<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 (Classes A, B, C and Y) and the S&P 500 Index from December 14, 1998
through August 31, 2000.
[GRAPH]
<TABLE>
<CAPTION>
PaineWebber Tax-Managed PaineWebber Tax-Managed PaineWebber Tax-Managed PaineWebber Tax-Managed
Equity Fund (Class A) Equity Fund (Class B) Equity Fund (Class C) Equity Fund (Class Y) S&P 500 Index
----------------------- ----------------------- ----------------------- ------------------------ -------------
<S> <C> <C> <C> <C> <C>
12/14/1998 $10,000 $10,000 $10,000 $10,000 $10,000
12/31/1998 $9,954 $10,424 $10,424 $10,424 $10,576
1/31/1999 $9,824 $10,280 $10,280 $10,288 $11,018
2/28/1999 $9,641 $10,080 $10,080 $10,088 $10,675
3/31/1999 $9,840 $10,280 $10,280 $10,272 $11,102
4/30/1999 $10,520 $10,984 $10,984 $11,000 $11,532
5/31/1999 $10,764 $11,232 $11,240 $11,232 $11,260
6/30/1999 $11,047 $11,520 $11,528 $11,520 $11,885
7/31/1999 $10,840 $11,296 $11,296 $11,304 $11,514
8/31/1999 $10,649 $11,088 $11,088 $11,104 $11,456
9/30/1999 $10,153 $10,576 $10,576 $10,600 $11,143
10/31/1999 $10,359 $10,784 $10,784 $10,816 $11,848
11/30/1999 $10,367 $10,776 $10,776 $10,824 $12,088
12/31/1999 $10,997 $11,427 $11,427 $11,483 $12,799
1/31/2000 $10,284 $10,675 $10,675 $10,743 $12,157
2/29/2000 $10,115 $10,499 $10,499 $10,566 $11,927
3/31/2000 $11,273 $11,691 $11,691 $11,781 $13,093
4/30/2000 $10,959 $11,355 $11,355 $11,451 $12,699
5/31/2000 $10,844 $11,235 $11,235 $11,338 $12,439
6/30/2000 $10,414 $10,779 $10,779 $10,888 $12,745
7/31/2000 $10,445 $10,803 $10,811 $10,920 $12,546
8/31/2000 $11,350 $11,339 $11,739 $11,869 $13,325
</TABLE>
Past performance is no guarantee of future performance.
The graph depicts the performance of PaineWebber Tax-Managed Equity Fund
(Classes A, B, C and Y) versus the S&P 500 Index. It is important to note
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.
---------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS, PERIODS ENDED 8/31/00
---------------------------------------------------
<TABLE>
<CAPTION>
6 Months 1 Year Inception(o)
<S> <C> <C> <C> <C>
CLASS A* 12.21% 6.58% 10.58%
CLASS B** 11.81 5.87 9.78
Before Deducting
Maximum Sales Charge
CLASS C+ 11.81 5.87 9.78
CLASS Y++ 12.34 6.89 10.49
CLASS A* 7.17 1.76 7.65
After Deducting
Maximum Sales Charge CLASS B** 6.81 0.87 7.59
CLASS C+ 10.81 4.87 9.78
S&P 500 Index 11.72 16.31 14.84
Lipper Multi-Cap Value
Funds Median 16.15 7.69 9.39
</TABLE>
(o) Inception: since commencement of issuance on December 14, 1998, for Classes
A, B, C and Y shares. Inception returns for Index and Lipper Median also as
of December 14, 1998.
* 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. Class Y shares
do not bear initial or contingent deferred sales charges or ongoing 12b-1
distribution and service fees.
1
<PAGE>
ANNUAL REPORT
PAINEWEBBER TAX-MANAGED
EQUITY FUND
INVESTMENT GOAL:
Maximize aftertax total return
COMMENCEMENT:
December 14, 1998
DIVIDEND PAYMENTS:
Annually, if any
Dear Shareholder, October 16, 2000
We are pleased to present you with the annual report for PaineWebber Tax-Managed
Equity Fund (the "Fund") for the fiscal year ended August 31, 2000.
MARKET REVIEW
--------------------------------------------------------------------------------
[GRAPHIC] The 12-month period ended August 31, 2000 was marked by turbulence in
the equity markets. At the beginning of the period, demand for technology stocks
dominated the market. The performance of "new economy" stocks, that is, those in
the technology area, far outpaced that of "old economy" stocks, those in more
traditional industries.
Around mid-March, market sentiment changed, as investors began to question
the sustainability of the high valuations of technology stocks. Investors also
grew increasingly concerned that higher interest rates and a slowdown in the
pace of economic growth would have a negative effect on corporate profits and,
ultimately, on stock prices. This uncertainty led to a broad-based stock market
decline.
As the fiscal year progressed, market volatility was the order of the day. A
rotation out of technology stocks and into more traditional companies would push
the Dow Jones Industrial Average and the S&P 500 Index higher for a short time;
but then investors would reverse course and technology stocks, as measured by
the NASDAQ Composite Index, would advance and other sectors of the market would
decline. Despite the turbulence, stocks made relatively strong gains during the
final weeks of the fiscal year, and most major stock indexes ended the period
with gains. The S&P 500 Index rose 16.31% and the NASDAQ Composite Index gained
53.55% for the year ended August 31, 2000.
PORTFOLIO HIGHLIGHTS
Early in the fiscal year, investors preferred high-flying growth stocks to
the value-oriented stocks we emphasize in the portfolio. As the year progressed,
however, there was renewed interest in value stocks but not a clear trend in
which the performance of value stocks significantly overtook that of growth
stocks. Concerns about rising interest rates, slower economic growth and higher
oil prices left the market without a clear direction; and investors rotated in
and out of value stocks throughout the period.
During the twelve months, we increased the Fund's positions in the technology
sector from 14.6% to 16.9% and in the financial sector from 11.9% to 19.9%.*
Because rising interest rates can have a negative effect on financial stocks,
investors tended to shy away from them. As a result, we purchased financial
shares at what we believe were attractive prices. Recent economic data indicate
that the Federal Reserve Board (the "Fed") may have achieved its goal of slowing
the pace of economic growth and containing inflation. If this is the case, the
Fed may have finished or may be close to finished raising interest rates. The
prospect of a more favorable interest-rate environment helped boost the prices
of the financial stocks in the portfolio, and financial stocks were strong
contributors to performance. At 4.7% of net assets, Citigroup was the
portfolio's largest holding on August 31, 2000. Lehman Brothers (3.6%), Chase
Manhattan (2.8%) and Merrill Lynch (2.6%) were among the Fund's top 10 holdings.
* Weightings represent percentages of net assets as of August 31, 2000. The
Fund's portfolio is actively managed and its composition will vary over
time.
2
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND ANNUAL REPORT
Over the past several months, we slightly increased investments in the energy
sector--particularly in major oil and oil service companies. Energy stocks
accounted for 15.7% of assets on August 31, 2000. Increased worldwide demand and
rising oil prices enhanced the value of the energy stocks in the portfolio.
We also added pharmaceutical companies, which had underperformed the market
for a relatively long period and were inexpensive. Pharmaceutical companies tend
to perform well during periods of slower economic growth.
Consumer cyclical stocks now represent 13.3% of the Fund's portfolio. In the
consumer cyclical area, we favored retailers such as The Limited (1.7%) and
Circuit City (1.3%). Retail companies were hurt somewhat by rising interest
rates, but should interest rates stabilize, we believe retailers could benefit
from strong consumer spending. Furthermore, we believe that a more positive
interest-rate environment will benefit capital goods companies, which now
account for 12.7% of the Fund.
While we expect some sectors and individual companies to thrive going
forward, relatively weak earnings forecasts may increase market volatility in
the short term. However, we believe that the companies we hold in the portfolio
have the potential to generate strong returns over the long term.
PROPOSED MERGER AND NEW FUND MANAGEMENT
--------------------------------------------------------------------------------
On October 6, 2000, the board of trustees unanimously approved the merger of
the PaineWebber Tax-Managed Equity Fund into the PACE Large Company Value Equity
Investments. The proposed merger will be submitted to shareholders at meetings
expected to be held in February 2001. If approved by the PaineWebber fund's
shareholders, the merger is expected to become effective no later than early
March 2001.
On October 6, 2000, the board of trustees for the PaineWebber fund terminated
the existing Investment Advisory and Administration Contract with Mitchell
Hutchins relating to the PaineWebber fund and approved new interim investment
management arrangements that became effective on October 10, 2000, including new
interim sub-advisory contracts with Institutional Capital Corporation and
Westwood Management Corporation who took over day-to-day portfolio management of
the fund effective October 10, 2000.
More information about the proposed merger for the PaineWebber fund and the
new investment management arrangements and the related investment strategy
changes is set out in the October 10, 2000 supplement to the prospectus dated
December 6, 1999 and additional information will be provided to shareholders in
proxy solicitation materials that are expected to be mailed in December 2000.
3
<PAGE>
ANNUAL REPORT
PORTFOLIO STATISTICS
<TABLE>
<CAPTION>
CHARACTERISTICS* 8/31/00 2/29/00
-----------------------------------------------------------------------------------------
<S> <C> <C>
Net Assets ($mm) $49.5 $52.2
Average Market Cap ($bln) $74.1 $51.9
Price/Earnings Ratio (1) 18.0x 19.5x
Dividend Yield 1.20% 1.19%
Number of Securities 61 74
Stocks 93.7% 92.2%
Cash & Equivalents 6.3% 7.8%
-----------------------------------------------------------------------------------------
<CAPTION>
TOP FIVE SECTORS* 8/31/00 2/29/00
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Financial Services 19.9% Financial Services 17.8%
Technology 16.9 Technology 17.4
Energy 15.7 Consumer Cyclicals 17.3
Consumer Cyclicals 13.3 Energy 12.3
Capital Goods 12.7 Capital Goods 12.0
-----------------------------------------------------------------------------------------
Total 78.5 Total 76.8
<CAPTION>
TOP TEN HOLDINGS* 8/31/00 2/29/00
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Citigroup 4.7% BJ Services 3.1%
Corning 4.0 Citigroup 2.9
Lehman Bros Holdings 3.6 Motorola 2.9
Cooper Cameron 2.9 Chase Manhattan 2.6
Chase Manhattan 2.8 Mettler Toledo International 2.6
Exxon Mobil 2.8 Exxon Mobil 2.5
BJ Services 2.7 Microsoft 2.4
Merrill Lynch 2.6 Koninklijke Philips Electronics 2.2
United Technologies 2.6 Corning 2.2
Koninklijke Philips Electronics 2.3 WorldCom 2.2
-----------------------------------------------------------------------------------------
Total 31.0 Total 25.6*
</TABLE>
* Weightings represent percentages of net assets as of the dates indicated.
The Fund's portfolio is actively managed and its composition will vary over
time.
(1) Based on projected forward fiscal year earnings.
4
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND ANNUAL REPORT
OUTLOOK
--------------------------------------------------------------------------------
There is some preliminary evidence that the Federal Reserve Board's efforts
of slowing the pace of economic growth and containing inflation may be working.
This good news, however, has been tempered by concerns about rising energy
prices, declining corporate profits and a weaker euro (Europe's single currency)
in relation to the U.S. dollar.
As we move toward the end of 2000 and into 2001, the news for the equity
markets may improve. The Fed left rates unchanged at its October meeting. Oil
prices have declined, and although oil prices have been sustained at far higher
levels than many expected just six months ago, we may have seen the highs. The
euro's weakness persists, but support may have been established with recent
coordinated central bank intervention. Clearly, there is much to preoccupy the
markets, but the weight of the evidence suggests to us a cautiously optimistic
posture. The underpinnings of the economy remain solid, productivity continues
to be strong and inflation remains in check. Such positive economic factors are
generally good for the financial markets.
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 /s/ Brian M. Storms
MARGO ALEXANDER BRIAN M. STORMS
Chairman Chief Executive Officer
Mitchell Hutchins and President
Asset Management Inc. Mitchell Hutchins
Asset Management Inc.
This letter is intended to assist shareholders in understanding how the
Fund performed during the fiscal year ended August 31, 2000, and reflects our
views at the time of its writing. Of course, these views may change in response
to changing circumstances. We encourage you to consult your Financial Advisor
regarding your personal investment program.
(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.
5
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
<TABLE>
<CAPTION>
PERFORMANCE RESULTS(UNAUDITED)
NET ASSET VALUE TOTAL RETURN(1)
---------------------------------------- ------------------------------------------
12 MONTHS 6 MONTHS
08/31/00 02/29/00 08/31/99 ENDED 08/31/00 ENDED 08/31/00
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $14.80 $13.19 $13.94 6.58% 12.21%
---------------------------------------------------------------------------------------------------------------------------
Class B Shares 14.67 13.12 13.86 5.87 11.81
---------------------------------------------------------------------------------------------------------------------------
Class C Shares 14.67 13.12 13.86 5.87 11.81
---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PERFORMANCE SUMMARY CLASS A SHARES
NET ASSET VALUE
---------------------------
CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL RETURN(1)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12/14/98-12/31/98 $12.50 $13.03 -- -- 4.24%
---------------------------------------------------------------------------------------------------------------------------
1999 13.03 14.34 $0.0034 $0.0495 10.48
---------------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 14.34 14.80 -- -- 3.21
---------------------------------------------------------------------------------------------------------------------------
Totals: $0.0034 $0.0495
---------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 18.86%
---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PERFORMANCE SUMMARY CLASS B SHARES
NET ASSET VALUE
---------------------------
CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL RETURN(1)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12/14/98-12/31/98 $12.50 $13.03 -- -- 4.24%
---------------------------------------------------------------------------------------------------------------------------
1999 13.03 14.28 $0.0034 -- 9.62
---------------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 14.28 14.67 -- -- 2.73
---------------------------------------------------------------------------------------------------------------------------
Totals: $0.0034 $0.000
---------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 17.39%
---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PERFORMANCE SUMMARY CLASS C SHARES
NET ASSET VALUE
---------------------------
CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL RETURN(1)
---------------------------------------------------------------------------------------------------------------------------
12/14/98-12/31/98 $12.50 $13.03 -- -- 4.24%
---------------------------------------------------------------------------------------------------------------------------
1999 13.03 14.28 $0.0034 -- 9.62
---------------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 14.28 14.67 -- -- 2.73
---------------------------------------------------------------------------------------------------------------------------
Totals: $0.0034 $0.000
---------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 17.39%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
PERFORMANCE RESULTS(UNAUDITED)(CONCLUDED)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN(1)
% RETURN WITHOUT DEDUCTING % RETURN AFTER DEDUCTING
MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
------------------------------ ------------------------------
CLASS CLASS
------------------------------ ------------------------------
A* B** C*** A* B** C***
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Twelve Months Ended 09/30/00 6.50% 5.62% 5.62% 1.68% 0.62% 4.62%
------------------------------------------------------------------------------------------------------------------
Commencement of Operations Through 09/30/00+ 7.15 6.34 6.34 4.44 4.21 6.34
------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Figures assume reinvestment of all dividends and distributions at net asset
value on the payable dates and do not include sales charges; results would
be lower if sales charges were included. Total investment return for
periods of less than one year has not been annualized.
* 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 6 years. Class B shares bear ongoing 12b-1 distibution
and service fees.
*** Maximum contingent deferred sales charge for Class C shares is 1% and is
reduced to 0% after 1 year. Class C shares bear onging 12b-1 distribution
and service fees.
+ Commencement of issuance date is December 14, 1998 for all classes.
Note: The Fund offers Class Y shares to a limited group of investors, including
participants in certain investment programs that are sponsored by PaineWebber
and that may invest in PaineWebber mutual funds. For the year ended August 31,
2000 and since inception, December 14, 1998 through August 31, 2000, Class Y
shares had a total return of 6.89% and 18.69%, respectively. For the twelve
months ended September 30, 2000 and since inception, December 14, 1998 through
September 30, 2000, Class Y shares had a total return of 6.50% and 13.23%
respectively. Class Y shares do not have initial or contingent deferred sales
charges or ongoing 12b-1 distribution and service fees.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost.
7
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 2000
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------- ----------
<S> <C>
COMMON STOCKS--93.68%
AIRLINES--1.35%
25,000 America West Holding Corp.*(1) ............ $ 365,625
9,300 AMR Corp.* ................................ 305,156
----------
670,781
----------
APPAREL & RETAIL--1.67%
41,400 The Limited, Inc. ......................... 828,000
----------
BANKS--8.70%
25,200 Chase Manhattan Corp. ..................... 1,408,050
39,600 Citigroup, Inc. ........................... 2,311,650
13,800 FleetBoston Financial Corp. ............... 589,087
----------
4,308,787
----------
COMPUTER HARDWARE--0.55%
4,000 Cisco Systems, Inc.* ...................... 274,500
----------
COMPUTER SOFTWARE--4.16%
8,100 IBM Corp. ................................. 1,069,200
14,200 Microsoft Corp.* .......................... 991,337
----------
2,060,537
----------
DEFENSE & AEROSPACE--3.37%
14,100 Boeing Co. ................................ 756,113
20,000 TRW Inc. .................................. 913,750
----------
1,669,863
----------
DIVERSIFIED RETAIL--0.56%
10,000 Federated Department Stores, Inc.* ........ 276,250
----------
DRUGS & MEDICINE--2.13%
13,500 American Home Products Corp. .............. 731,531
8,100 Schering-Plough Corp. ..................... 325,013
----------
1,056,544
----------
ELECTRIC UTILITIES--2.59%
12,600 Constellation Energy Group, Inc. .......... 481,950
8,800 PECO Energy Co. ........................... 424,050
9,100 Pinnacle West Capital Corp. ............... 374,806
----------
1,280,806
----------
ELECTRICAL EQUIPMENT--6.97%
6,000 Corning, Inc. ............................. 1,967,625
10,000 Johnson Controls, Inc. .................... 534,375
26,400 Motorola, Inc. ............................ 952,050
----------
3,454,050
----------
ELECTRICAL POWER--4.47%
10,000 Emerson Electric Co. ...................... 661,875
23,280 Koninklijke Philips Electronics N.V.* ..... 1,147,995
10,000 Rockwell International Corp. .............. 404,375
----------
2,214,245
----------
NUMBER OF
SHARES VALUE
---------- ----------
ENERGY RESERVES & PRODUCTION--7.70%
2,300 Chevron Corp. ............................. $ 194,350
17,161 Exxon Mobil Corp. ......................... 1,400,767
8,400 Phillips Petroleum Co. .................... 519,750
12,700 Royal Dutch Petroleum Co., ADR ............ 777,081
30,200 Tosco Corp................................. 921,100
----------
3,813,048
----------
ENTERTAINMENT--2.17%
15,995 Viacom, Inc., Class B* .................... 1,076,663
----------
FINANCIAL SERVICES--2.21%
9,200 Federal Home Loan Mortgage Corp. .......... 387,550
20,000 MBNA Corp. ................................ 706,250
----------
1,093,800
----------
FOREST PRODUCTS & PAPER--2.09%
5,900 International Paper Co. ................... 188,062
18,300 Weyerhaeuser Co. .......................... 847,519
----------
1,035,581
----------
INDUSTRIAL PARTS--4.81%
23,600 Mettler-Toledo International, Inc. ........ 1,116,575
20,306 United Technologies Corp. ................. 1,267,856
----------
2,384,431
----------
INFORMATION & COMPUTER SERVICES--2.68%
26,000 Comdisco, Inc. ............................ 624,000
14,800 First Data Corp. .......................... 705,775
----------
1,329,775
----------
LEISURE--2.26%
18,000 Eastman Kodak Co. ......................... 1,120,500
----------
LIFE INSURANCE--1.57%
15,000 AXA Financial, Inc. ....................... 776,250
----------
MEDICAL PRODUCTS--2.37%
6,700 Baxter International, Inc. ................ 557,775
6,700 Johnson & Johnson ......................... 615,981
----------
1,173,756
----------
MEDICAL PROVIDERS--1.41%
20,200 Columbia/HCA Healthcare Corp. ............. 696,900
----------
MINING & METALS--2.30%
34,344 Alcoa, Inc. ............................... 1,141,938
----------
MOTOR VEHICLES--1.44%
43,300 Delphi Automotive Systems Corp. ........... 711,744
----------
OIL REFINING--0.55%
10,500 Conoco, Inc. .............................. 274,313
----------
</TABLE>
8
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 2000
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------- ----------
<S> <C>
COMMON STOCKS--(CONCLUDED)
OIL SERVICES--7.41%
20,000 BJ Services Co.* .......................... $1,340,000
18,500 Cooper Cameron Corp.*(1) .................. 1,439,531
16,800 Halliburton Co. ........................... 890,400
----------
3,669,931
----------
OTHER INSURANCE--1.16%
19,700 Allstate Corp. ............................ 572,531
----------
PUBLISHING--2.95%
8,000 Dow Jones & Co., Inc. ..................... 500,500
9,000 Knight-Ridder, Inc. ....................... 491,625
12,000 New York Times Co., Class A ............... 470,250
----------
1,462,375
----------
SECURITIES & ASSET MANAGEMENT--6.23%
12,300 Lehman Brothers Holdings, Inc. ............ 1,783,500
9,000 Merrill Lynch & Co., Inc. ................. 1,305,000
----------
3,088,500
----------
NUMBER OF
SHARES VALUE
---------- ----------
SEMICONDUCTOR--2.55%
6,400 Intel Corp. ............................... $ 479,200
11,700 Texas Instruments, Inc. ................... 783,169
----------
1,262,369
----------
SPECIALTY RETAIL--2.25%
24,000 Circuit City Stores, Inc. ................. 622,500
11,000 Lowe's Companies, Inc. .................... 492,938
----------
1,115,438
----------
WIRELESS TELECOMMUNICATIONS--1.05%
11,900 Verizon Communications .................... 519,138
----------
Total Common Stocks (cost--$36,739,135) .................. 46,413,344
----------
<CAPTION>
PRINCIPAL
AMOUNT
(000) MATURITY DATES INTEREST RATES
---------- -------------- ---------------
<S> <C> <C> <C>
U.S. AGENCY OBLIGATION--3.03%
$ 1,500 Federal Home Loan Bank (cost--$1,500,000) ....................... 09/01/00 6.400%@ 1,500,000
-----------
REPURCHASE AGREEMENT--3.36%
1,665 Repurchase agreement dated 08/31/00 with SG Cowen Corporation,
collateralized by $1,726,000 U.S. Treasury Bills, 5.970% due
11/30/00 (value$1,698,384); proceeds: $1,665,305
(cost--$1,665,000) .............................................. 09/01/00 6.600 1,665,000
-----------
Total Investments (cost--$39,904,135)--100.07% ................................ 49,578,344
Liabilities in excess of other assets--(0.07)% ................................ (33,518)
-----------
Net Assets--100.00% ........................................................... $49,544,826
===========
</TABLE>
---------------------
* Non-Income producing security.
ADR American Depositary Receipt.
@ Interest rate shown is discount rate at date of purchase.
(1) Security, or portion thereof, was on loan at August 31, 2000.
See accompanying notes to financial statements 9
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2000
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at value (cost--$39,904,135) .......................................... $ 49,578,344
Investment of cash collateral received for securities loaned, at value (cost--$1,698,700) ........ 1,698,700
Cash ............................................................................................. 293
Dividends and interest receivable ................................................................ 97,898
Receivable for investments sold .................................................................. 97,547
Receivable for shares of beneficial interest sold ................................................ 15,000
Other assets ..................................................................................... 38,769
------------
Total assets ..................................................................................... 51,526,551
------------
LIABILITIES
Collateral for securities loaned ................................................................. 1,698,700
Payable for shares of beneficial interest repurchased ............................................ 78,356
Payable to affiliates ............................................................................ 63,565
Accrued expenses and other liabilities ........................................................... 141,104
------------
Total liabilities ................................................................................ 1,981,725
------------
NET ASSETS
Beneficial interest shares of $0.001 par value outstanding (unlimited amount authorized) ......... 42,104,876
Accumulated net investment loss .................................................................. (89,050)
Accumulated net realized loss from investment transactions ....................................... (2,145,209)
Net unrealized appreciation of investments ....................................................... 9,674,209
------------
Net assets ....................................................................................... $ 49,544,826
============
CLASS A:
Net assets ....................................................................................... $ 13,552,019
------------
Shares outstanding ............................................................................... 915,549
------------
Net asset value and redemption value per share ................................................... $14.80
======
Maximum offering price per share (net asset value plus sales charge of 4.50% of offering price) .. $15.50
======
CLASS B:
Net assets ....................................................................................... $ 22,461,968
------------
Shares outstanding ............................................................................... 1,531,641
------------
Net asset value and offering price per share ..................................................... $14.67
======
CLASS C:
Net assets ....................................................................................... $ 13,250,447
------------
Shares outstanding ............................................................................... 903,438
------------
Net asset value and offering price per share ..................................................... $14.67
======
CLASS Y:
Net assets ....................................................................................... $ 280,392
------------
Shares outstanding ............................................................................... 19,006
------------
Net asset value, offering price and redemption value per share ................................... $14.75
======
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
AUGUST 31, 2000
---------------
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $3,645) .......................................... $ 640,451
Interest ........................................................................................ 339,592
------------
980,043
------------
EXPENSES:
Investment advisory and administration fees ..................................................... 412,174
Service fees--Class A ........................................................................... 38,594
Service and distribution fees--Class B .......................................................... 233,881
Service and distribution fees--Class C .......................................................... 159,238
Legal and audit ................................................................................. 86,196
Reports and notices to shareholders ............................................................. 71,900
Transfer agency and service fees ................................................................ 53,069
State registration fees ......................................................................... 33,379
Custody and accounting .......................................................................... 32,961
Trustees' fees .................................................................................. 10,500
Other expenses .................................................................................. 24,656
------------
1,156,548
Less: Fee waivers from adviser .................................................................. (19,002)
------------
Net expenses .................................................................................... 1,137,546
------------
Net investment loss ............................................................................. (157,503)
------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT ACTIVITIES:
Net realized loss from investment transactions .................................................. (2,088,739)
Net change in unrealized appreciation/depreciation of investments ............................... 4,975,363
------------
NET REALIZED AND UNREALIZED GAIN FROM INVESTMENT TRANSACTIONS ................................... 2,886,624
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................................ $ 2,729,121
============
</TABLE>
See accompanying notes to financial statements
11
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE DECEMBER 14, 1998+
YEAR ENDED THROUGH
AUGUST 31, 2000 AUGUST 31, 1999
--------------- ------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment loss ........................................................... $ (157,503) $ (26,606)
Net realized loss from investment transactions ................................ (2,088,739) (41,636)
Net change in unrealized appreciation/depreciation of investments ............. 4,975,363 4,698,846
----------- -----------
Net increase in net assets resulting from operations .......................... 2,729,121 4,630,604
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class A ................................................ (61,467) -
Net investment income--Class Y ................................................ (948) -
Net realized gains from investment transactions--Class A ...................... (4,222) -
Net realized gains from investment transactions--Class B ...................... (6,167) -
Net realized gains from investment transactions--Class C ...................... (4,603) -
Net realized gains from investment transactions--Class Y ...................... (42) -
----------- -----------
Total dividends and distributions to shareholders ............................. (77,449) -
----------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares .......................................... 7,232,231 64,523,463
Cost of shares repurchased .................................................... (21,736,167) (7,827,159)
Proceeds from dividends reinvested ............................................ 70,132 -
----------- -----------
Net increase (decrease) in net assets from beneficial interest transactions ... (14,433,804) 56,696,304
----------- -----------
Net increase (decrease) in net assets ......................................... (11,782,132) 61,326,908
NET ASSETS:
Beginning of period ........................................................... 61,326,958 50
----------- -----------
End of period ................................................................. $49,544,826 $61,326,958
=========== ===========
</TABLE>
------------------------------
+ Commencement of operations.
See accompanying notes to financial statements
12
<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 accounting
principles generally accepted in the United States requires the 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. the investment adviser
and administrator of the Fund ("Mitchell Hutchins"), a wholly owned asset
management subsidiary of PaineWebber Incorporated ("PaineWebber"), a wholly
owned subsidiary of PaineWebber Group Inc. ("PW Group"). 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.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS(CONTINUED)
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 the 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 accounting principles generally accepted in the United States. 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 year ended August 31, 2000, 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,
2000, the Fund owed Mitchell Hutchins $30,945 in investment advisory and
administration fees.
For the year ended August 31, 2000, the Fund paid $3,318 in commissions to
PaineWebber for transactions executed on behalf of the Fund.
On July 12, 2000, PW Group and UBS AG ("UBS") announced that they had
entered into an agreement and plan of merger under which PW Group will merge
into a wholly owned subsidiary of UBS. If all required approvals are obtained
and the required conditions are satisfied, PW Group and UBS expect to complete
the transaction in the fourth quarter of 2000. UBS, with headquarters in Zurich,
Switzerland, is an internationally diversified organization with operations in
many areas of the financial services industry.
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, 2000, the Fund
owed Mitchell Hutchins $32,546 in service and distribution fees.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS(CONTINUED)
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 year ended
August 31, 2000, it earned $256,701 in sales charges.
TRANSFER AGENCY RELATED 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 year ended
August 31, 2000, PaineWebber received approximately 48% 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.
For the year ended August 31, 2000, the Fund earned $2,042 for lending its
securities. The Fund's lending agent is PaineWebber, which received $737 in
compensation in that capacity from the Fund for the year ended August 31, 2000.
At August 31, 2000, the Fund owed PaineWebber $74 in compensation.
As of August 31, 2000, the Fund held cash and/or cash equivalents having an
aggregate value of $1,698,700 as collateral for portfolio securities loaned
having a market value of $1,620,750 which was invested in the following money
market funds:
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------- -------------
<S> <C> <C>
274,014 AIM Liquid Assets Portfolio ....................................................... $ 274,014
8,745 AIM Prime Portfolio ............................................................... 8,745
1,415,941 Mitchell Hutchins Private Money Market Fund LLC ................................... 1,415,941
----------
Total Investments of Cash Collateral for Securities Loaned (cost--$1,698,700) ..... $1,698,700
==========
</TABLE>
BANK LINE OF CREDIT
The Fund may participate with other funds managed by Mitchell Hutchins in a
$200 million committed credit facility ("Facility") to be utilized for temporary
financing until 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 year ended August 31, 2000, the Fund did not borrow under the Facility.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS(CONTINUED)
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at August 31,
2000, was substantially the same as the cost of securities for financial
statement purposes.
At August 31, 2000, the components of net unrealized appreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value over cost) ............... $11,236,852
Gross depreciation (investments having an excess of cost over value) ............... (1,562,643)
-----------
Net unrealized appreciation of investments ......................................... $ 9,674,209
===========
</TABLE>
For the year ended August 31, 2000, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $37,715,090 and
$45,563,620, 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.
At August 31, 2000, the Fund had a net capital loss carryforward of $220,008
which will expire by 2008. The loss carryforward is available as a reduction, to
the extent provided in the regulations, of future net realized capital gains. To
the extent such losses are used, as provided in the regulations, to offset
future net realized capital gains, it is probable those gains will not be
distributed. In accordance with U.S. Treasury Regulations, the Fund has elected
to defer $1,925,202 of realized capital losses arising after October 31, 1999.
Such losses are treated for tax purposes as arising on September 1, 2000.
To reflect reclassifications arising from permanent "book/tax" differences
for the year ended August 31, 2000, the Fund's accumulated net realized loss was
decreased by $200, accumulated net investment loss was decreased by $157,474 and
beneficial interest was decreased by $157,674. Permanent book/tax differences
are primarily attributable to net operating losses.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS(CONCLUDED)
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 YEAR ENDED
AUGUST 31, 2000:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold ...................... 90,260 $ 1,251,438 319,579 $ 4,402,985 101,906 $ 1,392,955 13,579 $184,853
Shares repurchased ............... (458,127) (6,348,585) (511,696) (7,060,887) (604,785) (8,286,345) (2,982) (40,350)
Shares converted from
Class B to Class A ............ 7,102 98,435 (7,140) (98,435) -- -- -- --
Dividends reinvested ............. 4,291 59,006 416 5,699 324 4,437 72 990
--------- ----------- -------- ----------- -------- ----------- ------- --------
Net increase (decrease) .......... (356,474) $(4,939,706) (198,841) $(2,750,638) (502,555) $(6,888,953) 10,669 $145,493
========= =========== ======== =========== ======== =========== ======= ========
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 8,336 $119,040
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 8,336 $119,040
========= =========== ======== =========== ======== =========== ======= ========
</TABLE>
-----------------
+ Commencement of operations.
17
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------
FOR THE FOR THE PERIOD
YEAR ENDED DECEMBER 14, 1998+
AUGUST 31, 2000 THROUGH AUGUST 31, 1999
--------------- -----------------------
<S> <C> <C>
Net asset value, beginning of period ................................................. $ 13.94 $ 12.50
-------- --------
Net investment income (loss) ......................................................... 0.03@ 0.04
Net realized and unrealized gains from investments ................................... 0.88@ 1.40
-------- --------
Net increase from investment operations .............................................. 0.91 1.44
-------- --------
Dividends from net investment income ................................................. (0.05) --
Distributions from net realized gains from investments ............................... --++ --
-------- --------
Total dividends and distributions to shareholders .................................... (0.05) --
-------- --------
Net asset value, end of period ....................................................... $ 14.80 $ 13.94
======== ========
Total investment return(1) ........................................................... 6.58% 11.52%
======== ========
Ratios/Supplemental data:
Net assets, end of period (000's) .................................................... $13,552 $17,728
Expenses to average net assets, net of waivers from adviser .......................... 1.53% 1.62%*
Expenses to average net assets, before waivers from adviser .......................... 1.56% 1.87%*
Net investment income (loss) to average net assets, net of waivers from adviser ...... 0.26% 0.43%*
Net investment income (loss) to average net assets, before waivers from adviser ...... 0.23% 0.18%*
Portfolio turnover ................................................................... 77% 47%
</TABLE>
-----------------------------
* Annualized.
+ Commencement of operations.
@ Calculated using the average shares outstanding for the year.
++ The fund paid a distribution of less than $.005 for the year ended August
31, 2000.
(1) Total investment return is calculated assuming a $10,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates, and a sale
at net asset value on the last day of each period reported. The figures do
not include any applicable sales charges or program fees; results would be
lower if they were included. Total investment return for periods of less
than one year has not been annualized.
18
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------
FOR THE FOR THE PERIOD
YEAR ENDED DECEMBER 14, 1998+
AUGUST 31, 2000 THROUGH AUGUST 31, 1999
--------------- -----------------------
<S> <C> <C>
Net asset value, beginning of period ................................................. $ 13.86 $ 12.50
-------- --------
Net investment income (loss) ......................................................... (0.07)@ (0.03)
Net realized and unrealized gains from investments ................................... 0.88@ 1.39
-------- --------
Net increase from investment operations .............................................. 0.81 1.36
-------- --------
Dividends from net investment income ................................................. -- --
Distributions from net realized gains from investments ............................... --++ --
-------- --------
Total dividends and distributions to shareholders .................................... -- --
-------- --------
Net asset value, end of period ....................................................... $ 14.67 $ 13.86
======== ========
Total investment return(1) ........................................................... 5.87% 10.88%
======== ========
Ratios/Supplemental data:
Net assets, end of period (000's) .................................................... $22,462 $23,990
Expenses to average net assets, net of waivers from adviser .......................... 2.29% 2.37%*
Expenses to average net assets, before waivers from adviser .......................... 2.33% 2.57%*
Net investment income (loss) to average net assets, net of waivers from adviser ...... (0.52)% (0.31)%*
Net investment income (loss) to average net assets, before waivers from adviser ...... (0.56)% (0.51)%*
Portfolio turnover ................................................................... 77% 47%
<CAPTION>
CLASS C
---------------------------------------
FOR THE FOR THE PERIOD
YEAR ENDED DECEMBER 14, 1998+
AUGUST 31, 2000 THROUGH AUGUST 31, 1999
--------------- -----------------------
<S> <C> <C>
Net asset value, beginning of period ................................................. $ 13.86 $ 12.50
-------- --------
Net investment income (loss) ......................................................... (0.07)@ (0.02)
Net realized and unrealized gains from investments ................................... 0.88@ 1.38
-------- --------
Net increase from investment operations .............................................. 0.81 1.36
-------- --------
Dividends from net investment income ................................................. -- --
Distributions from net realized gains from investments ............................... --++ --
-------- --------
Total dividends and distributions to shareholders .................................... -- --
-------- --------
Net asset value, end of period ....................................................... $ 14.67 $ 13.86
======== ========
Total investment return(1) ........................................................... 5.87% 10.88%
======== ========
Ratios/Supplemental data:
Net assets, end of period (000's) .................................................... $13,250 $19,493
Expenses to average net assets, net of waivers from adviser .......................... 2.29% 2.37%*
Expenses to average net assets, before waivers from adviser .......................... 2.32% 2.56%*
Net investment income (loss) to average net assets, net of waivers from adviser ...... (0.50)% (0.31)%*
Net investment income (loss) to average net assets, before waivers from adviser ...... (0.53)% (0.50)%*
Portfolio turnover ................................................................... 77% 47%
<CAPTION>
CLASS Y
---------------------------------------
FOR THE FOR THE PERIOD
YEAR ENDED DECEMBER 14, 1998+
AUGUST 31, 2000 THROUGH AUGUST 31, 1999
--------------- -----------------------
<S> <C> <C>
Net asset value, beginning of period ................................................. $13.88 $12.50
------ ------
Net investment income (loss) ......................................................... 0.07@ 0.01
Net realized and unrealized gains from investments ................................... 0.88@ 1.37
------ ------
Net increase from investment operations .............................................. 0.95 1.38
------ ------
Dividends from net investment income ................................................. (0.08) --
Distributions from net realized gains from investments ............................... --++ --
------ ------
Total dividends and distributions to shareholders .................................... (0.08) --
------ ------
Net asset value, end of period ....................................................... $14.75 $13.88
====== ======
Total investment return(1) ........................................................... 6.89% 11.04%
====== ======
Ratios/Supplemental data:
Net assets, end of period (000's) .................................................... $ 280 $ 116
Expenses to average net assets, net of waivers from adviser .......................... 1.29% 1.37%*
Expenses to average net assets, before waivers from adviser .......................... 1.31% 1.47%*
Net investment income (loss) to average net assets, net of waivers from adviser ...... 0.52% 0.84%*
Net investment income (loss) to average net assets, before waivers from adviser ...... 0.50% 0.74%*
Portfolio turnover ................................................................... 77% 47%
</TABLE>
19
<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, 2000, and the related statement of operations for
the year then ended, the statement of changes in net assets and the financial
highlights for the year ended August 31, 2000 and 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 audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of investments owned at August 31, 2000 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Fund at August 31, 2000, the results of its operations for the year then ended,
the changes in its net assets and the financial highlights for the periods
indicated therein, in conformity with accounting principles generally accepted
in the United States.
/s/ Ernst & Young LLP
New York, New York
October 17, 2000
20
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
TAX INFORMATION(UNAUDITED)
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 (August 31,
2000), as to the federal tax status of distributions received by shareholders
during such fiscal year. Accordingly, we are advising you that the distributions
paid during the fiscal year by the PaineWebber Tax-Managed Equity Fund were
taxable and are derived from the following sources:
<TABLE>
<CAPTION>
PER SHARE DATA: CLASS A CLASS B CLASS C CLASS Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net investment income ........................... $0.0495 N/A N/A $0.0768
Short-term capital gains ........................ $0.0034 $0.0034 $0.0034 $0.0034
</TABLE>
The distributions paid did not qualify for the dividend received deduction
available to corporate shareholders.
Dividends received by tax-exempt recipients 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 2000. The second
notification, which reflects the amount to be used by calendar year taxpayers on
their federal income tax returns, is made in conjunction with Form 1099 DIV and
will be mailed in January 2001. Shareholders are advised to consult their own
tax advisers with respect to the tax consequences of their investment in the
Fund.
21
<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
Dianne E. O'Donnell
VICE PRESIDENT AND SECRETARY
Paul H. Schubert
VICE PRESIDENT AND TREASURER
Amy R. Doberman
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 26 funds
which encompass a diversified range of
investment goals.
PaineWebber
BOND FUNDS
- High Income Fund
- Investment Grade Income Fund
- Low Duration U.S. Government Income Fund
- Strategic Income Fund
- U.S. Government Income Fund
TAX-FREE BOND FUNDS
- California Tax-Free Income Fund
- Municipal High Income Fund
- National Tax-Free Income Fund
- New York Tax-Free Income Fund
STOCK FUNDS
- Enhanced S&P 500 Fund
- Enhanced Nasdaq-100 Fund
- Financial Services Growth Fund
- Growth Fund n Growth and Income Fund
- Mid Cap Fund n Small Cap Fund
- S&P 500 Index Fund n Strategy Fund
- Tax-Managed Equity Fund
ASSET ALLOCATION FUNDS
- Balanced Fund
- Tactical Allocation Fund
GLOBAL FUNDS
- Asia Pacific Growth Fund
- Emerging Markets Equity Fund
- Global Equity Fund
- Global Income Fund
PAINEWEBBER MONEY MARKET FUND
ANNUAL REPORT
------------------------
TAX-MANAGED
EQUITY FUND
PAINEWEBBER
-C-2000 PaineWebber Incorporated
All rights reserved
AUGUST 31, 2000
