<PAGE>
CALIFORNIA TAX-FREE INCOME FUND
PAINEWEBBER
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------- -----------------------------
12 MONTHS 6 MONTHS
08/31/96 02/29/96 08/31/95 ENDED 08/31/96 ENDED 08/31/96
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $10.70 $11.02 $10.81 4.03% (0.48)%
- ------------------------------------------------------------------------
Class B Shares 10.71 11.03 10.81 3.35 (0.85)
- ------------------------------------------------------------------------
Class C Shares 10.70 11.02 10.80 3.60 (0.73)
- ------------------------------------------------------------------------
</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 0.7362 6.68
- ------------------------------------------------------------------------------
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)
- ------------------------------------------------------------------------------
1995 10.09 11.18 -- 0.5713 16.80
- ------------------------------------------------------------------------------
01/01/96 -
08/31/96 11.18 10.70 -- 0.3173 (1.43)
- ------------------------------------------------------------------------------
Total: $0.6330 $7.4303
- ------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/96: 133.28%
- ------------------------------------------------------------------------------
</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)
- ----------------------------------------------------------------------------
1995 10.10 11.19 -- 0.4899 15.91
- ----------------------------------------------------------------------------
01/01/96 - 08/31/96 11.19 10.71 -- 0.2687 (1.87)
- ----------------------------------------------------------------------------
Total: $0.5990 $2.6477
- ----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/96: 30.72%
- ----------------------------------------------------------------------------
</TABLE>
Performance Summary Class C 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)
- ----------------------------------------------------------------------------
1995 10.09 11.17 -- 0.5149 16.09
- ----------------------------------------------------------------------------
01/01/96 - 08/31/96 11.17 10.70 -- 0.2843 (1.64)
- ----------------------------------------------------------------------------
Total: $0.5722 $2.1389
- ----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/96: 19.55%
- ----------------------------------------------------------------------------
</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 for each class would be lower if sales charges were included.
1
<PAGE>
CALIFORNIA TAX-FREE INCOME FUND
PAINEWEBBER
PERFORMANCE RESULTS (CONCLUDED)
Average Annual Return
<TABLE>
<CAPTION>
% RETURN AFTER DEDUCTING
% RETURN WITHOUT SALES CHARGE MAXIMUM SALES CHARGE
------------------------------------------------------
CLASS CLASS
------------------------------------------------------
A* B** C*** A* B** C***
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Twelve Months Ended
09/30/96 4.91% 4.12% 4.37% 0.71% (0.88)% 3.62%
- ---------------------------------------------------------------------------
Five Years Ended
09/30/96 5.90 5.10 N/A 5.03 4.77 N/A
- ---------------------------------------------------------------------------
Ten Years Ended
09/30/96 6.72 N/A N/A 6.28 N/A N/A
- ---------------------------------------------------------------------------
Commencement of
Operations Through
09/30/96+ 8.09 5.47 4.59 7.69 5.16 4.59
- ---------------------------------------------------------------------------
</TABLE>
* Maximum sales charge for Class A shares is 4.0% of the public offering price.
Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5.0% and is
reduced to 0% after 6 years. Class B shares bear ongoing 12b-1 distribution
and service fees.
*** Maximum contingent deferred sales charge for Class C shares is 0.75% and is
reduced to 0% after 1 year. Class C shares bear ongoing 12b-1 distribution
and service fees.
+ Commencement of issuance dates are September 16, 1985, July 1, 1991 and July
2, 1992 for Class A, Class B and Class C shares, respectively.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost.
2
<PAGE>
NATIONAL TAX-FREE INCOME FUND
PAINEWEBBER
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------- -----------------------------
12 MONTHS 6 MONTHS
08/31/96 02/29/96 08/31/95 ENDED 08/31/96 ENDED 08/31/96
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $11.28 $11.64 $11.45 3.45% (0.72)%
- ------------------------------------------------------------------------
Class B Shares 11.27 11.64 11.45 2.58 (1.18)
- ------------------------------------------------------------------------
Class C Shares 11.27 11.64 11.45 2.83 (1.06)
- ------------------------------------------------------------------------
</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 -- 0.7843 6.55
- -----------------------------------------------------------------------------
1991 11.15 11.56 0.0365 0.7519 11.12
- -----------------------------------------------------------------------------
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 0.6264 (7.14)
- -----------------------------------------------------------------------------
1995 10.75 11.84 -- 0.5954 16.01
- -----------------------------------------------------------------------------
01/01/96 - 08/31/96 11.84 11.28 -- 0.3447 (1.80)
- -----------------------------------------------------------------------------
Total: $0.3022 $8.5834
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/96: 161.16%
- -----------------------------------------------------------------------------
</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 0.5406 (7.84)
- -----------------------------------------------------------------------------
1995 10.75 11.83 -- 0.5094 15.05
- -----------------------------------------------------------------------------
01/01/96 - 08/31/96 11.83 11.27 -- 0.2907 (2.27)
- -----------------------------------------------------------------------------
Total: $0.3022 $2.8367
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/96: 31.99%
- -----------------------------------------------------------------------------
</TABLE>
Performance Summary Class C 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 0.5696 (7.60)
- -----------------------------------------------------------------------------
1995 10.75 11.84 -- 0.5369 15.42
- -----------------------------------------------------------------------------
01/01/96 - 08/31/96 11.84 11.27 -- 0.3082 (2.20)
- -----------------------------------------------------------------------------
Total: $0.2657 $2.2817
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/96: 19.81%
- -----------------------------------------------------------------------------
</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 for each class would be lower if sales charges were
included.
Note: The Fund currently offers Class Y shares primarily to INSIGHT Investment
Advisory Program participants. For the six months ended August 31, 1996
and since inception, November 3, 1995 through August 31, 1996, Class Y
shares have a total return of (0.67)% and 1.02%, respectively. Class Y
shares do not have initial or contingent deferred sales charges or
ongoing distribution and service fees.
3
<PAGE>
NATIONAL TAX-FREE INCOME FUND
PAINEWEBBER
PERFORMANCE RESULTS (CONCLUDED)
Average Annual Return
<TABLE>
<CAPTION>
% RETURN AFTER DEDUCTING
% RETURN WITHOUT SALES CHARGE MAXIMUM SALES CHARGE
--------------------------------------------------------------
CLASS CLASS
--------------------------------------------------------------
A* B** C*** A* B** C***
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Twelve Months
Ended 9/30/96 4.09% 3.31% 3.56% (0.09)% (1.69)% 2.81%
- -------------------------------------------------------------------------------
Five Years
Ended 9/30/96 6.07 5.26 N/A 5.20 4.94 N/A
- -------------------------------------------------------------------------------
Ten Years Ended
9/30/96 6.91 N/A N/A 6.47 N/A N/A
- -------------------------------------------------------------------------------
Commencement of
Operations
Through
9/30/96+ 8.55 5.65 4.63 8.18 5.35 4.63
- -------------------------------------------------------------------------------
</TABLE>
* Maximum sales charge for Class A shares is 4.0% of the public offering price.
Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5.0% and is
reduced to 0% after 6 years. Class B shares bear ongoing 12b-1 distribution
and service fees.
*** Maximum contingent deferred sales charge for Class C shares is 0.75% and is
reduced to 0% after 1 year. Class C shares bear ongoing 12b-1 distribution
and service fees.
+ Commencement of issuance dates are December 3, 1984, July 1, 1991 and July 2,
1992 for Class A, Class B and Class C shares, respectively.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost.
4
<PAGE>
MUNICIPAL HIGH INCOME FUND
PAINEWEBBER
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------- -----------------------------
12 MONTHS 6 MONTHS
08/31/96 02/29/96 08/31/95 ENDED 08/31/96 ENDED 08/31/96
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $10.12 $10.29 $10.16 5.52% 1.12%
- ------------------------------------------------------------------------
Class B Shares 10.11 10.29 10.16 4.62 0.65
- ------------------------------------------------------------------------
Class C Shares 10.12 10.29 10.16 4.98 0.87
- ------------------------------------------------------------------------
</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 0.0679 0.7144 13.32
- -----------------------------------------------------------------------------
1992 10.38 10.54 0.1406 0.6736 9.79
- -----------------------------------------------------------------------------
1993 10.54 10.97 0.2037 0.6180 12.14
- -----------------------------------------------------------------------------
1994 10.97 9.52 0.0260 0.5865 (7.77)
- -----------------------------------------------------------------------------
1995 9.52 10.36 -- 0.6079 15.55
- -----------------------------------------------------------------------------
01/01/96 - 08/31/96 10.36 10.12 -- 0.3435 1.02
- -----------------------------------------------------------------------------
Total: $0.4382 $6.1363
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/96: 101.83%
- -----------------------------------------------------------------------------
Performance Summary Class B Shares
<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 $0.0679 $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)
- -----------------------------------------------------------------------------
1995 9.52 10.35 -- 0.5328 14.59
- -----------------------------------------------------------------------------
01/01/96 - 08/31/96 10.35 10.11 -- 0.2974 0.57
- -----------------------------------------------------------------------------
Total: $0.4382 $2.7854
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/96: 37.13%
- -----------------------------------------------------------------------------
Performance Summary Class C Shares
<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)
- -----------------------------------------------------------------------------
1995 9.52 10.35 -- 0.5583 14.88
- -----------------------------------------------------------------------------
01/01/96 - 08/31/96 10.35 10.12 -- 0.3123 0.82
- -----------------------------------------------------------------------------
Total: $0.2432 $2.2300
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/96: 22.21%
- -----------------------------------------------------------------------------
</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 for each class would be lower if sales charges were included.
5
<PAGE>
MUNICIPAL HIGH INCOME FUND
PAINEWEBBER
PERFORMANCE RESULTS (CONCLUDED)
Average Annual Return
<TABLE>
<CAPTION>
% RETURN AFTER DEDUCTING
% RETURN WITHOUT SALES CHARGE MAXIMUM SALES CHARGE
-------------------------------------------------------------
CLASS CLASS
-------------------------------------------------------------
A* B** C*** A* B** C***
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Twelve Months
Ended 09/30/96 6.60% 5.92% 6.07% 2.38% 0.92% 5.32%
- -------------------------------------------------------------------------------
Five Years Ended
09/30/96 6.94 6.14 N/A 6.07 5.82 N/A
- -------------------------------------------------------------------------------
Commencement of
Operations
Through
09/30/96+ 8.06 6.54 5.24 7.58 6.25 5.24
- -------------------------------------------------------------------------------
</TABLE>
* Maximum sales charge for Class A shares is 4.0% of the public offering price.
Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5.0% and is
reduced to 0% after 6 years. Class B shares bear ongoing 12b-1 distribution
and service fees.
*** Maximum contingent deferred sales charge for Class C shares is 0.75% and is
reduced to 0% after 1 year. Class C shares bear ongoing 12b-1 distribution
and service fees.
+ Commencement of issuance dates are June 23, 1987, July 1, 1991 and July 2,
1992 for Class A, Class B and Class C shares, respectively.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost.
6
<PAGE>
NEW YORK TAX-FREE INCOME FUND
PAINEWEBBER
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------- -----------------------------
12 MONTHS 6 MONTHS
08/31/96 02/29/96 08/31/95 ENDED 08/31/96 ENDED 08/31/96
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $10.44 $10.71 $10.45 5.06% (0.09)%
- ------------------------------------------------------------------------
Class B Shares 10.43 10.71 10.45 4.17 (0.56)
- ------------------------------------------------------------------------
Class C Shares 10.44 10.71 10.46 4.43 (0.34)
- ------------------------------------------------------------------------
</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 5.53
- -----------------------------------------------------------------------------
1991 9.68 10.22 -- 0.6637 12.85
- -----------------------------------------------------------------------------
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)
- -----------------------------------------------------------------------------
1995 9.68 10.81 -- 0.5397 17.57
- -----------------------------------------------------------------------------
01/01/96 - 08/31/96 10.81 10.44 -- 0.3129 (0.52)
- -----------------------------------------------------------------------------
Total: $0.1270 $4.7854
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/96: 76.63%
- -----------------------------------------------------------------------------
</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 9.02
- -----------------------------------------------------------------------------
1993 10.55 11.25 0.0253 0.4959 11.78
- -----------------------------------------------------------------------------
1994 11.25 9.68 0.1017 0.4362 (9.08)
- -----------------------------------------------------------------------------
1995 9.68 10.81 -- 0.4616 16.71
- -----------------------------------------------------------------------------
01/01/96 - 08/31/96 10.81 10.43 -- 0.2656 (1.05)
- -----------------------------------------------------------------------------
Total: $0.1270 $2.5177
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/96: 37.22%
- -----------------------------------------------------------------------------
</TABLE>
Performance Summary Class C 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)
- -----------------------------------------------------------------------------
1995 9.69 10.81 -- 0.4875 15.03
- -----------------------------------------------------------------------------
01/01/96 - 08/31/96 10.81 10.44 -- 0.2814 (0.81)
- -----------------------------------------------------------------------------
Total: $0.1270 $2.0191
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
08/31/96: 22.75%
- -----------------------------------------------------------------------------
</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 for each class would be lower if sales charges were included.
7
<PAGE>
NEW YORK TAX-FREE INCOME FUND
PAINEWEBBER
PERFORMANCE RESULTS (CONCLUDED)
Average Annual Return
<TABLE>
<CAPTION>
% RETURN AFTER DEDUCTING
% RETURN WITHOUT SALES CHARGE MAXIMUM SALES CHARGE
-------------------------------- -----------------------------
CLASS CLASS
-------------------------------- -----------------------------
A* B** C*** A* B** C***
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Twelve Months
Ended 9/30/96 5.74% 5.06% 5.22% 1.51% 0.06% 4.47%
- -------------------------------------------------------------------------------
Five Years
Ended 9/30/96 6.84 6.04 N/A 5.97 5.72 N/A
- -------------------------------------------------------------------------------
Commencement of
Operations
Through
9/30/96+ 7.54 6.50 5.28 6.99 6.21 5.28
- -------------------------------------------------------------------------------
</TABLE>
* Maximum sales charge for Class A shares is 4.0% of the public offering price.
Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5.0% and is
reduced to 0% after 6 years. Class B shares bear ongoing 12b-1 distribution
and service fees.
*** Maximum contingent deferred sales charge for Class C shares is 0.75% and is
reduced to 0% after 1 year. Class C shares bear ongoing 12b-1 distribution
and service fees.
+ Commencement of issuance dates are September 23, 1988, July 1, 1991 and July
2, 1992 for Class A, Class B and Class C shares, respectively.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost.
8
<PAGE>
CALIFORNIA TAX-FREE INCOME FUND
PAINEWEBBER
PORTFOLIO OF INVESTMENTS AUGUST 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- --------------- ------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - 99.04%
$ 7,150 California General
Obligation Bonds....... 06/01/09 to 11/01/09 5.000 to 6.500% $ 7,174,426
2,000 California Educational
Facilities Authority
Claremont College...... 05/01/22 6.375 2,040,440
3,500 California Educational
Facilities Authority
Pepperdine University
(MBIA Insured)......... 06/01/19 5.500 3,279,850
1,140 California Educational
Facilities Authority
St Mary's College (Pre-
refunded with U.S.
Government Securities
to 10/01/00 @ 102)..... 10/01/20 7.500 1,286,216
6,000 California Educational
Facilities Authority
Stanford University.... 01/01/13 to 11/01/16 6.000 to 6.750 6,167,410
1,740 California Educational
Facilities Authority
University of San
Francisco.............. 10/01/07 6.250 1,896,966
8,500 California Educational
Facilities Authority
University of Southern
California............. 10/01/15 5.800 to 7.200 8,488,605
7,000 California Health
Facilities Financing
Authority
Kaiser Permanente
Hospital............... 10/01/18 to 10/01/19 6.750 to 7.000 7,449,790
4,000 California Health
Facilities Financing
Authority
Marin General Hospital
(FSA Insured).......... 08/01/14 5.500 3,832,800
200 California Pollution
Control Financing
Authority Southern
California Edison*..... 09/03/96 3.750 200,000
3,500 California State
Department of
Transportation......... 03/01/16 6.500 3,598,770
2,735 California State Public
Works Board
Department Of
Corrections............ 01/01/05 6.000 2,919,366
5,610 California State Public
Works Board
Various Community
College Projects....... 03/01/07 6.250 6,086,850
3,000 California Statewide
Communities Development
Authority Sutter Health
Obligated Group........ 08/15/13 5.500 2,894,190
3,370 University of California
Revenues
Multiple Purpose
Projects (MBIA
Insured)............... 09/01/01 10.000 4,159,760
1,390 Beverly Hills
Certificates of
Participation.......... 06/01/15 to 06/01/19 6.750 to 7.000 1,474,829
1,505 Big Bear Lake Water
Revenue Bonds (FGIC
Insured)............... 04/01/22 6.375 1,655,034
1,350 Contra Costa County
Transportation
Commission
Sales Tax Revenue
Bonds.................. 03/01/07 6.875 1,465,061
6,175 Contra Costa Water
District (AMBAC
Insured)............... 10/01/22 6.375 6,462,014
4,000 Contra Costa Water
District (MBIA
Insured)............... 10/01/19 5.500 3,794,600
3,850 Downey Certificates of
Participation
Civic Center Project... 02/01/07 to 02/01/09 6.500 4,210,859
1,235 East Bay Municipal
Utility District (AMBAC
Insured)............... 06/01/21 6.375 1,358,043
1,000 Intermodal Container
Transfer Facilities
Southern Pacific
Transfer Company....... 11/01/14 7.700 1,059,510
3,000 Kings River Conservation
District
Pine Flat Power........ 01/01/12 6.375 3,148,380
5,000 Los Angeles Department
of Water & Power....... 01/15/31 7.100 5,557,100
1,500 Los Angeles Department
of Water & Power
(Crossover refunded to
02/15/99 @ 102)........ 02/15/19 7.200 1,621,200
4,595 Los Angeles Harbor
Department Revenue
Bonds.................. 08/01/20 6.400 4,806,370
990 Los Angeles Harbor
Department Revenue
Bonds
(Pre-refunded with U.S.
Government Securities
to 09/01/99 @ 100)..... 09/01/15 8.700 1,105,721
10,900 Los Angeles Metropolitan
Transportation
Authority Sales Tax
Revenue (AMBAC
Insured)............... 07/01/17 to 07/01/25 5.000 to 5.500 10,013,594
</TABLE>
9
<PAGE>
CALIFORNIA TAX-FREE INCOME FUND
PAINEWEBBER
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- -------------- ------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - (CONCLUDED)
$ 1,265 Los Angeles Transport
Commission
Sales Tax Revenue (MBIA
Insured)............... 07/01/13 6.250% $ 1,321,356
1,260 Los Angeles Wastewater
Systems Revenue........ 06/01/12 6.250 1,316,435
5,000 M-S-R Public Power
Agency of California... 07/01/19 6.875 5,132,500
790 Marin County Housing
Authority (FNMA
Insured)............... 09/01/07 9.200 808,439
5,000 Oakland General
Obligation Bonds (FGIC
Insured)............... 06/15/22 6.000 5,030,350
860 Orange County Mortgage
Revenue Bonds (GNMA
Insured)............... 09/01/16 7.800 889,016
1,500 Pasadena Certificate of
Participation
Convention Center...... 01/01/13 5.750 1,455,090
1,745 Redding Joint Powers
Financing Authority
Electric Systems
Revenue................ 06/01/00 5.500 1,805,115
1,000 Riverside County
Certificate of
Participation.......... 12/01/15 7.875 1,028,490
2,000 Riverside Electric
Revenue Bonds.......... 10/01/15 6.000 1,979,720
1,000 Sacramento Sanitation
Financing Authority
Revenue Bonds.......... 12/01/13 5.125 912,180
1,300 San Diego Industrial
Development Authority
San Diego Gas &
Electric............... 09/01/18 6.400 1,329,107
6,500 San Francisco Airport
Revenue Bonds (AMBAC
Insured)............... 05/01/13 6.500 6,967,090
2,000 San Francisco Sewer
(AMBAC Insured)........ 10/01/11 6.000 2,051,340
1,000 San Jose Redevelopment
Agency Tax Allocation.. 08/01/09 6.000 1,059,060
2,000 Santa Clara County
Financing Authority
Lease
(AMBAC Insured)........ 11/15/20 6.750 2,187,380
5,000 Santa Monica Parking
Authority.............. 07/01/16 6.375 5,140,500
5,000 Southern California
Public Power Authority. 07/01/20 5.500 4,642,900
3,500 Southern California
Rapid Transit District
Special Benefit
Assessment District.... 09/01/08 6.000 3,651,165
1,000 Puerto Rico Commonwealth
Highway And
Transportation
Authority.............. 07/01/13 6.250 1,051,170
2,190 Puerto Rico Commonwealth
Highway And
Transportation
Authority (Pre-refunded
with U.S. Government
Securities to 07/01/98
@ 102)................. 07/01/13 8.125 2,384,844
18,630 Puerto Rico Electric
Power Authority Power
Revenue................ 07/01/12 to 07/01/25 5.000 to 5.500 17,020,305
------------
Total Investments (cost -
$172,124,980) - 99.04%........... 178,371,306
Other assets in excess of
liabilities - 0.96%............... 1,723,658
------------
Net Assets - 100.00%............... $180,094,964
============
</TABLE>
- -------
* Variable rate demand notes and variable rate certificates of participation
which are payable on demand. The maturity date shown is the next interest
rate reset date; the interest rate shown is the current rate as of August 31,
1996.
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
10
<PAGE>
NATIONAL TAX-FREE INCOME FUND
PAINEWEBBER
PORTFOLIO OF INVESTMENTS AUGUST 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- -------------- ------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - 102.61%
Alaska - 0.27%
$ 1,025 Anchorage Telephone
Utility Revenue Series
A...................... 03/01/06 6.000% $ 1,078,023
------------
Arizona - 3.34%
10,510 Maricopa County
Community College
District............... 07/01/07 6.000 11,037,707
2,875 Maricopa County School
District (MBIA
Insured)............... 07/01/01 5.025+ 2,266,334
------------
13,304,041
------------
California - 2.30%
1,000 California State........ 02/01/08 6.750 1,124,810
160 California State (FGIC
Insured)............... 11/01/12 7.000 179,805
3,000 Foothill/Eastern
Transportation Corridor
Agency
California Toll Road
Revenue Series A....... 01/01/34 6.000 2,830,020
5,000 Santa Barbara County
Series A*.............. 09/03/96 4.750 5,041,600
------------
9,176,235
------------
Connecticut - 0.16%
600 Connecticut State....... 03/15/12 6.000 630,414
------------
District of Columbia - 1.12%
4,355 District of Columbia
Hospital Revenue
Medlantic Healthcare
Group ................. 08/15/09 to 08/15/10 6.000 4,475,199
------------
Florida - 2.70%
2,750 Florida State Board of
Education.............. 06/01/20 7.000 3,025,220
6,500 Dade County Special
Obligation Series B.... 10/01/08 5.000 5,654,415
2,100 Pinellas County
Educational Facilities
Authority* ............ 09/03/96 3.750 2,100,000
------------
10,779,635
------------
Georgia - 5.66%
3,000 Georgia Municipal
Electric Authority..... 01/01/20 8.375 3,098,010
5,000 Georgia State Series B.. 03/01/12 6.000 5,269,250
5,000 Conyers Water and Sewage
Revenue
(AMBAC Insured)........ 07/01/15 6.600 5,424,550
8,000 Hall County School
District (AMBAC
Insured)............... 12/01/14 6.700 8,776,160
------------
22,567,970
------------
Hawaii - 3.18%
4,515 Hawaii General
Obligation Bonds....... 01/01/15 6.250 4,662,415
7,625 Hawaii State............ 02/01/08 to 10/01/09 5.125 to 6.000 7,998,637
------------
12,661,052
------------
Illinois - 4.73%
1,000 Illinois Board of
Education
Chicago School Reform.. 12/01/12 6.250 1,063,150
4,335 Illinois Development
Finance Authority
Citizens Utilities..... 08/01/20 7.150 4,618,552
</TABLE>
11
<PAGE>
NATIONAL TAX-FREE INCOME FUND
PAINEWEBBER
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- -------- ------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - (CONTINUED)
Illinois - (concluded)
$ 1,000 Illinois Health
Facilities Authority
Evangelical Hospital.... 04/15/17 6.750% $ 1,035,990
2,000 Illinois Skyway Toll
Bridge Revenue.......... 01/01/10 6.500 2,041,840
500 Chicago Metropolitan
Water Reclamation
District................ 12/01/10 7.000 574,450
2,500 Chicago Series A2........ 01/01/15 6.250 2,625,725
1,170 Northern Illinois
University (Pre-refunded
with U.S. Government
Securities to 04/01/09 @
100).................... 04/01/13 10.400 1,584,753
4,620 Regional Transportation
Authority (FGIC
Insured)................ 06/01/14 7.100 5,302,975
------------
18,847,435
------------
Indiana - 4.63%
3,000 Indiana Health Facility
Finance Authority
Methodist Hospital of
Indiana................. 09/01/15 5.750 2,892,600
10,650 Indianapolis Local Public
Improvement
Series C................ 01/01/17 6.700 11,749,719
1,600 Jasper County Pollution
Control Revenue
Northern Indiana Public
Service* ............... 09/03/96 3.850 1,600,000
2,000 Purdue University........ 07/01/15 6.700 2,196,740
------------
18,439,059
------------
Kentucky - 0.77%
3,000 Jefferson County School
District Series B....... 01/01/99 5.500 3,072,300
------------
Louisiana - 0.82%
1,800 Louisiana Offshore
Terminal Port
Authority*.............. 09/03/96 3.750 1,800,000
1,400 Louisiana Public
Facilities Authority
Tulane University (Pre-
refunded with U.S.
Government Securities to
08/15/97 @ 102)......... 08/15/15 8.000 1,479,156
------------
3,279,156
------------
Maryland - 1.32%
5,020 Anne Arundel County
Consolidated General
Improvement............. 08/01/14 to 08/01/15 6.300 5,274,640
------------
Massachusetts - 8.27%
20,000 Massachusetts General
Obligation Bonds........ 06/01/13 6.500 20,988,000
3,290 Massachusetts General
Obligation Bonds
(FGIC Insured).......... 11/01/13 to 11/01/14 7.000 3,675,893
1,770 Massachusetts Water
Resources Authority..... 12/01/11 6.000 1,832,587
5,650 Massachusetts Water
Resources Authority
(AMBAC Insured)......... 03/01/17 5.500 5,344,731
1,000 Massachusetts Water
Resources Authority
(Pre-refunded
with U.S. Government
Securities to 04/01/00 @
102).................... 04/01/16 7.500 1,112,960
------------
32,954,171
------------
Michigan - 2.41%
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 1,137,770
</TABLE>
12
<PAGE>
NATIONAL TAX-FREE INCOME FUND
PAINEWEBBER
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- -------------- ------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - (CONTINUED)
Michigan -(concluded)
$ 7,850 Royal Oak Hospital
Finance Authority
William Beaumont
Hospital............... 01/01/19 to 01/01/20 6.625 to 6.750% $ 8,485,659
------------
9,623,429
------------
Minnesota - 1.59%
6,000 Minnesota Public
Facilities Authority
Water Pollution........ 03/01/15 6.250 6,323,160
------------
New Jersey - 6.56%
100 New Jersey Economic
Development Authority
Dow Chemical*.......... 09/03/96 3.550 100,000
1,890 New Jersey Housing
General Resolution
Series A............... 11/01/04 6.700 2,025,400
5,000 New Jersey State........ 07/15/01 5.500 5,198,650
14,000 New Jersey State
Turnpike Authority
(MBIA Insured)......... 01/01/16 6.500 15,248,940
300 Newark Healthcare
Facility Revenue
New Community
Facility*.............. 09/05/96 3.600 300,000
3,000 Rutgers The State
University............. 05/01/13 6.400 3,254,190
------------
26,127,180
------------
New Mexico - 3.30%
4,500 Albuquerque Airport..... 07/01/19 6.500 4,517,955
8,000 Farmington Pollution
Control
Southern California
Edison................. 04/01/21 7.200 8,619,920
------------
13,137,875
------------
New York - 15.60%
11,590 New York State Dormitory
Authority Revenues
City University........ 07/01/02 to 07/01/03 6.000 11,921,065
7,300 New York State
Environmental
Facilities Corporation
State Water Pollution
Control................ 06/15/12 to 06/15/14 6.875 to 7.500 8,080,111
3,825 New York State Local
Government Assistance
Corporation............ 04/01/14 6.000 3,929,690
3,245 Metropolitan
Transportation
Authority
New York Transportation
Facilities Revenue..... 07/01/14 6.625 3,601,853
4,000 Municipal Assistance
Corporation for the
City of
New York............... 07/01/00 5.500 4,126,440
1,800 New York City*.......... 09/03/96 3.700 to 3.800 1,800,000
4,960 New York City Municipal
Water Finance
Authority.............. 06/15/12 7.100 5,430,952
700 Port Authority of New
York & New Jersey*..... 09/03/96 3.650 700,000
12,875 Triborough Bridge &
Tunnel Authority....... 01/01/10 to 01/01/17 5.500 to 7.100 12,836,026
10,000 United Nations
Development
Corporation............ 07/01/26 6.000 9,741,800
------------
62,167,937
------------
North Carolina - 1.96%
2,135 North Carolina Eastern
Municipal Power Agency. 01/01/21 7.250 2,189,229
400 North Carolina Medical
Care Commission
Hospital Revenue*...... 09/03/96 3.800 400,000
4,000 North Carolina Medical
Care Company
Rex Hospital........... 06/01/17 6.250 4,026,280
</TABLE>
13
<PAGE>
NATIONAL TAX-FREE INCOME FUND
PAINEWEBBER
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- -------------- ------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - (CONTINUED)
North Carolina -(concluded)
$ 1,250 Fayetteville Public
Works Commission
Revenue
(AMBAC Insured)........ 03/01/13 5.250% $ 1,192,912
------------
7,808,421
------------
Ohio - 1.16%
1,000 Ohio State
Infrastructure
Improvement............ 08/01/13 6.200 1,051,800
3,400 Lima Water Systems
Revenue................ 12/01/12 6.300 3,575,848
------------
4,627,648
------------
Oklahoma - 2.32%
8,520 Grand River Dam
Authority Revenue
(AMBAC Insured)........ 06/01/11 6.250 9,231,079
------------
Oregon - 2.69%
10,400 Portland Sewer Systems
Revenue................ 06/01/15 6.250 10,728,120
------------
Puerto Rico - 0.89%
1,500 Puerto Rico Commonwealth
(MBIA Insured)......... 07/01/15 5.650 1,494,705
2,425 Puerto Rico Commonwealth
Highway &
Transportation
Authority.............. 07/01/36 5.000 2,065,397
------------
3,560,102
------------
South Carolina - 4.84%
27,515 Piedmont Municipal Power
Agency................. 01/01/23 4.000 19,293,243
------------
Texas - 13.36%
2,705 Texas State Public
Finance Authority...... 10/01/13 6.000 2,772,246
9,000 Austin Utility Systems
Revenue................ 11/15/05 to 11/15/12 6.500 to 6.750 9,379,170
3,200 Bexar Metropolitan Water
District............... 05/01/25 6.350 3,325,344
1,000 Guadalupe Blanco River
Authority
Central Tax Power* .... 09/03/96 3.850 1,000,000
600 Gulf Coast Pollution
Control Revenue
Amoco Oil Company
Project* .............. 09/03/96 3.750 600,000
710 Harris County Toll Road
Authority (AMBAC
Insured)............... 08/15/17 6.500 758,905
7,750 Houston Water & Sewer
System................. 12/01/14 6.375 7,986,918
23,000 San Antonio Electric and
Gas Revenue............ 02/01/11 5.750 23,084,410
4,000 Texarkana Health
Facilities Development
Corporation
Wadley Regional Medical
Center (MBIA Insured).. 10/01/19 7.000 4,337,400
------------
53,244,393
------------
Utah - 1.29%
5,000 Intermountain Power
Agency................. 07/01/07 6.000 5,160,650
------------
Vermont - 0.72%
2,750 Burlington Electric
Revenue Series A....... 07/01/14 6.250 2,858,350
------------
</TABLE>
14
<PAGE>
NATIONAL TAX-FREE INCOME FUND
PAINEWEBBER
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------- --------- ------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - (CONCLUDED)
Virginia - 1.47%
$ 4,350 Virginia State Public
Facilities Authority...... 06/01/15 6.500% $ 4,816,364
1,000 Hampton Roads Medical
College................... 11/15/16 6.875 1,049,050
------------
5,865,414
------------
Washington - 0.13%
500 Washington State Health
Care Facilities Authority
Fred Hutchinson Cancer
Center*................... 09/03/96 3.850 500,000
------------
West Virginia - 1.42%
5,000 West Virginia State Water
Development Authority..... 11/01/29 7.700 5,668,350
------------
Wisconsin - 1.63%
6,945 Wisconsin State
Transportation Revenue.... 07/01/11 5.000 6,501,701
------------
Total Investments (cost -
$398,570,309) - 102.61%............. 408,966,382
Liabilities in excess of other as-
sets - (2.61)%....................... (10,408,696)
------------
Net Assets - 100.00%.................. $398,557,686
============
</TABLE>
- -------
* Variable rate demand notes and variable rate certificates of participation
which are payable on demand. The maturity dates shown are the next interest
rate reset dates; the interest rates shown are the current rates as of August
31, 1996.
+ Zero coupon bond, interest rate reflects yield to maturity at date of
purchase.
AMBAC - American Municipal Bond Assurance Corporation
FGIC - Financial Guaranty Insurance Company
MBIA - Municipal Bond Investors Assurance
See accompanying notes to financial statements
15
<PAGE>
MUNICIPAL HIGH INCOME FUND
PAINEWEBBER
PORTFOLIO OF INVESTMENTS AUGUST 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- ---------------- -------------- -----------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - 99.81%
Alaska - 1.43%
$1,300 Valdez Pollution Control
Revenue
Exxon Project*......... 09/03/96 3.750% $ 1,300,000
-----------
Arizona - 0.55%
500 Phoenix General
Obligation Bonds*...... 09/03/96 3.750 500,000
-----------
California - 6.58%
300 California Statewide
Communities Development
Authority St. Joseph's
Health System*......... 09/03/96 3.650 300,000
2,000 Adelanto California
Public Financing
Authority
Local Agency Revenue... 09/01/28 6.300 1,927,680
3,975 Long Beach Aquarium of
The Pacific Project.... 07/01/15 6.125 3,732,008
-----------
5,959,688
-----------
Colorado - 5.99%
2,155 Denver City & County
Airport Revenue........ 11/15/25 7.250 2,390,024
3,000 Hyland Hills
Metropolitan Park And
Recreation District.... 12/15/15 6.750 3,031,050
-----------
5,421,074
-----------
Georgia - 2.87%
2,500 Effingham County
Development Authority
Fort Howard Paper...... 10/01/05 7.900 2,599,075
-----------
Illinois - 6.16%
3,750 Illinois Educational
Facilities Authority 12/01/17 to
Columbia College....... 12/01/18 6.125 to 6.875 3,710,187
1,750 Illinois Metropolitan
Pier & Exposition
Authority McCormick
Place Convention....... 07/01/26 7.000 1,869,753
-----------
5,579,940
-----------
Indiana - 7.06%
4,000 Indiana State
Development Finance
Authority
Pollution Control
Revenue................ 12/01/12 6.850 3,944,000
1,300 Crawfordsville Economic
Development Authority
Kroger Co.............. 11/01/12 7.700 1,396,629
1,000 Indianapolis Airport
Authority
Federal Express........ 01/15/17 7.100 1,052,800
-----------
6,393,429
-----------
Kentucky - 2.66%
1,250 Kenton County Airport
Delta Airlines......... 02/01/22 7.250 1,323,750
1,000 Russell Health Financing
Authority
Franciscan Sisters of
the Poor Health System. 07/01/15 8.100 1,085,120
-----------
2,408,870
-----------
Louisiana - 7.82%
3,905 Orleans Levee District.. 11/01/15 8.250 3,939,715
1,000 Pointe Coupee Parish
Pollution Control
Revenue................ 03/01/13 6.700 991,340
</TABLE>
16
<PAGE>
MUNICIPAL HIGH INCOME FUND
PAINEWEBBER
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- -------------- -----------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - (CONTINUED)
Louisiana - (concluded)
$2,000 West Feliciana Parish
Pollution Control
Revenue................ 12/01/14 7.700% $ 2,147,200
-----------
7,078,255
-----------
Massachusetts - 1.15%
1,000 Agawam Resource Recovery
Springfield Project.... 12/01/08 8.500 1,038,210
-----------
New Hampshire - 2.89%
2,500 New Hampshire Industrial
Development Authority
Revenue
Central Maine Power
Company................ 05/01/14 7.375 2,621,250
-----------
New Jersey - 4.43%
3,900 New Jersey Health Care
Facilities Financing
Authority Columbus
Hospital............... 07/01/21 7.500 4,010,994
-----------
New Mexico - 6.08%
3,940 Chaves County Hospital
Revenue Bonds
Eastern New Mexico
Medical Center......... 12/01/10 to 12/01/22 7.250 4,053,236
1,500 Farmington Pollution
Control Revenue
San Juan Project....... 08/15/23 6.400 1,454,130
-----------
5,507,366
-----------
New York - 13.15%
3,100 New York City*.......... 09/03/96 3.700 to 3.800 3,100,000
2,800 New York City Industrial
Development Agency
American Airlines
Incorporated........... 08/01/24 6.900 2,927,596
3,870 New York Energy Research
and Development
Authority
Electric Facilities
Revenue................ 09/01/19 7.150 3,876,734
1,500 Port Authority of New
York and New Jersey
Special Obligation
Revenue................ 10/01/11 6.750 1,502,340
500 Port Authority of New
York and New Jersey
Special Obligation
Revenue
4th Installment
Project*............... 09/03/96 3.650 500,000
-----------
11,906,670
-----------
Ohio - 3.17%
1,150 Butler County Hospital
Facilities
Ft. Hamilton Hughes
Memorial Hospital...... 01/01/10 7.500 1,215,654
1,000 Dayton Special
Facilities Revenue..... 10/01/09 6.050 996,010
600 Meigs County Kroger Co.. 10/01/11 8.375 659,826
-----------
2,871,490
-----------
Pennsylvania - 5.62%
1,500 Beaver County Industrial
Development Authority
Pollution Control
Revenue................ 05/01/20 7.750 1,530,855
1,000 Monroeville Hospital
Authority Revenue
Forbes Health Systems.. 10/01/15 6.250 980,300
</TABLE>
17
<PAGE>
MUNICIPAL HIGH INCOME FUND
PAINEWEBBER
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------- --------- -----------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - (CONCLUDED)
Pennsylvania - (concluded)
$2,610 Philadelphia Hospitals and
Higher Education
Facilities Authority--
Jeanes Health Systems..... 07/01/10 6.600% $ 2,580,142
-----------
5,091,297
-----------
South Carolina - 1.97%
1,750 Myrtle Beach Certificates
of Participation
Convention Center Project. 07/01/17 6.875 1,786,365
-----------
Texas - 6.06%
1,750 Alliance Airport Authority
Incorporated
Federal Express
Corporation Project....... 04/01/21 6.375 1,717,940
1,875 El Paso International
Airport Revenue Bonds
Marriott Hotel............ 03/01/22 7.875 1,784,400
2,000 West Side Calhoun County
Navigation District
Solid Waste Disposal
Revenue
Union Carbide Chemicals
Project................... 05/01/23 6.400 1,983,340
-----------
5,485,680
-----------
Virginia - 1.28%
1,175 Loudoun County Industrial
Development Authority
Dulles Airport Marriott
Hotel..................... 09/01/15 7.125 1,158,303
-----------
Washington - 1.04%
1,000 Pilchuck Development Public
Corporation Revenue
Special Facilities Airport
Revenue Bonds
BF Goodrich............... 08/01/23 6.000 938,200
-----------
West Virginia - 2.32%
1,900 Harrison County Commercial
Development Bonds
Kroger Co................. 11/01/14 8.100 2,102,445
-----------
Wisconsin - 4.29%
3,900 Janesville Industrial
Development Revenue Bonds
Simmons Manufacturing Co.
(Paramount
Communications)........... 10/15/17 7.000 3,887,637
-----------
Wyoming - 5.24%
200 Lincoln County Pollution
Control Revenue
Exxon Project*............ 09/03/96 3.800 200,000
900 Platte County Pollution
Control Revenue*.......... 09/03/96 3.800 900,000
3,500 Sweetwater County Solid
Waste Disposal Revenue
FMC Corporation Project... 06/01/24 7.000 3,650,150
-----------
4,750,150
-----------
Total Investments (cost -
$89,389,988) - 99.81%............... 90,396,388
Other assets in excess of
liabilities - 0.19%.................. 169,892
-----------
Net Assets - 100.00%.................. $90,566,280
===========
</TABLE>
- -------
* Variable rate demand notes and variable rate certificates of participation
which are payable on demand. The maturity dates shown are the next interest
rate reset dates; the interest rates shown are the current rates as of August
31, 1996.
See accompanying notes to financial statements
18
<PAGE>
NEW YORK TAX-FREE INCOME FUND
PAINEWEBBER
PORTFOLIO OF INVESTMENTS AUGUST 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- -------------- -----------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - 100.13%
$1,705 Metropolitan
Transportation
Authority.............. 07/01/11 to 07/01/17 5.500 to 6.250% $ 1,665,456
700 Metropolitan
Transportation
Authority (MBIA
Insured)............... 01/01/08 6.875 753,249
1,750 Metropolitan
Transportation
Authority
New York Commuter
Facilities............. 07/01/17 6.250 1,805,528
2,350 New York State Dormitory
Authority Revenue Bonds
City University of New
York................... 07/01/16 to 07/01/02 5.625 to 6.000 2,335,310
450 New York State Dormitory
Authority Revenue Bonds
Colgate University..... 07/01/16 6.000 466,965
2,000 New York State Dormitory
Authority Revenue Bonds
Columbia University.... 07/01/14 4.750 1,768,380
600 New York State Dormitory
Authority Revenue Bonds
Cornell University..... 07/01/30 7.375 664,608
40 New York State Dormitory
Authority Revenue Bonds
Fordham University
(AMBAC Insured)........ 07/01/15 7.200 43,887
585 New York State Dormitory
Authority Revenue Bonds
Rockefeller University. 07/01/14 7.375 625,265
1,700 New York State Dormitory
Authority Revenue Bonds
State University of New
York................... 05/15/16 to 05/15/17 6.000 to 7.000 1,698,109
1,600 New York State Dormitory
Authority Revenue Bonds
Union College (FGIC
Insured)............... 07/01/10 5.750 1,612,896
800 New York State Energy
Research & Development
Central Hudson Gas &
Electric (FGIC
Insured)............... 10/01/14 7.375 880,344
2,400 New York State Energy
Research & Development
Consolidated Edison
Company................ 08/15/20 6.100 2,402,952
500 New York State Energy
Research & Development
Niagara Mohawk (FGIC
Insured)............... 10/01/13 6.625 541,025
1,500 New York State
Environmental
Facilities Corporation
Spring Valley Water
(AMBAC Insured)........ 08/01/24 6.150 1,536,825
1,400 New York State
Environmental
Facilities Corporation
State Water Pollution
Control................ 06/15/10 to 06/15/12 7.250 to 7.500 1,548,834
300 New York State Housing
Finance Agency......... 09/15/12 7.300 326,526
1,500 New York State Local
Government Assistance
Corporation............ 04/01/20 6.500 1,584,390
580 New York State Medical
Care Facilities
Hospital & Nursing (FHA
Insured)............... 02/15/09 7.500 622,572
1,500 New York State Medical
Care Facilities
Hospital & Nursing
(Huntington Hospital).. 11/01/14 6.500 1,479,870
3,155 New York State Thruway
Authority.............. 01/01/00 to 01/01/02 5.500 to 5.900+ 2,512,019
2,000 New York State Thruway
Authority
Highway & Bridge Trust
Fund................... 04/01/14 6.000 2,027,500
2,900 New York State Urban
Development
Corporation............ 01/01/04 to 04/01/07 6.250 to 6.400 3,049,828
1,500 Port Authority of New
York & New Jersey...... 08/01/14 5.625 1,451,445
2,000 Triborough Bridge &
Tunnel Authority....... 01/01/11 to 01/01/12 6.000 2,094,010
450 Triborough Bridge &
Tunnel Authority (MBIA
Insured)............... 01/01/17 6.625 481,410
1,000 Erie County Water
Revenue Authority
(AMBAC Insured)........ 12/01/14 6.750 1,069,700
1,550 New York City........... 06/01/05 to 08/01/19 6.000 to 8.250 1,629,175
650 New York City*.......... 09/03/96 3.700 650,000
</TABLE>
19
<PAGE>
NEW YORK TAX-FREE INCOME FUND
PAINEWEBBER
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------------------- -------------- -----------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - (CONCLUDED)
$ 3,030 New York City Industrial
Development Bonds
Lighthouse Project..... 07/01/22 6.500% $ 3,144,382
545 New York City Municipal
Water Finance
Authority.............. 06/15/12 7.100 596,748
1,025 Niagara Falls (FGIC
Insured)............... 06/15/08 5.500 1,034,153
1,250 Oneida Herkimer Waste
Management Authority... 04/01/14 6.750 1,253,688
700 Westchester County...... 11/01/05 to 11/01/07 6.700 793,044
3,700 Puerto Rico Commonwealth
Highway &
Transportation
Authority.............. 07/01/13 to 07/01/36 5.000 to 6.250 3,350,787
2,100 Puerto Rico Electric
Power Authority Power
Revenue................ 07/01/12 to 07/01/21 5.000 to 5.250 1,887,722
785 Puerto Rico Industrial
Medical & Environmental
Authority Warner
Lambert................ 05/01/14 7.600 854,221
-----------
Total Investments (cost - 52,242,823
$50,560,248) - 100.13%............
Liabilities in excess of other (67,180)
assets - (0.13)%...................
-----------
Net Assets - 100.00%............... $52,175,643
===========
</TABLE>
- -------
* Variable rate demand note is payable on demand. The maturity date shown is
the next interest rate reset date, the interest rate shown is the current
rate as of August 31, 1996.
+ Zero coupon bond, interest rate reflects yield to maturity at date of
purchase.
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
20
<PAGE>
PAINEWEBBER
STATEMENTS OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED)
<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--$172,124,980,
$398,570,309,
$89,389,988 and
$50,560,248,
respectively)........... $178,371,306 $408,966,382 $90,396,388 $52,242,823
Cash..................... 84,933 22,600 88,499 78,369
Interest receivable...... 2,985,765 5,246,691 1,625,705 654,845
Receivable for shares of
beneficial interest
sold.................... 13,110 117,946 29,539 --
Receivable for
investments sold........ -- 12,867,072 -- 863,736
Other assets............. 55,513 115,369 95,065 61,157
------------ ------------ ----------- -----------
Total assets............. 181,510,627 427,336,060 92,235,196 53,900,930
------------ ------------ ----------- -----------
Liabilities
Dividends payable........ 602,509 811,713 304,080 156,263
Payable for shares of
beneficial interest
repurchased............. 559,915 858,006 228,485 95,548
Payable to affiliates.... 141,701 322,957 88,404 52,590
Payable for investments
purchased............... -- 26,542,096 1,000,000 1,397,088
Accrued expenses and
other liabilities....... 111,538 243,602 47,947 23,798
------------ ------------ ----------- -----------
Total liabilities........ 1,415,663 28,778,374 1,668,916 1,725,287
------------ ------------ ----------- -----------
Net Assets
Beneficial interest--
$0.001 par value
(unlimited amount
authorized)............. 181,398,301 397,591,388 92,106,192 52,054,253
Accumulated net realized
losses from investment
transactions............ (7,549,663) (9,429,775) (2,546,312) (1,561,185)
Net unrealized
appreciation of
investments............. 6,246,326 10,396,073 1,006,400 1,682,575
------------ ------------ ----------- -----------
Net assets............... $180,094,964 $398,557,686 $90,566,280 $52,175,643
============ ============ =========== ===========
Class A:
Net assets............... $138,278,395 $287,355,401 $52,073,428 $26,188,785
------------ ------------ ----------- -----------
Shares outstanding....... 12,920,463 25,484,363 5,146,656 2,509,007
------------ ------------ ----------- -----------
Net asset value and
redemption value per
share................... $10.70 $11.28 $10.12 $10.44
====== ====== ====== ======
Maximum offering price
per share (net asset
value plus sales charge
of 4.00% of offering
price).................. $11.15 $11.75 $10.54 $10.88
====== ====== ====== ======
Class B:
Net assets............... $ 22,991,269 $ 46,067,673 $20,709,850 $10,000,953
------------ ------------ ----------- -----------
Shares outstanding....... 2,146,728 4,086,902 2,047,612 958,405
------------ ------------ ----------- -----------
Net asset value and
offering price per
share................... $10.71 $11.27 $10.11 $10.43
====== ====== ====== ======
Class C:
Net assets............... $ 18,825,300 $ 64,858,734 $17,783,002 $15,985,905
------------ ------------ ----------- -----------
Shares outstanding....... 1,760,134 5,752,492 1,758,074 1,531,187
------------ ------------ ----------- -----------
Net asset value and
offering price per
share................... $10.70 $11.27 $10.12 $10.44
====== ====== ====== ======
Class Y:
Net assets............... $ 275,878
------------
Shares outstanding....... 24,460
------------
Net asset value, offering
price and redemption
value per share......... $11.28
======
</TABLE>
See accompanying notes to financial statements
21
<PAGE>
PAINEWEBBER
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED)
<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................... $ 5,535,775 $12,090,920 $ 3,189,692 $ 1,622,214
----------- ----------- ----------- -----------
Expenses:
Investment advisory and
administration............ 471,855 1,051,873 287,115 164,247
Service fees--Class A...... 179,030 377,634 68,271 34,023
Service and distribution
fees--Class B............. 124,725 243,886 110,322 53,769
Service and distribution
fees--Class C............. 77,142 260,870 71,340 62,914
Custody and accounting..... 57,795 103,049 32,898 30,792
Legal and audit............ 50,903 53,754 15,063 64,470
Transfer agency and service
fees...................... 33,043 78,117 21,161 19,889
State registration......... 24,194 37,357 28,170 19,439
Reports and notices to
shareholders.............. 19,652 55,186 22,632 18,991
Trustees' fees............. 6,125 6,125 6,125 6,125
Other expenses............. 17,994 10,635 6,323 1,619
----------- ----------- ----------- -----------
1,062,458 2,278,486 669,420 476,278
Less: Fee waivers.......... -- -- -- (115,794)
----------- ----------- ----------- -----------
Net expenses............... 1,062,458 2,278,486 669,420 360,484
----------- ----------- ----------- -----------
Net investment income...... 4,473,317 9,812,434 2,520,272 1,261,730
----------- ----------- ----------- -----------
Realized and unrealized
gains (losses) from
investment activities:
Net realized gains (losses)
from investment
transactions.............. (3,384,167) (6,846,585) 309,476 (180,670)
Net change in unrealized
appreciation/depreciation
of investments............ (2,465,063) (7,365,783) (2,043,738) (1,295,421)
----------- ----------- ----------- -----------
Net realized and unrealized
losses from investment
activities................ (5,849,230) (14,212,368) (1,734,262) (1,476,091)
----------- ----------- ----------- -----------
Net increase (decrease) in
net assets resulting from
operations................ $(1,375,913) $(4,399,934) $ 786,010 $ (214,361)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
22
<PAGE>
CALIFORNIA TAX-FREE INCOME FUND
PAINEWEBBER
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
AUGUST 31, 1996 ENDED
(UNAUDITED) FEBRUARY 29, 1996
--------------- -----------------
<S> <C> <C>
From operations:
Net investment income........................ $ 4,473,317 $ 11,266,576
Net realized gains (losses) from investment
transactions................................ (3,384,167) 6,052,923
Net change in unrealized
appreciation/depreciation of investments.... (2,465,063) 1,143,428
------------ ------------
Net increase (decrease) in net assets
resulting from operations................... (1,375,913) 18,462,927
------------ ------------
Dividends to shareholders from:
Net investment income--Class A............... (3,505,694) (8,722,541)
Net investment income--Class B............... (516,232) (1,360,956)
Net investment income--Class C............... (451,391) (1,183,079)
------------ ------------
Total dividends to shareholders.............. (4,473,317) (11,266,576)
------------ ------------
From beneficial interest transactions:
Net proceeds from the sale of shares......... 4,144,334 9,546,393
Cost of shares repurchased................... (21,422,841) (60,908,096)
Proceeds from dividends reinvested........... 2,208,003 5,722,329
------------ ------------
Net decrease in net assets from beneficial
interest transactions....................... (15,070,504) (45,639,374)
------------ ------------
Net decrease in net assets................... (20,919,734) (38,443,023)
Net assets:
Beginning of period.......................... 201,014,698 239,457,721
------------ ------------
End of period................................ $180,094,964 $201,014,698
============ ============
</TABLE>
See accompanying notes to financial statements
23
<PAGE>
NATIONAL TAX-FREE INCOME FUND
PAINEWEBBER
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
AUGUST 31, 1996 ENDED
(UNAUDITED) FEBRUARY 29, 1996
--------------- -----------------
<S> <C> <C>
From operations:
Net investment income........................ $ 9,812,434 $ 23,261,272
Net realized gains (losses) from investment
transactions................................ (6,846,585) 16,795,602
Net change in unrealized
appreciation/depreciation of investments.... (7,365,783) (275,650)
------------- -------------
Net increase (decrease) in net assets
resulting from operations................... (4,399,934) 39,781,224
------------- -------------
Dividends to shareholders from:
Net investment income--Class A............... (7,305,006) (16,946,168)
Net investment income--Class B............... (994,133) (2,416,713)
Net investment income--Class C............... (1,505,610) (4,038,027)
Net investment income--Class Y............... (7,685) (6,581)
------------- -------------
Total dividends to shareholders.............. (9,812,434) (23,407,489)
------------- -------------
From beneficial interest transactions:
Net proceeds from the sale of shares......... 73,768,167 73,623,651
Proceeds from shares issued in connection
with the acquisition of Mitchell
Hutchins/Kidder, Peabody Municipal Bond
Fund........................................ -- 11,831,545
Cost of shares repurchased................... (109,993,341) (180,593,964)
Proceeds from dividends reinvested........... 6,133,387 14,447,770
------------- -------------
Net decrease in net assets from beneficial
interest transactions....................... (30,091,787) (80,690,998)
------------- -------------
Net decrease in net assets................... (44,304,155) (64,317,263)
Net assets:
Beginning of period.......................... 442,861,841 507,179,104
------------- -------------
End of period................................ $ 398,557,686 $ 442,861,841
============= =============
</TABLE>
See accompanying notes to financial statements
24
<PAGE>
MUNICIPAL HIGH INCOME FUND
PAINEWEBBER
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
AUGUST 31, 1996 ENDED
(UNAUDITED) FEBRUARY 29, 1996
--------------- -----------------
<S> <C> <C>
From operations:
Net investment income........................ $ 2,520,272 $ 6,115,736
Net realized gains from investment
transactions................................ 309,476 3,605,491
Net change in unrealized
appreciation/depreciation of investments.... (2,043,738) 406,432
------------ ------------
Net increase in net assets resulting from
operations.................................. 786,010 10,127,659
------------ ------------
Dividends to shareholders from:
Net investment income--Class A............... (1,513,567) (3,615,202)
Net investment income--Class B............... (527,695) (1,295,493)
Net investment income--Class C............... (479,010) (1,205,041)
------------ ------------
Total dividends to shareholders.............. (2,520,272) (6,115,736)
------------ ------------
From beneficial interest transactions:
Net proceeds from the sale of shares......... 2,391,606 11,836,359
Cost of shares repurchased................... (13,337,339) (29,710,576)
Proceeds from dividends reinvested........... 1,398,494 3,442,477
------------ ------------
Net decrease in net assets from beneficial
interest transactions....................... (9,547,239) (14,431,740)
------------ ------------
Net decrease in net assets................... (11,281,501) (10,419,817)
Net assets:
Beginning of period.......................... 101,847,781 112,267,598
------------ ------------
End of period................................ $ 90,566,280 $101,847,781
============ ============
</TABLE>
See accompanying notes to financial statements
25
<PAGE>
NEW YORK TAX-FREE INCOME FUND
PAINEWEBBER
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
AUGUST 31, 1996 ENDED
(UNAUDITED) FEBRUARY 29, 1996
--------------- -----------------
<S> <C> <C>
From operations:
Net investment income........................ $ 1,261,730 $ 3,039,490
Net realized gains (losses) from investment
transactions................................ (180,670) 304,150
Net change in unrealized
appreciation/depreciation of investments.... (1,295,421) 2,352,203
----------- ------------
Net increase (decrease) in net assets
resulting from operations................... (214,361) 5,695,843
----------- ------------
Dividends to shareholders from:
Net investment income--Class A............... (667,816) (1,567,191)
Net investment income--Class B............... (224,117) (581,692)
Net investment income--Class C............... (369,797) (890,607)
----------- ------------
Total dividends to shareholders.............. (1,261,730) (3,039,490)
----------- ------------
From beneficial interest transactions:
Net proceeds from the sale of shares......... 1,211,286 4,575,816
Cost of shares repurchased................... (6,819,330) (18,949,061)
Proceeds from dividends reinvested........... 814,795 1,931,595
----------- ------------
Net decrease in net assets from beneficial
interest transactions....................... (4,793,249) (12,441,650)
----------- ------------
Net decrease in net assets................... (6,269,340) (9,785,297)
Net assets:
Beginning of period.......................... 58,444,983 68,230,280
----------- ------------
End of period................................ $52,175,643 $ 58,444,983
=========== ============
</TABLE>
See accompanying notes to financial statements
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (UNAUDITED)
PAINEWEBBER
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").
Currently, each Fund offers Class A, Class B, Class C and Class Y shares (no
Class Y shares were outstanding during the period for California Tax-Free
Income Fund, Municipal High Income Fund and New York Tax-Free Income Fund).
Each class represents interests in the same assets of the applicable Fund and
the classes are identical except for differences in their sales charge
structures, ongoing service and distribution charges and certain transfer
agency expenses. In addition, Class B shares and all corresponding dividend
reinvested 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 service and/or distribution plan.
The preparation of financial statements in accordance with generally accepted
accounting principles requires Fund management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates. The following is
a summary of significant accounting policies:
Valuation of Investments -- Where market quotations are readily available,
portfolio securities are valued thereon, provided such quotations adequately
reflect the fair value of the securities, 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. 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.
27
<PAGE>
PAINEWEBBER
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 upon 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.
Dividends and Distributions -- Dividends and distributions to shareholders are
recorded on the ex-dividend date. The amount of dividends and distributions are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These "book/tax" differences
are either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment, temporary
differences do not require reclassification.
CONCENTRATION OF RISK
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 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.
ACQUISITION
Effective November 3, 1995, National Tax-Free Income Fund acquired all of the
net assets of Mitchell Hutchins/Kidder, Peabody Municipal Bond Fund ("MH/KP
Municipal Bond Fund") pursuant to a plan of reorganization approved by MH/KP
Municipal Bond Fund shareholders on October 27, 1995. The acquisition was
accomplished by a tax-free exchange of 727,202 Class A, 255,358 Class D
(currently Class C) and 35,331 Class C (currently Class Y) shares of National
Tax- Free Income Fund for 739,938 Class A, 259,829 Class B and 35,950 Class C
shares, respectively, of MH/KP Municipal Bond Fund outstanding on November 3,
1995. MH/KP Municipal Bond Fund's net assets at that date, valued at
$11,831,545,
28
<PAGE>
PAINEWEBBER
including accumulated net realized losses of $2,653,192 and net unrealized gain
of investments of $586,347, were combined with those of the National Tax-Free
Income Fund.
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 August 31, 1996, California Tax-Free Income Fund, National
Tax-Free Income Fund, Municipal High Income Fund and New York Tax-Free Income
Fund owed Mitchell Hutchins $77,993, $174,197, $46,766 and $27,151,
respectively, in investment advisory and administration fees. During the six
months ended August 31, 1996, Mitchell Hutchins voluntarily waived $45,415 in
investment advisory and administration fees from the New York Tax-Free Income
Fund.
DISTRIBUTION PLANS
Mitchell Hutchins is the distributor of each Fund's shares and has appointed
PaineWebber as exclusive dealer for the sale of those shares. Under separate
plans of distribution pertaining to Class A, Class B and Class C 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 C shares, respectively. At August 31, 1996, California Tax-
Free Income Fund, National Tax-Free Income Fund, Municipal High Income Fund and
New York Tax-Free Income Fund owed Mitchell Hutchins $62,341, $145,082, $40,520
and $24,791, respectively, in service and distribution fees. For the six months
ended August 31, 1996, Mitchell Hutchins voluntarily waived $66,359 in service
fees from New York Tax-Free Income Fund.
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 A, Class B
and Class C shares. Mitchell Hutchins has informed each Fund that, for the six
months ended August 31, 1996, it earned $101,507, $207,743, $80,280 and $44,911
in sales charges for the California Tax-Free Income Fund, National Tax-Free
Income Fund, Municipal High Income Fund and New York Tax-Free Income Fund,
respectively.
29
<PAGE>
PAINEWEBBER
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 six months ended August 31, 1996, PaineWebber
earned $8,512, $23,022, $6,957 and $4,020 from California Tax-Free Income Fund,
National Tax-Free Income Fund, Municipal High Income Fund and New York Tax-Free
Income Fund, respectively. At August 31, 1996, California Tax-Free Income Fund,
National Tax-Free Income Fund, Municipal High Income Fund and New York Tax-Free
Income Fund owed PaineWebber $1,367, $3,678, $1,118 and $648, respectively, for
transfer agency service fees. For the six months ended August 31, 1996,
PaineWebber voluntarily waived $4,020 in transfer agency service fees from New
York Tax-Free Income Fund.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at August 31,
1996, was substantially the same as the cost of securities for financial
statement purposes.
At August 31, 1996, the components of net unrealized appreciation of
investments were as follows:
<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>
Gross appreciation
(investments having an excess
of value over cost).......... $6,825,967 $13,051,043 $1,833,193 $1,893,275
Gross depreciation
(investments having an excess
of cost over value).......... (579,641) (2,654,970) (826,793) (210,700)
---------- ----------- ---------- ----------
Net unrealized appreciation of
investments.................. $6,246,326 $10,396,073 $1,006,400 $1,682,575
========== =========== ========== ==========
</TABLE>
For the six months ended August 31, 1996, total aggregate purchases and sales
of portfolio securities, excluding short-term securities, were as follows:
<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>
Purchases...................... $73,862,909 $220,177,997 $30,060,612 $16,836,219
Sales.......................... $82,751,996 $248,862,912 $40,853,885 $21,930,526
</TABLE>
30
<PAGE>
PAINEWEBBER
FEDERAL INCOME TAX STATUS
Each Fund intends to distribute all of its tax-exempt income and any taxable
income and to comply with the 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 29, 1996, the funds had the following net capital loss
carryforwards available as reductions, to the extent provided in the
regulations, of future net realized capital gains which expire as follows:
<TABLE>
<CAPTION>
FISCAL CALIFORNIA NATIONAL MUNICIPAL NEW YORK
YEAR TAX-FREE TAX-FREE HIGH TAX-FREE
ENDING INCOME FUND INCOME FUND INCOME FUND INCOME FUND
- ------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
2002 -- $2,034,069 -- --
2003 $4,164,891 549,124 $2,854,821 $ 436,117
2004 -- -- -- 943,931
---------- ---------- ---------- ----------
$4,164,891 $2,583,193 $2,854,821 $1,380,048
========== ========== ========== ==========
</TABLE>
The capital loss carryforwards for National Tax-Free Income Fund were acquired
pursuant to its acquisition on November 3, 1995 of Mitchell Hutchins/Kidder,
Peabody Municipal Bond Fund.
To the extent that any such losses are used to offset future capital gains, it
is probable that the gains so offset will not be distributed.
31
<PAGE>
PAINEWEBBER
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 C
-------------------------- ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount
----------- ------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
California Tax-
Free Income
Fund
Six Months Ended
August 31,
1996:
Shares sold..... 224,807 $ 2,396,177 60,407 $ 645,875 103,270 $ 1,102,282
Shares
repurchased.... (1,230,382) (13,150,818) (390,637) (4,187,073) (382,704) (4,084,950)
Shares converted
from Class B to
Class A........ 8,208 88,113 (8,200) (88,113) -- --
Dividends
reinvested..... 157,055 1,675,446 21,555 230,168 28,358 302,389
----------- ------------- ---------- ------------ ---------- ------------
Net decrease.... (840,312) $ (8,991,082) (316,875) $ (3,399,143) (251,076) $ (2,680,279)
=========== ============= ========== ============ ========== ============
Year Ended
February 29,
1996:
Shares sold..... 388,502 $ 4,236,457 228,144 $ 2,487,998 260,321 $ 2,821,938
Shares
repurchased.... (3,725,470) (40,598,803) (898,438) (9,785,607) (969,110) (10,523,686)
Shares converted
from Class B to
Class A........ 10,277 113,004 (10,273) (113,004) -- --
Dividends
reinvested..... 395,668 4,299,566 55,294 601,266 75,666 821,497
----------- ------------- ---------- ------------ ---------- ------------
Net decrease.... (2,931,023) $ (31,949,776) (625,273) $ (6,809,347) (633,123) $ (6,880,251)
=========== ============= ========== ============ ========== ============
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------------------------- ------------------------ ------------------------ ----------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ------------- ---------- ------------ ---------- ------------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
National Tax-
Free Income
Fund
Six Months Ended
August 31,
1996:
Shares sold..... 6,104,361 $ 69,212,182 135,604 $ 1,532,383 264,238 $ 3,023,602 -- --
Shares
repurchased.... (8,163,605) (92,244,800) (512,020) (5,769,796) (1,054,079) (11,916,929) (5,476) $(61,816)
Shares converted
from Class B to
Class A........ 13,424 151,534 (13,424) (151,534) -- -- -- --
Dividends
reinvested..... 401,177 4,514,427 48,639 547,306 94,558 1,063,918 687 7,736
----------- ------------- ---------- ------------ ---------- ------------ ------ --------
Net decrease.... (1,644,643) $ (18,366,657) (341,201) $ (3,841,641) (695,283) $ (7,829,409) (4,789) $(54,080)
=========== ============= ========== ============ ========== ============ ====== ========
Year Ended
February 29,
1996:
Shares sold..... 5,257,727 $ 60,650,008 571,893 $ 6,580,403 554,162 $ 6,393,240 -- --
Shares issued in
connection with
the acquisition
of Mitchell
Hutchins/Kidder,
Peabody
Municipal Bond
Fund........... 727,202 8,452,570 -- -- 255,358 2,968,259 35,331 $410,716
Shares
repurchased.... (10,526,704) (121,519,966) (1,488,130) (17,127,225) (3,634,729) (41,869,021) (6,574) (77,752)
Shares converted
from Class B to
Class A........ 7,263 82,843 (7,263) (82,843) -- -- -- --
Dividends
reinvested..... 889,218 10,262,007 114,973 1,325,467 247,608 2,854,511 492 5,785
----------- ------------- ---------- ------------ ---------- ------------ ------ --------
Net increase
(decrease)..... (3,645,294) $ (42,072,538) (808,527) $ (9,304,198) (2,577,601) $(29,653,011) 29,249 $338,749
=========== ============= ========== ============ ========== ============ ====== ========
</TABLE>
32
<PAGE>
PAINEWEBBER
SHARES OF BENEFICIAL INTEREST - (CONCLUDED)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------------------- ---------------------- -----------------------
Shares Amount Shares Amount Shares Amount
----------- ------------ --------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Municipal High Income
Fund
Six Months Ended August
31, 1996:
Shares sold............. 62,512 $ 632,178 107,959 $ 1,093,840 65,578 $ 665,588
Shares repurchased...... (582,316) (5,883,866) (387,240) (3,922,397) (349,603) (3,531,076)
Shares converted from
Class B to Class A..... 17,308 174,849 (17,314) (174,849) -- --
Dividends reinvested ... 83,448 847,629 24,126 244,974 30,121 305,891
----------- ------------ --------- ----------- --------- ------------
Net decrease............ (419,048) $ (4,229,210) (272,469) $(2,758,432) (253,904) $ (2,559,597)
=========== ============ ========= =========== ========= ============
Year Ended February 29,
1996:
Shares sold............. 486,514 $ 4,928,515 328,524 $ 3,324,149 355,164 $ 3,583,695
Shares repurchased...... (1,502,572) (15,268,177) (669,283) (6,789,711) (755,432) (7,652,688)
Shares converted from
Class B to Class A..... 6,026 61,833 (6,030) (61,833) -- --
Dividends reinvested ... 197,771 2,009,587 63,421 643,930 77,720 788,960
----------- ------------ --------- ----------- --------- ------------
Net decrease............ (812,261) $ (8,268,242) (283,368) $(2,883,465) (322,548) $ (3,280,033)
=========== ============ ========= =========== ========= ============
New York Tax-Free Income
Fund
Six Months Ended August
31, 1996:
Shares sold............. 49,538 $ 515,351 40,218 $ 419,631 26,515 $ 276,304
Shares repurchased...... (264,104) (2,750,866) (201,064) (2,108,316) (188,247) (1,960,148)
Shares converted from
Class B to Class A..... 459 4,767 (459) (4,767) -- --
Dividends reinvested ... 39,769 416,408 11,623 121,680 26,424 276,707
----------- ------------ --------- ----------- --------- ------------
Net decrease............ (174,338) $ (1,814,340) (149,682) $(1,571,772) (135,308) $ (1,407,137)
=========== ============ ========= =========== ========= ============
Year Ended February 29,
1996:
Shares sold............. 75,913 $ 852,300 80,011 $ 838,891 272,767 $ 2,884,625
Shares repurchased...... (648,187) (6,829,541) (427,162) (4,485,601) (724,723) (7,633,919)
Shares converted from
Class B to Class A..... 1,199 12,707 (1,199) (12,707) -- --
Dividends reinvested.... 93,623 932,899 29,185 307,243 65,656 691,453
----------- ------------ --------- ----------- --------- ------------
Net decrease............ (477,452) $ (5,031,635) (319,165) $(3,352,174) (386,300) $ (4,057,841)
=========== ============ ========= =========== ========= ============
</TABLE>
33
<PAGE>
CALIFORNIA TAX-FREE INCOME FUND
PAINEWEBBER
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT EACH PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------------------------
For the
Six Months
Ended For the Year For the Years Ended For the Three For the Years
August 31, Ended February 28, Months Ended Ended November 30,
1996 February 29, --------------------- February 28, --------------------
(unaudited) 1996 1995 1994 1993 1992 1991
----------- ------------ --------- --------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.02 $ 10.68 $ 11.41 $ 11.80 $ 11.39 $ 11.13 $ 10.94
-------- -------- --------- --------- -------- --------- ---------
Net investment income... 0.26 0.57 0.58 0.60 0.16 0.66 0.71
Net realized and
unrealized gains
(losses) from
investment
transactions........... (0.32) 0.34 (0.63) (0.08) 0.58 0.29 0.22
-------- -------- --------- --------- -------- --------- ---------
Net increase (decrease)
from investment
operations............. (0.06) 0.91 (0.05) 0.52 0.74 0.95 0.93
-------- -------- --------- --------- -------- --------- ---------
Dividends from net
investment income...... (0.26) (0.57) (0.58) (0.60) (0.16) (0.66) (0.71)
Distributions from net
realized gains from
investment
transactions........... -- -- (0.10) (0.31) (0.17) (0.03) (0.03)
-------- -------- --------- --------- -------- --------- ---------
Total dividends and
distributions to
shareholders........... (0.26) (0.57) (0.68) (0.91) (0.33) (0.69) (0.74)
-------- -------- --------- --------- -------- --------- ---------
Net asset value, end of
period................. $ 10.70 $ 11.02 $ 10.68 $ 11.41 $ 11.80 $ 11.39 $ 11.13
======== ======== ========= ========= ======== ========= =========
Total investment
return(1).............. (0.48)% 8.68% (0.18)% 4.46% 6.52% 8.73% 8.84%
======== ======== ========= ========= ======== ========= =========
Ratios/supplemental
data:
Net assets, end of
period (000's)......... $138,278 $151,684 $ 178,234 $ 227,179 $247,025 $ 239,851 $ 231,987
Expenses to average net
assets................. 0.97%* 0.94% 0.88% 0.90% 0.99%* 0.93% 0.83%
Net investment income to
average net assets..... 4.92%* 5.21% 5.55% 5.10% 5.61%* 5.80% 6.46%
Portfolio turnover rate. 41% 32% 11% 37% 3% 25% 2%
- ---------------------
</TABLE>
+ Commencement of issuance of shares
* Annualized
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
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 each class would be lower if sales
charges were included. Total investment returns for periods of less than
one year have not been annualized.
34
<PAGE>
CALIFORNIA TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
CLASS B
- ------------------------------------------------------------------------------------
For the For the For the
Six Months For the For the Years Three For the Period
Ended Year Ended Months Year July 1, 1991+
August 31, Ended February 28, Ended Ended through
1996 February 29, ----------------- February 28, November 30, November 30,
(unaudited) 1996 1995 1994 1993 1992 1991
- ----------- ------------ ------- ------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
$ 11.03 $ 10.69 $ 11.41 $ 11.81 $ 11.39 $ 11.14 $ 10.95
------- ------- ------- ------- ------- ------- -------
0.22 0.48 0.50 0.51 0.14 0.57 0.25
(0.32) 0.34 (0.62) (0.09) 0.59 0.28 0.19
------- ------- ------- ------- ------- ------- -------
(0.10) 0.82 (0.12) 0.42 0.73 0.85 0.44
------- ------- ------- ------- ------- ------- -------
(0.22) (0.48) (0.50) (0.51) (0.14) (0.57) (0.25)
-- -- (0.10) (0.31) (0.17) (0.03) --
------- ------- ------- ------- ------- ------- -------
(0.22) (0.48) (0.60) (0.82) (0.31) (0.60) (0.25)
------- ------- ------- ------- ------- ------- -------
$ 10.71 $ 11.03 $ 10.69 $ 11.41 $ 11.81 $ 11.39 $ 11.14
======= ======= ======= ======= ======= ======= =======
(0.85)% 7.86% (0.85)% 3.56% 6.50% 7.80% 3.69%
======= ======= ======= ======= ======= ======= =======
$22,991 $27,175 $33,007 $41,979 $36,693 $30,205 $10,743
1.74%* 1.70% 1.64% 1.65% 1.74%* 1.68% 1.62%*
4.16%* 4.45% 4.78% 4.32% 4.81%* 4.91% 5.02%*
41% 32% 11% 37% 3% 25% 2%
<CAPTION>
CLASS C
- ------------------------------------------------------------------------------------
For the For the For the For the For the
Six Months Six Months Year Years For the Three Period
Ended Ended Ended Ended Months July 2, 1992+
August 31, August 31, February 29, February 28, Ended through
1996 1996 ------------ ------------------ February 28, November 30,
(unaudited) (unaudited) 1996 1995 1994 1993 1992
- ------------ ----------- ------------ --------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 11.03 $ 11.02 $ 10.67 $ 11.40 $ 11.79 $ 11.38 $ 11.41
- ------------ ----------- ------------ --------- -------- ------------- -------------
0.22 0.24 0.51 0.53 0.54 0.14 0.21
(0.32) (0.32) 0.35 (0.63) (0.08) 0.58 (0.03)
- ------------ ----------- ------------ --------- -------- ------------- -------------
(0.10) (0.08) 0.86 (0.10) 0.46 0.72 0.18
- ------------ ----------- ------------ --------- -------- ------------- -------------
(0.22) (0.24) (0.51) (0.53) (0.54) (0.14) (0.21)
-- -- -- (0.10) (0.31) (0.17) --
- ------------ ----------- ------------ --------- -------- ------------- -------------
(0.22) (0.24) (0.51) (0.63) (0.85) (0.31) (0.21)
- ------------ ----------- ------------ --------- -------- ------------- -------------
$ 10.71 $ 10.70 $ 11.02 $ 10.67 $ 11.40 $ 11.79 $ 11.38
============ =========== ============ ========= ======== ============= =============
(0.85)% (0.73)% 8.22% (0.70)% 3.91% 6.49% 1.28%
============ =========== ============ ========= ======== ============= =============
$22,991 $18,825 $22,155 $28,217 $53,874 $39,029 $30,141
1.74%* 1.49%* 1.46% 1.40% 1.39% 1.48%* 1.39%*
4.16%* 4.41%* 4.69% 5.05% 4.55% 5.06%* 4.79%*
41% 41% 32% 11% 37% 3% 25%
</TABLE>
35
<PAGE>
NATIONAL TAX-FREE INCOME FUND
PAINEWEBBER
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT EACH PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------------------------
For the
Six Months For the Three
Ended For the Year For the Years Ended Months For the Years
August 31, Ended February 28, Ended Ended November 30,
1996 February 29, --------------------- February 28, --------------------
(unaudited) 1996 1995 1994 1993 1992 1991
----------- ------------ --------- --------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.64 $ 11.26 $ 12.00 $ 12.09 $ 11.67 $ 11.40 $ 11.20
-------- -------- --------- --------- -------- --------- ---------
Net investment income... 0.27 0.58 0.63 0.64 0.17 0.71 0.76
Net realized and
unrealized gains
(losses) from
investment
transactions........... (0.36) 0.39 (0.73) 0.03 0.55 0.31 0.20
-------- -------- --------- --------- -------- --------- ---------
Net increase (decrease)
from investment
operations............. (0.09) 0.97 (0.10) 0.67 0.72 1.02 0.96
-------- -------- --------- --------- -------- --------- ---------
Dividends from net
investment income...... (0.27) (0.59) (0.63) (0.64) (0.17) (0.71) (0.76)
Distributions from net
realized gains from
investment
transactions........... -- -- (0.01) (0.12) (0.13) (0.04) --
-------- -------- --------- --------- -------- --------- ---------
Total dividends and
distributions to
shareholders........... (0.27) (0.59) (0.64) (0.76) (0.30) (0.75) (0.76)
-------- -------- --------- --------- -------- --------- ---------
Net asset value, end of
period................. $ 11.28 $ 11.64 $ 11.26 $ 12.00 $ 12.09 $ 11.67 $ 11.40
======== ======== ========= ========= ======== ========= =========
Total investment
return(1).............. (0.72)% 8.75% (0.63)% 5.65% 6.31% 9.21% 8.85%
======== ======== ========= ========= ======== ========= =========
Ratios/supplemental
data:
Net assets, end of
period (000's)......... $287,355 $315,899 $ 346,579 $ 432,825 $419,596 $ 396,587 $ 366,300
Expenses to average net
assets................. 0.91%* 0.93%(/2/) 0.88% 0.89% 0.88%* 0.91% 0.83%
Net investment income to
average net assets..... 4.82%* 5.06%(/2/) 5.62% 5.28% 5.86%* 6.13% 6.66%
Portfolio turnover rate. 55% 74% 60% 16% 5% 21% 27%
- ---------------------
</TABLE>
+ Commencement of issuance of shares
* Annualized
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
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 each class would be lower if sales
charges were included. Total investment returns for periods of less than
one year have not been annualized.
(2) These ratios include non-recurring acquisition expenses of 0.03%.
36
<PAGE>
NATIONAL TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------------------------------
For the For the For the For the
Six Months For the Years Three For the Period
Ended Year Ended Months Year July 1, 1991+
August 31, Ended February 28, Ended Ended through
1996 February 29, ----------------- February 28, November 30, November 30,
(unaudited) 1996 1995 1994 1993 1992 1991
----------- ------------ ------- ------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
$ 11.64 $ 11.26 $ 11.99 $ 12.08 $ 11.67 $ 11.40 $11.19
------- ------- ------- ------- ------- ------- ------
0.23 0.49 0.54 0.55 0.15 0.62 0.27
(0.37) 0.39 (0.72) 0.03 0.54 0.31 0.21
------- ------- ------- ------- ------- ------- ------
(0.14) 0.88 (0.18) 0.58 0.69 0.93 0.48
------- ------- ------- ------- ------- ------- ------
(0.23) (0.50) (0.54) (0.55) (0.15) (0.62) (0.27)
-- -- (0.01) (0.12) (0.13) (0.04) --
------- ------- ------- ------- ------- ------- ------
(0.23) (0.50) (0.55) (0.67) (0.28) (0.66) (0.27)
------- ------- ------- ------- ------- ------- ------
$ 11.27 $ 11.64 $ 11.26 $ 11.99 $ 12.08 $ 11.67 $11.40
======= ======= ======= ======= ======= ======= ======
(1.18)% 7.94% (1.29)% 4.87% 6.02% 8.36% 4.06%
======= ======= ======= ======= ======= ======= ======
$46,068 $51,546 $58,958 $70,988 $50,064 $39,564 $8,620
1.66%* 1.68%(/2/) 1.64% 1.63% 1.63%* 1.65% 1.65%*
4.07%* 4.31%(/2/) 4.86% 4.50% 5.08%* 5.16% 5.26%*
55% 74% 60% 16% 5% 21% 27%
</TABLE>
37
<PAGE>
NATIONAL TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS--(CONCLUDED)
<TABLE>
<CAPTION>
CLASS C CLASS Y
--------------------------------------------------------------------------- ------------------------
For the
For the For the For the For the Period
Six Months For the For the Years Three Period Six Months November 3,
Ended Year Ended Months July 2, 1992+ Ended 1995+
August 31, Ended February 28, Ended through August 31, through
1996 February 29, ------------------ February 28, November 30, 1996 February 29,
(unaudited) 1996 1995 1994 1993 1992 (unaudited) 1996
----------- ------------ -------- -------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.64 $ 11.26 $ 12.00 12.09 $ 11.67 $ 11.71 $11.65 $11.62
------- ------- -------- -------- -------- -------- ------ ------
Net investment income... 0.24 0.52 0.57 0.58 0.15 0.23 0.29 0.19
Net realized and
unrealized gains
(losses) from
investment
transactions........... (0.37) 0.39 (0.73) 0.03 0.55 (0.04) (0.37) 0.01
------- ------- -------- -------- -------- -------- ------ ------
Net increase (decrease)
from investment
operations............. (0.13) 0.91 (0.16) 0.61 0.70 0.19 (0.08) 0.20
------- ------- -------- -------- -------- -------- ------ ------
Dividends from net
investment income...... (0.24) (0.53) (0.57) (0.58) (0.15) (0.23) (0.29) (0.17)
Distributions from net
realized gains from
investment
transactions........... -- -- (0.01) (0.12) (0.13) -- -- --
------- ------- -------- -------- -------- -------- ------ ------
Total dividends and
distributions to
shareholders........... (0.24) (0.53) (0.58) (0.70) (0.28) (0.23) (0.29) (0.17)
------- ------- -------- -------- -------- -------- ------ ------
Net asset value, end of
period................. $ 11.27 $ 11.64 $ 11.26 $ 12.00 $ 12.09 $ 11.67 $11.28 $11.65
======= ======= ======== ======== ======== ======== ====== ======
Total investment
return(1).............. (1.06)% 8.19% (1.13)% 5.13% 6.18% 1.41% (0.67)% 1.70%
======= ======= ======== ======== ======== ======== ====== ======
Ratios/supplemental
data:
Net assets, end of
period (000's)......... $64,859 $75,076 $101,642 $187,778 $138,989 $105,854 $ 276 $ 341
Expenses to average net
assets................. 1.42%* 1.45%(/2/) 1.40% 1.37% 1.37%* 1.42%* 0.64%* 0.64%(/2/)*
Net investment income to
average net assets..... 4.32%* 4.57%(/2/) 5.13% 4.75% 5.30%* 5.17%* 5.11%* 5.19%(/2/)*
Portfolio turnover rate. 55% 74% 60% 16% 5% 21% 55% 74%
- ---------------------
</TABLE>
+ Commencement of issuance of shares
* Annualized
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
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 each class would be lower if sales
charges were included. Total investment returns for periods of less than
one year have not been annualized.
(2) These ratios include non-recurring acquisition expenses of 0.03%.
38
<PAGE>
This Page Intentionally Left Blank
39
<PAGE>
MUNICIPAL HIGH INCOME FUND
PAINEWEBBER
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT EACH PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
For the
Six Months
Ended For the Year For the Years Ended For the Year
August 31, Ended February 28, Ended
1996 February 29, -------------------------- February 29,
(unaudited) 1996 1995 1994 1993 1992
----------- ------------ ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 10.29 $ 9.92 $ 10.77 $ 10.96 $ 10.29 $ 9.92
------- ------- ------- ------- ------- -------
Net investment income... 0.28 0.62 0.59 0.61 0.67 0.71
Net realized and
unrealized gains
(losses) from
investment
transactions........... (0.17) 0.37 (0.82) 0.01 0.81 0.44
------- ------- ------- ------- ------- -------
Net increase (decrease)
from investment
operations............. 0.11 0.99 (0.23) 0.62 1.48 1.15
------- ------- ------- ------- ------- -------
Dividends from net
investment income...... (0.28) (0.62) (0.59) (0.61) (0.67) (0.71)
Distributions from net
realized gains from
investment
transactions........... -- -- (0.03) (0.20) (0.14) (0.07)
------- ------- ------- ------- ------- -------
Total dividends and
distributions to
shareholders........... (0.28) (0.62) (0.62) (0.81) (0.81) (0.78)
------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $ 10.12 $ 10.29 $ 9.92 $ 10.77 $ 10.96 $ 10.29
======= ======= ======= ======= ======= =======
Total investment
return(1).............. 1.12% 10.18% (2.03)% 5.77% 15.05% 11.94%
======= ======= ======= ======= ======= =======
Ratios/supplemental
data:
Net assets, end of
period (000's)......... $52,073 $57,280 $63,287 $82,248 $82,251 $68,830
Expenses, net of waivers
from adviser, to
average net
assets................. 1.12%* 1.10% 1.13% 1.03% 0.87% 0.75%
Expenses, before waivers
from adviser, to
average net
assets................. 1.12%* 1.10% 1.13% 1.16% 1.29% 1.25%
Net investment income,
net of waivers from
adviser, to
average net assets..... 5.53%* 5.94% 5.96% 5.52% 6.31% 6.99%
Net investment income,
before waivers from
adviser, to
average net assets..... 5.53%* 5.94% 5.96% 5.39% 5.89% 6.49%
Portfolio turnover rate. 34% 48% 28% 23% 10% 45%
- ---------------------
</TABLE>
+ Commencement of issuance of shares
* Annualized
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period, reinvestment of all dividends and 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 each class would be lower if sales charges were
included. Total investment returns for periods of less than one year have
not been annualized.
40
<PAGE>
MUNICIPAL HIGH INCOME FUND
<TABLE>
<CAPTION>
CLASS B CLASS C
- ------------------------------------------------------------------- -----------------------------------------------------------
For the
Six Months For the Years For the Period For the Six For the Years For the Period
Ended For the Year Ended July 1, 1991+ Months Ended For the Year Ended July 2, 1992+
August 31, Ended February 28, through August 31, Ended February 28, through
1996 February 29, ------------------------- February 29, 1996 February 29, ----------------- February 28,
(unaudited) 1996 1995 1994 1993 1992 (unaudited) 1996 1995 1994 1993
- ----------- ------------ ------- ------- ------- -------------- ------------ ------------ ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 10.29 $ 9.92 $ 10.76 $ 10.96 $ 10.29 $10.05 $ 10.29 $ 9.92 $ 10.77 $ 10.96 $ 10.50
-------- ------- ------- ------- ------- ------ ------- ------- ------- ------- -------
0.24 0.54 0.52 0.52 0.59 0.42 0.26 0.56 0.55 0.55 0.36
(0.18) 0.37 (0.81) -- 0.81 0.31 (0.17) 0.37 (0.82) 0.01 0.47
-------- ------- ------- ------- ------- ------ ------- ------- ------- ------- -------
0.06 0.91 (0.29) 0.52 1.40 0.73 0.09 0.93 (0.27) 0.56 0.83
-------- ------- ------- ------- ------- ------ ------- ------- ------- ------- -------
(0.24) (0.54) (0.52) (0.52) (0.59) (0.42) (0.26) (0.56) (0.55) (0.55) (0.36)
-- -- (0.03) (0.20) (0.14) (0.07) -- -- (0.03) (0.20) (0.01)
-------- ------- ------- ------- ------- ------ ------- ------- ------- ------- -------
(0.24) (0.54) (0.55) (0.72) (0.73) (0.49) (0.26) (0.56) (0.58) (0.75) (0.37)
-------- ------- ------- ------- ------- ------ ------- ------- ------- ------- -------
$ 10.11 $ 10.29 $ 9.92 $ 10.76 $ 10.96 $10.29 $ 10.12 $ 10.29 $ 9.92 $ 10.77 $ 10.96
======== ======= ======= ======= ======= ====== ======= ======= ======= ======= =======
0.65% 9.36% (2.67)% 4.88% 14.81% 6.89% 0.87% 9.64% (2.51)% 5.24% 7.72%
======== ======= ======= ======= ======= ====== ======= ======= ======= ======= =======
$ 20,710 $23,868 $25,823 $32,287 $22,922 $8,176 $17,783 $20,700 $23,158 $35,872 $21,638
1.87%* 1.85% 1.87% 1.79% 1.63% 1.50%* 1.63%* 1.60% 1.63% 1.54% 1.40%*
1.87%* 1.85% 1.87% 1.90% 2.01% 1.98%* 1.63%* 1.60% 1.63% 1.64% 1.69%*
4.77%* 5.19% 5.21% 4.72% 5.48% 5.80%* 5.02%* 5.45% 5.48% 4.95% 5.26%*
4.77%* 5.19% 5.21% 4.61% 5.10% 5.32%* 5.02%* 5.45% 5.48% 4.85% 4.97%*
34% 48% 28% 23% 10% 46% 34% 48% 28% 23% 10%
</TABLE>
41
<PAGE>
NEW YORK TAX-FREE INCOME FUND
PAINEWEBBER
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT EACH PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
For the
Six Months
Ended For the Year For the Years Ended For the Year
August 31, Ended February 28, Ended
1996 February 29, -------------------------- February 29,
(unaudited) 1996 1995 1994 1993 1992
----------- ------------ ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 10.71 $ 10.27 $ 11.03 $ 10.99 $ 10.12 $ 9.76
------- ------- ------- ------- ------- -------
Net investment income... 0.26 0.54 0.54 0.57 0.63 0.66
Net realized and
unrealized gains
(losses) from
investment
transactions........... (0.27) 0.45 (0.66) 0.07 0.87 0.36
------- ------- ------- ------- ------- -------
Net increase (decrease)
from investment
operations............. (0.01) 0.99 (0.12) 0.64 1.50 1.02
------- ------- ------- ------- ------- -------
Dividends from net
investment income...... (0.26) (0.55) (0.54) (0.57) (0.63) (0.66)
Distributions from net
realized gains from
investment
transactions........... -- -- (0.10) (0.03) -- --
------- ------- ------- ------- ------- -------
Total dividends and
distributions to
shareholders........... (0.26) (0.55) (0.64) (0.60) (0.63) (0.66)
------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $ 10.44 $ 10.71 $ 10.27 $ 11.03 $ 10.99 $ 10.12
======= ======= ======= ======= ======= =======
Total investment
return(1).............. (0.09)% 9.83% (0.83)% 5.89% 15.44% 10.80%
======= ======= ======= ======= ======= =======
Ratios/supplemental
data:
Net assets, end of
period (000's)......... $26,189 $28,734 $32,475 $45,033 $43,443 $35,961
Expenses, net of
waivers, to average net
assets................. 1.02%* 1.02% 1.01% 0.75% 0.34% 0.25%
Expenses, before
waivers, to average net
assets................. 1.43%* 1.15% 1.26% 1.25% 1.47% 1.53%
Net investment income,
net of waivers, to
average net assets..... 4.91%* 5.11% 5.38% 5.13% 6.07% 6.65%
Net investment income,
before waivers, to
average net assets..... 4.50%* 4.98% 5.13% 4.63% 4.94% 5.37%
Portfolio turnover rate. 32% 13% 6% 8% 6% 6%
- ---------------------
</TABLE>
+ Commencement of issuance of shares
* Annualized
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
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 each class would be lower if sales
charges were included. Total investment returns for periods of less than
one year have not been annualized.
42
<PAGE>
NEW YORK TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
CLASS B CLASS C
- -------------------------------------------------------------------- ----------------------------------------------------------
For the For the
Six Months For the Period Six Months For the Years For the Period
Ended For the Year For the Years Ended July 1, 1991+ Ended For the Year Ended July 2, 1992+
August 31, Ended February 28, through August 31, Ended February 28, through
1996 February 29, -------------------------- February 29, 1996 February 29, ----------------- February 28,
(unaudited) 1996 1995 1994 1993 1992 (unaudited) 1996 1995 1994 1993
- ----------- ------------ ------- ------- ------- -------------- ----------- ------------ ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 10.71 $ 10.27 $ 11.03 $ 10.98 $ 10.12 $ 9.81 $ 10.71 $ 10.28 $ 11.03 $ 10.99 $ 10.45
------- ------- ------- ------- ------- ------ ------- ------- ------- ------- -------
0.22 0.47 0.47 0.49 0.56 0.39 0.23 0.49 0.49 0.51 0.36
(0.28) 0.44 (0.66) 0.08 0.86 0.31 (0.27) 0.43 (0.65) 0.07 0.54
------- ------- ------- ------- ------- ------ ------- ------- ------- ------- -------
(0.06) 0.91 (0.19) 0.57 1.42 0.70 (0.04) 0.92 (0.16) 0.58 0.90
------- ------- ------- ------- ------- ------ ------- ------- ------- ------- -------
(0.22) (0.47) (0.47) (0.49) (0.56) (0.39) (0.23) (0.49) (0.49) (0.51) (0.36)
-- -- (0.10) (0.03) -- -- -- -- (0.10) (0.03) --
------- ------- ------- ------- ------- ------ ------- ------- ------- ------- -------
(0.22) (0.47) (0.57) (0.52) (0.56) (0.39) (0.23) (0.49) (0.59) (0.54) (0.36)
------- ------- ------- ------- ------- ------ ------- ------- ------- ------- -------
$ 10.43 $ 10.71 $ 10.27 $ 11.03 $ 10.98 $10.12 $ 10.44 $ 10.71 $ 10.28 $ 11.03 $ 10.99
======= ======= ======= ======= ======= ====== ======= ======= ======= ======= =======
(0.56)% 9.01% (1.57)% 5.19% 14.35% 6.80% (0.34)% 9.17% (1.20)% 5.35% 8.38%
======= ======= ======= ======= ======= ====== ======= ======= ======= ======= =======
$10,001 $11,862 $14,660 $19,193 $13,776 $6,026 $15,986 $17,849 $21,095 $38,165 $19,553
1.77%* 1.77% 1.76% 1.51% 1.10% 1.00%* 1.52%* 1.52% 1.52% 1.27% 0.90%*
2.19%* 1.89% 2.01% 1.99% 2.19% 2.20%* 1.95%* 1.64% 1.75% 1.72% 1.83%*
4.17%* 4.36% 4.63% 4.34% 5.22% 5.59%* 4.41%* 4.61% 4.89% 4.55% 5.04%*
3.74%* 4.24% 4.83% 3.86% 4.13% 4.39%* 3.97%* 4.50% 4.65% 4.10% 4.11%*
32% 13% 6% 8% 6% 6% 32% 13% 6% 8% 6%
</TABLE>
43
<PAGE>
PAINEWEBBER
SHAREHOLDER INFORMATION
A special meeting of shareholders of the Trusts were held on April
10, 1996. At these meetings, the following proposals were
approved. (Shareholders of each Trust, voted together as a single
class with respect to the election of board members; other matters
noted below were approved by shareholders of each Fund.)
PROPOSAL 1
To elect ten members of its Board of Trustees:
Margo N. Alexander
Richard Q. Armstrong
E. Garrett Bewkes, Jr.
Richard R. Burt
Mary C. Farrell
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
John R. Torell III
For each of the above Trustees, the votes were as follows:
<TABLE>
<CAPTION>
SHARES VOTED SHARES WITHHOLD
FOR AUTHORITY
------------ ---------------
<S> <C> <C>
Mutual Fund Trust
(California Tax-Free Income Fund and National Tax-
Free Income Fund)................................ 29,162,872 516,707
Municipal Series
(Municipal High Income Fund and New York Tax-Free
Income Fund)..................................... 7,935,656 479,950
</TABLE>
PROPOSAL 2
Ratification of the selection of Ernst & Young LLP as independent auditors for
the current fiscal year:
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED
FOR AGAINST SHARES ABSTAIN
------------ ------------ --------------
<S> <C> <C> <C>
California Tax-Free Income Fund........ 9,445,166 596 360,236
National Tax-Free Income Fund.......... 19,691,273 39,211 743,097
Municipal High Income Fund............. 5,337,078 2,506 269,175
New York Tax-Free Income Fund.......... 2,708,867 8,273 207,713
PROPOSAL 3
Approval of the proposed changes to the Trusts' fundamental investment
restrictions and policies:
Modification of fundamental restriction on portfolio diversification for
diversified funds:
<CAPTION>
SHARES VOTED SHARES VOTED
FOR AGAINST SHARES ABSTAIN
------------ ------------ --------------
<S> <C> <C> <C>
California Tax-Free Income Fund........ 9,292,983 81,319 431,696
National Tax-Free Income Fund.......... 19,181,879 346,358 945,344
</TABLE>
44
<PAGE>
PAINEWEBBER
SHAREHOLDER INFORMATION--(CONCLUDED)
For each of the following proposals, the votes were as follows:
Modification of fundamental restriction on concentration;
Modification of fundamental restriction on senior securities and borrowing;
Modification of fundamental restriction on making loans;
Modification of fundamental restriction on underwriting securities;
Modification of fundamental restriction on real estate investments;
Modification of fundamental restriction on investing in commodities;
Elimination of fundamental restriction on margin transactions;
Elimination of fundamental restriction on short sales;
Elimination of fundamental restriction on investments in oil, gas and
mineral leases and programs;
Elimination of fundamental restriction on investments in other investment
companies;
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED
FOR AGAINST SHARES ABSTAIN
------------ ------------ --------------
<S> <C> <C> <C>
California Tax-Free Income Fund........ 9,292,983 81,319 431,696
National Tax-Free Income Fund.......... 19,181,879 346,358 945,344
Municipal High Income Fund............. 5,203,624 95,169 309,966
New York Tax-Free Income Fund.......... 2,644,032 41,582 239,239
</TABLE>
- -------
(Broker non-votes and abstentions are included within the "Shares Withhold
Authority" and "Shares Abstain" totals.)
45
