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<PAGE> PAGE 2
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SIGNATURE PAUL H. SCHUBERT
TITLE TREASURER
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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To the Shareholders and
Board of Trustees of
PaineWebber Small Cap Fund
In planning and performing our audit of the financial statements of
PaineWebber Small Cap Fund for the year ended July 31, 1997, we considered
its internal control, including control activities for safeguarding
securities, in order to determine our auditing procedures for the purpose
of expressing our opinion on the financial statements and to comply with
the requirements of Form N-SAR, not to provide assurance on internal control.
The management of PaineWebber Small Cap Fund is responsible for establishing
and maintaining internal control. In fulfilling this responsibility,
estimates and judgments by management are required to assess the expected
benefits and related costs of control activities. Generally, control
activities that are relevant to an audit pertain to the entity's objective
of preparing financial statements for external purposes that are fairly
presented in conformity with generally accepted accounting principles.
Those control activities include the safeguarding of assets against
unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, errors or irregularities
may occur and not be detected. Also, projection of any evaluation of
internal control to future periods is subject to the risk that it may become
inadequate because of changes in conditions or that the effectiveness of the
design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in internal control that might be material weaknesses
under standards established by the American Institute of Certified Public
Accountants. A material weakness is a condition in which the design or
operation of any specific internal control components does not reduce to a
relatively low level the risk that errors or irregularities in amounts that
would be material in relation to the financial statements being audited may
occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted no matters
involving internal control, including control activities for safeguarding
securities, that we consider to be material weaknesses as defined above as
of July 31, 1997.
This report is intended solely for the information and use of management and
the Board of Trustees of PaineWebber Small Cap Fund and the Securities and
Exchange Commission.
Price Waterhouse LLP
New York, NY
September 17, 1997
FORM 10f-3 FUND: PW Small Cap Value
Record of Securities Purchased Under the Fund's Rule 10f-3 Procedures
1. Issuer: Steel Dynamics
2. Date of Purchase: 11/21/97
3. Date offering commenced: 11/21/96
4. Underwriters from whom purchased: Morgan Stanley
5. "Affiliated Underwriter" managing or participating in syndicate:
PaineWebber
6. Aggregate principal amount of purchase: $160,000
7. Aggregate principal amount of offering: $157,500,000
8. Purchase price (net of fees and expenses): $16
9. Initial public offering price: $16
10. Commission, spread or profit: % $0.56
11. Have the following conditions been satisfied? YES NO
a. The securities are part of an issue
registered under the Securities Act
of 1933 which is being offered to the
public or are "municipal securities" as
defined in Section 3(a)(29) of the Securities
Exchange Act of 1934. X
b. The securities were purchased prior to the end
of the end first full business day of the offering
at not more than the initial offering price (or,
if a rights offering, the securities were
purchased on or before the fourth day preceding the
day on which the offering terminated. X
c. The underwriting was a firm commitment
underwriting. X
d. The commission, spread or profit was reasonable
and fair in relation to that being received by
others for underwriting similar securities during
the same period. X
e. (1)If securities are registered under the
Securities Act of 1933, the issuer of the
securities and its predecessor have been in
continuous operation for not less than three
years. X
(2)If securities are municipal securities, the
issue of securities has received an investment
grade rating from a nationally recognized
statistical rating organization or, if the
issuer or entity supplying the revenues from
which the issue is to be paid shall have been
in continuous operation for less than three
years (including any predecessor), the issue has
received one of the three highest ratings from at
least one such rating organization. N/A
f. The amount of such securities purchased by all of
the investment companies advised by Mitchell
Hutchins did not exceed 4% of the principal amount
of the offering or $500,000 in principal amount,
whichever is greater, provided that in no event did
such amount exceed 10% of the principal amount of
the offering. X
g. The purchase price was less than 3% of the Fund's
total assets. X
h. No Affiliated Underwriter was a direct or indirect
participant in or beneficiary of the sale or, with
respect to municipal securities, no purchases were
designated as group sales or otherwise allocated to
the account of any Affiliated Underwriter. X
Approved: Donald R. Jones Date: 11/25/96
FORM 10f-3 FUND: PW Small Cap Value
Record of Securities Purchased Under the Fund's Rule 10f-3 Procedures
1. Issuer: Triangle Pharm.
2. Date of Purchase: 11/01/96
3. Date offering commenced: 11/01/96
4. Underwriters from whom purchased: Dollon Reed
5. "Affiliated Underwriter" managing or participating in syndicate:
PaineWebber
6. Aggregate principal amount of purchase: $1,000,000
7. Aggregate principal amount of offering: $40,000,000
8. Purchase price (net of fees and expenses): $10
9. Initial public offering price: $10
10. Commission, spread or profit: % $0.42
11. Have the following conditions been satisfied? YES NO
a. The securities are part of an issue
registered under the Securities Act
of 1933 which is being offered to the
public or are "municipal securities" as
defined in Section 3(a)(29) of the Securities
Exchange Act of 1934. X
b. The securities were purchased prior to the end
of the end first full business day of the offering
at not more than the initial offering price (or,
if a rights offering, the securities were
purchased on or before the fourth day preceding the
day on which the offering terminated. X
c. The underwriting was a firm commitment
underwriting. X
d. The commission, spread or profit was reasonable
and fair in relation to that being received by
others for underwriting similar securities during
the same period. X
e. (1)If securities are registered under the
Securities Act of 1933, the issuer of the
securities and its predecessor have been in
continuous operation for not less than three
years. X
(2)If securities are municipal securities, the
issue of securities has received an investment
grade rating from a nationally recognized
statistical rating organization or, if the
issuer or entity supplying the revenues from
which the issue is to be paid shall have been
in continuous operation for less than three
years (including any predecessor), the issue has
received one of the three highest ratings from at
least one such rating organization. N/A
f. The amount of such securities purchased by all of
the investment companies advised by Mitchell
Hutchins did not exceed 4% of the principal amount
of the offering or $500,000 in principal amount,
whichever is greater, provided that in no event did
such amount exceed 10% of the principal amount of
the offering. X
g. The purchase price was less than 3% of the Fund's
total assets. X
h. No Affiliated Underwriter was a direct or indirect
participant in or beneficiary of the sale or, with
respect to municipal securities, no purchases were
designated as group sales or otherwise allocated to
the account of any Affiliated Underwriter. X
Approved: Donald R. Jones Date: 11/17/96
FORM 10f-3 FUND: PW Small Cap Value
Record of Securities Purchased Under the Fund's Rule 10f-3 Procedures
1. Issuer: Nuskin Asia Pacific
2. Date of Purchase: 11/21/97
3. Date offering commenced: 11/21/96
4. Underwriters from whom purchased: Merrill Lynch
5. "Affiliated Underwriter" managing or participating in syndicate:
PaineWebber
6. Aggregate principal amount of purchase: $46,000
7. Aggregate principal amount of offering: $209,300,000
8. Purchase price (net of fees and expenses): $23
9. Initial public offering price: $23
10. Commission, spread or profit: % $0.82
11. Have the following conditions been satisfied? YES NO
a. The securities are part of an issue
registered under the Securities Act
of 1933 which is being offered to the
public or are "municipal securities" as
defined in Section 3(a)(29) of the Securities
Exchange Act of 1934. X
b. The securities were purchased prior to the end
of the end first full business day of the offering
at not more than the initial offering price (or,
if a rights offering, the securities were
purchased on or before the fourth day preceding the
day on which the offering terminated. X
c. The underwriting was a firm commitment
underwriting. X
d. The commission, spread or profit was reasonable
and fair in relation to that being received by
others for underwriting similar securities during
the same period. X
e. (1)If securities are registered under the
Securities Act of 1933, the issuer of the
securities and its predecessor have been in
continuous operation for not less than three
years. X
(2)If securities are municipal securities, the
issue of securities has received an investment
grade rating from a nationally recognized
statistical rating organization or, if the
issuer or entity supplying the revenues from
which the issue is to be paid shall have been
in continuous operation for less than three
years (including any predecessor), the issue has
received one of the three highest ratings from at
least one such rating organization. N/A
f. The amount of such securities purchased by all of
the investment companies advised by Mitchell
Hutchins did not exceed 4% of the principal amount
of the offering or $500,000 in principal amount,
whichever is greater, provided that in no event did
such amount exceed 10% of the principal amount of
the offering. X
g. The purchase price was less than 3% of the Fund's
total assets. X
h. No Affiliated Underwriter was a direct or indirect
participant in or beneficiary of the sale or, with
respect to municipal securities, no purchases were
designated as group sales or otherwise allocated to
the account of any Affiliated Underwriter. X
Approved: Donald R. Jones Date: 11/25/96
FORM 10f-3 FUND: Small Cap Value
Record of Securities Purchased Under the Fund's Rule 10f-3 Procedures
1. Issuer: RCS Energy
2. Date of Purchase: 1/29/97
3. Date offering commenced: 1/29/97
4. Underwriters from whom purchased: Salomon Bros.
5. "Affiliated Underwriter" managing or participating in syndicate:
PaineWebber
6. Aggregate principal amount of purchase: $780,000
7. Aggregate principal amount of offering: $273,000,000
8. Purchase price (net of fees and expenses): $39
9. Initial public offering price: $39
10. Commission, spread or profit: % $1.09
11. Have the following conditions been satisfied? YES NO
a. The securities are part of an issue
registered under the Securities Act
of 1933 which is being offered to the
public or are "municipal securities" as
defined in Section 3(a)(29) of the Securities
Exchange Act of 1934. X
b. The securities were purchased prior to the end
of the end first full business day of the offering
at not more than the initial offering price (or,
if a rights offering, the securities were
purchased on or before the fourth day preceding the
day on which the offering terminated. X
c. The underwriting was a firm commitment
underwriting. X
d. The commission, spread or profit was reasonable
and fair in relation to that being received by
others for underwriting similar securities during
the same period. X
e. (1)If securities are registered under the
Securities Act of 1933, the issuer of the
securities and its predecessor have been in
continuous operation for not less than three
years. X
(2)If securities are municipal securities, the
issue of securities has received an investment
grade rating from a nationally recognized
statistical rating organization or, if the
issuer or entity supplying the revenues from
which the issue is to be paid shall have been
in continuous operation for less than three
years (including any predecessor), the issue has
received one of the three highest ratings from at
least one such rating organization. N/A
f. The amount of such securities purchased by all of
the investment companies advised by Mitchell
Hutchins did not exceed 4% of the principal amount
of the offering or $500,000 in principal amount,
whichever is greater, provided that in no event did
such amount exceed 10% of the principal amount of
the offering. X
g. The purchase price was less than 3% of the Fund's
total assets. X
h. No Affiliated Underwriter was a direct or indirect
participant in or beneficiary of the sale or, with
respect to municipal securities, no purchases were
designated as group sales or otherwise allocated to
the account of any Affiliated Underwriter. X
Approved: Donald R. Jones Date: 1/30/97
FORM 10f-3 FUND: Small Cap Value
Record of Securities Purchased Under the Fund's Rule 10f-3 Procedures
1. Issuer: Soncasters PLL
2. Date of Purchase: 1/29/97
3. Date offering commenced: 1/29/97
4. Underwriters from whom purchased: First Boston
5. "Affiliated Underwriter" managing or participating in syndicate:
PaineWebber
6. Aggregate principal amount of purchase: $330,000
7. Aggregate principal amount of offering: $132,000,000
8. Purchase price (net of fees and expenses): $16 1/2
9. Initial public offering price: $16 1/2
10. Commission, spread or profit: % $0.69
11. Have the following conditions been satisfied? YES NO
a. The securities are part of an issue
registered under the Securities Act
of 1933 which is being offered to the
public or are "municipal securities" as
defined in Section 3(a)(29) of the Securities
Exchange Act of 1934. X
b. The securities were purchased prior to the end
of the end first full business day of the offering
at not more than the initial offering price (or,
if a rights offering, the securities were
purchased on or before the fourth day preceding the
day on which the offering terminated. X
c. The underwriting was a firm commitment
underwriting. X
d. The commission, spread or profit was reasonable
and fair in relation to that being received by
others for underwriting similar securities during
the same period. X
e. (1)If securities are registered under the
Securities Act of 1933, the issuer of the
securities and its predecessor have been in
continuous operation for not less than three
years. X
(2)If securities are municipal securities, the
issue of securities has received an investment
grade rating from a nationally recognized
statistical rating organization or, if the
issuer or entity supplying the revenues from
which the issue is to be paid shall have been
in continuous operation for less than three
years (including any predecessor), the issue has
received one of the three highest ratings from at
least one such rating organization. N/A
f. The amount of such securities purchased by all of
the investment companies advised by Mitchell
Hutchins did not exceed 4% of the principal amount
of the offering or $500,000 in principal amount,
whichever is greater, provided that in no event did
such amount exceed 10% of the principal amount of
the offering. X
g. The purchase price was less than 3% of the Fund's
total assets. X
h. No Affiliated Underwriter was a direct or indirect
participant in or beneficiary of the sale or, with
respect to municipal securities, no purchases were
designated as group sales or otherwise allocated to
the account of any Affiliated Underwriter. X
Approved: Donald R. Jones Date: 1/30/97
FORM 10f-3 FUND: Small Cap Value
Record of Securities Purchased Under the Fund's Rule 10f-3 Procedures
1. Issuer: Yurie Systems
2. Date of Purchase: 02/05/97
3. Date offering commenced: 02/05/97
4. Underwriters from whom purchased: Alex Brown
5. "Affiliated Underwriter" managing or participating in syndicate:
PaineWebber
6. Aggregate principal amount of purchase: $21,600
7. Aggregate principal amount of offering: $48,000,000
8. Purchase price (net of fees and expenses): $12
9. Initial public offering price: $12
10. Commission, spread or profit: % $0.47
11. Have the following conditions been satisfied? YES NO
a. The securities are part of an issue
registered under the Securities Act
of 1933 which is being offered to the
public or are "municipal securities" as
defined in Section 3(a)(29) of the Securities
Exchange Act of 1934. X
b. The securities were purchased prior to the end
of the end first full business day of the offering
at not more than the initial offering price (or,
if a rights offering, the securities were
purchased on or before the fourth day preceding the
day on which the offering terminated. X
c. The underwriting was a firm commitment
underwriting. X
d. The commission, spread or profit was reasonable
and fair in relation to that being received by
others for underwriting similar securities during
the same period. X
e. (1)If securities are registered under the
Securities Act of 1933, the issuer of the
securities and its predecessor have been in
continuous operation for not less than three
years. X
(2)If securities are municipal securities, the
issue of securities has received an investment
grade rating from a nationally recognized
statistical rating organization or, if the
issuer or entity supplying the revenues from
which the issue is to be paid shall have been
in continuous operation for less than three
years (including any predecessor), the issue has
received one of the three highest ratings from at
least one such rating organization. N/A
f. The amount of such securities purchased by all of
the investment companies advised by Mitchell
Hutchins did not exceed 4% of the principal amount
of the offering or $500,000 in principal amount,
whichever is greater, provided that in no event did
such amount exceed 10% of the principal amount of
the offering. X
g. The purchase price was less than 3% of the Fund's
total assets. X
h. No Affiliated Underwriter was a direct or indirect
participant in or beneficiary of the sale or, with
respect to municipal securities, no purchases were
designated as group sales or otherwise allocated to
the account of any Affiliated Underwriter. X
Approved: Donald R. Jones Date: 2/05/97
FORM 10f-3 FUND: Small Cap Value
Record of Securities Purchased Under the Fund's Rule 10f-3 Procedures
1. Issuer: Samsonite Corp.
2. Date of Purchase: 2/06/97
3. Date offering commenced: 2/06/97
4. Underwriters from whom purchased: Merrill Lynch
5. "Affiliated Underwriter" managing or participating in syndicate:
PaineWebber
6. Aggregate principal amount of purchase: $75,600
7. Aggregate principal amount of offering: $328,572,552
8. Purchase price (net of fees and expenses): $42
9. Initial public offering price: $42
10. Commission, spread or profit: % $1.26
11. Have the following conditions been satisfied? YES NO
a. The securities are part of an issue
registered under the Securities Act
of 1933 which is being offered to the
public or are "municipal securities" as
defined in Section 3(a)(29) of the Securities
Exchange Act of 1934. X
b. The securities were purchased prior to the end
of the end first full business day of the offering
at not more than the initial offering price (or,
if a rights offering, the securities were
purchased on or before the fourth day preceding the
day on which the offering terminated. X
c. The underwriting was a firm commitment
underwriting. X
d. The commission, spread or profit was reasonable
and fair in relation to that being received by
others for underwriting similar securities during
the same period. X
e. (1)If securities are registered under the
Securities Act of 1933, the issuer of the
securities and its predecessor have been in
continuous operation for not less than three
years. X
(2)If securities are municipal securities, the
issue of securities has received an investment
grade rating from a nationally recognized
statistical rating organization or, if the
issuer or entity supplying the revenues from
which the issue is to be paid shall have been
in continuous operation for less than three
years (including any predecessor), the issue has
received one of the three highest ratings from at
least one such rating organization. N/A
f. The amount of such securities purchased by all of
the investment companies advised by Mitchell
Hutchins did not exceed 4% of the principal amount
of the offering or $500,000 in principal amount,
whichever is greater, provided that in no event did
such amount exceed 10% of the principal amount of
the offering. X
g. The purchase price was less than 3% of the Fund's
total assets. X
h. No Affiliated Underwriter was a direct or indirect
participant in or beneficiary of the sale or, with
respect to municipal securities, no purchases were
designated as group sales or otherwise allocated to
the account of any Affiliated Underwriter. X
Approved: Donald R. Jones Date: 2/06/97
FORM 10f-3 FUND: PW Small Cap Value Fund
Record of Securities Purchased Under the Fund's Rule 10f-3 Procedures
1. Issuer: Special Metals
2. Date of Purchase: 2/26/97
3. Date offering commenced: 2/26/97
4. Underwriters from whom purchased: Morgan Stanley
5. "Affiliated Underwriter" managing or participating in syndicate:
PaineWebber
6. Aggregate principal amount of purchase: $156,750
7. Aggregate principal amount of offering: $61,050,000
8. Purchase price (net of fees and expenses): $16.5
9. Initial public offering price: $16.5
10. Commission, spread or profit: % $0.70
11. Have the following conditions been satisfied? YES NO
a. The securities are part of an issue
registered under the Securities Act
of 1933 which is being offered to the
public or are "municipal securities" as
defined in Section 3(a)(29) of the Securities
Exchange Act of 1934. X
b. The securities were purchased prior to the end
of the end first full business day of the offering
at not more than the initial offering price (or,
if a rights offering, the securities were
purchased on or before the fourth day preceding the
day on which the offering terminated. X
c. The underwriting was a firm commitment
underwriting. X
d. The commission, spread or profit was reasonable
and fair in relation to that being received by
others for underwriting similar securities during
the same period. X
e. (1)If securities are registered under the
Securities Act of 1933, the issuer of the
securities and its predecessor have been in
continuous operation for not less than three
years. X
(2)If securities are municipal securities, the
issue of securities has received an investment
grade rating from a nationally recognized
statistical rating organization or, if the
issuer or entity supplying the revenues from
which the issue is to be paid shall have been
in continuous operation for less than three
years (including any predecessor), the issue has
received one of the three highest ratings from at
least one such rating organization. N/A
f. The amount of such securities purchased by all of
the investment companies advised by Mitchell
Hutchins did not exceed 4% of the principal amount
of the offering or $500,000 in principal amount,
whichever is greater, provided that in no event did
such amount exceed 10% of the principal amount of
the offering. X
g. The purchase price was less than 3% of the Fund's
total assets. X
h. No Affiliated Underwriter was a direct or indirect
participant in or beneficiary of the sale or, with
respect to municipal securities, no purchases were
designated as group sales or otherwise allocated to
the account of any Affiliated Underwriter. X
Approved: Donald R. Jones Date: 2/26/97
