<PAGE>
PAINEWEBBER CALIFORNIA TAX-FREE INCOME FUND
RECENT PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------- -----------------------------
12 MONTHS 6 MONTHS
02/28/95 08/31/94 02/28/94 ENDED 02/28/95 ENDED 02/28/95
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $10.68 $10.71 $11.41 (0.18)% 2.61%
- ------------------------------------------------------------------------
Class B Shares 10.69 10.72 11.41 (0.85) 2.22
- ------------------------------------------------------------------------
Class D Shares 10.67 10.71 11.40 (0.70) 2.25
- ------------------------------------------------------------------------
</TABLE>
Performance Summary Class A Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
--------------------
PERIOD CAPITAL GAINS TOTAL
COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
09/16/85 - 12/31/85 $ 9.57 $10.09 $ -- $0.1827 7.41%
- -----------------------------------------------------------------------------
1986 10.09 11.18 -- 0.7883 19.18
- -----------------------------------------------------------------------------
1987 11.18 10.49 -- 0.7564 0.65
- -----------------------------------------------------------------------------
1988 10.49 10.74 -- 0.7908 10.20
- -----------------------------------------------------------------------------
1989 10.74 10.95 -- 0.7384 9.11
- -----------------------------------------------------------------------------
1990 10.95 10.88 0.0340 0.7877 6.18
- -----------------------------------------------------------------------------
1991 10.88 11.29 0.0268 0.7064 10.84
- -----------------------------------------------------------------------------
1992 11.29 11.29 0.1701 0.6504 7.49
- -----------------------------------------------------------------------------
1993 11.29 11.70 0.3052 0.6077 11.96
- -----------------------------------------------------------------------------
1994 11.70 10.09 0.0969 0.5844 (8.07)
- -----------------------------------------------------------------------------
01/01/95 - 02/28/95 10.09 10.68 -- 0.0587 6.44
- -----------------------------------------------------------------------------
Total: $0.6330 $6.6519
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/95: 109.10%
- -----------------------------------------------------------------------------
</TABLE>
Performance Summary Class B Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/01/91 - 12/31/91 $10.95 $11.29 $0.0268 $0.3043 6.20%
- ----------------------------------------------------------------------------
1992 11.29 11.29 0.1701 0.5631 6.67
- ----------------------------------------------------------------------------
1993 11.29 11.70 0.3052 0.5188 11.11
- ----------------------------------------------------------------------------
1994 11.70 10.10 0.0969 0.5029 (8.69)
- ----------------------------------------------------------------------------
01/01/95 - 02/28/95 10.10 10.69 -- 0.0509 6.35
- ----------------------------------------------------------------------------
Total: $0.5990 $1.9400
- ----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/95: 22.23%
- ----------------------------------------------------------------------------
</TABLE>
Performance Summary Class D Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/02/92 - 12/31/92 $11.41 $11.28 $0.1701 $0.2625 2.68%
- ----------------------------------------------------------------------------
1993 11.28 11.69 0.3052 0.5477 11.40
- ----------------------------------------------------------------------------
1994 11.69 10.09 0.0969 0.5295 (8.47)
- ----------------------------------------------------------------------------
01/01/95 - 02/28/95 10.09 10.67 -- 0.0533 6.28
- ----------------------------------------------------------------------------
Total: $0.5722 $1.3930
- ----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/95: 11.28%
- ----------------------------------------------------------------------------
</TABLE>
/1/ Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the payable dates and do not include sales charges;
results would be lower for Class A and Class B shares if sales charges were
included.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The investment return and 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. Capital gain
distributions, distributions from income from market discount amortization
and gains realized on the sale of Fund shares are taxable.
<PAGE>
PAINEWEBBER NATIONAL TAX-FREE INCOME FUND
RECENT PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------- -----------------------------
12 MONTHS 6 MONTHS
02/28/95 08/31/94 02/28/94 ENDED 02/28/95 ENDED 02/28/95
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $11.26 $11.36 $12.00 (0.63)% 2.04%
- ------------------------------------------------------------------------
Class B Shares 11.26 11.36 11.99 (1.29) 1.65
- ------------------------------------------------------------------------
Class D Shares 11.26 11.36 12.00 (1.13) 1.78
- ------------------------------------------------------------------------
</TABLE>
Performance Summary Class A Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12/03/84 - 12/31/84 $ 9.57 $ 9.60 $ -- $ -- 0.31%
- -----------------------------------------------------------------------------
1985 9.60 10.45 -- 0.8903 19.00
- -----------------------------------------------------------------------------
1986 10.45 11.39 -- 0.8246 17.38
- -----------------------------------------------------------------------------
1987 11.39 10.74 -- 0.7823 1.30
- -----------------------------------------------------------------------------
1988 10.74 11.06 -- 0.8244 10.98
- -----------------------------------------------------------------------------
1989 11.06 11.23 -- 0.8041 9.11
- -----------------------------------------------------------------------------
1990 11.23 11.15 -- 0.7810 6.26
- -----------------------------------------------------------------------------
1991 11.15 11.56 0.0365 0.7585 10.49
- -----------------------------------------------------------------------------
1992 11.56 11.62 0.1314 0.7043 8.01
- -----------------------------------------------------------------------------
1993 11.62 12.25 0.1208 0.6507 12.32
- -----------------------------------------------------------------------------
1994 12.25 10.75 0.0135 0.9671 (7.14)
- -----------------------------------------------------------------------------
01/01/95 - 02/28/95 10.75 11.26 -- 0.0808 5.51
- -----------------------------------------------------------------------------
Total: $0.3022 $8.0681
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/95: 141.88%
- -----------------------------------------------------------------------------
</TABLE>
Performance Summary Class B Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/01/91 - 12/31/91 $11.19 $11.55 $0.0365 $0.3222 6.50%
- -----------------------------------------------------------------------------
1992 11.55 11.62 0.1314 0.6139 7.27
- -----------------------------------------------------------------------------
1993 11.62 12.25 0.1208 0.5599 11.49
- -----------------------------------------------------------------------------
1994 12.25 10.75 0.0135 0.8336 (7.84)
- -----------------------------------------------------------------------------
01/01/95 - 02/28/95 10.75 11.26 -- 0.0704 5.41
- -----------------------------------------------------------------------------
Total: $0.3022 $2.4000
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/95: 23.74%
- -----------------------------------------------------------------------------
</TABLE>
Performance Summary Class D Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/02/92 - 12/31/92 $11.71 $11.62 $0.1314 $0.2766 2.78%
- -----------------------------------------------------------------------------
1993 11.62 12.25 0.1208 0.5904 11.77
- -----------------------------------------------------------------------------
1994 12.25 10.75 0.0135 0.8786 (7.60)
- -----------------------------------------------------------------------------
01/01/95 - 02/28/95 10.75 11.26 -- 0.0738 5.44
- -----------------------------------------------------------------------------
Total: $0.2657 $1.8194
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/95: 11.92%
- -----------------------------------------------------------------------------
</TABLE>
/1/ Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the payable dates and do not include sales charges;
results would be lower for Class A and Class B shares if sales charges were
included.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The investment return and 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. Capital gain
distributions, distributions from income from market discount amortization
and gains realized on the sale of Fund shares are taxable.
2
<PAGE>
PAINEWEBBER MUNICIPAL HIGH INCOME FUND
RECENT PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------- -----------------------------
12 MONTHS 6 MONTHS
02/28/95 08/31/94 02/28/94 ENDED 02/28/95 ENDED 02/28/95
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $9.92 $10.14 $10.77 (2.03)% 0.88%
- ------------------------------------------------------------------------
Class B Shares 9.92 10.13 10.76 (2.67) 0.61
- ------------------------------------------------------------------------
Class D Shares 9.92 10.13 10.77 (2.51) 0.74
- ------------------------------------------------------------------------
</TABLE>
Performance Summary Class A Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
06/23/87 - 12/31/87 $ 9.58 $ 9.40 $ -- $0.3131 1.46%
- -----------------------------------------------------------------------------
1988 9.40 9.90 -- 0.8091 14.45
- -----------------------------------------------------------------------------
1989 9.90 10.09 -- 0.7380 9.66
- -----------------------------------------------------------------------------
1990 10.09 9.89 -- 0.7322 5.52
- -----------------------------------------------------------------------------
1991 9.89 10.38 0.0678 0.7144 13.32
- -----------------------------------------------------------------------------
1992 10.38 10.54 0.1406 0.6736 9.79
- -----------------------------------------------------------------------------
1993 10.54 10.97 0.2037 0.0618 12.14
- -----------------------------------------------------------------------------
1994 10.97 9.52 0.0260 0.5865 (7.77)
- -----------------------------------------------------------------------------
01/01/95 - 02/28/95 9.52 9.92 -- 0.0531 4.77
- -----------------------------------------------------------------------------
Total: $0.4381 $4.6818
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/95: 81.14%
- -----------------------------------------------------------------------------
</TABLE>
Performance Summary Class B Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/01/91 - 12/31/91 $10.05 $10.38 $0.0678 $0.3170 7.21%
- -----------------------------------------------------------------------------
1992 10.38 10.54 0.1406 0.5930 8.95
- -----------------------------------------------------------------------------
1993 10.54 10.97 0.2037 0.5349 11.30
- -----------------------------------------------------------------------------
1994 10.97 9.52 0.0260 0.5103 (8.47)
- -----------------------------------------------------------------------------
01/01/95 - 02/28/95 9.52 9.92 -- 0.0469 4.70
- -----------------------------------------------------------------------------
Total: $0.4381 $2.0021
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/95: 24.59%
- -----------------------------------------------------------------------------
</TABLE>
Performance Summary Class D Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/02/92 - 12/31/92 $10.50 $10.54 $0.0135 $0.2635 3.06%
- -----------------------------------------------------------------------------
1993 10.54 10.97 0.2037 0.5620 11.57
- -----------------------------------------------------------------------------
1994 10.97 9.52 0.0260 0.5339 (8.23)
- -----------------------------------------------------------------------------
01/01/95 - 02/28/95 9.52 9.92 -- 0.0491 4.73
- -----------------------------------------------------------------------------
Total: $0.2432 $1.4085
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/95: 10.51%
- -----------------------------------------------------------------------------
</TABLE>
/1/ Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the payable dates and do not include sales charges;
results would be lower for Class A and Class B shares if sales charges were
included.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The investment return and 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. Capital gain
distributions, distributions from income from market discount amortization
and gains realized on the sale of Fund shares are taxable.
3
<PAGE>
PAINEWEBBER NEW YORK TAX-FREE INCOME FUND
RECENT PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------- -----------------------------
12 MONTHS 6 MONTHS
02/28/95 08/31/94 02/28/94 ENDED 02/28/95 ENDED 02/28/95
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $10.27 $10.37 $11.03 (0.83)% 1.79%
- ------------------------------------------------------------------------
Class B Shares 10.27 10.36 11.03 (1.57) 1.51
- ------------------------------------------------------------------------
Class D Shares 10.28 10.37 11.03 (1.20) 1.66
- ------------------------------------------------------------------------
</TABLE>
Performance Summary Class A Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
09/23/88 - 12/31/88 $ 9.60 $ 9.61 $ -- $0.1630 1.82%
- -----------------------------------------------------------------------------
1989 9.61 9.84 -- 0.6931 9.90
- -----------------------------------------------------------------------------
1990 9.84 9.68 -- 0.6797 5.02
- -----------------------------------------------------------------------------
1991 9.68 10.22 -- 0.6637 12.31
- -----------------------------------------------------------------------------
1992 10.22 10.55 -- 0.6442 9.85
- -----------------------------------------------------------------------------
1993 10.55 11.26 0.0253 0.5796 12.72
- -----------------------------------------------------------------------------
1994 11.26 9.68 0.1017 0.5095 (8.48)
- -----------------------------------------------------------------------------
01/01/95 - 02/28/95 9.68 10.27 -- 0.0472 6.60
- -----------------------------------------------------------------------------
Total: $0.1270 $3.9800
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/95: 60.98%
- -----------------------------------------------------------------------------
</TABLE>
Performance Summary Class B Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/01/91 - 12/31/91 $ 9.81 $10.22 $ -- $0.2930 7.25%
- -----------------------------------------------------------------------------
1992 10.22 10.55 -- 0.5654 8.91
- -----------------------------------------------------------------------------
1993 10.55 11.25 0.0253 0.4959 11.78
- -----------------------------------------------------------------------------
1994 11.25 9.68 0.1017 0.4362 (9.08)
- -----------------------------------------------------------------------------
01/01/95 - 02/28/95 9.68 10.27 -- 0.0408 6.53
- -----------------------------------------------------------------------------
Total: $0.1270 $1.8313
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/95: 26.59%
- -----------------------------------------------------------------------------
</TABLE>
Performance Summary Class D Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN/1/
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/02/92 - 12/31/92 $10.45 $10.56 $ -- $0.2663 3.65%
- -----------------------------------------------------------------------------
1993 10.56 11.26 0.0253 0.5226 12.04
- -----------------------------------------------------------------------------
1994 11.26 9.69 0.1017 0.4613 (8.81)
- -----------------------------------------------------------------------------
01/01/95 - 02/28/95 9.69 10.28 -- 0.0429 6.55
- -----------------------------------------------------------------------------
Total: $0.1270 $1.2931
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/95: 12.82%
- -----------------------------------------------------------------------------
</TABLE>
/1/ Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the payable dates and do not include sales charges;
results would be lower for Class A and Class B shares if sales charges were
included.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The investment return and 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. Capital gain
distributions, distributions from income from market discount amortization
and gains realized on the sale of Fund shares are taxable.
4
<PAGE>
PAINEWEBBER CALIFORNIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- -------------- ------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - 98.77%
$ 3,250 California General
Obligation Bonds........ 10/01/00 to 11/01/00 8.250 to 9.100% $ 3,769,905
California Department of
8,140 Water Resources......... 12/01/13 to 12/01/20 6.000 to 6.125 8,095,381
5,000 California Educational
Facilities Authority
California Institute of
Technology............. 01/01/21 6.000 4,973,500
3,000 California Educational
Facilities Authority
Carnegie Institute of
Washington............. 10/01/23 5.600 2,748,900
2,000 California Educational
Facilities Authority
Claremont College...... 05/01/22 6.375 1,958,080
4,500 California Educational
Facilities Authority
Pepperdine University
(MBIA-Insured)......... 06/01/19 5.500 4,143,915
1,140 California Educational
Facilities Authority
St Mary's College of
California (Pre-
refunded with U.S.
Government Securities
to 10/01/00 @ 102)..... 10/01/20 7.500 1,291,814
6,000 California Educational
Facilities Authority
Stanford University.... 01/01/13 to 11/01/16 6.000 to 6.750 6,088,055
15,750 California Educational
Facilities Authority
University of Southern
California............. 10/01/15 5.800 to 7.200 15,979,138
1,250 California Health
Facilities Financing
Authority Children's
Hospital of San
Francisco (MBIA-Insured) 10/01/20 7.500 1,374,600
7,600 California Health
Facilities Financing
Authority
Kaiser Permanente
Hospital............... 10/01/15 to 10/01/19 6.750 to 9.125 7,765,602
4,000 California Health
Facilities Financing
Authority
Marin General Hospital
(FSA-Insured).......... 08/01/14 5.500 3,718,040
540 California Health
Facilities Financing
Authority O'Connor
Hospital............... 03/01/15 9.250 571,520
4,035 California Health
Facilities Financing
Authority
San Diego Hospital
(MBIA-Insured)......... 08/01/20 6.200 4,060,420
400 California Health
Facilities Financing
Authority
St. Joseph's Health
System*................ 07/01/09 3.700 400,000
800 California Health
Facilities Financing
Authority
West Sutter Adventist
Health*................ 03/01/20 3.600 800,000
1,000 California Pollution
Control Financing
Authority
Atlantic Richfield..... 11/01/04 9.125 1,047,420
890 California Pollution
Control Financing
Authority Southern
California Edison...... 12/01/08 6.850 932,142
1,600 California Pollution
Control Financing
Authority Southern
California Edison*..... 02/28/08 4.000 1,600,000
3,500 California State
Department of
Transportation......... 03/01/16 6.500 3,495,940
1,355 California State
University (Crossover
refunded to 11/01/95 @
103)................... 11/01/09 to 11/01/12 8.800 1,433,129
20 University of California
Faculty Mortgage....... 01/01/18 9.200 20,715
1,390 Beverly Hills
Certificates of
Participation.......... 06/01/15 to 06/01/19 6.750 to 7.000 1,414,389
710 Beverly Hills
Certificates of
Participation (Pre-
refunded with U.S.
Government Securities
to 06/01/99 @ 102)..... 06/01/15 7.000 776,726
1,505 Big Bear Lake Water
Revenue Bonds (FGIC-
Insured)............... 04/01/22 6.375 1,535,536
1,350 Contra Costa County
Transportation
Commission
Sales Tax Revenue
Bonds.................. 03/01/07 6.875 1,448,874
</TABLE>
5
<PAGE>
PAINEWEBBER CALIFORNIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- -------------- ------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - (CONTINUED)
$ 4,000 Contra Costa Water
Authority (FGIC-
Insured)............... 10/01/20 5.750% $ 3,829,440
6,175 Contra Costa Water
District (AMBAC-
Insured)............... 10/01/22 6.375 6,305,478
1,235 East Bay Municipal
Utility District
(AMBAC-Insured)........ 06/01/21 6.375 1,259,305
1,000 Intermodal Container
Transfer Facilities
Southern Pacific
Transfer Company....... 11/01/14 7.700 1,047,550
3,000 Kings River Conservation
District
Pine Flat Power........ 01/01/12 6.375 3,045,810
3,555 Long Beach Water Revenue
Bonds.................. 05/01/19 6.125 3,534,630
6,000 Los Angeles Department
of Airports............ 05/01/10 7.400 6,312,600
5,000 Los Angeles Department
of Water & Power
(Crossover refunded to
01/15/01 @ 102)........ 01/15/31 7.100 5,496,250
1,500 Los Angeles Department
of Water & Power
(Crossover refunded to
02/15/99 @ 102)........ 02/15/19 7.200 1,626,210
4,595 Los Angeles Harbor
Department Revenue
Bonds.................. 08/01/20 6.400 4,675,918
990 Los Angeles Harbor
Department Revenue
Bonds
(Pre-refunded with U.S.
Government Securities
to 09/01/99 @ 102)..... 09/01/15 8.700 1,101,127
10,700 Los Angeles
Transportation
Commission
Sales Tax Revenue Bonds 07/01/15 to 07/01/19 7.000 to 7.400 11,248,075
6,250 Los Angeles Wastewater
System Revenue Bonds
(FGIC-Insured)......... 12/01/18 6.000 6,202,375
4,000 Los Angeles Wastewater
System Revenue Bonds
(MBIA-Insured)......... 06/01/21 5.800 3,838,400
5,000 M-S-R Public Power
Agency of California... 07/01/19 6.875 5,114,900
955 Marin County Housing
Authority (FNMA)....... 09/01/07 9.200 996,294
8,880 Metropolitan Water
District of Southern
California............. 07/01/19 to 06/01/22 5.500 to 6.750 8,655,486
300 Newport Beach Health
Facilities
Hoag Memorial Hospital* 10/01/22 3.750 300,000
5,000 Oakland General
Obligation Bonds (FGIC-
Insured)............... 06/15/22 6.000 4,939,900
860 Orange County Mortgage
Revenue Bonds (GNMA)... 09/01/16 7.800 888,268
1,455 Pasadena Certificate of
Participation
Civic Center (Pre-
refunded with U.S.
Government Securities
to 12/01/99 @ 102)..... 12/01/14 7.000 1,599,729
1,500 Pasadena Certificate of
Participation
Convention Center...... 01/01/13 5.750 1,421,415
1,000 Riverside County
Certificate of
Participation.......... 12/01/15 7.875 1,046,510
6,250 Riverside Electric
Revenue Bonds.......... 10/01/15 6.000 6,155,187
1,000 Riverside Hospital
Revenue
Kaiser Permanente...... 12/01/15 9.000 1,048,600
3,000 Sacramento Utility
District Electric
Revenue Bonds (MBIA-
Insured)............... 01/01/24 6.000 2,963,220
6,300 San Diego Industrial
Development Authority
San Diego Gas &
Electric............... 09/01/18 to 09/01/20 6.400 to 9.250 6,491,607
11,000 San Francisco Airport
Revenue Bonds
(AMBAC-Insured)........ 05/01/13 6.500 11,374,660
8,000 San Francisco Sewer
(AMBAC-Insured)........ 10/01/11 6.000 8,057,440
3,750 San Jose Airport Revenue
Bonds (MBIA-Insured)... 03/01/16 5.750 3,599,925
2,800 Santa Barbara County
Certificate of
Participation
(Pre-refunded with U.S.
Government Securities
to 12/01/98 @ 102)..... 12/01/10 7.500 3,096,016
</TABLE>
6
<PAGE>
PAINEWEBBER CALIFORNIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS (CONCLUDED) FEBRUARY 28, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- -------------- ------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - (CONCLUDED)
$ 2,000 Santa Clara County
Financing Authority
Lease (AMBAC-Insured).. 11/15/20 6.750% $ 2,110,840
10,085 Santa Monica Malibu
Unified School District 08/01/18 5.500 9,172,005
5,000 Santa Monica Parking
Authority.............. 07/01/16 6.375 5,011,650
12,040 Southern California
Public Power Authority. 07/01/18 to 07/01/20 5.500 to 6.125 11,492,191
------------
Total Investments (cost -- $228,934,791)--98.77%....................... 236,502,752
Other assets in excess of liabilities--1.23%........................... 2,954,969
------------
Net Assets-100.00%..................................................... $239,457,721
============
</TABLE>
- -------
* Variable rate demand notes which are payable on demand. The maturity dates
shown are the stated maturities; the interest rates shown are the current
rates as of February 28, 1995.
AMBAC-American Municipal Bond Assurance Corporation
FGIC-Financial Guaranty Insurance Company
FNMA-Federal National Mortgage Association
FSA-Financial Security Assurance Incorporated
GNMA-Government National Mortgage Association
MBIA-Municipal Bond Investors Assurance
See accompanying notes to financial statements
7
<PAGE>
PAINEWEBBER NATIONAL TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- --------------- ------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - 104.59%
Alabama - 0.81%
$ 4,000 Alabama Special Care
Facilities Financing
Authority Providence
Hospital Daughters of
Charity Health System.. 06/01/15 10.125% $ 4,128,800
------------
Alaska - 2.45%
9,250 Alaska Housing Finance
Corporation............ 12/01/23 6.600 9,800,838
2,500 Valdez Marine Terminal
British Petroleum Co... 12/01/25 7.125 2,614,925
------------
12,415,763
------------
Arizona - 2.13%
10,510 Maricopa County Arizona
Community College
District............... 07/01/07 6.000 10,826,982
------------
California - 1.15%
5,000 California State (FGIC-
Insured)............... 11/01/12 7.000 5,441,100
400 Southern California
Public Power Authority. 07/01/18 6.000 384,440
------------
5,825,540
------------
Florida - 10.46%
125 Florida General
Obligation Bonds....... 07/01/14 10.000 182,312
13,520 Florida State Board of
Education Capital
Outlay
Public Education Series
A...................... 01/01/15 to 06/01/16 5.875 to 5.900 13,309,608
5,000 Florida State Board of
Education Capital
Outlay
Public Education Series
B...................... 06/01/15 6.000 4,996,000
6,750 Florida State Board of
Education.............. 06/01/20 to 06/01/25 6.000 to 7.000 6,925,040
2,000 Hillsborough County
Aviation Authority
Tampa Airport (AMBAC-
Insured) (Pre-refunded
with U.S. Government
Securities to 10/01/99
@ 102)................. 10/01/09 7.100 2,204,760
9,100 Hillsborough County
Industrial Development
Authority*............. 05/15/18 3.550 9,100,000
3,000 Jacksonville Electric
Authority.............. 10/01/13 6.900 3,120,330
4,100 Jacksonville Electric
Authority (Crossover
refunded to 10/01/95 @
102)................... 10/01/15 8.500 4,273,225
1,750 Marion County Hospital
District
Monroe Regional Medical
Center (FGIC-Insured).. 10/01/20 6.000 1,754,725
3,000 Orange County Florida
Tourist Development
(MBIA-Insured)......... 10/01/24 6.000 2,983,320
3,800 Palm Beach County
Criminal Justice
Facilities Board (FGIC-
Insured)............... 06/01/11 7.250 4,241,788
------------
53,091,108
------------
Georgia - 4.54%
3,000 Georgia Municipal
Electric Authority..... 01/01/20 8.375 3,222,750
500 Georgia Municipal
Electric Authority
(Crossover refunded to
01/01/97 @ 102)........ 01/01/20 8.375 537,125
5,000 Georgia Municipal
Electric Authority
(Pre-refunded with U.S.
Government Securities
to 01/01/99 @ 102)..... 01/01/09 to 01/01/25 7.250 to 7.400 5,476,220
</TABLE>
8
<PAGE>
PAINEWEBBER NATIONAL TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- --------------- ------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - (CONTINUED)
Georgia - (concluded)
$ 5,000 Conyers Georgia Water
and Sewage Revenue
(AMBAC-Insured)........ 07/01/15 6.600% $ 5,273,200
8,000 Hall County School
District (AMBAC-
Insured)............... 12/01/14 6.700 8,515,200
------------
23,024,495
------------
Hawaii - 0.90%
4,515 Hawaii General
Obligation Bonds....... 01/01/15 6.250 4,574,101
------------
Illinois - 8.26%
4,335 Illinois Development
Finance Authority
Citizens Utilities..... 08/01/20 7.150 4,546,331
2,000 Illinois Health
Facilities Authority
Children's Memorial
Hospital (MBIA-
Insured)............... 11/01/13 7.125 2,114,140
1,000 Illinois Health
Facilities Authority
Evangelical Hospital... 04/15/17 6.750 1,008,000
5,000 Illinois Health
Facilities Authority
Franciscan Sisters
Health Care (MBIA-
Insured)............... 09/01/18 5.750 4,705,750
2,675 Illinois Health
Facilities Authority
Sherman Hospital (MBIA-
Insured)............... 08/01/21 6.750 2,747,305
45 Illinois Housing
Development Authority.. 07/01/28 9.250 46,784
3,600 Illinois Toll Road
Authority (FGIC-
Insured)............... 01/01/16 6.200 3,595,428
5,000 Bloomingdale Water
(MBIA-Insured)......... 05/01/16 6.400 5,124,800
7,000 Chicago Gas Supply
People's Gas........... 03/01/15 6.875 to 10.250 7,225,890
2,710 Madison County (FGIC-
Insured)............... 02/01/13 5.850 2,665,556
1,170 Northern Illinois
University (Pre-
refunded with U.S.
Government Securities
to 04/01/09 @ 100)..... 04/01/13 10.400 1,637,321
1,250 Regional Transportation
Authority (AMBAC-
Insured)............... 11/01/20 7.200 1,439,613
4,620 Regional Transportation
Authority (FGIC-
Insured)............... 06/01/14 7.100 5,026,375
------------
41,883,293
------------
Indiana - 2.80%
1,400 Hammond Indiana
Pollution Control
Revenue*............... 02/01/22 3.600 1,400,000
11,715 Indiana Health Facility
Finance Authority
Methodist Hospital of
Indiana................ 09/01/15 5.750 10,727,074
2,000 Purdue University....... 07/01/15 6.700 2,073,040
------------
14,200,114
------------
Kansas - 2.41%
12,000 Wichita Hospital
Authority CSJ Health
Systems................ 11/15/18 7.000 12,209,280
------------
Kentucky - 1.27%
1,000 Kentucky Development
Finance Authority
Baptist Hospital--(Pre-
refunded with U.S.
Government Securities
to 09/01/99 @ 102)
(MBIA-Insured)......... 09/01/15 7.200 1,103,820
5,010 Louisville & Jefferson
County (AMBAC-Insured). 05/15/16 6.750 5,348,325
------------
6,452,145
------------
</TABLE>
9
<PAGE>
PAINEWEBBER NATIONAL TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- --------------- ------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - (CONTINUED)
Louisiana - 4.37%
$ 3,000 Ascension Parish
Louisiana Pollution
Control Revenue*....... 09/01/23 3.600% $ 3,000,000
200 Louisiana Offshore
Terminal Authority*.... 09/01/08 3.700 200,000
4,500 Louisiana Offshore
Terminal Authority..... 09/01/10 7.600 4,839,165
1,500 Louisiana Public
Facilities Authority
Loyola University...... 10/01/10 9.750 1,574,460
1,400 Louisiana Public
Facilities Authority
Tulane University...... 08/15/15 8.000 1,529,178
11,030 Louisiana State (MBIA-
Insured)............... 05/15/08 5.700 10,998,454
------------
22,141,257
------------
Maryland - 1.02%
5,020 Anne Arundel County
Maryland
Consolidated General
Improvement............ 08/01/14 to 08/01/15 6.300 5,148,060
------------
Massachusetts - 11.84%
11,000 Massachusetts Bay
Transportation
Authority.............. 03/01/23 6.100 10,941,260
20,000 Massachusetts General
Obligation Bonds....... 06/01/13 6.500 20,628,200
3,290 Massachusetts General
Obligation Bonds
(FGIC-Insured)......... 11/01/13 to 11/01/14 7.000 3,577,114
11,985 Massachusetts Health and
Ed. Facilities
Authority
New England Deaconess
Hospital............... 04/01/22 7.200 12,241,000
2,655 Massachusetts Water
Resources Authority.... 11/01/15 5.500 2,468,991
8,315 Massachusetts Water
Resources Authority
(Pre-refunded with U.S.
Government Securities
to 07/15/02 @ 102)..... 07/15/21 6.500 9,057,030
1,000 Massachusetts Water
Resources Authority
(Pre-refunded with U.S.
Government Securities
to 04/01/00 @ 102)..... 04/01/16 7.500 1,121,360
------------
60,034,955
------------
Michigan - 4.25%
7,000 Lake Orion Community
School District
(AMBAC-Insured)........ 05/01/15 to 05/01/20 7.000 7,557,220
1,000 Michigan State Hospital
Finance Authority
McLaren Regional
Medical Center (Pre-
refunded with U.S.
Government Securities
to 09/15/01 @ 102)..... 09/15/21 7.500 1,140,540
12,850 Royal Oak Hospital
Finance Authority
William Beaumont
Hospital............... 01/01/19 to 01/01/20 6.250 to 6.750 12,841,799
------------
21,539,559
------------
Minnesota - 1.22%
6,000 Minnesota Public
Facilities Authority
Water Pollution........ 03/01/15 6.250 6,166,080
------------
Mississippi - 0.06%
300 Jackson County Pollution
Control Revenue Chevron
USA Incorporated
Project*............... 06/01/23 3.600 300,000
------------
</TABLE>
10
<PAGE>
PAINEWEBBER NATIONAL TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- --------------- ------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - (CONTINUED)
Nebraska - 0.85%
$ 1,000 Nebraska Public Power
District............... 01/01/22 6.250% $ 1,001,230
3,500 Omaha Public Power
District............... 02/01/17 5.700 3,331,720
------------
4,332,950
------------
Nevada - 0.54%
2,810 Clark County Sanitation
District (FGIC-Insured) 07/01/11 5.700 2,739,778
------------
New Jersey - 0.31%
1,650 New Jersey Highway
Authority
Garden State Parkway... 01/01/19 5.750 1,585,749
------------
New Mexico - 3.16%
4,500 Albuquerque Airport..... 07/01/19 6.500 4,501,395
1,000 Albuquerque Gross
Receipts Sales Tax..... 07/01/14 8.250 1,041,990
8,000 Farmington Pollution
Control
Southern California
Edison................. 04/01/21 7.200 8,471,040
2,000 Santa Fe Water Revenue
(AMBAC-Insured)........ 06/01/24 6.300 2,034,800
------------
16,049,225
------------
New York - 18.75%
9,700 New York State Energy
Research & Development
Authority-Niagara
Mohawk*................ 07/01/15 to 03/01/27 3.500 to 3.600 9,700,000
7,300 New York State
Environmental
Facilities Corporation. 06/15/12 to 06/15/14 6.875 to 7.500 7,799,522
18,750 New York State Local
Government Assistance
Corporation............ 04/01/16 to 04/01/21 5.500 to 7.000 18,587,435
14,900 New York State Power
Authority.............. 01/01/18 6.750 15,466,498
7,280 New York State Power
Authority (MBIA-Insured) 01/01/13 7.875 7,897,125
1,150 New York State Thruway
Authority
Highway & Bridge Trust
Fund................... 04/01/14 6.000 1,130,680
12,155 New York City*.......... 08/01/95 to 08/15/23 3.600 to 3.750 12,155,000
9,135 New York City Municipal
Water Finance Authority 06/15/12 to 06/15/19 6.000 to 7.100 9,449,836
3,100 Triborough Bridge &
Tunnel Authority....... 01/01/10 7.100 3,288,573
10,000 United Nations
Development Corporation 07/01/26 6.000 9,604,100
------------
95,078,769
------------
North Carolina - 1.22%
2,135 North Carolina Eastern
Municipal Power Agency. 01/01/21 7.250 2,179,323
4,000 North Carolina Medical
Care Company
Rex Hospital........... 06/01/17 6.250 4,005,440
------------
6,184,763
------------
Ohio - 0.75%
500 Ohio Higher Education
Facilities Authority
Kenyon College......... 12/01/16 7.125 529,130
1,000 Ohio State
Infrastructure
Improvement............ 08/01/13 6.200 1,026,980
2,250 Maumee Ohio Hospital
Revenue
St. Lukes Hospital
Project (AMBAC-Insured) 12/01/04 5.800 2,226,263
------------
3,782,373
------------
</TABLE>
11
<PAGE>
PAINEWEBBER NATIONAL TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- --------------- -------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - (CONTINUED)
Oregon - 2.09%
$10,400 Portland Sewer Systems
Revenue................ 06/01/15 6.250% $ 10,600,720
-------------
Puerto Rico - 0.21%
1,000 Puerto Rico Industrial
Medical & Environmental
Pollution Control
Facilities Financing
Authority Warner
Lambert................ 05/01/14 7.600 1,077,380
-------------
South Carolina - 1.07%
5,000 South Carolina Public
Service Authority
Santee Cooper Project.. 07/01/26 6.500 5,421,900
-------------
South Dakota - 0.41%
2,000 South Dakota Building
Authority.............. 12/01/16 7.500 2,091,600
-------------
Tennessee - 1.79%
7,000 Metropolitan Nashville
and Davidson Tennessee
County Electric
Revenue................ 05/15/12 6.000 7,013,930
2,000 Metropolitan Nashville
Airport Authority
(FGIC-Insured)......... 07/01/15 9.750 2,078,340
-------------
9,092,270
-------------
Texas - 9.35%
5 Texas Housing Agency
Mortgage............... 09/01/16 9.375 5,149
13,200 Texas State Public
Finance Authority...... 10/01/12 to 10/01/13 5.700 to 6.000 13,211,249
9,100 Harris County Industrial
Development Corporation
Pollution Control
Revenue*............... 03/01/24 3.750 9,100,000
710 Harris County Toll Road
Authority (AMBAC-
Insured)............... 08/15/17 6.500 733,771
7,665 Houston Water & Sewer
System (AMBAC-Insured). 12/01/17 6.375 7,836,696
7,750 Houston Water & Sewer
System................. 12/01/14 6.375 7,858,577
1,500 San Antonio Texas
Electric & Gas......... 02/01/14 5.000 1,322,310
3,000 San Antonio Water (MBIA-
Insured)............... 05/15/10 6.500 3,137,010
4,000 Texarkana Health
Facilities Development
Corporation Wadley
Regional Medical Center
(MBIA-Insured)......... 10/01/19 7.000 4,208,400
-------------
47,413,162
-------------
Utah - 2.37%
11,550 Intermountain Power
Agency................. 07/01/16 to 07/01/20 7.200 to 10.375 12,014,854
-------------
Virginia--1.41%
5,850 Virginia State Public
Facilities Authority... 06/01/15 6.500 6,134,895
1,000 Hampton Roads Medical
College................ 11/15/16 6.875 1,032,550
-------------
7,167,445
-------------
Wisconsin - 0.11%
530 Wisconsin Housing &
Economic Development
Authority.............. 12/01/11 9.125 550,654
-------------
</TABLE>
12
<PAGE>
PAINEWEBBER NATIONAL TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS (CONCLUDED) FEBRUARY 28, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- --------------- ------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - (CONCLUDED)
Wyoming - 0.26%
$ 30 Wyoming Community
Development Authority.. 06/01/31 7.400% $ 31,505
1,300 Lincoln County Pollution
Control*............... 11/01/14 3.750 1,300,000
------------
1,331,505
------------
Total Investments (cost - $513,025,470)-104.59%......................... 530,476,629
Liabilities in excess of other assets-(4.59)%........................... (23,297,525)
------------
Net Assets-100.00%...................................................... $507,179,104
============
</TABLE>
- -------
* Variable rate demand notes and variable rate certificates of participation
which are payable on demand. The maturity dates shown are the stated
maturities; the interest rates shown are the current rates as of February 28,
1995.
AMBAC-American Municipal Bond Assurance Corporation
FGIC-Financial Guaranty Insurance Company
MBIA-Municipal Bond Investors Assurance
See accompanying notes to financial statements
13
<PAGE>
PAINEWEBBER MUNICIPAL HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- -------------- ------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - 96.93%
Alabama - 1.39%
$1,500 Courtland Industrial
Development Board
Champion International. 12/01/13 7.200% $ 1,555,515
------------
Arizona - 2.92%
3,000 Gila County Industrial
Development Authority
ASARCO................. 07/01/06 8.900 3,280,620
------------
California - 0.09%
100 California Health
Facilities Financing
Authority
West Sutter Adventist
Health*................ 03/01/20 3.600 100,000
------------
Colorado - 2.72%
3,000 Denver City & County
Airport................ 11/15/25 7.250 3,055,950
------------
District of Columbia - 0.86%
1,000 District of Columbia
Hospital
Medlantic Healthcare
Group.................. 08/15/19 7.125 964,700
------------
Florida - 0.62%
700 Hillsborough County
Industrial Development
Authority Pollution
Control Revenue*....... 05/15/18 3.600 700,000
------------
Georgia - 5.88%
1,675 Municipal Electric
Authority of Georgia... 01/01/20 8.375 1,799,369
150 Municipal Electric
Authority of Georgia
(Crossover refunded to
01/01/97 @ 102)........ 01/01/20 8.375 161,137
2,500 Effingham County
Development Authority
Fort Howard Paper...... 10/01/05 7.900 2,582,725
2,500 Tri City Hospital
Authority
South Fulton Medical
Center................. 07/01/16 6.375 2,056,325
------------
6,599,556
------------
Illinois - 11.12%
750 Illinois Development
Finance Authority
Illinois Power......... 07/01/21 7.375 789,848
6,000 Illinois Educational
Facilities Authority
Columbia College....... 12/01/17 to 12/01/18 6.125 to 6.875 5,760,850
545 Illinois Health
Facilities Authority
Hinsdale Health System. 11/15/19 9.500 628,619
1,000 Illinois Health
Facilities Authority
Holy Cross Hospital.... 03/01/14 6.700 953,600
2,000 Chicago O'Hare
International Airport
American Airlines...... 12/01/24 8.200 2,187,720
2,340 Chicago O'Hare
International Airport
Delta Airlines......... 05/01/18 6.450 2,167,986
------------
12,488,623
------------
</TABLE>
14
<PAGE>
PAINEWEBBER MUNICIPAL HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- -------------- ------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - (CONTINUED)
Indiana - 5.68%
$1,000 Indiana Health Facility
Financing Authority
Jackson County Schneck
Memorial Hospital...... 02/15/22 7.500% $ 1,014,900
1,300 Crawfordsville Economic
Development Authority
Kroger Co.............. 11/01/12 7.700 1,350,024
4,000 Indianapolis Airport
Facility
Federal Express........ 04/01/17 6.800 4,005,960
------------
6,370,884
------------
Kentucky - 2.07%
1,250 Kenton County Airport
Delta Airlines......... 02/01/22 7.250 1,262,125
1,000 Russell Health Financing
Authority
Franciscan Sisters of
the Poor Health System. 07/01/18 8.100 1,059,420
------------
2,321,545
------------
Louisiana - 7.99%
8,905 Orleans Levee District.. 11/01/14 to 11/01/15 8.250 8,971,787
------------
Massachusetts - 2.75%
2,000 Massachusetts Health &
Education Finance
Authority
New England Deaconess
Hospital............... 04/01/12 6.625 1,999,800
1,000 Agawam Resource Recovery
Springfield Project.... 12/01/08 8.500 1,083,800
------------
3,083,600
------------
Michigan - 3.91%
3,000 Greater Detroit Resource
Recovery Authority..... 12/13/08 9.250 3,160,350
1,150 Monroe County Pollution
Control
Detroit Edison......... 12/01/16 10.500 1,223,520
------------
4,383,870
------------
New Hampshire - 0.72%
800 New Hampshire Higher
Educational Health Care
Facilities-St. Joseph
Hospital............... 01/01/16 7.500 811,680
------------
New Jersey - 4.84%
5,500 New Jersey Health Care
Facilities Financing
Authority
Columbus Hospital...... 07/01/21 7.500 5,436,860
------------
New Mexico - 3.95%
4,475 Chaves County Hospital
Revenue Bonds
Eastern New Mexico
Medical Center......... 12/01/10 to 12/01/22 7.250 4,438,050
------------
New York - 8.48%
850 Brookhaven Industrial
Development Agency
St. Joseph's College... 04/01/08 8.100 929,143
1,250 Cattaraugus County
Certificates of
Participation.......... 08/01/09 8.500 1,355,263
3,000 Hempstead Town
Industrial Development
Agency
American Refuel........ 12/01/05 7.375 3,091,560
4,290 New York City........... 08/01/07 to 08/01/19 6.000 to 8.250 4,146,282
------------
9,522,248
------------
</TABLE>
15
<PAGE>
PAINEWEBBER MUNICIPAL HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- -------------- ------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - (CONTINUED)
Ohio - 1.62%
$1,150 Butler County Hospital
Facilities
Ft. Hamilton Hughes
Memorial Hospital...... 01/01/10 7.500% $ 1,175,484
600 Meigs County Kroger Co.. 10/01/11 8.375 643,296
------------
1,818,780
------------
Pennsylvania - 6.51%
1,450 Pennsylvania State
Higher Education
Drexel University...... 05/01/17 6.375 1,437,095
1,975 Allegheny County
Hospital Development
Authority
South Side Hospital.... 06/01/03 8.625 2,076,278
1,150 Beaver County Industrial
Development Authority
Cleveland Electric..... 09/01/15 10.500 1,201,083
2,610 Philadelphia Hospitals
and Higher Education
Facilities
Authority--Jeanes
Health Systems......... 07/01/10 6.600 2,589,825
------------
7,304,281
------------
Tennessee - 5.33%
5,950 Memphis Shelby County
Airport
Federal Express........ 09/01/12 6.750 5,987,187
------------
Texas - 9.39%
1,875 El Paso International
Airport Revenue Bonds
Marriott Hotel......... 03/01/22 7.875 1,859,419
400 Harris County Industrial
Development Corporation
Pollution Control
Revenue*............... 03/01/24 3.900 400,000
2,300 Harris County Industrial
Development GATX....... 02/01/22 6.950 2,341,055
3,000 Houston Water & Sewer
System................. 12/01/14 6.375 3,042,030
2,600 Port of Corpus Christi
Industrial Development
Corporation--Valero
Industries............. 06/01/17 10.250 2,900,820
------------
10,543,324
------------
Utah - 2.19%
2,350 Intermountain Power
Agency................. 07/01/19 7.200 2,454,035
------------
Virginia - 0.89%
1,000 Virginia College
Building Authority
Marymount University... 07/01/22 7.000 1,001,900
------------
West Virginia - 3.04%
1,900 Harrison County
Commercial Development
Bonds
Kroger Co.............. 11/01/14 8.100 2,042,804
1,300 Kanawha County
Commercial Development
Bonds
Kroger Co.............. 10/01/11 8.000 1,375,010
------------
3,417,814
------------
</TABLE>
16
<PAGE>
PAINEWEBBER MUNICIPAL HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS (CONCLUDED) FEBRUARY 28, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- --------------- ------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - (CONCLUDED)
Wisconsin - 1.97%
$2,150 Janesville Industrial
Development Revenue
Bonds
Simmons Manufacturing
Co.................... 10/15/17 7.000% $ 2,206,459
------------
Total Investments (cost--$106,175,562)--96.93%......................... 108,819,268
Other assets in excess of liabilities--3.07%........................... 3,448,330
------------
Net Assets--100.00%.................................................... $112,267,598
============
</TABLE>
- -------
* Variable rate demand notes and variable rate certificates of participation
which are payable on demand. The maturity dates shown are the stated
maturities; the interest rates shown are the current rates as of February 28,
1995.
See accompanying notes to financial statements
17
<PAGE>
PAINEWEBBER NEW YORK TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- -------------- -----------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - 99.08%
$1,705 Metropolitan
Transportation
Authority.............. 07/01/11 to 07/01/17 5.500 to 6.250% $ 1,637,980
1,000 Metropolitan
Transportation
Authority (FGIC-Insured) 07/01/18 6.500 1,033,090
700 Metropolitan
Transportation
Authority (MBIA-Insured) 01/01/08 6.875 748,027
1,465 Municipal Assistance
Corporation............ 07/01/06 to 07/01/08 6.900 to 7.625 1,549,977
2,800 New York State Dormitory
Authority Revenue Bonds
City University of New
York................... 07/01/16 to 07/01/20 6.000 to 6.500 2,686,312
3,000 New York State Dormitory
Authority Revenue Bonds
Columbia University.... 07/01/14 to 07/01/15 4.750 to 5.750 2,633,480
1,200 New York State Dormitory
Authority Revenue Bonds
Cornell University..... 07/01/06 to 07/01/30 6.875 to 7.375 1,262,786
250 New York State Dormitory
Authority Revenue Bonds
Fordham University
(AMBAC-Insured)........ 07/01/15 7.200 277,393
800 New York State Dormitory
Authority Revenue Bonds
Oxford University Press
Incorporated*.......... 07/01/23 3.950 800,000
585 New York State Dormitory
Authority Revenue Bonds
Rockefeller University. 07/01/14 7.375 629,998
2,015 New York State Dormitory
Authority Revenue Bonds
State University of New
York................... 05/15/16 to 07/01/18 6.000 to 7.600 2,014,374
1,600 New York State Dormitory
Authority Revenue Bonds
Union College (FGIC-
Insured)............... 07/01/10 5.750 1,595,008
1,200 New York State Energy
Research & Development
Brooklyn Union Gas..... 12/01/20 7.000 1,228,272
800 New York State Energy
Research & Development
Central Hudson Gas &
Electric (FGIC-Insured) 10/01/14 7.375 868,552
700 New York State Energy
Research & Development
Niagara Mohawk......... 11/01/25 8.875 727,503
500 New York State Energy
Research & Development
Niagara Mohawk (FGIC-
Insured)............... 10/01/14 6.625 522,060
1,500 New York State
Environmental
Facilities Corporation
Spring Valley Water
(AMBAC-Insured)........ 08/01/24 6.150 1,507,215
1,400 New York State
Environmental
Facilities Corporation
State Water Pollution
Control................ 06/15/10 to 06/15/12 7.250 to 7.500 1,511,783
300 New York State Housing
Finance Agency......... 09/15/12 7.300 318,357
3,870 New York State Local
Government Assistance
Corporation............ 04/01/18 to 04/01/20 5.500 to 6.500 3,786,871
580 New York State Medical
Care Facilities
Hospital & Nursing
(FHA-Insured).......... 02/15/09 7.500 623,697
1,500 New York State Medical
Care Facilities
Hospital & Nursing
(Huntington Hospital).. 11/01/14 6.500 1,443,525
2,000 New York State Medical
Care Facilities
Presbyterian Hospital
(FHA-Insured).......... 08/15/24 5.500 1,789,240
2,685 New York State Mortgage
Agency................. 04/01/15 to 10/01/15 6.450 to 7.950 2,709,114
3,900 New York State Power
Authority.............. 01/01/17 to 01/01/23 5.250 to 8.000 3,748,193
2,100 New York State Thruway
Authority.............. 01/01/19 5.750 1,995,420
2,000 New York State Thruway
Authority
Highway and Bridge
Trust Fund............. 04/01/14 6.000 1,966,400
1,600 Port Authority of New
York & New Jersey...... 08/01/14 5.625 1,538,704
1,350 Triborough Bridge &
Tunnel Authority....... 01/01/10 to 01/01/13 6.000 to 7.100 1,372,988
700 Triborough Bridge &
Tunnel Authority (MBIA-
Insured)............... 01/01/17 6.625 730,072
1,500 Battery Park City
Authority.............. 11/01/20 5.700 1,361,325
</TABLE>
18
<PAGE>
PAINEWEBBER NEW YORK TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS (CONCLUDED) FEBRUARY 28, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- -------------- -----------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - (CONCLUDED)
$ 350 Brookhaven Industrial
Development Agency
St. Joseph's College... 04/01/08 8.100% $ 382,589
1,000 Erie County Water
Revenue Authority
(AMBAC-Insured)........ 12/01/14 6.750 1,101,380
200 Great Neck North Water
Authority.............. 01/01/18 7.000 219,234
1,500 Hempstead Town
Industrial Development
Agency
American Refuel........ 12/01/05 7.375 1,545,780
3,900 New York City........... 06/01/05 to 05/15/20 6.000 to 8.250 3,791,310
2,000 New York City Industrial
Development Agency
Rockefeller Foundation. 07/01/23 5.375 1,768,720
3,030 New York City Industrial
Development Bonds
Lighthouse Project..... 07/01/22 6.500 3,025,758
2,545 New York City Municipal
Water Finance Authority 06/15/12 to 06/15/21 6.250 to 7.100 2,576,272
870 New York City Trust for
Cultural Resources
Museum Of Modern Art
(AMBAC-Insured)........ 01/01/12 5.400 834,626
2,200 Niagara Falls (FGIC-
Insured)............... 06/15/08 to 06/15/11 5.500 to 5.550 2,172,708
1,250 Oneida Herkimer Waste
Management Authority... 04/01/14 6.750 1,240,625
700 Westchester County...... 11/01/05 to 11/01/07 6.700 782,033
250 Puerto Rico Industrial
Medical & Environmental
Authority Baxter
Travenol............... 09/01/12 8.000 273,368
400 Puerto Rico Industrial
Medical & Environmental
Authority Dr Pila
Hospital (FHA-Insured). 08/01/08 7.700 427,528
785 Puerto Rico Industrial
Medical & Environmental
Authority Warner
Lambert................ 05/01/14 7.600 845,743
-----------
Total Investments (cost - $66,979,597)--99.08%......................... 67,605,390
Other assets in excess of liabilities--0.92%........................... 624,890
-----------
Net Assets--100.00%.................................................... $68,230,280
===========
</TABLE>
- -------
* Variable rate demand notes and variable rate certificates of participation
which are payable on demand. The maturity dates shown are the stated
maturities; the interest rates shown are the current rates as of February 28,
1995.
AMBAC-American Municipal Bond Assurance Corporation
FGIC-Financial Guaranty Insurance Company
FHA-Federal Housing Authority
MBIA-Municipal Bond Investors Assurance
See accompanying notes to financial statements
19
<PAGE>
PAINEWEBBER
STATEMENTS OF ASSETS AND LIABILITIES FEBRUARY 28, 1995
<TABLE>
<CAPTION>
CALIFORNIA NATIONAL MUNICIPAL NEW YORK
TAX-FREE TAX-FREE HIGH TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Assets
Investments in
securities, at value
(cost-$228,934,791,
$513,025,470,
$106,175,562, and
$66,979,597,
respectively).......... $236,502,752 $530,476,629 $108,819,268 $67,605,390
Cash.................... 51,325 14,763 15,623 56,677
Receivable for
investments sold....... 527,225 8,157,484 3,095,983 --
Interest receivable..... 4,363,260 8,491,297 2,195,490 1,010,034
Receivable for shares of
beneficial interest
sold................... 569,944 1,047,134 127,837 287,441
Other assets............ 33,449 87,033 39,628 14,336
------------ ------------ ------------ -----------
Total assets............ 242,047,955 548,274,340 114,293,829 68,973,878
------------ ------------ ------------ -----------
Liabilities
Payable for investments
purchased.............. -- 36,060,656 -- --
Payable for shares of
beneficial interest
repurchased............ 1,452,131 3,371,975 1,152,649 259,732
Dividends payable....... 838,023 1,037,310 544,355 278,600
Payable to affiliates... 168,313 367,997 98,313 47,554
Accrued expenses and
other liabilities...... 131,767 257,298 230,914 157,712
------------ ------------ ------------ -----------
Total liabilities....... 2,590,234 41,095,236 2,026,231 743,598
------------ ------------ ------------ -----------
Net Assets
Beneficial interest -
$0.001 par value
(unlimited amount
authorized)............ 242,108,179 506,456,721 116,085,171 69,289,152
Accumulated net realized
losses from investment
transactions........... (10,218,419) (16,728,776) (6,461,279) (1,684,665)
Net unrealized
appreciation of
investments............ 7,567,961 17,451,159 2,643,706 625,793
------------ ------------ ------------ -----------
Net assets.............. $239,457,721 $507,179,104 $112,267,598 $68,230,280
============ ============ ============ ===========
Class A:
Net assets.............. $178,233,547 $346,579,345 $ 63,286,556 $32,474,705
------------ ------------ ------------ -----------
Shares outstanding...... 16,691,798 30,774,300 6,377,965 3,160,797
------------ ------------ ------------ -----------
Net asset and redemption
value per share........ $ 10.68 $ 11.26 $ 9.92 $ 10.27
============ ============ ============ ===========
Maximum offering price
per share (net asset
value plus sales charge
of 4.00% of offering
price)................. $ 11.13 $ 11.73 $ 10.33 $ 10.70
============ ============ ============ ===========
Class B:
Net assets.............. $ 33,006,830 $ 58,958,037 $ 25,823,473 $14,659,955
------------ ------------ ------------ -----------
Shares outstanding...... 3,088,876 5,236,630 2,603,449 1,427,252
------------ ------------ ------------ -----------
Net asset and offering
price per share........ $ 10.69 $ 11.26 $ 9.92 $ 10.27
============ ============ ============ ===========
Class D:
Net assets.............. $ 28,217,344 $101,641,722 $ 23,157,569 $21,095,620
------------ ------------ ------------ -----------
Shares outstanding...... 2,644,333 9,025,376 2,334,526 2,052,795
------------ ------------ ------------ -----------
Net asset, offering
price and redemption
value per share........ $ 10.67 $ 11.26 $ 9.92 $ 10.28
============ ============ ============ ===========
</TABLE>
See accompanying notes to financial statements
20
<PAGE>
PAINEWEBBER
STATEMENT OF OPERATIONS FOR THE YEAR ENDED FEBRUARY 28, 1995
<TABLE>
<CAPTION>
CALIFORNIA NATIONAL MUNICIPAL NEW YORK
TAX-FREE TAX-FREE HIGH TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Investment Income:
Interest.................. $ 17,239,098 $ 37,660,408 $ 9,084,940 $ 5,131,194
------------ ------------ ------------ -----------
Expenses:
Investment advisory and
administration fees...... 1,340,491 2,891,059 768,555 481,509
Service fees--Class A..... 484,315 939,618 175,612 90,781
Service and distribution
fees--Class B............ 361,590 634,659 282,845 165,807
Service and distribution
fees--Class D............ 286,597 1,041,736 221,147 205,191
Custody and accounting.... 118,564 184,822 85,554 106,296
Transfer agency and
service fees............. 86,400 210,305 67,148 48,686
Legal and audit........... 81,274 117,465 62,352 83,653
Reports and notices to
shareholders............. 34,790 119,900 50,784 31,035
State registration........ 23,309 134,794 55,751 34,455
Trustees' fees............ 8,125 8,125 10,625 10,625
Other expenses............ 10,268 22,145 21,769 11,471
------------ ------------ ------------ -----------
2,835,723 6,304,628 1,802,142 1,269,509
Less: Fee waivers and
reimbursements from
adviser.................. -- -- -- (193,119)
------------ ------------ ------------ -----------
Net Expenses.............. 2,835,723 6,304,628 1,802,142 1,076,390
------------ ------------ ------------ -----------
Net investment income..... 14,403,375 31,355,780 7,282,798 4,054,804
------------ ------------ ------------ -----------
Realized and unrealized
losses on investment
activities:
Net realized losses from
investment transactions.. (10,217,814) (16,725,603) (6,460,311) (1,684,198)
Net change in unrealized
appreciation/depreciation
of investments........... (9,344,955) (27,594,131) (5,273,473) (5,028,753)
------------ ------------ ------------ -----------
Net realized and
unrealized losses from
investment activities.... (19,562,769) (44,319,734) (11,733,784) (6,712,951)
------------ ------------ ------------ -----------
Net decrease in net assets
resulting from operations $ (5,159,394) $(12,963,954) $ (4,450,986) $(2,658,147)
============ ============ ============ ===========
</TABLE>
See accompanying notes to financial statements
21
<PAGE>
PAINEWEBBER CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
FEBRUARY 28, 1995 FEBRUARY 28, 1994
----------------- -----------------
<S> <C> <C>
From operations:
Net investment income...................... $ 14,403,375 $ 16,343,627
Net realized gains (losses) from investment
transactions.............................. (10,217,814) 10,556,982
Net change in unrealized
appreciation/depreciation of investments.. (9,344,955) (13,144,123)
------------ ------------
Net increase (decrease) in net assets
resulting from operations................. (5,159,394) 13,756,486
------------ ------------
Dividends and distributions to shareholders
from:
Net investment income--Class A............. (10,753,281) (12,143,649)
Net investment income--Class B............. (1,729,251) (1,774,423)
Net investment income--Class D............. (1,929,403) (2,416,995)
Net realized gains from investment
transactions--Class A..................... (1,807,929) (6,083,535)
Net realized gains from investment
transactions--Class B..................... (334,849) (1,102,724)
Net realized gains from investment
transactions--Class D..................... (362,876) (1,488,471)
------------ ------------
Total dividends and distributions to
shareholders.............................. (16,917,589) (25,009,797)
------------ ------------
From beneficial interest transactions:
Net proceeds from the sale of shares....... 37,898,363 89,176,398
Cost of shares repurchased................. (108,667,003) (92,124,819)
Proceeds from dividends reinvested......... 9,271,310 14,486,519
------------ ------------
Net increase (decrease) in net assets from
beneficial interest transactions.......... (61,497,330) 11,538,098
------------ ------------
Net increase (decrease) in net assets...... (83,574,313) 284,787
Net assets:
Beginning of period........................ 323,032,034 322,747,247
------------ ------------
End of period (including undistributed net
investment income of $8,560 at February
28, 1994)................................. $239,457,721 $323,032,034
============ ============
</TABLE>
See accompanying notes to financial statements
22
<PAGE>
PAINEWEBBER NATIONAL TAX-FREE INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
FEBRUARY 28, 1995 FEBRUARY 28, 1994
----------------- -----------------
<S> <C> <C>
From operations:
Net investment income...................... $ 31,355,780 $ 34,164,253
Net realized gains (losses) from investment
transactions.............................. (16,725,603) 4,546,014
Net change in unrealized
appreciation/depreciation of investments.. (27,594,131) (3,668,100)
------------- -------------
Net increase (decrease) in net assets
resulting from operations................. (12,963,954) 35,042,167
------------- -------------
Dividends and distributions to shareholders
from:
Net investment income--Class A............. (21,139,476) (22,720,055)
Net investment income--Class B............. (3,087,440) (2,848,462)
Net investment income--Class D............. (7,128,978) (8,595,623)
Net realized gains from investment
transactions--Class A..................... (466,250) (4,281,417)
Net realized gains from investment
transactions--Class B..................... (79,017) (657,773)
Net realized gains from investment
transactions--Class D..................... (176,196) (1,866,373)
------------- -------------
Total dividends and distributions to
shareholders.............................. (32,077,357) (40,969,703)
------------- -------------
From beneficial interest transactions:
Net proceeds from the sale of shares....... 111,184,759 289,739,713
Cost of shares repurchased................. (271,144,962) (227,959,490)
Proceeds from dividends reinvested......... 20,588,449 27,091,462
------------- -------------
Net increase (decrease) in net assets from
beneficial interest transactions.......... (139,371,754) 88,871,685
------------- -------------
Net increase (decrease) in net assets...... (184,413,065) 82,944,149
Net assets:
Beginning of period........................ 691,592,169 608,648,020
------------- -------------
End of period (including undistributed net
investment income of $114 at
February 28, 1994)........................ $ 507,179,104 $ 691,592,169
============= =============
</TABLE>
See accompanying notes to financial statements
23
<PAGE>
PAINEWEBBER MUNICIPAL HIGH INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
FEBRUARY 28, 1995 FEBRUARY 28, 1994
----------------- -----------------
<S> <C> <C>
From operations:
Net investment income...................... $ 7,282,798 $ 7,516,661
Net realized gains (losses) from investment
transactions.............................. (6,460,311) 2,737,138
Net change in unrealized
appreciation/depreciation of investments.. (5,273,473) (2,812,898)
------------ ------------
Net increase (decrease) in net assets
resulting from operations................. (4,450,986) 7,440,901
------------ ------------
Dividends and distributions to shareholders
from:
Net investment income--Class A............. (4,189,927) (4,598,308)
Net investment income--Class B............. (1,474,018) (1,344,496)
Net investment income--Class D............. (1,619,104) (1,573,605)
Net realized gains from investment
transactions--Class A..................... (187,891) (1,555,470)
Net realized gains from investment
transactions--Class B..................... (74,685) (562,054)
Net realized gains from investment
transactions--Class D..................... (81,737) (669,711)
------------ ------------
Total dividends and distributions to
shareholders.............................. (7,627,362) (10,303,644)
------------ ------------
From beneficial interest transactions:
Net proceeds from the sale of shares....... 24,601,158 72,841,364
Cost of shares repurchased................. (55,028,010) (52,335,652)
Proceeds from dividends reinvested......... 4,365,166 5,953,254
------------ ------------
Net increase (decrease) in net assets from
beneficial interest transactions.......... (26,061,686) 26,458,966
------------ ------------
Net increase (decrease) in net assets...... (38,140,034) 23,596,223
Net assets:
Beginning of period........................ 150,407,632 126,811,409
------------ ------------
End of period (including undistributed net
investment income of $252 at
February 28, 1994)........................ $112,267,598 $150,407,632
============ ============
</TABLE>
See accompanying notes to financial statements
24
<PAGE>
PAINEWEBBER NEW YORK TAX-FREE INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
FEBRUARY 28, 1995 FEBRUARY 28, 1994
----------------- -----------------
<S> <C> <C>
From operations:
Net investment income...................... $ 4,054,804 $ 4,458,454
Net realized gains (losses) from investment
transactions.............................. (1,684,198) 823,510
Net change in unrealized
appreciation/depreciation of investments.. (5,028,753) (488,608)
------------ ------------
Net increase (decrease) in net assets
resulting from operations................. (2,658,147) 4,793,356
------------ ------------
Dividends and distributions to shareholders
from:
Net investment income--Class A............. (1,951,739) (2,334,975)
Net investment income--Class B............. (766,052) (726,927)
Net investment income--Class D............. (1,337,013) (1,396,552)
Net realized gains from investment
transactions--Class A..................... (371,191) (105,515)
Net realized gains from investment
transactions--Class B..................... (169,704) (40,073)
Net realized gains from investment
transactions--Class D..................... (282,222) (70,617)
------------ ------------
Total dividends and distributions to
shareholders.............................. (4,877,921) (4,674,659)
------------ ------------
From beneficial interest transactions:
Net proceeds from the sale of shares....... 12,977,985 56,493,732
Cost of shares repurchased................. (43,175,356) (34,122,275)
Proceeds from dividends reinvested......... 3,572,415 3,129,354
------------ ------------
Net increase (decrease) in net assets from
beneficial interest transactions.......... (26,624,956) 25,500,811
------------ ------------
Net increase (decrease) in net assets...... (34,161,024) 25,619,508
Net assets:
Beginning of period........................ 102,391,304 76,771,796
------------ ------------
End of period.............................. $ 68,230,280 $102,391,304
============ ============
</TABLE>
See accompanying notes to financial statements
25
<PAGE>
PAINEWEBBER NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Mutual Fund Trust ("Mutual Fund Trust") and PaineWebber Municipal
Series ("Municipal Series") (collectively, the "Trusts") were organized under
Massachusetts law by Declarations of Trust dated November 21, 1986 and January
28, 1987, respectively, and are registered with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, as an open-end
diversified management investment company and an open-end non-diversified
management investment company, respectively. Mutual Fund Trust has two series:
PaineWebber California Tax-Free Income Fund ("California Tax-Free Income Fund")
and PaineWebber National Tax-Free Income Fund ("National Tax-Free Income
Fund"). Municipal Series has two series: PaineWebber Municipal High Income Fund
("Municipal High Income Fund") and PaineWebber New York Tax-Free Income Fund
("New York Tax-Free Income Fund") (collectively, the "Funds").
Organizational Matters - Prior to July 1, 1991 each Fund issued only Class A
shares. On July 1, 1991 and July 2, 1992, each Fund commenced issuing Class B
and Class D shares, respectively. 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 distribution charges and
certain transfer agency expenses. In addition, Class B shares automatically
convert to Class A shares approximately six years after initial issuance. All
classes of shares have equal voting privileges, except that each class has
exclusive voting rights with respect to its distribution plan.
Valuation of Investments - Where market quotations are readily available,
portfolio securities are valued thereon, provided such quotations adequately
reflect, in the judgment of Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins"), a wholly owned subsidiary of PaineWebber Incorporated
("PaineWebber") and investment adviser, administrator and distributor of the
Funds, the fair value of the securities. When market quotations are not readily
available, securities are valued based upon appraisals received from a pricing
service which utilizes a computerized matrix system, or based upon appraisals
derived from information concerning those securities or similar securities
received from recognized dealers in those securities. All other securities are
valued at fair value as determined in good faith by or under the direction of
each Trust's board of trustees. The amortized cost method of valuation, which
approximates market value, is used to value debt obligations with 60 days or
less remaining to maturity, unless the respective Trust's board of trustees
determines that this does not represent fair value.
Each Fund follows an investment policy of investing primarily in municipal
obligations of various states except for California Tax-Free Income Fund and
New York Tax-Free Income Fund which invest solely in municipal obligations of
their
26
<PAGE>
PAINEWEBBER NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
respective state. Economic changes affecting those states and certain of their
public bodies and municipalities may affect the ability of the issuers within
those states to pay interest on, or repay principal of, municipal obligations
held by those Funds.
Investment Transactions and Investment Income - Investment transactions are
recorded on the trade date. Realized gains and losses from investment
transactions are calculated on the identified cost method. Interest income is
recorded on an accrual basis. Discounts are accreted and premiums are amortized
as adjustments to interest income and the identified cost of securities.
Income and expenses (excluding class-specific expenses) are allocated
proportionately to each class of shares based upon the relative value of
dividend-eligible shares of each class at the beginning of the day (after
adjusting for current capital share activity of the respective classes).
Realized and unrealized gains and losses are allocated proportionately to each
class of shares based on the relative value of shares outstanding at the
beginning of the day (after adjusting for current capital share activity of the
respective class). Class-specific expenses are charged directly to the
applicable class of shares.
Federal Tax Status - Each Fund intends to distribute all of its tax-exempt
income and any taxable income and to comply with the other requirements of the
Internal Revenue Code applicable to regulated investment companies.
Accordingly, no provisions for federal income taxes are required. In addition,
by distributing during each calendar year substantially all of its net
investment income, capital gains and certain other amounts, if any, each Fund
intends not to be subject to a federal excise tax.
At February 28, 1995, California Tax-Free Income Fund, National Tax-Free Income
Fund, Municipal High Income Fund and New York Tax-Free Income Fund had net
capital loss carryforwards of $5,757,844, $6,647,094, $4,924,213 and $436,117,
respectively. These loss carryforwards are available as reductions, to the
extent provided in the regulations, of future net realized capital gains, and
will expire by February 28, 2003.
In accordance with Treasury Regulations, California Tax-Free Income Fund,
National Tax-Free Income Fund, Municipal High Income Fund and New York Tax-Free
Income Fund have elected to defer realized losses arising after October 31,
1994. Such losses have been treated for tax purposes as arising on March 1,
1995. To the extent that such losses are used to offset future capital gains,
it is probable that the gains so offset will not be distributed to
shareholders.
Dividends and Distributions - Each Fund declares dividends on a daily basis
from net investment income. Dividends from net investment income and
distributions from realized gains from investment transactions are determined
in accordance with income tax regulations which may differ from generally
accepted accounting
27
<PAGE>
PAINEWEBBER NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 income tax classification. Net capital gains and certain other amounts,
if any, will be distributed at least annually but each Fund may make more
frequent distributions of such amounts, if necessary, to avoid income or excise
taxes.
INVESTMENT ADVISER AND ADMINISTRATOR
Each 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
Funds. In accordance with the Advisory Contracts, each Fund pays Mitchell
Hutchins an investment advisory and administration fee, which is accrued daily
and paid monthly, at the annual rates of 0.50% of California Tax-Free Income
Fund's and National Tax-Free Income Fund's average daily net assets and 0.60%
of Municipal High Income Fund's and New York Tax-Free Income Fund's average
daily net assets. At February 28, 1995, California Tax-Free Income Fund,
National Tax-Free Income Fund, Municipal High Income Fund and New York Tax-Free
Income Fund owed Mitchell Hutchins $91,181, $193,491, $51,569 and $30,306,
respectively, in investment advisory and administration fees. For the year
ended February 28, 1995, Mitchell Hutchins voluntarily waived $10,398 in
investment advisory and administration fees from the New York Tax-Free Income
Fund.
In compliance with applicable state securities laws, Mitchell Hutchins will
reimburse each Fund if and to the extent that the aggregate operating expenses
in any fiscal year, exclusive of taxes, interest, brokerage fees, distribution
fees and extraordinary expenses, exceed limitations imposed by various state
regulations. Currently, the most restrictive limitation applicable to the Funds
is 2.5% of the first $30 million of average daily net assets, 2.0% of the next
$70 million and 1.5% of any excess over $100 million. For the year ended
February 28, 1995, no reimbursements were required pursuant to the above
limitation for any of the Funds.
DISTRIBUTION PLAN
Mitchell Hutchins is the distributor of each Fund's shares and has appointed
PaineWebber as dealer for the sale of those shares. Under separate plans of
distribution pertaining to Class A, Class B and Class D shares, each Fund pays
Mitchell Hutchins monthly service fees at the annual rate of 0.25% of the
average daily net assets of each class of shares and monthly distribution fees
at the annual rate of 0.75% and 0.50% of the average daily net assets of Class
B and Class D shares, respectively. At February 28, 1995, California Tax-Free
Income Fund, National Tax-Free Income Fund, Municipal High Income Fund and New
York Tax-Free Income Fund owed Mitchell Hutchins $75,297, $169,642, $45,253 and
$16,569, respectively, in service and distribution fees. For the year ended
February 28, 1995, Mitchell Hutchins voluntarily waived $178,987 in service
fees from New York Tax-Free Income Fund.
28
<PAGE>
PAINEWEBBER NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Mitchell Hutchins also receives the proceeds of the initial sales charges paid
by shareholders upon the purchase of Class A shares and the contingent deferred
sales charges paid by shareholders upon certain redemptions of Class B shares.
Mitchell Hutchins has informed each Fund that, for the year ended February 28,
1995, it earned the following amounts in sales charges:
<TABLE>
<CAPTION>
CALIFORNIA NATIONAL NEW YORK
TAX-FREE TAX-FREE MUNICIPAL HIGH TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND
----------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
Initial sales charges--Class
A.......................... $ 88,183 $195,108 $ 59,937 $ 38,348
Contingent deferred sales
charges--Class B........... $280,699 $423,583 $239,162 $168,594
</TABLE>
TRANSFER AGENCY SERVICE FEES
Each Fund pays PaineWebber an annual fee of $4.00 per active PaineWebber
shareholder account for certain services not provided by the Funds' transfer
agent. For these services for the year ended February 28, 1995, PaineWebber
earned $24,838, $64,620, $19,534 and $10,747 from California Tax-Free Income
Fund, National Tax-Free Income Fund, Municipal High Income Fund and New York
Tax- Free Income Fund, respectively. For the year ended February 28, 1995,
PaineWebber voluntarily waived $3,734 in service fees from the New York Tax
Free Income Fund. At February 28, 1995, California Tax-Free Income Fund,
National Tax-Free Income Fund, Municipal High Income Fund and New York Tax-
Free Income Fund owed PaineWebber $1,835, $4,864, $1,491 and $679,
respectively, for transfer agency service fees.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at February 28,
1995, was substantially the same as the cost of securities for financial
statement purposes.
At February 28, 1995, the components of net unrealized appreciation of
investments were as follows:
<TABLE>
<CAPTION>
CALIFORNIA NATIONAL NEW YORK
TAX-FREE TAX-FREE MUNICIPAL HIGH TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND
----------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
Gross appreciation
(investments having an
excess of value over
cost).................. $ 8,867,237 $19,276,450 $ 3,688,044 $ 2,030,372
Gross depreciation
(investments having an
excess of cost over
value)................. (1,299,276) (1,825,291) (1,044,338) (1,404,579)
----------- ----------- ----------- -----------
Net unrealized
appreciation of
investments............ $ 7,567,961 $17,451,159 $ 2,643,706 $ 625,793
=========== =========== =========== ===========
</TABLE>
For the year ended February 28, 1995, total aggregate purchases and sales of
portfolio securities, excluding short-term securities, were as follows:
<TABLE>
<CAPTION>
CALIFORNIA NATIONAL NEW YORK
TAX-FREE TAX-FREE MUNICIPAL HIGH TAX-FREE
INCOME FUND INCOME FUND INCOME FUND INCOME FUND
----------- ------------ -------------- -----------
<S> <C> <C> <C> <C>
Purchases................... $27,854,076 $331,694,214 $35,421,591 $ 4,952,755
Sales....................... $92,520,648 $478,415,792 $67,723,187 $30,096,176
</TABLE>
29
<PAGE>
PAINEWEBBER NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
SHARES OF BENEFICIAL INTEREST
There is an unlimited amount of $0.001 par value shares of beneficial interest
authorized. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
----------------------- ---------------------- ------------------------
FOR THE YEARS ENDED FOR THE YEARS ENDED FOR THE YEARS ENDED
FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
----------------------- ---------------------- ------------------------
1995 1994 1995 1994 1995 1994
----------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
California Tax-Free
Income Fund:
Shares sold............. 2,134,302 1,547,956 525,879 1,374,878 904,455 4,641,752
Shares repurchased...... (6,021,282) (3,458,286) (1,168,617) (899,621) (3,148,117) (3,469,159)
Shares converted from
Class B to Class A..... 44,953 37,884 (44,934) (37,858) -- --
Dividends reinvested in
additional Fund shares. 616,881 854,824 98,867 132,899 161,815 244,037
----------- ---------- ---------- ---------- ----------- -----------
Net increase (decrease)
in shares outstanding.. (3,225,146) (1,017,622) (588,805) 570,298 (2,081,847) 1,416,630
=========== ========== ========== ========== =========== ===========
National Tax-Free Income
Fund:
Shares sold............. 5,957,610 5,747,249 955,454 2,768,673 3,013,454 15,286,120
Shares repurchased...... (12,519,609) (5,901,074) (1,732,673) (1,053,130) (10,137,360) (11,763,587)
Shares converted from
Class B to Class A..... 65,470 104,678 (65,470) (104,724) -- --
Dividends reinvested in
additional Fund shares. 1,188,102 1,420,183 159,664 166,036 494,843 633,812
----------- ---------- ---------- ---------- ----------- -----------
Net increase (decrease)
in shares outstanding.. (5,308,427) 1,371,036 (683,025) 1,776,855 (6,629,063) 4,156,345
=========== ========== ========== ========== =========== ===========
Municipal High Income
Fund:
Shares sold............. 720,430 1,416,584 550,580 1,515,971 1,193,461 3,684,351
Shares repurchased...... (2,251,267) (1,637,975) (997,368) (663,862) (2,307,181) (2,455,212)
Shares converted from
Class B to Class A..... 30,243 40,171 (30,243) (40,200) -- --
Dividends reinvested in
additional Fund shares. 241,093 316,424 81,216 95,804 116,205 128,750
----------- ---------- ---------- ---------- ----------- -----------
Net increase (decrease)
in shares outstanding.. (1,259,501) 135,204 (395,815) 907,713 (997,515) 1,357,889
=========== ========== ========== ========== =========== ===========
New York Tax-Free Income
Fund:
Shares sold............. 283,990 1,017,459 301,219 876,338 663,852 3,178,342
Shares repurchased...... (1,369,728) (1,038,361) (670,547) (420,545) (2,201,138) (1,598,543)
Shares converted from
Class B to Class A..... 15,724 5,188 (15,731) (5,188) -- --
Dividends reinvested in
additional Fund shares. 148,031 144,793 71,731 35,837 130,636 100,525
----------- ---------- ---------- ---------- ----------- -----------
Net increase (decrease)
in shares outstanding.. (921,983) 129,079 (313,328) 486,442 (1,406,650) 1,680,324
=========== ========== ========== ========== =========== ===========
</TABLE>
30
<PAGE>
[This page intentionally left blank]
31
<PAGE>
PAINEWEBBER CALIFORNIA TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT EACH PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------
FOR THE YEARS FOR THE THREE
ENDED MONTHS FOR THE YEARS
FEBRUARY 28, ENDED ENDED NOVEMBER 30,
------------------ FEBRUARY 28, ----------------------------
1995 1994 1993 1992 1991 1990
-------- -------- ------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.41 $ 11.80 $ 11.39 $ 11.13 $ 10.94 $ 10.95
-------- -------- -------- -------- -------- --------
Net increase (decrease)
from investment
operations:
Net investment income... 0.58 0.60 0.16 0.66 0.71 0.78
Net realized and
unrealized gains
(losses) from
investment transactions (0.63) (0.08) 0.58 0.29 0.22 (0.01)
-------- -------- -------- -------- -------- --------
Net increase (decrease)
from investment
operations............. (0.05) 0.52 0.74 0.95 0.93 0.77
-------- -------- -------- -------- -------- --------
Less dividends and
distributions:
Dividends from net
investment income...... (0.58) (0.60) (0.16) (0.66) (0.71) (0.78)
Distributions from net
realized gains from
investment transactions (0.10) (0.31) (0.17) (0.03) (0.03) --
-------- -------- -------- -------- -------- --------
Total dividends and
distributions to
shareholders........... (0.68) (0.91) (0.33) (0.69) (0.74) (0.78)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period................. $ 10.68 $ 11.41 $ 11.80 $ 11.39 $ 11.13 $ 10.94
======== ======== ======== ======== ======== ========
Total investment
return(1).............. (0.18)% 4.46% 6.52% 8.73% 8.84% 6.89%
======== ======== ======== ======== ======== ========
Ratios and supplemental
data:
Net assets, end of
period (000's)......... $178,234 $227,179 $247,025 $239,851 $231,987 $211,701
Ratio of expenses to
average net assets..... 0.88% 0.90% 0.99%* 0.93% 0.83% 0.68%
Ratio of net investment
income to average net
assets................. 5.55% 5.10% 5.61%* 5.80% 6.46% 6.78%
Portfolio turnover rate. 10.61% 36.73% 3.42% 24.78% 2.44% 22.82%
- ---------------------
</TABLE>
+ Commencement of issuance of shares
* Annualized
(1) Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends and capital gains
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. The figures do not
include sales charges; results for Class A and Class B shares would be
lower if sales charges were included. Total returns for periods of less
than one year have not been annualized.
32
<PAGE>
<TABLE>
<CAPTION>
CLASS B CLASS D
- ---------------------------------------------------------- ---------------------------------------------
FOR THE FOR THE
FOR THE YEARS FOR THE THREE FOR THE PERIOD FOR THE YEARS FOR THE THREE PERIOD
ENDED MONTHS YEAR JULY 1, 1991+ ENDED MONTHS JULY 2, 1992+
FEBRUARY 28, ENDED ENDED THROUGH FEBRUARY 28, ENDED THROUGH
- ---------------- FEBRUARY 28, NOVEMBER 30, NOVEMBER 30, ---------------- FEBRUARY 28, NOVEMBER 30,
1995 1994 1993 1992 1991 1995 1994 1993 1992
- ------- ------- ------------- ------------ ------------- ------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 11.41 $ 11.81 $ 11.39 $ 11.14 $ 10.95 $ 11.40 $ 11.79 $ 11.38 $ 11.41
- ------- ------- ------- ------- ------- ------- ------- ------- -------
0.50 0.51 0.14 0.57 0.25 0.53 0.54 0.14 0.21
(0.62) (0.09) 0.59 0.28 0.19 (0.63) (0.08) 0.58 (0.03)
- ------- ------- ------- ------- ------- ------- ------- ------- -------
(0.12) 0.42 0.73 0.85 0.44 (0.10) 0.46 0.72 0.18
- ------- ------- ------- ------- ------- ------- ------- ------- -------
(0.50) (0.51) (0.14) (0.57) (0.25) (0.53) (0.54) (0.14) (0.21)
(0.10) (0.31) (0.17) (0.03) -- (0.10) (0.31) (0.17) --
- ------- ------- ------- ------- ------- ------- ------- ------- -------
(0.60) (0.82) (0.31) (0.60) (0.25) (0.63) (0.85) (0.31) (0.21)
- ------- ------- ------- ------- ------- ------- ------- ------- -------
$ 10.69 $ 11.41 $ 11.81 $ 11.39 $ 11.14 $ 10.67 $ 11.40 $ 11.79 $ 11.38
======= ======= ======= ======= ======= ======= ======= ======= =======
(0.85)% 3.56% 6.50% 7.80% 3.69% (0.70)% 3.91% 6.49% 1.28%
======= ======= ======= ======= ======= ======= ======= ======= =======
$33,007 $41,979 $36,693 $30,205 $10,743 $28,217 $53,874 $39,029 $30,141
1.64% 1.65% 1.74%* 1.68% 1.62%* 1.40% 1.39% 1.48%* 1.39%*
4.78% 4.32% 4.81%* 4.91% 5.02%* 5.05% 4.55% 5.06%* 4.79%*
10.61% 36.73% 3.42% 24.78% 2.44% 10.61% 36.73% 3.42% 24.78%
</TABLE>
33
<PAGE>
PAINEWEBBER NATIONAL TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT EACH PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------
FOR THE YEARS FOR THE THREE
ENDED MONTHS FOR THE YEARS
FEBRUARY 28, ENDED ENDED NOVEMBER 30,
------------------- FEBRUARY 28, ----------------------------
1995 1994 1993 1992 1991 1990
-------- -------- ------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 12.00 $ 12.09 $ 11.67 $ 11.40 $ 11.20 $ 11.21
-------- -------- -------- -------- -------- --------
Net increase (decrease)
from investment
operations:
Net investment income... 0.63 0.64 0.17 0.71 0.76 0.78
Net realized and
unrealized gains
(losses) from
investment transactions (0.73) 0.03 0.55 0.31 0.20 (0.01)
-------- -------- -------- -------- -------- --------
Net increase (decrease)
from investment
operations............. (0.10) 0.67 0.72 1.02 0.96 0.77
-------- -------- -------- -------- -------- --------
Less dividends and
distributions:
Dividends from net
investment income...... (0.63) (0.64) (0.17) (0.71) (0.76) (0.78)
Distributions from net
realized gains from
investment
transactions........... (0.01) (0.12) (0.13) (0.04) -- --
-------- -------- -------- -------- -------- --------
Total dividends and
distributions to
shareholders........... (0.64) (0.76) (0.30) (0.75) (0.76) (0.78)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period................. $ 11.26 $ 12.00 $ 12.09 $ 11.67 $ 11.40 $ 11.20
======== ======== ======== ======== ======== ========
Total investment
return(1).............. (0.63)% 5.65% 6.31% 9.21% 8.85% 7.17%
======== ======== ======== ======== ======== ========
Ratios and supplemental
data:
Net assets, end of
period (000's)......... $346,579 $432,825 $419,596 $396,587 $366,300 $343,539
Ratio of expenses to
average net assets..... 0.88% 0.89% 0.88%* 0.91% 0.83% 0.69%
Ratio of net investment
income to average net
assets................. 5.62% 5.28% 5.86%* 6.13% 6.66% 7.08%
Portfolio turnover rate. 59.85% 15.87% 5.36% 21.40% 26.69% 24.45%
- ---------------------
</TABLE>
+ Commencement of issuance of shares
* Annualized
(1) Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends, and capital gains
distributions at net asset value on the payable date and a sale at net
asset value on the last day of each period reported. The figures do not
include sales charges; results for Class A and Class B shares would be
lower if sales charges were included. Total returns for periods of less
than one year have not been annualized.
34
<PAGE>
<TABLE>
<CAPTION>
CLASS B CLASS D
- ----------------------------------------------------------- ------------------------------------------------
FOR THE FOR THE
FOR THE YEARS FOR THE THREE FOR THE PERIOD FOR THE YEARS FOR THE THREE PERIOD
ENDED MONTHS YEAR JULY 1, 1991+ ENDED MONTHS JULY 2, 1992+
FEBRUARY 28, ENDED ENDED THROUGH FEBRUARY 28, ENDED THROUGH
- ----------------- FEBRUARY 28, NOVEMBER 30, NOVEMBER 30, ------------------- FEBRUARY 28, NOVEMBER 30,
1995 1994 1993 1992 1991 1995 1994 1993 1992
- ------- ------- ------------- ------------ ------------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 11.99 $ 12.08 $ 11.67 $ 11.40 $11.19 $ 12.00 $ 12.09 $ 11.67 $ 11.71
- ------- ------- ------- ------- ------ -------- -------- -------- --------
0.54 0.55 0.15 0.62 0.27 0.57 0.58 0.15 0.23
(0.72) 0.03 0.54 0.31 0.21 (0.73) 0.03 0.55 (0.04)
- ------- ------- ------- ------- ------ -------- -------- -------- --------
(0.18) 0.58 0.69 0.93 0.48 (0.16) 0.61 0.70 0.19
- ------- ------- ------- ------- ------ -------- -------- -------- --------
(0.54) (0.55) (0.15) (0.62) (0.27) (0.57) (0.58) (0.15) (0.23)
(0.01) (0.12) (0.13) (0.04) -- (0.01) (0.12) (0.13) --
- ------- ------- ------- ------- ------ -------- -------- -------- --------
(0.55) (0.67) (0.28) (0.66) (0.27) (0.58) (0.70) (0.28) (0.23)
- ------- ------- ------- ------- ------ -------- -------- -------- --------
$ 11.26 $ 11.99 $ 12.08 $ 11.67 $11.40 $ 11.26 $ 12.00 $ 12.09 $ 11.67
======= ======= ======= ======= ====== ======== ======== ======== ========
(1.29)% 4.87% 6.02% 8.36% 4.06% (1.13)% 5.13% 6.18% 1.41%
======= ======= ======= ======= ====== ======== ======== ======== ========
$58,958 $70,988 $50,064 $39,564 $8,620 $101,642 $187,778 $138,989 $105,854
1.64% 1.63% 1.63%* 1.65% 1.65%* 1.40% 1.37% 1.37%* 1.42%*
4.86% 4.50% 5.08%* 5.16% 5.26%* 5.13% 4.75% 5.30%* 5.17%*
59.85% 15.87% 5.36% 21.40% 26.69% 59.85% 15.87% 5.36% 21.40%
</TABLE>
35
<PAGE>
PAINEWEBBER MUNICIPAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT EACH PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
FOR THE YEARS ENDED
----------------------------------------------------
FEBRUARY 28,
------------------------- FEBRUARY 29, FEBRUARY 28,
1995 1994 1993 1992 1991
------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 10.77 $ 10.96 $ 10.29 $ 9.92 $ 10.00
------- ------- ------- ------- -------
Net increase (decrease)
from investment
operations:
Net investment income... 0.59 0.61 0.67 0.71 0.72
Net realized and
unrealized gains
(losses) from
investment transactions (0.82) 0.01 0.81 0.44 (0.08)
------- ------- ------- ------- -------
Net increase (decrease)
from investment
operations............. (0.23) 0.62 1.48 1.15 0.64
------- ------- ------- ------- -------
Less dividends and
distributions:
Dividends from net
investment income...... (0.59) (0.61) (0.67) (0.71) (0.72)
Distributions from net
realized gains from
investment transactions (0.03) (0.20) (0.14) (0.07) --
------- ------- ------- ------- -------
Total dividends and
distributions to
shareholders........... (0.62) (0.81) (0.81) (0.78) (0.72)
------- ------- ------- ------- -------
Net asset value, end of
period................. $ 9.92 $ 10.77 $ 10.96 $ 10.29 $ 9.92
======= ======= ======= ======= =======
Total investment
return(1).............. (2.03)% 5.77% 15.05% 11.94% 6.69%
======= ======= ======= ======= =======
Ratios and supplemental
data:
Net assets, end of
period (000's)......... $63,287 $82,248 $82,251 $68,830 $62,559
Ratio of expenses to
average net assets**... 1.13% 1.03% 0.87% 0.75% 0.69%
Ratio of net investment
income to average net
assets**............... 5.96% 5.52% 6.31% 6.99% 7.32%
Portfolio turnover rate. 28.44% 23.19% 10.05% 45.93% 19.82%
- ---------------------
</TABLE>
+ Commencement of issuance of shares
* Annualized
** During some of the periods presented above, PaineWebber/Mitchell Hutchins
reimbursed the Fund for a portion of its operating expenses and waived all
or a portion of its advisory and administration, distribution and transfer
agency service fees. If such reimbursements and waivers had not been made,
for the Class A shares, the ratios of expenses to average net assets and
the ratios of net investment income to average net assets would have been
1.16% and 5.39%, 1.29% and 5.89%, 1.25% and 6.49%, 1.54% and 6.47%,
respectively, for the years ended February 28, 1994, 1993, February 29,
1992, and February 28, 1991, respectively. If such reimbursements and
waivers had not been made, for the Class B shares, the annualized ratios of
expenses to average net assets and the annualized ratios of net investment
income to average net assets would have been 1.90% and 4.61%, 2.01% and
5.10%, and 1.98% and 5.32%, respectively, for the years ended February 28,
1994 and 1993 and for the period from July 1, 1991 to February 29, 1992,
respectively. If such reimbursements and waivers had not been made, for the
Class D shares, the annualized ratios of expenses to average net assets and
net investment income to average net assets would have been 1.64% and
4.85%, and 1.69% and 4.97%, respectively, for the year ended February 28,
1994 and for the period July 2, 1992 to February 28, 1993, respectively.
(1) Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends and capital gains
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. The figures do not
include sales charges; results for Class A and Class B shares would be
lower if sales charges were included. Total returns for periods of less
than one year have not been annualized.
36
<PAGE>
<TABLE>
<CAPTION>
CLASS B CLASS D
- ----------------------------------------- --------------------------------
FOR THE PERIOD FOR THE YEARS FOR THE PERIOD
FOR THE YEARS ENDED JULY 1, 1991+ ENDED JULY 2, 1992+
FEBRUARY 28, THROUGH FEBRUARY 28, THROUGH
- ------------------------- FEBRUARY 29, ---------------- FEBRUARY 28,
1995 1994 1993 1992 1995 1994 1993
- ------- ------- ------- -------------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 10.76 $ 10.96 $ 10.29 $10.05 $ 10.77 $ 10.96 $ 10.50
- ------- ------- ------- ------ ------- ------- -------
0.52 0.52 0.59 0.42 0.55 0.55 0.36
(0.81) -- 0.81 0.31 (0.82) 0.01 0.47
- ------- ------- ------- ------ ------- ------- -------
(0.29) 0.52 1.40 0.73 (0.27) 0.56 0.83
- ------- ------- ------- ------ ------- ------- -------
(0.52) (0.52) (0.59) (0.42) (0.55) (0.55) (0.36)
(0.03) (0.20) (0.14) (0.07) (0.03) (0.20) (0.01)
- ------- ------- ------- ------ ------- ------- -------
(0.55) (0.72) (0.73) (0.49) (0.58) (0.75) (0.37)
- ------- ------- ------- ------ ------- ------- -------
$ 9.92 $ 10.76 $ 10.96 $10.29 $ 9.92 $ 10.77 $ 10.96
======= ======= ======= ====== ======= ======= =======
(2.67)% 4.88% 14.81% 6.89% (2.51)% 5.24% 7.72%
======= ======= ======= ====== ======= ======= =======
$25,823 $32,287 $22,922 $8,176 $23,158 $35,872 $21,638
1.87% 1.79% 1.63% 1.50%* 1.63% 1.54% 1.40%*
5.21% 4.72% 5.48% 5.80%* 5.48% 4.95% 5.26%*
28.44% 23.19% 10.05% 45.93% 28.44% 23.19% 10.05%
</TABLE>
37
<PAGE>
PAINEWEBBER NEW YORK TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT EACH PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------
FOR THE YEARS ENDED
-----------------------------------------------------
FEBRUARY 28,
-------------------------- FEBRUARY 29, FEBRUARY 28,
1995 1994 1993 1992 1991
------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.03 $ 10.99 $ 10.12 $ 9.76 $ 9.72
------- ------- ------- ------- -------
Net increase (decrease)
from investment
operations:
Net investment income... 0.54 0.57 0.63 0.66 0.67
Net realized and
unrealized gains
(losses) from
investment transactions (0.66) 0.07 0.87 0.36 0.04
------- ------- ------- ------- -------
Net increase (decrease)
from investment
operations............. (0.12) 0.64 1.50 1.02 0.71
------- ------- ------- ------- -------
Less dividends and
distributions:
Dividends from net
investment income...... (0.54) (0.57) (0.63) (0.66) (0.67)
Distributions from net
realized gains from
investment transactions (0.10) (0.03) -- -- --
------- ------- ------- ------- -------
Total dividends and
distributions to
shareholders........... (0.64) (0.60) (0.63) (0.66) (0.67)
------- ------- ------- ------- -------
Net asset value, end of
period................. $ 10.27 $ 11.03 $ 10.99 $ 10.12 $ 9.76
======= ======= ======= ======= =======
Total investment
return(1).............. (0.83)% 5.89% 15.44% 10.80% 7.59%
======= ======= ======= ======= =======
Ratios and supplemental
data:
Net assets, end of
period (000's)......... $32,475 $45,033 $43,443 $35,961 $30,173
Ratio of expenses to
average net assets**... 1.01% 0.75% 0.34% 0.25% 0.21%
Ratio of net investment
income to average net
assets**............... 5.38% 5.13% 6.07% 6.65% 6.93%
Portfolio turnover rate. 6.30% 8.14% 5.76% 5.55% 2.65%
- ---------------------
</TABLE>
+ Commencement of issuance of shares
* Annualized
** During some of the periods presented above, PaineWebber/Mitchell Hutchins
reimbursed the Fund for a portion of its operating expenses and waived all
or a portion of its advisory and administration, distribution and transfer
agency service fees. If such reimbursements and waivers had not been made,
for the Class A shares, the annualized ratios of expenses to average net
assets and the annualized ratios of net investment income to average net
assets would have been 1.26% and 5.13%, 1.25% and 4.63%, 1.47% and 4.94%,
1.53% and 5.37%, and 1.84% and 5.30%, respectively, for the years ended
February 28, 1995, 1994 and 1993, for the year ended February 29, 1992, and
for the year ended February 28, 1991, respectively. If such reimbursements
and waivers had not been made, for the Class B shares, the annualized
ratios of expenses to average net assets and the annualized ratios of net
investment income to average net assets would have been 2.01% and 4.38%,
1.99% and 3.86%, 2.19% and 4.13%, 2.20% and 4.39%, respectively, for the
years ended February 28, 1995, 1994 and 1993 and for the period from July
1, 1991 to February 29, 1992, respectively. If such reimbursements and
waivers had not been made, for the Class D shares, the annualized ratio of
expenses to average net assets and the annualized ratios of net investment
income to average net assets would have been 1.75% and 4.65%, 1.72% and
4.10%, 1.83% and 4.11%, respectively, for the years ended February 28, 1995
and 1994 and for the period from July 2, 1992 to February 28, 1993,
respectively.
(1) Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends and capital gains
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. The figures do not
include sales charges; results for Class A and Class B shares would be
lower if sales charges were included. Total returns for periods of less
than one year have not been annualized.
38
<PAGE>
<TABLE>
<CAPTION>
CLASS B CLASS D
- ----------------------------------------- ---------------------------------
FOR THE PERIOD FOR THE YEARS FOR THE PERIOD
FOR THE YEARS ENDED JULY 1, 1991+ ENDED JULY 2, 1992+
FEBRUARY 28, THROUGH FEBRUARY 28, THROUGH
- ------------------------- FEBRUARY 29, ----------------- FEBRUARY 28,
1995 1994 1993 1992 1995 1994 1993
- ------- ------- ------- -------------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 11.03 $ 10.98 $ 10.12 $ 9.81 $ 11.03 $ 10.99 $ 10.45
- ------- ------- ------- ------ ------- ------- -------
0.47 0.49 0.56 0.39 0.49 0.51 0.36
(0.66) 0.08 0.86 0.31 (0.65) 0.07 0.54
- ------- ------- ------- ------ ------- ------- -------
(0.19) 0.57 1.42 0.70 (0.16) 0.58 0.90
- ------- ------- ------- ------ ------- ------- -------
(0.47) (0.49) (0.56) (0.39) (0.49) (0.51) (0.36)
(0.10) (0.03) -- -- (0.10) (0.03) --
- ------- ------- ------- ------ ------- ------- -------
(0.57) (0.52) (0.56) (0.39) (0.59) (0.54) (0.36)
- ------- ------- ------- ------ ------- ------- -------
$ 10.27 $ 11.03 $ 10.98 $10.12 $ 10.28 $ 11.03 $ 10.99
======= ======= ======= ====== ======= ======= =======
(1.57)% 5.19% 14.35% 6.80% (1.20)% 5.35% 8.38%
======= ======= ======= ====== ======= ======= =======
$14,660 $19,193 $13,776 $6,026 $21,095 $38,165 $19,553
1.76% 1.51% 1.10% 1.00%* 1.52% 1.27% 0.90%*
4.63% 4.34% 5.22% 5.59%* 4.89% 4.55% 5.04%*
6.30% 8.14% 5.76% 5.55% 6.30% 8.14% 5.76%
</TABLE>
39
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
PaineWebber Mutual Fund Trust
PaineWebber Municipal Series
We have audited the accompanying statements of assets and
liabilities, including the portfolios of investments, of
PaineWebber Mutual Fund Trust (comprising PaineWebber California
Tax-Free Income Fund and PaineWebber National Tax-Free Income
Fund), and PaineWebber Municipal Series (comprising PaineWebber
Municipal High Income Fund and PaineWebber New York Tax-Free
Income Fund) (the "Trusts") as of February 28, 1995, and the
related statements of operations for the year then ended and the
statements of changes in net assets and financial highlights for
each of the periods indicated therein. These financial statements
and financial highlights are the responsibility of the Trusts'
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments
owned at February 28, 1995 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 each of the respective Funds constituting
PaineWebber Mutual Fund Trust and PaineWebber Municipal Series at
February 28, 1995, the results of their operations for the year
then ended, and the changes in their net assets and financial
highlights for each of the indicated periods, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
April 21, 1995
40
<PAGE>
PAINEWEBBER
TAX INFORMATION
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of each Fund's fiscal year end (February
28, 1995), as to the federal tax status of distributions received by
shareholders during such fiscal year. Accordingly, we are advising you that the
following distributions paid during the fiscal year were derived from the
following sources:
<TABLE>
<CAPTION>
CALIFORNIA NATIONAL NEW YORK
TAX-FREE TAX-FREE MUNICIPAL HIGH TAX-FREE
PER SHARE DATA: INCOME FUND INCOME FUND INCOME FUND INCOME FUND
--------------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
Tax-exempt income*
Class A................. $0.5826 $0.6272 $0.5887 $0.5432
Class B................. 0.5024 0.5427 0.5139 0.4667
Class D................. 0.5285 0.5711 0.5372 0.4932
Short-term capital
gains+**................ -- 0.0027 -- --
Long-term capital gains+. 0.0969 0.0108 0.0260 0.1017
</TABLE>
- -------------
* Federally exempt interest dividends
** Taxable as ordinary income
+ Amounts apply to all classes
Each Fund did not invest in any security which paid interest subject to the
federal alternative minimum tax for individual taxpayers during its fiscal
year. Therefore none of the dividends paid by the Funds were subject to such
tax. Additionally, all exempt interest dividends paid by California Tax-Free
Income Fund and New York Tax-Free Income Fund were exempt from California
income tax and New York income tax, respectively.
Because each Fund's fiscal year is not the calendar year, another notification
will be sent in respect of calendar year 1995. The second notification, which
reflects the amount to be used by calendar year taxpayers on their federal
income tax returns, will be made in conjunction with Form 1099 DIV and will be
mailed in January 1996. Shareholders are advised to consult their own tax
advisers with respect to the tax consequences of their investment in each Fund.
41
