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TITLE TREASURER
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Board of Trustees
PaineWebber Mutual Fund Trust
In planning and performing our audit of the financial statements of
PaineWebber Mutual Fund Trust (comprising, respectively, the PaineWebber
California Tax-Free Income Fund and the PaineWebber National Tax-Free
Income Fund) for the year ended February 28, 1997, we considered its
internal control structure, including procedures for safeguarding
securities, in order to determine our auditing procedures for the purpose
of expressing our opinion on the financial statements and to comply with
the requirements of Form N-SAR, not to provide assurance on the internal
control structure.
The management of PaineWebber Mutual Fund Trust is responsible for
establishing and maintaining an internal control structure. In fulfilling
this responsibility, estimates and judgments by management are required to
assess the expected benefits and related costs of internal control structure
policies and procedures. Two of the objectives of an internal control
structure are to provide management with reasonable, but not absolute,
assurance that assets are safeguarded against loss from unauthorized use or
disposition and that transactions are executed in accordance with management's
authorization and recorded properly to permit preparation of financial
statements in conformity with generally accepted accounting principles.
Because of inherent limitations in any internal control structure, errors or
irregularities may occur and not be detected. Also, projection of any
evaluation of the structure to future periods is subject to the risk that it
may become inadequate because of changes in conditions or that the
effectiveness of the design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the design or
operation of the specific internal control structure elements does not reduce
to a relatively low level the risk that errors or irregularities in amounts
that would be material in relation to the financial statements being audited
may occur and not be detected within a timely period by employees in the
normal course of performing their assigned functions. However, we noted no
matters involving the internal control structure, including procedures for
safeguarding securities, that we consider to be material weaknesses as defined
above as of February 28, 1997.
This report is intended solely for the information and use of management and
the Securities and Exchange Commission.
ERNST & YOUNG LLP
April 7, 1997
<PAGE>
For period ending February 28, 1997
File number 811-4312 Exhibit 77D
PaineWebber Mutual Fund Trust
California Tax-Free Income Fund and National Tax-Free Income Fund
amended its non-fundamental investment policies to permit investment
in municipal securities rated below investment grade.
<PAGE>
FORM 10f-3 FUND: National Tax-Free Income Fund
Record of Securities Purchased Under the Fund's Rule 10f-3 Procedures
1. Issuer: Cal Met Wtr
Date of Purchase: 11-27-96
3. Date offering commenced: 11-26-96
4. Underwriters from whom purchased: B-S/250 S-B/250 Leh/100 ML/250
M-S/150 Pru/125
5. "Affiliated Underwriter" managing or participating in syndicate:
PaineWebber
6. Aggregate principal amount of purchase: Market Value 10,007,223
7. Aggregate principal amount of offering: 377,500M
8. Purchase price (net of fees and expenses): 90 7/8
9. Initial public offering price: 90 7/8
10. Commission, spread or profit: % $ 5.50
11. Have the following conditions been satisfied? YES NO
a. The securities are part of an issue registered
under the Securities Act of 1933 which is being
offered to the public or are "municipal securities"
as defined in Section 3(a)(29) of the Securities
Exchange Act of 1934. ____X___
b. The securities were purchased prior to the
end of the end first full business day of the
offering at not more than the initial offering
price (or, if a rights offering, the securities
were purchased on or before the fourth day
preceding the day on which the offering
terminated. ____X___
c. The underwriting was a firm commitment
underwriting. ___X___
d. The commission, spread or profit was
reasonable and fair in relation to that being
received by others for underwriting similar
securities during the same period. ____X___
e. (1) If securities are registered under
the Securities Act of 1933, the issuer of the
securities and its predecessor have been in
continuous operation for not less than three years. ____X___
(2) If securities are municipal securities,
the issue of securities has received an investment
grade rating from a nationally recognized
statistical rating organization or, if the
issuer or entity supplying the revenues from
which the issue is to be paid shall have been
in continuous operation for less than three
years (including any predecessor), the issue has
received one of the three highest ratings from
at least one such rating organization. ____X___
f. The amount of such securities purchased
by all of the investment companies advised by
Mitchell Hutchins did not exceed 4% of the
principal amount of the offering or $500,000
in principal amount, whichever is greater,
provided that in no event did such amount
exceed 10% of the principal amount of the offering. ____X___
g. The purchase price was less than 3% of the
Fund's total assets. ____X___
h. No Affiliated Underwriter was a direct or
indirect participant in or beneficiary of the sale
or, with respect to municipal securities, no
purchases were designated as group sales or
otherwise allocated to the account of any
Affiliated Underwriter. ____X___
Approved: Richard S. Murphy Date: December 2, 1996
<PAGE>
FORM 10f-3 FUND: National Tax-Free Income Fund
Record of Securities Purchased Under the Fund's Rule 10f-3 Procedures
1. Issuer: New York State Dormanth City University
2. Date of Purchase: 8-30-96
3. Date offering commenced: 8-28-96
4. Underwriters from whom purchased: Smith Barney
5. "Affiliated Underwriter" managing or participating in syndicate:
PaineWebber
6. Aggregate principal amount of purchase: 11,982,115.8
7. Aggregate principal amount of offering: 395,250,000
8. Purchase price (net of fees and expenses): 102.938 - 7-1-02
/ 102.79 7-1-03
9. Initial public offering price: 102.538 - 7-1-02 / 102.75 7-1-03
10. Commission, spread or profit: --% $ --
11. Have the following conditions been satisfied? YES NO
a. The securities are part of an issue registered
under the Securities Act of 1933 which is being
offered to the public or are "municipal securities"
as defined in Section 3(a)(29) of the Securities
Exchange Act of 1934. ____X___
b. The securities were purchased prior to the
end of the end first full business day of the
offering at not more than the initial offering
price (or, if a rights offering, the securities
were purchased on or before the fourth day
preceding the day on which the offering
terminated. ____X__
c. The underwriting was a firm commitment
underwriting. ___X___
d. The commission, spread or profit was
reasonable and fair in relation to that being
received by others for underwriting similar
securities during the same period. ____X___
e. (1) If securities are registered under
the Securities Act of 1933, the issuer of the
securities and its predecessor have been in
continuous operation for not less than three years. ____X_
(2) If securities are municipal securities,
the issue of securities has received an investment
grade rating from a nationally recognized
statistical rating organization or, if the
issuer or entity supplying the revenues from
which the issue is to be paid shall have been
in continuous operation for less than three
years (including any predecessor), the issue has
received one of the three highest ratings from
at least one such rating organization. ____X___
f. The amount of such securities purchased
by all of the investment companies advised by
Mitchell Hutchins did not exceed 4% of the
principal amount of the offering or $500,000
in principal amount, whichever is greater,
provided that in no event did such amount
exceed 10% of the principal amount of the offering. ____X___
g. The purchase price was less than 3% of the
Fund's total assets. ____X___
h. No Affiliated Underwriter was a direct or
indirect participant in or beneficiary of the sale
or, with respect to municipal securities, no
purchases were designated as group sales or
otherwise allocated to the account of any
Affiliated Underwriter. ____X___
Approved: Richard S. Murphy Date: December 2, 1996
<PAGE>
FORM 10f-3 FUND: National Tax-Free Income Fund
Record of Securities Purchased Under the Fund's Rule 10f-3 Procedures
1. Issuer: MAC for New York City
2. Date of Purchase: 4-26-96
3. Date offering commenced: 4-24-96
4. Underwriters from whom purchased: Goldman Sachs
5. "Affiliated Underwriter" managing or participating in syndicate:
PaineWebber
6. Aggregate principal amount of purchase: 4MM
7. Aggregate principal amount of offering: 820MM
8. Purchase price (net of fees and expenses): 4.55 YTM
9. Initial public offering price: 4/53 YTM
10. Commission, spread or profit: % $ 5.00
11. Have the following conditions been satisfied? YES NO
a. The securities are part of an issue registered
under the Securities Act of 1933 which is being
offered to the public or are "municipal securities"
as defined in Section 3(a)(29) of the Securities
Exchange Act of 1934. ____X___
b. The securities were purchased prior to the
end of the end first full business day of the
offering at not more than the initial offering
price (or, if a rights offering, the securities
were purchased on or before the fourth day
preceding the day on which the offering
terminated. ____X___
c. The underwriting was a firm commitment
underwriting. _______
d. The commission, spread or profit was
reasonable and fair in relation to that being
received by others for underwriting similar
securities during the same period. ____X___
e. (1) If securities are registered under
the Securities Act of 1933, the issuer of the
securities and its predecessor have been in
continuous operation for not less than three years. ____X___
(2) If securities are municipal securities,
the issue of securities has received an investment
grade rating from a nationally recognized
statistical rating organization or, if the
issuer or entity supplying the revenues from
which the issue is to be paid shall have been
in continuous operation for less than three
years (including any predecessor), the issue has
received one of the three highest ratings from
at least one such rating organization. ____X___
f. The amount of such securities purchased
by all of the investment companies advised by
Mitchell Hutchins did not exceed 4% of the
principal amount of the offering or $500,000
in principal amount, whichever is greater,
provided that in no event did such amount
exceed 10% of the principal amount of the offering. ____X___
g. The purchase price was less than 3% of the
Fund's total assets. ____X___
h. No Affiliated Underwriter was a direct or
indirect participant in or beneficiary of the sale
or, with respect to municipal securities, no
purchases were designated as group sales or
otherwise allocated to the account of any
Affiliated Underwriter. ____X___
Approved: Richard S. Murphy Date: December 2, 1996
<PAGE>
FORM 10f-3 FUND: National Tax-Free Income Fund
Record of Securities Purchased Under the Fund's Rule 10f-3 Procedures
1. Issuer: Puerto Rico Highway
2. Date of Purchase: 3-29-96
3. Date offering commenced: 3-29-96
4. Underwriters from whom purchased: Merrill Lynch
5. "Affiliated Underwriter" managing or participating in syndicate:
PaineWebber
6. Aggregate principal amount of purchase: 8,225MM
7. Aggregate principal amount of offering: 1,075MM
8. Purchase price (net of fees and expenses): 5.75N
9. Initial public offering price: 5.75N
10. Commission, spread or profit: % $ 6.25
11. Have the following conditions been satisfied? YES NO
a. The securities are part of an issue registered
under the Securities Act of 1933 which is being
offered to the public or are "municipal securities"
as defined in Section 3(a)(29) of the Securities
Exchange Act of 1934. ____X___
b. The securities were purchased prior to the
end of the end first full business day of the
offering at not more than the initial offering
price (or, if a rights offering, the securities
were purchased on or before the fourth day
preceding the day on which the offering
terminated. ____X___
c. The underwriting was a firm commitment
underwriting. ___X___
d. The commission, spread or profit was
reasonable and fair in relation to that being
received by others for underwriting similar
securities during the same period. ____X___
e. (1) If securities are registered under
the Securities Act of 1933, the issuer of the
securities and its predecessor have been in
continuous operation for not less than three years. ____X___
(2) If securities are municipal securities,
the issue of securities has received an investment
grade rating from a nationally recognized
statistical rating organization or, if the
issuer or entity supplying the revenues from
which the issue is to be paid shall have been
in continuous operation for less than three
years (including any predecessor), the issue has
received one of the three highest ratings from
at least one such rating organization. ____X___
f. The amount of such securities purchased
by all of the investment companies advised by
Mitchell Hutchins did not exceed 4% of the
principal amount of the offering or $500,000
in principal amount, whichever is greater,
provided that in no event did such amount
exceed 10% of the principal amount of the offering. ____X___
g. The purchase price was less than 3% of the
Fund's total assets. ____X___
h. No Affiliated Underwriter was a direct or
indirect participant in or beneficiary of the sale
or, with respect to municipal securities, no
purchases were designated as group sales or
otherwise allocated to the account of any
Affiliated Underwriter. ____X___
Approved: Richard S. Murphy Date: December 2, 1996
<PAGE>
FORM 10f-3 FUND: National Tax-Free Income Fund
Record of Securities Purchased Under the Fund's Rule 10f-3 Procedures
1. Issuer: Texas Wtr
2. Date of Purchase: 3-21-96
3. Date offering commenced: 3-20-96
4. Underwriters from whom purchased: Smith Barney
5. "Affiliated Underwriter" managing or participating in syndicate:
PaineWebber
6. Aggregate principal amount of purchase: 5,605M
7. Aggregate principal amount of offering: 200MM
8. Purchase price (net of fees and expenses): 107.104
9. Initial public offering price: 107.104
10. Commission, spread or profit: % $ 5.00
11. Have the following conditions been satisfied? YES NO
a. The securities are part of an issue registered
under the Securities Act of 1933 which is being
offered to the public or are "municipal securities"
as defined in Section 3(a)(29) of the Securities
Exchange Act of 1934. ____X___
b. The securities were purchased prior to the
end of the end first full business day of the
offering at not more than the initial offering
price (or, if a rights offering, the securities
were purchased on or before the fourth day
preceding the day on which the offering
terminated. ____X___
c. The underwriting was a firm commitment
underwriting. ___X___
d. The commission, spread or profit was
reasonable and fair in relation to that being
received by others for underwriting similar
securities during the same period. ____X___
e. (1) If securities are registered under
the Securities Act of 1933, the issuer of the
securities and its predecessor have been in
continuous operation for not less than three years. ____X___
(2) If securities are municipal securities,
the issue of securities has received an investment
grade rating from a nationally recognized
statistical rating organization or, if the
issuer or entity supplying the revenues from
which the issue is to be paid shall have been
in continuous operation for less than three
years (including any predecessor), the issue has
received one of the three highest ratings from
at least one such rating organization. ____X___
f. The amount of such securities purchased
by all of the investment companies advised by
Mitchell Hutchins did not exceed 4% of the
principal amount of the offering or $500,000
in principal amount, whichever is greater,
provided that in no event did such amount
exceed 10% of the principal amount of the offering. ____X___
g. The purchase price was less than 3% of the
Fund's total assets. ____X___
h. No Affiliated Underwriter was a direct or
indirect participant in or beneficiary of the sale
or, with respect to municipal securities, no
purchases were designated as group sales or
otherwise allocated to the account of any
Affiliated Underwriter. ____X___
Approved: Richard S. Murphy Date: December 2, 1996
<PAGE>
FORM 10f-3 FUND: National Tax-Free Income Fund
Record of Securities Purchased Under the Fund's Rule 10f-3 Procedures
1. Issuer: Gainesville Florida Utility
2. Date of Purchase: 2-2-96
3. Date offering commenced: 2-2-96
4. Underwriters from whom purchased: Goldman Sachs
5. "Affiliated Underwriter" managing or participating in syndicate:
PaineWebber
6. Aggregate principal amount of purchase: 1,000M
7. Aggregate principal amount of offering: 142MM
8. Purchase price (net of fees and expenses): 5.28
9. Initial public offering price: 5.28
10. Commission, spread or profit: .05 % $
11. Have the following conditions been satisfied? YES NO
a. The securities are part of an issue registered
under the Securities Act of 1933 which is being
offered to the public or are "municipal securities"
as defined in Section 3(a)(29) of the Securities
Exchange Act of 1934. ____X___
b. The securities were purchased prior to the
end of the end first full business day of the
offering at not more than the initial offering
price (or, if a rights offering, the securities
were purchased on or before the fourth day
preceding the day on which the offering
terminated. ____X___
c. The underwriting was a firm commitment
underwriting. ___X___
d. The commission, spread or profit was
reasonable and fair in relation to that being
received by others for underwriting similar
securities during the same period. ____X___
e. (1) If securities are registered under
the Securities Act of 1933, the issuer of the
securities and its predecessor have been in
continuous operation for not less than three years. ____X___
(2) If securities are municipal securities,
the issue of securities has received an investment
grade rating from a nationally recognized
statistical rating organization or, if the
issuer or entity supplying the revenues from
which the issue is to be paid shall have been
in continuous operation for less than three
years (including any predecessor), the issue has
received one of the three highest ratings from
at least one such rating organization. ____X___
f. The amount of such securities purchased
by all of the investment companies advised by
Mitchell Hutchins did not exceed 4% of the
principal amount of the offering or $500,000
in principal amount, whichever is greater,
provided that in no event did such amount
exceed 10% of the principal amount of the offering. ____X___
g. The purchase price was less than 3% of the
Fund's total assets. ____X___
h. No Affiliated Underwriter was a direct or
indirect participant in or beneficiary of the sale
or, with respect to municipal securities, no
purchases were designated as group sales or
otherwise allocated to the account of any
Affiliated Underwriter. ____X___
Approved: Richard S. Murphy Date: December 2, 1996
<PAGE>
FORM 10f-3 FUND: California Tax-Free Income Fund
Record of Securities Purchased Under the Fund's Rule 10f-3 Procedures
1. Issuer: Metropolitan Water District of Southern California
2. Date of Purchase: 2-15-96
3. Date offering commenced: 2-15-96
4. Underwriters from whom purchased: Smith Barney
5. "Affiliated Underwriter" managing or participating in syndicate:
PaineWebber
6. Aggregate principal amount of purchase: 5,280.00
7. Aggregate principal amount of offering: 259,075.00
8. Purchase price (net of fees and expenses): 93.829
9. Initial public offering price: 93,829
10. Commission, spread or profit: % $ 6.18
11. Have the following conditions been satisfied? YES NO
a. The securities are part of an issue registered
under the Securities Act of 1933 which is being
offered to the public or are "municipal securities"
as defined in Section 3(a)(29) of the Securities
Exchange Act of 1934. ____X___
b. The securities were purchased prior to the
end of the end first full business day of the
offering at not more than the initial offering
price (or, if a rights offering, the securities
were purchased on or before the fourth day
preceding the day on which the offering
terminated. ____X___
c. The underwriting was a firm commitment
underwriting. ___X___
d. The commission, spread or profit was
reasonable and fair in relation to that being
received by others for underwriting similar
securities during the same period. ____X___
e. (1) If securities are registered under
the Securities Act of 1933, the issuer of the
securities and its predecessor have been in
continuous operation for not less than three years. ____X___
(2) If securities are municipal securities,
the issue of securities has received an investment
grade rating from a nationally recognized
statistical rating organization or, if the
issuer or entity supplying the revenues from
which the issue is to be paid shall have been
in continuous operation for less than three
years (including any predecessor), the issue has
received one of the three highest ratings from
at least one such rating organization. ____X___
f. The amount of such securities purchased
by all of the investment companies advised by
Mitchell Hutchins did not exceed 4% of the
principal amount of the offering or $500,000
in principal amount, whichever is greater,
provided that in no event did such amount
exceed 10% of the principal amount of the offering. ____X___
g. The purchase price was less than 3% of the
Fund's total assets. ____X___
h. No Affiliated Underwriter was a direct or
indirect participant in or beneficiary of the sale
or, with respect to municipal securities, no
purchases were designated as group sales or
otherwise allocated to the account of any
Affiliated Underwriter. ____X___
Approved: Cynthia Bow Date: February 1996
