PAINEWEBBER SMALL CAP FUND SEMIANNUAL REPORT
March 15, 2000
Dear Shareholder,
We are pleased to present you with the semiannual report for PaineWebber Small
Cap Fund (the "Fund") for the six-month period ended January 31, 2000.
PAINEWEBBER
SMALL CAP FUND
INVESTMENT OBJECTIVE:
Long-term capital
appreciation through
small-cap investing
PORTFOLIO MANAGER:
Donald R. Jones,
Mitchell Hutchins
Asset Management Inc.
COMMENCEMENT:
February 1, 1993
DIVIDEND PAYMENTS:
Annually
MARKET REVIEW
================================================================================
[GRAPHIC OMITTED] All of the major equity markets gained during the six-month
period, but none more than the NASDAQ Composite, which, propelled by technology
stocks, jumped 49.34%. By comparison, the Dow Jones Industrial Average (the
"Dow") and Standard and Poor's 500 Index (S&P 500) gained 3.50% and 5.58%,
respectively. A relatively small number of stocks led the markets throughout the
period. In ever-greater numbers, investors chased technology stocks, where
earnings growth and positive earnings surprises have been strong.
During the six months ended January 31, 2000, small-cap stocks as measured by
the S&P 600 Index gained 4.62%, trailing large-cap stocks as measured by the S&P
500. As measured by the Russell 2000 Index, however, small caps posted a return
of 12.25%, outperforming the S&P 500 for the period.
OUTLOOK
The big picture for the stock market looks positive: estimates of corporate
profit growth for 2000 are rising, productivity remains strong and inflation
appears to be under control. The overall market's current valuation seems high
to us, but we think the market is capable of achieving returns commensurate with
the growth of corporate profits.
The technology sector is likely to remain the market leader as overseas demand
for U.S. technology products continues to expand. The expanding global economy
could benefit U.S. cyclical and capital goods companies that derive significant
portions of their revenues from exports. If this happens, we believe that stock
market gains could broaden to include other companies besides the largest 50
stocks of the S&P 500.
1
<PAGE>
SEMIANNUAL REPORT
PORTFOLIO REVIEW
================================================================================
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS, PERIODS ENDED 1/31/00
6 Months 1 Year 5 Years Inception(0)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Before Deducting Class A* 3.65% 3.93% 10.51% 8.39%
Maximum Sales Charge Class B** 3.19% 2.99% 9.79% 7.66%
Class C+ 3.19% 3.09% 9.65% 7.56%
Class Y++ 3.70% 4.08% N/A 10.11%
- -------------------------------------------------------------------------------------
After Deducting Class A* -1.04% -0.79% 9.50% 7.68%
Maximum Sales Charge Class B** -1.81% -2.01% 9.51% 7.66%
Class C+ 2.19% 2.09% 9.65% 7.56%
- -------------------------------------------------------------------------------------
S&P 600 Index 4.62% 10.31% 16.64% 12.95%
Russell 2000 Index 12.25% 17.74% 16.61% 13.35%
Lipper Small Cap
Value Median -4.74% 1.61% 12.44% 10.07%
- -------------------------------------------------------------------------------------
</TABLE>
Past performance is no guarantee of future performance. The investment return
and the principal value of an investment in the Fund will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Total returns for periods less than one year are not annualized.
(0) Inception: since commencement of issuance on February 1, 1993 for Class A,
Class B and Class C shares and on July 26, 1996 for Class Y shares. Index
inception returns are shown as of the oldest share class.
* Maximum sales charge for Class A shares is 4.5% of the public offering
price. Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5% and is
reduced to 0% after six years. Class B shares bear ongoing 12b-1
distribution and service fees.
+ Maximum contingent deferred sales charge for Class C shares is 1% and is
reduced to 0% after one year. Class C shares bear ongoing 12b-1
distribution and service fees.
++ The Fund offers Class Y shares to a limited group of eligible investors,
including participants in certain investment programs that are sponsored by
PaineWebber and that may invest in PaineWebber mutual funds, as well as the
trustee of the PaineWebber 401(k) Plus Plan. Class Y shares do not bear
initial or contingent deferred sales charges or ongoing distribution and
service fees.
PORTFOLIO HIGHLIGHTS
[GRAPHIC OMITTED] For the six-month period ended January 31, 2000, the Fund
outperformed the Lipper Small Cap Value Median, yet lagged the broader small-cap
indices such as the S&P 600 and the Russell 2000. The greater representation of
growth stock in the indices accounted for most of the performance disparity
between the indices and the Fund. The Fund's value-oriented investment style
detracted from performance during the period, as investors showed a preference
for growth companies.
2
<PAGE>
PAINEWEBBER SMALL CAP FUND SEMIANNUAL REPORT
<TABLE>
<CAPTION>
TOP FIVE SECTORS* 1/31/00 7/31/99
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consumer Cyclical 28.3% Consumer Cyclical 31.7%
Technology 27.8 Technology 31.1
Healthcare 11.5 Healthcare 8.6
Financial Services 9.6 Financial Services 8.1
Capital Goods 7.0 Capital Goods 6.7
- ---------------------------------------------------------------------------------------
Total 84.2 Total 86.2
</TABLE>
During the period we reduced the Fund's weighting in technology due to valuation
concerns. At period-end, the Fund's 27.8% technology position represented a
significant underweight versus the nearly 40% weighting of the S&P 600 Small Cap
Index. Despite its underweighting the Fund benefited from selected technology
stocks such as Alpha Industries (sold in January) and Caere Corp. (CAER) (0.1%),
which received a takeover bid. Healthcare stocks such as Counsel Corporation
(CXSN) (1.8%) also contributed to performance.
<TABLE>
<CAPTION>
TOP TEN STOCKS* 1/31/00 7/31/99
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Metris Co., Inc. 3.5% First Cash Financial Services, Inc. 4.0%
Orbotech Ltd. 3.3 Quadramed Corp. 3.5
Quadramed Corp. 3.1 Wackenhut Corp., Class B 3.4
Stericycle, Inc. 2.9 Piercing Pagoda, Inc. 3.0
Tecnomatix Technologies Ltd. 2.9 Sun Guard Data Systems 2.9
First Cash Financial Services, Inc.2.9 J. Jill Group, Inc. 2.7
Piercing Pagoda, Inc. 2.9 DSP Group, Inc. 2.5
Maximus, Inc. 2.6 Cornell Corrections, Inc. 2.3
Calpine Corp. 2.4 Fresh America Corp. 2.2
Pomeroy Computer Resources, Inc. 2.2 Orbotech Ltd. 2.1
- ---------------------------------------------------------------------------------------
Total 28.7 Total 28.6
</TABLE>
We sold two positive contributors, DII Group and DSP Group, and reduced our
position in Orbotech (ORBK) (3.3%) another stock that helped performance during
the period. Our sell discipline led us to sell Watsco (WSO) and Transworld
Entertainment (TWMC) because of disappointing earnings announcements, and Hughes
Supply (HUG) because of earnings deceleration.
- ----------
* Weightings represent percentages of portfolio assets as of January 31, 2000,
unless indicated otherwise. The portfolio is actively managed and its
composition will vary over time.
3
<PAGE>
SEMIANNUAL REPORT
PORTFOLIO CHARACTERISTICS VS. S&P 600 INDEX* FUND INDEX
- --------------------------------------------------------------------------------
Approximate No. of Securities 84 600
Average Market Cap. ($mm) 649 602
Price/Earnings Ratio (next fiscal year EPS) 13.7x 15.7x
Price/Book Ratio 3.3x 3.2x
Dividend Yield 0.2% 1.0%
Long-Term Projected EPS Growth1 21.1% 18.2%
Beta (5-year average, relative to S&P 600)2 0.96 1.00
Net Assets ($mm) $71.2 N/A
Equities 94.9% 100%
Cash and Cash Equivalents 5.1% N/A
- --------------------------------------------------------------------------------
* As of January 31, 2000. The Portfolio is actively managed and its
composition will vary over time.
1 Sources: I/B/E/S and Mitchell Hutchins. I/B/E/S determines the mean values
of brokerage analysts' earnings-per-share estimates and projected three- to
five-year earnings-per-share growth rates. The investment advisor
calculates the Fund's projected earnings per share growth by taking the
simple average of the I/B/E/S means for the Fund's holdings.
2 Source: Lipper Analytical Services, Inc. Beta is a measure of risk commonly
used to compare the return volatility of mutual funds or stocks to the
market. A beta of 0.7 means the fund's total return is likely to move up or
down 70% of the market change; a beta of 1.3 means the total return is
likely to move up or down 130% of the market change.
GOING FORWARD
Recently we have emphasized adding to the Fund's positions in basic materials
(5.5%), capital goods (7.0%), energy (3.8%), and to a lesser extent, financial
services (9.6%). We believe these sectors generally contain better values, with
P/E ratios under 10 in some cases. The Fund is currently overweighted in the
consumer cyclical sector (28.3%), where we emphasize selected retailing,
homebuilding and business service stocks. Positive trends in employment and
wages are likely to promote consumer spending over the near term, which should
benefit these companies.
The outlook for small caps has improved in recent months, as economies around
the world have become more stable and healthy. This may broaden investor
interest beyond the perceived safety and liquidity of larger growth stocks
toward smaller capitalization and value-oriented stocks. Furthermore, insider
buying, corporate share repurchases and merger and acquisition activity have
continued in the small cap market and may be the catalysts needed for small caps
to realize their potential value.
We continue to believe that attractively valued stocks exist at both the upper
and lower ends of our capitalization range. We intend to pursue our strategy of
guiding the Fund so that average market cap does not deviate too far from the
S&P 600's average market cap ($602 million at period-end).
4
<PAGE>
PAINEWEBBER SMALL CAP FUND SEMIANNUAL REPORT
Our ultimate objective in managing your investments is to help you successfully
meet your financial goals. We thank you for your continued support and welcome
any comments or questions you may have. For a QUARTERLY REVIEW on PaineWebber
Small Cap Fund or another fund in the PaineWebber Family of Funds,3 please
contact your Financial Advisor.
Sincerely,
<TABLE>
<S> <C>
/s/ MARGO ALEXANDER /s/ MARK A. TINCHER
- --------------------------------------- ----------------------------------------
MARGO ALEXANDER MARK A. TINCHER
Chairman and Chief Executive Officer Managing Director and Chief
Mitchell Hutchins Asset Management Inc. Investment Officer-- Equity Investments,
Mitchell Hutchins Asset Management Inc.
/s/ BRIAN M. STORMS /s/ DONALD R. JONES
- --------------------------------------- ----------------------------------------
BRIAN M. STORMS DONALD R. JONES
President and Chief Operating Officer Portfolio Manager
Mitchell Hutchins Asset Management Inc. PaineWebber Small Cap Fund
Mitchell Hutchins Asset Management Inc.
</TABLE>
This letter is intended to assist shareholders in understanding how the Fund
performed during the six-month period ended January 31, 2000, and reflects our
views at the time of its writing. Of course, these views may change in response
to changing circumstances. We encourage you to consult your Financial Advisor
regarding your personal investment program.
3 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.
5
<PAGE>
PAINEWEBBER SMALL CAP FUND
PERFORMANCE RESULTS (unaudited)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN1
-------------------------------------------- -----------------------------------
12 MONTHS 6 MONTHS
01/31/00 07/31/99 01/31/99 ENDED 01/31/00 ENDED 01/31/00
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $11.37 $10.97 $10.94 3.93% 3.65%
- ----------------------------------------------------------------------------------------------------------------------------
Class B Shares 10.69 10.36 10.38 2.99 3.19
- ----------------------------------------------------------------------------------------------------------------------------
Class C Shares 10.69 10.36 10.37 3.09 3.19
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PERFORMANCE SUMMARY CLASS A SHARES
NET ASSET VALUE
-----------------------
CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN1
- ----------------------------------------------------------------------------------------------------------------------------
<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
- ----------------------------------------------------------------------------------------------------------------------------
1998 13.31 11.21 1.1141 -- (6.75)
- ----------------------------------------------------------------------------------------------------------------------------
1999 11.21 11.46 -- -- 2.23
- ----------------------------------------------------------------------------------------------------------------------------
01/01/2000-1/31/00 11.46 11.37 -- -- (0.79)
- ----------------------------------------------------------------------------------------------------------------------------
Totals: $4.8124 $0.1281
- ----------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 01/31/00: 75.84%
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PERFORMANCE SUMMARY CLASS B SHARES
NET ASSET VALUE
-----------------------
CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN1
- ----------------------------------------------------------------------------------------------------------------------------
<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
- ----------------------------------------------------------------------------------------------------------------------------
1998 12.80 10.64 1.1141 -- (7.49)
- ----------------------------------------------------------------------------------------------------------------------------
1999 10.64 10.78 -- -- 1.32
- ----------------------------------------------------------------------------------------------------------------------------
01/01/00-01/31/00 10.78 10.69 -- -- (0.83)
- ----------------------------------------------------------------------------------------------------------------------------
Totals: $4.8124 $0.0631
- ----------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 01/31/00: 67.71%
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PERFORMANCE SUMMARY CLASS C SHARES
NET ASSET VALUE
-----------------------
CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN1
- ----------------------------------------------------------------------------------------------------------------------------
<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
- ----------------------------------------------------------------------------------------------------------------------------
1998 12.79 10.63 1.1141 -- (7.49)
- ----------------------------------------------------------------------------------------------------------------------------
1999 10.63 10.78 -- -- 1.41
- ----------------------------------------------------------------------------------------------------------------------------
01/01/00-01/31/00 10.78 10.69 -- -- (0.83)
- ----------------------------------------------------------------------------------------------------------------------------
Totals: $4.8124 $0.0682
- ----------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 01/31/00: 66.55%
- ----------------------------------------------------------------------------------------------------------------------------
</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 would
be lower if sales charges were included. Total investment return for
periods of less than one year has not been annualized.
Note: The Fund offers Class Y shares to a limited group of investors, including
participants in certain investment programs that are sponsored by PaineWebber
and that may invest in PaineWebber mutual funds. For the six months ended
January 31, 2000 and since inception, July 26, 1996 through January 31, 2000,
Class Y shares had a total return of 3.70% and 40.38%, 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.
6
<PAGE>
PAINEWEBBER SMALL CAP FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 2000 (unaudited)
NUMBER OF
SHARES VALUE
-------- ----------
COMMON STOCKS--94.84%
AGRICULTURE, FOOD & BEVERAGE--2.41%
9,500 Canandaigua Wine Inc. .......................... $ 492,813
532,000 Creative Bakeries, Inc.* ....................... 249,375
42,200 Performance Food Group Co.* .................... 973,238
----------
1,715,425
----------
APPAREL, RETAIL--4.79%
47,700 Childrens Place Retail Stores, Inc. (1) ........ 691,650
196,000 Florsheim Group, Inc.* ......................... 477,750
11,850 Pacific Sunwear of California, Inc.* ........... 348,094
33,472 REX Stores Corp.* .............................. 514,632
77,193 Wilsons The Leather Experts Inc. ............... 1,375,000
----------
3,407,126
----------
BANKS--0.60%
17,200 Cullen Frost Bankers Inc. ...................... 427,850
----------
CHEMICALS--1.83%
50,700 Spartech Corp. ................................. 1,299,187
----------
COMPUTER HARDWARE--0.95%
11,250 Kronos, Inc.* .................................. 675,000
----------
COMPUTER SOFTWARE--7.09%
37,000 AVT Corp.* ..................................... 827,875
238,817 Quadramed Corp.* (1) ........................... 2,164,279
400 Skillsoft Corp. ................................ 5,600
54,926 Tecnomatix Technologies Ltd.* (1) .............. 2,045,994
----------
5,043,748
----------
CONSTRUCTION--3.21%
34,950 Elcor Corp. .................................... 1,173,010
12,000 M/I Schottenstein Homes, Inc. .................. 156,000
137,775 Nobility Homes Inc.* ........................... 774,984
4,000 NVR Inc.* ...................................... 181,000
----------
2,284,994
----------
CONSUMER DURABLES--0.28%
11,600 Furniture Brands International Inc.* ........... 197,896
----------
DIVERSIFIED RETAIL--1.03%
40,000 Shopko Stores, Inc.* ........................... 732,500
----------
DRUGS & MEDICINE--3.99%
11,400 Alpharma, Inc.* (1) ............................ 387,600
29,300 Amerisource Health Corp., Class A* ............. 531,062
28,800 Bio Technology General Corp.* (1) .............. 396,000
16,100 Cephalon Inc. .................................. 571,550
46,671 Noven Pharmaceuticals Inc. ..................... 752,570
7,500 PolyMedica Corp.* .............................. 201,094
----------
2,839,876
----------
ELECTRIC UTILITIES--2.38%
23,200 Calpine Corp. (1) .............................. $1,696,500
----------
ELECTRICAL EQUIPMENT--7.18%
8,400 CTS Corp. ...................................... 589,575
30,200 Orbotech Ltd.* ................................. 2,295,200
10,000 Pinnacle Systems, Inc.* ........................ 487,500
9,600 Plantronics, Inc.* ............................. 687,600
33,000 Thermo Ecotek Corp.* ........................... 235,125
16,600 Xircom, Inc.* .................................. 818,587
----------
5,113,587
----------
ENTERTAINMENT--0.61%
41,800 Funco, Inc.* ................................... 431,063
----------
ENVIRONMENTAL SERVICES--3.05%
126,750 Stericycle, Inc.* .............................. 2,051,766
60,200 Thermatrix, Inc.* .............................. 120,400
----------
2,172,166
----------
FINANCIAL SERVICES--6.89%
24,000 Americredit Corp.* ............................. 393,000
279,200 First Cash Financial Services, Inc.* ........... 2,041,650
67,500 Metris Co., Inc. ............................... 2,472,187
----------
4,906,837
----------
FOREST PRODUCTS, PAPER--1.93%
49,300 Greif Brothers Corp., Class A .................. 1,377,319
----------
GAS UTILITY--0.36%
7,400 Equitable Resources Inc. ....................... 255,300
----------
INDUSTRIAL PARTS--0.77%
79,700 Powell Industries, Inc.* ....................... 547,938
----------
INDUSTRIAL SERVICES & SUPPLIES--6.13%
82,400 AHL Services, Inc.* (1) ........................ 1,308,100
147,100 Cornell Corrections, Inc.* ..................... 1,498,581
31,700 Correctional Services Corp.* ................... 159,491
144,882 Wackenhut Corp., Class B ....................... 1,394,489
----------
4,360,661
----------
INFORMATION & COMPUTER SERVICES--10.58%
52,500 4Front Technologies, Inc.* (1) ................. 931,875
6,529 Caere Corp.* ................................... 57,129
40,200 Health Management Systems, Inc.* ............... 251,250
49,700 Maximus, Inc.* ................................. 1,842,006
97,263 Pomeroy Computer Resources, Inc* ............... 1,580,524
123,978 Right Management Consultants, Inc.* ............ 1,549,725
45,061 Sun Guard Data Systems* ........................ 1,318,034
----------
7,530,543
----------
7
<PAGE>
PAINEWEBBER SMALL CAP FUND
COMMON STOCKS--(CONCLUDED)
LEISURE--1.65%
15,000 Activision, Inc.* .............................. $ 234,375
32,200 Meade Instruments Corp.* ....................... 939,837
-----------
1,174,212
-----------
MEDICAL PRODUCTS--3.85%
59,000 American Science & Engineering, Inc.* .......... 405,625
35,200 Biomatrix, Inc.* (1) ........................... 781,000
45,100 Pharmaceutical Product
Development, Inc.* ............................. 575,025
200 Sequenom Inc. .................................. 5,200
59,000 Theragenics Corp.* ............................. 601,062
25,000 Young Innovations, Inc.* ....................... 375,000
-----------
2,742,912
-----------
MEDICAL PROVIDERS--3.55%
238,700 Counsel Corp.* ................................. 1,297,931
63,200 Hooper Holmes, Inc. ............................ 1,228,450
-----------
2,526,381
-----------
MINING & METALS--1.62%
8,200 Ball Corp. ..................................... 298,275
23,400 Texas Industries, Inc.* ........................ 855,563
-----------
1,153,838
-----------
MOTOR VEHICLES--1.12%
17,300 Borg Warner Automotive, Inc. ................... 581,713
40,000 Keystone Automotive Industries, Inc.* .......... 215,000
-----------
796,713
-----------
OIL REFINING--1.85%
223,800 Kaneb Services, Inc.* .......................... 1,007,100
28,000 Tesoro Petroleum Corp.* ........................ 308,000
-----------
1,315,100
-----------
OIL SERVICES--1.85%
79,300 Patterson Energy Inc. .......................... 1,318,362
-----------
OTHER INSURANCE--1.36%
24,000 Radian Group, Inc. ............................. $ 967,500
-----------
RESTAURANTS--1.46%
26,000 Applebees International, Inc. .................. 651,625
19,000 Jack In The Box Inc. ........................... 390,688
-----------
1,042,313
-----------
SECURITIES & ASSET MANAGEMENT--0.57%
21,400 Raymond James Financial, Inc. .................. 406,600
-----------
SPECIALTY RETAIL--8.31%
3,767 Central Garden & Pet Co.* ...................... 38,611
122,700 Intertan, Inc.* ................................ 1,388,044
20,000 Movado Group, Inc. ............................. 380,000
113,500 Musicland Stores, Inc.* (1) .................... 716,469
12,000 PC Connection, Inc. ............................ 354,000
157,800 Piercing Pagoda, Inc.* ......................... 2,031,675
36,150 Whitehall Jewellers, Inc.* ..................... 881,156
3,600 Zale Corp.* .................................... 128,700
-----------
5,918,655
-----------
WIRELESS TELECOMMUNICATIONS--1.59%
30,600 Viatel Inc. .................................... 1,130,288
-----------
Total Common Stocks (cost-- $67,701,836) ....... 67,508,390
-----------
NUMBER OF
WARRANTS
- -----------
WARRANTS--0.02%
AGRICULTURE, FOOD & BEVERAGE--0.02%
350,000 Creative Bakeries, Inc.*+,
strike price of $3.00
expiring December 31, 2000
(cost-- $171,500) .............................. 17,500
-----------
8
<PAGE>
PAINEWEBBER SMALL CAP FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) MATURITY DATE INTEREST RATE VALUE
-------- ------------- ------------- ------
<S> <C> <C> <C>
REPURCHASE AGREEMENT--3.83%
$ 2,725 Repurchase Agreement dated 01/31/00 with Zions Bancorp,
collateralized by $2,765,000 U.S. Treasury Notes, 5.50%
due 8/31/01 (value-$2,784,217); proceeds: $2,725,430
(cost--$2,725,000) ................................ 02/01/00 5.680% $ 2,725,000
-----------
Total Investments (cost--$70,598,336)--98.69% ................................................................ 70,250,890
Other assets in excess of liabilities--1.31% ................................................................. 929,869
-----------
Net Assets--100.00% .......................................................................................... $71,180,759
===========
</TABLE>
- ----------
* Non-Income producing security.
(1) Security, or a portion thereof, was on loan at January 31, 2000
+ Illiquid security representing 0.02% of net assets. This security is fair
valued as determined in good faith by a management committee under the
direction of the Fund's board of trustees.
See accompanying notes to financial statements
9
<PAGE>
PAINEWEBBER SMALL CAP FUND
STATEMENT OF ASSETS AND LIABILITIES JANUARY 31, 2000 (unaudited)
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost--$70,598,336) ..................................................... $ 70,250,890
Investments of cash collateral for securities loaned, at value (cost--$7,770,400) ............. 7,770,400
Cash .......................................................................................... 447
Receivable for investments sold ............................................................... 3,376,864
Dividends and interest receivable ............................................................. 36,592
Receivable for shares of beneficial interest sold ............................................. 45,980
Other assets .................................................................................. 18,567
------------
Total assets .................................................................................. 81,499,740
------------
LIABILITIES
Cash collateral for securities loaned ......................................................... 7,770,400
Payable for investments purchased ............................................................. 2,162,069
Payable for shares of beneficial interest repurchased ......................................... 152,531
Payable to affiliates ......................................................................... 99,521
Accrued expenses and other liabilities ........................................................ 134,460
------------
Total liabilities ............................................................................. 10,318,981
------------
NET ASSETS
Beneficial interest shares of $0.001 par value outstanding (unlimited amount authorized) ...... 77,663,373
Accumulated net investment loss ............................................................... (636,792)
Accumulated net realized losses from investments .............................................. (5,498,376)
Net unrealized depreciation of investments .................................................... (347,446)
------------
Net assets .................................................................................... $ 71,180,759
============
CLASS A:
Net assets .................................................................................... $ 41,518,621
------------
Shares outstanding ............................................................................ 3,651,593
------------
Net asset value and redemption value per share ................................................ $ 11.37
============
Maximum offering price per share (net asset value plus sales charge of
4.50% of offering price)..................................................................... $ 11.91
============
CLASS B:
Net assets .................................................................................... $ 12,719,675
------------
Shares outstanding ............................................................................ 1,190,374
------------
Net asset value and offering price per share .................................................. $ 10.69
============
CLASS C:
Net assets .................................................................................... $ 14,281,494
------------
Shares outstanding ............................................................................ 1,336,536
------------
Net asset value and offering price per share .................................................. $ 10.69
============
CLASS Y:
Net assets .................................................................................... $ 2,660,969
------------
Shares outstanding ............................................................................ 231,695
------------
Net asset value, offering price and redemption value per share ................................ $ 11.48
============
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
PAINEWEBBER SMALL CAP FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JANUARY 31, 2000
(UNAUDITED)
----------------
<S> <C>
INVESTMENT INCOME:
Dividends .......................................................... $ 25,797
Interest ........................................................... 56,820
-----------
82,617
-----------
EXPENSES:
Investment advisory and administration fees ........................ 380,330
Service fees--Class A .............................................. 52,525
Service and distribution fees--Class B ............................. 71,316
Service and distribution fees--Class C ............................. 77,526
Transfer agency and service fees ................................... 62,299
Custody and accounting ............................................. 23,941
Legal and audit .................................................... 22,664
Reports and notices to shareholders ................................ 22,297
Trustees' fees and expenses ........................................ 6,750
Other expenses ..................................................... 1,137
-----------
720,785
Less: Fee waivers from adviser ..................................... (1,376)
-----------
Net expenses ....................................................... 719,409
-----------
Net investment loss ................................................ (636,792)
-----------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT TRANSACTIONS:
Net realized gain from investment transactions ..................... 4,232,575
Net change in unrealized appreciation/depreciation of investments .. (2,121,394)
-----------
NET REALIZED AND UNREALIZED GAIN FROM INVESTMENT TRANSACTIONS ...... 2,111,181
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............... $ 1,474,389
===========
</TABLE>
See accompanying notes to financial statements
11
<PAGE>
PAINEWEBBER SMALL CAP FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
JANUARY 31, 2000 YEAR ENDED
(UNAUDITED) JULY 31, 1999
---------------- -------------
<S> <C> <C>
FROM OPERATIONS:
Net investment loss ............................................. $ (636,792) $ (1,243,383)
Net realized gain/loss from investment transactions ............. 4,232,575 (9,769,687)
Net change in unrealized appreciation/depreciation
of investments................................................. (2,121,394) (4,659,990)
------------- -------------
Net increase (decrease) in net assets resulting from operations.. 1,474,389 (15,673,060)
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain from investment transactions--Class A ......... -- (3,700,009)
Net realized gain from investment transactions--Class B ......... -- (4,415,748)
Net realized gain from investment transactions--Class C ......... -- (2,637,230)
Net realized gain from investment transactions--Class Y ......... -- (637,228)
------------- -------------
Total distributions to shareholders ............................. -- (11,390,215)
------------- -------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares ............................ 7,263,218 25,989,556
Cost of shares repurchased ...................................... (26,554,707) (62,296,548)
Proceeds from dividends reinvested .............................. -- 10,797,893
------------- -------------
Net decrease in net assets from beneficial interest
transactions................................................... (19,291,489) (25,509,099)
------------- -------------
Net decrease in net assets ...................................... (17,817,100) (52,572,374)
NET ASSETS:
Beginning of period ............................................. 88,997,859 141,570,233
------------- -------------
End of period ................................................... $ 71,180,759 $ 88,997,859
============= =============
</TABLE>
See accompanying notes to financial statements
12
<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 currently 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.
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--The Fund calculates its net asset value based on
the current market value for its portfolio securities. The Fund normally obtains
market values for its securities from independent pricing sources. Independent
pricing sources may use reported last sale prices, current market quotations or
valuations from computerized "matrix" systems that derive values based on
comparable securities. Securities traded in the over-the-counter ("OTC") market
and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") normally are valued at
the last sale price on Nasdaq prior to valuation. Other OTC securities are
valued at the last bid price available prior to valuation. Securities which are
listed on U.S. and foreign stock exchanges normally are valued at the last sale
price on the day the securities are valued or, lacking any sales on such day, at
the last available bid price. In cases where securities are traded on more than
one exchange, the securities are valued on the exchange designated as the
primary market by Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"),
a wholly owned asset management subsidiary of PaineWebber Incorporated
("PaineWebber") and investment adviser and administrator of the Fund. If a
market value is not available from an independent pricing source for a
particular security, that security is valued at fair value as determined in good
faith by or under the direction of the Fund's board of trustees (the "board").
The amortized cost method of valuation, which approximates market value,
generally is used to value short-term debt instruments with sixty days or less
remaining to maturity, unless the board determines that this does not represent
fair value.
REPURCHASE AGREEMENTS--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.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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, 2000, the
Fund owed Mitchell Hutchins $61,700 in investment advisory and administration
fees. Mitchell Hutchins waived a portion of its investment advisory and
administration fees in connection with the Fund's investment of cash collateral
from security lending in the Mitchell Hutchins Private Money Market Fund LLC.
For the six months ended January 31, 2000, Mitchell Hutchins waived $1,376.
For the six months ended January 31, 2000, the Fund paid no 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, 2000, the Fund owed Mitchell Hutchins
$32,522 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, 2000, it received $42,203 in sales
charges.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SERVICING AGREEMENT
The board has approved a Servicing Agreement with Mitchell Hutchins and the
Mitchell Hutchins Portfolios (comprising, respectively, the Aggressive
Portfolio, Moderate Portfolio and the Conservative Portfolio) (each a
"Portfolio") pursuant to an exemptive order from the Securities and Exchange
Commission that permits the Fund to reimburse each Portfolio for certain
expenses to the extent the Fund realizes savings from each Portfolio. The
estimated savings to the Fund result from the elimination of separate
shareholder accounts for each Portfolio's investors, who otherwise might invest
directly in the Fund. For the six months ended January 31, 2000, the Fund
incurred $3,762 under the Servicing Agreement which is included in other
expenses on the Statement of Operations. At January 31, 2000, the Fund owed the
Portfolios $3,106 under the Servicing Agreement.
SECURITY LENDING
The Fund may lend securities up to 331/3% 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 retain 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. For the six months ended January 31, 2000, the
Fund earned $17,931 for lending its securities and PaineWebber earned $6,547 as
the Fund's lending agent. At January 31, 2000, the Fund owed PaineWebber $2,193
in security lending fees.
At January 31, 2000, the Fund's custodian held cash having an aggregate value
of $7,770,400 as collateral for portfolio securities loaned having a market
value of $7,294,600 which was invested in the following money market funds:
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
<S> <C> <C>
2,581,725 Liquid Assets Portfolio .............................. $2,581,725
3,904,812 MH Money Market Fund LLC.............................. 3,904,812
1,283,863 Prime Portfolio....................................... 1,283,863
----------
Total Investments of Cash Collateral for Securities Loaned (cost--$7,770,400) $7,770,400
==========
</TABLE>
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, 2000, the Fund did not borrow under the
Facility.
TRANSFER AGENCY RELATED SERVICE FEES
PaineWebber provides certain 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, 2000, PaineWebber received approximately 43% of
the total fees collected by PFPC, Inc.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at January 31,
2000 was substantially the same as the cost of securities for financial
statement purposes.
At January 31, 2000, the components of net unrealized depreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess
of value over cost)............................................... $ 12,157,342
Gross depreciation (investments having an excess
of cost over value)............................................... (12,504,788)
------------
Net unrealized depreciation of investments ......................... $ (347,446)
============
</TABLE>
For the six months ended January 31, 2000, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $32,944,444 and
$55,538,681, respectively.
FEDERAL INCOME TAX STATUS
The Fund intends to distribute substantially all of its taxable income and to
comply with the 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.
At July 31, 1999, Small Cap Fund had a net capital loss carryforward of
$392,122 which will expire by July 31, 2007. To the extent such losses are used,
as provided in the regulations, to offset future net realized capital gains, it
is probable these gains will not be distributed.
In accordance with U.S. Treasury regulations, the Fund has elected to defer
$9,177,062 of net realized capital losses arising after October 31, 1998. Such
losses are treated for tax purposes as arising on August 1, 1999.
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
------------------------ -----------------------
SIX MONTHS ENDED
JANUARY 31, 2000: SHARES AMOUNT SHARES AMOUNT
-------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Shares sold ........................... 176,406 $ 1,857,158 82,395 $ 819,291
Shares repurchased .................... (1,010,076) (10,551,017) (418,890) (4,163,224)
Shares converted from
Class B to Class A .................. 230,976 2,406,668 (244,996) (2,406,668)
Dividends reinvested .................. -- -- -- --
------------ ------------ ------------ ------------
Net decrease .......................... (602,694) $ (6,287,191) (581,491) $ (5,750,601)
============ ============ ============ ============
<CAPTION>
CLASS C CLASS Y
------------------------ -----------------------
SIX MONTHS ENDED
JANUARY 31, 2000: SHARES AMOUNT SHARES AMOUNT
-------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Shares sold ........................... 357,393 $ 3,540,053 99,631 $ 1,046,716
Shares repurchased .................... (847,264) (8,407,457) (323,657) (3,433,009)
Shares converted from
Class B to Class A .................. -- -- -- --
Dividends reinvested .................. -- -- -- --
------------ ------------ ------------ ------------
Net decrease .......................... (489,871) $ (4,867,404) (224,026) $ (2,386,293)
============ ============ ============ ============
<CAPTION>
CLASS A CLASS B
------------------------ -----------------------
YEAR ENDED
JULY 31, 1999: SHARES AMOUNT SHARES AMOUNT
-------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Shares sold ........................... 464,017 $ 4,930,773 444,517 $ 4,538,969
Shares repurchased .................... (1,944,337) (20,168,102) (1,440,167) (14,391,448)
Shares converted from
Class B to Class A .................. 1,825,991 19,603,262 (1,924,449) (19,603,262)
Dividends reinvested .................. 342,408 3,557,623 416,167 4,107,567
------------ ------------ ------------ ------------
Net increase (decrease) ............... 688,079 $ 7,923,556 (2,503,932) $(25,348,174)
============ ============ ============ ============
<CAPTION>
CLASS C CLASS Y
------------------------ -----------------------
YEAR ENDED
JULY 31, 1999: SHARES AMOUNT SHARES AMOUNT
-------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Shares sold ........................... 1,209,782 $ 12,273,496 404,894 $ 4,246,318
Shares repurchased .................... (2,158,699) (21,775,911) (543,473) (5,961,087)
Shares converted from
Class B to Class A .................. -- -- -- --
Dividends reinvested .................. 254,305 2,504,908 60,019 627,795
------------- ------------ ------------ ------------
Net increase (decrease) ............... (694,612) $ (6,997,507) (78,560) $ (1,086,974)
============= ============ ============ ============
</TABLE>
16
<PAGE>
[This Page Intentionally Left Blank]
<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 ENDED
JANUARY 31, FOR THE YEARS ENDED JULY 31,
2000 ---------------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996# 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 10.97 $ 13.34 $ 13.42 $ 10.22 $ 11.30 $ 10.27
---------- ---------- ---------- ---------- ---------- ----------
Net investment income (loss) ............. (0.07)@ (0.08) (0.13) (0.14) 0.00@ 0.05
Net realized and unrealized gains (losses)
from investments ....................... 0.47@ (1.18) 1.22 3.75 0.50@ 1.50
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations .................. 0.40 (1.26) 1.09 3.61 0.50 1.55
---------- ---------- ---------- ---------- ---------- ----------
Distributions from net realized gains
from investments ....................... -- (1.11) (1.17) (0.41) (1.58) (0.52)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period ........... $ 11.37 $ 10.97 $ 13.34 $ 13.42 $ 10.22 $ 11.30
========== ========== ========== ========== ========== ==========
Total investment return(1) ............... 3.65% (8.95)% 8.45% 36.11% 4.69% 15.80%
========== ========== ========== ========== ========== ==========
Ratios/Supplemental Data:
Net assets, end of period (000's) ........ $ 41,519 $ 46,680 $ 47,589 $ 32,968 $ 30,675 $ 20,494
Expenses to average net assets,
net of waivers from adviser(2) ......... 1.58%* 1.59% 1.56% 2.00% 2.11% 1.98%
Net investment income (loss) to
average net assets, net of
waivers from adviser(2) ................ (1.37)%* (0.77)% (0.99)% (1.16)% 0.02% 0.41%
Portfolio turnover rate .................. 44% 61% 45% 54% 84% 19%
</TABLE>
- ----------
* Annualized
# 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 any applicable sales charges or program fees; results would be lower
if they were included. Total investment return for periods of less than one
year has not been annualized.
(2) During the six months ended January 31, 2000 and the year ended July 31,
1999, Mitchell Hutchins waived a portion of its advisory and administration
fees.
18
<PAGE>
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------------------------------
FOR THE SIX
MONTHS ENDED
JANUARY 31, FOR THE YEARS ENDED JULY 31,
2000 ---------------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996# 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 10.36 $ 12.78 $ 13.00 $ 9.98 $ 11.15 $ 10.22
---------- ---------- ---------- ---------- ---------- ----------
Net investment income (loss) ............. (0.11)@ (0.29) (0.22) (0.23) (0.09)@ (0.04)
Net realized and unrealized gains (losses)
from investments ....................... 0.44@ (1.02) 1.17 3.66 0.50@ 1.49
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations .................. 0.33 (1.31) 0.95 3.43 0.41 1.45
---------- ---------- ---------- ---------- ---------- ----------
Distributions from net realized gains
from investments ....................... -- (1.11) (1.17) (0.41) (1.58) (0.52)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period ........... $ 10.69 $ 10.36 $ 12.78 $ 13.00 $ 9.98 $ 11.15
========== ========== ========== ========== ========== ==========
Total investment return(1) ............... 3.19% (9.79)% 7.60% 35.16% 3.90% 14.86%
========== ========== ========== ========== ========== ==========
Ratios/Supplemental Data:
Net assets, end of period (000's) ........ $ 12,720 $ 18,361 $ 54,639 $ 40,749 $ 36,612 $ 46,142
Expenses to average net assets,
net of waivers from adviser(2) ......... 2.42%* 2.43% 2.33% 2.75% 2.90% 2.74%
Net investment income (loss) to
average net assets, net of
waivers from adviser(2) ................ (2.21)%* (1.62)% (1.75)% (1.91)% (0.78)% (0.35)%
Portfolio turnover rate .................. 44% 61% 45% 54% 84% 19%
<CAPTION>
CLASS C
-------------------------------------------------------------------------------------
FOR THE SIX
MONTHS ENDED
JANUARY 31, FOR THE YEARS ENDED JULY 31,
2000 ---------------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996# 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 10.36 $ 12.76 $ 12.98 $ 9.97 $ 11.14 $ 10.22
---------- ---------- ---------- ---------- ---------- ----------
Net investment income (loss) ............. (0.11)@ (0.20) (0.21) (0.24) (0.08)@ (0.05)
Net realized and unrealized gains (losses)
from investments ....................... 0.44@ (1.09) 1.16 3.66 0.49@ 1.49
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations .................. 0.33 (1.29) 0.95 3.42 0.41 1.44
---------- ---------- ---------- ---------- ---------- ----------
Distributions from net realized gains
from investments ....................... -- (1.11) (1.17) (0.41) (1.58) (0.52)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period ........... $ 10.69 $ 10.36 $ 12.76 $ 12.98 $ 9.97 $ 11.14
========== ========== ========== ========== ========== ==========
Total investment return(1) ............... 3.19% (9.63)% 7.61% 35.09% 3.90% 14.76%
========== ========== ========== ========== ========== ==========
Ratios/Supplemental Data:
Net assets, end of period (000's) ........ $ 14,281 $ 18,913 $ 32,174 $ 18,812 $ 18,606 $ 13,263
Expenses to average net assets,
net of waivers from adviser(2) ......... 2.39%* 2.39% 2.32% 2.77% 2.91% 2.73%
Net investment income (loss) to
average net assets, net of
waivers from adviser(2) ................ (2.18)%* (1.59)% (1.75)% (1.93)% (0.77)% (0.34)%
Portfolio turnover rate .................. 44% 61% 45% 54% 84% 19%
</TABLE>
- ----------
* Annualized
# 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 any applicable sales charges or program fees; results would be lower
if they were included. Total investment return for periods of less than one
year has not been annualized.
(2) During the six months ended January 31, 2000 and the year ended July 31,
1999, Mitchell Hutchins waived a portion of its advisory and administration
fees.
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 Y
--------------------------------------------------------------------
FOR THE SIX
MONTHS ENDED FOR THE
JANUARY 31, FOR THE YEARS ENDED JULY 31, PERIOD ENDED
2000 ------------------------------- JULY 31,
(UNAUDITED) 1999 1998 1997 1996+
---------- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......................... $ 11.07 $ 13.42 $ 13.46 $ 10.21 $ 10.23
--------- ---------- --------- --------- ---------
Net investment income (loss) ................................. (0.06)@ (0.07) (0.07) (0.11) 0.00@
Net realized and unrealized gains (losses)
from investments ........................................... 0.47@ (1.17) 1.20 3.77 (0.02)@
--------- ---------- --------- --------- ---------
Net increase (decrease) from investment operations ........... 0.41 (1.24) 1.13 3.66 (0.02)
--------- ---------- --------- --------- ---------
Distributions from net realized gains from investments ....... -- (1.11) (1.17) (0.41) --
--------- ---------- --------- --------- ---------
Net asset value, end of period ............................... $ 11.48 $ 11.07 $ 13.42 $ 13.46 $ 10.21
========= ========== ========= ========= =========
Total investment return(1) ................................... 3.70% (8.73)% 8.74% 36.65% (0.20)%
========= ========== ========= ========= =========
Ratios/Supplemental Data:
Net assets, end of period (000's) ............................ $ 2,661 $ 5,044 $ 7,169 $ 2,768 $ 2,801
Expenses to average net assets, net of waivers
from adviser(2)............................................. 1.31%* 1.31% 1.39% 1.72% 1.72%*
Net investment income (loss) to average net assets, net of
waivers from adviser(2) .................................... (1.11)%* (0.50)% (0.83)% (0.88)% 0.07%*
Portfolio turnover rate ...................................... 44% 61% 45% 54% 84%
</TABLE>
- ----------
* Annualized.
+ For the period July 26, 1996 (commencement of offering 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 any applicable sales charges or program fees; results would be lower
if they were included. Total investment return for periods of less than one
year has not been annualized
(2) During the six months ended January 31, 2000 and the year ended July 31,
1999, Mitchell Hutchins waived a portion of its advisory and administration
fees. The ratios excluding the waivers would be the same since the fee
waivers represent less than 0.005%.
20
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<PAGE>
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<PAGE>
PAINEWEBBER SMALL CAP FUND
TRUSTEES
E. Garrett Bewkes, Jr. Meyer Feldberg
CHAIRMAN
George W. Gowen
Margo N. Alexander
Frederic V. Malek
Richard Q. Armstrong
Carl W. Schafer
Richard R. Burt
Brian M. Storms
Mary C. Farrell
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.
51 West 52nd Street
New York, New York 10019
A PROSPECTUS CONTAINING MORE COMPLETE INFORMATION FOR ANY OF THE FUNDS LISTED ON
THE BACK COVER CAN BE OBTAINED FROM A PAINEWEBBER FINANCIAL ADVISOR OR
CORRESPONDING FIRM. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
THE FINANCIAL INFORMATION INCLUDED HEREIN IS TAKEN FROM THE RECORDS OF THE FUND
WITHOUT EXAMINATION BY INDEPENDENT AUDITORS WHO DO NOT EXPRESS AN OPINION
THEREON.
THIS REPORT IS NOT TO BE USED IN CONNECTION WITH THE OFFERING OF SHARES OF THE
FUND UNLESS ACCOMPANIED OR PRECEDED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
==========
PaineWebber offers a family of 27 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 |
| P A I N E W E B B E R
TAX-FREE BOND FUNDS |
o California Tax-Free Income Fund |
o Municipal High Income Fund |
o National Tax-Free Income Fund |
o New York Tax-Free Income Fund |
|
STOCK FUNDS |
o Enhanced S&P 500 Fund |
o Enhanced Nasdaq - 100 Fund |
o Financial Services Growth Fund | ============================
o Growth Fund | S M A L L
o Growth and Income Fund |
o Mid Cap Fund | C A P
o Small Cap Fund |
o S&P 500 Index Fund | F U N D
o Strategy Fund |
o Tax-Managed Equity Fund |
o Utility Income Fund | S E M I A N N U A L
|
ASSET ALLOCATION FUNDS | R E P O R T
o Balanced Fund |
o Tactical Allocation Fund |
|
GLOBAL FUNDS |
o Asia Pacific Growth Fund |
o Emerging Markets Equity Fund |
o Global Equity Fund |
o Global Income Fund |
|
PAINEWEBBER MONEY MARKET FUND |
|
PAINEWEBBER |
(C)2000 PaineWebber Incorporated | J A N U A R Y 3 1, 2 0 0 0
All Rights Reserved |
Member SIPC |
