<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND SEMIANNUAL REPORT
April 16, 1999
Dear Shareholder,
We are pleased to present you with the first semiannual report for the
PaineWebber Tax-Managed Equity Fund (the "Fund") for the 11-week period from
commencement of operations on December 14, 1998 through February 28, 1999.
MARKET REVIEW
- --------------------------------------------------------------------------------
As the Fund commenced operations in December, the stock market was in the
midst of a period of intense volatility. Only the month before, the Federal
Reserve had lowered short-term interest rates for the third time in three
months to quell investor anxieties. The market rebounded with strong gains at
the end of 1998, led by technology stocks. Prices remained volatile, however,
and the market, as measured by the S&P 500 Index (the "Index") posted a much
lower gain in January 1999. Investors began to worry that inflation might heat
up and cause interest rates to rise again. Concerns about decreasing demand
for PCs and a potential for year 2000 disruptions hurt technology stock
prices. The Index lost 3.11% in February, its first monthly loss since August
1998. From December 1998 through February 1999, the Index gained 6.88%.
OUTLOOK
The economy is sending mixed signals -- auto sales look strong but airline
traffic has been weak. Unemployment is down, but inflation does not seem to be
increasing. We'll be watching for a clear signal on interest rates from the
Federal Reserve, but right now it looks as if monetary policy will remain
neutral.
The stock market has remained volatile since period-end -- the Dow Jones
Industrial Average recently surpassed 10,000 but promptly fell back almost 180
points intraday. Technology stocks are still correcting, and no other sector
has emerged yet as a market leader. This could be good for the long-term
health of the market, in that it may encourage investors to diversify into
other capitalization segments or styles as market volatility subsides.
PORTFOLIO REVIEW
- --------------------------------------------------------------------------------
PERFORMANCE
The Fund's total return consists of the change in net asset value with
dividends reinvested. For the 11-week period from commencement of operations
on December 14, 1998 through February 28, 1999, without deducting sales
charges, Class A shares gained 0.96%, Class B shares gained 0.80%, Class C
shares gained 0.80% and Class Y shares gained 0.88%.
- ------------------------------------------------------------------------------
PAINEWEBBER
TAX-MANAGED
EQUITY FUND
PROFILE
Goal:
Maximize after-tax
total return
Portfolio Managers:
Mark A. Tincher,
Christopher G. Altschul
Mitchell Hutchins
Asset Management Inc.
Total Net Assets:
$44.5 million as of
February 28, 1999
Dividend Payments:
Annually
- ------------------------------------------------------------------------------
1
<PAGE>
SEMIANNUAL REPORT
The Fund's total return may be lower for shareowners who purchased or redeemed
Fund shares during the period. After deducting the maximum applicable sales
charges, Class A shares lost 3.59%, Class B shares lost 4.20% and Class C
shares lost 0.20%. Class Y shares are not subject to sales charges.
Highlights
From commencement through February 28, 1999, we began constructing the Fund's
portfolio according to its investment discipline. The Fund seeks to maximize
after-tax total return by using a tax-advantaged valuation model to invest
primarily in stocks of companies believed to have above-average earnings
growth potential with reasonable valuations. As of February 28, 1999, the Fund
was 81.5% invested in stocks, with 18.5% in cash.* The Fund held about 100
stocks and its average market capitalization was $13.8 billion.*
We eliminated several of the Fund's positions during the period. For example,
we sold Bethlehem Steel at a small profit after it announced disappointing
earnings for the fourth quarter of 1998. Also, when Morton International
became a takeover target we sold the stock at its tender price, not wanting to
risk a price decline if obstacles to the takeover arose.
The Fund has lagged the Index since its inception. The Fund's investment
discipline generally favors value stocks, i.e., stocks with lower prices
relative to earnings per share. Since the Fund's inception in December 1998,
value stocks generally have underperformed growth stocks, i.e., stocks with
higher prices relative to earnings per share and above average earnings
growth.
Value and growth stocks have tended to perform in line with each other over
time. In light of that trend, and considering our economic outlook for 1999,
we expect the unusually wide gap between value and growth stocks to narrow
- --although there can be no guarantee that this will happen. Based on our
current assessment, we do not anticipate making any strategic changes to the
Fund over the next reporting period.
TOP TEN STOCKS*
Mettler-Toledo International Inc. 4.1%
Chase Manhattan Corp. 1.3%
Hewlett-Packard Corp. 1.3%
The Limited, Inc. 1.3%
Travelers Property Casualty Corp. 1.3%
K Mart Corp. 1.2%
Litton Industries, Inc. 1.1%
Ross Stores, Inc. 1.1%
Computer Associates International Inc. 1.1%
Autodesk, Inc. 1.1%
* Portfolio weightings represent percentages of net assets as of February 28,
1999. The Fund's portfolio is actively managed and its composition will vary
over time.
PaineWebber
Tax-Managed Equity Fund
Top Five Sectors*
Financial Services 17.5%
Technology 17.2%
Capital Goods 16.3%
Customer Cyclical 15.5%
Consumer Noncyclical 6.5%
2
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND SEMIANNUAL REPORT
Our ultimate objective in managing your investments is to help you
successfully meet your financial goals. We thank you for your continued
support and welcome any comments or questions you may have.
For a Quarterly Review on PaineWebber Tax-Managed Equity Fund or another fund
in the PaineWebber Family of Funds,(1) please contact your Financial Advisor.
Sincerely,
/s/ Margo Alexander
- -----------------------
MARGO ALEXANDER
Chairman and Chief Executive Officer
Mitchell Hutchins Asset Management Inc.
/s/ Mark A. Tincher
- --------------------------
MARK A. TINCHER
Managing Director and
Chief Investment Officer - Equities
Mitchell Hutchins Asset Management Inc.
Portfolio Manager, Tax-Managed Equity Fund
/s/ Christopher G. Altschul
- ----------------------------
CHRISTOPHER G. ALTSCHUL
First Vice President
Mitchell Hutchins Asset Management Inc.
Portfolio Manager, Tax-Managed Equity Fund
(1) Mutual funds are sold by prospectus only. The prospectuses for the funds
contain more complete information regarding risks, charges and expenses, and
should be read carefully before investing.
This letter is intended to assist shareholders in understanding how the Fund
performed during the 11-week period ended February 28, 1999, and reflects our
views at the time of its writing. Of course, these views may change in
response to changing circumstances. We encourage you to consult your Financial
Advisor regarding your personal investment program.
3
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1999 (unaudited)
<TABLE>
<CAPTION>
Number of
Shares Value
- --------- ---------
<S> <C>
COMMON STOCK--81.48%
Agriculture, Food & Beverage--2.53%
14,000 Interstate Bakeries Corporation .................. $ 336,000
15,000 RJR Nabisco Holdings Corporation ................. 409,687
14,000 Sara Lee Corporation ............................. 380,625
------------
1,126,312
------------
Airlines--0.76%
9,800 Continental Airlines Incorporated* ............... 339,325
------------
Alcohol--0.94%
7,000 Coors Adolph Corporation ......................... 416,938
------------
Apparel, Retail--2.41%
11,000 Ross Stores, Incorporated ........................ 503,250
16,000 The Limited, Incorporated ........................ 568,000
------------
1,071,250
------------
Apparel, Textiles--0.91%
12,000 Liz Claiborne, Incorporated ...................... 404,250
------------
Banks--3.17%
9,000 Bank One Corporation ............................. 483,750
3,200 Independent Bancshares Incorporated .............. 36,600
7,500 The Chase Manhattan Corporation .................. 597,187
9,300 UnionBanCal Corporation .......................... 292,369
------------
1,409,906
------------
Chemicals--2.05%
10,000 Alliedsignal, Incorporated ....................... 413,750
11,500 Gencorp Incorporated ............................. 230,719
20,000 W.R. Grace and Company ........................... 268,750
------------
913,219
------------
Computer Hardware--3.99%
9,000 Hewlett-Packard Company .......................... 597,938
2,200 International Business Machines Corporation ...... 374,000
3,500 Lexmark International Group, Incorporated* ....... 361,156
8,000 Xerox Corporation ................................ 441,500
------------
1,774,594
------------
Computer Software--3.99%
12,500 Autodesk, Incorporated ........................... 501,562
12,000 Computer Associates International, Incorporated... 504,000
25,000 Parametric Technology Corporation* ............... 384,375
13,000 Unisys Corporation* .............................. 387,563
------------
1,777,500
------------
Construction--0.74%
9,000 Centex Corporation ............................... $ 331,313
------------
Consumer Durables--1.29%
14,000 Herman Miller, Incorporated ...................... 238,000
6,000 Maytag Corporation ............................... 336,375
------------
574,375
------------
Defense/Aerospace--6.96%
11,000 Cordant Technologies Incorporated ................ 428,313
8,000 General Dynamics Corporation ..................... 483,500
15,000 Howmet International Incorporated ................ 241,875
9,000 Litton Industries, Incorporated .................. 505,125
10,000 Lockheed Martin Corporation ...................... 376,875
3,300 Newport News Shipbuilding Incorporated ........... 95,494
7,000 Sundstrand Corporation ........................... 473,812
4,000 United Technologies Corporation .................. 495,500
------------
3,100,494
------------
Diversified Retail--2.86%
9,000 Federated Department Stores, Incorporated* ....... 342,562
30,000 K Mart Corporation* .............................. 525,000
10,000 Sears, Roebuck & Company ......................... 406,250
------------
1,273,812
------------
Drugs & Medicine--0.98%
8,000 Pharmacia & Upjohn, Incorporated ................. 436,000
------------
Electric Utilities--9.12%
11,000 Baltimore Gas & Electric Corporation ............. 281,875
7,500 BEC Energy ....................................... 273,281
8,000 Carolina Power & Light Corporation ............... 319,000
10,800 Edison International, Incorporated ............... 275,400
72,000 Mettler-Toledo International Incorporated* ....... 1,840,500
7,700 PECO Energy Company .............................. 272,869
9,400 PG&E Corporation ................................. 296,100
7,000 Pinnacle West Capital Corporation ................ 252,875
9,600 Rochester Gas & Electric Corporation ............. 250,800
------------
4,062,700
------------
Electrical Equipment--0.52%
7,500 SCI Systems, Incorporated* ....................... 232,031
------------
Electrical Power--0.94%
6,000 Philips Electronics N.V. ......................... 417,750
------------
</TABLE>
4
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
<TABLE>
<CAPTION>
Number of
Shares Value
- --------- ---------
<S> <C>
COMMON STOCK (continued)
Energy Reserves & Production--0.52%
2,800 Mobil Corporation ................................ $ 232,925
------------
Entertainment--0.89%
15,000 King World Productions, Incorporated* ............ 396,563
------------
Environmental Services--1.25%
4,200 Allied Waste Industries Incorporated* ............ 81,900
15,000 Browning-Ferris Industries, Incorporated ......... 472,500
------------
554,400
------------
Food Retail--0.62%
29,000 Food Lion Incorporated ........................... 276,406
------------
Heavy Machinery--1.73%
9,000 Caterpillar, Incorporated ........................ 410,062
11,000 Deere & Company .................................. 359,563
------------
769,625
------------
Information & Computer Services--3.10%
6,500 Computer Sciences Corporation* ................... 433,062
9,700 Electronic Data Systems Corporation* ............. 451,050
13,000 First Data Corporation ........................... 497,250
------------
1,381,362
------------
Leisure--1.04%
7,000 Eastman Kodak Company ............................ 463,313
------------
Life Insurance--2.91%
6,000 CIGNA Corporation ................................ 471,000
13,000 Conseco, Incorporated ............................ 389,188
4,600 Lincoln National Corporation ..................... 435,562
------------
1,295,750
------------
Manufacturing--General--2.35%
12,000 American Standard Companies, Incorporated* ....... 402,750
12,000 Crane Company .................................... 329,250
5,500 SPX Corporation* ................................. 314,187
------------
1,046,187
------------
Medical Products--1.87%
12,000 Mallinckrodt Incorporated ........................ 371,250
5,600 St. Jude Medical, Incorporated* .................. 140,700
10,000 Varian Associates, Incorporated .................. 320,000
------------
831,950
------------
<CAPTION>
Number of
Shares Value
- --------- ---------
<S> <C>
Medical Providers--0.64%
16,000 Columbia/HCA Healthcare Corporation .............. $ 286,000
------------
Mining & Metals--0.67%
7,000 Reynolds Metals Company .......................... 299,250
------------
Motor Vehicles--2.92%
8,000 Ford Motor Company ............................... 474,500
6,000 General Motors Corporation ....................... 495,375
7,000 TRW Incorporated ................................. 330,750
------------
1,300,625
------------
Oil Refining--1.79%
16,000 Tosco Corporation ................................ 331,000
16,000 YPF S.A., ADR .................................... 464,000
------------
795,000
------------
Oil Services--1.44%
25,000 BJ Services Company* ............................. 351,563
12,600 Cooper Cameron Corporation ....................... 291,375
------------
642,938
------------
Other Insurance--7.58%
6,000 ACE Limited ...................................... 163,500
12,500 Allstate Corporation ............................. 468,750
7,000 Chubb Corporation ................................ 418,250
11,000 Enhance Financial Services Group Incorporated .... 260,562
10,600 Horace Mann Educators Corporation ................ 248,438
4,000 Loews Corporation ................................ 312,750
5,500 MBIA, Incorporated ............................... 338,594
16,000 Old Republic International Corporation ........... 301,000
6,800 PartnerRe Limited ................................ 294,100
15,000 Travelers Property Casualty Corporation .......... 569,062
------------
3,375,006
------------
Publishing--0.84%
11,000 Deluxe Corporation ............................... 372,625
------------
Restaurants--0.99%
20,000 Darden Restaurants, Incorporated ................. 440,000
------------
Securities & Asset Management--1.63%
7,000 Lehman Brothers Holdings, Incorporated ........... 371,000
4,600 Merrill Lynch & Company, Incorporated ............ 353,050
------------
724,050
------------
</TABLE>
5
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
<TABLE>
<CAPTION>
Number of
Shares Value
- --------- ---------
<S> <C>
COMMON STOCK (concluded)
Thrift--0.69%
10,000 Greenpoint Financial Corporation ................. $ 306,875
------------
<CAPTION>
Number of
Shares Value
- --------- ---------
<S> <C>
Tobacco--1.85%
8,000 Philip Morris Companies Incorporated ............. $ 313,000
9,000 Universal Corporation ............................ 244,688
9,000 UST Incorporated ................................. 266,062
------------
823,750
------------
Total Common Stocks
(cost--$36,591,396) ........................................... 36,276,369
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
(000) Maturity Dates Interest Rates
--------- -------------- --------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS--18.88%
$2,000 Repurchase Agreement dated 02/26/99 with
Deutsche Bank Securities Incorporated,
collateralized by $1,895,000 U.S. Treasury Notes,
6.500% due 05/15/05 (value--$2,055,365);
proceeds: $2,000,788 ................................ 03/01/99 4.730% 2,000,000
-------------
2,000 Repurchase Agreement dated 02/26/99 with
Dresdner Kleinwort Benson N.A. LLC, collateralized
by $1,931,000 U.S. Treasury Bonds, 8.250% due
05/15/05 (value--$2,040,275); proceeds: $2,000,788 .. 03/01/99 4.730 2,000,000
-------------
2,000 Repurchase Agreement dated 02/26/99 with
SG Cowen Corporation, collateralized by
$1,512,000 U.S. Treasury Bonds, 8.875% due
08/15/17 (value--$2,041,200); proceeds: $2,000,792... 03/01/99 4.750 2,000,000
-------------
2,407 Repurchase Agreement dated 02/26/99 with
State Street Bank Corporation, collateralized by
$1,685,000 U.S. Treasury Bonds, 12.000% due
08/15/13 (value--$2,462,206); proceeds: $2,407,947... 03/01/99 4.720 2,407,000
Total Repurchase Agreements (cost--$8,407,000) .................................................... 8,407,000
-------------
Total Investments (cost--$44,998,396)--100.36% .................................................... 44,683,369
Liabilities in excess of other assets--(0.36)% .................................................... (158,465)
-------------
Net Assets--100.00% ............................................................................... $ 44,524,904
=============
</TABLE>
- ---------------------------
* Non-Income producing security
ADR American Depositary Receipt
See accompanying notes to financial statements
6
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 (unaudited)
<TABLE>
<S> <C>
Assets
Investments in securities, at value (cost--$44,998,396) ....................................... $ 44,683,369
Cash .......................................................................................... 130
Receivable for shares of beneficial interest sold ............................................. 371,957
Dividends and interest receivable ............................................................. 48,971
Other assets .................................................................................. 543
------------
Total assets .................................................................................. 45,104,970
------------
Liabilities
Payable for investments purchased ............................................................. 476,786
Payable to affiliates ......................................................................... 38,568
Payable for shares of beneficial interest repurchased ......................................... 28,709
Accrued expenses and other liabilities ........................................................ 36,003
------------
Total liabilities ............................................................................. 580,066
------------
Net Assets
Beneficial interest--$0.001 par value outstanding (unlimited amount authorized) ............... 44,528,224
Accumulated net investment loss ............................................................... (15,175)
Accumulated net realized gain from investment transactions .................................... 326,882
Net unrealized depreciation of investments .................................................... (315,027)
------------
Net assets .................................................................................... $ 44,524,904
============
Class A:
Net assets .................................................................................... $ 14,350,306
------------
Shares outstanding ............................................................................ 1,137,230
------------
Net asset value and redemption value per share ................................................ $ 12.62
============
Maximum offering price per share (net asset value plus sales charge of 4.50%
of offering price) $ 13.21
============
Class B:
Net assets .................................................................................... $ 16,894,851
------------
Shares outstanding ............................................................................ 1,340,895
------------
Net asset value and offering price per share .................................................. $ 12.60
============
Class C:
Net assets .................................................................................... $ 13,279,734
------------
Shares outstanding ............................................................................ 1,053,931
------------
Net asset value and offering price per share .................................................. $ 12.60
============
Class Y:
Net assets .................................................................................... $ 13
------------
Shares outstanding ............................................................................ 1
------------
Net asset value, offering price and redemption value per share ................................ $ 12.61
============
</TABLE>
See accompanying notes to financial statements
7
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Period
December 14, 1998+
through
February 28, 1999
(unaudited)
---------------
<S> <C>
Investment income:
Dividends ..................................................................................... $ 91,884
Interest ...................................................................................... 65,695
---------
157,579
---------
Expenses:
Investment advisory and administration ........................................................ 61,247
Service fees--Class A ......................................................................... 6,788
Service and distribution fees--Class B ........................................................ 31,564
Service and distribution fees--Class C ........................................................ 22,947
Organizational expenses ....................................................................... 36,197
Legal and audit ............................................................................... 17,391
Reports and notices to shareholders ........................................................... 10,972
Transfer agency fees .......................................................................... 4,667
Custody and accounting ........................................................................ 4,621
Trustees' fees ................................................................................ 2,625
Federal and state registration fees ........................................................... 1,042
Other expenses ................................................................................ 7,405
---------
207,466
Less: Fee waivers from adviser ................................................................ (34,712)
---------
Net expenses .................................................................................. 172,754
---------
Net investment loss ........................................................................... (15,175)
---------
Realized and unrealized gains (losses) from investment activities:
Net realized gain from investment transactions ................................................ 326,882
Net unrealized appreciation/depreciation of investments ....................................... (315,027)
---------
Net realized and unrealized gain from investment activities ................................... 11,855
---------
Net decrease in net assets resulting from operations .......................................... $ (3,320)
=========
</TABLE>
+ Commencement of operations
See accompanying notes to financial statements
8
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Period
December 14, 1998+
through
February 28,1999
(unaudited)
---------------
<S> <C>
From operations:
Net investment loss ........................................................................... $ (15,175)
Net realized gain from investment transactions ................................................ 326,882
Net unrealized appreciation/depreciation of investments ....................................... (315,027)
-----------
Net decrease in net assets resulting from operations .......................................... (3,320)
-----------
From beneficial interest transactions:
Net proceeds from the sale of shares .......................................................... 46,508,489
Cost of shares repurchased .................................................................... (1,980,315)
-----------
Net increase in net assets derived from beneficial interest transactions ...................... 44,528,174
-----------
Net increase in net assets .................................................................... 44,524,854
Net assets:
Beginning of period ........................................................................... 50
-----------
End of period ................................................................................. $44,524,904
===========
</TABLE>
- ------------------------
+ Commencement of operations
See accompanying notes to financial statements
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (unaudited)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Tax-Managed Equity Fund (the "Fund") is a diversified series of
PaineWebber Managed Investments Trust (the "Trust"). The Trust was organized
as a Massachusetts business trust and is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended, as
an open-end management investment company. The Fund's investment objective is
to maximize after-tax total return.
Currently, the Fund offers Class A, Class B, Class C and Class Y shares.
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 service
and/or distribution plan. Class Y shares have no service 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--Securities which are listed on stock exchanges
are valued at the last sale price on the day the securities are being valued
or, lacking any sales on such day, at the last available bid price. In cases
where securities are traded on more than one exchange, the securities are
valued on the exchange designated by Mitchell Hutchins Asset Management Inc.
("Mitchell Hutchins"), a wholly owned asset management subsidiary of
PaineWebber Incorporated ("PaineWebber") and investment adviser, administrator
and distributor of the Fund. Securities traded in the over-the-counter ("OTC")
market or listed on the Nasdaq Stock Market, Inc. ("Nasdaq") are valued at the
last available sale price, or last bid price available if no sale occurs, on
Nasdaq prior to the time of valuation. Where market quotations are readily
available, debt securities are valued thereon, provided such quotations
adequately reflect the fair value of the securities in the judgment of
Mitchell Hutchins. 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 is used to value short-term
debt securities with sixty 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. The Fund occasionally
participates in joint repurchase agreement transactions with other funds
managed by Mitchell Hutchins.
10
<PAGE>
Notes to Financial Statements (unaudited)
Investment Transactions and Investment Income--Investment transactions are
recorded on the trade date. Realized gains and losses from investment
transactions are calculated using the identified cost method. Interest income
is recorded on an accrual basis. Dividend income is recorded on the
ex-dividend date. Discounts are accreted and premiums are amortized as
adjustments to interest income and identified cost of investments.
Income, expenses (excluding class-specific expenses) and
realized/unrealized gains/losses are allocated proportionately to each class
of shares based upon the relative net asset value of outstanding shares (or
the value of dividend-eligible shares, as appropriate) of each class at the
beginning of the day (after adjusting for current capital share activity of
the respective classes). Class specific expenses are charged directly to the
applicable class of shares.
Dividends and Distributions--Dividends and distributions to shareholders
are recorded on the ex-dividend date. The amount of dividends and
distributions are determined in accordance with federal income tax
regulations, which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification.
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 an annual rate of 0.75% of the Fund's average daily net
assets. For the period ended February 28, 1999, Mitchell Hutchins has
voluntarily undertaken to waive a portion of advisory fees and reimburse a
portion of other expenses when necessary to maintain the Fund's total annual
operating expenses at a level not to exceed 1.62%, 2.37%, 2.37% and 1.37% of
the Fund's average daily net assets for Class A, Class B, Class C and Class Y
shares, respectively. At February 28, 1999, the Fund owed Mitchell Hutchins
$13,483 in investment advisory and administration fees.
For the period ended February 28, 1999, the Tax-Managed Equity Fund paid
$1,164 in commissions to PaineWebber for transactions executed on behalf of
the Fund.
DISTRIBUTION PLANS
Mitchell Hutchins is the distributor of the Fund's shares and has appointed
PaineWebber as the exclusive dealer for the sale of those shares. Under
separate plans of service and/or distribution pertaining to Class A, Class B
and Class C shares, the Fund pays Mitchell Hutchins monthly service fees at
the annual rate of up to 0.25% of the average daily net assets of Class A,
Class B and Class C shares and monthly distribution fees at the annual rate of
0.75% of the average daily net assets on Class B and Class C shares. At
February 28, 1999, the Fund owed Mitchell Hutchins $25,085 in service and
distribution fees.
Mitchell Hutchins also receives the proceeds of the initial sales charges
paid upon the purchase of Class A shares and the contingent deferred sales
charges paid by shareholders upon certain redemptions of Class A, Class B and
Class C shares. Mitchell Hutchins has informed the Fund that for the period
ended February 28, 1999, it earned $281,836 in sales charges.
11
<PAGE>
Notes to Financial Statements (unaudited)
SECURITY LENDING
The Fund may lend securities up to 33 1/3% of its total assets to qualified
institutions. The loans are secured at all times by cash, U.S. government
securities or irrevocable letters of credit that meet certain guidelines
established by Mitchell Hutchins, in an amount at least equal to the market
value of the securities loaned, plus accrued interest, determined on a daily
basis and adjusted accordingly. The Fund will regain record ownership of
loaned securities to exercise certain beneficial rights, however, the Fund may
bear the risk of delay in recovery of, or even loss of rights in, the
securities loaned should the borrower fail financially. The Fund receives
compensation, which is included in interest income, for lending its securities
from interest earned on the cash or U.S. government securities held as
collateral, net of fee rebates paid to the borrower plus reasonable
administrative and custody fees. During the period ended February 28, 1999,
the Fund did not participate in the Securities Lending Program.
BANK LINE OF CREDIT
The Fund may participate with other funds managed by Mitchell Hutchins in a
$200 million committed credit facility ("Facility") to be utilized for
temporary financing until the settlement of sale or purchase of portfolio
securities, the repurchase or redemption of shares of the Fund at the request
of the shareholders and other temporary or emergency purchases. In connection
therewith, the Fund has agreed to pay a commitment fee, pro rata, based on the
relative asset size of the Fund in the Facility. Interest is charged to the
Fund at rates based on prevailing market rates in effect at the time of
borrowings. For the period ended February 28, 1999, the Fund did not borrow
under the Facility.
TRANSFER AGENCY SERVICE FEES
PaineWebber provides transfer agency related services to the Fund pursuant
to a delegation of authority from PFPC, Inc., the Fund's transfer agent, and
is compensated for these services by PFPC, Inc., not the Fund. For the period
ended February 28, 1999, PaineWebber received approximately 51% of the total
transfer agency service fees collected by PFPC, Inc. from the Fund.
12
<PAGE>
Notes to Financial Statements (unaudited)
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at February
28, 1999 was substantially the same as the cost of securities for financial
statement purposes.
At February 28, 1999, the components of net unrealized depreciation of
investments were as follows:
Gross depreciation (investments having an
excess of cost over value) .............. $(2,116,412)
Gross appreciation (investments having an excess
of value over cost) ..................... 1,801,385
-----------
Net unrealized depreciation of investments .. $ (315,027)
===========
For the period ended February 28, 1999, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $38,008,191 and
$1,743,649, respectively.
FEDERAL TAX STATUS
The Fund intends to distribute substantially all of its taxable income and
to comply with the other requirements of the Internal Revenue Code applicable
to regulated investment companies. Accordingly, no provision for federal
income taxes is required. In addition, by distributing during each calendar
year, substantially all of its net investment income, capital gains and
certain other amounts, if any, the Fund intends not to be subject to any
federal excise tax.
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
------ ------ ------ ------ ------ ------ ------ ------
For the Period December 14, 1998+
through February 28, 1999:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold .................. 1,185,069 $14,927,087 1,382,794 $17,412,859 1,120,935 $14,168,543 -- $ --
Shares repurchased ........... (52,073) (660,861) (37,663) (473,310) (67,005) (846,144) -- --
Shares converted from
Class B to Class A ......... 4,233 54,526 (4,237) (54,526) -- -- -- --
--------- ----------- --------- ----------- --------- ----------- ------ -----
Net Increase ................. 1,137,229 $14,320,752 1,340,894 $16,885,023 1,053,930 $13,322,399 -- $ --
========= =========== ========= =========== ========= =========== ====== =====
</TABLE>
+ Commencement of operations
13
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
FINANCIAL HIGHLIGHTS (unaudited)
Selected data for a share of beneficial interest outstanding throughout the
period is presented below:
<TABLE>
<CAPTION>
For the Period December 14, 1998+
through February 28, 1999
--------------------------------------------
Class A Class B Class C
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period ............................................ $ 12.50 $ 12.50 $ 12.50
-------- --------- --------
Net investment income (loss) .................................................... 0.01 (0.01) (0.01)
Net realized and unrealized gains from investments .............................. 0.11 0.11 0.11
-------- -------- --------
Total increase from investment operations ....................................... 0.12 0.10 0.10
-------- -------- --------
Net asset value, end of period .................................................. $ 12.62 $ 12.60 $ 12.60
======== ======== ========
Total investment return (1) ..................................................... 0.96% 0.80% 0.80%
======== ======== ========
Ratios/Supplemental data:
Net assets, end of period (000's) ............................................... $ 14,350 $ 16,895 $ 13,280
Expenses to average net assets, net of waivers from adviser ..................... 1.61%* 2.36%* 2.37%*
Expenses to average net assets, before waivers from adviser ..................... 2.07%* 2.78%* 2.77%*
Net investment income (loss) to average net assets, net of waivers from adviser . 0.31%* (0.44)%* (0.42)%*
Net investment loss to average net assets, before waivers from adviser .......... (0.15)%* (0.85)%* (0.83)%*
Portfolio turnover rate ......................................................... 5% 5% 5%
</TABLE>
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* Annualized
+ Commencement of operations
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of the period reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates and a sale
at net asset value on the last day of the 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 return for the
period has not been annualized.
Note: For the period December 14, 1998+ through February 28, 1999, the fund
issued one share of Class Y at a net asset value of $12.50. Net realized
and unrealized gains from investments during the period were $0.11 and the
end of period net asset value was $12.61. Total return(1) was 0.88% and
the portfolio turnover rate was 5%.
<PAGE>
- -----------
TRUSTEES
E. Garrett Bewkes, Jr.
Chairman
Margo N. Alexander
Richard Q. Armstrong
Richard R. Burt
Mary C. Farrell
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
PRINCIPAL OFFICERS
Margo N. Alexander
President
Victoria E. Schonfeld
Vice President
Dianne E. O'Donnell
Vice President and Secretary
Paul H. Schubert
Vice President and Treasurer
Mark A. Tincher
Vice President
INVESTMENT ADVISER,
ADMINISTRATOR AND DISTRIBUTOR
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
A prospectus containing more complete information for any of the Funds listed
on the back cover can be obtained from a PaineWebber Financial Advisor or
corresponding firm. Read the prospectus carefully before investing.
The financial information included herein is taken from the records of the
Fund without examination by independent auditors who do not express an opinion
thereon.
This report is not to be used in conjunction with the offering of shares of
the Fund unless accompanied or preceded by an effective prospectus.
<PAGE>
- --------------------------------------------------------------------------------
PaineWebber offers a family of 27 funds which encompass a diversified range of
investment goals.
BOND FUNDS
o High Income Fund
o Investment Grade Income Fund
o Low Duration U.S. Government Income Fund
o Strategic Income Fund
o U.S. Government Income Fund
TAX-FREE BOND FUNDS
o California Tax-Free Income Fund
o Municipal High Income Fund
o National Tax-Free Income Fund
o New York Tax-Free Income Fund
STOCK FUNDS
o Financial Services Growth Fund
o Growth Fund
o Growth and Income Fund
o Mid Cap Fund
o Small Cap Fund
o S&P 500 Index Fund
o Tax-Managed Equity Fund
o Utility Income Fund
ASSET ALLOCATION FUNDS
o Balanced Fund
o Tactical Allocation Fund
GLOBAL FUNDS
o Asia Pacific Growth Fund
o Emerging Markets Equity Fund
o Global Equity Fund
o Global Income Fund
MITCHELL HUTCHINS PORTFOLIOS
o Aggressive Portfolio
o Moderate Portfolio
o Conservative Portfolio
PAINEWEBBER MONEY MARKET FUND
[PAINEWEBBER LOGO]
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(Copyright) 1999 PaineWebber Incorporated
Member SIPC
PAINEWEBBER
- --------------------------------------------------------------------------------
TAX-MANAGED
EQUITY FUND
SEMIANNUAL REPORT
FEBRUARY 28, 1999
