SMALL CAP FUND SEMIANNUAL REPORT
SMALL CAP FUND
FUND PROFILE
GOAL:
Long-term capital appreciation through small-cap investing
PORTFOLIO MANAGER:
Donald R. Jones,
Mitchell Hutchins
Asset Management Inc.
TOTAL NET ASSETS:
$89.7 million as of January 31, 1997
DIVIDEND PAYMENT:
Annually
March 17, 1997
Dear Shareholder,
We are pleased to present you with the semiannual report for PaineWebber Small
Cap Fund for the six-month period ending January 31, 1997
GENERAL MARKET OVERVIEW
- --------------------------------------------------------------------------------
[ART] The fiscal period got off to a difficult start for small-cap stocks as
events occurring in July--including higher long-term interest rates and a spate
of disappointing earnings announcements-- contributed to the first meaningful
overall stock market correction since 1994. By month-end, the small-cap market,
as measured by the Standard & Poor's 600 (a measure of small-cap stock
performance), had declined nearly 14% from a high achieved on June 5, 1996. For
stocks in general, the correction proved short-lived; by August, the stock
market, as measured by the Standard & Poor's 500 (S&P 500, a general measure of
stock market performance) had retraced much of the ground it had lost. By
mid-September, as investor confidence grew, money returning to the equity
markets propelled the S&P 500 to a then-record high (a circumstance which
underscores the hazards of market timing). Although the fall and early winter
months were characterized by continued market volatility, the nation's economic
outlook continued to encourage investors, and the stock market continued its
upward climb. During this time, small-caps turned in a less impressive, yet
strong, performance, gaining 8.02% during the latter half of the fiscal period.
This was taken as a sign by the market as a whole that the current bull market
run may be broadening to include mid- and smaller-cap issues.
PORTFOLIO REVIEW
[ART] For the six-month period ended January 31, 1997, the Fund's total returns
(the net asset value change with dividends re-invested) without deducting sales
charges were 17.86% for Class A shares, 17.38% for Class B shares and 17.40% for
Class C shares. For share owners who purchased or redeemed Fund shares during
the period, the Fund's total return for the period may be lower; for example,
after deducting the maximum applicable sales charges, the Fund's total return
for the period was 12.57% for Class A shares,
1
<PAGE>
PAINEWEBBER SMALL CAP FUND
Top Five Sectors as a percentage of net assets as of January 31, 1997
Other Insurance 12.38%
Banks 9.03%
Manufacturing-General 5.48%
Medical Providers 4.80%
Real Property 4.65%
SEMIANNUAL REPORT
12.38% for Class B shares and 16.40% for Class C shares. Over the six-month
period, the Fund outperformed the 17.05% Lipper average return of its peer group
(Small Company Growth Funds).
Early in the period, the Fund was in the final stages of a restructuring
effort that began in April 1996. As discussed in the annual report for the
fiscal year ended July 31, 1996, the new stock selection discipline seeks to
identify undervalued companies with a catalyst for change; that is, companies
that will likely report a positive earnings surprise. Examples of these include
Valmont Industries (1.8% of net assets as of January 31, 1997) and Prime
Hospitality Corp. (2.1%).
With regard to sector, both financial services (26.9% of net assets as of
January 31, 1997) and energy (9.5%) experienced strong performance over the
period, finishing up 30.63% and 31.28%, respectively. In turn, the Fund's
overweighting in these sectors helped relative performance throughout the
period. Given the current environment--modest economic growth and declining
interest rates-- we intend to maintain the Fund's overweighting in finance, in
light of the relatively low valuations currently found in select regional banks
and insurance companies. Additionally, a continuing consolidation and
restructuring theme should improve the potential for the long-term profitability
of these businesses. Several companies we currently favor within this sector
include CCB Financial (1.2%) and Capital Re Corp. (1.6%).
Conversely, the performance of the technology sector (8.4% of net assets as
of January 31, 1997) was disappointing over the period. Although technology
stocks rebounded somewhat from July's market correction, earnings reports
remained mixed and, as a result, these issues were extremely volatile. However,
the Fund's low weighting in this sector kept any negative performance incurred
as a result of this volatility down to a minimum. The Fund's positions in
capital goods (11.8%) and healthcare (6.9%) fared less well, hampering
performance somewhat as earnings disappointments continued to plague these
sectors.
2
<PAGE>
OUTLOOK
- --------------------------------------------------------------------------------
[ART] Going forward, we continue to view small-caps positively. Reasonable
valuations and superior long-term earnings growth prospects continue to point to
the existence of buying opportunities within the small-cap market. Mid-teens
earnings per share growth should prove favorable in comparison to the
single-digit earnings growth expected for the S&P 500 during the next few
quarters. Moreover, we will continue to focus on companies that possess a
combination of low valuation relative to growth and the potential for a positive
earnings surprise and/or an acceleration in fundamental performance.
Our ultimate objective in managing your investments is to help you
successfully meet your financial goals. We thank you for your continued support,
and welcome any comments or questions you may have.
Sincerely,
/S/ MARGO N. ALEXANDER
- ------------------------------
MARGO N. ALEXANDER
President, Mitchell Hutchins
Asset Management Inc.
/S/ MARK A. TINCHER
- ------------------------------
MARK A. TINCHER
Managing Director and
Chief Investment Officer--Equity Investments,
Mitchell Hutchins Asset Management Inc.
/S/ DONALD R. JONES
- ------------------------------
DONALD R. JONES
Portfolio Manager, PaineWebber Small Cap Fund
3
<PAGE>
PAINEWEBBER SMALL CAP FUND
PERFORMANCE RESULTS (UNAUDITED)
NET ASSET VALUE TOTAL RETURN(1)
--------------- -------------
12 MONTHS 6 MONTHS
01/31/97 07/31/96 01/31/96 ENDED 01/31/97 ENDED 01/31/97
- --------------------------------------------------------------------------------
Class A Shares $11.62 $10.22 $10.72 20.72% 17.86%
- --------------------------------------------------------------------------------
Class B Shares 11.29 9.98 10.53 19.72 17.38
- --------------------------------------------------------------------------------
Class C Shares 11.28 9.97 10.52 19.74 17.40
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS A SHARES
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN(1)
- --------------------------------------------------------------------------------
02/01/93 - 12/31/93 $10.00 $10.62 $0.0168 $0.1281 7.68%
- --------------------------------------------------------------------------------
1994 10.62 9.97 0.5208 -- (1.20)
- --------------------------------------------------------------------------------
1995 9.97 10.81 0.8306 -- 16.81
- --------------------------------------------------------------------------------
1996 10.81 11.40 1.1566 -- 17.45
- --------------------------------------------------------------------------------
01/01/97 - 01/31/97 11.40 11.62 -- -- 1.93
- --------------------------------------------------------------------------------
Total: $2.5248 $0.1281
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 01/31/97: 48.77%
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS B SHARES
NET ASSET VALUE
------------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN(1)
- --------------------------------------------------------------------------------
02/01/93 - 12/31/93 $10.00 $10.61 $0.0168 $0.0631 6.91%
- --------------------------------------------------------------------------------
1994 10.61 9.88 0.5208 -- (1.96)
- --------------------------------------------------------------------------------
1995 9.88 10.62 0.8306 -- 15.90
- --------------------------------------------------------------------------------
1996 10.62 11.08 1.1566 -- 16.50
- --------------------------------------------------------------------------------
01/01/97 - 01/31/97 11.08 11.29 -- -- 1.90
- --------------------------------------------------------------------------------
Total: $2.5248 $0.0631
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 01/31/97: 44.26%
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS C SHARES
NET ASSET VALUE
------------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN(1)
- --------------------------------------------------------------------------------
02/01/93 - 12/31/93 $10.00 $10.61 $0.0168 $0.0682 6.97%
- --------------------------------------------------------------------------------
1994 10.61 9.88 0.5208 -- (1.96)
- --------------------------------------------------------------------------------
1995 9.88 10.61 0.8306 -- 15.84
- --------------------------------------------------------------------------------
1996 10.61 11.07 1.1566 -- 16.52
- --------------------------------------------------------------------------------
01/01/97 - 01/31/97 11.07 11.28 -- -- 1.90
- --------------------------------------------------------------------------------
Total: $2.5248 $0.0682
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 01/31/97: 44.24%
- --------------------------------------------------------------------------------
(1) Figures assume reinvestment of all dividends and distributions at net
asset value on the payable dates and do not include sales charges; results for
each class would be lower if sales charges were included.
Note: The Fund offers Class Y shares to a limited group of eligible
investors, including the trustee of the PaineWebber Savings Investment Plan and
INSIGHT Investment Advisory Program participants. For the six months ended
January 31, 1997 and since inception, July 26, 1996 through January 31, 1997,
Class Y shares had a total return of 17.97% and 17.74%, respectively. Class Y
shares do not have initial or contingent deferred sales charges or ongoing
distribution and service fees.
- --------------------------------------------------------------------------------
The data above represents past performance of the Fund's shares, which is no
guarantee of future results.
The investment return and principal value of an investment in the Fund will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
4
<PAGE>
PAINEWEBBER SMALL CAP FUND
AVERAGE ANNUAL RETURNS
% RETURN AFTER DEDUCTING
% RETURN WITHOUT SALES CHARGE MAXIMUM SALES CHARGE
------------------------------ ------------------------
CLASS CLASS
-------------------------------------------------------
A* B** C*** A* B** C***
- --------------------------------------------------------------------------------
Twelve Months Ended 12/31/96 17.45% 16.50% 16.52% 12.16% 11.50% 15.52%
- --------------------------------------------------------------------------------
Five years Ended 12/31/96 N/A N/A N/A N/A N/A N/A
- --------------------------------------------------------------------------------
Commencement of Operations +
Through 12/31/96 10.13% 9.28% 9.27% 8.85% 8.88% 9.27%
- --------------------------------------------------------------------------------
* 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 5.0% and
is reduced to 0% after 6 years. Class B shares bear ongoing 12b-1 distribution
and service fees.
*** Maximum contingent deferred sales charge for Class C shares is 1.0% and
is reduced to 0% after 1 year. Class C shares bear ongoing 12b-1 distribution
and service fees.
+ Commencement of operations was February 1, 1993 for Class A, Class B and
Class C shares.
- --------------------------------------------------------------------------------
The data above represents past performance of the Fund's shares, which is
no guarantee of future results.
5
<PAGE>
PAINEWEBBER SMALL CAP FUND
JANUARY 31, 1997 (UNAUDITED)
PORTFOLIO OF INVESTMENTS
NUMBER OF
SHARES VALUE
- --------- ---------
COMMON STOCKS - 98.70%
AGRICULTURE, FOOD & BEVERAGE - 0.89%
5,000 Farmer Brothers Company ...............................$ 725,000
32,000 William Greenberg Jr. Desserts & Cafes * .............. 72,000
---------
797,000
---------
APPAREL, RETAIL - 0.58%
25,000 Paul Harris Stores Incorporated * ..................... 515,625
--------
APPAREL, TEXTILES - 2.15%
17,000 Quiksilver Incorporated * ............................. 399,500
110,000 Vans Incorporated * ................................... 1,526,250
---------
1,925,750
---------
BANKS - 9.03%
26,800 Banknorth Group Incorporated .......................... 1,092,100
17,000 CCB Financial Corporation ............................. 1,105,000
35,000 Cullen Frost Bankers Incorporated ..................... 1,222,813
42,870 Provident Bankshares Corporation ...................... 1,688,006
37,000 Silicon Valley Bancshares * ........................... 1,341,250
13,000 Texas Regional Bancshares Incorporated * .............. 429,000
20,000 Westamerica Bank Corporation .......................... 1,215,000
---------
8,093,169
---------
CHEMICALS - 1.41%
35,000 Cambrex Corporation ................................... 1,264,375
---------
COMPUTER HARDWARE - 1.21%
180,000 Oshap Technologies Limited * .......................... 1,088,438
---------
COMPUTER SOFTWARE - 0.46%
13,000 SPSS Incorporated * ................................... 416,000
---------
CONSUMER DURABLES - 0.60%
5,000 Furniture Brands International Incorporated * ......... 71,250
21,000 Movado Group Incorporated * ........................... 469,875
---------
541,125
---------
DEFENSE/AEROSPACE - 0.72%
20,000 Doncasters plc * ...................................... 392,500
13,000 Wyman Gordon Company * ................................ 251,875
---------
644,375
---------
DIVERSIFIED RETAIL - 0.27%
15,000 Shopko Stores Incorporated ............................ 238,125
---------
6
<PAGE>
PAINEWEBBER SMALL CAP FUND
NUMBER OF
SHARES VALUE
- --------- -------
COMMON STOCKS - (CONTINUED)
DRUGS & MEDICINE - 1.07%
63,000 Alpharma, Incorporated ............................... $ 826,875
60,000 IVC Industries Incorporated * ........................ 131,250
---------
958,125
---------
ELECTRIC UTILITIES - 0.79%
25,000 Sierra Pacific Resources ............................. 709,375
---------
ELECTRICAL POWER - 1.27%
15,000 Hughes Supply Incorporated ........................... 519,375
35,000 Kuhlman Corporation .................................. 621,250
---------
1,140,625
---------
ENERGY RESERVES & PRODUCTION - 3.58%
28,000 Benton Oil & Gas Company * ........................... 546,000
15,000 Howell Corporation ................................... 228,750
20,000 Lomak Petroleum Incorporated ......................... 445,000
50,000 Offshore Energy Development Corporation * ............ 650,000
18,000 Parker & Parsley Petroleum Company ................... 627,750
48,000 Santa Fe Energy Resources Incorporated * ............. 714,000
---------
3,211,500
---------
ENVIRONMENTAL SERVICES - 1.09%
5,000 Newpark Resources Incorporated * ..................... 233,125
85,000 Thermatrix Incorporated * ............................ 743,750
---------
976,875
---------
FINANCIAL SERVICES - 3.95%
10,000 Arbatax International Incorporated * ................. 60,625
15,000 CMAC Investment Corporation .......................... 521,250
100,000 Cash America International Incorporated .............. 875,000
9,000 First American Financial Corporation * ............... 375,750
130,000 First Cash Incorporated * ............................ 875,469
2,000 Markel Corporation * ................................. 196,000
16,000 Student Loan Corporation ............................. 638,000
---------
3,542,094
---------
FOREST PRODUCTS, PAPER - 2.89%
48,600 Greif Brothers Corporation ........................... 1,488,375
20,000 Mercer International Incorporated * .................. 212,500
23,999 Mosinee Paper Corporation ............................ 887,963
---------
2,588,838
---------
FREIGHT-AIR, LAND & SEA - 1.55%
150,000 Smithway Motor Xpress Corporation * .................. 1,387,500
---------
7
<PAGE>
PAINEWEBBER SMALL CAP FUND
NUMBER OF
SHARES VALUE
- --------- ---------
COMMON STOCKS - (CONTINUED)
GAS UTILITIES - 0.50%
17,000 Belden & Blake Corporation * ........................ $ 446,250
---------
HEAVY MACHINERY - 2.65%
65,000 Cascade Corporation ................................. 1,072,500
105,000 Titan Wheel International Incorporated .............. 1,299,375
---------
2,371,875
---------
HOTELS - 2.25%
20,000 Homegate Hospitality Incorporated * ................. 172,500
107,600 Prime Hospitality Corporation * ..................... 1,842,650
---------
2,015,150
---------
INDUSTRIAL SERVICES/SUPPLIES - 4.23%
50,000 Cornell Corrections Incorporated * .................. 537,500
40,000 GTS Duratek Incorporated * .......................... 540,000
78,000 Union Corporation * ................................. 1,745,250
8,400 Wackenhut Corporation, Class A ...................... 148,050
55,000 Wackenhut Corporation, Class B ...................... 825,000
---------
3,795,800
---------
INFORMATION & COMPUTER SERVICES - 3.73%
8,000 Barra Incorporated * ................................ 214,000
35,000 Comdisco Incorporated ............................... 1,080,625
10,000 Computer Data Systems Incorporated * ................ 310,000
40,000 Computervision Corporation * ........................ 300,000
60,000 Control Data System Incorporated * .................. 1,020,000
50,000 Physicians Computer Network Incorporated * .......... 418,750
---------
3,343,375
---------
LEISURE - 2.30%
75,000 Galoob Lewis Toys Incorporated * .................... 1,312,500
16,000 Harman International Industries Incorporated ........ 742,000
---------
2,054,500
---------
LIFE INSURANCE - 1.50%
3,000 Life Re Corporation ................................. 130,500
20,000 Life USA Holdings Incorporated * .................... 215,000
16,000 Reinsurance Group of America Incorporated ........... 734,000
7,000 Security Connecticut Company * ...................... 268,625
---------
1,348,125
---------
8
<PAGE>
PAINEWEBBER SMALL CAP FUND
NUMBER OF
SHARES VALUE
- ---------- ---------
COMMON STOCKS - (CONTINUED)
LONG DISTANCE & PHONE COMPANIES - 1.11%
25,000 Norstan Incorporated * ............................... $ 418,750
20,000 Smartalk Teleservices Incorporated * ................. 352,500
30,000 Viatel Incorporated * ................................ 225,000
---------
996,250
---------
MANUFACTURING-GENERAL - 5.49%
7,000 Kaydon Corporation ................................... 309,750
205,000 Powell Industries Incorporated * ..................... 1,483,125
32,000 Robbins & Myers Incorporated ......................... 848,000
31,000 Tadiran Limited ADR .................................. 833,125
47,000 Watsco Incorporated .................................. 1,451,125
---------
4,925,125
---------
MANUFACTURING-HIGH TECHNOLOGY - 2.63%
30,000 American Science & Engineering Incorporated * ........ 393,750
20,000 Brown & Sharpe Manufacturing Company * ............... 252,500
39,200 DII Group Incorporated * ............................. 931,000
10,000 Intelidata Technologies Corporation * ................ 66,250
30,000 Kemet Corporation * .................................. 712,500
---------
2,356,000
---------
MEDIA - 1.35%
100,000 Heritage Media Corporation * ......................... 1,212,500
---------
MEDICAL PRODUCTS - 1.00%
46,000 Conmed Corporation * ................................. 891,250
---------
MEDICAL PROVIDERS - 4.80%
100,000 Counsel Corporation * ................................ 1,312,500
75,000 Lanvision Systems Incorporated * ..................... 534,375
7,000 Lincare Holdings Incorporated * ...................... 264,687
100,000 Stericycle Incorporated * ............................ 1,075,000
137,500 Walsh International Incorporated * ................... 1,117,187
---------
4,303,749
---------
MINING & METALS - 2.21%
8,000 AK Steel Holding Corporation ......................... 322,000
40,000 Valmont Industries Incorporated ...................... 1,580,000
2,000 Wolverine Tube Incorporated * ........................ 76,250
---------
1,978,250
---------
MOTOR VEHICLES - 1.63%
20,000 A.O. Smith Corporation ............................... 667,500
25,000 Breed Technologies, Incorporated ..................... 540,625
15,000 Donnelly Corporation ................................. 253,125
---------
1,461,250
---------
9
<PAGE>
PAINEWEBBER SMALL CAP FUND
NUMBER OF
SHARES VALUE
- ---------- ---------
COMMON STOCKS - (CONTINUED)
OIL REFINING - 2.38%
20,000 KCS Energy Incorporated * ........................... $ 777,500
30,000 Smith International Incorporated * .................. 1,365,000
---------
2,142,500
---------
OIL SERVICES - 3.47%
15,000 Camco International Incorporated .................... 718,125
10,000 Cliffs Drilling Company * ........................... 682,500
21,000 Oceaneering International Incorporated * ............ 359,625
60,000 Pride Petroleum Services Incorporated *(1) .......... 1,357,500
---------
3,117,750
---------
OTHER INSURANCE - 12.39%
25,000 American Bankers Insurance Group Incorporated ...... 1,387,500
32,600 Capital Re Corporation ............................. 1,434,400
10,000 Fidelity National Financial Incorporated ........... 132,500
27,000 Fremont General Corporation ........................ 810,000
29,000 Frontier Insurance Group Incorporated .............. 1,145,500
110,000 Gainsco Incorporated ............................... 1,003,750
19,000 Lawyers Title Corporation .......................... 439,375
15,000 Leucadia National Corporation ...................... 393,750
17,000 Orion Capital Corporation .......................... 1,071,000
7,000 RLI Corporation .................................... 245,000
26,000 Stewart Information Services Corporation * ......... 539,500
45,000 Terra Nova Bermuda Holdings Limited ................ 888,750
15,000 Trenwick Group Incorporated ........................ 750,000
23,000 Vesta Insurance Group Incorporated ................. 871,125
---------
11,112,150
---------
PUBLISHING - 0.44%
10,000 CCC Information Service Group, Incorporated * ....... 185,000
10,000 Factset Research Systems Incorporated * ............. 206,250
---------
391,250
---------
RAILROADS - 0.43%
35,000 Greenbrier Companies Incorporated ................... 389,375
---------
REAL PROPERTY - 4.65%
90,000 D.R. Horton Incorporated ............................ 1,068,750
45,000 Granite Construction Incorporated ................... 1,057,500
42,000 Newhall Land & Farming Company ...................... 735,000
59,000 Nobility Homes Incorporated * ....................... 826,000
32,000 Pacific Greystone Corporation * ..................... 484,000
---------
4,171,250
---------
10
<PAGE>
PAINEWEBBER SMALL CAP FUND
NUMBER OF
SHARES VALUE
- ----------- ---------
COMMON STOCKS - (CONCLUDED)
RESTAURANTS - 1.51%
75,000 Casa Ole Restaurants Incorporated * .................. $ 656,250
80,000 Diedrich Coffee Incorporated * ....................... 700,000
---------
1,356,250
---------
SEMICONDUCTOR - 0.33%
10,000 Electro Scientific Industries Incorporated * ......... 292,500
---------
SPECIALTY RETAIL - 0.90%
30,000 National Media Corporation * ......................... 228,750
60,000 West Coast Entertainment Corporation * ............... 495,000
5,000 Zale Corporation * ................................... 80,000
---------
803,750
---------
TOBACCO - 1.31%
38,000 Universal Corporation ................................ 1,178,000
---------
Total Common Stocks (cost - $80,027,188) ...................... 88,493,138
---------
WARRANTS - 0.55%
AGRICULTURE, FOOD & BEVERAGE - 0.55%
500,000 William Greenberg Jr. Desserts & Cafes*(cost - $550,000) 495,000
---------
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED - 1.37%
MONEY MARKET FUNDS - 1.37%
772,799 Liquid Assets Portfolio .............................. 772,799
460,000 TempCash Portfolio ................................... 460,000
---------
Total Money Market Funds (cost - $1,232,799) .................. 1,232,799
---------
<TABLE>
<S> <C> <C> <C>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATE RATE
- --------- --------- --------
REPURCHASE AGREEMENT - 2.38%
$2,130 Repurchase Agreement dated 01/31/97 with
Salomon Brothers Incorporated, collateralized by
$2,175,599 U.S. Treasury Notes, 4.750% due 08/31/98;
proceeds: $2,130,976 (cost - $2,130,000) .................. 02/03/97 5.500% 2,130,000
-----------
Total Investments (cost - $83,939,987) - 103.00% .................... 92,350,937
Liabilities in excess of other assets - (3.00)% ..................... (2,696,689)
-----------
Net Assets - 100.00% ................................................ $89,654,248
===========
</TABLE>
- -------------
* Non-income producing security
ADR American Depositary Receipts
(1) Security, or a portion thereof, was loaned at January 31, 1997.
See accompanying notes to financial statements
11
<PAGE>
PaineWebber SMALL CAP FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES January 31, 1997 (unaudited)
<S> <C>
ASSETS
Investments, at value (cost - $83,939,987) ........................... $ 92,350,937
Cash ................................................................. 740
Dividends and interest receivable .................................... 49,133
Receivable for shares of beneficial interest sold .................... 31,394
Deferred organizational expenses ..................................... 115,901
Other assets ......................................................... 44,549
----------
Total assets ......................................................... 92,592,654
----------
LIABILITIES
Payable for investments purchased .................................... 1,110,000
Payable for shares of beneficial interest repurchased ................ 197,824
Collateral for securities loaned ..................................... 1,232,799
Payable to affiliate ................................................. 134,131
Accrued expenses and other liabilities ............................... 263,652
----------
Total liabilities .................................................... 2,938,406
----------
NET ASSETS
Beneficial interest shares of $0.001 par value outstanding (unlimited
amount authorized) ................................................... 77,019,894
Accumulated net investment loss ...................................... (725,727)
Accumulated net realized gains from investments ...................... 4,949,131
Net unrealized appreciation of investments ........................... 8,410,950
----------
Net Assets ........................................................... $ 89,654,248
===========
CLASS A:
Net assets ........................................................... $ 30,256,844
----------
Shares outstanding ................................................... 2,604,504
----------
Net asset and redemption value per share ............................. $ 11.62
=====
Maximum offering price per share (net asset value plus sales charge of
4.50% of offering price) ............................................. $ 12.17
=====
CLASS B:
Net assets ........................................................... $ 38,193,921
----------
Shares outstanding ................................................... 3,382,525
----------
Net asset value and offering price per share ......................... $ 11.29
=====
CLASS C:
Net assets ........................................................... $ 18,488,633
----------
Shares outstanding ................................................... 1,639,421
----------
Net asset value and offering price per share ......................... $ 11.28
=====
CLASS Y:
Net assets ........................................................... $ 2,714,850
----------
Shares outstanding ................................................... 233,708
----------
Net asset value, offering price and redemption value per share ....... $ 11.62
=====
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
PaineWebber SMALL CAP FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JANUARY 31, 1997 (unaudited)
INVESTMENT INCOME:
Dividends ....................................................... $ 346,988
Interest ........................................................ 47,346
---------
394,334
---------
EXPENSES:
Investment advisory and administration fees ..................... 449,962
Services fees-Class A ........................................... 38,654
Service and distribution fees-Class B ........................... 187,769
Service and distribution fees-Class C ........................... 93,674
Reports and notices to shareholders ............................. 67,978
Federal and state registration fees ............................. 67,797
Transfer agency and service fees ................................ 66,235
Legal and audit ................................................. 57,334
Amortization of organizational expenses ......................... 47,884
Custody and accounting .......................................... 33,017
Trustees' fees and expenses ..................................... 7,940
Other expenses .................................................. 1,817
---------
1,120,061
---------
NET INVESTMENT LOSS ............................................. (725,727)
---------
REALIZED AND UNREALIZED GAINS FROM INVESTMENT TRANSACTIONS:
Net realized gains from investment transactions ................. 6,672,437
Net change in unrealized appreciation/depreciation of
investments .................................................... 8,575,122
---------
NET REALIZED AND UNREALIZED GAINS FROM INVESTMENT TRANSACTIONS .. 15,247,559
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............ $ 14,521,832
=========
See accompanying notes to financial statements
13
<PAGE>
PaineWebber SMALL CAP FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE
JANUARY 31, 1997 YEAR ENDED
(UNAUDITED) JULY 31, 1996
----------------- -------------
<S> <C> <C>
FROM OPERATIONS:
Net investment loss .......................................................................... $ (725,727) $ (408,651)
Net realized gains from investment transactions .............................................. 6,672,437 7,823,052
Net change in unrealized appreciation/depreciation of investments ............................ 8,575,122 (4,208,066)
------------ ------------
Net increase in net assets resulting from operations ......................................... 14,521,832 3,206,335
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gains from investment transactions--Class A ..................................... (1,065,273) (2,580,753)
Net realized gains from investment transactions--Class B ..................................... (1,348,187) (5,623,020)
Net realized gains from investment transactions--Class C ..................................... (663,541) (1,514,097)
Net realized gains from investment transactions--Class Y ..................................... (94,831) --
------------ ------------
(3,171,832) (9,717,870)
------------ ------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares ......................................................... 11,378,859 6,234,900
Shares issued in connection with the acquisition of PaineWebber
Small Cap Growth Fund ....................................................................... -- 27,156,461
Cost of shares repurchased ................................................................... (24,788,443) (27,176,983)
Proceeds from dividends reinvested ........................................................... 3,020,513 9,091,388
------------ ------------
Net increase (decrease) in net assets from beneficial interest transactions .................. (10,389,071) 15,305,766
------------ ------------
Net increase in net assets ................................................................... 960,929 8,794,231
NET ASSETS:
Beginning of period .......................................................................... 88,693,319 79,899,088
------------ ------------
End of period ................................................................................ $ 89,654,248 $ 88,693,319
============ ============
</TABLE>
See accompanying notes to financial statements
14
<PAGE>
PAINEWEBBER NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Small Cap Fund (the "Fund") is a diversified series of
PaineWebber Securities Trust ("Trust"), which was organized under Massachusetts
law by a Declaration of Trust dated December 3, 1992 and registered with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Trust currently
offers another series of shares, PaineWebber Strategic Income Fund, whose
financial statements are not included herein. The Fund incurred costs in
connection with its organization and the registration of its shares. Such costs
have been deferred and are being amortized using the straight-line method over a
period of benefit of 60 months, beginning with the commencement of investment
operations of the Fund.
Currently, the Fund offers Class A, Class B, Class C and Class Y shares.
Each class represents interests in the same assets of the 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 dividend reinvested shares
automatically convert to Class A shares approximately six years after initial
issuance. All classes of shares have equal voting privileges, except that Class
A, Class B and Class C shares have exclusive voting rights with respect to their
service and/or distribution plan.
Acquisition of PaineWebber Small Cap Growth Fund - Effective as of the close
of business on July 26, 1996 (the "Acquisition Date"), the Fund acquired all of
the assets and assumed all of the liabilities of PaineWebber Small Cap Growth
Fund ("Small Cap Growth Fund"). The acquisitions were accomplished by tax-free
exchanges of 1,404,733 Class A, 63,270 Class B, 936,155 Class C and 274,241
Class Y shares of the Fund for 1,450,092 Class A, 65,772 Class B, 969,172 Class
C and 280,828 Class Y shares of Small Cap Growth Fund outstanding on the
Acquisition Date. Small Cap Growth Fund's net assets at that date, valued at
$27,156,461, including accumulated net realized losses of $3,287 and net
unrealized depreciation of investments of $1,297,019, were combined with those
of the Fund. All shares were exchanged at net asset value. Accordingly, no
shareholder had any gain or loss as a result of the exchange. The Fund's
financial highlights do not include the operations of Small Cap Growth Fund
prior to the Acquisition Date.
The preparation of financial statements in accordance with generally
accepted accounting principles 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 - Securities which are listed on U.S. and foreign
stock exchanges are valued at the last sales price on the day the securities are
being valued or, lacking any sales on such day, at the last available bid price.
In cases where securities are traded on more than one exchange, the securities
are generally valued on the exchange designated by Mitchell Hutchins Asset
15
<PAGE>
PAINEWEBBER
Management Inc. ("Mitchell Hutchins"), a wholly owned subsidiary of
PaineWebber Incorporated, and investment adviser and administrator of the Fund
as the primary market. Securities traded in the over-the-counter ("OTC") market
and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") are valued at the last
trade price on Nasdaq prior to the time of valuation; other OTC securities are
valued at the last bid price available prior to valuation. The amortized cost
method of valuation, which approximates market value, is used to value
short-term debt instruments with sixty days or less remaining to maturity unless
the Fund's board of trustees determines that this does not represent fair value.
Securities and assets for which market quotations are not readily available
(including restricted securities subject to limitations as to their sale) are
valued at fair value as determined in good faith by or under the direction of
the Fund's board of trustees.
Repurchase Agreements - The 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, the 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. The Fund occasionally
participates in joint repurchase agreement transactions with other funds managed
by Mitchell Hutchins.
Investment Transactions and Investment Income - Investment transactions are
recorded on the trade date. Realized gains and losses from investment
transactions are calculated using the identified cost method. Interest income is
recorded on an accrual basis and dividend income is recorded on the ex-dividend
date.
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 generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they
16
<PAGE>
PAINEWEBBER
exceed net investment income and net realized capital gains for tax
purposes, they are reported as distributions of paid-in-capital.
CONCENTRATION OF RISK
Small cap companies may be more vulnerable than larger companies to adverse
business or economic developments. Small cap companies may also have limited
product lines, markets or financial resources, and may be dependent on a
relatively small management group. Securities of such companies may be less
liquid and more volatile than securities of larger companies or the market
averages in general and therefore may involve greater risk than investing in
larger companies. In addition, small cap companies may not be well-known to the
investing public, may not have institutional ownership and may have only
cyclical, static or moderate growth prospects.
INVESTMENT ADVISER AND ADMINISTRATOR
The Fund has an Investment Advisory and Administration Contract ("Advisory
Contract") with Mitchell Hutchins under which Mitchell Hutchins serves as
investment adviser and administrator of the Fund. In accordance with the
Advisory Contract the Fund pays Mitchell Hutchins an investment advisory and
administration fee, which is accrued daily and payable monthly, at the annual
rate of 1.00% of the Fund's average daily net assets. At January 31, 1997, the
Fund owed Mitchell Hutchins $76,345 in investment advisory and administration
fees.
For the six months ended January 31, 1997, the Fund paid $900 in brokerage
commissions to PaineWebber for transactions executed on behalf of the Fund.
DISTRIBUTION PLANS
Mitchell Hutchins is the distributor of the Fund's shares and has appointed
PaineWebber as the exclusive dealer for the sale of those shares. Under separate
plans of distribution pertaining to Class A, Class B and Class C shares, the
Fund pays Mitchell Hutchins monthly service fees at an annual rate of 0.25% of
the average daily net assets of Class A, Class B and Class C shares and monthly
distribution fees at the annual rate of 0.75% of the average daily net assets of
Class B and Class C shares. At January 31, 1997, the Fund owed Mitchell Hutchins
$54,794 in service and distribution fees.
Mitchell Hutchins also receives the proceeds of the initial sales charges
paid by shareholders upon the purchase of Class A shares and the contingent
deferred sales charges paid by the shareholders upon certain redemptions of
Class A, Class B and Class C shares. Mitchell Hutchins has informed the Fund
that for the six months ended January 31, 1997, it received $57,500 in sales
charges.
SECURITY LENDING
The Fund may lend up to 33 1/3% of its total assets to qualified
institutions. The loans are secured at all times by cash or U.S. government
securities in an amount
17
<PAGE>
PAINEWEBBER
at least equal to the market value of the securities loaned, plus accrued
interest and dividends, determined on a daily basis and adjusted accordingly.
The Fund will regain record ownership of loaned securities to exercise certain
beneficial rights, however, the Fund may bear the risk of delay in recovery of,
or even loss of rights in, the securities loaned should the borrower fail
financially. The Fund receives compensation for lending its securities from
interest earned on the cash or U.S. government securities held as collateral,
net of fee rebates paid to the borrower plus reasonable administrative and
custody fees. The Fund's lending agent is PaineWebber Global Security Lending, a
wholly owned subsidiary of PaineWebber, who receives no compensation from the
Fund.
As of January 31, 1997, the Fund's custodian held cash and cash equivalents
having an aggregate value of $1,232,799 as collateral for portfolio securities
loaned having a market value of $1,212,700.
TRANSFER AGENCY SERVICE FEES
The Fund pays PaineWebber an annual fee of $4.00 per active PaineWebber
shareholder account for certain services not provided by the Fund's transfer
agent. For these services for the six months ended January 31, 1997, PaineWebber
earned $18,606 from the Fund. At January 31, 1997, the Fund owed PaineWebber
$2,992 for shareholder service fees.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at January 31,
1997 was substantially the same as the cost of securities for financial
statement purposes.
At January 31, 1997, the components of net unrealized appreciation of
investments were as follows:
Gross appreciation (investments having an excess of value
over cost) .......................................................$14,736,637
Gross depreciation (investments having an excess of cost
over value) ...................................................... (6,325,687)
------------
Net unrealized appreciation of investments .......................$ 8,410,950
============
For the six months ended January 31, 1997, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $25,841,545 and
$39,752,948, respectively.
FEDERAL INCOME TAX STATUS
The 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, the Fund intends not to be subject to a federal excise tax.
18
<PAGE>
PAINEWEBBER
SHARES OF BENEFICIAL INTEREST
There was an unlimited amount of $0.001 par value shares of beneficial interest
authorized. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
Class A Class B Class C Class Y
--------------------- ---------------------- ---------------------- --------------------
Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Six months ended
January 31, 1997:
Shares sold ......... 532,151 $ 5,877,887 93,023 $ 1,014,036 408,622 $ 4,433,688 4,814 $ 53,248
Shares repurchased .. (1,057,497) (11,718,983) (461,876) (4,947,851) (694,524) (7,523,916) (53,754) (597,693)
Shares converted from
Class B to Class A . 34,597 393,832 (35,539) (393,832) -- -- -- --
Dividends reinvested 92,573 1,029,415 117,091 1,265,749 58,505 631,858 8,407 93,491
--------- ----------- --------- ------------- -------- ------------- ------- ----------
Net decrease ........ (398,176) $ (4,417,849) (287,301) $ (3,061,898) (227,397) $ (2,458,370) (40,533) $(450,954)
========= ============ ========= ============= ======== ============= ======== ==========
Class A Class B Class C Class Y
--------------------- ---------------------- ---------------------- --------------------
Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------ ------ ------
Year ended July 31, 1996:
Shares sold ............. 162,734 $ 1,784,341 246,297 $ 2,708,345 158,976 $ 1,742,214 -- --
Shares issued in
connection with the
acquisition of
PaineWebber Small
Cap Growth Fund ........ 1,404,733 14,374,663 63,270 632,216 936,155 9,344,754 274,241 $2,804,828
Shares repurchased ...... (729,600) (8,163,423) (1,173,417) (12,903,027) (554,588) (6,110,533) -- --
Shares converted from
Class B to Class A ..... 114,185 1,313,683 (115,951) (1,313,683) -- -- -- --
Dividends reinvested .... 236,526 2,470,300 511,372 5,228,853 136,084 1,392,235 -- --
--------- ------------ ---------- ------------ ------- ------------ -------- ----------
Net increase (decrease) . 1,188,578 $ 11,779,564 (468,429) $ (5,647,296) 676,627 $ 6,368,670 274,241 $2,804,828
========= ============ ========== ============= ======= ============ ======== ==========
</TABLE>
19
<PAGE>
PAINEWEBBER SMALL CAP FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
FOR THE
SIX MONTHS FOR THE YEARS FOR THE FOR THE
ENDED ENDED PERIOD YEAR
JANUARY 13, JULY 31, ENDED ENDED
1997 ------------- JULY 31, JANUARY 31,
(UNAUDITED) 1996# 1995 1994+ 1994
----------- ------ ------ -------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........................ $10.22 $11.30 $10.27 $10.61 $10.00
--------- -------- ------ ------ ------
Net investment income (loss) (0.07) 0.00@ 0.05 0.02 0.13
Net realized and unrealized gains (losses) from investments . 1.88 0.50@ 1.50 (0.36) 0.62
--------- -------- ------ ------ ------
Total income (loss) from investment operations .............. 1.81 0.50 1.55 (0.34) 0.75
--------- -------- ------ ------ ------
Dividends from net investment income ........................ -- -- -- -- (0.12)
Distributions from net realized gains from investments ...... (0.41) (1.58) (0.52) -- (0.02)
--------- -------- ------ ------ ------
Total dividends and distributions ........................... (0.41) (1.58) (0.52) 0.00 (0.14)
--------- -------- ------ ------ ------
Net asset value, end of period .............................. $11.62 $10.22 $11.30 $10.27 $10.61
========= ======== ====== ====== ======
Total investment return (1) ................................. 17.86% 4.69% 15.80% (3.20)% 7.58%
--------- -------- ------ ------ ------
Ratios/Supplemental Data:
Net assets, end of period (000's) ........................... $30,257 $30,675 $20,494 $22,848 $25,226
Expenses to average net assets .............................. 2.03%* 2.11% 1.98% 1.91%* 1.75%
Net investment income (loss) to average net assets .......... (1.15)* 0.02% 0.41% 0.41%* 1.41%
Portfolio turnover .......................................... 29% 84% 19% 20% 98%
Average commission rate paid (2) ............................ $0.0596 -- -- -- --
</TABLE>
- --------------
* Annualized
+ For the period February 1, 1994 to July 31, 1994.
# Effective April 1, 1996, Mitchell Hutchins took over day-to-day
management of the Fund's assets.
@ Calculated using the average shares
outstanding for the period.
(1) Total investment return is calculated assuming a $1,000 investment on
the first day of each period reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates, and a sale at
net asset value on the last day of each period reported. The figures do not
include sales charges; results for each class would be lower if sales charges
were included. Total investment returns for periods of less than one year have
not been annualized.
(2) Effective for fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose the average commission rate paid per share of
common stock investments purchased or sold.
20
<PAGE>
<TABLE>
<CAPTION>
CLASS B CLASS C
---------------------------------------------------- ----------------------------------------------------
FOR THE FOR THE
SIX MONTHS FOR THE YEARS FOR THE FOR THE SIX MONTHS FOR THE YEARS FOR THE FOR THE
ENDED ENDED PERIOD YEAR ENDED ENDED PERIOD YEAR
JANUARY 13, JULY 31, ENDED ENDED JANUARY 13, JULY 31, ENDED ENDED
1997 ------------- JULY 31, JANUARY 31, 1997 ------------- JULY 31, JANUARY 31,
(UNAUDITED) 1996# 1995 1994+ 1994 (UNAUDITED) 1996# 1995 1994+ 1994
----------- ----- ---- -------- ----------- ----------- ----- ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9.98 $11.15 $10.22 $10.60 $10.00 $ 9.97 $11.14 $10.22 $10.59 $10.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(0.11) (0.09)@ (0.04) (0.02) 0.06 (0.11) (0.08)@ (0.05) (0.02) 0.06
1.83 0.50)@ 1.49 (0.36) 0.62 1.83 0.49 @ 1.49 (0.35) 0.62
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
1.72 0.41 1.45 (0.38) 0.68 1.72 0.41 1.44 (0.37) 0.68
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
-- -- -- -- (0.06) -- -- -- -- (0.07)
(0.41) (1.58) (0.52) -- (0.02) (0.41) (1.58) (0.52) -- (0.02)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(0.41) (1.58) (0.52) 0.00 (0.08) (0.41) (1.58) (0.52) 0.00 (0.09)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$11.29 $ 9.98 $11.15 $10.22 $10.60 $11.28 $ 9.97 $11.14 $10.22 $10.59
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
17.38% 3.90% 14.86% (3.58)% 6.81% 17.40% 3.90% 14.76% (3.49)% 6.77%
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
$38,194 $36,612 $46,142 $52,624 $59,993 $18,489 $18,606 $13,263 $16,285 $20,941
2.76 %* 2.90 % 2.74 % 2.69 %* 2.50% 2.79 %* 2.91 % 2.73 % 2.69 %* 2.50%
(1.88)%* (0.78)% (0.35)% (0.37)%* 0.67% (1.92)%* (0.77)% (0.34)% (0.36)%* 0.64%
29 % 84 % 19 % 20 % 98% 29 % 84 % 19 % 20 % 98%
$0.0596 -- -- -- -- $0.0596 -- -- -- --
</TABLE>
21
<PAGE>
PAINEWEBBER SMALL CAP FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
CLASS Y
--------------------------
FOR THE
SIX MONTHS FOR THE
ENDED PERIOD
JANUARY 31, ENDED
1997 JULY 31,
(UNAUDITED) 1996+
--------- --------
<S> <C> <C>
Net asset value, beginning of period ................................................. $10.21 $10.23
------- ------
Net investment income (loss) ......................................................... (0.05) 0.00 @
Net realized and unrealized gains (losses) from investments .......................... 1.87 (0.02)@
------- ------
Total income (loss) from investment operations ....................................... 1.82 (0.02)
------- ------
Dividends from net investment income ................................................. -- --
Distributions from net realized gains from investments ............................... (0.41) --
------- ------
Total dividends and distributions .................................................... (0.41) 0.00
------- ------
Net asset value, end of period ....................................................... $11.62 $10.21
======= ======
Total investment return (1) .......................................................... 17.97% (0.20)%
======= ======
Ratios/Supplemental Data:
Net assets, end of period (000's) .................................................... $2,715 $2,801
Expenses to average net assets ....................................................... 1.72 %* 1.72%*
Net investment income (loss) to average net assets ................................... (0.85)%* 0.07%*
Portfolio turnover ................................................................... 29 % 84%
Average commission rate paid (2) ..................................................... $0.0596 --
</TABLE>
- -----------------
* Annualized
+ For the period July 26, 1996 (commencement of offering of shares) to July
31, 1996.
@ Calculated using the average shares outstanding for the period.
(1) Total investment return is calculated assuming a $1,000 investment on
the first day of each period reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates, and a sale at
net asset value on the last day of each period reported. The figures do not
include sales charges; results for each class would be lower if sales charges
were included. Total investment returns for periods of less than one year have
not been annualized.
(2) Effective for fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose the average commission rate paid per share of
common stock investments purchased or sold.
22
<PAGE>
- --------------------------------------------------------------------------------
DIRECTORS
E. Garrett Bewkes, Jr.
Chairman
Margo N. Alexander
Richard Q. Armstrong
Richard Burt
Mary C. Farrell
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
John R. Torell III
PRINCIPAL OFFICERS
Margo N. Alexander
President
Victoria E. Schonfeld
Vice President
Dianne E. O'Donnell
Vice President and Secretary
Julian F. Sluyters
Vice President and Treasurer
Mark A. Tincher
Vice President
Don Jones
Vice President
INVESTMENT ADVISER AND ADMINISTRATOR
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that from time to time the Fund may purchase shares of its
common stock in the open market at market prices.
The financial information included herein is taken from the records of the
Trust without examination by independent auditors who do not express an opinion
thereon.
This report is sent to the shareholders of the Fund for their information.
It is not a prospectus, circular or representation intended for the use in the
purchase or sale of shares of the Fund or of any securities mentioned in this
report.
<PAGE>
||
||
PaineWebber offers a family of ||
22 funds which encompass a ||
diversified range of investment ||
goals. ||
||
BOND FUNDS || [LOGO PaineWebber]
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 || S M A L L C A P F U N D
o National Tax-Free Income Fund ||
o New York Tax-Free Income Fund || S
|| E
STOCK FUNDS || M
o Capital Appreciation Fund || I
o Financial Services Growth Fund || A
o Growth Fund || N
o Growth and Income Fund || N
o Small Cap Fund || U
o Utility Income Fund || A
|| L
ASSET ALLOCATION FUNDS ||
o Balanced Fund ||
o Tactical Allocation Fund || R
|| E
GLOBAL FUNDS || P
o Asia Pacific Growth Fund || O
o Emerging Markets Equity Fund || R
o Global Equity Fund || T
o Global Income Fund ||
||
PaineWebber MONEY MARKET FUND ||
||
[LOGO PaineWebber] ||
(C)1997 PaineWebber Incorporated ||
Member SIPC || J A N U A R Y 3 1 , 1 9 9 7
||
||
||
||
