5,875
7
<PAGE>
PAINEWEBBER ENHANCED S&P 500 FUND
NUMBER OF
SHARES VALUE
-------- ----------
COMMON STOCKS--(CONTINUED)
COMPUTER HARDWARE--(CONCLUDED)
11,400 Cisco Systems, Inc.* .................................... $ 629,850
2,600 Compaq Computer Corp. ................................... 71,708
4,500 Dell Computer Corp.* .................................... 138,656
3,900 EMC Corp.* .............................................. 386,587
600 Gateway, Inc.* .......................................... 28,050
1,600 Hewlett-Packard Co. ..................................... 155,200
300 Lexmark International Group, Inc.* ...................... 11,250
500 Network Appliance, Inc.* ................................ 63,688
844 Palm, Inc. .............................................. 44,679
400 Pitney Bowes, Inc. ...................................... 15,775
400 Seagate Technology, Inc.* ............................... 27,600
2,700 Sun Microsystems, Inc.* ................................. 315,225
1,200 Xerox Corp. ............................................. 18,075
-----------
1,927,093
-----------
COMPUTER SOFTWARE--7.65%
300 Adobe Systems, Inc. ..................................... 46,575
400 BMC Software, Inc.* ..................................... 7,650
300 Citrix Systems, Inc.* ................................... 6,019
1,200 Computer Associates International, Inc. ................. 30,225
3,000 IBM Corp. ............................................... 337,500
200 Mercury Interactive Corp.* .............................. 31,350
8,700 Microsoft Corp.* ........................................ 524,718
4,800 Oracle Systems Corp.* ................................... 378,000
400 Parametric Technology Corp.* ............................ 4,375
400 Peoplesoft, Inc.* ....................................... 11,175
100 Sabre Holdings Corp.* ................................... 2,894
200 Sapient Corp.* .......................................... 8,137
700 Siebel Systems, Inc.* ................................... 77,919
300 Unisys Corp.* ........................................... 3,375
700 Veritas Software Co.* ................................... 99,400
-----------
1,569,312
-----------
CONSTRUCTION--0.12%
200 Centex Corp. ............................................ 6,425
600 Masco Corp. ............................................. 11,175
200 Pulte Corp. ............................................. 6,600
-----------
24,200
-----------
CONSUMER DURABLES--0.08%
200 Black & Decker Corp. .................................... 6,837
200 Maytag Corp. ............................................ 6,213
100 Whirlpool Corp. ......................................... 3,888
-----------
16,938
-----------
DEFENSE & Aerospace--0.78%
1,200 Boeing Co. .............................................. 75,600
500 General Dynamics Corp. .................................. 31,406
200 Goodrich, B.F. Co. ...................................... 7,838
500 Lockheed Martin Corp. ................................... 16,480
100 Northrop Grumman Corp. .................................. 9,087
400 Raytheon Co. ............................................ 11,375
200 TRW, Inc. ............................................... 8,125
-----------
159,911
-----------
DIVERSIFIED RETAIL--2.39%
600 Costco Wholesale Corp.* ................................. 20,962
400 Federated Department Stores, Inc.* ...................... 10,450
400 Kohls Corp.* ............................................ 23,075
500 May Department Stores Co. ............................... 10,250
700 Sears Roebuck & Co. ..................................... 22,694
1,400 Target Corp. ............................................ 35,875
7,600 Wal-Mart Stores, Inc. ................................... 365,750
-----------
489,056
-----------
DRUGS & Medicine--7.64%
200 Allergan, Inc. .......................................... 16,887
2,000 American Home Products Corp. ............................ 113,125
1,800 Amgen, Inc.* ............................................ 125,691
300 Biogen, Inc.* ........................................... 18,300
3,400 Bristol-Myers Squibb Co. ................................ 194,225
500 Cardinal Health, Inc. ................................... 44,094
1,900 Lilly, Eli & Co. ........................................ 154,137
100 McKesson HBOC, Inc. ..................................... 3,056
300 Medimmune, Inc. ......................................... 23,175
3,800 Merck & Co., Inc. ....................................... 282,862
10,550 Pfizer, Inc. ............................................ 474,091
2,300 Schering-Plough Corp. ................................... 106,950
100 Sigma-Aldrich Corp. ..................................... 3,300
100 Watson Pharmaceuticals, Inc.* ........................... 6,488
-----------
1,566,381
-----------
ELECTRIC UTILITIES--1.67%
700 AES Corp.* .............................................. 47,950
500 American Electric Power, Inc. ........................... 19,562
300 Cinergy Corp. ........................................... 9,919
200 CMS Energy Corp. ........................................ 5,388
600 Consolidated Edison, Inc. ............................... 20,475
200 CP & L Energy Inc. ...................................... 8,338
200 DTE Energy Co. .......................................... 7,650
500 Duke Energy Corp. ....................................... 42,875
600 Edison International, Inc. .............................. 11,588
300 Entergy Corp. ........................................... 11,175
300 FPL Group, Inc. ......................................... 19,725
200 PECO Energy Co. ......................................... 12,112
200 PG&E Corp. .............................................. 4,838
8
<PAGE>
PAINEWEBBER ENHANCED S&P 500 FUND
NUMBER OF
SHARES VALUE
-------- ----------
COMMON STOCKS--(CONTINUED)
ELECTRIC UTILITIES--(CONCLUDED)
200 PPL Corp. ............................................... $ 8,350
300 Public Service Enterprise Group, Inc. ................... 13,406
400 Reliant Energy, Inc. .................................... 18,600
400 Sempra Energy ........................................... 8,325
1,000 Southern Co. ............................................ 32,437
600 TXU Corp.* .............................................. 23,775
300 Unicom Corp. ............................................ 16,856
-----------
343,344
-----------
ELECTRICAL EQUIPMENT--5.52%
900 ADC Telecommunications, Inc.* ........................... 24,202
419 Agilent Technologies, Inc. .............................. 20,505
400 Comverse Technology, Inc.* .............................. 43,200
500 Corning, Inc. ........................................... 148,500
200 Danaher Corp. ........................................... 9,950
500 Dover Corp. ............................................. 23,469
200 Eaton Corp. ............................................. 12,325
1,300 Honeywell, Inc. ......................................... 46,312
200 Johnson Controls, Inc. .................................. 10,637
200 KLA-Tencor Corp.* ....................................... 8,238
5,100 Lucent Technologies, Inc. ............................... 155,869
300 Molex, Inc. ............................................. 16,331
3,100 Motorola, Inc. .......................................... 87,575
4,900 Nortel Networks Corp. ................................... 291,856
300 PE Corp. ................................................ 34,950
1,000 Qualcomm, Inc.* ......................................... 71,250
200 Sanmina Corp.* .......................................... 18,725
200 Scientific-Atlanta, Inc. ................................ 12,725
900 Solectron Corp.* ........................................ 41,512
800 Tellabs, Inc.* .......................................... 38,200
300 Teradyne, Inc.* ......................................... 10,500
200 Thermo Electron Corp.* .................................. 5,200
-----------
1,132,031
-----------
ELECTRICAL POWER--0.42%
400 American Power Conversion Corp.* ........................ 7,675
200 Cooper Industries, Inc. ................................. 7,050
800 Emerson Electric Co. .................................... 53,600
600 Rockwell International Corp. ............................ 18,150
-----------
86,475
-----------
ENERGY RESERVES & Production--4.87%
200 Amerada Hess Corp. ...................................... 13,388
391 Anadarko Petroleum Corp. ................................ 25,986
100 Apache Corp. ............................................ 5,913
300 Burlington Resources, Inc. .............................. 11,044
1,200 Chevron Corp. ........................................... 102,300
200 Devon Energy Corp. ...................................... 12,030
5,900 Exxon/Mobil Corp. ....................................... 525,837
200 Kerr-McGee Corp. ........................................ 13,250
800 Occidental Petroleum Corp. .............................. 17,450
500 Phillips Petroleum Co. .................................. 31,375
3,400 Royal Dutch Petroleum Co., ADR .......................... 203,787
300 Tosco Corp. ............................................. 9,356
500 Unocal Corp. ............................................ 17,719
310 Xcel Energy, Inc. ....................................... 8,525
-----------
997,960
-----------
ENTERTAINMENT--0.81%
800 Carnival Corp. .......................................... 19,700
2,493 Viacom, Inc., Class B* .................................. 145,841
-----------
165,541
-----------
ENVIRONMENTAL SERVICES--0.06%
700 Waste Management, Inc. .................................. 12,206
-----------
FINANCIAL SERVICES--7.72%
2,300 American Express Co. .................................... 139,725
400 AON Corp. ............................................... 15,700
1,100 Associates First Capital Corp. .......................... 41,800
500 Capital One Financial Corp. ............................. 35,031
600 Cendant Corp.* .......................................... 6,525
1,100 Federal Home Loan Mortgage Corp. ........................ 59,469
1,600 Federal National Mortgage Association ................... 114,400
16,200 General Electric Co. .................................... 934,537
200 H&R Block, Inc. ......................................... 7,413
900 Household International, Inc. ........................... 50,962
500 Marsh & McLennan Companies, Inc. ........................ 66,375
1,700 MBNA Corp. .............................................. 65,450
200 Providian Corp. ......................................... 25,400
400 USA Education, Inc. ..................................... 19,275
-----------
1,582,062
-----------
FOOD RETAIL--0.40%
500 Albertson's, Inc. ....................................... 10,500
1,500 Kroger Co.* ............................................. 33,844
800 Safeway, Inc.* .......................................... 37,350
-----------
81,694
-----------
FOREST PRODUCTS, PAPER--0.62%
200 Bemis, Inc. ............................................. 6,425
400 Fort James Corp. ........................................ 12,225
500 Georgia-Pacific Corp. ................................... 11,750
700 International Paper Co. ................................. 20,081
900 Kimberly-Clark Corp. .................................... 50,231
100 Mead Corp. .............................................. 2,338
100 Westvaco Corp. .......................................... 2,669
9
<PAGE>
PAINEWEBBER ENHANCED S&P 500 FUND
NUMBER OF
SHARES VALUE
-------- ----------
COMMON STOCKS--(CONTINUED)
FOREST PRODUCTS, PAPER--(CONCLUDED)
400 Weyerhaeuser Co. ........................................ $ 16,150
200 Willamette Industries, Inc. ............................. 5,600
-----------
127,469
-----------
FREIGHT, AIR, SEA & Land--0.09%
400 Fedex Corp.* ............................................ 17,736
-----------
GAS UTILITY--0.19%
100 Columbia Energy Group ................................... 7,100
400 El Paso Energy Corp. .................................... 24,650
200 NICOR, Inc. ............................................. 7,238
-----------
38,988
-----------
HEAVY MACHINERY--0.05%
300 Deere & Co. ............................................. 9,975
-----------
HOTELS--0.07%
200 Harrah's Entertainment, Inc.* ........................... 5,500
500 Hilton Hotels Corp. ..................................... 5,781
100 Marriott International, Inc. ............................ 3,644
-----------
14,925
-----------
HOUSEHOLD PRODUCTS--1.56%
600 Avon Products, Inc. ..................................... 24,525
400 Clorox Co. .............................................. 15,825
900 Colgate-Palmolive Co. ................................... 42,480
200 Fortune Brands, Inc. .................................... 5,300
1,600 Gillette Co. ............................................ 49,400
100 International Flavors and Fragrances .................... 1,825
600 Newell Rubbermaid, Inc. ................................. 13,687
2,300 Procter & Gamble Co. .................................... 154,100
500 Ralston Purina Co. ...................................... 11,844
-----------
318,986
-----------
INDUSTRIAL PARTS--0.88%
700 Caterpillar, Inc. ....................................... 23,625
200 Crane Co. ............................................... 4,575
300 Genuine Parts Co. ....................................... 5,719
500 Illinois Tool Works, Inc. ............................... 27,937
300 Ingersoll Rand Co. ...................................... 10,163
200 Parker-Hannifin Corp. ................................... 6,750
100 Snap-On, Inc. ........................................... 2,356
200 Stanley Works ........................................... 4,613
400 Textron, Inc. ........................................... 18,450
1,100 United Technologies Corp. ............................... 76,175
-----------
180,363
-----------
INDUSTRIAL SERVICES & SUPPLIES--0.73%
2,900 Tyco International Ltd., ADR ............................ 150,438
1,100 Automatic Data Processing, Inc. ......................... 73,562
300 Computer Sciences Corp.* ................................ 22,275
100 Convergys Corp. ......................................... 3,888
400 Dun & Bradstreet Corp. .................................. 13,775
700 Electronic Data Systems Corp. ........................... 29,050
200 Equifax, Inc. ........................................... 5,388
400 First Data Corp. ........................................ 15,625
300 IMS Health, Inc. ........................................ 6,225
600 Interpublic Group Companies, Inc. ....................... 20,437
200 Omnicom Group, Inc. ..................................... 14,587
500 Paychex, Inc. ........................................... 26,250
100 Young & Rubicam, Inc.* .................................. 4,950
-----------
236,012
-----------
INTERNET--1.42%
3,900 America Online Inc.* .................................... 209,625
900 Yahoo!, Inc.* ........................................... 81,900
-----------
291,525
-----------
LEISURE--0.36%
300 Dominion Resources, Inc. ................................ 17,419
500 Eastman Kodak Co. ....................................... 20,437
500 Harley Davidson, Inc. ................................... 23,937
200 Hasbro, Inc. ............................................ 2,288
500 Mattel, Inc. ............................................ 5,594
300 Polaroid Corp. .......................................... 4,031
-----------
73,706
-----------
LIFE INSURANCE--0.61%
200 Aetna Life & Casualty Co. ............................... 11,612
400 AFLAC, Inc. ............................................. 25,625
400 American General Corp. .................................. 31,200
200 CIGNA Corp. ............................................. 20,880
300 Conseco, Inc. ........................................... 2,288
400 Lincoln National Corp. .................................. 19,250
200 Torchmark, Inc. ......................................... 5,563
300 UnumProvident Corp. ..................................... 8,175
-----------
124,593
-----------
LONG DISTANCE & PHONE COMPANIES--5.57%
5,647 AT&T Corp. .............................................. 165,881
3,100 BellSouth Corp. ......................................... 124,775
1,300 Global Crossing Ltd.* ................................... 40,300
4,600 MCI Worldcom, Inc.* ..................................... 139,725
2,837 Qwest Communications International Inc.* ................ 136,353
5,700 SBC Communications, Inc. ................................ 285,000
900 Sprint Corp. ............................................ 26,381
4,608 Verizon Communications .................................. 223,200
-----------
1,141,615
-----------
10
<PAGE>
PAINEWEBBER ENHANCED S&P 500 FUND
NUMBER OF
SHARES VALUE
-------- ----------
COMMON STOCKS--(CONTINUED)
MEDIA--1.71%
500 Clear Channel Communications* ........................... $ 28,250
900 Comcast Corp., Class A* ................................. 36,844
2,800 Disney, Walt Co. ........................................ 107,100
2,100 Time Warner, Inc. ....................................... 164,325
300 Tribune Co. ............................................. 13,087
-----------
349,606
-----------
MEDICAL PRODUCTS--2.85%
2,800 Abbott Laboratories ..................................... 133,175
100 Alza Corp.* ............................................. 8,650
300 Baxter International, Inc. .............................. 23,944
700 Becton, Dickinson & Co. ................................. 18,506
350 Biomet, Inc. ............................................ 12,250
600 Boston Scientific Corp.* ................................ 9,862
500 Guidant Corp.* .......................................... 35,344
2,500 Johnson & Johnson ....................................... 234,844
2,000 Medtronic, Inc. ......................................... 103,625
100 St. Jude Medical, Inc.* ................................. 5,100
-----------
585,300
-----------
MEDICAL PROVIDERS--0.38%
800 Columbia/HCA Healthcare Corp. ........................... 29,700
500 Tenet Healthcare Corp.* ................................. 18,188
200 UnitedHealth Group, Inc. ................................ 19,750
100 Wellpoint Health Networks, Inc.* ........................ 9,600
-----------
77,238
-----------
MINING & Metals--0.29%
300 Alcan Aluminum, Ltd. .................................... 8,681
1,500 Alcoa, Inc. ............................................. 37,969
200 Allegheny Technologies, Inc. ............................ 3,625
100 Nucor Corp. ............................................. 3,012
100 Phelps Dodge Corp.* ..................................... 4,175
100 USX-U.S. Steel Group, Inc. .............................. 1,519
-----------
58,981
-----------
MOTOR VEHICLES--0.89%
200 DANA Corp. .............................................. 4,300
1,500 Delphi Automotive Systems Corp. ......................... 22,687
2,922 Ford Motor Co. .......................................... 73,963
900 General Motors Corp. .................................... 58,500
100 Navistar International Corp.* ........................... 2,994
200 PACCAR, Inc. ............................................ 7,413
796 Visteon Corp. ........................................... 12,039
-----------
181,896
-----------
OIL REFINING--1.24%
400 Coastal Corp. ........................................... 29,650
1,200 Conoco, Inc. ............................................ 32,325
1,100 Enron Corp. ............................................. 96,387
100 Sunoco, Inc. ............................................ 2,694
900 Texaco, Inc. ............................................ 47,250
700 USX-Marathon Group ...................................... 19,863
600 Williams Companies, Inc. ................................ 25,350
-----------
253,519
-----------
OIL SERVICES--0.73%
500 Baker Hughes, Inc. ...................................... 18,563
700 Halliburton Co. ......................................... 34,256
900 Schlumberger Ltd. ....................................... 74,081
400 Transocean Sedco Forex, Inc. ............................ 23,450
-----------
150,350
-----------
OTHER INSURANCE--2.43%
800 Allstate Corp. .......................................... 27,800
3,750 American International Group, Inc. ...................... 358,828
200 Chubb Corp. ............................................. 15,825
100 Cincinnati Financial Corp. .............................. 3,550
300 Hartford Financial Services Group, Inc. ................. 21,881
200 Jefferson-Pilot Corp. ................................... 13,575
100 Loews Corp. ............................................. 8,337
100 MBIA, Inc. .............................................. 7,113
300 MGIC Investment Corp. ................................... 18,337
100 Progressive Corp. ....................................... 8,188
300 St. Paul Companies, Inc. ................................ 14,794
-----------
498,228
-----------
PRECIOUS METALS--0.04%
400 Barrick Gold Corp. ...................................... 6,100
500 Homestake Mining Co. .................................... 2,594
-----------
8,694
-----------
PUBLISHING--0.43%
100 Dow Jones & Co., Inc. ................................... 6,050
500 Gannett, Inc. ........................................... 26,500
100 Harcourt General, Inc. .................................. 5,900
100 Knight-Ridder, Inc. ..................................... 5,081
400 McGraw-Hill Companies, Inc. ............................. 25,425
500 New York Times Co., Class A ............................. 19,657
-----------
88,613
RAILROADS--0.21% -----------
900 Burlington Northern Santa Fe, Inc. ...................... 19,406
200 CSX Corp. ............................................... 4,363
500 Norfolk Southern Corp. .................................. 7,313
300 Union Pacific Corp. ..................................... 11,662
-----------
42,744
-----------
11
<PAGE>
PAINEWEBBER ENHANCED S&P 500 FUND
NUMBER OF
SHARES VALUE
-------- ----------
COMMON STOCKS--(CONCLUDED)
RESTAURANTS--0.40%
2,000 McDonalds Corp. ......................................... $ 60,375
300 Starbucks Corp.* ........................................ 12,019
200 Tricon Global Restaurants, Inc.* ........................ 6,125
200 Wendy's International, Inc. ............................. 4,012
-----------
82,531
-----------
SECURITIES & ASSET MANAGEMENT--2.06%
200 Bear Stearns Co., Inc. .................................. 12,600
2,050 Charles Schwab Corp. .................................... 72,775
300 Franklin Resources, Inc. ................................ 13,329
200 Lehman Brothers Holdings, Inc. .......................... 29,550
1,200 Merrill Lynch & Co., Inc. ............................... 79,200
2,000 Morgan Stanley Dean Witter & Co. ........................ 182,875
400 Stilwell Financial, Inc. ................................ 17,400
300 T. Rowe Price & Associates, Inc. ........................ 14,081
-----------
421,810
-----------
SEMICONDUCTOR--6.12%
800 Advanced Micro Devices, Inc.* ........................... 18,900
600 Altera Corp.* ........................................... 28,650
700 Analog Devices, Inc.* ................................... 57,794
1,200 Applied Materials, Inc.* ................................ 71,175
400 Broadcom Corp. .......................................... 97,500
300 Conexant Systems, Inc.* ................................. 12,563
11,300 Intel Corp. ............................................. 469,656
1,600 JDS Uniphase Corp.* ..................................... 151,500
600 Linear Technology Corp. ................................. 38,850
400 LSI Logic Corp.* ........................................ 11,700
400 Maxim Integrated Productions, Inc.* ..................... 32,175
800 Micron Technology, Inc.* ................................ 36,800
300 National Semiconductor Corp.* ........................... 12,075
500 Novellus Systems, Inc.* ................................. 23,281
100 Perkinelmer, Inc. ....................................... 10,438
2,600 Texas Instruments, Inc. ................................. 122,687
700 Xilinx, Inc.* ........................................... 59,937
-----------
1,255,681
-----------
SPECIALTY RETAIL--2.11%
200 Autozone, Inc.* ......................................... 4,538
400 Bed, Bath & Beyond, Inc.* ............................... 9,756
200 Best Buy Company, Inc.* ................................. 12,725
500 Circuit City Stores, Inc. ............................... 11,500
600 CVS Corp. ............................................... 27,787
975 Dollar General Corp. .................................... 16,331
4,300 Home Depot, Inc. ........................................ 228,169
600 Lowe's Companies, Inc. .................................. 26,925
300 Radioshack Corp. ........................................ 19,388
500 Staples, Inc.* .......................................... 7,094
400 Tiffany & Co. ........................................... 15,425
1,400 Walgreen Co. ............................................ 53,112
-----------
432,750
-----------
THRIFT--0.25%
200 Golden West Financial Corp. ............................. 10,725
1,000 Washington Mutual, Inc. ................................. 39,813
-----------
50,538
-----------
TOBACCO--0.54%
3,500 Philip Morris Companies, Inc. ........................... 103,031
300 UST, Inc. ............................................... 6,863
-----------
109,894
-----------
WIRELESS TELECOMMUNICATIONS--0.53%
400 Alltel Corp. ............................................ 20,875
900 Nextel Communications, Inc.* ............................ 42,075
1,300 Sprint Corp.* ........................................... 45,581
-----------
108,531
-----------
Total Common Stocks (cost--$20,972,331) ............................ 20,475,280
-----------
Principal
Amount
(000) Maturity Interest
--------- Date Rate
-------- --------
U.S. AGENCY OBLIGATION--0.11%
$ 23 Federal Farm Credit
Bank Discount Notes
(cost--$22,996) ................... 10/02/00 6.280%@ 22,996
-----------
Total Investments (cost--$20,995,327)--99.98%.. 20,498,276
Other assets in excess of liabilities--0.02%... 2,784
-----------
Net Assets--100.00% ........................... $20,501,060
===========
----------
* Non-Income producing security
ADR American Depositary Receipt
@ Interest rate shown is discount rate at date of purchase.
See accompanying notes to financial statements
12
<PAGE>
PAINEWEBBER ENHANCED NASDAQ-100 FUND
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 2000
NUMBER OF
SHARES VALUE
-------- ----------
COMMON STOCKS--100.35%
AIRLINES--0.07%
2,600 Northwest Airlines Corp.* ............................... $ 63,862
-----------
COMPUTER HARDWARE--15.03%
11,000 3Com Corp.* ............................................. 211,062
3,100 Adaptec, Inc.* .......................................... 62,000
18,600 Apple Computer, Inc.* ................................... 478,950
108,100 Cisco Systems, Inc.* .................................... 5,972,525
40,000 Dell Computer Corp.* .................................... 1,232,500
14,400 Network Appliance, Inc.* ................................ 1,834,200
30,400 Sun Microsystems, Inc.* ................................. 3,549,200
-----------
13,340,437
-----------
COMPUTER SOFTWARE--22.48%
5,300 Adobe Systems, Inc. ..................................... 822,825
8,400 BMC Software, Inc.* ..................................... 160,650
7,800 Citrix Systems, Inc.* ................................... 156,487
300 Compuware Corp.* ........................................ 2,513
6,000 Electronic Arts, Inc.* .................................. 296,250
18,500 Gemstar-TV Guide International, Inc.* ................... 1,612,969
9,500 I2 Technologies, Inc.* .................................. 1,777,094
10,400 Intuit, Inc.* ........................................... 592,800
75,400 Microsoft Corp.* ........................................ 4,547,562
5,500 Network Associates, Inc.* ............................... 124,438
12,600 Novell, Inc.* ........................................... 125,212
51,700 Oracle Systems Corp.* ................................... 4,071,375
20,000 Parametric Technology Corp.* ............................ 218,750
17,300 Peoplesoft, Inc.* ....................................... 483,319
20,900 Siebel Systems, Inc.* ................................... 2,326,431
4,000 Synopsys, Inc.* ......................................... 151,500
17,500 Veritas Software Co.* ................................... 2,485,000
-----------
19,955,175
-----------
CONSUMER DURABLES--0.10%
2,900 Herman Miller, Inc. ..................................... 92,981
-----------
DIVERSIFIED RETAIL--0.41%
10,500 Costco Wholesale Corp.* ................................. 366,844
-----------
DRUGS & MEDICINE--5.01%
20,300 Amgen, Inc.* ............................................ 1,417,511
6,700 Biogen, Inc.* ........................................... 408,700
11,700 Chiron Corp.* ........................................... 526,500
26,100 Immunex Corp.* .......................................... 1,135,350
9,700 Medimmune, Inc.* ........................................ 749,325
6,300 Sigma-Aldrich Corp. ..................................... 207,900
-----------
4,445,286
-----------
ELECTRICAL EQUIPMENT--11.17%
36,900 ADC Telecommunications, Inc.* ........................... 992,264
15,500 Ciena Corp.* ............................................ 1,903,594
6,700 Comverse Technology, Inc.* .............................. 723,600
43,100 Ericsson L M Telephone Co. .............................. 638,419
9,200 KLA-Tencor Corp. * ...................................... 378,925
9,500 Level 3 Communications, Inc.* ........................... 732,687
21,700 Metromedia Fiber Network, Inc.* ......................... 527,581
4,800 Molex, Inc. ............................................. 261,300
35,900 Qualcomm, Inc.* ......................................... 2,557,875
7,300 Sanmina Corp.* .......................................... 683,463
10,800 Tellabs, Inc.* .......................................... 515,700
-----------
9,915,408
-----------
ELECTRICAL POWER--0.28%
12,900 American Power Conversion Corp.* ........................ 247,519
-----------
FINANCIAL SERVICES--0.45%
11,300 Concord EFS, Inc.* ...................................... 401,327
-----------
FOREST PRODUCTS, PAPER--0.14%
10,100 Smurfit-Stone Container Corp.* .......................... 121,200
-----------
INDUSTRIAL SERVICES & SUPPLIES--0.62%
2,600 Apollo Group, Inc.* ..................................... 103,675
10,200 Cintas Corp. ............................................ 444,337
-----------
548,012
-----------
INFORMATION & COMPUTER SERVICES--3.61%
8,800 Fiserv, Inc.* ........................................... 526,900
16,550 Paychex, Inc. ........................................... 868,875
5,500 Quintiles Transnational Corp.* .......................... 87,656
8,502 VeriSign, Inc.* ......................................... 1,722,187
-----------
3,205,618
-----------
INTERNET--5.82%
9,300 Amazon.Com, Inc.* ....................................... 357,469
9,300 At Home Corp.* .......................................... 131,362
11,900 Broadvision, Inc.* ...................................... 304,194
9,600 CMG Information Services, Inc.* ......................... 268,200
6,100 CNET Networks, Inc.* .................................... 148,592
7,700 Ebay, Inc.* ............................................. 528,412
8,900 Juniper Networks, Inc.* ................................. 1,948,544
5,800 Lycos, Inc.* ............................................ 398,841
2,300 RealNetworks, Inc.* ..................................... 91,425
10,900 Yahoo!, Inc.* ........................................... 991,900
-----------
5,168,939
-----------
13
<PAGE>
PAINEWEBBER ENHANCED NASDAQ-100 FUND
NUMBER OF
SHARES VALUE
-------- ----------
COMMON STOCKS--(CONCLUDED)
LONG DISTANCE & PHONE COMPANIES--3.87%
35,400 Global Crossing Ltd.* ................................... $ 1,097,400
42,700 MCI Worldcom, Inc.* ..................................... 1,297,012
14,800 McLeod, Inc.* ........................................... 211,825
9,600 Nextlink Communications, Inc.* .......................... 337,800
10,600 NTL, Inc.* .............................................. 490,913
-----------
3,434,950
-----------
MEDIA--2.11%
5,900 Adelphia Communications Corp.* .......................... 162,619
13,600 Comcast Corp., Class A* ................................. 556,750
11,200 Echostar Communications Corp.* .......................... 590,800
8,000 Panamsat Corp.* ......................................... 255,500
14,000 USA Networks, Inc.* ..................................... 307,125
-----------
1,872,794
-----------
MEDICAL PRODUCTS--0.85%
11,200 Biomet, Inc. ............................................ 392,000
5,300 Genzyme Corp.* .......................................... 361,394
-----------
753,394
-----------
MEDICAL PROVIDERS--0.13%
3,300 Pacificare Health Systems* .............................. 114,881
-----------
MOTOR VEHICLES--0.16%
3,800 PACCAR, Inc. ............................................ 140,837
-----------
RESTAURANTS--0.50%
11,100 Starbucks Corp.* ........................................ 444,694
-----------
SEMICONDUCTOR--23.20%
24,400 Altera Corp.* ........................................... 1,165,100
17,700 Applied Materials, Inc.* ................................ 1,049,831
6,300 Applied Micro Circuits Corp.* ........................... 1,304,494
12,500 Atmel Corp.* ............................................ 189,844
6,600 Conexant Systems, Inc.* ................................. 276,375
101,100 Intel Corp. ............................................. 4,201,969
38,400 JDS Uniphase Corp.* ..................................... 3,636,000
18,500 Linear Technology Corp. ................................. 1,197,875
16,800 Maxim Integrated Productions, Inc.* ..................... 1,351,350
6,150 Microchip Technology, Inc.* ............................. 203,334
8,400 PMC-Sierra, Inc.* ....................................... 1,808,100
3,800 Qlogic Corp.* ........................................... 334,400
8,900 RF Micro Devices, Inc.* ................................. 279,238
4,200 SDL, Inc.* .............................................. 1,293,600
7,700 Vitesse Semiconductor Corp.* ............................ 684,819
18,900 Xilinx, Inc.* ........................................... 1,618,312
-----------
20,594,641
-----------
SPECIALTY RETAIL--0.97%
21,300 Bed, Bath & Beyond, Inc.* ............................... 519,520
5,250 Dollar Tree Stores, Inc.* ............................... 212,953
9,300 Staples, Inc.* .......................................... 131,944
-----------
864,417
-----------
WIRELESS TELECOMMUNICATIONS--3.37%
39,900 Nextel Communications, Inc.* ............................ 1,865,325
9,700 Voicestream Wireless Corp.* ............................. 1,125,806
-----------
2,991,131
-----------
Total Common Stocks (cost--$91,477,620) ............................ 89,084,347
-----------
Principal
Amount
(000) Maturity Interest
-------- Date Rate
-------- --------
U.S. AGENCY OBLIGATION--0.36%
$ 316 Federal Farm Credit
Bank Discount Notes
(cost--$315,945) .................... 10/02/00 6.280%@ 315,945
-----------
Total Investments (cost--$91,793,565)--100.71% .. 89,400,292
Liabilities in excess of other assets--(0.71)% .. (633,422)
-----------
Net Assets--100.00% ............................. $88,766,870
============
----------
* Non-Income producing security
@ Interest rate shown is discount rate at date of purchase.
See accompanying notes to financial statements
14
<PAGE>
PAINEWEBBER
STATEMENTS OF ASSETS AND LIABILITIES SEPTEMBER 30, 2000
ENHANCED ENHANCED
S&P 500 NASDAQ-100
FUND FUND
----------- -----------
ASSETS
Investments in securities, at value
(cost--$20,995,327 and $91,793,565,
respectively) .................................... $20,498,276 $89,400,292
Cash ............................................... 906 396
Dividends and interest receivable .................. 15,784 358
Receivable for shares of beneficial interest sold .. 185,812 727,609
Other assets ....................................... 33,248 105,350
----------- -----------
Total assets ....................................... 20,734,026 90,234,005
----------- -----------
LIABILITIES
Payable for investments purchased .................. 203,846 1,280,799
Payable to affiliates .............................. 7,806 78,193
Payable for shares of beneficial
interest repurchased ............................. 983 42,156
Accrued expenses and other liabilities ............. 20,331 65,987
----------- -----------
Total liabilities .................................. 232,966 1,467,135
----------- -----------
NET ASSETS
Beneficial interest shares of $0.001 par value
outstanding (unlimited amount authorized) ........ 21,561,734 91,441,366
Accumulated net investment income (loss) ........... 2,560 (174,604)
Accumulated net realized losses from
investment transactions .......................... (566,183) (106,619)
Net unrealized depreciation of investments ......... (497,051) (2,393,273)
----------- -----------
Net assets ......................................... $20,501,060 $88,766,870
=========== ===========
CLASS A:
Net assets ......................................... $ 8,197,084 $25,300,504
----------- -----------
Shares outstanding ................................. 846,233 2,572,775
----------- -----------
Net asset value and redemption value per share ..... $9.69 $9.83
=========== ===========
Maximum offering price per share
(net asset value plus sales charge of 3.00%
and 4.50% of offering price, respectively) ....... $9.99 $10.29
=========== ===========
CLASS B:
Net assets ......................................... $ 7,735,233 $37,714,356
----------- -----------
Shares outstanding ................................. 799,349 3,847,401
----------- -----------
Net asset value and offering price per share ....... $9.68 $9.80
=========== ===========
CLASS C:
Net assets ......................................... $ 3,954,202 $24,011,735
----------- -----------
Shares outstanding ................................. 408,536 2,449,737
----------- -----------
Net asset value and offering price per share ....... $9.68 $9.80
=========== ===========
CLASS Y:
Net assets ......................................... $ 614,541 $ 1,740,275
----------- -----------
Shares outstanding ................................. 63,298 176,778
----------- -----------
Net asset value, offering price and
redemption value per share ....................... $9.71 $9.84
=========== ===========
See accompanying notes to financial statements
15
<PAGE>
PAINEWEBBER
STATEMENTS OF OPERATIONS
FOR THE PERIOD
APRIL 26, 2000+
THROUGH
SEPTEMBER 30, 2000
-------------------------
ENHANCED ENHANCED
S&P 500 NASDAQ-100
FUND FUND
----------- -----------
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes
of $746 and $0, respectively) .................... $ 85,578 $ 8,604
Interest ........................................... 3,714 1,254
----------- -----------
89,292 9,858
----------- -----------
EXPENSES:
Investment advisory and administration fees ........ 29,561 214,036
Service fees--Class A .............................. 9,129 20,438
Service and distribution fees--Class B ............. 16,840 123,598
Service and distribution fees--Class C ............. 6,791 75,253
Offering expenses .................................. 115,000 115,000
Federal and State registration fees ................ 73,652 77,467
Professional fees .................................. 44,554 45,639
Reports and notices to shareholders ................ 12,500 17,500
Transfer agency and service fees ................... 8,485 17,865
Trustees' fees ..................................... 5,250 5,250
Custody and accounting ............................. 2,110 8,582
Other expenses ..................................... 14,325 14,368
----------- -----------
338,197 734,996
Less: Fee waivers and reimbursements
from investment adviser .......................... (251,465) (221,755)
----------- -----------
Net expenses ....................................... 86,732 513,241
----------- -----------
Net investment income (loss) ....................... 2,560 (503,383)
----------- -----------
REALIZED AND UNREALIZED GAINS
(LOSSES) FROM INVESTMENT ACTIVITIES:
Net realized gain (loss) from
investment transactions .......................... (566,183) 222,160
Net change in unrealized appreciation/
depreciation of investments ...................... (497,051) (2,393,273)
----------- -----------
NET REALIZED AND UNREALIZED LOSS
FROM INVESTMENT ACTIVITIES ....................... (1,063,234) (2,171,113)
----------- -----------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS .................................. $(1,060,674) $(2,674,496)
=========== ===========
----------
+ Commencement of operations
See accompanying notes to financial statements
16
<PAGE>
PAINEWEBBER
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD
APRIL 26, 2000+
THROUGH
SEPTEMBER 30, 2000
-------------------------
ENHANCED ENHANCED
S&P 500 NASDAQ-100
FUND FUND
----------- -----------
FROM OPERATIONS:
Net investment income (loss) ....................... $ 2,560 $ (503,383)
Net realized gain (loss)
from investment transactions ..................... (566,183) 222,160
Net change in unrealized appreciation/
depreciation of investments ...................... (497,051) (2,393,273)
----------- -----------
Net decrease in net assets resulting
from operations .................................. (1,060,674) (2,674,496)
----------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares ............... 31,731,746 106,025,112
Cost of shares repurchased ......................... (10,220,012) (14,633,746)
----------- -----------
Net increase in net assets from beneficial
interest transactions ............................ 21,511,734 91,391,366
----------- -----------
Net increase in net assets ......................... 20,451,060 88,716,870
NET ASSETS:
Beginning of period ................................ 50,000 50,000
----------- -----------
End of period (Including undistributed
net investment income of $2,560
for the Enhanced S&P 500 Fund) ................... $20,501,060 $88,766,870
=========== ===========
----------
+ Commencement of operations.
See accompanying notes to financial statements
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Enhanced S&P 500 Fund is a diversified series of Mitchell
Hutchins Securities Trust ("Trust") and PaineWebber Enhanced Nasdaq-100 Fund is
a non-diversified series of the Trust. The Trust is a professionally managed,
open-end management investment company organized as a Delaware business trust.
The Funds' investment objective is to seek higher total return over the long
term than the S&P 500 Index and the Nasdaq 100 Index, respectively. Offering
costs have been deferred and have been amortized using the straight line method
through the first fiscal period end, September 30, 2000. Prior to the
commencement of operations on April 26, 2000, the Funds had no activity other
than the sale of total 5,000 shares of Class A, Class B, Class C and Class Y to
Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), the investment
advisor, administrator and distributor, and a wholly owned asset management
subsidiary of PaineWebber Incorporated ("PaineWebber"), an indirect wholly owned
subsidiary of UBS AG.
Currently, each Fund offers Class A, Class B, Class C and Class Y shares.
Each class represents interests in the same assets of the applicable Fund, and
the classes are identical except for differences in their sales charge
structures, ongoing service and distribution charges and certain transfer agency
expenses. In addition, Class B shares and all corresponding reinvested dividend
shares automatically convert to Class A shares approximately six years after
issuance. All classes of shares have equal voting privileges except that each
class has exclusive voting rights with respect to its service and/or
distribution plan. Class Y shares have no service or distribution plan.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States requires Fund management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies:
VALUATION OF INVESTMENTS--The Funds calculate net asset values based on the
current market value for their portfolio securities. The Funds normally obtain
market values for their securities from independent pricing sources. Independent
pricing sources may use reported last sale prices, current market quotations or
valuations from computerized "matrix" systems that derive values based on
comparable securities. Securities traded in the over-the-counter ("OTC") market
and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") normally are valued at
the last sale price on Nasdaq prior to valuation. Other OTC securities are
valued at the last bid price available prior to valuation. Securities which are
listed on U.S. and foreign stock exchanges normally are valued at the last sale
price on the day the securities are valued or, lacking any sales on such day, at
the last available bid price. In cases where securities are traded on more than
one exchange, the securities are valued on the exchange designated as the
primary market by Mitchell Hutchins Asset Management Inc., a wholly owned asset
management subsidiary of PaineWebber Incorporated ("PaineWebber"), an indirect
wholly owned subsidiary of UBS AG. If a market value is not available from an
independent pricing source for a particular security, that security is valued at
fair value as determined in good faith by or under the direction of the Trust's
board of trustees (the "board"). The amortized cost method of valuation, which
approximates market value, generally is used to value short-term debt
instruments with sixty days or less remaining to maturity, unless the board
determines that this does not represent fair value.
REPURCHASE AGREEMENTS--Each Fund's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, each Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. Each Fund occasionally
participates in joint repurchase agreement transactions with other funds managed
by Mitchell Hutchins.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are
recorded on the trade date. Realized gains and losses from investment
transactions are calculated using the identified cost method. Interest income is
recorded on an accrual basis. Dividend income is recorded on the ex-dividend
date. Discounts are accreted and premiums are amortized as adjustments to
interest income and the identified cost of investments.
Income, expenses (excluding class specific expenses) and
realized/unrealized gains/losses are allocated proportionately to each class of
shares based upon the relative net asset value of outstanding shares (or the
value of dividend-eligible shares, as appropriate) of each class at the
beginning of the day (after adjusting for current capital share activity of the
respective classes). Class specific expenses are charged directly to the
applicable class of shares.
DIVIDENDS AND DISTRIBUTIONS--Dividends and distributions to shareholders
are recorded on the ex-dividend date. The amount of dividends and distributions
are determined in accordance with federal income tax regulations, which may
differ from accounting principles generally accepted in the United States. These
"book/tax" differences are either considered temporary or permanent in nature.
To the extent these differences are permanent in nature, such amounts are
reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification.
INVESTMENT ADVISER AND ADMINISTRATOR
The Trust's board has approved an Investment Advisory and Administration
Contract ("Advisory Contract") with Mitchell Hutchins, under which Mitchell
Hutchins serves as investment adviser and administrator of the Funds. In
accordance with the Advisory Contract, the Enhanced S&P 500 Fund and Enhanced
Nasdaq-100 Fund pay Mitchell Hutchins an investment advisory and administration
fee, which is computed daily and payable monthly, at an annual rate of 0.40% and
0.75%, respectively, of each Fund's average daily net assets. Mitchell Hutchins
pays DSI International Management, Inc., a wholly owned asset management
subsidiary of PaineWebber Incorporated ("PaineWebber"), to serve as each Fund's
sub-adviser. Mitchell Hutchins (not the Funds) pays the sub-adviser a fee,
computed daily and paid monthly, at an annual rate of 0.20% of average daily net
assets for Enhanced S&P 500 Fund and 0.35% of average daily net assets for
Enhanced Nasdaq-100 Fund.
For the period ended September 30, 2000, Mitchell Hutchins has voluntarily
undertaken to waive a portion of advisory fees and reimburse a portion of other
expense when necessary to maintain Enhanced S&P 500 Fund's and Enhanced
Nasdaq-100 Fund's total annual operating expenses at a level not to exceed
0.98%, 1.38%, 1.38% and 0.73%, and 1.28%, 2.03%, 2.03% and 1.03% of each Funds'
average daily net assets for Class A, Class B, Class C and Class Y shares,
respectively. At September 30, 2000, Enhanced Nasdaq-100 Fund owed Mitchell
Hutchins $22,323 in investment advisory and administration fees.
For the period ended September 30, 2000, Enhanced S&P 500 Fund and Enhanced
Nasdaq-100 Fund did not pay brokerage commissions to PaineWebber because they
had no transactions executed with PaineWebber.
SERVICE AND DISTRIBUTION PLANS
Mitchell Hutchins is the distributor of each Fund's shares and has
appointed PaineWebber as the exclusive dealer for the sale of those shares.
Under separate plans of service and/or distribution pertaining to Class A, Class
B and Class C shares, the Enhanced S&P 500 Fund and Enhanced Nasdaq-100 Fund pay
Mitchell Hutchins monthly service fees at the annual rate of up to 0.25% of the
average daily net assets of Class A, Class B and Class C shares, respectively,
and monthly distribution fees at the annual rate of 0.40% of Class B and Class C
shares of Enhanced S&P 500 Fund's average daily net assets and 0.75% of Class B
and Class C shares of Enhanced Nasdaq-100 Fund's average daily net assets. At
September 30, 2000, the Enhanced S&P 500
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Fund and Enhanced Nasdaq-100 Fund owed Mitchell Hutchins $7,806 and $55,870 in
service and distribution fees, respectively.
Mitchell Hutchins also receives the proceeds of the initial sales charges
paid upon the purchase of Class A shares and the contingent deferred sales
charges paid by shareholders upon certain redemptions of Class A, Class B and
Class C shares. Mitchell Hutchins has informed each Fund that for the period
ended September 30, 2000, it earned $97,506 and $515,768 in sales charges for
the Enhanced S&P 500 Fund and Enhanced Nasdaq-100 Fund, respectively.
TRANSFER AGENCY SERVICE FEES
PaineWebber provides transfer agency related services to each Fund pursuant
to a delegation of authority from PFPC, Inc., each Fund's transfer agent, and is
compensated for these services by PFPC, Inc., not the Funds. For the period
ended September 30, 2000, PaineWebber received approximately 52% and 51% of the
total transfer agency service fees collected by PFPC, Inc. from the Enhanced S&P
500 Fund and Enhanced Nasdaq-100 Fund, respectively.
SECURITY LENDING
Each Fund may lend securities up to 331U3% of its total assets to qualified
institutions. The loans are secured at all times by cash, cash equivalents or
U.S. government securities in an amount at least equal to the market value of
the securities loaned, plus accrued interest, determined on a daily basis and
adjusted accordingly. Each Fund will regain record ownership of loaned
securities to exercise certain beneficial rights; however, each Fund may bear
the risk of delay in recovery of, or even loss of rights in, the securities
loaned should the borrower fail financially. Each Fund receives compensation,
which is included in interest income, for lending its securities from interest
earned on the cash, cash equivalents or U.S. government securities held as
collateral, net of fee rebates paid to the borrower plus reasonable
administrative and custody fees. For the period ended September 30, 2000, the
Funds did not participate in the securities lending program.
BANK LINE OF CREDIT
Each Fund may participate with other funds managed by Mitchell Hutchins in
a $200 million committed credit facility ("Facility") to be utilized for
temporary financing until the settlement of sale or purchase of portfolio
securities, the repurchase or redemption of shares of each Fund at the request
of the shareholders and other temporary or emergency purchases. In connection
therewith, each Fund has agreed to pay a commitment fee, pro rata, based on the
relative asset size of the Funds in the Facility. Interest is charged to each
Fund at rates based on prevailing market rates in effect at the time of
borrowings. For the period ended September 30, 2000, the Funds did not borrow
under the Facility.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at September
30, 2000 was substantially the same as the cost of securities for financial
statement purposes.
At September 30, 2000, the components of net unrealized depreciation of
investments were as follows:
ENHANCED ENHANCED
S&P 500 NASDAQ-100
FUND FUND
----------- -----------
Gross appreciation (investments having
an excess of value over cost) .................... $ 1,374,214 $ 8,843,311
Gross depreciation (investments having
an excess of cost over value) .................... (1,871,265) (11,236,584)
----------- -----------
Net unrealized depreciation of investments ......... $ (497,051) $(2,393,273)
=========== ===========
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
For the period ended September 30, 2000, total aggregate purchases and
sales of portfolio securities, excluding short-term securities, were as follows:
ENHANCED ENHANCED
S&P 500 NASDAQ-100
FUND FUND
----------- -----------
Purchases .......................................... $33,938,821 $94,793,806
Sales .............................................. 12,378,776 3,538,436
FEDERAL TAX STATUS
Each Fund intends to distribute substantially all of its taxable income and
to comply with the other requirements of the Internal Revenue Code applicable to
regulated investment companies. Accordingly, no provision for federal income
taxes is required. In addition, by distributing during each calendar year,
substantially all of its net investment income, capital gains and certain other
amounts, if any, each Fund intends not to be subject to any federal excise tax.
To reflect reclassifications arising from permanent "book/tax" differences
for the year ended September 30, 2000, the Enhanced Nasdaq-100 Fund's
accumulated net realized gain was decreased by $328,779, and accumulated net
investment loss was decreased by $328,779. Permanent book/tax differences are
primarily attributable to net operating losses.
SHARES OF BENEFICIAL INTEREST
There is an unlimited amount of $0.001 par value shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
ENHANCED S&P 500 FUND CLASS A CLASS B CLASS C CLASS Y
FOR THE PERIOD APRIL 26, 2000+ ----------------------- ----------------------- ----------------------- --------------------
THROUGH SEPTEMBER 30, 2000 SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- ----------- --------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold ................... 1,745,823 $17,404,177 888,383 $ 8,779,275 496,962 $ 4,932,107 62,495 $ 616,187
Shares repurchased ............ (901,204) (8,442,042) (89,919) (884,571) (89,676) (889,021) (447) (4,378)
Shares converted from
Class B to Class A .......... 364 3,630 (365) (3,630) -- -- -- --
Dividends reinvested .......... -- -- -- -- -- -- -- --
--------- ----------- --------- ----------- --------- ----------- ------- ----------
Net increase .................. 844,983 $ 8,965,765 798,099 $ 7,891,074 407,286 $ 4,043,086 62,048 $ 611,809
========= =========== ========= =========== ========= =========== ======= ==========
ENHANCED NASDAQ-100 FUND
FOR THE PERIOD APRIL 26, 2000+
THROUGH SEPTEMBER 30, 2000
Shares sold ................... 3,236,588 $32,998,424 4,257,079 $42,928,621 2,754,644 $27,833,175 222,767 $2,264,892
Shares repurchased ............ (670,948) (6,946,961) (405,032) (4,079,455) (306,157) (3,125,289) (47,239) (482,041)
Shares converted from
Class B to Class A .......... 5,885 57,007 (5,896) (57,007) -- -- -- --
Dividends reinvested .......... -- -- -- -- -- -- -- --
--------- ----------- --------- ----------- --------- ----------- ------- ----------
Net increase .................. 2,571,525 $26,108,470 3,846,151 $38,792,159 2,448,487 $24,707,886 175,528 $1,782,851
========= =========== ========= =========== ========= =========== ======= ==========
</TABLE>
----------
+ Commencement of operations
21
<PAGE>
PAINEWEBBER ENHANCED S&P 500 FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period is presented below:
<TABLE>
<CAPTION>
FOR THE PERIOD APRIL 26, 2000+ THROUGH SEPTEMBER 30, 2000
---------------------------------------------------------
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................................. $10.00 $10.00 $10.00 $10.00
------ ------ ------ ------
Net investment income (loss) ......................................... 0.01 (0.01) (0.01) 0.01
Net realized and unrealized losses from investments .................. (0.32) (0.31) (0.31) (0.30)
------ ------ ------ ------
Net decrease from investment operations .............................. (0.31) (0.32) (0.32) (0.29)
------ ------ ------ ------
Net asset value, end of period ....................................... $ 9.69 $ 9.68 $ 9.68 $ 9.71
====== ====== ====== ======
Total investment return(1) ........................................... (3.10)% (3.20)% (3.20)% (2.90)%
====== ====== ====== ======
Ratios/Supplemental Data:
Net assets, end of period (000's) .................................... $8,197 $7,735 $3,954 $ 615
Expenses to average net assets, net of waivers from adviser .......... 0.98%* 1.38%* 1.38%*
0.73%*
Expenses to average net assets, before waivers from adviser .......... 4.29%* 4.88%* 4.88%*
4.23%*
Net investment income (loss) to average net assets,
net of waivers from adviser ........................................ 0.24%* (0.20)%* (0.21)%* 0.41%*
Net investment income (loss) to average net assets,
before waivers from adviser ........................................ (3.05)%* (3.70)%* (3.71)%* (3.09)%*
Portfolio turnover ................................................... 74% 74% 74% 74%
</TABLE>
----------
* Annualized
+ Commencement of operations.
(1) Total investment return is calculated assuming a $10,000 investment on the
first day of the period reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable date, and a sale
at net asset value on the last day of the period reported. The figures do
not include any applicable sales charges or program fees; results would be
lower if they were included. Total investment return has not been
annualized.
22
<PAGE>
PAINEWEBBER ENHANCED NASDAQ-100 FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period is presented below:
<TABLE>
<CAPTION>
FOR THE PERIOD APRIL 26, 2000+ THROUGH SEPTEMBER 30, 2000
---------------------------------------------------------
CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period .................................... $ 10.00 $ 10.00 $ 10.00 $ 10.00
------- ------- ------- -------
Net investment loss ..................................................... (0.04) (0.06) (0.06) (0.03)
Net realized and unrealized losses from investments ..................... (0.13) (0.14) (0.14) (0.13)
------- ------- ------- -------
Net decrease from investment operations ................................. (0.17) (0.20) (0.20) (0.16)
------- ------- ------- -------
Net asset value, end of period .......................................... $ 9.83 $ 9.80 $ 9.80 $ 9.84
======= ======= ======= =======
Total investment return(1) .............................................. (1.70)% (2.00)% (2.00)% (1.60)%
======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's) ....................................... $25,301 $37,714 $24,012 $ 1,740
Expenses to average net assets, net of waivers from adviser ............. 1.28%* 2.03%* 2.03%* 1.03%*
Expenses to average net assets, before waivers from adviser ............. 2.07%* 2.82%* 2.82%* 2.02%*
Net investment loss to average net assets, net of waivers from adviser .. (1.25)%* (2.00)%* (2.00)%* (1.00)%*
Net investment loss to average net assets, before waivers from adviser .. (2.04)%* (2.79)%* (2.79)%* (1.99)%*
Portfolio turnover ...................................................... 5% 5% 5% 5%
</TABLE>
----------
* Annualized
+ Commencement of operations.
(1) Total investment return is calculated assuming a $10,000 investment on the
first day of the period reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable date, and a sale
at net asset value on the last day of the period reported. The figures do
not include any applicable sales charges or program fees; results would be
lower if they were included. Total investment return has not been
annualized.
23
<PAGE>
PAINEWEBBER ENHANCED S&P 500 FUND
PAINEWEBBER ENHANCED NASDAQ-100 FUND
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
PaineWebber Enhanced S&P 500 Fund
PaineWebber Enhanced Nasdaq-100 Fund
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of the PaineWebber Enhanced S&P 500 Fund and
PaineWebber Enhanced Nasdaq-100 Fund (the "Funds") as of September 30, 2000, and
the related statements of operations, changes in net assets and the financial
highlights for the period April 26, 2000 (commencement of operations) through
September 30, 2000. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We have conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned at September 30, 2000, by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of
PaineWebber Enhanced S&P 500 Fund and PaineWebber Enhanced Nasdaq-100 Fund at
September 30, 2000, and the results of their operations, the changes in their
net assets and their financial highlights for the period April 26, 2000
(commencement of operations) through September 30, 2000, in conformity with
accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
New York, New York
November 21, 2000
24
<PAGE>
[This Page Intentionally Left Blank]
25
<PAGE>
[This Page Intentionally Left Blank]
26
<PAGE>
================================================================================
TRUSTEES
E. Garrett Bewkes, Jr. George W. Gowen
CHAIRMAN
Frederic V. Malek
Margo N. Alexander
Carl W. Schafer
Richard Q. Armstrong
Brian M. Storms
Richard R. Burt
Meyer Feldberg
PRINCIPAL OFFICERS
Brian M. Storms Dianne E. O'Donnell
PRESIDENT VICE PRESIDENT AND SECRETARY
Amy R. Doberman Paul H. Schubert
VICE PRESIDENT VICE PRESIDENT AND TREASURER
INVESTMENT ADVISER,
ADMINISTRATOR AND DISTRIBUTOR
Mitchell Hutchins Asset Management Inc.
51 West 52nd Street
New York, New York 10019-6114
A PROSPECTUS CONTAINING MORE COMPLETE INFORMATION FOR ANY OF THE FUNDS LISTED ON
THE BACK COVER CAN BE OBTAINED FROM A PAINEWEBBER FINANCIAL ADVISOR OR
CORRESPONDENT FIRM. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
THIS REPORT IS NOT TO BE USED IN CONJUNCTION WITH THE OFFERING OF SHARES OF THE
FUND UNLESS ACCOMPANIED OR PRECEDED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
==========
PaineWebber offers a family of 26 funds which
encompass a diversified range of investment goals.
BOND FUNDS
o High Income Fund
o Investment Grade Income Fund
o Low Duration U.S. Government Income Fund
o Strategic Income Fund
o U.S. Government Income Fund
TAX-FREE BOND FUNDS
o California Tax-Free Income Fund
o Municipal High Income Fund
o National Tax-Free Income Fund
o New York Tax-Free Income Fund
STOCK FUNDS
o Enhanced S&P 500 Fund
o Enhanced Nasdaq-100 Fund
o Financial Services Growth Fund
o Growth Fund
o Growth and Income Fund
o Mid Cap Fund
o Small Cap Fund
o S&P 500 Index Fund
o Strategy Fund
o Tax-Managed Equity Fund
ASSET ALLOCATION FUNDS
o Balanced Fund
o Tactical Allocation Fund
GLOBAL FUNDS
o Asia Pacific Growth Fund
o Emerging Markets Equity Fund
o Global Equity Fund
o Global Income Fund
PAINEWEBBER MONEY MARKET FUND
[PAINEWEBBER LOGO]
(C)2000 PaineWebber Incorporated
All Rights Reserved.
PAINEWEBBER
==========================
ENHANCED
S&P 500
FUND
ENHANCED
NASDAQ-100
FUND
ANNUAL REPORT
SEPTEMBER 30, 2000
