<PAGE>
PAINEWEBBER LOW DURATION U.S. GOVERNMENT INCOME FUND
PERFORMANCE RESULTS--(UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------------- -----------------------------
12 MONTHS 6 MONTHS
11/30/96 05/31/96 11/30/95 ENDED 11/30/96 ENDED 11/30/96
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $2.35 $2.30 $2.34 6.46% 5.33%
- ------------------------------------------------------------------------------
Class B Shares 2.35 2.30 2.34 5.60 4.90
- ------------------------------------------------------------------------------
Class C Shares 2.35 2.30 2.34 5.82 5.02
- ------------------------------------------------------------------------------
Performance Summary Class A Shares
<CAPTION>
NET ASSET VALUE
------------------ CAPITAL GAINS TOTAL
BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
05/03/93 -
12/31/93 $2.50 $2.48 -- $0.0812 2.48%
- ------------------------------------------------------------------------------
1994 2.48 2.25 -- 0.1217 (4.39)
- ------------------------------------------------------------------------------
1995 2.25 2.35 -- 0.1357 10.75
- ------------------------------------------------------------------------------
01/01/96 -
11/30/96 2.35 2.35 -- 0.1188 5.24
- ------------------------------------------------------------------------------
Total: $0.0000 $0.4574
- ------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS
OF 11/30/96: 14.20%
- ------------------------------------------------------------------------------
Performance Summary Class B Shares
<CAPTION>
NET ASSET VALUE
------------------ CAPITAL GAINS TOTAL
BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
05/03/93 -
12/31/93 $2.50 $2.48 -- $0.0687 1.97%
- ------------------------------------------------------------------------------
1994 2.48 2.25 -- 0.1034 (5.14)
- ------------------------------------------------------------------------------
1995 2.25 2.35 -- 0.1157 9.79
- ------------------------------------------------------------------------------
01/01/96 -
11/30/96 2.35 2.35 -- 0.1023 4.50
- ------------------------------------------------------------------------------
Total: $0.0000 $0.3901
- ------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS
OF 11/30/96: 10.98%
- ------------------------------------------------------------------------------
Performance Summary Class C Shares
<CAPTION>
NET ASSET VALUE
------------------ CAPITAL GAINS TOTAL
BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
05/03/93 -
12/31/93 $2.50 $2.48 -- $0.0730 2.14%
- ------------------------------------------------------------------------------
1994 2.48 2.25 -- 0.1094 (4.89)
- ------------------------------------------------------------------------------
1995 2.25 2.35 -- 0.1217 10.09
- ------------------------------------------------------------------------------
01/01/96 -
11/30/96 2.35 2.35 -- 0.1066 4.69
- ------------------------------------------------------------------------------
Total: $0.0000 $0.4107
- ------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS
OF 11/30/96: 11.97%
- ------------------------------------------------------------------------------
</TABLE>
/1/ Figures assume reinvestment of all dividends at net asset value on the
payable dates, and do not include sales charges; results would be lower
for each class if sales charges were included.
Note: The Fund offers Class Y shares to a limited group of investors, including
INSIGHT Investment Advisory Program participants. For the year ended
November 30, 1996 and since inception, October 20, 1995 through November
30, 1996, Class Y shares had total returns of 6.64% and 7.52%,
respectively. Class Y shares do not have initial or contingent deferred
sales charges or ongoing distribution or 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.
5
<PAGE>
PAINEWEBBER LOW DURATION U.S. GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS NOVEMBER 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) MATURITY DATES INTEREST RATES VALUE
--------- -------------------- -------------- -----------
<C> <S> <C> <C> <C>
Government National Mortgage Association Certificates - 39.21%
$ 199 GNMA ................... 02/15/23 8.000% $ 205,197
13,894 GNMA ................... 01/15/16 to 09/15/20 10.500 15,401,168
6,860 GNMA ................... 03/15/10 to 05/15/19 11.500 7,800,604
2,010 GNMA II ARM............. 01/20/18 6.500 2,044,261
5,249 GNMA II ARM............. 12/20/22 to 12/20/23 7.000 5,387,314
27,127 GNMA II ARM............. 06/20/23 7.125 27,935,172
20,000 GNMA TBA ............... TBA 8.000 20,612,500
-----------
Total Government National Mort-
gage Association Certificates
(cost - $78,996,629)............ 79,386,216
-----------
Federal Home Loan Mortgage Corporation Certificates - 30.16%
12,868 FHLMC .................. 01/01/23 to 02/01/26 8.000 13,237,513
4,535 FHLMC .................. 05/01/16 8.500 4,724,972
664 FHLMC .................. 07/01/09 to 02/01/10 9.000 703,155
1,455 FHLMC .................. 11/01/16 9.750 1,574,114
1,061 FHLMC .................. 10/01/20 to 11/01/20 10.500 1,179,053
4,401 FHLMC .................. 05/01/11 to 12/01/20 11.000 4,961,150
3,196 FHLMC .................. 06/01/04 to 06/01/20 11.500 3,628,153
2,407 FHLMC ARM............... 06/01/17 7.375 2,466,103
2,440 FHLMC ARM............... 09/01/24 7.679 2,520,180
25,000 FHLMC TBA .............. TBA 8.500 26,062,500
-----------
Total Federal Home Loan Mortgage
Corporation Certificates
(cost - $59,937,198)............ 61,056,893
-----------
Federal National Mortgage Association Certificates - 21.31%
3,543 FNMA.................... 02/01/05 9.000 3,716,444
6,221 FNMA.................... 04/01/10 to 12/01/15 9.250 6,651,379
834 FNMA.................... 03/01/06 to 12/01/09 9.500 901,276
1,253 FNMA.................... 04/01/10 to 06/01/19 10.250 1,382,448
3,144 FNMA.................... 11/01/10 to 04/01/22 10.500 3,478,112
4,417 FNMA.................... 07/01/13 to 05/01/20 11.000 5,022,471
2,801 FNMA ARM................ 03/01/26 6.672 2,825,793
10,019 FNMA ARM................ 09/01/26 7.095 10,182,517
3,537 FNMA ARM................ 09/01/15 7.393 3,635,927
5,118 FNMA ARM................ 01/01/31 7.617 5,346,419
-----------
Total Federal National Mortgage
Association Certificates
(cost - $42,371,320)............ 43,142,786
-----------
Collateralized Mortgage Obligations - 6.72%
1,755 Bear Stearns, Series
1989-1, Class D ....... 06/01/17 9.000 1,770,475
1,640 Prudential Bache Mort-
gage Trust, Series 2,
Class C ............... 06/01/18 9.200 1,649,998
5,053 Resolution Trust Corpo-
ration, Series 1994-1,
Class A2A.............. 09/25/29 7.750 5,088,636
4,798 Ryland Mortgage Accept-
ance Corporation, Se-
ries 76, Class B ...... 08/01/18 9.000 5,100,983
-----------
Total Collateralized Mortgage Ob-
ligations (cost - $13,171,272).. 13,610,092
-----------
Agency Backed Obligations - 3.85%
7,800 Federal Farm Credit Bank
Discount Note (cost -
$7,797,690)........... 12/03/96 5.330@ 7,797,690
-----------
</TABLE>
6
<PAGE>
PAINEWEBBER LOW DURATION U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) MATURITY DATES INTEREST RATES VALUE
--------- ------------------- -------------- ------------
Commercial Paper - 15.69%
<C> <S> <C> <C> <C>
$ 8,500 Dow Jones & Company In-
corporated............. 12/02/96 5.240%@ $ 8,498,763
10,000 Dupont (E. I.) de
Nemours & Company...... 01/22/97 5.290@ 9,923,589
9,200 Ford Motor Credit Compa-
ny..................... 12/9/96 to 01/10/97 5.260 to 5.340@ 9,146,366
4,200 Walmart Stores Incorpo-
rated.................. 12/05/96 5.330@ 4,197,513
------------
Total Commercial Paper (cost -
$31,766,231)................... 31,766,231
------------
Repurchase Agreement - 4.55%
9,209 Repurchase Agreement
dated 11/29/96, with
State Street Bank and
Trust Company, collat-
eralized by $9,220,000
U.S. Treasury Bonds,
5.250% due 12/31/97;
proceeds $9,212,645
(cost - $9,209,000).... 12/02/96 4.750 9,209,000
------------
Total Investments (cost -
$243,249,340) - 121.49%........ 245,968,908
Liabilities in excess of other
assets - (21.49)%............... (43,500,822)
------------
Net Assets - 100.00%............. $202,468,086
============
</TABLE>
- --------------------
@Yield to maturity for discounted securities
ARM - Adjustable Rate Mortgage Security; the interest rate shown is the
current rate at November 30, 1996
TBA - (To Be Assigned) Securities are purchased on a forward commitment
basis with an approximate (generally +/-1.0%) principal amount and
generally stated maturity date. The actual principal amount and maturity
date will be determined upon settlement when the specific mortgage pools
are assigned.
See accompanying notes to financial statements
7
<PAGE>
PAINEWEBBER LOW DURATION U.S. GOVERNMENT INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES NOVEMBER 30, 1996
<TABLE>
<S> <C>
Assets
Investments in securities, at value (cost - $243,249,340)....... $ 245,968,908
Receivable for investments sold................................. 2,535,868
Interest receivable............................................. 1,223,444
Receivable for shares of beneficial interest sold............... 105,678
Deferred organizational expenses................................ 67,473
Other assets.................................................... 32,812
-------------
Total assets.................................................... 249,934,183
-------------
Liabilities
Payable for investments purchased............................... 45,776,562
Payable for shares of beneficial interest repurchased........... 661,229
Dividends payable............................................... 444,085
Payable to affiliates........................................... 188,772
Accrued expenses and other liabilities.......................... 395,449
-------------
Total liabilities............................................... 47,466,097
-------------
Net Assets
Beneficial interest - $0.001 par value (unlimited amount
authorized).................................................... 320,643,636
Distributions in excess of net investment income................ (442,125)
Accumulated net realized losses from investment transactions.... (120,452,993)
Net unrealized appreciation of investments...................... 2,719,568
-------------
Net assets...................................................... $ 202,468,086
=============
Class A:
Net assets...................................................... $ 71,216,470
-------------
Shares outstanding.............................................. 30,297,682
-------------
Net asset value and redemption value per share.................. $2.35
=====
Maximum offering price per share (net asset value plus sales
charge of 3.00% of offering price)............................. $2.42
=====
Class B:
Net assets...................................................... $ 7,716,085
-------------
Shares outstanding.............................................. 3,284,394
-------------
Net asset value and offering price per share.................... $2.35
=====
Class C:
Net assets...................................................... $ 123,202,511
-------------
Shares outstanding.............................................. 52,455,425
-------------
Net asset value and offering price per share.................... $2.35
=====
Class Y:
Net assets...................................................... $ 333,020
-------------
Shares outstanding.............................................. 141,760
-------------
Net asset value, offering price and redemption value per share.. $2.35
=====
</TABLE>
See accompanying notes to financial statements
8
<PAGE>
PAINEWEBBER LOW DURATION U.S. GOVERNMENT INCOME FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED NOVEMBER 30, 1996
<TABLE>
<S> <C>
Investment income:
Interest................. $17,894,792
-----------
Expenses:
Investment advisory and
administration.......... 1,272,455
Service fees - Class A... 244,189
Service and distribution
fees - Class B.......... 88,618
Service and distribution
fees - Class C.......... 1,107,463
Transfer agency and
service fees............ 300,895
Custody and accounting... 195,759
Interest expense......... 159,538
Reports and notices to
shareholders............ 149,994
Legal and audit.......... 120,643
State registration fees.. 98,526
Amortization of
organizational expense.. 47,130
Trustees' fees........... 12,250
Other expenses........... 218,749
-----------
4,016,209
-----------
Net investment income ... 13,878,583
-----------
Realized and unrealized
gains (losses) from
investment activities:
Net realized gains from
investment transactions. 714,614
Net change in unrealized
appreciation/depreciation
of investments.......... (698,960)
-----------
Net realized and
unrealized gains from
investment activities .. 15,654
-----------
Net increase in net
assets resulting from
operations ............. $13,894,237
===========
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
PAINEWEBBER LOW DURATION U.S. GOVERNMENT INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
NOVEMBER 30,
----------------------------
1996 1995
------------- -------------
<S> <C> <C>
From operations:
Net investment income............................ $ 13,878,583 $ 20,155,215
Net realized gains from investment transactions.. 714,614 2,426,285
Net change in unrealized
appreciation/depreciation of investments........ (698,960) 11,673,716
------------- -------------
Net increase in net assets resulting from
operations...................................... 13,894,237 34,255,216
------------- -------------
Dividends to shareholders from:
Net investment income - Class A.................. (5,708,538) (7,943,582)
Net investment income - Class B.................. (442,330) (531,437)
Net investment income - Class C.................. (7,717,388) (11,679,163)
Net investment income - Class Y.................. (17,499) (2,104)
------------- -------------
(13,885,755) (20,156,286)
------------- -------------
From beneficial interest transactions:
Net proceeds from the sale of shares of
beneficial interest............................. 85,715,637 20,692,668
Proceeds from shares issued in connection with
the acquisition of Mitchell Hutchins/Kidder,
Peabody Adjustable Rate Government Fund......... -- 23,768,145
Cost of shares of beneficial interest
repurchased..................................... (208,663,857) (220,493,522)
Proceeds from dividends reinvested............... 7,810,176 11,255,825
------------- -------------
Net decrease in net assets from beneficial
interest transactions........................... (115,138,044) (164,776,884)
------------- -------------
Net decrease in net assets....................... (115,129,562) (150,677,954)
Net assets:
Beginning of year................................ 317,597,648 468,275,602
------------- -------------
End of year...................................... $ 202,468,086 $ 317,597,648
============= =============
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
PAINEWEBBER NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Low Duration U.S. Government Income Fund (the "Fund") is a
diversified series of PaineWebber Managed Investments Trust (the "Trust"),
which is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended, as an open-end investment company.
The Trust is a series mutual fund with six funds: the Fund, as well as
PaineWebber U.S. Government Income Fund, PaineWebber Investment Grade Income
Fund, PaineWebber High Income Fund, PaineWebber Utility Income Fund and the
newly created PaineWebber Asia Pacific Growth Fund, which are not presented in
these financial statements.
The Fund offers Class A, Class B, Class C and Class Y shares. Each class
represents interests in the same assets of the Fund and the classes are
identical except for differences in their sales charge structures, ongoing
service and distribution charges and certain transfer agency expenses. In
addition, Class B shares and all corresponding dividend reinvested shares
automatically convert to Class A shares approximately six years after issuance.
All classes of shares have equal voting privileges, except that each class has
exclusive voting rights with respect to its 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 - Where market quotations are readily available,
portfolio securities are valued thereby, provided such quotations adequately
reflect the fair value of the securities, in the judgment of Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins"), a wholly owned subsidiary of
PaineWebber Incorporated ("PaineWebber") and investment adviser and
administrator of the Fund. 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 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.
11
<PAGE>
PAINEWEBBER
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. Discounts are accreted and premiums are
amortized as adjustments to interest income and the identified cost of
investments. The Fund may enter into transactions in which the Fund sells
securities for delivery in the current month and simultaneously contracts to
repurchase substantially similar (same type, coupon and maturity) securities on
a specified future date (the "roll period"). During the roll period the Fund
forgoes principal and interest paid on the securities. The Fund is compensated
by the interest earned on the cash proceeds of the initial sale and by fee
income or a lower repurchase price.
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.
Reverse Repurchase Agreement - The Fund enters into reverse repurchase
agreements with qualified, third party broker-dealers as determined by, and
under the direction of, the Trust's board of trustees. Interest on the value of
reverse repurchase agreements issued and outstanding is based upon competitive
market rates at the time of issuance. At the time the Fund enters into a
reverse repurchase agreement, it establishes and maintains a segregated account
with the Trust's custodian containing liquid securities having a value not less
than the repurchase price, including accrued interest, of the reverse
repurchase agreement.
The average monthly balance of reverse repurchase agreements outstanding during
the year ended November 30, 1996 was $2,491,000 at a weighted average interest
rate of 5.37%. The maximum amount of reverse repurchase agreements outstanding
at any month-end during the year was $17,795,000 as of April 30, 1996.
Dividends and Distributions to Shareholders - 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
The ability of the issuers of the debt securities including mortgage- and
asset-backed securities held by the Trust to meet their obligations may be
affected by economic developments, including those particular to a specific
issuer, industry or region.
12
<PAGE>
PAINEWEBBER
Mortgage- and asset-backed securities may decrease in value as a result of
increases in interest rates and may benefit less than other fixed-income
securities from declining interest rates because of the risk of prepayments.
ACQUISITION
Effective as of the close of business on October 20, 1995, the Fund acquired
all the net assets of Mitchell Hutchins/Kidder, Peabody Adjustable Rate
Government Fund ("MH/KP Adjustable Rate Government Fund") pursuant to a plan of
reorganization approved by MH/KP Adjustable Rate Government Fund shareholders
on October 19, 1995. The acquisition was accomplished by a tax-free exchange of
9,170,754 Class A, 892,249 Class D (currently Class C) and 140,324 Class C
(currently Class Y) shares of Low Duration U.S. Government Income Fund for
1,890,961 Class A, 183,977 Class B, and 28,934 Class C shares, respectively, of
MH/KP Adjustable Rate Government Fund outstanding on October 20, 1995. MH/KP
Adjustable Rate Government Fund's net assets at that date, valued at
$23,768,145, including accumulated net realized losses of $4,063,268 and net
unrealized appreciation on investments of $109,800, were combined with those of
the 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
Fund. In accordance with the Advisory Contract, the 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 the Fund's average daily net assets. At
November 30, 1996, the Fund owed Mitchell Hutchins $85,376 in investment
advisory and administration fees.
Under a separate contract with Mitchell Hutchins ("Sub-Advisory Contract"),
Pacific Investment Management Company ("PIMCO") serves as the Trust's sub-
adviser. Under the Sub-Advisory Contract, Mitchell Hutchins (not the Fund) pays
PIMCO a fee, computed weekly and payable monthly, in an amount equal to one-
half of the advisory fee received by Mitchell Hutchins from 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 the Class A, Class B, and Class C
shares, the 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
average daily net assets of Class B shares and Class C shares, respectively. At
November 30, 1996, the Fund owed Mitchell Hutchins $98,270 in service and
distribution fees.
13
<PAGE>
PAINEWEBBER
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 the Fund
that for the year ended November 30, 1996, it earned $49,964 in sales charges.
TRANSFER AGENCY SERVICE FEES
The Fund pays PaineWebber an annual fee of $4.00 per active PaineWebber
shareholder account for certain services not provided by the Fund's transfer
agent. For these services for the year ended November 30, 1996, PaineWebber
earned $70,807 and was owed $5,126 at November 30, 1996 in shareholder service
fees from the Fund.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at November 30,
1996 was substantially the same as the cost of securities for financial
statement purposes.
At November 30, 1996, the components of the net unrealized appreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value
over cost)........................................................ $3,024,961
Gross depreciation (investments having an excess of cost
over value)....................................................... (305,393)
----------
Net unrealized appreciation of investments......................... $2,719,568
==========
</TABLE>
For the year ended November 30, 1996, total aggregate purchases and sales of
portfolio securities, excluding short-term securities, were as follows:
<TABLE>
<S> <C>
Purchases.......................................................... $580,466,656
Sales.............................................................. $750,811,389
</TABLE>
FEDERAL TAX STATUS
The 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, the Fund intends not to be subject to a federal excise tax.
At November 30, 1996, the Fund had a net capital loss carryforward of
$120,452,991. The capital loss carryforward includes capital losses acquired by
the Fund pursuant to its reorganization with MH/KP Adjustable Rate Government
Fund (which was effected during fiscal year 1995) in the amount of $4,063,268.
The loss carryforward will expire between November 30, 2002 and November 30,
2004. 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.
14
<PAGE>
PAINEWEBBER
To reflect reclassifications arising from permanent "book/tax" differences for
the year ended November 30, 1996, undistributed/distributions in excess of net
investment income was increased by $300,223 and beneficial interest was
decreased by $300,223.
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>
YEAR ENDED
NOVEMBER 30, 1996:
Shares sold.......... 33,345,282 $ 77,185,738 1,056,888 $ 2,465,649 2,528,030 $ 5,896,920 71,997 $167,330
Shares repurchased... (58,723,622) (136,218,122) (1,671,128) (3,877,425) (29,435,054) (68,397,449) (73,823) (170,861)
Shares converted from
Class B to Class A.. 131,800 304,321 (131,800) (304,321) -- -- -- --
Dividends reinvested. 878,124 2,041,079 122,139 283,662 2,354,265 5,470,009 6,638 15,426
----------- ------------ ---------- ----------- ----------- ------------- ------- --------
Net increase
(decrease).......... (24,368,416) $(56,686,984) (623,901) $(1,432,435) (24,552,759) $ (57,030,520) 4,812 $ 11,895
=========== ============ ========== =========== =========== ============= ======= ========
YEAR ENDED
NOVEMBER 30, 1995:
Shares sold.......... 3,414,851 $ 7,851,777 916,721 $ 2,108,569 4,678,309 $ 10,731,253 448 $ 1,069
Shares issued in
connection with the
acquisition of MH/KP
Adjustable Rate
Government Fund..... 9,170,754 21,362,365 -- -- 892,249 2,078,777 140,324 327,003
Shares repurchased... (29,451,783) (67,685,410) (3,100,165) (7,087,519) (63,802,261) (145,710,456) (4,340) (10,137)
Dividends reinvested. 1,076,029 2,468,585 150,283 344,937 3,681,087 8,441,101 516 1,202
----------- ------------ ---------- ----------- ----------- ------------- ------- --------
Net increase
(decrease).......... (15,790,149) $(36,002,683) (2,033,161) $(4,634,013) (54,550,616) $(124,459,325) 136,948 $319,137
=========== ============ ========== =========== =========== ============= ======= ========
</TABLE>
15
<PAGE>
PAINEWEBBER LOW DURATION 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 FOR THE PERIOD
NOVEMBER 30, MAY 3, 1993#
--------------------------- TO NOVEMBER 30,
1996 1995 1994 1993
------- -------- -------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 2.34 $ 2.25 $ 2.48 $ 2.50
------- -------- -------- --------
Net investment income.......... 0.14 0.13 0.12 0.07
Net realized and unrealized
gains (losses) from
investments, futures and
options........................ 0.01 0.09 (0.29) (0.02)
------- -------- -------- --------
Net increase (decrease) in net
asset value from operations.... 0.15 0.22 (0.17) 0.05
------- -------- -------- --------
Dividends from net investment
income......................... (0.14) (0.13) (0.12) (0.07)
------- -------- -------- --------
Contribution to capital from
adviser........................ -- -- 0.06 --
------- -------- -------- --------
Net asset value, end of period. $ 2.35 $ 2.34 $ 2.25 $ 2.48
======= ======== ======== ========
Total investment return(1)..... 6.46% 10.25% (4.50)%** 1.88%
======= ======== ======== ========
Ratios/Supplemental data:
Net assets, end of period
(000's)........................ $71,216 $127,961 $158,712 $551,243
Expenses to average net
assets(2)...................... 1.21% 1.15% 0.84% 0.81%*
Net investment income to
average net assets(2).......... 5.84% 5.89% 5.16% 4.85%*
Portfolio turnover rate........ 210% 242% 246% 97%
</TABLE>
- ----------
# Commencement of issuance of shares
* Annualized
** Net of $0.06 contribution of capital from adviser. If such contribution had
not been made the total investment returns would have been (7.02)% for
Class A, (7.74)% for Class B and (7.50)% for 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 would be lower if sales charges
were included. Total investment returns for periods less than one year have
not been annualized.
(2) During the year ended November 30, 1994 Mitchell Hutchins waived a portion
of its advisory and administration fees. If such waivers had not been made
the annualized ratios of expenses to average net assets, and net investment
income to average net assets, respectively, would have been 0.88% and 5.12%
for Class A, 1.66% and 4.35% for Class B, and 1.39% and 4.61% for Class C.
16
<PAGE>
PAINEWEBBER LOW DURATION U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
CLASS B CLASS C CLASS Y
- ------------------------------------------- ------------------------------------------------ ------------------------------
FOR THE YEARS ENDED FOR THE PERIOD FOR THE YEARS ENDED FOR THE PERIOD FOR THE YEAR FOR THE PERIOD
NOVEMBER 30, MAY 3, 1993# NOVEMBER 30, MAY 3, 1993# ENDED OCTOBER 20, 1995#
- ----------------------- TO NOVEMBER 30, ---------------------------- TO NOVEMBER 30, NOVEMBER 30, TO NOVEMBER 30,
1996 1995 1994 1993 1996 1995 1994 1993 1996 1995
- ------ ------ ------- --------------- -------- -------- -------- --------------- ------------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 2.34 $ 2.25 $ 2.48 $ 2.50 $ 2.34 $ 2.25 $ 2.47 $ 2.50 $2.34 $2.33
- ------ ------ ------- ------- -------- -------- -------- ---------- ----- -----
0.12 0.11 0.10 0.06 0.12 0.12 0.11 0.06 0.14 0.01
0.01 0.09 (0.29) (0.02) 0.01 0.09 (0.28) (0.03) 0.01 0.01
- ------ ------ ------- ------- -------- -------- -------- ---------- ----- -----
0.13 0.20 (0.19) 0.04 0.13 0.21 (0.17) 0.03 0.15 0.02
- ------ ------ ------- ------- -------- -------- -------- ---------- ----- -----
(0.12) (0.11) (0.10) (0.06) (0.12) (0.12) (0.11) (0.06) (0.14) (0.01)
- ------ ------ ------- ------- -------- -------- -------- ---------- ----- -----
-- -- 0.06 -- -- -- 0.06 -- -- --
- ------ ------ ------- ------- -------- -------- -------- ---------- ----- -----
$ 2.35 $ 2.34 $ 2.25 $ 2.48 $ 2.35 $ 2.34 $ 2.25 $ 2.47 $2.35 $2.34
====== ====== ======= ======= ======== ======== ======== ========== ===== =====
5.60% 9.30% (5.24)%** 1.47% 5.82% 9.60% (4.99)%** 1.20% 6.64% 0.83%
====== ====== ======= ======= ======== ======== ======== ========== ===== =====
$7,716 $9,147 $13,382 $31,706 $123,203 $180,169 $296,182 $1,186,181 $ 333 $ 321
2.03% 2.02% 1.62% 1.62%* 1.80% 1.75% 1.36% 1.35%* 0.99% 0.99%*
4.99% 5.03% 4.40% 4.31%* 5.22% 5.31% 4.65% 4.52%* 6.00% 5.87%*
210% 242% 246% 97% 210% 242% 246% 97% 210% 242%
</TABLE>
17
<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 Low Duration U.S. Government
Income Fund (one of the portfolios of PaineWebber Managed Investments Trust)
(the "Fund") as of November 30, 1996, 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 Fund's 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 audit 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, 1996, by correspondence with the custodian and others. 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 Low Duration U.S. Government Income Fund at November 30, 1996, and
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for the indicated periods, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
New York, New York
January 22, 1997
18
<PAGE>
PAINEWEBBER LOW DURATION U.S. GOVERNMENT INCOME FUND
TAX INFORMATION
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the Fund's fiscal year end (November
30, 1996) as to the federal tax status of distributions received by
shareholders during such fiscal year from the Fund. Accordingly, we are
advising you that all of the distributions paid by the Low Duration U.S.
Government Income Fund during the period were derived from net investment
income and are taxable as ordinary 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 the Fund's fiscal year is not the calendar year, another notification
will be sent in respect of calendar year 1996. 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 1997. Shareholders are advised to consult their own tax
advisers with respect to the tax consequences of their investment in the Fund.
19
<PAGE>
[This page intentionally left blank]
