<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND SEMIANNUAL REPORT
April 15, 2000
Dear Shareholder,
We are pleased to present you with the semiannual report for PaineWebber
Tax-Managed Equity Fund (the "Fund") for the six-month period ended February 29,
2000.
MARKET REVIEW
- --------------------------------------------------------------------------------
[GRAPHICS] Technology stocks continued to lead the equity markets during the six
months ended February 29, 2000. The NASDAQ Composite, one of the most
technology-heavy of the major market indices, surged 71.45% for the period. On
the other hand, the Standard and Poor's 500 Index (S&P 500) gained only 4.10%
for the period, and the Dow Jones Industrial Average (Dow) lost 5.73%.
Other trends of recent years also continued: an ever-smaller number of stocks
accounted for most of the market's gains, while day-to-day price fluctuations
became more volatile. In January 2000, the market briefly rewarded investors who
owned more cyclical, value-oriented stocks, but high-growth technology stocks
resumed their predominance in February.
Outlook
The near-term outlook for the market appears uncertain in light of recent
volatility among technology stocks and the likelihood that the Federal Reserve
(the Fed) will continue to raise interest rates. We are therefore concerned that
the stock market currently appears somewhat overvalued. Offsetting our concern,
however, expectations for corporate profits are rising. If these higher profit
expectations prove correct, then we believe the market can "grow into" its
current price levels without significant downside risk--barring an inflationary
shock.
Despite some uncertainty, the longer-term picture looks positive. The consensus
estimate of real GDP growth in 2000 stands at about 3.4%; early estimates for
real GDP growth in 2001 stand at about 3.5%. It seems likely that the economy
will remain healthy, with tolerable inflation of around 2.5% per year. Long-term
interest rates, as gauged by the 30-year U.S. Treasury bond, have been dipping
below six percent. We believe the combination of lower long-term rates and
higher profit expectations will help support stock prices over the longer term.
- --------------------------------------------------------------------------------
PAINEWEBBER
TAX-MANAGED EQUITY FUND
Investment Goal:
Maximize aftertax total return
Portfolio Managers:
Mark A. Tincher
Christopher G. Altschul
Mitchell Hutchins Asset Management Inc.
Commencement:
December 14, 1998
Dividend Payments:
Annually, if any
- --------------------------------------------------------------------------------
1
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND SEMIANNUAL REPORT
PORTFOLIO REVIEW
- --------------------------------------------------------------------------------
- ---------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS, PERIODS ENDED 2/29/00
- ---------------------------------------------------
6 Months 1 Year Inception(o)
Class A* -5.02% 4.92% 4.86%
Before Deducting Class B** -5.32 4.15 4.09
Maximum Sales Charge Class C+ -5.32 4.15 4.09
Class Y++ -4.85 4.73 4.64
Class A* -9.31 0.23 0.95
After Deducting Class B** -10.05 -0.85 -0.01
Maximum Sales Charge Class C+ -6.26 3.15 3.27
S&P 500 Index 4.10 11.73 15.14
Lipper Growth and 3.25 7.49 15.31
Income Funds Median
Past performance is no guarantee of future performance. 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. Six-month and one-year returns are cumulative.
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
distribution and service fees.
PORTFOLIO HIGHLIGHTS
Because of its value-oriented investment style, the Fund did not participate in
the gains achieved by the broad market indices. During the last month of the
period, however, Fund performance did improve because of gains in its holdings
of energy, basic material and newspaper stocks.
Trading activity during the period included the sale of UAL Corp. (UAL), which
we swapped into Delta Air Lines, Inc. (DAL) (1.1%)* due to Delta's more
attractive price and valuation outlook. We sold the Fund's position in General
Dynamics Corp. (GD) after the company indicated that its earnings would come in
at the lower end of street estimates.
During the period we added Corning Inc. (GLW) (2.1%) to the portfolio. We feel
Corning offers one of the most attractive relative valuations in the high growth
optical market. When Wal-Mart Stores Inc. (WMT) shares rose 50%, we took the
opportunity to sell one-third of the Fund's position (0.9%). Finally, we sold
the Fund's position in Apple Computer Inc. (AAPL) after the stock had a major
move, as we felt that it was fully valued.
We reduced the number of holdings in the Fund's portfolio during the period,
* Weightings represent percentages of portfolio assets as of February 29,
2000. The Fund's portfolio is actively managed and its composition will
vary over time.
2
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND SEMIANNUAL REPORT
and increased its weightings in technology and financial services companies.
Tech-nology stocks look attractive to us in light of recent price pullbacks in
the sector. Finan-cial service stocks lost ground as interest rates rose in
1999, but may be poised to recover in the latter part of 2000. We believe the
Federal Reserve is nearing the end of its cycle of rate increases to slow the
economy. Generally, financial stocks begin to recover in an-ticipation of the
last Fed hike.
The new century commenced with a few high-profile earnings disappointments,
including Lucent Technologies Inc. (LU), BMC Software Inc. (BMCS) and Amazon.Com
Inc. (AMZN). Should this trend continue we believe growth managers will become
even more selective, perhaps abandoning some of the stocks that led the market
in 1999.
A rotation away from growth would be beneficial for the Fund, with its value
bias. Heightened interest in "old media" companies, driven by the merger of
America Online Inc. (AOL) and Time Warner Inc. (TWX), may encourage similar
combinations of newer Internet portals and older content providers. The Fund
maintains exposure to "old media" through its positions in CBS Corp. (CBS)
(1.7%), New York Times Co. (NYT) (1.0%), Dow Jones & Co. Inc. (DJ) (0.9%),
Knight Ridder Inc. (KRI) (0.8%) and Times Mirror Company (TMC) (0.6%).
PORTFOLIO STATISTICS
Characteristics* 2/29/00 8/31/99
- --------------------------------------------------------------------------------
Net Assets ($mm) $52.2 $61.3
Average Market Cap ($bln) $51.9 $22.0
Price/Earnings Ratio(1) 19.5x 17.1x
Dividend Yield 1.19% 1.22%
Number of Securities 74 99
Stocks 92.2% 83.8%
Cash & Equivalents 7.8% 16.2%
- --------------------------------------------------------------------------------
Top Five Sectors* 2/29/00 8/31/99
- --------------------------------------------------------------------------------
Financial Services 17.5% Consumer Cyclicals 18.4%
Technology 17.1 Technology 14.6
Consumer Cyclicals 17.0 Capital Goods 14.2
Energy 12.1 Financial Services 11.9
Capital Goods 11.8 Energy 8.0
- --------------------------------------------------------------------------------
Total 75.5 Total 67.1
* Weightings represent percentages of portfolio assets. The Fund's portfolio
is actively managed and its composition will vary over time.
(1) Based on projected forward fiscal year earnings.
3
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND SEMIANNUAL REPORT
Top Ten Equity Holdings* 2/29/00 8/31/99
- --------------------------------------------------------------------------------
BJ Services Co. 3.1% General Dynamics Corp. 2.5%
Citigroup, Inc. 2.9 Microsoft Corp. 2.1
Motorola Inc. 2.8 Reynolds Metals Co. 1.7
Chase Manhattan Corp. 2.5 United Technologies Corp. 1.7
Mettler Toledo International Inc. 2.5 Apple Computer, Inc. 1.6
Exxon Mobil Corp 2.4 BJ Services Co. 1.6
Microsoft Corp. 2.4 Chase Manhattan Corp. 1.6
Koninklijke Philips Electronics NV 2.2 TRW Inc. 1.5
Corning Inc. 2.1 Mettler Toledo International Inc. 1.5
MCI Worldcom 2.1 SPX Corp. 1.5
- --------------------------------------------------------------------------------
Total 25.0 Total 17.3
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 and Chief Executive Officer President and Chief Operating Officer
Mitchell Hutchins Asset Management Inc. Mitchell Hutchins Asset Management Inc.
/s/ Mark A. Tincher /s/ Christopher G. Altschul
MARK A. TINCHER CHRISTOPHER G. ALTSCHUL
Managing Director and First Vice President
Chief Investment Officer--Equities Mitchell Hutchins Asset Management Inc.
Mitchell Hutchins Asset Management Inc. Portfolio Manager, PaineWebber
Portfolio Manager, PaineWebber Tax-Managed Equity Fund
Tax-Managed Equity Fund
This letter is intended to assist shareholders in understanding how the Fund
performed during the six-month period ended February 29, 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.
* Weightings represent percentages of portfolio assets. The Fund's portfolio
is actively managed and its composition will vary over time.
(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.
4
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
PERFORMANCE RESULTS (unaudited)
Net Asset Value Total Return(1)
------------------------------ ---------------------
12 Months 6 Months
Ended Ended
02/29/00 08/31/99 02/28/99 02/29/00 02/29/00
- --------------------------------------------------------------------------------
Class A Shares $ 13.19 $ 13.94 $ 12.62 4.92 (5.02)%
- --------------------------------------------------------------------------------
Class B Shares 13.12 13.86 12.60 4.15 (5.32)
- --------------------------------------------------------------------------------
Class C Shares 13.12 13.86 12.60 4.15 (5.32)
- --------------------------------------------------------------------------------
Performance Summary Class A Shares
Net Asset Value
-------------------
Capital Gains Dividends Total
Period Covered Beginning Ending Distributed Paid Return(1)
- --------------------------------------------------------------------------------
12/14/98-12/31/98 $12.50 $13.03 -- -- 4.24%
- --------------------------------------------------------------------------------
1999 13.03 14.34 $0.0034 $0.0495 10.48
- --------------------------------------------------------------------------------
01/01/00-02/29/00 14.34 13.19 -- -- (8.02)
- --------------------------------------------------------------------------------
Totals: $0.0034 $0.0495
- --------------------------------------------------------------------------------
Cumulative Total Return as of 02/29/00: 5.93%
- --------------------------------------------------------------------------------
Performance Summary Class B Shares
Net Asset Value
-------------------
Capital Gains Dividends Total
Period Covered Beginning Ending Distributed Paid Return(1)
- --------------------------------------------------------------------------------
12/14/98-12/31/98 $12.50 $13.03 -- -- 4.24%
- --------------------------------------------------------------------------------
1999 13.03 14.28 $0.0034 -- 9.62
- --------------------------------------------------------------------------------
01/01/00-02/29/00 14.28 13.12 -- -- (8.12)
- --------------------------------------------------------------------------------
Totals: $0.0034 $0.0000
- --------------------------------------------------------------------------------
Cumulative Total Return as of 02/29/00: 4.99%
- --------------------------------------------------------------------------------
Performance Summary Class C Shares
Net Asset Value
-------------------
Capital Gains Dividends Total
Period Covered Beginning Ending Distributed Paid Return(1)
- --------------------------------------------------------------------------------
12/14/98-12/31/98 $12.50 $13.03 -- -- 4.24%
- --------------------------------------------------------------------------------
1999 13.03 14.28 $0.0034 -- 9.62
- --------------------------------------------------------------------------------
01/01/00-02/29/00 14.28 13.12 -- -- (8.12)
- --------------------------------------------------------------------------------
Totals: $0.0034 $0.0000
- --------------------------------------------------------------------------------
Cumulative Total Return as of 02/29/00: 4.99%
- --------------------------------------------------------------------------------
(1) Figures assume reinvestment of all dividends and distributions at net
asset value on the payable dates and do not include sales charges; results
for each class would be lower if sales charges were included. Total
investment return for periods of less than one year has not been
annualized.
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 six months ended
February 29, 2000 and since inception, December 14, 1998 through February 29,
2000, Class Y shares have a total return of (4.85)% and 5.66%, respectively.
Class Y shares do not have initial or contingent deferred sales charges or
ongoing 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.
5
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
PORTFOLIO OF INVESTMENTS FEBRUARY 29, 2000 (UNAUDITED)
Number of
Shares Value
--------- -----
COMMON STOCKS--93.89%
Airlines--1.68%
5,400 AMR Corp.* ..................................... $ 285,525
13,000 Delta Air Lines, Inc. .......................... 593,125
-----------
878,650
-----------
Apparel, Retail--1.35%
20,700 Limited, Inc. .................................. 703,800
-----------
Banks--8.64%
16,800 Chase Manhattan Corp. .......................... 1,337,700
29,700 Citigroup, Inc. ................................ 1,535,119
25,200 UnionBanCal Corp. .............................. 809,550
25,000 Wells Fargo and Co. ............................ 826,562
-----------
4,508,931
-----------
Computer Hardware--0.51%
2,000 Cisco Systems, Inc.* ........................... 264,375
-----------
Computer Software--5.92%
8,100 IBM Corp. ...................................... 826,200
14,200 Microsoft Corp.* ............................... 1,269,125
33,100 Unisys Corp.* .................................. 990,931
-----------
3,086,256
-----------
Consumer Durables--1.56%
15,000 Whirlpool Corp. ................................ 814,688
-----------
Defense & Aerospace--2.46%
8,700 Boeing Co. ..................................... 320,812
20,000 TRW Inc. ....................................... 960,000
-----------
1,280,812
-----------
Diversified Retail--0.93%
10,000 Wal Mart Stores, Inc. .......................... 486,875
-----------
Drugs & Medicine--1.20%
13,100 Pharmacia & Upjohn, Inc., ADR .................. 623,888
-----------
Electric Utilities--2.25%
12,600 Constellation Energy Group, Inc. ............... $ 374,850
8,800 PECO Energy Co. ................................ 328,350
10,700 PG&E Corp. ..................................... 220,688
9,100 Pinnacle West Capital Corp. .................... 251,387
-----------
1,175,275
-----------
Electrical Equipment--5.77%
6,000 Corning, Inc. .................................. 1,128,000
8,800 Motorola, Inc. ................................. 1,500,400
8,000 Tellabs, Inc.* ................................. 384,000
-----------
3,012,400
-----------
Electrical Power--2.20%
6,000 Koninklijke Philips Electronics N.V.* .......... 1,149,000
-----------
Energy Reserves & Production--4.80%
7,700 Atlantic Richfield Co. ......................... 546,700
17,161 Exxon Mobil Corp. .............................. 1,292,438
12,700 Royal Dutch Petroleum Co., ADR ................. 666,750
-----------
2,505,888
-----------
Financial Services--2.58%
12,300 Lehman Brothers Holdings, Inc. ................. 891,750
20,000 MBNA Corp. ..................................... 455,000
-----------
1,346,750
-----------
Forest Products, Paper--3.85%
10,000 Champion International Corp. ................... 517,500
14,500 Georgia-Pacific Corp. .......................... 502,969
5,900 International Paper Co. ........................ 217,194
15,000 Weyerhaeuser Co. ............................... 769,687
-----------
2,007,350
-----------
Industrial Parts--7.36%
14,600 American Standard Companies Inc.* .............. 509,175
34,500 Mettler-Toledo International Inc., ADR *........ 1,332,563
12,800 SPX Corp.* ..................................... 1,114,400
17,306 United Technologies Corp. ...................... 881,524
-----------
3,837,662
-----------
6
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
Number of
Shares Value
--------- -----
COMMON STOCKS (concluded)
Industrial Services & Supplies--0.69%
10,000 Hertz Corp. .................................... $ 358,125
-----------
Information & Computer Services--4.56%
26,000 Comdisco Inc. .................................. 999,375
11,000 Electronic Data Systems Corp. .................. 712,250
14,800 First Data Corp. ............................... 666,000
-----------
2,377,625
-----------
Life Insurance--1.93%
15,000 AXA Financial Inc. ............................. 449,063
20,100 Lincoln National Corp. ......................... 559,031
-----------
1,008,094
-----------
Long Distance & Phone Companies--3.11%
10,000 AT&T Corp. ..................................... 494,375
25,300 MCI WorldCom, Inc.* ............................ 1,129,012
-----------
1,623,387
-----------
Media--1.68%
14,742 CBS Corp.* ..................................... 878,070
-----------
Medical Products--2.26%
6,700 Baxter International, Inc. ..................... 365,150
6,700 Johnson & Johnson .............................. 480,725
13,600 Mallinckrodt Group, Inc. ....................... 334,900
-----------
1,180,775
-----------
Medical Providers--0.75%
20,200 Columbia/HCA Healthcare Corp. .................. 390,113
-----------
Mining & Metals--1.97%
16,200 Reynolds Metals Co. ............................ 1,028,700
-----------
Motor Vehicles--4.82%
43,300 Delphi Automotive Systems Corp. (1) ............ 722,569
7,000 Ford Motor Co. ................................. 291,375
4,400 General Motors Corp. ........................... 334,675
23,400 Lear Corp.* .................................... 494,325
20,500 Navistar International Corp.* .................. 671,375
-----------
2,514,319
-----------
Oil Refining--1.95%
10,500 Conoco, Inc. ................................... $ 206,719
30,200 Tosco Corp. .................................... 807,850
-----------
1,014,569
-----------
Oil Services--5.57%
28,500 BJ Services Co.*(1) ............................ 1,626,281
18,500 Cooper Cameron Corp.* .......................... 1,022,125
6,700 Halliburton Co. ................................ 255,856
-----------
2,904,262
-----------
Other Insurance--1.77%
19,700 Allstate Corp. ................................. 384,150
17,100 Travelers Property Casualty Corp. .............. 540,788
-----------
924,938
-----------
Publishing--3.37%
8,000 Dow Jones & Co., Inc. .......................... 499,000
9,000 Knight Ridder, Inc. ............................ 421,875
12,000 New York Times Co., Class A .................... 507,000
6,500 Times Mirror Co. ............................... 331,500
-----------
1,759,375
-----------
Securities & Asset Management--2.85%
13,000 Donaldson, Lufkin & Jenrette Inc. .............. 564,687
9,000 Merrill Lynch & Co., Inc. ...................... 922,500
-----------
1,487,187
-----------
Semiconductor--0.69%
3,200 Intel Corp. .................................... 361,600
-----------
Specialty Retail--2.86%
24,000 Circuit City Stores, Inc. ...................... 969,000
11,000 Lowe's Companies, Inc. ......................... 523,875
-----------
1,492,875
-----------
Total Common Stocks (cost--$46,799,064) ........ 48,986,614
-----------
7
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
<TABLE>
<CAPTION>
Principal
Amount
(000) Maturity Dates Interest Rates Value
--------- -------------- -------------- ------------
<S> <C> <C> <C>
Repurchase Agreements--7.92%
$2,133 Repurchase Agreement dated 02/29/00 with Dresdner Bank,
collateralized by $2,224,000 U.S. Treasury Bonds, 6.250% due
08/15/23 (value--$2,176,406); proceeds: $2,133,341
(cost--$2,133,000)................................................. 03/01/00 5.750% $2,133,000
2,000 Repurchase Agreement dated 02/29/00 with SG Cowen Corporation,
collateralized by $1,631,000 U.S. Treasury Bonds, 8.750% due
05/15/17 (value--$2,040,870); proceeds: $2,000,320
(cost--$2,000,000)................................................. 03/01/00 5.760 2,000,000
-----------
Total Repurchase Agreements (cost--$4,133,000).................................. 4,133,000
-----------
Total Investments (cost--$50,932,064)--101.81%..................................................................... 53,119,614
-----------
Liabilities in excess of other assets--(1.81)%..................................................................... (944,401)
-----------
Net Assets--100.00%................................................................................................ $52,175,213
===========
</TABLE>
- ----------
* Non-Income producing security
ADR American Depositary Receipt
(1) Security, or portion thereof, on loan at Feburary 29, 2000
See accompanying notes to financial statements
8
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 (unaudited)
<TABLE>
<S> <C>
Assets
Investments in securities, at value (cost--$50,932,064) ............... $ 53,119,614
Investments of cash collateral received for securities loaned, at value
(cost--$1,940,400) ................................................... 1,940,400
Cash .................................................................. 893
Dividends and interest receivable ..................................... 65,581
Receivable for shares of beneficial interest sold ..................... 63,933
Other assets .......................................................... 94,202
------------
Total assets .......................................................... 55,284,623
------------
Liabilities
Collateral for securities loaned ...................................... 1,940,400
Payable for shares of beneficial interest repurchased ................. 614,949
Payable for investments purchased ..................................... 335,467
Payable to affiliates ................................................. 63,338
Accrued expenses and other liabilities ................................ 155,256
------------
Total liabilities ..................................................... 3,109,410
------------
Net Assets
Beneficial interest--$0.001 par value outstanding
(unlimited amount authorized) ....................................... 50,664,492
Accumulated net investment loss ....................................... (177,213)
Accumulated net realized loss from investment transactions ............ (499,616)
Net unrealized appreciation of investments ............................ 2,187,550
------------
Net assets ............................................................ $ 52,175,213
============
Class A:
Net assets ............................................................ $ 14,291,143
------------
Shares outstanding .................................................... 1,083,382
------------
Net asset value and redemption value per share ........................ $13.19
======
Maximum offering price per share
(net asset value plus sales charge of 4.50% of offering price) ...... $13.81
======
Class B:
Net assets ............................................................ $ 22,591,199
------------
Shares outstanding .................................................... 1,721,861
------------
Net asset value and offering price .................................... $13.12
======
Class C:
Net assets ............................................................ $ 15,094,395
------------
Shares outstanding .................................................... 1,150,389
------------
Net asset value and offering price .................................... $13.12
======
Class Y:
Net assets ............................................................ $ 198,476
------------
Shares outstanding .................................................... 15,112
------------
Net asset value, offering price and redemption value per share ........ $13.13
======
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
STATEMENT OF OPERATIONS
For the Six
Months Ended
February 29, 2000
(unaudited)
-----------------
Investment income:
Dividends .................................................... $ 318,383
Interest ..................................................... 200,101
-----------
518,484
-----------
Expenses:
Investment advisory and administration ....................... 220,216
Service fees--Class A ........................................ 20,470
Service and distribution fees--Class B ....................... 120,359
Service and distribution fees--Class C ....................... 90,554
Legal and audit .............................................. 53,109
Reports and notices to shareholders .......................... 36,103
Transfer agency and service fees ............................. 28,692
Custody and accounting ....................................... 20,083
State registration fees ...................................... 16,628
Trustees' fees ............................................... 5,250
Other expenses ............................................... 12,718
-----------
624,182
Less: Fee waivers from adviser ............................... (17,506)
-----------
Net expenses ................................................. 606,676
-----------
Net investment loss .......................................... (88,192)
-----------
Realized and unrealized losses from investment activities:
Net realized loss from investment transactions ............... (442,946)
Net unrealized appreciation/depreciation of investments ...... (2,511,296)
-----------
Net realized and unrealized loss from investment activities... (2,954,242)
-----------
Net decrease in net assets resulting from operations ......... $(3,042,434)
===========
See accompanying notes to financial statements
10
<PAGE>
PAINEWEBBER TAX-MANAGED EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the Period
Months Ended December 14, 1998+
February 29, 2000 through
(unaudited) August 31, 1999
----------------- ------------------
<S> <C> <C>
From operations:
Net investment loss ........................................................ $ (88,192) $ (26,606)
Net realized loss from investment transactions ............................. (442,946) (41,636)
Net unrealized appreciation/depreciation of investments .................... (2,511,296) 4,698,846
Net increase (decrease) in net assets resulting from operations ............ (3,042,434) 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) --
(77,449) --
From beneficial interest transactions:
Net proceeds from the sale of shares ....................................... 4,890,865 64,523,463
Cost of shares repurchased ................................................. (10,992,859) (7,827,159)
Proceeds from dividends reinvested ......................................... 70,132 --
Net increase (decrease) in net assets derived from beneficial interest ..... (6,031,862) 56,696,304
Net increase (decrease) in net assets ...................................... (9,151,745) 61,326,908
Net assets:
Beginning of period ........................................................ 61,326,958 50
End of period .............................................................. $ 52,175,213 $ 61,326,958
</TABLE>
- ----------
+ Commencement of operations
See accompanying notes to financial statements
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS (unaudited)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Tax-Managed Equity Fund (the "Fund") is a diversified series
of PaineWebber Managed Investments Trust (the "Trust"). The Trust was organized
as a Massachusetts business trust and is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Fund's investment objective is to
maximize after-tax total return.
Currently, the Fund offers Class A, Class B, Class C and Class Y shares.
Each class represents interests in the same assets of the applicable Fund, and
the classes are identical except for differences in their sales charge
structures, ongoing service and distribution charges and certain transfer agency
expenses. In addition, Class B shares and all corresponding reinvested dividend
shares automatically convert to Class A shares approximately six years after
issuance. All classes of shares have equal voting privileges except that each
class has exclusive voting rights with respect to its service and/or
distribution plan. Class Y shares have no service or distribution plan.
The preparation of financial statements in accordance with generally
accepted accounting principles requires Fund management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates. The following is a
summary of significant accounting policies:
Valuation of Investments--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.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (unaudited)
Investment Transactions and Investment Income--Investment transactions are
recorded on the trade date. Realized gains and losses from investment
transactions are calculated using the identified cost method. Interest income is
recorded on an accrual basis. Dividend income is recorded on the ex-dividend
date. Discounts are accreted and premiums are amortized as adjustments to
interest income and identified cost of investments.
Income, expenses (excluding class-specific expenses) and
realized/unrealized gains/losses are allocated proportionately to each class of
shares based upon the relative net asset value of outstanding shares (or the
value of dividend-eligible shares, as appropriate) of each class at the
beginning of the day (after adjusting for current capital share activity of the
respective classes). Class specific expenses are charged directly to the
applicable class of shares.
Dividends and Distributions--Dividends and distributions to shareholders
are recorded on the ex-dividend date. The amount of dividends and distributions
are determined in accordance with federal income tax regulations, which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification.
Investment Adviser and Administrator
The Trust's board of trustees has approved an Investment Advisory and
Administration Contract ("Advisory Contract") with Mitchell Hutchins, under
which Mitchell Hutchins serves as investment adviser and administrator of the
Fund. In accordance with the Advisory Contract, the Fund pays Mitchell Hutchins
an investment advisory and administration fee, which is accrued daily and paid
monthly, at an annual rate of 0.75% of the Fund's average daily net assets. For
the six months ended February 29, 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 February 29, 2000, the Fund owed Mitchell Hutchins $29,285 in investment
advisory and administration fees.
For the six months ended February 29, 2000, the Tax-Managed Equity Fund
paid $964 in commissions to PaineWebber for transactions executed on behalf of
the Fund.
Distribution Plans
Mitchell Hutchins is the distributor of the Fund's shares and has
appointed PaineWebber as the exclusive dealer for the sale of those shares.
Under separate plans of service and/or distribution pertaining to Class A, Class
B and Class C shares, the Fund pays Mitchell Hutchins monthly service fees at
the annual rate of up to 0.25% of the average daily net assets of Class A, Class
B and Class C shares and monthly distribution fees at the annual rate of 0.75%
of the average daily net assets on Class B and Class C shares. At February 29,
2000, the Fund owed Mitchell Hutchins $33,995 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 six months
ended February 29, 2000, it earned $124,858 in sales charges.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (unaudited)
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 six months
ended February 29, 2000, PaineWebber received approximately 54% of the total
transfer agency service fees collected by PFPC, Inc. from the Fund.
SECURITY LENDING
The Fund may lend securities up to 331/3% 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 six months ended February 29, 2000, the Fund earned $329 for lending its
securities. The Fund's lending agent is PaineWebber, which received $179 in
compensation in that capacity from the Fund for the six months ended February
29, 2000. At February 29, 2000, the Fund owed PaineWebber $58 in compensation.
As of February 29, 2000, the Fund held cash and/or cash equivalents having
an aggregate value of $1,940,400 as collateral for portfolio securities loaned
having a market value of $1,994,913 which was invested in the following money
market funds:
<TABLE>
<CAPTION>
Number of
Shares Value
-------- -------
<S> <C> <C>
1,191,232 Liquid Assets Portfolio ....................................................... $1,191,232
657,242 Mitchell Hutchins Money Market Fund LLC ....................................... 657,242
91,926 Prime Portfolio ............................................................... 91,926
----------
Total Investment of Cash Collateral for Securities Loaned (cost--$1,940,400)... $1,940,400
==========
</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 six months ended February 29, 2000, the Fund did not borrow under the
Facility.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (unaudited)
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at February
29, 2000, was substantially the same as the cost of securities for financial
statement purposes.
At February 29, 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) .............. $ 6,534,467
Gross depreciation (investments having an excess of cost over value) .............. (4,346,917)
-----------
Net unrealized appreciation of investments $ 2,187,550
===========
</TABLE>
For the six months ended February 29, 2000, aggregate purchases and sales
of portfolio securities, excluding short-term securities, were $25,733,481 and
$25,167,877 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
--------------------- -----------------------
Shares Amount Shares Amount
-------- -------- -------- --------
<S> <C> <C> <C> <C>
For the Six Months Ended
February 29, 2000:
Shares sold ..................... 60,790 $ 834,222 210,828 $ 2,855,372
Shares repurchased .............. (260,675) (3,570,674) (212,875) (2,870,753)
Shares converted from
Class B to Class A ............ 6,952 96,415 (6,990) (96,415)
Dividends reinvested ............ 4,292 59,006 416 5,699
------------ ------------ ------------ ------------
Net increase (decrease) ......... (188,641) $ (2,581,031) (8,621) $ (106,097)
============ ============ ============ ============
For the Period December 14, 1998+
through August 31, 1999:
Shares sold ..................... 1,532,036 $ 19,692,976 1,914,198 $ 24,772,096
Shares repurchased .............. (276,011) (3,793,164) (167,726) (2,299,643)
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
============ ============ ============ ============
<CAPTION>
Class C Class Y
--------------------- -----------------------
Shares Amount Shares Amount
-------- -------- -------- --------
<S> <C> <C> <C> <C>
For the Six Months Ended
February 29, 2000:
Shares sold ..................... 79,388 $ 1,075,147 9,344 $ 126,124
Shares repurchased .............. (335,316) (4,515,905) (2,641) (35,527)
Shares converted from
Class B to Class A ............ -- -- -- --
Dividends reinvested ............ 324 4,437 72 990
------------ ------------ ------------ ------------
Net increase (decrease) ......... (255,604) $ (3,436,321) 6,775 $ 91,587
============ ============ ============ ============
For the Period December 14, 1998+
through August 31, 1999:
Shares sold ..................... 1,536,658 $ 19,939,351 8,336 $ 119,040
Shares repurchased .............. (130,666) (1,734,352) -- --
Shares converted from
Class B to Class A ............ -- -- -- --
------------ ------------ ------------ ------------
Net increase .................... 1,405,992 $ 18,204,999 8,336 $ 119,040
============ ============ ============ ============
</TABLE>
- ----------
+ Commencement of operations
15
<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 Class B
---------------------------------- -------------------------------------
For the Six For the Six
Months Ended For the Period Months Ended For the Period
February December 14, 1998+ February December 14, 1998+
29, 2000 through August 29, 2000 through August
(unaudited) 31, 1999 (unaudited) 31, 1999
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period .............. $ 13.94 $ 12.50 $ 13.86 $ 12.50
---------- ---------- ---------- ---------
Net investment income (loss) ...................... 0.02 0.04 (0.04) (0.03)
Net realized and unrealized gains (losses)
from investments .................................. (0.72) 1.40 (0.70) 1.39
---------- ---------- ---------- ---------
Net increase (decrease) from investment
operations ...................................... (0.70) 1.44 (0.74) 1.36
---------- ---------- ---------- ---------
Dividends from net investment income .............. (0.05) -- -- --
Distributions from net realized gains from
investment transactions ......................... --++ -- --++ --
---------- ---------- ---------- ---------
Total dividends and distributions to shareholders . (0.05) -- -- --
---------- ---------- ---------- ---------
Net asset value, end of period .................... $ 13.19 $ 13.94 $ 13.12 $ 13.86
========== ========== ========== =========
Total investment return (1) ....................... (5.02)% 11.52% (5.32)% 10.88
========== ========== ========== =========
Ratios/Supplemental data:
Net assets, end of period (000's) ................. $ 14,291 $ 17,728 $ 22,591 $ 23,990
Expenses to average net assets, net of waivers
from adviser .................................... 1.62%* 1.62%* 2.37%* 2.37%*
Expenses to average net assets, before waivers
from adviser ................................... 1.68%* 1.87%* 2.43%* 2.57%*
Net investment income (loss) to average net assets,
net of waivers from adviser .................... 0.25%* 0.43%* (0.53)%* (0.31)%*
Net investment income (loss) to average net assets,
before waivers from adviser ................... 0.19%* 0.18%* (0.59)%* (0.51)%*
Portfolio turnover rate ........................... 49% 47% 49% 47%
</TABLE>
- ----------
* Annualized
+ Commencement of operations
++ The fund paid a distribution of less than $.005 for the six months ended
February 29, 2000.
(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 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.
16
<PAGE>
<TABLE>
<CAPTION>
Class C
-------------------------------------------
For the Six
Months Ended For the Period
February 29, 2000 December 14, 1998+
(unaudited) through August 31, 1999
----------------- -----------------------
<S> <C> <C>
Net asset value, beginning of period .............. $ 13.86 $ 12.50
---------- ----------
Net investment income (loss) ...................... (0.04) (0.02)
Net realized and unrealized gains (losses)
from investments .................................. (0.70) 1.38
---------- ----------
Net increase (decrease) from investment
operations ...................................... (0.74) 1.36
---------- ----------
Dividends from net investment income .............. -- --
Distributions from net realized gains from
investment transactions ......................... --++ --
---------- ----------
Total dividends and distributions to shareholders . -- --
---------- ----------
Net asset value, end of period .................... $ 13.12 $ 13.86
========== ==========
Total investment return (1) ....................... 5.32% 10.88%
========== ==========
Ratios/Supplemental data:
Net assets, end of period (000's) ................. $ 15,094 $ 19,493
Expenses to average net assets, net of waivers
from adviser .................................... 2.37%* 2.37%*
Expenses to average net assets, before waivers
from adviser ................................... 2.43%* 2.56%*
Net investment income (loss) to average net assets,
net of waivers from adviser .................... (0.51)%* (0.31)%*
Net investment income (loss) to average net assets,
before waivers from adviser ................... (0.57)%* (0.50)%
Portfolio turnover rate ........................... 49% 47%
<CAPTION>
Class Y
------------------------------------------
For the Six
Months Ended For the Period
February 29, 2000 December 14, 1998+
(unaudited) through August 31, 1999
----------------- -----------------------
Net asset value, beginning of period .............. $ 13.88 $ 12.50
------- -------
Net investment income (loss) ...................... 0.03 0.01
Net realized and unrealized gains (losses)
from investments .................................. (0.70) 1.37
------- -------
Net increase (decrease) from investment
operations ...................................... (0.67) 1.38
------- -------
Dividends from net investment income .............. (0.08) --
Distributions from net realized gains from
investment transactions ......................... --++ --
------- -------
Total dividends and distributions to shareholders . (0.08) --
------- -------
Net asset value, end of period .................... $ 13.13 $ 13.88
======= =======
Total investment return (1) ....................... (4.85)% 11.04%
======= =======
Ratios/Supplemental data:
Net assets, end of period (000's) ................. $ 199 $ 116
Expenses to average net assets, net of waivers
from adviser .................................... 1.37%* 1.37%*
Expenses to average net assets, before waivers
from adviser ................................... 1.41%* 1.47%*
Net investment income (loss) to average net assets,
net of waivers from adviser .................... 0.47%* 0.84%*
Net investment income (loss) to average net assets,
before waivers from adviser ................... 0.43%* 0.74%*
Portfolio turnover rate ........................... 49% 47%
</TABLE>
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
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.
The financial information included herein is taken from the records of the Fund
without examination by independent auditors who do not express an opinion
thereon.
This report is not to be used in conjunction with the offering of shares of the
Fund unless accompanied or preceded by an effective prospectus.
<PAGE>
PaineWebber offers a family of 27 funds which encompass a diversified range of
investment goals.
BOND FUNDS
o High Income Fund
o Investment Grade Income Fund
o Low Duration U.S. Government Income Fund
o Strategic Income Fund
o U.S. Government Income Fund
TAX-FREE BOND FUNDS
o California Tax-Free Income Fund
o Municipal High Income Fund
o National Tax-Free Income Fund
o New York Tax-Free Income Fund
STOCK FUNDS
o Enhanced S&P 500 Fund
o Enhanced Nasdaq-100 Fund
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
PAINEWEBBER MONEY MARKET FUND
PAINEWEBBER [LOGO]
(c)2000 PaineWebber Incorporated
Member SPIC
All Rights Reserved
SEMIANNUAL REPORT
PAINEWEBBER [LOGO]
- -----------------------------
TAX-MANAGED
EQUITY FUND
FEBRUARY 29, 2000
