<PAGE>
PAINEWEBBER
===========================================================================
TAX-MANAGED
EQUITY FUND
ANNUAL REPORT
AUGUST 31, 1999
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND ANNUAL REPORT
PERFORMANCE AT A GLANCE
================================================================================
Comparison of the change of a $10,000 investment in PaineWebber Tax-Managed
Equity Fund (A, B, C, Y) and the S&P 500 Index, from December 14, 1998 through
August 31, 1999
[GRAPHIC OMITTED]
[The following table was depicted as a line chart in the printed material.]
<PLOT POINTS NEEDED>
The graph depicts the performance of PaineWebber Tax-Managed Equity Fund (A, B,
C, Y) versus the S&P 500 Index. It is important to note that PaineWebber
Tax-Managed Equity Fund is a professionally managed mutual fund while the Index
is not available for investment and is unmanaged. The comparison is shown for
illustrative purposes only.
Past performance is no guarantee of future performance.
- ------------------------------------
TOTAL % RETURN, PERIOD ENDED 8/31/99
- ------------------------------------
Inception(1)
- --------------------------------------------------------------------------------
Class A* 11.52
Before Deducting Class B** 10.88
Maximum Sales Charge Class C+ 10.88
Class Y++ 11.04
- --------------------------------------------------------------------------------
Class A* 6.49
After Deducting Class B** 5.88
Maximum Sales Charge Class C+ 9.88
The investment return and the principal value of an investment in the Fund will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
(1) Inception: since commencement of issuance on December 14, 1998, for Class
A, B, C and Y shares.
* Maximum sales charge for Class A shares is 4.5% of the public offering
price. Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5% and is
reduced to 0% after six years. Class B shares bear ongoing 12b-1
distribution and service fees.
+ Maximum contingent deferred sales charge for Class C shares is 1% and is
reduced to 0% after one year. Class C shares bear ongoing 12b-1
distribution and service fees.
++ The Fund offers Class Y shares to a limited group of eligible investors,
including participants in certain investment programs that are sponsored
by PaineWebber and that may invest in PaineWebber mutual funds, as well as
the trustee of the PaineWebber 401(k) Plus Plan. Class Y shares do not
bear initial or contingent deferred sales charges or ongoing distribution
and service fees.
1
<PAGE>
ANNUAL REPORT
- ----------------------------
PAINEWEBBER
TAX-MANAGED
EQUITY FUND
PROFILE
As of August 31, 1999
Investment Goal:
Maximize after-tax
total return
Portfolio Managers:
Mark A. Tincher
and Christopher G. Altschul,
Mitchell Hutchins
Asset Management Inc.
Commencement:
December 14, 1998
Dividend Payments:
annually, if any
- ----------------------------
October 15, 1999
Dear Shareholder,
We are pleased to present you with the first annual report for the PaineWebber
Tax-Managed Equity Fund (the "Fund") for the fiscal period from December 14,
1998 through August 31, 1999.
MARKET REVIEW
================================================================================
[GRAPHIC OMITTED] For most of 1998 and the first quarter of 1999 the market was
very narrow, focused primarily on large-capitalization growth companies. This
was a highly unusual situation and we expected conditions to return to
normal--i.e., near parity between growth and value styles. The market did
briefly turn around in the second quarter, but only the most undervalued of the
value stocks benefited before investors got concerned about the surge in
commodity prices, and narrowness returned. For the 12 months ended August 31,
1999, the S&P 500 Index gained 39.81%.
Despite gains in the broad market, individual stock performance varied widely.
About two thirds of the stocks traded on the New York Stock Exchange have
actually posted losses year to date. The market weakened at the end of the
Fund's fiscal year, as investors became concerned about the possibility of the
Federal Reserve again raising short-term interest rates. Technology and consumer
cyclicals were the strongest sectors; the weakest sectors included healthcare,
utilities and capital goods.
OUTLOOK
We expect gross domestic product growth of around 3.80% for 1999, and about
2.90% growth for 2000. Our outlook calls for 2.25% inflation for calendar year
1999, and about the same or slightly higher for calendar year 2000. We expect
the yield on the long bond (30-year Treasury) to stay close to 6.10% for the
rest of 1999, and to retreat below 6.00% in 2000. Overseas growth does not seem
strong enough to raise inflationary expectations to a great degree, but should
allow companies to maintain profitability.
PORTFOLIO HIGHLIGHTS
================================================================================
[GRAPHIC OMITTED]
CHARACTERISTICS*
8/31/99 2/28/99
--------------------------------------------------------------------
Net Assets ($mm) $61.3 $44.5
Average Market Cap ($bln) $22.0 $12.4
Price/Earnings Ratio(1) 17.1x 13.9x
Dividend Yield 1.22% 1.51%
Number of Securities 99 85
Stocks 83.8% 87.7%
Cash 16.2% 12.3%
--------------------------------------------------------------------
* Weightings represent percentages of net assets as of August 31, 1999,
except where noted otherwise. The Fund's portfolio is actively managed and
its composition will vary over time.
(1) Based on projected fiscal year earnings for August 31, 1999 to August 31,
2000.
2
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND ANNUAL REPORT
The Fund's investment style, which focuses on stocks with reasonable valuations
and favorable earnings forecasts, suffered for most of the fiscal period due to
a narrow, growth style market, though the mid-summer value rebound temporarily
helped performance. Fund performance lagged the S&P 500 Index return of 14.57%
for the fiscal period.
The Fund remains overweighted in capital goods (14.2%) and cyclical stocks
(18.4%), and continues to be underweighted in technology (14.6%), healthcare
(3.3%) and utilities (3.6%). The Fund also remains underweighted in consumer
nondurables. The underweighting reflected our expectation that the Federal
Reserve would raise short-term interest rates, which it did twice during the
fiscal period. The consumer nondurables sector historically has performed poorly
in rising interest rate environments.
TOP TEN HOLDINGS*
As of 8/31/99
- ---------------------------------------------------
General Dynamics Corp. 2.5
Microsoft Corp. 2.1
Reynolds Metals Co. 1.7
United Technologies Corp. 1.7
Apple Computer, Inc. 1.6
BJ Services Co. 1.6
The Chase Manhattan Corp. 1.6
TRW Inc. 1.5
Mettler Toledo International Inc. 1.5
SPX Corp. 1.5
- ---------------------------------------------------
As of 2/28/99
- -------------------------------------------------------------
Mettler Toledo International Inc. 4.1
The 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
- -------------------------------------------------------------
The Fund seeks to identify companies believed to have reasonable valuations with
favorable earnings forecasts. In the current interest rate environment, such
companies are difficult to find and the Fund is maintaining a relatively high
level of cash as a result.
We expect value stocks to rebound and believe the Fund's positions could benefit
as the market broadens. We plan to look selectively for buying opportunities in
financial services. Earnings estimates for financial services companies
generally are improving, and we feel the sector is poised to rebound as
investors put interest rate and inflation fears behind them.
* Weightings represent percentages of net assets as of August 31, 1999,
except where noted otherwise. The Fund's portfolio is actively managed and
its composition will vary over time.
PAINEWEBBER
TAX-MANAGED
EQUITY FUND
Top Five Sectors*
As of 8/31/99
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
Consumer Cyclical 18.4%
Technology 14.6%
Capital Goods 14.2%
Financial Services 11.9%
Energy 8.0%
As of 2/28/99
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
Financial Services 17.5%
Technology 17.2%
Capital Goods 16.3%
Consumer Cyclical 15.5%
Consumer Nonyclical 6.5%
3
<PAGE>
ANNUAL 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,(2)
please contact your Financial Advisor.
Sincerely,
/s/ Margo Alexander
MARGO ALEXANDER
Chairman and Chief Executive Officer
Mitchell Hutchins Asset Management Inc.
/s/ Brian M. Storms
BRIAN M. STORMS
President and Chief Operating 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
(2) 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 fiscal period from December 14, 1998 through August 31,
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.
4
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 1999
Number of
Shares Value
- -------------- ------------
COMMON STOCK--83.77%
Agriculture, Food & Beverage--1.94%
11,400 Hershey Foods Corp. ..................... $ 610,612
800 Interstate Bakeries Corp. ............... 19,150
900 Sara Lee Corp. .......................... 19,969
23,900 Supervalue, Inc. ........................ 537,750
------------
1,187,481
------------
Airlines--1.44%
5,400 AMRCorp.* ............................... 316,575
8,700 UAL-Corp.* .............................. 563,869
------------
880,444
------------
Apparel, Retail--3.05%
18,200 Limited, Inc. ........................... 689,325
16,600 Liz Claiborne Inc. ...................... 610,050
12,600 Ross Stores Inc. ........................ 524,475
2,600 Too Inc.* ............................... 45,662
------------
1,869,512
------------
Banks--3.71%
22,700 Bank of New York Co. Inc. ............... 811,525
11,400 The Chase Manhattan Corp. ............... 954,037
3,500 Independent Bancshares Inc. ............. 39,813
12,200 UnionBanCal Corp. ....................... 468,175
------------
2,273,550
------------
Chemicals--1.90%
12,000 Gencorp Inc. ............................ 258,000
14,100 Sherwin-Williams Co. .................... 343,688
29,600 W.R. Grace & Co.* ....................... 566,100
------------
1,167,788
------------
Computer Hardware--2.95%
15,400 Apple Computer, Inc.*(1) ................ 1,004,850
10,200 Lexmark International Group, Inc.* ...... 803,250
------------
1,808,100
------------
Computer Software--5.50%
13,800 Autodesk, Inc. .......................... 317,400
7,100 IBM Corp. ............................... 884,394
14,200 Microsoft Corp.* ........................ 1,314,387
19,900 Unisys Corp.* ........................... 855,700
------------
3,371,881
------------
Construction--0.95%
8,400 Armstrong World Industries, Inc. ........ $ 407,925
6,200 Centex Corp. ............................ 174,375
------------
582,300
------------
Consumer Durables--0.50%
4,900 Maytag Corp. ............................ 306,863
------------
Defense/Aerospace--8.10%
11,400 Allied Signal, Inc. ..................... 698,250
12,600 Cordant Technologies Inc. ............... 521,325
24,700 General Dynamics Corp. .................. 1,556,100
34,200 Howmet International Inc.* .............. 611,325
10,300 Litton Industries, Inc.* ................ 659,200
16,900 TRW Inc. ................................ 921,050
------------
4,967,250
------------
Diversified Retail--2.65%
11,600 Federated Department Stores, Inc.* ...... 533,600
11,400 Sears, Roebuck & Co. .................... 427,500
15,000 Wal Mart Stores, Inc. ................... 664,687
------------
1,625,787
------------
Drugs & Medicine--0.77%
9,100 Pharmacia & Upjohn, Inc. ADR ............ 475,475
------------
Electric Utilities--3.11%
12,600 Constellation Energy Group, Inc. ........ 373,275
10,300 Nstar Corp.* ............................ 444,831
8,800 PECO Energy Co. ......................... 357,500
10,700 PG&E Corp. .............................. 324,344
9,100 Pinnacle West Capital Corp. ............. 345,800
2,300 RGS Energy Group Inc. ................... 59,512
------------
1,905,262
------------
Electrical Power--2.48%
12,600 Cooper Industries, Inc. ................. 653,625
8,420 Koninklijke Philips Electronics N.V.* ... 865,681
------------
1,519,306
------------
Energy Reserves & Production--3.69%
9,100 Atlantic Richfield Co. .................. 800,231
6,600 Mobil Corp. ............................. 675,675
12,700 Royal Dutch Petroleum Co. ADR ........... 785,813
------------
2,261,719
------------
5
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
Number of
Shares Value
- -------------- ------------
COMMON STOCK (continued)
Entertainment--1.13%
18,200 King World Productions, Inc.* ........... $ 693,875
------------
Financial Services--2.09%
12,300 Lehman Brothers Holdings, Inc. .......... 661,125
8,500 Marsh & McLennan Cos., Inc. ............. 618,906
------------
1,280,031
------------
Food Retail--0.17%
13,200 Food Lion Inc. .......................... 104,363
------------
Forest Products, Paper--0.77%
11,400 Georgia-Pacific Corp. ................... 471,675
------------
Industrial Parts--6.52%
14,600 American Standard Companies Inc.* ....... 598,600
9,500 Caterpillar, Inc. ....................... 537,938
34,500 Mettler-Toledo International Inc.* ...... 918,562
10,800 SPX Corp.* .............................. 915,300
15,506 United Technologies Corp. ............... 1,025,334
------------
3,995,734
------------
Industrial Services/Supplies--1.32%
43,300 Delphi Automotive Systems Corp. ......... 811,875
------------
Information & Computer Services--2.95%
13,600 Comdisco Inc. ........................... 286,450
3,700 Computer Sciences Corp.* ................ 255,994
11,000 Electronic Data Systems Corp. ........... 617,375
14,800 First Data Corp. ........................ 651,200
------------
1,811,019
------------
Leisure--0.39%
3,300 Eastman Kodak Co. ....................... 242,344
------------
Life Insurance--2.02%
8,400 CIGNA Corp. ............................. 754,425
10,400 Lincoln National Corp. .................. 487,500
------------
1,241,925
------------
Long Distance & Phone Companies--0.51%
4,100 MCI WorldCom, Inc.* ..................... 310,575
------------
Medical Products--1.75%
13,600 Mallinckrodt Group, Inc. ................ 436,050
6,400 St. Jude Medical, Inc.* ................. 232,000
10,800 Varian Inc.* ............................ 171,450
10,800 Varian Medical Systems Inc. ............. 233,550
------------
1,073,050
------------
Medical Providers--0.73%
18,200 Columbia/HCA Healthcare Corp. ........... 448,175
------------
Mining & Metals--3.15%
6,500 Ball Corp. .............................. 292,094
16,200 Reynolds Metals Co. ..................... 1,025,662
22,800 USX-U.S. Steel Group, Inc. .............. 615,600
------------
1,933,356
------------
Motor Vehicles--3.69%
13,100 Borg Warner Automotive, Inc. ............ 620,612
7,000 Ford Motor Co. .......................... 364,875
7,600 General Motors Corp. .................... 502,550
11,400 Lear Corp.* ............................. 458,137
6,500 Navistar International Corp.* ........... 316,063
------------
2,262,237
------------
Oil Refining--1.63%
18,200 Tosco Corp. ............................. 464,100
17,200 USX-Marathon Group ...................... 535,350
------------
999,450
------------
Oil Services--2.64%
28,500 BJ Services Co.* ........................ 976,125
15,500 Cooper Cameron Corp.* ................... 645,188
------------
1,621,313
------------
Other Insurance--4.45%
19,700 Allstate Corp. .......................... 646,406
8,000 Chubb Corp. ............................. 457,500
18,600 Enhance Financial Services Group Inc. ... 381,300
900 Old Republic International Corp. ........ 13,950
19,500 St. Paul Co., Inc. ...................... 625,219
17,100 Travelers Property Casualty Corp. ....... 607,050
------------
2,731,425
------------
6
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
Number of
Shares Value
- -------------- ------------
COMMON STOCK (concluded)
Publishing--2.94%
20,700 Deluxe Corp. ............................ $ 705,094
2,700 Dow Jones & Co., Inc. ................... 135,675
9,000 Knight Ridder, Inc. ..................... 485,437
8,000 New York Times Co., Class A ............. 312,500
2,800 Times Mirror Co. ........................ 161,700
------------
1,800,406
------------
Restaurants--0.58%
22,800 Darden Restaurants, Inc. ................ 356,250
------------
Securities & Asset Management--0.75%
6,200 Merrill Lynch & Co., Inc. ............... 462,675
------------
Semiconductor--0.40%
10,800 Varian Semiconductor Equipment Inc.* .... 245,700
------------
Tobacco--0.45%
5,400 Reynolds RJ Tobacco Holdings, Inc. ...... 148,163
4,000 UST Inc. ................................ 126,750
------------
274,913
------------
Total Common Stocks (cost--$46,676,238) 51,375,084
------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Maturity Dates Interest Rates Value
- ---------------- ----------------- -------------- ------------
<C> <C> <S> <C> <C> <C>
U.S. Government Obligations--14.16%
$2,500 Federal Home Loan Mortgage Discount Notes ..................... 09/16/99 4.950%** 2,494,844
6,200 Federal National Mortgage Association Discount Notes .......... 09/16/99 5.100** 6,186,825
------------
Total U.S. Government Obligations (cost--$8,681,669) ........................... 8,681,669
------------
<CAPTION>
Repurchase Agreement--2.13%
1,308 Repurchase Agreement dated 08/31/99 with SG Cowen Corporation,
collateralized by $903,000 U.S. Treasury Bonds, 11.250% due
02/15/15 (value--$1,334,183); proceeds: $1,308,197
(cost--$1,308,000) ............................................ 09/01/99 5.430 1,308,000
------------
Total Investments (cost--$56,665,907)--100.06% ...................................................................... 61,364,753
Liabilities in excess of other assets--(0.06)% ...................................................................... (37,795)
------------
Net Assets--100.00% ................................................................................................. $ 61,326,958
============
</TABLE>
- ----------
* Non-Income producing security
** Interest rate reflects yield to maturity at date of purchase.
ADR American Depositary Receipt
(1) Security, or portion thereof, was on loan at August 31, 1999.
See accompanying notes to financial statements
7
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999
<TABLE>
<S> <C>
Assets
Investments in securities, at value (cost--$56,665,907) ....................................... $ 61,364,753
Investments of cash collateral received for securities loaned, at value (cost--$710,400) ...... 710,400
Cash .......................................................................................... 503
Receivable for shares of beneficial interest sold ............................................. 398,716
Dividends and interest receivable ............................................................. 88,006
Other assets .................................................................................. 6,492
------------
Total assets .................................................................................. 62,568,870
------------
Liabilities
Payable for investments purchased ............................................................. 325,334
Collateral for securities loaned .............................................................. 710,400
Payable to affiliate .......................................................................... 73,994
Accrued expenses and other liabilities ........................................................ 132,184
------------
Total liabilities ............................................................................. 1,241,912
------------
Net Assets
Beneficial interest--$0.001 par value outstanding (unlimited amount authorized) ............... 56,696,354
Accumulated net investment loss ............................................................... (26,606)
Accumulated net realized loss from investment transactions .................................... (41,636)
Net unrealized appreciation of investments .................................................... 4,698,846
------------
Net assets .................................................................................... $ 61,326,958
============
Class A:
Net assets .................................................................................... $ 17,727,924
------------
Shares outstanding ............................................................................ 1,272,023
------------
Net asset value and redemption value per share ................................................ $13.94
======
Maximum offering price per share (net asset value plus sales charge of 4.50% of offering price) $14.60
======
Class B:
Net assets .................................................................................... $ 23,990,413
------------
Shares outstanding ............................................................................ 1,730,482
------------
Net asset value and offering price per share .................................................. $13.86
======
Class C:
Net assets .................................................................................... $ 19,492,863
------------
Shares outstanding ............................................................................ 1,405,993
------------
Net asset value and offering price per share .................................................. $13.86
======
Class Y:
Net assets .................................................................................... $ 115,758
------------
Shares outstanding ............................................................................ 8,337
------------
Net asset value, offering price and redemption value per share ................................ $13.88
======
</TABLE>
See accompanying notes to financial statements
8
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Period
December 14, 1998+
through
August 31, 1999
------------------
<S> <C>
Investment income:
Dividends (net of foreign withholding taxes of $3,406) ............. $ 457,259
Interest ........................................................... 282,307
-----------
739,566
-----------
Expenses:
Investment advisory and administration ............................. 269,530
Service fees--Class A .............................................. 28,328
Service and distribution fees--Class B ............................. 137,150
Service and distribution fees--Class C ............................. 108,776
Organizational expenses ............................................ 125,000
Legal and audit .................................................... 59,261
Reports and notices to shareholders ................................ 48,200
Custody and accounting ............................................. 21,724
Transfer agency and service fees ................................... 19,363
Trustees' fees ..................................................... 7,875
Federal and state registration fees ................................ 3,977
Other expenses ..................................................... 14,375
-----------
843,559
Less: Fee waivers from adviser ..................................... (77,387)
-----------
Net expenses ....................................................... 766,172
-----------
Net investment loss ................................................ (26,606)
-----------
Realized and unrealized gains (losses) from investment transactions:
Net realized loss from investment transactions ..................... (41,636)
Net unrealized appreciation/depreciation of investments ............ 4,698,846
-----------
Net realized and unrealized gain from investment transactions ...... 4,657,210
-----------
Net increase in net assets resulting from operations ............... $ 4,630,604
===========
</TABLE>
- ----------
+Commencement of operations
See accompanying notes to financial statements
9
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Period
December 14, 1998+
through
August 31, 1999
------------------
<S> <C>
From operations:
Net investment loss .................................................... $ (26,606)
Net realized loss from investment transactions ......................... (41,636)
Net unrealized appreciation/depreciation of investments ................ 4,698,846
------------
Net increase in net assets resulting from operations ................... 4,630,604
------------
From beneficial interest transactions:
Net proceeds from the sale of shares ................................... 64,523,463
Cost of shares repurchased ............................................. (7,827,159)
------------
Net increase in net assets derived from beneficial interest transactions 56,696,304
------------
Net increase in net assets ............................................. 61,326,908
Net assets:
Beginning of period .................................................... 50
------------
End of period .......................................................... $ 61,326,958
============
</TABLE>
- ----------
+ Commencement of operations
See accompanying notes to financial statements
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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--The Fund calculates its net asset value based on
the current market value for its portfolio securities. The Fund normally obtains
market values for its securities from independent pricing sources. Independent
pricing sources may use reported last sale prices, current market quotations or
valuations from computerized "matrix" systems that derive values based on
comparable securities. Securities traded in the over-the-counter ("OTC") market
and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") normally are valued at
the last sale price on Nasdaq prior to valuation. Other OTC securities are
valued at the last bid price available prior to valuation. Securities which are
listed on U.S. and foreign stock exchanges normally are valued at the last sale
price on the day the securities are valued or, lacking any sales on such day, at
the last available bid price. In cases where securities are traded on more than
one exchange, the securities are valued on the exchange designated as the
primary market by Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"),
a wholly owned asset management subsidiary of PaineWebber Incorporated
("PaineWebber") and investment adviser and administrator of the Fund. If a
market value is not available from an independent pricing source for a
particular security, that security is valued at fair value as determined in good
faith by or under the direction of the Fund's board of trustees (the "board").
The amortized cost method of valuation, which approximates market value,
generally is used to value short-term debt instruments with sixty days or less
remaining to maturity, unless the board determines that this does not represent
fair value.
Repurchase Agreements--The Fund's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. The Fund occasionally
participates in joint repurchase agreement transactions with other funds managed
by Mitchell Hutchins.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 August 31, 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 August
31, 1999, the Fund owed Mitchell Hutchins $33,811 in investment advisory and
administration fees.
For the period ended August 31, 1999, the Tax-Managed Equity Fund paid
$3,960 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 August 31,
1999, the Fund owed Mitchell Hutchins $40,173 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 August 31, 1999, it earned $389,204 in sales charges.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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
August 31, 1999, PaineWebber received approximately 55% of the total transfer
agency service fees collected by PFPC, Inc. from the Fund.
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, cash
equivalents or U.S. government securities 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, cash equivalents or U.S. government securities held as
collateral, net of fee rebates paid to the borrower plus reasonable
administrative and custody fees. The Fund's lending agent is PaineWebber, which
received $31 in compensation in that capacity from the Fund for the period ended
August 31, 1999. At August 31, 1999, the Fund owed PaineWebber $10 in
compensation.
As of August 31, 1999, the Fund held cash and/or cash equivalents having
an aggregate value of $710,400 as collateral for portfolio securities loaned
having a market value of $724,275 which was invested in the following money
market fund:
Number of
Shares Value
-------- --------
710,400 Liquid Assets Portfolio (cost--$710,400) ........ $710,400
========
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 August 31, 1999, the Fund did not borrow under the
Facility.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at August
31, 1999 was substantially the same as the cost of securities for financial
statement purposes.
At August 31, 1999, the components of net unrealized appreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value over cost) .... $ 5,620,452
Gross depreciation (investments having an excess of cost over value) .... (921,606)
-----------
Net unrealized appreciation of investments .............................. $ 4,698,846
===========
</TABLE>
For the period ended August 31, 1999, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $67,869,229 and
$21,125,623 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
---------------------------- ---------------------------- ----------------------------
Shares Amount Shares Amount Shares Amount
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
For the Period December 14, 1998+
through August 31, 1999:
Shares sold ..................... 1,532,036 $ 19,692,976 1,914,198 $ 24,772,096 1,536,658 $ 19,939,351
Shares repurchased .............. (276,011) (3,793,164) (167,726) (2,299,643) (130,666) (1,734,352)
Shares converted from
Class B to Class A ............ 15,997 205,479 (15,991) (205,479) -- --
------------ ------------ ------------ ------------ ------------ ------------
Net increase .................... 1,272,022 $ 16,105,291 1,730,481 $ 22,266,974 1,405,992 $ 18,204,999
============ ============ ============ ============ ============ ============
<CAPTION>
Class Y
---------------------------
Shares Amount
------------ ------------
<S> <C> <C>
For the Period December 14, 1998+
through August 31, 1999:
Shares sold ..................... 8,336 $ 119,040
Shares repurchased .............. -- --
Shares converted from
Class B to Class A ............ -- --
------------ ------------
Net increase .................... 8,336 $ 119,040
============ ============
</TABLE>
- ----------
+ Commencement of operations
14
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period is presented below:
<TABLE>
<CAPTION>
For the Period December 14, 1998+
through August 31, 1999
---------------------------------------------------------
Class A Class B Class C Class Y
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $ 12.50 $ 12.50 $ 12.50 $ 12.50
---------- ---------- ---------- ----------
Net investment income (loss) ............................. 0.04 (0.03) (0.02) 0.01
Net realized and unrealized gains from investments ....... 1.40 1.39 1.38 1.37
---------- ---------- ---------- ----------
Total increase from investment operations ................ 1.44 1.36 1.36 1.38
---------- ---------- ---------- ----------
Net asset value, end of period ........................... $ 13.94 $ 13.86 $ 13.86 $ 13.88
========== ========== ========== ==========
Total investment return (1) .............................. 11.52% 10.88% 10.88% 11.04%
========== ========== ========== ==========
Ratios/Supplemental data:
Net assets, end of period (000's) ........................ $ 17,728 $ 23,990 $ 19,493 $ 116
Expenses to average net assets, net of waivers
from adviser ........................................... 1.62%* 2.37%* 2.37%* 1.37%*
Expenses to average net assets, before waivers
from adviser ........................................... 1.87%* 2.57%* 2.56%* 1.47%*
Net investment income (loss) to average net assets,
net of waivers from adviser ............................ 0.43%* (0.31)%* (0.31)%* 0.84%*
Net investment income (loss) to average net assets, before
waivers from adviser ................................... 0.18%* (0.51)%* (0.50)%* 0.74%*
Portfolio turnover rate .................................. 47% 47% 47% 47%
</TABLE>
- ----------
* 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 or programs fees; results would be lower if
sales charges or programs fees were included. Total investment return for
the period has not been annualized.
15
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Trustees and Shareholders of
PaineWebber Tax-Managed Equity Fund
We have audited the accompanying statement of assets and liabilities of
the PaineWebber Tax-Managed Equity Fund (the "Fund"), including the portfolio of
investments, as of August 31, 1999, and the related statement of operations,
changes in net assets and the financial highlights for the period December 14,
1998 (commencement of operations) through August 31, 1999. 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 audit.
We conducted our audit 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 and financial highlights. Our procedures included confirmation of
investments owned at August 31, 1999 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 audit provides 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 the
Fund at August 31, 1999, the results of its operations, the changes in its net
assets and the financial highlights for the period December 14, 1998 to August
31, 1999, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
October 14, 1999
16
<PAGE>
[This Page Intentionally Left Blank]
17
<PAGE>
[This Page Intentionally Left Blank]
18
<PAGE>
================================================================================
TRUSTEES
E. Garrett Bewkes, Jr.
Chairman
Margo N. Alexander
Richard Q. Armstrong
Richard R. Burt
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
Brian M. Storms
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.
51 West 52nd Street
New York, New York 10019
A prospectus containing more complete information for any of the Funds listed on
the back cover can be obtained from a PaineWebber Financial Advisor or
correspondent firm. Read the prospectus carefully before investing.
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 28 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 Strategy 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
(Copyright)1999 PaineWebber Incorporated
Member SIPC
- -------------------------------------------------------------------------------
PAINEWEBBER
--------------------
TAX-MANAGED
EQUITY FUND
AUGUST 31, 1999
ANNUAL REPORT
