PAINEWEBBER SECURITIES TRUST, N-30D, 1998-04-02

PAINEWEBBER SECURITIES TRUST
N-30D, 1998-04-02

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<PAGE>

PAINEWEBBER SMALL CAP FUND SEMIANNUAL REPORT

March 23, 1998

Dear Shareholder,

We are pleased to present you with the semiannual report for the PaineWebber
Small Cap Fund (the "Fund") for the six months ended January 31, 1998.

GENERAL MARKET OVERVIEW

Small cap stocks fared well in the late summer, but toward the end of the
period gave back some of their gains. Reacting to the Asian crisis, investors
fled small caps in favor of large cap stocks. Even though small cap companies
generally have less exposure to overseas markets and therefore would be less
vulnerable than large cap companies to spillover effects from the Asian
crisis, investors apparently perceived greater safety in big cap stocks.

For the six months ended January 31, 1998, the S&P 500 Index rose 3.56%
and the Fund's benchmark, the small-cap S&P 600 Index, rose 3.85%. These
gains occurred despite steady downward revisions in earnings estimates. The
best performing sectors were financials and utilities; the laggards were
technology and energy. The market is not cheap, however, and could be
sensitive to bad news such as accelerating GDP growth or slower earnings
growth.

PORTFOLIO REVIEW

PERFORMANCE

PaineWebber Small Cap Fund's total return (the net asset value change with
dividends reinvested) for the six-month period ended January 31, 1998,
without deducting sales charges, was 5.85% for Class A shares, 5.41% for
Class B shares, 5.42% for Class C shares and 5.90% for Class Y shares.

For shareowners who purchased or redeemed Fund shares during the period
the Fund's total return may be lower; for example, after deducting the
maximum applicable sales charges, the Fund's total return for the period was
1.10% for Class A shares, 0.41% for Class B shares, 4.42% for Class C shares
and 5.90% for Class Y shares. The Fund outperformed its Lipper Small Cap
Average over the six-month period.

PORTFOLIO POSITIONING

The Fund's investment discipline uses a quantitative model -- the Factor
Valuation Model -- to help identify attractive sectors and stocks. Since its
implementation in spring 1996 use of this model has had a significant
positive impact on the Fund's total return.

The Fund continues to be fully invested in stocks with a minimal cash
reserve of 1.6%. The Fund's top five sectors at January 31, 1998, were
consumer cyclicals (22.4%), financials (20.1%), technology (16.4%), health

care (8.6%) and capital goods (8.5%). Together these weightings represented
76% of the Fund's portfolio.

In January, we slightly increased the weighting in consumer cyclicals and
slightly decreased the weighting in financials. Consumer cyclicals,
especially homebuilding and retailing stocks, were showing reasonable
valuations. We sold several financial stocks that had met our price
objectives. We still think financial stocks look attractive, however,
particularly insurance and specialty finance companies, which are likely to
benefit from slower economic growth and low interest rates.

- ------------------------------------------------------------------------------

PAINEWEBBER
SMALL CAP
FUND

Top five sectors
as percent of net assets
January 31, 1996

Consumer Cyclicals 22.4%

Financials 20.1%

Technology 16.4%

Health Care 8.6%

Capital Goods 8.5%

- ------------------------------------------------------------------------------

PAINEWEBBER
SMALL CAP FUND
FUND PROFILE

Portfolio Management

Total Net Assets

Dividend Payments
- ------------------------------------------------------------------------------

1
<PAGE>

SEMIANNUAL REPORT

OUTLOOK

We think the current outlook for small cap stocks is favorable: they have
modest valuations, and their earnings growth potential is superior to that of
large caps. We believe these two features should draw investors back to small

caps as the Asian storm passes. If there is any negative impact from the
overseas markets, it should affect large cap companies more than small caps.

The price/earnings ratios of small cap stocks normally feature a 10-20%
premium over large cap stocks on a "forward basis," that is, when projecting
earnings for the next fiscal year. Currently, however, the small cap premium
is zero -- as measured by comparing the Russell 2000 Small Cap Index to the
Russell 1000 Large Cap Index. With expected earnings growth of 13-15% this
year vs. 6-8% for large caps, we think small caps are poised to outperform
the S&P 500 Index over the next 12 months.

The average forward price/earnings ratio of the Fund's portfolio is now
less than 14x versus 19x for its benchmark, the S&P 600.

Longer term, attractive valuations and superior earnings prospects
continue to point to buying opportunities in the small-cap market. We will
seek investments in less volatile stocks, particularly within the consumer
and financial sectors.

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. Look for the
Fund's new brochure, which will be sent to you this spring. For a quarterly
Fund Profile on PaineWebber Small Cap Fund or another fund in the PaineWebber
Family of Funds(1), please contact your investment executive.

Sincerely,

/s/ Margo N. Alexander /s/ Mark A. Tincher

MARGO N. ALEXANDER MARK A. TINCHER
President Managing Director and Chief
Mitchell Hutchins Asset Investment Officer,
Management Inc. Equity Investments
Mitchell Hutchins Asset
Management Inc.

(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.

This letter is intended to assist shareholders in understanding how the
Fund performed during the six-month period ended January 31, 1998, and
reflects our views at the time we are writing this report. Of course,
these views may change in response to changing circumstances. We
encourage you to consult your investment executive regarding your
personal investment program.

<PAGE>

PAINEWEBBER SMALL CAP FUND

PERFORMANCE RESULTS (unaudited)

Net Asset Value Total Return(1)
---------------------------------------- -----------------------------------
12 Months 6 months
01/31/98 07/31/97 01/31/97 Ended 01/31/98 Ended 01/31/98
-------- -------- -------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Class A Shares $13.02 $13.42 $11.62 22.24% 5.85%
Class B Shares 12.52 13.00 11.29 21.38 5.41
Class C Shares 12.50 12.98 11.28 21.30 5.42

<CAPTION>
Performance Summary
Class A Shares
Net Asset Value
------------------------
Capital Gains Dividends Total
Period Covered Beginning Ending Distributed Paid Return(1)
- -------------- --------- ------ ----------- ---- -------
<S> <C> <C> <C> <C> <C>
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
1997 11.40 13.31 1.1735 -- 27.38
01/01/98-01/31/98 13.31 13.02 -- -- (2.18)
------- -------
Total: $3.6983 $0.1281

Cumulative Total Return
as of 01/31/98: 81.86%

<CAPTION>
Performance Summary
Class B Shares
Net Asset Value
-----------------------
Capital Gains Dividends Total
Period Covered Beginning Ending Distributed Paid Return(1)
- -------------- --------- ------ ----------- ---- -------
<S> <C> <C> <C> <C> <C>
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
1997 11.08 12.80 1.1735 -- 26.45

01/01/98-01/31/98 12.80 12.52 -- -- (2.19)
------- -------
Total: $3.6983 $0.0631

Cumulative Total Return
as of 01/31/98: 75.11%

<CAPTION>
Performance Summary
Class C Shares

Net Asset Value
-----------------------
Capital Gains Dividends Total
Period Covered Beginning Ending Distributed Paid Return(1)
- -------------- --------- ------ ----------- ---- -------
<S> <C> <C> <C> <C> <C>
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
1997 11.07 12.79 1.1735 -- 26.47
01/01/98-01/31/98 12.79 12.50 -- -- (2.27)
------- -------
Total: $3.6983 $0.0682

Cumulative Total Return
as of 01/31/98: 74.96%
</TABLE>

(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

The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost.

<PAGE>

PAINEWEBBER SMALL CAP FUND

PERFORMANCE RESULTS (unaudited) (concluded)

AVERAGE ANNUAL RETURNS

% Return Without % Return After Deducting
Sales Charge Maximum Sales Charge
---------------------------------- ---------------------------------
Class A* B** C*** A* B** C***
----- --- --- ---- --- --- ----
<S> <C> <C> <C> <C> <C> <C>

Twelve Months Ended 12/31/97 27.38% 26.45% 26.47% 21.61% 21.45% 25.47%
Five Years Ended 12/31/97 N/A N/A N/A N/A N/A N/A
Commencement of Operations+
Through 12/31/97 13.44% 12.57% 12.57% 12.38% 12.31% 12.57%
</TABLE>

* 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.

Note: The Fund offers Class Y shares to certain eligible investors,
including the INSIGHT Investment Advisory Program participants. For the six
months ended January 31, 1998 and since inception, July 26, 1996 through
January 31, 1998, Class Y shares had a total return of 5.90% and 44.43%,
respectively. For the twelve months ended December 31, 1997, and since
inception, July 26, 1996 through December 31, 1997, Class Y shares have an
average annual total return of 27.81% and 31.25%, respectively. Class Y
shares do not have initial or contingent deferred sales charges or ongoing
distribution and service fees.

The data above represents past performance of the Fund's shares, which is
no guarantee of future results. The principal value of an investment in the
Fund will fluctuate, so that an investor's shares, when redeemed, may be
worth more or less than their original cost.

<PAGE>

PAINEWEBBER SMALL CAP FUND

PORTFOLIO OF INVESTMENTS JANUARY 31, 1998 (unaudited)

Number of
Shares Value
------ -----

COMMON STOCKS--98.25%

Agriculture, Food & Beverage--2.78%
382,000 Creative Bakeries, Inc.* ................... $ 477,500
3,000 Farmer Brothers Co. ........................ 549,000
128,900 Fresh America Corp.* ....................... 2,449,100
----------
3,475,600
----------

Apparel, Retail--1.10%
159,000 Paul Harris Stores Inc.* ................... 1,371,375
----------
Apparel, Textiles--2.27%
160,000 Florsheim Group Inc.* ...................... 1,380,000
175,000 Vans Inc.* ................................. 1,465,625
----------
2,845,625
----------
Banks--3.01%
15,000 BankNorth Group, Inc. ...................... 933,750
18,000 Cullen Frost Bankers Inc. .................. 987,750
23,000 Silicon Valley Bancshares* ................. 1,267,875
19,500 Texas Regional Bankshares Inc. ............. 585,000
----------
3,774,375
----------
Chemicals--0.91%
27,000 Cambrex Corp. .............................. 1,135,688
----------

Computer Hardware--3.33%
30,000 Box Hill Systems Corp.* .................. 288,750
30,000 Ciprico Inc.* ............................ 416,250
280,000 Oshap Technologies Ltd.* ................. 2,345,000
100,000 SED International Holdings Inc.* ......... 1,125,000
----------
4,175,000
----------

Computer Software--0.32%
18,000 SPSS Inc.* ............................... 402,750
----------

Consumer Durables--1.53%
70,000 Furniture Brands
International Inc.* ...................... 1,806,875
7,500 Ladd Furniture Inc.* ..................... 109,688
----------
1,916,563
----------

Diversified Retail--0.92%
45,000 Shopko Stores Inc. ....................... 1,147,500
----------

Drugs & Medicine--0.10%
60,000 IVC Industries Inc.* ..................... 123,750
----------

Electrical Equipment--6.29%
75,500 Brown & Sharpe Manufacturing Co.* ........ 778,594
25,000 Computer Products Inc.* .................. 603,125
46,000 Davox Corp.* ............................. 1,322,500
10,000 DII Group Inc.* .......................... 282,500
5,000 Excel Switching Corp.* ................... 96,250
68,000 IFR Systems Inc. ......................... 1,096,500

Electrical Equipment--(continued)
30,000 Kemet Corp.* ............................. $ 555,000
73,000 Orbotech Ltd.* ........................... 2,272,125
24,500 Tadiran Ltd. ADR ......................... 866,687
----------
7,873,281
----------

Electrical Power--2.53%
18,750 AFC Cable Systems Inc.* .................. 534,375
50,000 Hughes Supply Inc. ....................... 1,631,250
25,000 Kuhlman Corp. ............................ 996,875
----------
3,162,500
----------

Electronic Components--0.48%
30,000 CHS Electronics Inc.* ............................ 601,875
---------

Energy Reserves & Production--1.68%
36,200 Benton Oil & Gas Co.* ............................ 447,975
5,000 Dril Quip Inc.* .................................. 148,125
33,000 KCS Energy Inc. .................................. 552,750
43,000 Lomak Petroleum Inc. ............................. 685,312
21,000 Williams Clayton Energy Inc.* .................... 267,750
---------
2,101,912
---------

Entertainment--0.20%
10,000 Imax Corp.* ...................................... 247,500
---------

Environmental Services--0.18%
135,000 Thermatrix Inc.* ................................. 219,375
---------

Financial Services--3.75%
95,000 Cash America International Inc. .................. 1,128,125
31,200 DVI Inc.* ........................................ 586,950
191,000 First Cash Inc.* ................................. 1,366,844
22,000 Imperial Credit Industries Inc.* ................. 402,875
20,000 Litchfield Financial Corp. ....................... 397,500
2,000 Markel Corp.* .................................... 325,375
10,700 Student Loan Corp. ............................... 486,850
---------
4,694,519
---------

Forest Products & Paper--2.90%
48,000 Greif Brothers Corp. ............................. 1,704,000
20,000 Mercer International Inc. ........................ 165,000
15,000 United Stationers Inc.* .......................... 721,875
50,397 Wausau Mosinee Paper Corp. ....................... 1,045,738
---------
3,636,613
---------

Freight, Air, Sea & Land--2.16%
16,000 Allied Holdings Inc.* ............................ 330,000
12,000 Roadway Express Inc. ............................. 262,500
120,000 Smithway Motor Xpress Corp.* ..................... 1,410,000
10,400 US Freightways Corp.* ............................ 364,000
15,000 US Xpress Enterprises Inc.* ...................... 337,500
---------
2,704,000
---------

5
<PAGE>

PAINEWEBBER SMALL CAP FUND

Number of
Shares Value
------ -----

COMMON STOCKS--(continued)

Heavy Machinery--2.49%
10,000 Avondale Industries Inc.* .................. $ 282,812

34,000 Cascade Corp. .............................. 533,375
12,500 Manitowoc Inc. ............................. 425,000
105,000 Titan International Inc. ................... 1,876,875
----------
3,118,062
----------

Hotels--1.93%
128,000 Prime Hospitality Corp.* (1) ............... 2,416,000
----------

Industrial Parts--3.31%
27,000 Chart Industries Inc. ...................... 580,500
15,000 International Comfort Products* ............ 114,375
133,000 Powell Industries Inc.* .................... 1,745,625
17,000 Robbins & Myers Inc. ....................... 531,250
45,000 Watsco Inc. ................................ 1,178,437
----------
4,150,187
----------

Industrial Services/Supplies--1.39%
35,000 Cornell Corrections Inc.* .................. 693,438
55,000 Wackenhut Corp., Class B ................... 1,051,875
----------
1,745,313
----------

Information & Computer Services--4.09%
12,000 Barra Inc.* ................................ 273,000
30,000 Executive Telecard Ltd.* ................... 75,000
50,000 Factset Research Systems Inc.* ............. 1,400,000
75,000 Lanvision Systems Inc.* .................... 346,875
50,000 Physicians Computer Network Inc.* .......... 206,250
74,000 Pomeroy Computer Resources* ................ 1,318,125
146,700 Walsh International Inc.* .................. 1,503,675
----------
5,122,925
----------

Leisure--2.66%

113,000 Galoob Lewis Toys Inc.* .................... 1,009,937
21,000 Harman International Industries Inc. ....... 821,625
35,000 Meade Instruments Corp.* ................... 321,563
55,000 Movado Group Inc. .......................... 1,182,500
----------
3,335,625
----------

Life Insurance--1.18%
30,000 Life USA Holdings Inc.* .................... 480,000
24,000 Reinsurance Group of America, Inc. ......... 1,000,500
----------

1,480,500
----------

Long Distance & Phone Companies--1.21%
35,000 Davel Communications Group* ................ 748,125
25,000 General Communication Inc.* ................ 173,438
25,000 Norstan Inc.* .............................. 587,500
----------
1,509,063
----------

Manufacturing--High Technology--0.61%
88,000 En Pointe Technologies Inc.* ............... 770,000
----------

Medical Products--1.32%
43,000 American Science &
Engineering Inc.* .......................... $ 537,500
32,000 Conmed Corp.* .............................. 698,000
25,000 Young Innovations Inc.* .................... 412,500
----------
1,648,000
----------

Medical Providers--7.58%
124,500 Counsel Corp.* ............................. 1,735,219
40,000 Curative Health Services Inc.* ............. 1,380,000
200,000 Hooper Holmes Inc. ......................... 2,900,000
21,000 Medical Assurance Inc.* .................... 546,000
25,000 Physicians Specialty Corp.* ................ 237,500
189,200 Stericycle Inc.* ........................... 2,696,100
----------
9,494,819
----------

Mining & Metals--4.42%
30,000 Atchison Casting Corp.* .................... 508,125
28,000 Texas Industries Inc. ...................... 1,370,250
80,000 Valmont Industries Inc. .................... 1,560,000
120,000 Wyman Gordon Co.* (1) ...................... 2,092,500
----------
5,530,875
----------

Motor Vehicles--0.67%
20,000 A.O. Smith Corp. ........................... 840,000
----------

Oil Services--2.30%
90,000 American Oilfield Divers Inc.* ............. 1,012,500
10,000 Cliffs Drilling Co.* ....................... 422,500
10,600 Maverick Tube Corp.* ....................... 229,887
50,000 Pride International Inc.* .................. 1,065,625
10,000 Unifab International Inc.* ................. 143,750
----------
2,874,262
----------

Other Insurance--11.70%
35,600 Capital Re Corp. ........................... 2,120,425
15,000 CMAC Investment Corp. ...................... 935,625
5,000 Enhance Financial Services Group Inc. ...... 278,125
8,000 Executive Risk Inc. ........................ 570,000
11,000 Fidelity National Financial Inc. ........... 316,250
13,500 First American Financial Corp. ............. 671,625
56,000 Frontier Insurance Group Inc. .............. 1,337,000
105,000 Gainsco Inc. ............................... 840,000
43,000 Landamerica Financial Group ................ 1,515,750
10,000 MFC Bancorp Ltd. ........................... 109,375
26,000 Orion Capital Corp. ........................ 1,158,625
16,000 Philadelphia Consolidated Holding Corp.* ... 304,000
28,000 RLI Corp. .................................. 1,387,750
65,000 Stewart Information Services Corp. ......... 1,941,875
35,000 Terra Nova Bermuda Holdings Ltd. ........... 883,750
5,000 Vesta Insurance Group Inc. ................. 282,500
----------
14,652,675
----------

<PAGE>

PAINEWEBBER SMALL CAP FUND

Number of
Shares Value
------ -----

COMMON STOCKS--(concluded)

Precious Metals--0.06%
5,000 Special Metals Corp.* .................... $ 80,625
----------
Publishing--0.17%
10,000 CCC Information Services
Group, Inc.* ............................. 218,750
----------

Railroads--0.32%
25,000 Greenbrier Companies Inc. ................ 406,250
----------

Real Property--5.03%
6,000 Beazer Homes USA Inc.* ................... 128,625
10,000 Crossmann Community Inc.* ................ 235,000
40,000 Granite Construction Inc. ................ 940,000
65,000 Griffon Corp.* ........................... 970,937
42,000 M.D.C. Holdings, Inc. .................... 635,250
7,500 Medusa Corp. ............................. 330,469

6,000 Monterey Homes Corp.* .................... 90,375
22,000 Newhall Land & Farming Co. ............... 661,375
73,500 Nobility Homes Inc.* ..................... 1,378,125
12,000 NVR Inc.* ................................ 300,000
17,000 Schottenstein Homes Inc.* ................ 361,250
10,000 Webb Delaware Corp. ...................... 270,625
----------
6,302,031
----------

Restaurants--0.65%
75,000 Casa Ole Restaurants Inc.* ............... 281,250
80,000 Diedrich Coffee Inc.* .................... 535,000
----------
816,250
----------

Semiconductor--1.12%
10,000 Aehr Test Systems* .......................... 65,000
10,000 Electro Scientific Industries
Inc.* ....................................... 310,000
100,000 Tower SemiConductor Ltd.* ................... 1,025,000
------------
1,400,000
------------

Specialty Retail--3.96%
75,000 Central Garden & Pet Co.* ................... 2,306,250
15,000 Inacom Corp.* ............................... 375,000
------------

Specialty Retail--(continued)
37,000 Piercing Pagoda Inc.* ....................... $ 1,110,000
53,000 West Coast Entertainment
Corp.* ...................................... 96,062
44,000 Zale Corp.* ................................. 1,078,000
------------
4,965,312
------------

Tobacco--1.10%
18,000 Standard Commercial Corp.* .................. 294,750
28,000 Universal Corp. ............................. 1,083,250
------------
1,378,000
------------

Wireless Telecommunications--2.54%
105,000 Smartalk Teleservices
Inc.* (1) ................................... 3,045,000
20,000 Viatel Inc.* ................................ 135,000
------------
3,180,000
------------
Total Common Stocks (cost--$110,311,002) .... 123,045,325
------------

Investments of Cash Collateral for
Securities Loaned--4.40%

Money Market Funds--4.40%
5,027,799 Liquid Assets Portfolio ..................... 5,027,799
327,248 Prime Portfolio ............................. 327,248
151,429 TempCash Portfolio .......................... 151,429
8,524 TempFund Portfolio .......................... 8,524
------------

Total Investments of Cash Collateral for Securities Loaned
(cost--$5,515,000).......................................... 5,515,000
------------

Number of
Warrants

Warrants--0.26%

Agriculture, Food & Beverage--0.26%
350,000 Creative Bakery Inc.,* strike
price of $2.50 expiring
December 31, 2000 (2) ............................ 171,500
150,000 Creative Bakery Inc.,* strike
price of $3.00 expiring
December 31, 2000 (2) ............................ 148,500
-------
Total Warrants (cost--$336,500) .............................. 320,000
-------

Principal
Amount Maturity Interest
(000) Date Rate
----- -------- ---------

Repurchase Agreement--1.68%
$ 2,104 Repurchase Agreement dated
01/30/98 with Citibank,
collateralized by
$1,685,000 U.S. Treasury
Bonds, 10.750% due 02/15/03
(value-$2,152,588) proceeds:
$2,104,975 (cost-$2,104,000)... 02/02/98 5.560% 2,104,000
------------

Total Investments (cost-$118,266,502)--
104.59%................................ 130,984,325
Liabilities in excess of other assets--
(4.59)%................................ (5,748,336)
------------
Net Assets--100.00%...................... $125,235,989
============
* Non-income producing security
ADR American Depositary Receipt

(1) Security, or a portion thereof, was on loan at January 31, 1998.
(2) Illiquid securities represent 0.26% of net assets.

See accompanying notes to financial statements

<PAGE>

PAINEWEBBER SMALL CAP FUND

STATEMENT OF ASSETS AND LIABILITIES JANUARY 31, 1998 (unaudited)

Assets
Investments, at value (cost--$118,266,502) .................................................... $ 130,984,325
Cash .......................................................................................... 872
Receivable for investments sold ............................................................... 347,965
Receivable for shares of beneficial interest sold ............................................. 101,105
Dividends and interest receivable ............................................................. 29,291
Deferred organizational expenses .............................................................. 21,866
Other assets .................................................................................. 49,071
-------------
Total assets .................................................................................. 131,534,495
-------------
Liabilities
Collateral for securities loaned .............................................................. 5,515,000
Payable for investments purchased ............................................................. 370,295
Payable for shares of beneficial interest repurchased ......................................... 155,094
Payable to affiliates ......................................................................... 184,264
Accrued expenses and other liabilities ........................................................ 73,853
-------------
Total liabilities ............................................................................. 6,298,506
-------------
Net assets
Beneficial interest shares of $0.001 par value outstanding (unlimited amount authorized) ...... 106,726,529
Accumulated net investment loss ............................................................... (643,531)
Accumulated net realized gains from investments ............................................... 6,435,168
Net unrealized appreciation of investments .................................................... 12,717,823
-------------
Net assets .................................................................................... $ 125,235,989
=============

Class A:
Net assets .................................................................................... $ 42,237,939
-------------
Shares outstanding ............................................................................ 3,243,999
-------------

Net asset and redemption value per share ...................................................... $ 13.02
=============
Maximum offering price per share (net asset value plus sales charge of 4.50% of offering price) $ 13.63
=============

Class B:
Net assets .................................................................................... $ 51,408,598
-------------
Shares outstanding ............................................................................ 4,107,215
-------------
Net asset value and offering price per share .................................................. $ 12.52
=============
Class C:
Net assets .................................................................................... $ 28,954,884
-------------
Shares outstanding ............................................................................ 2,316,439
-------------
Net asset value and offering price per share .................................................. $ 12.50
=============
Class Y:
Net assets .................................................................................... $ 2,634,568
-------------
Shares outstanding ............................................................................ 201,513
-------------
Net asset value, offering price and redemption value per share ................................ $ 13.07
=============

</TABLE>

See accompanying notes to financial statements

<PAGE>

PAINEWEBBER SMALL CAP FUND

STATEMENT OF OPERATIONS

For the Six
Months Ended
January 31, 1998
(unaudited)
-----------
<S> <C>

Investment income:
Dividends (net of foreign withholding taxes of $10,225) ....................................... $ 318,230
Interest ...................................................................................... 84,137
-----------
402,367
-----------

Expenses:
Investment advisory and administration fees ................................................... 599,923
Services fees--Class A ........................................................................ 42,534
Service and distribution fees--Class B ........................................................ 210,981
Service and distribution fees--Class C ........................................................ 110,800
Amortization of organizational expenses ....................................................... 47,404
Transfer agency and related service fees ...................................................... 9,872
Custody and accounting ........................................................................ 7,009
Legal and audit fees .......................................................................... 5,935
Reports and notices to shareholders ........................................................... 5,135
Trustees' fees ................................................................................ 6,750
Other expenses ................................................................................ 160
-----------
1,046,503
-----------

Net investment loss ........................................................................... (644,136)
-----------
Realized and unrealized gains (losses) from investments:
Net realized gains from investments ........................................................... 8,186,521
Net change in unrealized appreciation/depreciation of investments ............................. (3,519,194)
-----------
Net realized and unrealized gain from investments ............................................. 4,667,327
-----------
Net increase in net assets resulting from operations .......................................... $ 4,023,191
===========
</TABLE>

See accompanying notes to financial statements

9
<PAGE>

PAINEWEBBER SMALL CAP FUND

STATEMENT OF CHANGES IN NET ASSETS

For the
Six Months For the
Ended Year Ended
January 31, 1998 July 31,
(unaudited) 1997
------------ -----------
<S> <C> <C>

From operations:
Net investment loss ....................................................... $ (644,136) $ (1,421,696)
Net realized gains from investments ....................................... 8,186,521 11,923,735
Net change in unrealized appreciation/depreciation of investments ......... (3,519,194) 16,401,189
------------- -------------
Net increase in net assets resulting from operations ...................... 4,023,191 26,903,228
------------- -------------

Distributions to shareholders from:
Net realized gains from investment transactions-Class A ................... (3,468,839) (1,065,273)
Net realized gains from investment transactions-Class B ................... (4,427,192) (1,348,187)
Net realized gains from investment transactions-Class C ................... (2,421,561) (663,541)
Net realized gains from investment transactions-Class Y ................... (224,585) (94,831)
------------- -------------
(10,542,177) (3,171,832)
------------- -------------

From beneficial interest transactions:
Net proceeds from the sale of shares ...................................... 51,625,490 21,265,021
Cost of shares repurchased ................................................ (25,212,171) (41,414,621)
Proceeds from dividends reinvested ........................................ 10,046,028 3,020,513
------------- -------------
Net increase (decrease) in net assets from beneficial interest transactions 36,459,347 (17,129,087)
------------- -------------
Net increase in net assets ................................................ 29,940,361 6,602,309

Net Assets:
Beginning of period ....................................................... 95,295,628 88,693,319
------------- -------------
End of period (including undistributed net investment income of $605 at
July 31, 1997) ........................................................... $ 125,235,989 $ 95,295,628
============= =============
</TABLE>

See accompanying notes to financial statements

<PAGE>

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.

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, if any.

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 sale price on the day the securities
are being valued or, lacking any sales on such day, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are generally valued on the exchange designated as the primary
market by Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a
wholly owned asset management subsidiary of PaineWebber Incorporated
("PaineWebber"), and investment adviser and administrator of the Fund.
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 (other than short
term debt securities described below) are valued at the last quoted bid price
in the OTC Market. 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 Trust'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 Trust'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.

<PAGE>

NOTES TO FINANCIAL STATEMENTS (unaudited)

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.

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, 1998,
the Fund owed Mitchell Hutchins $106,263 in investment advisory and
administration fees.

For the six months ended January 31, 1998, the Fund paid no brokerage
commissions to PaineWebber because no transactions were 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, 1998,
the Fund owed Mitchell Hutchins $77,302 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, 1998, it received $209,793 in sales
charges.

<PAGE>

NOTES TO FINANCIAL STATEMENTS (unaudited)

Security Lending

The Fund may lend securities 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 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, who received $4,511 as compensation from the Fund for
the six months ended January 31, 1998. At January 31, 1998, the Fund owed
PaineWebber $699 in security lending fees.

As of January 31, 1998, the Fund's custodian held cash and cash
equivalents having an aggregate value of $5,515,000 as collateral for
portfolio securities loaned having a market value of $5,320,938.

Bank Line of Credit

The 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 settlement of sales or purchases of portfolio
securities, the repurchase or redemption of shares of the fund at the request
of the shareholders and other temporary or emergency purposes. In connection
therewith, the 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
the fund at rates based on prevailing market rates in effect at the time of
borrowings. For the six months ended January 31, 1998, the Fund did not
borrow under the Facility.

Transfer Agency and Related Service Fees

Prior to August 1, 1997, the Fund paid PaineWebber an annual fee of $4.00
per active shareholder account for certain services not provided by the
Fund's transfer agent. Subsequent to August 1, 1997, PaineWebber provides
transfer agency related services to the Fund pursuant to a delegation of
authority from PFPC, Inc., the Fund's transfer agent, and is compensated for
these services by PFPC, Inc., not the Fund. For the six months ended January
31, 1998, PaineWebber received approximately 55% of the total service fees
collected by PFPC, Inc.

Investments in Securities

For federal income tax purposes, the cost of securities owned at January
31, 1998 was substantially the same as the cost of securities for financial
statement purposes.

At January 31, 1998, the components of net unrealized appreciation of
investments were as follows:
<TABLE>

<S> <C>

Gross appreciation (investments having an excess of value over cost) ...... $ 24,889,829
Gross depreciation (investments having an excess of cost over value) ...... (12,172,006)
------------
Net unrealized appreciation of investments ................................ $ 12,717,823
============
</TABLE>

For the six months ended January 31, 1998, aggregate purchases and sales
of portfolio securities, excluding short-term securities, were $47,106,363
and $22,046,639, respectively.

13
<PAGE>

NOTES TO FINANCIAL STATEMENTS (unaudited)

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.

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:

Class A Class B Class C Class Y
Six Months Ended ------------------ ------------------ ------------------ -----------------
January 31, 1998: Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Shares sold............. 737,233 $10,774,807 1,075,027 $15,196,135 1,814,042 $25,545,460 7,348 $ 109,088
Shares repurchased...... (297,059) (4,163,848) (345,916) (4,731,682) (1,135,338) (15,907,911) (28,484) (408,730)
Shares converted from
Class B to Class A.... 88,582 1,286,380 (91,717) (1,286,380) -- -- -- --
Dividends reinvested.... 259,053 3,341,792 334,319 4,148,894 188,343 2,335,453 16,980 219,889
--------- ------------ --------- ----------- ---------- ----------- ------- ---------

Net increase (decrease). 787,809 $11,239,131 971,713 $13,326,967 867,047 $11,973,002 (4,156) $ (79,753)
========= ============ ========= =========== ========== =========== ======= =========

Class A Class B Class C Class Y
Year Ended ------------------ ------------------ ------------------ -----------------
July 31, 1997: Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Shares sold............. 899,879 $10,405,245 304,294 $3,473,458 640,060 $7,143,793 21,510 $ 242,525
Shares repurchased...... (1,607,499) (18,331,478) (885,194) (9,720,897) (1,115,991) (12,256,753) (98,489) (1,105,493)
Shares converted from
Class B to Class A.... 68,557 783,133 (70,514) (783,133) -- -- -- --
Dividends reinvested.... 92,573 1,029,415 117,090 1,265,749 58,505 631,858 8,407 93,491
--------- ------------ --------- ----------- ---------- ----------- ------- ---------

Net decrease............ (546,490) $(6,113,685) (534,324) $(5,764,823) (417,426) $(4,481,102) (68,572) $(769,477)
========= ============ ========= =========== ========== =========== ======= =========
</TABLE>

<PAGE>

PAINEWEBBER SMALL CAP FUND

FINANCIAL HIGHLIGHTS

Selected data for a share of beneficial interest outstanding throughout each
period is presented below:

Class A
---------------------------------------------------------------------

For the Six For the For the
Months Ended For the Years Ended Period Year
January 31, July 31, Ended Ended
1998 ------------------------- July 31, January 31,
(unaudited) 1997 1996# 1995 1994+ 1994
----------- ---- ----- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C>

Net asset value, beginning of period............... $ 13.42 $ 10.22 $ 11.30 $ 10.27 $ 10.61 $ 10.00
--------- ------- ------- ------- ------- --------
Net investment income (loss)....................... (0.04) (0.14) 0.00@ 0.05 0.02 0.13

Net realized and unrealized gains (losses)
from investments................................... 0.81 3.75 0.50@ 1.50 (0.36) 0.62
--------- ------- ------- ------ -------- -------

Net increase (decrease) from investment operation.. 0.77 3.61 0.50 1.55 (0.34) 0.75
--------- ------- ------- ------- ------- --------
Dividends from net investment income............... -- -- -- -- -- (0.12)

Distributions from net realized gains from
investments........................................ (1.17) (0.41) (1.58) (0.52) -- (0.02)
--------- ------- ------- ------- ------- --------
Total dividends and distributions.................. (1.17) (0.41) (1.58) (0.52) 0.00 (0.14)
--------- ------- ------- ------- ------- --------
Net asset value, end of period..................... $ 13.02 $ 13.42 $ 10.22 $ 11.30 $ 10.27 $ 10.61
========= ======= ======= ======= ======= ========
Total investment return (1)........................ 5.85% 36.11% 4.69% 15.80 (3.20)% 7.58%
========= ======= ======= ======= ======= ========
Ratios/Supplemental Data:

Net assets, end of period (000's).................. $ 42,238 $32,968 $30,675 $20,494 $22,848 $ 25,226

Expenses to average net assets..................... 1.25%* 2.00% 2.11% 1.98% 1.91%* 1.75%

Net investment income (loss) to average net assets (0.58)%* (1.16)% 0.02% 0.41% 0.41%* 1.41%

Portfolio turnover rate............................ 19% 54% 84% 19% 20% 98%

Average commission rate paid (2)................... $ 0.0598 $0.0597 -- -- -- --

</TABLE>

- --------
* Annualized

+ For the period February 1, 1994 to July 31, 1994.

# Effective April 1, 1996, Mitchell Hutchins took over the advisory
functions 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.

<PAGE>

PAINEWEBBER SMALL CAP FUND

FINANCIAL HIGHLIGHTS (concluded)

Selected data for a share of beneficial interest outstanding throughout each
period is presented below:

<TABLE>
<CAPTION>
Class B
----------------------------------------------------------------------

Net asset value, beginning of period............... $ 13.00 $ 9.96 $ 11.15 $ 10.22 $ 10.60 $ 10.00
--------- ------- ------- ------- ------- --------
Net investment income (loss)....................... (0.06) (0.23) (0.09)@ (0.04) (0.02) 0.06

Net realized and unrealized gains (losses)
from investments................................... 0.77 3.66 0.50)@ 1.49 (0.36) 0.62
--------- ------- ------- ------- ------- --------
Net increase (decrease) from investment operations. 0.69 3.43 0.41 1.45 (0.38) 0.68
--------- ------- ------- ------- ------- --------
Dividends from net investment income............... -- -- -- -- -- (0.06)

Distributions from net realized gains from
investments........................................ (1.17) (0.41) (1.58) (0.52) -- (0.02)
--------- ------- ------- ------- ------- --------
Total dividends and distributions.................. (1.17) (0.41) (1.58) (0.52) 0.00 (0.08)
--------- ------- ------- ------- ------- --------
Net asset value, end of period..................... $ 12.52 $ 13.00 $ 9.98 $11.15 $ 10.22 $ 10.60
========= ======= ======= ======= ======= ========
Total investment return (1)........................ 5.41% 36.16% 3.90% 14.86% (3.58)% 6.81%
========= ======= ======= ======= ======= ========
Ratios/Supplemental Data:

Net assets, end of period (000's).................. $ 51,409 $40,749 $36,612 $46,142 $52,624 $ 59,993

Expenses to average net assets..................... 2.03%* 2.75% 2.90% 2.74% 2.69%* 2.50%

Net investment income (loss) to average net assets (1.36)%* (1.91)% (0.78)% (0.35)% (0.37)%* 0.67%

Portfolio turnover rate............................ 19% 54% 84% 19% 20% 98%

Average commission rate paid (2)................... $ 0.0598 $0.0597 -- -- -- --
</TABLE>

- --------

* Annualized

+ For the period February 1, 1994 to July 31, 1994.

++ For the period July 26, 1996 (commencement of offering shares) to July
31, 1996.

# Effective April 1, 1996, Mitchell Hutchins took over the advisory
functions of the Fund's assets.

@ Calculated using the average shares outstanding for the period.

(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.

<PAGE>

<TABLE>
<CAPTION>
Class C
-----------------------------------------------------------------

For the Six For the For the
Months Ended For the Years Ended Period Year
January 31, July 31, Ended Ended
1998 ------------------------ July 31, January 31,
(unaudited) 1997 1996# 1995 1994+ 1994
----------- ---- ----- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C>

Net asset value, beginning of period............... $ 12.98 $ 9.97 $ 11.14 $ 10.22 $ 10.59 $ 10.00
------- ------- ------- ------- ------- -------
Net investment income (loss)....................... (0.08) (0.24) (0.08)@ (0.05) (0.02) 0.06

Net realized and unrealized gains (losses)
from investments................................... 0.77 3.66 0.49 @ 1.49 (0.35) 0.62
------- ------- ------- ------- ------- -------
Net increase (decrease) from investment operations. 0.69 3.42 0.41 1.44 (0.37) 0.68
------- ------- ------- ------- ------- -------
Dividends from net investment income............... -- -- -- -- -- (0.07)

Distributions from net realized gains from
investments........................................ (1.17) (0.41) (1.58) (0.52) -- (0.02)
------- ------- ------- ------- ------- -------
Total dividends and distributions.................. (1.17) (0.41) (1.58) (0.52) 0.00 (0.09)
------- ------- ------- ------ ------- -------
Net asset value, end of period..................... $ 12.50 $ 12.98 $ 9.97 $ 11.14 $ 10.22 $ 10.59
======= ======= ======= ======= ======= =======
Total investment return (1)........................ 5.42% 35.09% 3.90% 14.76% (3.49)% 6.77%
======= ======= ======= ======= ======= =======
Ratios/Supplemental Data:

Net assets, end of period (000's).................. $28,955 $18,812 $18,606 $13,263 $16,285 $20,941

Expenses to average net assets..................... 1.99%* 2.77% 2.91% 2.73% 2.69%* 2.50%

Net investment income (loss) to average net assets (1.32)%* (1.93)% (0.77)% (0.34)% (0.36)%* 0.64%

Portfolio turnover rate............................ 19% 54% 84% 19% 20% 98%

Average commission rate paid (2)................... $0.0598 $0.0597 -- -- -- --

<CAPTION>
Class Y
---------------------------------

For the Six For the For the
Months Ended Year Period
January 31, Ended Ended
1996 July 31, July 31,
(unaudited) 1997 1996++
----------- ---- ------
<S> <C> <C> <C>

Net asset value, beginning of period............... $ 13.46 $ 10.21 $ 10.23
-------- ------- -------
Net investment income (loss)....................... (0.03) (0.11) 0.00 @

Net realized and unrealized gains (losses)
from investments................................... 0.81 3.77 (0.02)@
-------- ------- -------
Net increase (decrease) from investment operations. 0.78 3.66 (0.02)
-------- ------- -------
Dividends from net investment income............... -- -- --

Distributions from net realized gains from
investments........................................ (1.17) (0.41) --
-------- ------- -------
Total dividends and distributions.................. (1.17) (0.41) 0.00
-------- ------- -------
Net asset value, end of period..................... $ 13.07 $ 13.46 $ 10.21
======== ======= =======
Total investment return (1)........................ 5.90% 36.65% (0.20)%
======== ======= =======
Ratios/Supplemental Data:

Net assets, end of period (000's).................. $ 2,635 $ 2,768 $ 2,801

Expenses to average net assets..................... 1.05%* 1.72% 1.72%*

Net investment income (loss) to average net assets (0.38)%* (0.88)% 0.07%*

Portfolio turnover rate............................ 19% 54% 84%

Average commission rate paid (2)................... $ 0.0598 $0.0597 --
</TABLE>

<PAGE>

[This Page Intentionally Left Blank]

<PAGE>

TRUSTEES

E. Garrett Bewkes, Jr. Mary C. Farrell
Chairman
Meyer Feldberg
Margo N. Alexander
George W. Gowen
Richard Q. Armstrong
Frederic V. Malek
Richard R. Burt
Carl W. Schafer

PRINCIPAL OFFICERS

Margo N. Alexander Paul H. Schubert
President Vice President and Treasurer

Victoria E. Schonfeld Mark A. Tincher
Vice President Vice President

Dianne E. O'Donnell Donald R. Jones
Vice President and Secretary Vice President

INVESTMENT ADVISER,
ADMINISTRATOR AND DISTRIBUTOR

Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019

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.

The financial information included herein is taken from the records of the
Fund without examination by independent accountants who do not express an
opinion thereon.

A prospectus containing more complete information for any of the Funds
listed on the back cover can be obtained from a PaineWebber investment
executive or corresponding firm. Read the prospectus carefully before
investing.

<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 Capital Appreciation Fund
o Financial Services Growth Fund
o Growth Fund
o Growth and Income Fund
o Small Cap Fund
o S&P 500 Index Fund
o Utility Income 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

MITCHELL HUTCHINS PORTFOLIOS
o Aggressive Portfolio
o Moderate Portfolio
o Conservative Portfolio

PAINEWEBBER MONEY MARKET FUND

PaineWebber

SMALL
CAP
FUND

JANUARY 31, 1998

SEMIANNUAL REPORT