<PAGE>
PAINEWEBBER U.S. GOVERNMENT INCOME FUND
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------- -----------------------------
12 MONTHS 6 MONTHS
11/30/95 05/31/95 11/30/94 ENDED 11/30/95 ENDED 11/30/95
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $9.12 $8.95 $8.50 14.70% 5.15%
- ---------------------------------------------------------------------------
Class B Shares 9.12 8.95 8.50 13.81 4.74
- ---------------------------------------------------------------------------
Class C Shares/3/ 9.11 8.94 8.49 14.12 4.88
- ---------------------------------------------------------------------------
</TABLE>
Performance Summary Class A Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID/2/ RETURN/1/
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
08/31/84-12/31/84 $ 9.57 $ 9.78 $ $0.3515 5.95%
--
- ------------------------------------------------------------------------------
1985 9.78 10.32 -- 1.2600 19.79
- ------------------------------------------------------------------------------
1986 10.32 10.21 0.0053 1.1924 11.18
- ------------------------------------------------------------------------------
1987 10.21 9.34 0.0027 0.9160 0.59
- ------------------------------------------------------------------------------
1988 9.34 9.18 -- 0.8718 7.83
- ------------------------------------------------------------------------------
1989 9.18 9.49 -- 0.7994 12.58
- ------------------------------------------------------------------------------
1990 9.49 9.57 -- 0.7883 9.25
- ------------------------------------------------------------------------------
1991 9.57 10.18 -- 0.7683 15.04
- ------------------------------------------------------------------------------
1992 10.18 10.05 -- 0.7372 6.23
- ------------------------------------------------------------------------------
1993 10.05 10.03 -- 0.6590 6.48
- ------------------------------------------------------------------------------
1994 10.03 8.40 -- 0.6014 -10.51
- ------------------------------------------------------------------------------
01/01/95-11/30/95 8.40 9.12 -- 0.5083 14.99
- ------------------------------------------------------------------------------
Total: $0.0080 $9.4536
- ------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 11/30/95: 153.00%
- ------------------------------------------------------------------------------
Performance Summary Class B Shares
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/01/91-12/31/91 $ 9.59 $10.19 $ $0.3535 10.09%
--
- ------------------------------------------------------------------------------
1992 10.19 10.05 -- 0.6599 5.31
- ------------------------------------------------------------------------------
1993 10.05 10.04 -- 0.5821 5.78
- ------------------------------------------------------------------------------
1994 10.04 8.40 -- 0.5317 -11.28
- ------------------------------------------------------------------------------
01/01/95-11/30/95 8.40 9.12 -- 0.4486 14.21
- ------------------------------------------------------------------------------
Total: $0.0000 $2.5758
- ------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 11/30/95: 24.28%
- ------------------------------------------------------------------------------
Performance Summary Class C Shares/3/
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/02/92-12/31/92 $10.13 $10.05 $ $0.3281 2.16%
--
- ------------------------------------------------------------------------------
1993 10.05 10.02 -- 0.6089 5.85
- ------------------------------------------------------------------------------
1994 10.02 8.39 -- 0.5557 -10.97
- ------------------------------------------------------------------------------
01/01/95-11/30/95 8.39 9.11 -- 0.4683 14.49
- ------------------------------------------------------------------------------
Total: $0.0000 $1.9610
- ------------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURN AS OF 11/30/95: 10.23%
- --------------------------------------------------------------------------------
/1/Figures assume reinvestment of all dividends and capital gains 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.
/2/Certain distributions may contain short-term capital gains.
/3/Formerly Class D shares
Note: The Fund offers Class Y (formerly Class C) shares to the trustee of the
PaineWebber Savings Investment Plan. For the year ended November 30,
1995, and since inception, September 11, 1991 through November 30, 1995,
Class Y shares have a total return of 15.06% and 24.32%, respectively.
Class Y shares do not have initial or contingent deferred sales charges
or ongoing distribution and service fees.
1
<PAGE>
PAINEWEBBER INVESTMENT GRADE INCOME FUND
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------- -----------------------------
12 MONTHS 6 MONTHS
11/30/95 05/31/95 11/30/94 ENDED 11/30/95 ENDED 11/30/95
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $10.68 $10.41 $9.67 18.95% 6.24%
- ---------------------------------------------------------------------------
Class B Shares 10.67 10.41 9.67 17.97 5.75
- ---------------------------------------------------------------------------
Class C Shares/3/ 10.68 10.41 9.67 18.37 5.98
- ---------------------------------------------------------------------------
</TABLE>
Performance Summary Class A Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID/2/ RETURN/1/
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
08/31/84-12/31/84 $ 9.57 $ 9.77 $ $ 0.3549 5.88%
--
- -----------------------------------------------------------------------------
1985 9.77 10.52 -- 1.3080 22.76
- -----------------------------------------------------------------------------
1986 10.52 10.75 0.0125 1.2060 14.47
- -----------------------------------------------------------------------------
1987 10.75 9.55 0.0279 0.9846 -1.51
- -----------------------------------------------------------------------------
1988 9.55 9.51 -- 0.8603 8.88
- -----------------------------------------------------------------------------
1989 9.51 9.77 -- 0.8363 11.98
- -----------------------------------------------------------------------------
1990 9.77 9.54 -- 0.8284 6.04
- -----------------------------------------------------------------------------
1991 9.54 10.42 -- 0.8180 18.04
- -----------------------------------------------------------------------------
1992 10.42 10.50 -- 0.8081 8.87
- -----------------------------------------------------------------------------
1993 10.50 11.08 -- 0.7920 13.35
- -----------------------------------------------------------------------------
1994 11.08 9.70 -- 0.7659 -5.59
- -----------------------------------------------------------------------------
01/01/95-11/30/95 9.70 10.68 -- 0.6591 17.39
- -----------------------------------------------------------------------------
Total: $0.0404 $10.2216
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 11/30/95: 208.46%
- -----------------------------------------------------------------------------
Performance Summary Class B Shares
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/01/91-12/31/91 $ 9.79 $10.41 $ $ 0.3795 10.38%
--
- -----------------------------------------------------------------------------
1992 10.41 10.49 -- 0.7623 8.05
- -----------------------------------------------------------------------------
1993 10.49 11.08 -- 0.7101 12.63
- -----------------------------------------------------------------------------
1994 11.08 9.70 -- 0.6894 -6.30
- -----------------------------------------------------------------------------
01/01/95-11/30/95 9.70 10.67 -- 0.5923 16.53
- -----------------------------------------------------------------------------
Total: $0.0000 $ 3.1336
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 11/30/95: 46.67%
- -----------------------------------------------------------------------------
Performance Summary Class C Shares/3/
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/02/92-12/31/92 $10.48 $10.50 $ $ 0.3377 3.44%
--
- -----------------------------------------------------------------------------
1993 10.50 11.08 -- 0.7383 12.80
- -----------------------------------------------------------------------------
1994 11.08 9.70 -- 0.7022 -6.00
- -----------------------------------------------------------------------------
01/01/95-11/30/95 9.70 10.68 -- 0.6147 16.89
- -----------------------------------------------------------------------------
Total: $0.0000 $ 2.3929
- -----------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURN AS OF 11/30/95: 28.10%
- --------------------------------------------------------------------------------
/1Figures/assume reinvestment of all dividends and capital gains 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.
/2Certain/distributions may contain short-term capital gains.
/3Formerly/Class D shares
2
<PAGE>
PAINEWEBBER HIGH INCOME FUND
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------- -----------------------------
12 MONTHS 6 MONTHS
11/30/95 05/31/95 11/30/94 ENDED 11/30/95 ENDED 11/30/95
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $6.96 $7.24 $7.14 9.01% 1.39%
- ---------------------------------------------------------------------------
Class B Shares 6.95 7.23 7.14 8.05 1.02
- ---------------------------------------------------------------------------
Class C Shares/3/ 6.97 7.25 7.15 8.45 1.15
- ---------------------------------------------------------------------------
</TABLE>
Performance Summary Class A Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID/2/ RETURN/1/
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
08/31/84-12/31/84 $ 9.57 $ 9.80 $0.0100 $ 0.3717 6.46%
- -----------------------------------------------------------------------------
1985 9.80 10.38 -- 1.4080 21.67
- -----------------------------------------------------------------------------
1986 10.38 10.36 0.0250 1.4160 14.27
- -----------------------------------------------------------------------------
1987 10.36 8.88 0.0475 1.3010 -1.98
- -----------------------------------------------------------------------------
1988 8.88 8.44 -- 1.2317 9.13
- -----------------------------------------------------------------------------
1989 8.44 7.26 -- 1.0687 -1.83
- -----------------------------------------------------------------------------
1990 7.26 5.70 -- 0.9744 -9.25
- -----------------------------------------------------------------------------
1991 5.70 7.23 -- 0.9661 45.92
- -----------------------------------------------------------------------------
1992 7.23 7.93 -- 0.9698 24.06
- -----------------------------------------------------------------------------
1993 7.93 8.77 -- 0.8894 22.74
- -----------------------------------------------------------------------------
1994 8.77 6.96 -- 0.8576 -11.69
- -----------------------------------------------------------------------------
01/01/95-11/30/95 6.96 6.96 -- 0.6962 10.15
- -----------------------------------------------------------------------------
Total: $0.0825 $12.1506
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 11/30/95: 209.61%
- -----------------------------------------------------------------------------
Performance Summary Class B Shares
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/01/91-12/31/91 $6.85 $7.22 $ $ 0.4960 12.92%
--
- -----------------------------------------------------------------------------
1992 7.22 7.92 -- 0.9037 23.07
- -----------------------------------------------------------------------------
1993 7.92 8.77 -- 0.8237 21.97
- -----------------------------------------------------------------------------
1994 8.77 6.96 -- 0.7969 -12.34
- -----------------------------------------------------------------------------
01/01/95-11/30/95 6.96 6.95 -- 0.6493 9.29
- -----------------------------------------------------------------------------
Total: $0.0000 $ 3.6696
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 11/30/95: 62.37%
- -----------------------------------------------------------------------------
Performance Summary Class C Shares /3/
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/02/92-12/31/92 $7.80 $7.94 $ $ 0.4041 7.07%
--
- -----------------------------------------------------------------------------
1993 7.94 8.79 -- 0.8456 22.22
- -----------------------------------------------------------------------------
1994 8.79 6.97 -- 0.8185 -12.20
- -----------------------------------------------------------------------------
01/01/95-11/30/95 6.97 6.97 -- 0.6654 9.66
- -----------------------------------------------------------------------------
Total: $0.0000 $ 2.7336
- -----------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURN AS OF 11/30/95: 26.00%
- --------------------------------------------------------------------------------
/1Figures/assume reinvestment of all dividends and capital gains 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.
/2Certain/distributions may contain short-term capital gains.
/3Formerly/Class D shares
3
<PAGE>
PAINEWEBBER U.S. GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS NOVEMBER 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- ---------------- ------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS -
42.90%
$ 73,700+ U.S. Treasury Bonds..... 05/15/05 to 02/15/25 7.500 to 12.000% $ 89,370,914
148,311 U.S. Treasury Notes..... 05/31/97 to 08/15/05 5.750 to 7.875 157,130,823
------------
Total U.S. Government Obligations
(cost - $238,558,131)............. 246,501,737
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION CERTIFICATES -
5.51%
4,212 GNMA.................... 10/15/24 8.500 4,398,124
378 GNMA.................... 10/15/16 to 05/15/18 9.000 401,271
176 GNMA.................... 08/15/17 9.500 189,476
2,934 GNMA.................... 06/15/11 to 02/15/16 11.000 3,299,260
20,563 GNMA.................... 09/15/20 11.500 23,378,115
------------
Total Government National Mortgage
Association Certificates
(cost - $30,685,520).............. 31,666,246
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION CERTIFICATES -
12.40%
421 FHLMC................... 03/01/09 6.500 420,006
203 FHLMC................... 08/01/25 7.000 203,559
7,531 FHLMC................... 07/01/24 7.743* 7,798,525
6,515 FHLMC................... 11/01/22 7.803* 6,769,246
3,172 FHLMC................... 03/01/24 7.843* 3,287,708
3,989 FHLMC................... 06/01/25 to 08/01/25 8.000 4,106,346
17,999 FHLMC................... 04/01/25 9.000 19,067,657
3,933 FHLMC................... 09/01/05 10.000 4,160,314
5,804 FHLMC................... 06/01/04 to 12/01/05 10.500 6,116,383
9,606 FHLMC................... 01/01/16 11.000 10,646,028
7,719 FHLMC................... 10/01/16 11.500 8,651,040
------------
Total Federal Home Loan Mortgage
Corporation Certificates
(cost - $71,267,166).............. 71,226,812
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION CERTIFICATES -
13.14%
34,697 FNMA.................... 07/01/17 to 02/01/25 7.000 34,676,806
31,641 FNMA.................... 02/01/14 to 07/01/25 7.500 32,195,538
4,645 FNMA.................... 04/01/17 to 08/01/25 8.500 4,825,762
3,622 FNMA.................... 05/01/09 9.000 3,821,487
------------
Total Federal National Mortgage
Association Certificates
(cost - $73,170,182).............. 75,519,593
------------
AGENCY BACKED NOTES - 17.19%
57,500 Federal Home Loan
Mortgage Corporation... 09/23/99 to 09/08/04 7.420 to 7.980 58,947,596
38,000 Federal National
Mortgage Association... 06/12/00 to 12/10/03 5.800 to 8.900 39,808,562
------------
Total Agency Backed Notes (cost -
$92,967,267)..................... 98,756,158
------------
COLLATERALIZED MORTGAGE
OBLIGATIONS - 5.28%
12,472 FNMA REMIC, Trust 1987-
2, Class Z............. 11/25/17 11.000 13,829,234
10,010 FNMA REMIC, Trust 1994-
M5, Class C............ 02/25/09 8.400 11,204,944
300 Collateralized Mortgage
Obligation Trust Series
14,
Class Z................ 01/01/17 8.000 306,565
170 Community Program Loan
Trust Series 1987-A,
Class A4............... 10/01/18 4.500 149,347
213 Mid-State Trust, Series
4, Class A............. 04/01/30 8.330 229,289
4,550 Structured Asset
Securities Corporation,
Series 1995-C4, Class
A-1B................... 06/25/26 6.890 4,602,609
------------
Total Collateralized Mortgage
Obligations
(cost - $29,026,059).............. 30,321,988
------------
</TABLE>
4
<PAGE>
PAINEWEBBER U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- --------------- ------------
<C> <S> <C> <C> <C>
ASSET-BACKED SECURITIES - 2.37%
$ 150 MBNA Master Credit Card
Trust, Series 1995-F,
Class A................ 01/15/03 6.600% $ 154,621
160 Standard Credit Card
Master Trust, Series
1995-6, Class A........ 06/07/00 6.750 163,650
3,972 Western Financial,
Series 1994-4, Class A-
1...................... 01/01/00 7.100 4,039,802
9,161 Western Financial,
Series 1994-4, Class A-
2...................... 01/01/00 7.100 9,284,565
------------
Total Asset-Backed Securities
(cost - $13,407,462).............. 13,642,638
------------
CORPORATE BONDS - 0.37%
125 American Home Products.. 02/15/00 7.700 133,018
125 BCH Cayman Islands...... 06/15/04 8.250 135,822
125 Bell Telephone Company.. 12/15/30 8.350 153,941
100 Columbia/HCA
Healthcare............. 04/15/24 8.360 115,074
150 Ford Motor Credit
Company................ 05/15/99 7.250 155,785
600 General Motors
Acceptance Corp. -
Medium Term Notes..... 09/11/97 6.100 602,850
245 Hydro Quebec............ 02/01/12 to 04/15/26 8.250 to 11.750 311,902
240 Lehman Brothers Inc..... 07/15/02 7.125 245,698
100 Province of Ontario..... 08/04/05 7.000 104,315
160 Vornado Finance
Corporation............ 12/01/00 6.360 160,000
------------
Total Corporate Bonds (cost -
$2,035,587)...................... 2,118,405
------------
REPURCHASE AGREEMENT - 0.01%
25 Repurchase Agreement
dated 11/30/95, with
State Street Bank and
Trust Company,
collateralized by
$24,915 U.S. Treasury
Notes, 6.000% due
08/31/97; proceeds:
$25,004 (cost -
$25,000).............. 12/01/95 5.250 25,000
------------
Total Investments (cost -
$551,142,374) - 99.17%........... 569,778,577
Other assets in excess of
liabilities - 0.83%............... 4,763,785
------------
Net Assets - 100.00%............... $574,542,362
============
</TABLE>
- -------
+ Entire or partial principal amount pledged as collateral for futures
transactions.
* Adjustable rate instrument
REMIC - Real Estate Mortgage Investment Conduit
<TABLE>
<C> <S> <C> <C> <C>
FUTURES CONTRACTS
<CAPTION>
UNREALIZED
NUMBER OF IN EXPIRATION APPRECIATION
CONTRACTS CONTRACT TO RECEIVE EXCHANGE FOR DATE (DEPRECIATION)
--------- ------------------- ------------ ---------- --------------
<C> <S> <C> <C> <C>
340 10 year U.S. Treasury
Notes..................... $38,547,500 Dec 95 $42,500
200 10 year U.S. Treasury
Notes..................... 22,675,000 Dec 95 (6,250)
-------
Total net unrealized appreciation.. $36,250
=======
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
PAINEWEBBER INVESTMENT GRADE INCOME FUND
PORTFOLIO OF INVESTMENTS NOVEMBER 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- ---------------- ------------
<C> <S> <C> <C> <C>
CORPORATE BONDS - 88.34%
Airlines - 4.35%
$ 2,500 AMR Corp................ 04/15/21 10.000% $ 3,054,985
10,500 Delta Airlines Inc. .... 04/30/16 to 12/15/22 10.375 to 10.500 12,999,048
------------
16,054,033
------------
Auto/Truck Manufacturers - 2.77%
9,500 General Motors Corp. ... 07/15/01 to 09/01/25 7.400 to 9.125 10,232,942
------------
Banking - 12.85%
Bankers Trust New York
5,000 Corp. ................. 05/01/05 8.250 5,515,355
6,000 Chase Manhattan Corp. .. 08/01/04 7.875 6,305,502
5,000 Citicorp ............... 11/01/04 8.625 5,379,845
First America Bank Corp.
7,000 ....................... 07/15/04 7.750 7,558,613
Old Kent Financial Corp.
6,500 ....................... 11/15/05 6.625 6,518,304
6,000 PNC Bank NA ............ 04/15/05 7.875 6,552,804
4,000 Society National Bank .. 06/15/03 6.750 4,085,932
Southtrust Bank Alabama
5,000 ....................... 05/15/05* 7.690 5,562,730
------------
47,479,085
------------
Cable/Communications - 3.68%
TCI Communications Inc.
5,000 ....................... 08/01/15 8.750 5,392,650
7,000 TKR Cable Inc. ......... 10/30/07 10.500 8,203,300
------------
13,595,950
------------
Chemicals - 1.61%
5,500 Huntsman Corp. ......... 04/15/01 10.625 5,960,625
------------
Diversified/Industrial - 9.25%
American Standard Inc.
4,000 ....................... 05/15/04 11.375 4,430,000
6,000 HMH Properties Inc. .... 05/15/05 9.500 6,045,000
6,500 ITT Destinations ....... 11/15/00 to 11/15/25 6.250 to 7.750 6,471,841
5,000 Joy Technologies Inc. .. 09/01/03 10.250 5,600,000
2,000 Ogden Corp. ............ 03/01/22 9.250 2,475,160
3,750 Overhead Door Corp. .... 02/01/00 12.250 3,581,250
5,000 Owens-Illinois Inc. .... 12/01/03 11.000 5,581,250
------------
34,184,501
------------
Financial Services - 2.76%
5,000 Bear Stearns & Co. ..... 04/15/03 6.750 5,083,665
Countrywide Funding
5,000 Corp. ................. 09/15/05 6.875 5,101,145
------------
10,184,810
------------
Food & Beverage - 2.23%
Grand Metropolitan
7,500 Investment Corp. ...... 04/15/05* 7.450 8,241,308
------------
</TABLE>
6
<PAGE>
PAINEWEBBER INVESTMENT GRADE INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- ---------------- ------------
<C> <S> <C> <C> <C>
CORPORATE BONDS - (CONTINUED)
Hotel/Gaming - 2.52%
$ 5,000 Bally's Grand Inc. ..... 12/15/03 10.375% $ 5,012,500
4,000 GNS Finance Corp. ...... 03/15/03 9.250 4,300,000
------------
9,312,500
------------
Insurance - 4.60%
Allmerica Financial
4,000 Corp. ................. 10/15/25 7.625 4,102,404
4,265 CNA Financial Corp. .... 11/15/23 7.250 4,130,759
3,200 Chubb Corp. ............ 11/15/99 8.750 3,373,210
Leucadia National Corp.
5,000 ....................... 06/15/02 10.375 5,387,500
------------
16,993,873
------------
Media - 7.90%
News America Holdings
11,500 Inc. .................. 10/15/12 to 02/01/13 9.250 to 10.125 13,485,612
Paramount Communications
5,000 Inc. .................. 07/15/23 7.500 4,919,320
5,000 Time Warner Inc. ....... 02/01/23 9.150 5,543,160
5,000 Viacom Inc. ............ 06/01/05 7.750 5,232,100
------------
29,180,192
------------
Oil & Gas - 1.21%
Occidental Petroleum
3,750 Corp. ................. 06/01/19 11.125 4,458,368
------------
Retail/Drug Stores - 3.79%
2,500 Hook SuperX Inc. ....... 06/01/02 10.125 2,739,045
Mays Department Stores
4,750 Co. ................... 06/15/21 9.875 5,708,227
5,000 Shopko Stores .......... 03/15/22 9.250 5,562,840
------------
14,010,112
------------
Telephone Companies &
Telecommunications - 6.77%
10,100 Alltell Corp. .......... 03/01/21 9.500 10,887,346
8,000 Pacific Bell ........... 08/15/31 8.500 8,860,648
Rogers Cantel Mobile
5,000 Inc. .................. 11/01/01 10.750 5,262,500
------------
25,010,494
------------
Utilities - 13.74%
Arizona Public Service
3,400 Co. ................... 08/01/23 7.250 3,281,109
Commonwealth Edison Co.
11,000 ....................... 06/15/20 9.875 12,893,594
Consolidated Edison Co.
2,000 of New York Inc. ...... 12/01/25 9.700 2,151,196
7,000 Cooperative Utilities .. 03/15/19 9.520 7,809,046
7,750 Duke Power Co. ......... 03/01/21 8.750 8,045,221
Louisiana Power & Light
5,000 Co. ................... 07/01/22 8.500 5,172,650
New York State Electric
1,540 & Gas Co. ............. 02/01/20 9.875 1,642,952
Oklahoma Gas & Electric
5,000 Co. ................... 10/15/00 6.250 5,048,825
Texas Utilities Electric
4,000 Co. ................... 05/01/21 9.750 4,700,948
------------
50,745,541
------------
</TABLE>
7
<PAGE>
PAINEWEBBER INVESTMENT GRADE INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- -------------- ------------
<C> <S> <C> <C> <C>
CORPORATE BONDS - (CONCLUDED)
Yankee - 8.31%
Banca Commerziale
$ 9,500 Italiana .............. 07/15/07 8.250% $ 10,313,855
Indah Kiat International
5,000 Finance Co. ........... 06/15/02 11.875 5,000,000
7,000 Midland Bank PLC ....... 05/01/07* 7.650 7,652,610
7,300 Philips Electronics .... 05/15/07* 7.125 7,724,415
------------
30,690,880
------------
Total Corporate Bonds (cost -
$308,372,579).................... 326,335,214
------------
U.S. GOVERNMENT OBLIGATIONS - 4.42%
8,000 U.S. Treasury Bills .... 12/14/95 to 02/08/96 5.240 to 5.365 7,968,080
8,000 U.S. Treasury Notes .... 09/30/00 to 08/15/05 6.125 to 6.500 8,361,872
------------
Total U.S. Government Obligations
(cost - $16,254,020).............. 16,329,952
------------
REPURCHASE AGREEMENTS - 5.85%
4,624 Repurchase Agreement
dated 11/30/95, with
Daiwa Securities
America Inc.
collateralized by
$4,675,000 U.S.
Treasury Notes, 6.500%
due 11/30/96; proceeds:
$4,624,755............. 12/01/95 5.880 4,624,000
17,000 Repurchase Agreement
dated 11/30/95, with
Nomura Securities
International
collateralized by
$17,320,000 U.S.
Treasury Notes, 5.125%
due 03/31/98; proceeds:
$17,002,774............ 12/01/95 5.875 17,000,000
------------
Total Repurchase Agreements (cost -
$21,624,000)...................... 21,624,000
------------
Total Investments (cost -
$346,250,599) - 98.61%........... 364,289,166
Other assets in excess of
liabilities - 1.39%............... 5,131,021
------------
Net Assets - 100.00%............... $369,420,187
============
</TABLE>
- -------
* Maturity date reflects earliest date bonds can be put back to issuer.
See accompanying notes to financial statements
8
<PAGE>
PAINEWEBBER HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS NOVEMBER 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- --------------- ------------
<C> <S> <C> <C> <C>
CORPORATE BONDS - 91.74%
Aerospace - 5.18%
$15,000 GPA Holland BV.......... 01/15/99 to 02/25/99 8.625 to 9.140% $ 13,056,250
11,750 SabreLiner Corp. Series
A...................... 04/15/03 12.500 11,045,000
5,000 Wyman Gordon............ 03/15/03 10.750 5,200,000
------------
29,301,250
------------
Airlines - 0.31%
8,500# USAfrica Airways,
Inc.++................. 05/31/99 12.000(a) 1,750,000
------------
Cable - 3.88%
8,650# Australis Media......... 05/15/03 14.000+ 6,271,250
5,000 Fundy Cable............. 11/15/05 11.000 5,125,000
2,500 Lenfest Communications.. 11/01/05 8.375 2,493,750
11,000 Marcus Cable Co. ....... 08/01/04 13.500+ 8,030,000
------------
21,920,000
------------
Chemicals - 2.59%
7,750 Acetex Corp.**.......... 10/01/03 9.750 7,924,375
8,390 Associated Materials.... 08/15/03 11.500 6,712,000
------------
14,636,375
------------
Communications - 11.39%
14,000 Comcast Cellular........ 03/05/00 0.000 10,710,000
8,000 Intelcom Group.......... 09/15/05 13.500+ 4,520,000
8,000 IXC Communications
Inc.** ................ 10/01/05 13.000* 8,410,000
7,000 Mobile
Telecommunications..... 12/15/02 13.500 7,962,500
11,130 PageMart Nationwide
Inc.................... 02/01/05 15.000+ 7,206,675
5,000 Paxson
Communications**....... 10/01/02 11.625 4,937,500
9,500 People's Telephone...... 07/15/02 12.250 7,790,000
14,000 Telewest PLC............ 10/01/07 11.000+ 8,120,000
9,250 Viatel Inc.............. 01/15/05 15.000+ 4,763,750
------------
64,420,425
------------
Consumer Manufacturing - 7.19%
3,150 American Safety Razor... 08/01/05 9.875 3,157,875
7,515 Apparel Ventures,
Inc. .................. 12/31/00 12.250 5,899,275
7,606 Chattem Inc............. 06/15/04 12.750 7,149,640
8,500 Decorative Home
Accents**.............. 06/30/02 13.000 8,500,000
14,000 Icon Health & Fitness... 11/15/04 15.000+ 8,680,000
3,000 JPS Textile............. 06/01/99 10.250 2,340,000
6,250 US Leather Inc. ........ 07/31/03 10.250 4,937,500
------------
40,664,290
------------
Energy - 7.58%
6,000 Crown Central
Petroleum.............. 02/01/05 10.875 6,270,000
8,500 Empire Gas Corp......... 07/15/04 12.875+ 7,203,750
4,350 Kelley Oil & Gas........ 06/15/99 13.500 3,306,000
8,000 Pemex................... 12/01/23 8.625 5,680,000
2,125 Santa Fe Energy......... 05/15/04 11.000 2,316,250
10,750# Transamerican Refining
Corp. ................. 02/15/02 18.500+ 7,738,065
10,000 TransTexas Gas.......... 06/15/02 11.500 10,337,500
------------
42,851,565
------------
</TABLE>
9
<PAGE>
PAINEWEBBER HIGH INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- --------------- ------------
<C> <S> <C> <C> <C>
CORPORATE BONDS - (CONTINUED)
Financial Services - 3.66%
$ 4,700 American Life Holding
Co. ................... 09/15/04 11.250% $ 4,982,000
2,500 CCP Funding............. 12/15/04 10.500 2,631,250
8,000 Imperial Credit
Industries............. 01/15/04 9.750 7,440,000
5,500 Reliance Group Holdings
Inc.................... 11/15/00 9.000 5,637,500
7,526 West Fed Holdings++..... 09/15/99 15.500(a) 0
------------
20,690,750
------------
Food & Beverage - 7.27%
6,000 American Rice Inc. ..... 07/31/02 13.000 5,640,000
3,500 Flagstar................ 12/01/02 10.875 3,193,750
4,500 Fresh Delmonte Produce
N.V.................... 05/01/03 10.000 3,892,500
42,000 Iowa Select Farms++..... 02/15/04 17.250+ 16,909,839
6,500 Specialty Equipment
Companies Inc. ........ 12/01/03 11.375 6,581,250
5,000 TLC Beatrice
International.......... 10/01/05 11.500 4,900,000
------------
41,117,339
------------
Gaming - 5.41%
10,075 El Comandante Capital
Corp. ................. 12/15/03 11.750 8,664,500
10,258# Grand Palais Casino,
Inc.++................. 11/01/97 18.250(a) 0
25,892# Hemmeter Enterprises**.. 12/15/00 12.000(a) 11,133,663
10,000 PRT Funding Inc. ....... 04/15/04 11.625 7,500,000
11,175# Sam Houston Race Park... 07/15/99 11.750(a) 3,296,625
------------
30,594,788
------------
General Industrial - 6.69%
6,000 Alpine Group**.......... 07/15/03 12.250 5,805,000
2,000 Communications &
Power**................ 08/01/05 12.000 2,055,000
5,000 Kindercare Learning
Centers................ 06/01/01 10.375 5,250,000
3,000 Owens-Illinois Inc. .... 12/01/03 11.000 3,348,750
4,500 Poindexter JB Inc. ..... 05/15/04 12.500 3,600,000
5,000 Sullivan Graphics**..... 08/01/05 12.750 4,862,500
5,500 Terex Corp.**........... 05/15/02 13.750 4,730,000
8,500# Uniroyal Technology
Corp. ................. 06/01/03 11.750 8,160,000
------------
37,811,250
------------
Healthcare - 1.47%
7,800 Tenet Healthcare........ 12/01/03 to 03/01/05 8.625 to 10.125 8,316,000
------------
Homebuilding - 1.04%
6,250 MDC Holdings Corp. ..... 12/15/03 11.125 5,875,000
------------
Media - 4.48%
12,000 Affiliated Newspaper.... 07/01/06 13.250+ 6,960,000
5,000 Pegasus Media........... 07/01/05 12.500 4,950,000
10,000 Universal Outdoor
Holdings Inc. ......... 07/01/04 14.000+ 5,837,500
7,500 Viacom.................. 07/07/06 8.000 7,593,750
------------
25,341,250
------------
</TABLE>
10
<PAGE>
PAINEWEBBER HIGH INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- --------------- ------------
<C> <S> <C> <C> <C>
CORPORATE BONDS - (CONCLUDED)
Packaging - 4.89%
$ 665 Data Documents Inc. .... 07/15/02 13.500% $ 721,525
5,250 Doman Industries Ltd. .. 03/15/04 8.750 5,026,875
5,580 Grupo Industrial Durango
S.A. .................. 07/15/01 12.000 4,673,250
7,500 Indah Kiat
International.......... 06/15/06 12.500 7,481,250
5,000 RePap Wisconsin......... 05/01/06 9.875 4,800,000
5,000 Tembec Finance Corp. ... 09/30/05 9.875 4,937,500
------------
27,640,400
------------
Retail - 11.56%
20,000 Apparel Retailers Inc... 08/15/05 12.750+ 12,200,000
7,500 Big Five Holdings....... 09/15/02 13.625 6,825,000
4,400 Cort Furniture Rental... 09/01/00 12.000 4,686,000
7,750 County Seat............. 10/01/02 12.000 6,975,000
12,350 Finlay Enterprises
Inc. .................. 05/01/05 12.000+ 8,521,500
6,000 Great American Cookie
Inc. .................. 01/15/01 10.875 5,100,000
2,900 Pamida Inc. ............ 03/15/03 11.750 2,320,000
6,750 Pantry Inc. ............ 11/15/00 12.000 6,716,250
7,406 Petro PSC Properties.... 06/01/02 12.500 7,146,790
6,705 Wickes Lumber Co. ...... 12/15/03 11.625 4,894,650
------------
65,385,190
------------
Supermarkets & Drugstores - 3.02%
4,367 Di Giorgio Corp......... 02/15/03 12.000 3,624,610
13,709 Duane Reade Holding
Corp. ................. 09/15/04 15.000+ 4,798,150
19,174 Farm Fresh Holdings..... 10/01/02 14.250 8,628,378
------------
17,051,138
------------
Transport Non-Air - 4.13%
4,000 Gearbulk Holding........ 12/01/04 11.250 4,240,000
8,000 TNT Transport........... 04/15/04 11.500 8,340,000
6,700 Viking Star............. 07/15/03 9.625 6,884,250
4,000 Walbro Corp. ........... 07/15/05 9.875 3,900,000
------------
23,364,250
------------
Total Corporate Bonds (cost -
$585,718,824).................... 518,731,260
------------
CONVERTIBLE BONDS - 1.80%
Technology - 1.80%
3,000 Ampex Inc. ............. 06/30/97 0.000 3,270,300
6,500 EMC Corp. .............. 01/01/01 4.250 6,914,375
------------
Total Convertible Bonds (cost -
$8,893,302)...................... 10,184,675
------------
<CAPTION>
NUMBER OF
SHARES
---------
<C> <S> <C> <C> <C>
COMMON STOCK (A) - 1.84%
Communications - 0.29%
38,955 PageMart Nationwide Inc. ..................................... 350,595
333,925 Viatel Inc. .................................................. 1,302,308
------------
1,652,903
------------
</TABLE>
11
<PAGE>
PAINEWEBBER HIGH INCOME FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------- ------------
<C> <S> <C> <C> <C>
COMMON STOCK
(A) -
(CONCLUDED)
Food & Beverage -
0.04%
Specialty Foods
Acquisition
240,000 Corp............. $ 240,000
------------
Gaming - 0.59%
Hollywood Casino
506,666 Corp. ........... 2,659,996
Lady Luck Gaming
364,322 Corp. ........... 683,104
------------
3,343,100
------------
General
Industrial -
0.42%
Berg Electronics
333,840 Inc. ............ 2,169,960
7,926 Dimac Corp. ...... 213,011
------------
2,382,971
------------
Healthcare -
0.17%
Total Renal
63,000 Care............. 968,625
------------
Media - 0.09%
Affiliated
12,000 Newspaper........ 360,000
500 Pegasus Media..... 150,000
------------
510,000
------------
Retail - 0.06%
Finlay
Enterprises
16,467 Inc. ............ 259,355
Vestar Investment
5,000 Corp. ........... 75,000
------------
334,355
------------
Supermarkets &
Drugstores -
0.18%
Duane Reade
21,787 Corp. ........... 196,083
Farm Fresh
40,000 Holdings......... 800,000
------------
996,083
------------
Total Common Stock (cost -
$3,140,842)................ 10,428,037
------------
PREFERRED STOCK
(A) - 1.11%
General
Industrial -
0.39%
Communications &
838 Power............ 2,203,800
------------
Retail - 0.72%
80 Signet Group...... 4,080,000
------------
Total Preferred Stock (cost -
$6,000,000)................ 6,283,800
------------
<CAPTION>
NUMBER OF
WARRANTS
----------
<C> <S> <C> <C> <C>
WARRANTS (A) -
1.18%
Aerospace - 0.01%
SabreLiner
11,750 Corp. ........... 58,750
------------
Communications -
0.03%
PageMart
Nationwide
27,600 Inc. ............ 193,200
------------
</TABLE>
12
<PAGE>
PAINEWEBBER HIGH INCOME FUND
<TABLE>
<CAPTION>
NUMBER OF
WARRANTS VALUE
------------- ------------
<C> <S> <C> <C> <C>
WARRANTS (A) -
(CONCLUDED)
Consumer
Manufacturing -
0.20%
11,000 Chattem Inc. ... $ 41,250
Icon Health &
14,000 Fitness........ 1,120,000
------------
1,161,250
------------
Energy - 0.01%
Empire Gas
11,730 Corp. ......... 35,190
------------
Food & Beverage -
0.60%
Iowa Select
420,000 Farms++........ 3,405,360
------------
Gaming - 0.06%
HDA Management
10,075 Corp. ......... 328,203
------------
Homebuilding -
0.00%
Peters JM
39,500 Inc. .......... 19,750
------------
Media - 0.08%
AVI Holdings
8,350 Inc. .......... 41,750
Universal
Outdoor
Holdings
10,000 Inc. .......... 400,000
------------
441,750
------------
Packaging - 0.10%
Data Documents
6,500 Inc. .......... 552,500
------------
Retail - 0.09%
Cookies USA
1,080 Inc. .......... 16,200
Cort Furniture
99,000 Rental......... 222,750
8,000 County Seat..... 12,000
Petro PSC
7,406 Properties..... 236,992
------------
487,942
------------
Total Warrants (cost -
$6,404,820)............... 6,683,895
------------
Total Investments (cost -
$610,157,788) - 97.67%.... 552,311,667
Other assets in excess of
liabilities - 2.33%........ 13,165,206
------------
Net Assets - 100.00%........ $565,476,873
============
</TABLE>
- -------
(a) Non-income producing securities
# Security represents a unit which is composed of the stated bond or preferred
stock with attached warrants or common stock.
+ Denotes a step-up bond or zero coupon bond that converts to the noted fixed
rate at a designated future date.
* Adjustable rate instrument
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
++Illiquid securities representing 4.0% of portfolio assets.
See accompanying notes to financial statements
13
<PAGE>
PAINEWEBBER
STATEMENT OF ASSETS AND LIABILITIES NOVEMBER 30, 1995
<TABLE>
<CAPTION>
U.S. INVESTMENT
GOVERNMENT GRADE HIGH
INCOME FUND INCOME FUND INCOME FUND
------------ ------------ ------------
<S> <C> <C> <C>
Assets
Investments in securities, at value
(cost - $551,142,374, $346,250,599
and $610,157,788, respectively).... $569,778,577 $364,289,166 $552,311,667
Interest receivable................. 7,677,142 7,301,392 13,189,533
Receivable for investments sold..... 878,321 4,176,118 20,107,148
Receivable for shares of beneficial
interest sold...................... 216,770 80,506 838,945
Variation margin receivable......... 36,250 -- --
Other assets........................ 310,978 47,802 4,466
------------ ------------ ------------
Total assets........................ 578,898,038 375,894,984 586,451,759
------------ ------------ ------------
Liabilities
Dividends payable................... 1,474,464 1,032,746 2,454,008
Payable for shares of beneficial
interest repurchased............... 1,300,443 1,356,545 4,237,434
Payable to affiliate................ 438,711 301,651 566,887
Payable for investments purchased... 80,143 3,203,124 9,419,833
Payable to custodian................ -- -- 3,990,714
Accrued expenses and other
liabilities........................ 1,061,915 580,731 306,010
------------ ------------ ------------
Total liabilities................... 4,355,676 6,474,797 20,974,886
------------ ------------ ------------
Net Assets
Beneficial interest--$0.001 par
value (unlimited amount
authorized)........................ 836,627,318 450,223,504 882,002,965
Distributions in excess of net
investment income.................. (1,474,464) (540,279) (1,875,856)
Accumulated net realized losses from
investment, option and futures
transactions....................... (279,282,945) (98,301,605) (256,804,115)
Net unrealized
appreciation/depreciation of
investments and futures contracts.. 18,672,453 18,038,567 (57,846,121)
------------ ------------ ------------
Net assets.......................... $574,542,362 $369,420,187 $565,476,873
============ ============ ============
Class A:
Net assets.......................... $430,284,894 $258,897,609 $248,619,481
------------ ------------ ------------
Shares outstanding.................. 47,185,454 24,250,647 35,739,029
------------ ------------ ------------
Net asset value and redemption value
per share.......................... $9.12 $10.68 $6.96
===== ====== =====
Maximum offering price per share
(net asset value plus sales charge
of 4.00% of offering price)........ $9.50 $11.13 $7.25
===== ====== =====
Class B:
Net assets.......................... $ 82,468,861 $ 71,372,356 $212,946,314
------------ ------------ ------------
Shares outstanding.................. 9,042,514 6,687,180 30,629,651
------------ ------------ ------------
Net asset value and offering price
per share.......................... $9.12 $10.67 $6.95
===== ====== =====
Class C:
Net assets.......................... $ 53,831,532 $ 39,150,222 $103,911,078
------------ ------------ ------------
Shares outstanding.................. 5,908,843 3,667,320 14,914,733
------------ ------------ ------------
Net asset value and offering price
per share.......................... $9.11 $10.68 $6.97
===== ====== =====
Class Y:
Net assets.......................... $ 7,957,075
------------
Shares outstanding.................. 873,368
------------
Net asset value, offering price and
redemption value per share......... $9.11
=====
</TABLE>
See accompanying notes to financial statements
14
<PAGE>
PAINEWEBBER
STATEMENT OF OPERATIONS FOR THE YEAR ENDED NOVEMBER 30, 1995
<TABLE>
<CAPTION>
U.S. INVESTMENT
GOVERNMENT GRADE HIGH
INCOME FUND INCOME FUND INCOME FUND
----------- ----------- ------------
<S> <C> <C> <C>
Investment Income:
Interest................................ $42,799,925 $31,668,053 $ 73,791,208
----------- ----------- ------------
Expenses:
Investment advisory and administration.. 2,784,437 1,890,394 3,050,197
Service fees--Class A................... 1,010,288 660,995 658,053
Service and distribution fees--Class B.. 897,787 722,217 2,336,921
Service and distribution fees--Class C.. 434,110 310,949 848,445
Transfer agency and service fees........ 543,779 316,753 519,823
Custody and accounting.................. 286,221 150,116 177,435
Reports and notices to shareholders..... 208,100 127,615 146,631
Legal and audit......................... 158,425 104,832 94,512
State registration...................... 121,635 40,740 78,166
Trustees' fees.......................... 6,250 6,250 6,250
Reorganization expenses................. 179,070 -- --
Other expenses.......................... 104,995 13,049 94,933
----------- ----------- ------------
6,735,097 4,343,910 8,011,366
----------- ----------- ------------
Net investment income................... 36,064,828 27,324,143 65,779,842
----------- ----------- ------------
Realized and unrealized gains (losses)
from investment activities:
Net realized gains (losses) from:
Investment transactions................ (2,337,197) 5,724,646 (36,987,965)
Futures Contracts...................... 1,104,974 -- --
Net change in unrealized
appreciation/depreciation of:
Investments............................ 40,607,371 31,522,859 21,627,563
Futures contracts...................... 36,250 -- --
----------- ----------- ------------
Net realized and unrealized gains
(losses) from investment activities.... 39,411,398 37,247,505 (15,360,402)
----------- ----------- ------------
Net increase in net assets resulting
from operations........................ $75,476,226 $64,571,648 $ 50,419,440
=========== =========== ============
</TABLE>
See accompanying notes to financial statements
15
<PAGE>
PAINEWEBBER
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED NOVEMBER 30, 1995
<TABLE>
<CAPTION>
U.S. INVESTMENT
GOVERNMENT GRADE HIGH
INCOME FUND INCOME FUND INCOME FUND
-------------- ------------- -------------
<S> <C> <C> <C>
From operations:
Net investment income............ $ 36,064,828 $ 27,324,143 $ 65,779,842
Net realized gains (losses) from
investment transactions......... (2,337,197) 5,724,646 (36,987,965)
Net realized gains from futures
contracts....................... 1,104,974 -- --
Net change in unrealized
appreciation/depreciation of
investments..................... 40,607,371 31,522,859 21,627,563
Net change in unrealized
appreciation/depreciation of
futures contracts............... 36,250 -- --
-------------- ------------- -------------
Net increase in net assets
resulting from operations....... 75,476,226 64,571,648 50,419,440
-------------- ------------- -------------
Dividends to shareholders from:
Net investment income--Class A... (26,985,748) (19,623,343) (29,457,620)
Net investment income--Class B... (5,310,026) (4,818,171) (24,398,534)
Net investment income--Class C... (3,591,061) (2,882,641) (12,058,241)
Net investment income--Class Y... (357,072) -- --
-------------- ------------- -------------
Total dividends to shareholders.. (36,243,907) (27,324,155) (65,914,395)
-------------- ------------- -------------
From beneficial interest
transactions:
Net proceeds from the sale of
shares.......................... 20,857,803 39,567,386 163,583,471
Shares issued in connection with
the acquisition of Mitchell
Hutchins/Kidder, Peabody
Intermediate Fixed Income Fund.. 17,397,551 -- --
Shares issued in connection with
the acquisition of Mitchell
Hutchins/Kidder, Peabody
Government Income Fund.......... 43,064,945 -- --
Cost of shares repurchased....... (167,328,659) (107,864,824) (230,082,157)
Proceeds from dividends
reinvested...................... 19,660,388 14,085,541 28,397,685
-------------- ------------- -------------
Net decrease in net assets from
beneficial interest
transactions.................... (66,347,972) (54,211,897) (38,101,001)
-------------- ------------- -------------
Net decrease in net assets....... (27,115,653) (16,964,404) (53,595,956)
Net assets:
Beginning of year................ 601,658,015 386,384,591 619,072,829
-------------- ------------- -------------
End of year...................... $ 574,542,362 $ 369,420,187 $ 565,476,873
============== ============= =============
FOR THE YEAR ENDED NOVEMBER 30, 1994
From operations:
Net investment income............ $ 49,770,005 $ 27,669,132 $ 81,226,517
Net realized losses from
investment transactions......... (90,205,295) (18,925,323) (42,848,247)
Net change in unrealized
appreciation/depreciation of
investments..................... (41,153,792) (29,597,304) (111,001,210)
-------------- ------------- -------------
Net decrease in net assets
resulting from operations....... (81,589,082) (20,853,495) (72,622,940)
-------------- ------------- -------------
Dividends to shareholders from:
Net investment income--Class A... (35,554,012) (19,418,731) (35,523,144)
Net investment income--Class B... (7,531,696) (4,525,799) (28,733,202)
Net investment income--Class C... (6,309,747) (3,757,399) (17,359,463)
Net investment income--Class Y... (377,439) -- --
-------------- ------------- -------------
Total dividends to shareholders.. (49,772,894) (27,701,929) (81,615,809)
-------------- ------------- -------------
From beneficial interest
transactions:
Net proceeds from the sale of
shares.......................... 73,782,062 81,155,923 377,540,744
Shares issued in connection with
the acquisition of PaineWebber
Income Fund..................... -- 167,067,960 --
Cost of shares repurchased....... (327,879,970) (131,961,171) (463,708,223)
Proceeds from dividends
reinvested...................... 27,332,029 14,432,019 36,511,036
-------------- ------------- -------------
Net increase (decrease) in net
assets from beneficial interest
transactions.................... (226,765,879) 130,694,731 (49,656,443)
-------------- ------------- -------------
Net increase (decrease) in net
assets.......................... (358,127,855) 82,139,307 (203,895,192)
Net assets:
Beginning of year................ 959,785,870 304,245,284 822,968,021
-------------- ------------- -------------
End of year...................... $ 601,658,015 $ 386,384,591 $ 619,072,829
============== ============= =============
</TABLE>
See accompanying notes to financial statements
16
<PAGE>
PAINEWEBBER NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Managed Investments Trust (the "Trust") was organized under
Massachusetts law by a Declaration of Trust dated November 21, 1986 and is
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended, as an open-end, diversified investment
company. The Trust is a series mutual fund with five funds: PaineWebber U.S.
Government Income Fund ("U.S. Government Income Fund"), PaineWebber Investment
Grade Income Fund ("Investment Grade Income Fund"), PaineWebber High Income
Fund ("High Income Fund") (collectively the "Funds"), PaineWebber Low Duration
U.S. Government Income Fund and PaineWebber Utility Income Fund. The financial
statements for PaineWebber Low Duration U.S. Government Income Fund and
PaineWebber Utility Income Fund are not included herein.
Organizational Matters -- Currently, each Fund offers Class A, Class B and
Class C (formerly Class D) shares. U.S. Government Income Fund also offers
Class Y (formerly Class C) shares. Effective November 10, 1995, the Funds began
using industry standardized nomenclature and Class D and Class C shares were
renamed Class C and Class Y shares, respectively. Each Class represents
interests in the same assets of the applicable Fund, and the Classes are
identical except for differences in their sales charge structures, ongoing
service and distribution charges and certain transfer agency expenses. In
addition, Class B shares and all corresponding reinvested dividend shares
automatically convert to Class A shares approximately six years after issuance.
All classes of shares have equal voting privileges, except that each class has
exclusive voting rights with respect to its distribution plan.
Valuation of Investments -- Where market quotations are readily available,
portfolio securities are valued thereon, provided such quotations adequately
reflect, in the judgment of Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins"), a wholly owned subsidiary of PaineWebber and investment adviser and
administrator of the Funds, the fair value of the securities. When market
quotations are not readily available, securities are valued based upon
appraisals derived from information concerning those securities or similar
securities received from recognized dealers in those securities. All other
securities are valued at fair value as determined in good faith by or under the
direction of the Trust's board of trustees. The amortized cost method of
valuation, which approximates market value, is used to value debt obligations
with 60 days or less remaining to maturity, unless the Trust's board of
trustees determines that this does not represent fair value.
Repurchase Agreements -- The Funds' custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, each Fund has the right to
liquidate the collateral and
17
<PAGE>
PAINEWEBBER
apply the proceeds in satisfaction of the obligation. Under certain
circumstances, in the event of default or bankruptcy by the other party to the
agreement, realization and/or retention of the collateral may be subject to
legal proceedings. Each of the Funds 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. 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.
Futures Contracts -- Upon entering into a financial futures contract, a Fund is
required to pledge to a broker an amount of cash and/or U.S. Government
securities equal to a certain percentage of the contract amount. This amount is
known as the "initial margin." Subsequent payments, known as "variation
margin," are made or received by the Fund each day, depending on the daily
fluctuations in the value of the underlying financial futures contracts. Such
variation margin is recorded for financial statement purposes on a daily basis
as unrealized gain or loss until the financial futures contract is closed, at
which time the net gain or loss is reclassified to realized.
Using financial futures contracts involves various market risks. The maximum
amount at risk from the purchase of a futures contract is the contract value.
The Fund is subject to a number of guidelines which reduce this risk by seeking
to ensure that financial futures contracts are used for hedging purposes as
well as to manage the average duration of a Fund's portfolio and not for
leverage. However, imperfect correlations between futures contracts and the
portfolio securities being hedged, or market disruptions, do not normally
permit full control of these risks at all times.
Federal Taxes -- Each Fund intends to distribute all of its taxable income and
to comply with the other requirements of the Internal Revenue Code applicable
to regulated investment companies. Accordingly, no provision for federal income
taxes is required. In addition, by distributing during each calendar year
substantially all of its net investment income, capital gains and certain other
amounts, if any, each Fund intends not to be subject to a federal excise tax.
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
18
<PAGE>
PAINEWEBBER
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized capital
gains. To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of paid-in-capital.
CONCENTRATION OF RISK
The ability of the issuers of the debt securities held by the Funds to meet
their obligations may be affected by economic developments, including those
particular to a specific industry, country or region.
ACQUISITIONS
Acquisition of PaineWebber Income Fund ("Income Fund") -- Effective as of the
close of business on April 29, 1994, Investment Grade Income Fund acquired all
of the net assets of Income Fund pursuant to a plan of reorganization approved
by Income Fund shareholders. The acquisition was accomplished by a tax-free
exchange of 12,647,181 Class A, 2,618,902 Class B, and 1,093,463 Class D
(currently Class C) shares of Investment Grade Income Fund for 13,591,398
Class A, 2,817,387 Class B, and 1,175,099 Class D shares, respectively, of
Income Fund outstanding on April 29, 1994. Income Fund's net assets at that
date, valued at $167,217,960, including accumulated net realized losses of
$36,695,472 and net unrealized depreciation of investments of $6,651,112, were
combined with those of Investment Grade Income Fund.
Acquisition of Mitchell Hutchins/Kidder, Peabody Government Income Fund ("MH/KP
Government Income Fund") -- Effective as of the close of business on October
20, 1995, U.S. Government Income Fund acquired all the net assets of MH/KP
Government Income Fund pursuant to a plan of reorganization approved by MH/KP
Government Income Fund shareholders on October 19, 1995. The acquisition was
accomplished by a tax-free exchange of 4,290,119 Class A, 138,273 Class D
(currently Class C) and 342,128 Class C (currently Class Y) shares of U.S.
Government Income Fund for 2,722,402 Class A, 87,710 Class B, and 217,018 Class
C shares, respectively, of MH/KP Government Income Fund outstanding on October
20, 1995. MH/KP Government Income Fund's net assets at that date, valued at
$43,064,945, including accumulated net realized losses of $9,283,707 and net
unrealized appreciation of investments of $763,982, were combined with those of
the U.S. Government Income Fund.
19
<PAGE>
PAINEWEBBER
Acquisition of Mitchell Hutchins/Kidder, Peabody Intermediate Fixed Income Fund
("MH/KP Intermediate Fixed Income Fund") -- Effective as of the close of
business on October 20, 1995, U.S. Government Income Fund acquired all the net
assets of MH/KP Intermediate Fixed Income Fund pursuant to a plan of
reorganization approved by MH/KP Intermediate Fixed Income Fund shareholders on
October 19, 1995. The acquisition was accomplished by a tax-free exchange of
1,619,680 Class A, 209,318 Class D (currently Class C) and 98,013 Class C
(currently Class Y) shares of U.S. Government Income Fund for 1,199,812 Class
A, 154,885 Class B, and 72,584 Class C shares, respectively, of MH/KP
Intermediate Fixed Income Fund outstanding on October 20, 1995. MH/KP
Intermediate Fixed Income Fund's net assets at that date, valued at
$17,397,551, including accumulated net realized losses of $2,284,311 and net
unrealized appreciation of investments of $444,710, were combined with those of
the U.S. Government Income Fund.
INVESTMENT ADVISER AND ADMINISTRATOR
The Trust's board of trustees has approved an Investment Advisory and
Administration Contract ("Advisory Contract") with Mitchell Hutchins, under
which Mitchell Hutchins serves as investment adviser and administrator of the
Funds. In accordance with the Advisory Contract, each Fund pays Mitchell
Hutchins an investment advisory and administration fee, which is accrued daily
and paid monthly, at the annual rate of 0.50% of each Fund's average daily net
assets. At November 30, 1995, U.S. Government Income Fund, Investment Grade
Income Fund and High Income Fund owed Mitchell Hutchins $236,541, $151,345 and
$245,380, respectively, in investment advisory and administration fees.
In compliance with applicable state securities laws, Mitchell Hutchins will
reimburse each Fund if and to the extent that the aggregate operating expenses
in any fiscal year, exclusive of taxes, distribution fees, interest, brokerage
fees and extraordinary expenses, exceed limitations imposed by various state
regulations. Currently, the most restrictive limitation applicable to each Fund
is 2.5% of the first $30 million of average daily net assets, 2.0% of the next
$70 million and 1.5% of any excess over $100 million. For the year ended
November 30, 1995, no reimbursements were required pursuant to the above
limitation for any of the Funds.
DISTRIBUTION PLANS
Mitchell Hutchins is the distributor of each Fund's shares and has appointed
PaineWebber as the exclusive dealer for the sale of those shares. Under
separate plans of distribution pertaining to the Class A, Class B and Class C
(formerly Class D) shares, each Fund pays Mitchell Hutchins monthly service
fees at the 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% and 0.50% of the
20
<PAGE>
PAINEWEBBER
average daily net assets of Class B shares and Class C (formerly Class D)
shares, respectively. At November 30, 1995, U.S. Government Income Fund,
Investment Grade Income Fund and High Income Fund owed Mitchell Hutchins
$189,882, $135,307 and $309,205, respectively, in service and distribution
fees.
Mitchell Hutchins also receives the proceeds of the initial sales charges paid
by the 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 each Fund
that for the year ended November 30, 1995, it earned $515,410, $324,881 and
$1,492,597 in sales charges for the U.S. Government Income Fund, Investment
Grade Income Fund and High Income Fund, respectively.
TRANSFER AGENCY SERVICE FEES
Each Fund pays PaineWebber an annual fee of $4.00 per active PaineWebber
shareholder account for certain services not provided by the Funds' transfer
agent. For these services for the year ended November 30, 1995, PaineWebber
earned $154,428, $99,641 and $158,323 in transfer agency service fees from U.S.
Government Income Fund, Investment Grade Income Fund and High Income Fund,
respectively. At November 30, 1995, U.S. Government Income Fund, Investment
Grade Income Fund and High Income Fund owed PaineWebber $12,288, $14,999 and
$12,302, respectively, for shareholder service fees.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at November 30,
1995 was substantially the same as the cost of securities for financial
statement purposes.
At November 30, 1995, the components of the net unrealized
appreciation/depreciation of investments were as follows:
<TABLE>
<CAPTION>
U.S. INVESTMENT
GOVERNMENT GRADE HIGH
INCOME FUND INCOME FUND INCOME FUND
----------- ----------- ------------
<S> <C> <C> <C>
Gross appreciation (investments having
an excess of value over cost)........ $18,921,967 $18,416,737 $ 25,161,664
Gross depreciation (investments having
an excess of cost over value)........ (285,764) (378,170) (83,007,785)
----------- ----------- ------------
Net unrealized appreciation
(depreciation) of investments........ $18,636,203 $18,038,567 $(57,846,121)
=========== =========== ============
</TABLE>
21
<PAGE>
PAINEWEBBER
For the year ended November 30, 1995, total aggregate purchases and sales of
portfolio securities, excluding short-term securities, were as follows:
<TABLE>
<CAPTION>
U.S. INVESTMENT
GOVERNMENT GRADE HIGH
INCOME FUND INCOME FUND INCOME FUND
-------------- ------------ ------------
<S> <C> <C> <C>
Purchases.............................. $1,113,317,921 $517,531,960 $561,226,269
Sales.................................. $1,158,781,567 $574,218,089 $622,891,165
</TABLE>
FEDERAL INCOME TAX STATUS
At November 30, 1995, U.S. Government Income Fund, Investment Grade Income Fund
and High Income Fund had net capital loss carryforwards of approximately
$278,666,740, $98,174,733 and $256,601,184, respectively. These loss
carryforwards are available as reductions, to the extent provided in the
regulations, of future net realized capital gains, and will expire between
November 30, 1996 and November 30, 2003.
The capital loss carryforward for U.S. Government Income Fund includes capital
losses acquired pursuant to its reorganizations with MH/KP Government Income
Fund and MH/KP Intermediate Fixed Income Fund in the amounts of $9,286,109 and
$2,239,627, respectively. The capital loss carryforward for Investment Grade
Income Fund includes capital losses acquired pursuant to its reorganization
with the Income Fund of $36,695,472.
To the extent that any such losses are used to offset future capital gains, it
is probable that the gains so offset will not be distributed.
To reflect reclassifications arising from permanent "book/tax" differences for
the year ended November 30, 1995, U.S. Government Income Fund's
overdistributed/underdistributed net investment income was increased by
$694,494; accumulated net realized gain/loss was increased by $42,278; and
beneficial interest was decreased by $736,772.
22
<PAGE>
PAINEWEBBER
SHARES OF BENEFICIAL INTEREST
THERE IS AN UNLIMITED AMOUNT OF $0.001 PAR VALUE SHARES OF
BENEFICIAL INTEREST AUTHORIZED. TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST WERE AS FOLLOWS:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------------------------- ------------------------ ------------------------ --------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ---------- ------------ ---------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government Income Fund
Year Ended November 30, 1995:
Shares sold........ 567,868 $ 4,893,780 1,041,362 $ 9,030,263 617,760 $ 5,366,938 178,845 $1,566,822
Shares issued in
connection with
the acquisition of
Mitchell
Hutchins/Kidder,
Peabody
Intermediate Fixed
Income Fund....... 1,619,680 14,625,152 -- -- 209,318 1,888,044 98,013 884,355
Shares issued in
connection with
the acquisition of
Mitchell
Hutchins/Kidder,
Peabody Government
Income Fund....... 4,290,119 38,732,028 -- -- 138,273 1,247,330 342,128 3,085,587
Shares
repurchased....... (11,424,195) (99,775,829) (3,971,731) (34,673,089) (3,397,945) (29,578,351) (369,283) (3,301,390)
Shares converted
from Class B to
Class A........... 113,269 977,788 (113,269) (977,788) -- -- -- --
Dividends
reinvested........ 1,554,471 13,634,365 365,906 3,205,239 282,504 2,470,539 39,956 350,245
----------- ------------- ---------- ------------ ---------- ------------ -------- ----------
Net increase
(decrease)........ (3,278,788) $ (26,912,716) (2,677,732) $(23,415,375) (2,150,090) $(18,605,500) 289,659 $2,585,619
=========== ============= ========== ============ ========== ============ ======== ==========
Year Ended November 30, 1994:
Shares sold........ 2,194,886 $ 21,105,595 2,683,818 $ 25,083,436 2,771,863 $ 26,580,036 107,988 $1,012,995
Shares
repurchased....... (18,389,111) (168,398,977) (7,474,061) (68,931,236) (9,522,607) (88,822,081) (186,721) (1,727,676)
Shares converted
from Class B to
Class A........... 50,083 464,467 (50,083) (464,467) -- -- -- --
Dividends
reinvested........ 1,915,098 17,758,175 495,622 4,599,701 493,223 4,597,786 40,709 376,367
----------- ------------- ---------- ------------ ---------- ------------ -------- ----------
Net decrease....... (14,229,044) $(129,070,740) (4,344,704) $(39,712,566) (6,257,521) $(57,644,259) (38,024) $ (338,314)
=========== ============= ========== ============ ========== ============ ======== ==========
Investment Grade Income Fund
Year Ended November 30, 1995:
Shares sold........ 1,118,498 $ 11,245,387 1,602,309 $ 16,080,209 1,203,107 $ 12,241,790
Shares
repurchased....... (6,102,145) (61,730,284) (2,170,282) (22,050,209) (2,382,752) (24,084,331)
Shares converted
from Class B to
Class A........... 166,181 1,661,858 (166,181) (1,661,858) -- --
Dividends
reinvested........ 992,104 10,085,704 248,368 2,525,239 145,268 1,474,598
----------- ------------- ---------- ------------ ---------- ------------
Net decrease....... (3,825,362) $ (38,737,335) (485,786) $ (5,106,619) (1,034,377) $(10,367,943)
=========== ============= ========== ============ ========== ============
Year Ended November 30, 1994:
Shares sold........ 2,253,575 $ 23,559,584 2,748,255 $ 28,306,967 2,777,103 $ 29,289,372
Shares issued in
connection with
the acquisition of
the PaineWebber
Income Fund....... 12,647,181 129,212,006 2,618,902 26,728,624 1,093,463 11,127,330
Shares
repurchased....... (6,542,726) (65,956,742) (2,848,257) (28,719,821) (3,671,524) (37,284,608)
Shares converted
from Class B to
Class A........... 312,181 3,161,809 (312,190) (3,161,809) -- --
Dividends
reinvested........ 955,311 9,756,340 242,740 2,486,037 212,380 2,189,642
----------- ------------- ---------- ------------ ---------- ------------
Net increase....... 9,625,522 $ 99,732,997 2,449,450 $ 25,639,998 411,422 $ 5,321,736
=========== ============= ========== ============ ========== ============
</TABLE>
23
<PAGE>
PAINEWEBBER
SHARES OF BENEFICIAL INTEREST -- (CONCLUDED)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------------------------- -------------------------- --------------------------
Shares Amount Shares Amount Shares Amount
----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
High Income Fund
Year Ended November 30, 1995:
Shares sold............. 4,193,138 $ 29,947,530 10,325,456 $ 73,506,514 8,404,914 $ 60,129,427
Shares repurchased...... (8,121,352) (57,873,371) (13,672,291) (97,254,677) (10,508,559) (74,954,109)
Shares converted from
Class B to Class A..... 265,832 1,888,065 (266,021) (1,888,065) -- --
Dividends reinvested.... 1,814,578 12,966,608 1,246,815 8,905,265 911,864 6,525,812
----------- ------------- ----------- ------------- ----------- -------------
Net decrease............ (1,847,804) $ (13,071,168) (2,366,041) $ (16,730,963) (1,191,781) $ (8,298,870)
=========== ============= =========== ============= =========== =============
Year Ended November 30, 1994:
Shares sold............. 8,883,010 $ 75,638,582 18,254,951 $ 155,033,164 16,905,382 $ 146,868,998
Shares repurchased...... (15,069,065) (124,250,729) (18,822,027) (153,776,805) (22,171,116) (185,680,689)
Shares converted from
Class B to Class A..... 487,991 4,129,197 (488,453) (4,129,197) -- --
Dividends reinvested.... 2,002,590 16,546,529 1,199,402 9,863,476 1,215,286 10,101,031
----------- ------------- ----------- ------------- ----------- -------------
Net increase
(decrease)............. (3,695,474) $ (27,936,421) 143,873 $ 6,990,638 (4,050,448) $ (28,710,660)
=========== ============= =========== ============= =========== =============
</TABLE>
24
<PAGE>
[This Page Intentionally Left Blank]
25
<PAGE>
PAINEWEBBER U.S. GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT EACH PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
For the Years Ended November 30,
----------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 8.50 $10.03 $ 9.98 $ 9.97 $ 9.47
-------- -------- -------- -------- --------
Net investment income... 0.58 0.60 0.67 0.75 0.77
Net realized and
unrealized gains
(losses) from
investment, option and
futures transactions... 0.62 (1.53) 0.05 0.01 0.49
-------- -------- -------- -------- --------
Net increase (decrease)
from investment
operations............. 1.20 (0.93) 0.72 0.76 1.26
-------- -------- -------- -------- --------
Dividends from net
investment income...... (0.58) (0.60) (0.67) (0.75) (0.76)
-------- -------- -------- -------- --------
Net asset value, end of
period................. $ 9.12 $ 8.50 $10.03 $ 9.98 $ 9.97
======== ======== ======== ======== ========
Total investment return
(1).................... 14.70% (9.62)% 7.38% 7.92% 13.80%
======== ======== ======== ======== ========
Ratios/Supplemental
Data:
Net assets, end of
period (000's)......... $430,285 $428,722 $648,923 $703,198 $737,189
Ratio of expenses to
average net assets..... 1.03%(2) 0.95% 0.91% 0.93% 0.87%
Ratio of net investment
income to average net
assets................. 6.65%(2) 6.48% 6.60% 7.42% 7.94%
Portfolio turnover
rate................... 206% 358% 83% 28% 71%
</TABLE>
- -------
# Commencement of issuance of shares
* Annualized
** Formerly Class D
*** Formerly Class C
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends 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 Class A, Class B and Class C shares would be lower if sales
charges were included. Total investment returns for periods of less than
one year have not been annualized.
(2) These ratios include non-recurring reorganization expenses of 0.03% for
each class of shares.
26
<PAGE>
PAINEWEBBER U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
CLASS B CLASS C**
- ------------------------------------------------------- ---------------------------------------------
For the Period For the Period
For the Years Ended July 1, 1991# For the Years Ended July 2, 1992#
November 30, to November 30, to
- --------------------------------------- November 30, ----------------------------- November 30,
1995 1994 1993 1992 1991 1995 1994 1993 1992
- ------- ------- -------- -------- -------------- ------- ------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8.50 $10.03 $ 9.98 $ 9.98 $ 9.59 $ 8.49 $10.02 $ 9.98 $10.13
- ------- ------- -------- -------- ------- ------- ------- -------- --------
0.51 0.53 0.60 0.67 0.29 0.53 0.55 0.62 0.25
0.63 (1.53) 0.05 0.01 0.39 0.63 (1.53) 0.04 (0.15)
- ------- ------- -------- -------- ------- ------- ------- -------- --------
1.14 (1.00) 0.65 0.68 0.68 1.16 (0.98) 0.66 0.10
- ------- ------- -------- -------- ------- ------- ------- -------- --------
(0.52) (0.53) (0.60) (0.68) (0.29) (0.54) (0.55) (0.62) (0.25)
- ------- ------- -------- -------- ------- ------- ------- -------- --------
$ 9.12 $ 8.50 $10.03 $ 9.98 $ 9.98 $ 9.11 $ 8.49 $10.02 $ 9.98
======= ======= ======== ======== ======= ======= ======= ======== ========
13.81% (10.31)% 6.57% 6.98% 6.78% 14.12% (10.08)% 6.75% 0.62%
======= ======= ======== ======== ======= ======= ======= ======== ========
$82,469 $99,581 $161,158 $132,357 $23,532 $53,832 $68,400 $143,473 $127,026
1.81%(2) 1.72% 1.66% 1.67% 1.68%* 1.55%(2) 1.45% 1.40% 1.44%*
5.88%(2) 5.71% 5.79% 6.38% 6.40%* 6.17%(2) 5.99% 6.06% 6.13%*
206% 358% 83% 28% 71% 206% 358% 83% 28%
<CAPTION>
CLASS B CLASS Y***
- ------------------------------------------------------- -------------------------------------------------
For the Period
September 11,
For the Years Ended For the Years Ended 1991#
November 30, November 30, to
- ---------------------------------------- ---------------------------------- November 30,
1995 1995 1994 1993 1992 1991
- ----------- ---------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C>
$ 8.50 $ 8.49 $10.02 $ 9.97 $ 9.97 $ 9.88
- ----------- ---------- ------- ------- ------- --------------
0.51 0.61 0.62 0.70 0.77 0.18
0.63 0.62 (1.53) 0.05 0.01 0.09
- ----------- ---------- ------- ------- ------- --------------
1.14 1.23 (0.91) 0.75 0.78 0.27
- ----------- ---------- ------- ------- ------- --------------
(0.52) (0.61) (0.62) (0.70) (0.78) (0.18)
- ----------- ---------- ------- ------- ------- --------------
$ 9.12 $ 9.11 $ 8.49 $10.02 $ 9.97 $ 9.97
=========== ========== ======= ======= ======= ==============
13.81% 15.06% (9.37)% 7.69% 8.13% 2.37%
=========== ========== ======= ======= ======= ==============
$82,469 $7,957 $4,955 $6,232 $5,517 $4,514
1.81%(2) 0.71%(2) 0.65% 0.62% 0.63% 0.72%*
5.88%(2) 6.96%(2) 6.76% 6.87% 7.70% 8.36%*
206% 206% 358% 83% 28% 71%
</TABLE>
27
<PAGE>
PAINEWEBBER INVESTMENT GRADE INCOME FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT EACH PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------
For the Years Ended November 30,
-----------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 9.67 $11.08 $10.38 $10.17 $ 9.50
-------- -------- -------- -------- --------
Net investment income... 0.76 0.77 0.79 0.81 0.82
Net realized and
unrealized gains
(losses) from
investment
transactions........... 1.01 (1.41) 0.70 0.22 0.66
-------- -------- -------- -------- --------
Net increase (decrease)
from investment
operations............. 1.77 (0.64) 1.49 1.03 1.48
-------- -------- -------- -------- --------
Dividends from net
investment income...... (0.76) (0.77) (0.79) (0.82) (0.81)
-------- -------- -------- -------- --------
Net asset value, end of
period................. $10.68 $ 9.67 $11.08 $10.38 $10.17
======== ======== ======== ======== ========
Total investment return
(1).................... 18.95% (5.99)% 14.77% 10.39% 16.17%
======== ======== ======== ======== ========
Ratios/Supplemental
Data:
Net assets, end of
period (000's)......... $258,898 $271,553 $204,418 $197,795 $220,216
Ratio of expenses to
average net assets..... 0.95% 0.97% 0.96% 1.01% 0.91%
Ratio of net investment
income to average net
assets................. 7.42% 7.50% 7.24% 7.81% 8.32%
Portfolio turnover
rate................... 149% 142% 27% 44% 46%
</TABLE>
- -------
# Commencement of issuance of shares
* Annualized
** Formerly Class D
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period, reinvestment of all dividends 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.
28
<PAGE>
PAINEWEBBER INVESTMENT GRADE INCOME FUND
<TABLE>
<CAPTION>
CLASS B CLASS C**
- --------------------------------------------------- ------------------------------------------
For the Period For the Period
For the Years Ended July 1, 1991# For the Years Ended July 2, 1992#
November 30, to November 30, to
- ----------------------------------- November 30, -------------------------- November 30,
1995 1994 1993 1992 1991 1995 1994 1993 1992
- ------- ------- ------- ------- -------------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9.67 $11.07 $10.38 $10.17 $ 9.79 $ 9.67 $11.08 $10.38 $10.48
- ------- ------- ------- ------- ------ ------- ------- ------- -------
0.68 0.69 0.71 0.73 0.31 0.70 0.72 0.74 0.28
1.00 (1.40) 0.69 0.22 0.38 1.01 (1.41) 0.70 (0.10)
- ------- ------- ------- ------- ------ ------- ------- ------- -------
1.68 (0.71) 1.40 0.95 0.69 1.71 (0.69) 1.44 0.18
- ------- ------- ------- ------- ------ ------- ------- ------- -------
(0.68) (0.69) (0.71) (0.74) (0.31) (0.70) (0.72) (0.74) (0.28)
- ------- ------- ------- ------- ------ ------- ------- ------- -------
$10.67 $ 9.67 $11.07 $10.38 $10.17 $10.68 $ 9.67 $11.08 $10.38
======= ======= ======= ======= ====== ======= ======= ======= =======
17.97% (6.60)% 13.81% 9.56% 6.76% 18.37% (6.40)% 14.21% 1.32%
======= ======= ======= ======= ====== ======= ======= ======= =======
$71,372 $69,359 $52,301 $20,862 $5,368 $39,150 $45,473 $47,527 $16,067
1.70% 1.72% 1.70% 1.74% 1.67%* 1.45% 1.45% 1.44% 1.49%*
6.67% 6.73% 6.40% 6.88% 6.87%* 6.95% 6.99% 6.61% 6.83%*
149% 142% 27% 44% 46% 149% 142% 27% 44%
</TABLE>
29
<PAGE>
PAINEWEBBER HIGH INCOME FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT EACH PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------
For the Years Ended November 30,
-------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................. $ 7.14 $ 8.73 $ 7.92 $ 7.30 $ 5.61
-------- -------- -------- -------- --------
Net investment income...... 0.79 0.86 0.89 0.98 0.98
Net realized and unrealized
gains (losses) from
investment transactions... (0.17) (1.59) 0.83 0.61 1.69
-------- -------- -------- -------- --------
Net increase (decrease)
from investment
operations................ 0.62 (0.73) 1.72 1.59 2.67
-------- -------- -------- -------- --------
Dividends from net
investment income......... (0.80) (0.86) (0.91) (0.97) (0.98)
-------- -------- -------- -------- --------
Net asset value, end of
period.................... $ 6.96 $ 7.14 $ 8.73 $ 7.92 $ 7.30
======== ======== ======== ======== ========
Total investment return
(1)....................... 9.01% (9.20)% 22.89% 22.99% 51.11%
======== ======== ======== ======== ========
Ratios/Supplemental Data:
Net assets, end of period
(000's)................... $248,619 $268,397 $360,281 $279,685 $243,210
Ratio of expenses to
average net assets........ 0.93% 0.91% 0.93% 0.98% 1.05%
Ratio of net investment
income to average net
assets.................... 11.17% 10.43% 10.61% 12.68% 15.12%
Portfolio turnover rate.... 94% 156% 182% 185% 117%
</TABLE>
- -------
# Commencement of issuance of shares
* Annualized
** Formerly Class D
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period, reinvestment of all dividends 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.
30
<PAGE>
PAINEWEBBER HIGH INCOME FUND
<TABLE>
<CAPTION>
CLASS B CLASS C**
- ------------------------------------------------------ ---------------------------------------------
For the Period For the Period
For the Years Ended July 1, 1991# For the Years Ended July 2, 1992#
November 30, to November 30, to
- -------------------------------------- November 30, ----------------------------- November 30,
1995 1994 1993 1992 1991 1995 1994 1993 1992
- -------- -------- -------- ------- -------------- -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 7.14 $ 8.72 $ 7.91 $ 7.29 $ 6.85 $ 7.15 $ 8.74 $ 7.92 $ 7.80
- -------- -------- -------- ------- ------- -------- -------- -------- -------
0.74 0.80 0.83 0.92 0.41 0.76 0.82 0.85 0.33
(0.18) (1.58) 0.82 0.61 0.44 (0.18) (1.59) 0.82 0.11
- -------- -------- -------- ------- ------- -------- -------- -------- -------
0.56 (0.78) 1.65 1.53 0.85 0.58 (0.77) 1.67 0.44
- -------- -------- -------- ------- ------- -------- -------- -------- -------
(0.75) (0.80) (0.84) (0.91) (0.41) (0.76) (0.82) (0.85) (0.32)
- -------- -------- -------- ------- ------- -------- -------- -------- -------
$ 6.95 $ 7.14 $ 8.72 $ 7.91 $ 7.29 $ 6.97 $ 7.15 $ 8.74 $ 7.92
======== ======== ======== ======= ======= ======== ======== ======== =======
8.05% (9.77)% 21.89% 22.07% 11.93% 8.45% (9.62)% 22.19% 5.21%
======== ======== ======== ======= ======= ======== ======== ======== =======
$212,946 $235,480 $286,525 $99,645 $18,274 $103,911 $115,196 $176,161 $35,992
1.68% 1.64% 1.66% 1.70% 1.73%* 1.44% 1.38% 1.39% 1.45%*
10.42% 9.66% 9.69% 11.42% 12.43%* 10.63% 9.91% 9.81% 10.67%*
94% 156% 182% 185% 117% 94% 156% 182% 185%
</TABLE>
31
<PAGE>
PAINEWEBBER
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
PaineWebber Managed Investments Trust
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of PaineWebber U.S. Government Income Fund,
PaineWebber Investment Grade Income Fund, and PaineWebber High Income Fund
(three of the portfolios of PaineWebber Managed Investments Trust) (the
"Funds") as of November 30, 1995, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of investments
owned at November 30, 1995 by correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
PaineWebber U.S. Government Income Fund, PaineWebber Investment Grade Income
Fund, and PaineWebber High Income Fund at November 30, 1995, and the results of
their operations for the year then ended, the changes in their net assets for
each of the two years in the period then ended, and the financial highlights
for each of the indicated periods, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
New York, New York
January 25, 1996
<PAGE>
PAINEWEBBER
TAX INFORMATION
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of each Fund's fiscal year end (November
30, 1995) as to the federal tax status of distributions received by
shareholders during such fiscal year from each Fund. Accordingly, we are
advising you that all of the distributions paid by U.S. Government Income Fund,
Investment Grade Income Fund and High Income Fund during the fiscal year were
derived from net investment income.
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need not be
reported as taxable income. Some retirement trusts (e.g., corporate, Keogh and
403(b)(7) plans) may need this information for their annual reporting.
Because each Fund's fiscal year is not the calendar year, another notification
will be sent in respect of calendar year 1995. The second notification, which
will reflect the amounts to be used by calendar year taxpayers on their federal
income tax returns, will be made in conjunction with Form 1099 DIV and is
mailed in January 1996. Shareholders are advised to consult their own tax
advisers with respect to the tax consequences of their investment in each Fund.
