<PAGE>
PAINEWEBBER TAX-FREE BOND FUNDS SEMIANNUAL REPORT
Dear Shareholder, October 16, 2000
We are pleased to present you with the semiannual report for PaineWebber
California Tax-Free Income Fund, PaineWebber National Tax-Free Income Fund,
PaineWebber Municipal High Income Fund and PaineWebber New York Tax-Free Income
Fund for the six-month period ended August 31, 2000.
MARKET REVIEW
[ICON] During the six-month period ended August 31, 2000, market sentiment
toward the fixed-income markets changed dramatically for the better. A
broad-based decline in stock prices triggered renewed interest in the relative
stability of fixed-income investments. In addition, investors reacted favorably
to evidence that the Federal Reserve Board's tight monetary policy of raising
short-term interest rates was having the desired effect of containing inflation
and slowing the pace of economic growth. In general, an environment of
relatively low inflation and moderate economic growth is positive for bonds.
In the tax-exempt area of the market, many state and local municipalities
enjoyed continued prosperity. Several years of robust economic growth and low
unemployment have boosted property tax valuations and tax revenues. As a result,
the coffers of many municipalities are relatively full.
Both municipal and high-yield municipal bonds rallied during the period;
however, the performance of high-yield bonds lagged that of higher-rated
securities. Nevertheless, the performance of the municipal market, as measured
by the Lehman Brothers Municipal Bond Index, rose 6.79% for the six months ended
August 31, 2000. For the same period, municipal bonds outperformed the taxable
bond market. The Lehman Brothers Aggregate Bond Index, which tracks the
performance of taxable bonds, gained 5.53%.
OUTLOOK
Because the bond market has advanced significantly during the past six
months, it is possible that it will take a breather in the short term before
continuing its positive trend. Recent economic data indicate that the Federal
Reserve Board may have achieved its goal of a "soft landing," one in which the
economy slows but does not move into recession. If so, there may be no further
interest-rate hikes. An environment of moderate economic growth and relatively
stable interest rates should be positive for fixed-income investments.
1
<PAGE>
SEMIANNUAL REPORT
PAINEWEBBER CALIFORNIA TAX-FREE INCOME FUND
PAINEWEBBER CALIFORNIA TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN, PERIODS ENDED 8/31/00
6 Months 1 Year 5 Years 10 Years Inception(0)
<S> <C> <C> <C> <C> <C> <C>
CLASS A* 8.91% 7.88% 5.63% 6.50% 7.49%
Before Deducting CLASS B** 8.38 6.94 4.81 N/A 5.54
Maximum Sales Charge
CLASS C+ 8.53 7.33 5.08 N/A 4.90
CLASS Y++ 8.96 8.05 N/A N/A 4.18
CLASS A* 4.59 3.57 4.77 6.07 7.20
After Deducting CLASS B** 3.38 1.94 4.48 N/A 5.54
Maximum Sales Charge
CLASS C+ 7.78 6.58 5.08 N/A 4.90
LB Municipal Bond Index 6.79 6.77 6.03 7.38 8.43
Lipper California Municipal 7.99 6.90 5.68 6.94 8.28
Debt Funds Median
</TABLE>
The investment return and the principal value of an investment in the Fund will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost. Six-month and one-year returns are cumulative.
(0) Inception: since commencement of issuance on September 16, 1985 for Class A
shares, July 1, 1991 for Class B shares, July 2, 1992 for Class C shares and
February 5, 1998 for Class Y shares. Index and Lipper Median inception
returns are as of oldest share class inception.
* Maximum sales charge for Class A shares is 4% of the public offering price.
Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5% and is
reduced to 0% after six years. Class B shares bear ongoing 12b-1
distribution and service fees.
+ Maximum contingent deferred sales charge for Class C shares is 0.75% and is
reduced to 0% after one year. Class C shares bear ongoing 12b-1 distribution
and service fees.
++ The Fund offers Class Y shares to a limited group of eligible investors,
including participants in certain investment programs that are sponsored by
PaineWebber and that may invest in PaineWebber mutual funds. Class Y shares
do not bear initial or contingent deferred sales charges or ongoing 12b-1
distribution and service fees.
PORTFOLIO HIGHLIGHTS
For the six-month period ended August 31, 2000, all share classes
outperformed both the Lipper California Municipal Debt Median and the Lipper
Municipal Bond Index. An average duration (a measure of a bond portfolio's
sensitivity to interest rate changes) that was shorter than the benchmark helped
contribute to the positive performance, and overweighting in the 15-to-20 year
area of the yield curve continued to aid performance.
Lower bond supply and increased demand have continued to benefit the
short-maturity end of the municipal curve. The curve has begun to steepen on the
long end, however, as long bonds have responded positively to the probability
that interest rates will remain stable at least through year-end. Bullish
sentiment marked May and especially June, when reinvested cash and the
expiration of June municipal bond futures helped to bolster the market. Demand
for California issues has been strong, with 10-year bonds performing 25 to 30
basis points higher than their AAA counterparts, which represent the strongest
national general
[SIDENOTE]
INVESTMENT GOAL:
High current income exempt from federal income tax and California personal
income tax
PORTFOLIO MANAGER:
Elbridge T. Gerry, III
Mitchell Hutchins Asset Management Inc.
COMMENCEMENT:
September 16, 1985 (Class A)
July 1, 1991 (Class B)
July 2, 1992 (Class C)
February 5, 1998 (Class Y)
DIVIDEND PAYMENTS:
Monthly
2
<PAGE>
PAINEWEBBER TAX-FREE BOND FUNDS SEMIANNUAL REPORT
obligation bonds. (A basis point equals 1/100 of one percent.)
In June, we added two new bonds to our portfolio. One, issued by San
Francisco International Airport (2.4%),* was deeply discounted and added nine
basis points in yield. This purchase makes the airport sector one of the top
five in the Fund. The other bond, Little Lake City School District (0.9%),* was
purchased as a premium coupon bond, providing an opportunity to buy a larger
coupon with a minimal price premium.
Going forward, the Fund is poised to take advantage of opportunities
presented in the market. Both weighted average duration and weighted average
maturity have shortened since the beginning of the period. As has been the case
for most of this year, we expect the 15-20 year area of the municipal yield
curve to remain the most attractive.
PROPOSED FUND MERGER
On October 6, 2000, the board of trustees unanimously approved the merger of
the PaineWebber California Tax-Free Income Fund into the MFS California
Municipal Bond Fund. The proposed merger will be submitted to shareholders at
meetings expected to be held in February 2001. If approved by the PaineWebber
fund's shareholders, the merger is expected to become effective in March 2001.
More information about the proposed merger for the PaineWebber California
Tax-Free Income Fund is set out in the October 10, 2000 supplement to the
prospectus dated June 30, 2000 and additional information will be provided to
shareholders in proxy solicitation materials that are expected to be mailed in
December 2000.
PAINEWEBBER CALIFORNIA TAX-FREE INCOME FUND--PORTFOLIO STATISTICS
<TABLE>
<CAPTION>
CHARACTERISTICS* 8/31/00 2/29/00
------------------------------------------------------------------
<S> <C> <C>
Weighted Average Duration 7.8 yrs 8.9 yrs
Weighted Average Maturity 18.2 yrs 19.6 yrs
AMT Paper (%) 11.6% 11.3%
Net Assets ($mm) $127.4 $126.8
------------------------------------------------------------------
<CAPTION>
TOP FIVE SECTORS* 8/31/00 2/29/00
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax Allocation 14.7% Tax Allocation 15.5%
Power 13.9 Power 13.6
General Obligation 12.9 General Obligation 11.1
Special Tax 9.7 Special Tax 9.0
Airport 8.2 Water 8.9
---------------------------------------------------------------------------------------
Total 59.4 Total 58.1
</TABLE>
* Weightings represent percentages of net assets as of the dates indicated. The
Fund's portfolio is actively managed and its composition will vary over time.
3
<PAGE>
SEMIANNUAL REPORT
PAINEWEBBER CALIFORNIA TAX-FREE INCOME FUND -- PORTFOLIO STATISTICS
<TABLE>
<CAPTION>
CREDIT QUALITY* 8/31/00 2/29/00
--------------------------------------------------------------------------------
<S> <C> <C>
Cash 0.2% 0.8%
AAA 57.8 55.5
AA 6.2 8.5
A 4.9 5.1
BBB 17.9 16.4
Non-Rated 13.0 13.7
--------------------------------------------------------------------------------
Total 100.0 100.0
</TABLE>
PAINEWEBBER NATIONAL TAX-FREE
INCOME FUND
================================================================================
PAINEWEBBER NATIONAL TAX-FREE INCOME FUND
AVERAGE ANNUAL TOTAL RETURN, PERIODS ENDED 8/31/00
<TABLE>
<CAPTION>
6 Months 1 Year 5 Years 10 Years Inception(0)
<S> <C> <C> <C> <C> <C> <C>
CLASS A* 6.49% 5.67% 5.06% 6.35% 7.73%
Before Deducting CLASS B** 5.98 4.84 4.23 N/A 5.42
Maximum Sales Charge
CLASS C+ 6.11 5.02 4.50 N/A 4.67
CLASS Y++ 6.62 5.92 N/A N/A 4.94
CLASS A* 2.27 1.46 4.20 5.91 7.45
After Deducting CLASS B** 0.98 -0.15 3.90 N/A 5.42
Maximum Sales Charge
CLASS C+ 5.36 4.27 4.50 N/A 4.67
LB Municipal Bond Index 6.79 6.77 6.03 7.38 8.82
Lipper General Municipal
Debt Funds Median 6.39 5.24 5.07 6.77 8.30
</TABLE>
The investment return and the principal value of an investment in the Fund will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost. Six-month and one-year returns are cumulative.
(0) Inception: since commencement of issuance on December 3, 1984 for Class A
shares, July 1, 1991 for Class B shares, July 2, 1992 for Class C shares and
November 3, 1995 for Class Y shares. Index and Lipper Median inception
returns are as of oldest share class inception.
* Maximum sales charge for Class A shares is 4% of the public offering price.
Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5% and is
reduced to 0% after six years. Class B shares bear ongoing 12b-1
distribution and service fees.
+ Maximum contingent deferred sales charge for Class C shares is 0.75% and is
reduced to 0% after one year. Class C shares bear ongoing 12b-1 distribution
and service fees.
++ The Fund offers Class Y shares to a limited group of eligible investors,
including participants in certain investment programs that are sponsored by
PaineWebber and that may invest in PaineWebber mutual funds. Class Y shares
do not bear initial or contingent deferred sales charges or ongoing 12b-1
distribution and service fees.
[SIDENOTE]
INVESTMENT GOAL:
High current income exempt from federal income tax consistent with the
preservation of capital and liquidity
PORTFOLIO MANAGER:
Elbridge T. Gerry, III
Mitchell Hutchins Asset
Management Inc
COMMENCEMENT:
December 3, 1984 (Class A)
July 1, 1991 (Class B)
July 2, 1992 (Class C)
November 3, 1995 (Class Y)
DIVIDEND PAYMENTS:
Monthly
4
<PAGE>
PAINEWEBBER TAX-FREE BOND FUNDS SEMIANNUAL REPORT
PORTFOLIO HIGHLIGHTS
On the heels of the huge Treasury debt buyback in February, the period began
positively as the Fund returned 2.2% in March. April, however, was a different
story as the economy continued to overheat, prompting speculation of yet another
interest rate increase by the Federal Reserve. Both Treasurys and the municipal
market stalled while awaiting the latest interest rate hike in mid-May. Since
then, the economy has stabilized, interest rates are predicted to remain stable
through the end of the year and bond markets, in general, have rebounded.
For the six-month period ended August 31, 2000, the Fund's various share
classes were in line with or slightly lower than the Lehman Brothers Municipal
Bond Index and the Lipper General Municipal Debt Funds Median, with Class A
shares returning 6.49%.
Strong market momentum marked most of the summer, as mostly comforting
economic news combined with a scarcity of new issues, particularly in the
10-year range. This lower bond supply has limited the opportunities to acquire
premium coupon bonds, but we have found relative value in the 15-25 year range
of the municipal yield curve.
California 10-year bonds in particular continue to perform strongly,
outperforming the AAA ten-year by 25-30 basis points. (A basis point equals
1/100th of one percent.) Other states also have shown such relative value
compared to the AAA ten-year. More than half of our portfolio consists of debt
from Texas, Illinois, New York, California and Indiana.
We will continue to monitor credit quality in the secondary markets which
featured some poorly structured bonds, as well as the yield curve, which has
increased on the long maturity end in recent months. The curve tends to flatten
during interest rate increases and steepens at the end of most interest rate
tightening cycles. The announced intention by the Treasury in August to buy back
$750 million in shorter-term debt also marks the first time in almost a year
that 30-year bonds remain relatively untouched by the buyback, which may temper
enthusiasm on the long end of the Treasury yield curve.
PROPOSED MERGER AND NEW FUND MANAGEMENT
================================================================================
On October 6, 2000, the board of trustees unanimously approved
the merger of the PaineWebber National Tax-Free Income Fund into the PACE
Municipal Fixed Income Investments. The proposed merger will be submitted to
shareholders at meetings expected to be held in January 2001. If approved by the
PaineWebber fund's shareholders, the merger is expected to become effective no
later than early March 2001.
On October 6, 2000, the board of trustees for the PaineWebber fund terminated
the existing Investment Advisory and Administration Contract with Mitchell
Hutchins relating to that PaineWebber fund and approved new interim investment
management arrangements that became effective on October 10, 2000, including a
new interim sub-advisory contract with Standish, Ayer & Wood, Inc. who took over
day-to-day portfolio management of the fund effective October 10, 2000.
More information about the proposed merger for the PaineWebber National
Tax-Free Income Fund and the new investment management
5
<PAGE>
SEMIANNUAL REPORT
arrangements and the related investment strategy changes is set out in the
October 10, 2000 supplement to the prospectus dated June 30, 2000 and additional
information will be provided to shareholders in proxy solicitation materials
that are expected to be mailed in November 2000.
PAINEWEBBER NATIONAL TAX-FREE INCOME FUND -- PORTFOLIO STATISTICS
<TABLE>
<CAPTION>
CHARACTERISTICS* 8/31/00 2/29/00
---------------------------------------------------------------------------------------
<S> <C> <C>
Weighted Average Duration 7.4 yrs 8.0 yrs
Weighted Average Maturity 18.2 yrs 18.2 yrs
AMT Paper (%) 13.8% 12.8%
Net Assets ($mm) $248.2 $250.2
---------------------------------------------------------------------------------------
<CAPTION>
TOP FIVE SECTORS* 8/31/00 2/29/00
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Power 16.2% Power 16.1%
General Obligation 15.2 General Obligation 12.8
Water 13.0 Toll 11.6
Lease 12.3 Lease 9.4
Toll 9.0 Water 7.9
---------------------------------------------------------------------------------------
Total 65.7 Total 57.8
<CAPTION>
TOP FIVE STATES* 8/31/00 2/29/00
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Texas 19.0% Texas 16.9%
Illinois 12.7 Illinois 13.8
California 9.0 New York 8.5
New York 7.3 California 8.4
Indiana 6.0 New Jersey 8.3
---------------------------------------------------------------------------------------
Total 54.0 Total 55.8
<CAPTION>
CREDIT QUALITY* 8/31/00 2/29/00
---------------------------------------------------------------------------------------
<S> <C> <C>
SP1 & A1 -- 3.2%
AAA 43.5% 41.4
AA 15.4 14.6
A 5.8 7.1
BBB 12.3 13.1
BB 2.8 2.8
Non-Rated 18.3 17.8
Cash 1.9 --
---------------------------------------------------------------------------------------
Total 100.0 100.0
</TABLE>
*Weightings represent percentages of net assets as of the dates
indicated. The Fund's portfolio is actively managed and its composition will
vary over time.
6
<PAGE>
PAINEWEBBER TAX-FREE BOND FUNDS SEMIANNUAL REPORT
PAINEWEBBER MUNICIPAL HIGH INCOME FUND
================================================================================
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN, PERIODS ENDED 8/31/00
6 Months 1 Year 5 Years 10 Years Inception(0)
<S> <C> <C> <C> <C> <C> <C>
CLASS A* 3.38% 1.02% 5.16% 6.66% 7.06%
Before Deducting CLASS B** 3.08 0.24 4.36 N/A 5.68
Maximum Sales Charge
CLASS C+ 3.22 0.50 4.63 N/A 4.74
CLASS Y++ 3.55 1.27 N/A N/A 1.74
CLASS A* -0.75 -2.98 4.32 6.22 6.73
After Deducting CLASS B** -1.92 -4.51 4.03 N/A 5.68
Maximum Sales Charge
CLASS C+ 2.47 -0.21 4.63 N/A 4.74
LB Municipal Bond Index 6.79 6.77 6.03 7.38 7.54
Lipper High Yield Municipal
Debt Funds Median 3.95 1.27 4.82 6.35 7.05
</TABLE>
The investment return and the principal value of an investment in the Fund will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost. Six-month and one-year returns are cumulative.
(0) Inception: since commencement of issuance on June 23, 1987 for Class A
shares, July 1, 1991 for Class B shares, July 2, 1992 for Class C shares and
February 5, 1998 for Class Y shares. Index and Lipper Median inception
returns are as of oldest share class inception.
* Maximum sales charge for Class A shares is 4% of the public offering price.
Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5% and is
reduced to 0% after six years. Class B shares bear ongoing 12b-1
distribution and service fees.
+ Maximum contingent deferred sales charge for Class C shares is 0.75% and is
reduced to 0% after one year. Class C shares bear ongoing 12b-1 distribution
and service fees.
++ The Fund offers Class Y shares to a limited group of eligible investors,
including participants in certain investment programs that are sponsored by
PaineWebber and that may invest in PaineWebber mutual funds. Class Y shares
do not bear initial or contingent deferred sales charges or ongoing 12b-1
distribution and service fees.
PORTFOLIO HIGHLIGHTS
While bonds across the board rallied during the six-month period ended August
31, 2000, the performance of high-yield bonds trailed that of higher-rated
securities.
High-yield securities were affected by countervailing forces. On one hand,
they benefited from declining long-term interest rates and higher bond prices.
On the other hand, their performance was held back, because as investors
returned to the fixed-income markets, they tended to favor higher-quality
issues. The possibility of slower economic growth also dampened the
attractiveness of high-yield securities. Investors became concerned that a
decline in economic growth would adversely affect companies that issue
high-yield securities more than it would affect companies that issue
investment-grade securities.
During the period, the Federal Reserve Board continued to raise short-term
interest rates, but even as short-term rates rose, long-term interest rates
declined. Because interest rates and bond prices move in opposite directions,
the drop in
[SIDENOTE]
PAINEWEBBER MUNICIPAL HIGH INCOME FUND
INVESTMENT GOAL:
High current income exempt from federal income tax
PORTFOLIO MANAGERS:
Elbridge T. Gerry, III
William W. Veronda
Mitchell Hutchins Asset Management Inc.
COMMENCEMENT:
June 23, 1987 (Class A)
July 1, 1991 (Class B)
July 2, 1992 (Class C)
February 5, 1998 (Class Y)
DIVIDEND PAYMENTS:
Monthly
7
<PAGE>
SEMIANNUAL REPORT
long-term rates aided the Fund. As long-term rates fell, the prices generally
rose on the existing long-term bonds in the portfolio.
In managing the portfolio, we maintained our discipline of seeking value
in various fixed-income sectors. We tended to favor investments in the power,
leisure, paper, airlines and lease-financing areas of the market. We avoided
sectors such as healthcare and resource recovery, where economic fundamentals
were unattractive. While we moved cautiously when investing available cash,
we believe we made some attractive purchases.
In March, we purchased Pittsylvania County, VA Industrial Development
Authority bonds. These bonds are secured by a wood-burning electric plant that
operates as one of the more efficient plants in the area. The bonds have a 7.5%
coupon and a relatively short 2014 maturity.
In May, we added Houston Community College District bonds to the portfolio.
We purchased the obligations of this successful district at the lowest prices
prevailing in the bond market at the time.
The monitoring of markets to sell securities that we believe have become
fully valued is a fundamental part of our investment strategy. As a result, the
Fund benefited from the sale of two significant holdings. In May, we sold Loudon
County, Virginia, 71/8% Economic Development Bonds due 2015 when we saw a very
strong bid that we believed represented a price well above the bond's credit
rating.
In August, we sold San Diego County, California bonds secured by Burnham
Research Institute. We purchased this issue in 1999 when many California
offerings temporarily depressed the market. The economics of medical research
have improved considerably since we added these bonds to the portfolio. As a
result, the San Diego County bonds became more highly regarded by investors and
the bonds became fully priced. We used the proceeds from the sale of San Diego
County bonds to purchase Northcumberland County, Pennsylvania bonds.
The Fund's performance was held back by a position in Tooele County Utah
Hazardous Waste Disposal Bonds, which are secured by Laidlaw, a provider of
ambulances, school buses and inter-city buses. In March, Tooele County Bonds
declined significantly, when the company faced a financial crisis. We continue
to hold Tooele Country bonds in the portfolio, and we believe they should
recover significantly over the next year or two.
8
<PAGE>
PAINEWEBBER TAX-FREE BOND FUNDS SEMIANNUAL REPORT
PROPOSED MERGER
On October 6, 2000, the board of trustees unanimously approved the merger of
the PaineWebber Municipal High Income Fund into the MFS Municipal High Income
Fund. The proposed merger will be submitted to shareholders at meetings expected
to be held in February 2001. If approved by the PaineWebber fund's shareholders,
the merger is expected to become effective in March 2001.
More information about the proposed merger for the PaineWebber fund is set
out in the October 10, 2000 supplement to the prospectus dated June 30, 2000 and
additional information will be provided to shareholders in proxy solicitation
materials that are expected to be mailed in December 2000.
PAINEWEBBER MUNICIPAL HIGH INCOME FUND--PORTFOLIO STATISTICS
<TABLE>
<CAPTION>
CHARACTERISTICS* 8/31/00 2/29/00
------------------------------------------------------------------------------
<S> <C> <C>
Weighted Average Maturity 18.2 yrs 17.4 years
AMT PAPER (%) 45.9% 45.6%
Net Assets ($mm) $91.6 $96.6
------------------------------------------------------------------------------
<CAPTION>
TOP FIVE SECTORS* 8/31/00 2/29/00
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Power 21.8% Power 19.4%
Leisure 10.7 Leisure 10.9
Lease 10.6 Paper 8.2
Paper 9.0 Lease 6.8
Airlines 6.7 Airlines 6.1
--------------------------------------------------------------------------------
Total 58.8 Total 51.4
<CAPTION>
CREDIT QUALITY* 8/31/00 2/29/00
--------------------------------------------------------------------------------
<S> <C> <C>
Cash Equivalents 1.9% 5.6%
AAA 0.6 0.6
A 5.0 6.9
BBB 27.9 27.4
BB 19.6 16.2
B ---- 2.0
Non-Rated 45.0 41.3
--------------------------------------------------------------------------------
Total 100.0 100.0
</TABLE>
* Weightings represent percentages of net assets as of the dates indicated.
The Fund's portfolio is actively managed and its composition will vary over
time.
9
<PAGE>
SEMIANNUAL REPORT
PAINEWEBBER NEW YORK TAX-FREE INCOME FUND
================================================================================
AVERAGE ANNUAL TOTAL RETURN, PERIODS ENDED 8/31/00
<TABLE>
<CAPTION>
6 Months 1 Year 5 Years 10 Years Inception(0)
<S> <C> <C> <C> <C> <C> <C>
CLASS A* 6.77% 6.08% 5.45% 6.85% 6.79%
Before Deducting CLASS B** 6.26 5.18 4.63 N/A 5.88
Maximum Sales Charge
CLASS C+ 6.39 5.45 4.90 N/A 5.03
CLASS Y++ 6.91 6.35 N/A N/A 3.45
CLASS A* 2.46 1.87 4.59 6.41 6.43
After Deducting CLASS B** 1.26 0.18 4.30 N/A 5.88
Maximum Sales Charge
CLASS C+ 5.64 4.70 4.90 N/A 5.03
LB Municipal Bond Index 6.79 6.77 6.03 7.38 7.48
Lipper New York Municipal
Debt Funds Median 6.61 5.28 5.17 6.91 7.22
</TABLE>
The investment return and the principal value of an investment in the Fund will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost. Six-month and one-year returns are cumulative.
(0) Inception: since commencement of issuance on September 23, 1988 for Class A
shares, July 1, 1991 for Class B shares, July 2, 1992 for Class C shares and
May 21, 1998 for Class Y shares. Index and Lipper Median inception returns
are as of oldest share class inception.
* Maximum sales charge for Class A shares is 4% of the public offering price.
Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5% and is
reduced to 0% after six years. Class B Shares bear ongoing 12b-1
distribution and service fees.
+ Maximum contingent deferred sales charge for Class C shares is 0.75% and is
reduced to 0% after one year. Class C shares bear ongoing 12b-1 distribution
and service fees.
++ The Fund offers Class Y shares to a limited group of eligible investors,
including participants in certain investment programs that are sponsored by
PaineWebber and that may invest in PaineWebber mutual funds. Class Y shares
do not bear initial or contingent deferred sales charges or ongoing 12b-1
distribution and service fees.
[SIDENOTE]
PAINEWEBBER NEW YORK TAX-FREE INCOME FUND
INVESTMENT GOAL:
High current income exempt from federal income tax and New York State and New
York City personal income taxes
PORTFOLIO MANAGER:
Elbridge T. Gerry, III
Mitchell Hutchins Asset
Management Inc.
COMMENCEMENT:
September 23, 1988 (Class A)
July 1, 1991 (Class B)
July 2, 1992 (Class C)
March 21, 1998 (Class Y)
DIVIDEND PAYMENTS:
Monthly
10
<PAGE>
PAINEWEBBER TAX-FREE BOND FUNDS SEMIANNUAL REPORT
PORTFOLIO HIGHLIGHTS
During the period ended August 31, 2000, the Fund's average annual return for
Class A shares stood at 6.77%, in line with the Lehman Brothers Municipal Bond
Index at 6.79% and the Lipper New York Municipal Debt Funds Median at 6.61%.
Class B and C shares came in slightly under the averages for the Index and
median, while Class Y shares slightly outperformed the averages. A weighted
average duration (a measure of a bond portfolio's sensitivity to interest rate
changes) that was shorter than the benchmark helped contribute to the positive
performance, and overweighting in the 15-to-20 year area of the municipal curve
continued to aid performance.
The latest six-month period was nothing if not eventful. After a strong
March, buoyed by the early-year Treasury buy-back, April and May performance
stuttered, resulting in negative months, as concerns about an overheating
economy and additional interest rate increases persisted. Following an interest
rate hike in mid-May, the market and the Fund rebounded throughout the summer. A
smaller-than-average number of new issues contributed to increased demand, while
a lack of damaging economic news and the hope that interest rates would remain
stable through year-end helped to boost the market.
Some credit concerns remain in secondary markets because of poorly structured
bonds, but we continue to place an emphasis on credit quality, with almost 90%
of the Fund's holdings rated A or above. The weighted average maturity and
weighted average duration continue slightly below benchmark, giving us the
flexibility to seek out opportunities when they develop.
Our top five state holdings remain the same from the start of the period,
although the general obligation sector--our largest sector--comprises slightly
less of the Fund's assets than it did six months ago. In contrast, we have
increased our stake in the university sector, which now comprises 11.7% of the
Fund's assets. New York City obligations make up 20.6% of state
holdings.
PROPOSED MERGER
--------------------------------------------------------------------------------
On October 6, 2000, the board of trustees unanimously approved the merger of
the PaineWebber New York Tax- Free Income Fund into the MFS New York Municipal
Bond Fund. The proposed merger will be submitted to shareholders at meetings
expected to be held in February 2001. If approved by the PaineWebber fund's
shareholders, the merger is expected to become effective in March 2001.
More information about the proposed merger for the PaineWebber fund is set
out in the October 10, 2000 supplement to the prospectus dated June 30, 2000 and
additional information will be provided to shareholders in proxy solicitation
materials that are expected to be mailed in December 2000.
11
<PAGE>
SEMIANNUAL REPORT
PAINEWEBBER NEW YORK TAX-FREE INCOME FUND -- PORTFOLIO STATISTICS
<TABLE>
<CAPTION>
CHARACTERISTICS* 8/31/00 2/29/00
--------------------------------------------------------------------------------
<S> <C> <C>
Weighted Average Duration 7.7 yrs 8.6 yrs
Weighted Average Maturity 17.2 yrs 17.9 yrs
AMT Paper (%) 15.8% 16.7%
Total Net Assets ($mm) $35.9 $35.9
--------------------------------------------------------------------------------
<CAPTION>
TOP FIVE SECTORS* 8/31/00 2/29/00
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
General Obligation 21.8% General Obligation 29.9%
Water 12.3 Power 13.7
University 11.7 Water 13.1
Toll 8.7 Toll 8.3
Fuel Tax 7.5 University 7.1
--------------------------------------------------------------------------------------------
Total 62.0 Total 72.1
<CAPTION>
CREDIT QUALITY* 8/31/00 2/29/00
--------------------------------------------------------------------------------------------
<S> <C> <C>
AAA 48.7% 53.3%
AA 11.9 7.9
A 28.2 29.1
BBB 1.4 3.6
Non-Rated 6.5 6.1
Cash 3.3 --
--------------------------------------------------------------------------------------------
Total 100.0 100.0
</TABLE>
* Weightings represent percentages of net assets as of the dates indicated. The
Fund's portfolio is actively managed and its composition will vary over time.
12
<PAGE>
PAINEWEBBER TAX-FREE BOND FUNDS SEMIANNUAL REPORT
Our ultimate objective in managing your investments is to help you successfully
meet your financial goals. We thank you for your continued support and welcome
any comments or questions you may have. For a QUARTERLY REVIEW on PaineWebber
California Tax-Free Income Fund, PaineWebber National Tax-Free Income Fund,
PaineWebber Municipal High Income Fund and PaineWebber New York Tax-Free Income
Fund or another fund in the PaineWebber Family of Funds,(1) please contact your
Financial Advisor.
Sincerely,
/s/ Margo Alexander /s/ Brian M. Storms /s/ Elbridge T. Gerry, III
MARGO ALEXANDER BRIAN M. STORMS ELBRIDGE T. GERRY, III
Chairman Chief Executive Officer and Managing Director
Mitchell Hutchins President Mitchell Hutchins
Asset Management Inc. Mitchell Hutchins Asset Management Inc.
Asset Management Inc. Portfolio Manager,
PaineWebber Municipal High
Income Fund, PaineWebber
New York Tax-Free Income
Fund and PaineWebber
California Tax-Free Income
Fund
/s/ William W. Veronda
WILLIAM W. VERONDA
Portfolio Manager
PaineWebber Municipal
High Income Fund
This letter is intended to assist shareholders in understanding how the funds
performed during the six-month period ended August 31, 2000, and reflects our
views at the time of its writing. Of course, these views may change in response
to changing circumstances. We encourage you to consult your Financial Advisor
regarding your personal investment program.
(1) Mutual funds are sold by prospectus only. The prospectuses for the funds
contain more complete information regarding risks, charges and expenses, and
should be read carefully before investing.
13
<PAGE>
PAINEWEBBER CALIFORNIA TAX-FREE INCOME FUND
PERFORMANCE RESULTS(UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN(1)
----------------------------------------- ---------------------------------
12 MONTHS 6 MONTHS
08/31/00 02/29/00 08/31/99 ENDED 08/31/00 ENDED 08/31/00
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $10.80 $10.17 $10.59 7.88% 8.91%
-------------------------------------------------------------------------------------------------------------------
Class B Shares 10.80 10.18 10.60 6.94 8.38
-------------------------------------------------------------------------------------------------------------------
Class C Shares 10.79 10.17 10.58 7.33 8.53
-------------------------------------------------------------------------------------------------------------------
<CAPTION>
PERFORMANCE SUMMARY CLASS A SHARES
NET ASSET VALUE
----------------------- CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL RETURN(1)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
-------------------------------------------------------------------------------------------------------------------
1996 11.18 10.94 -- 0.5271 2.74
-------------------------------------------------------------------------------------------------------------------
1997 10.94 11.37 -- 0.5056 8.80
-------------------------------------------------------------------------------------------------------------------
1998 11.37 11.20 0.3170 0.5189 6.00
-------------------------------------------------------------------------------------------------------------------
1999 11.20 10.16 0.0585 0.5133 (4.32)
-------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 10.16 10.80 -- 0.3438 9.88
-------------------------------------------------------------------------------------------------------------------
Totals: $1.0085 $9.5217
-------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 194.83%
-------------------------------------------------------------------------------------------------------------------
<CAPTION>
PERFORMANCE SUMMARY CLASS B SHARES
NET ASSET VALUE
----------------------- CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL RETURN(1)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
-------------------------------------------------------------------------------------------------------------------
1996 11.19 10.95 -- 0.4449 1.96
-------------------------------------------------------------------------------------------------------------------
1997 10.95 11.38 -- 0.4213 7.96
-------------------------------------------------------------------------------------------------------------------
1998 11.38 11.21 0.3170 0.4326 5.20
-------------------------------------------------------------------------------------------------------------------
1999 11.21 10.17 0.0585 0.4312 (5.04)
-------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 10.17 10.80 -- 0.2914 9.22
-------------------------------------------------------------------------------------------------------------------
Totals: $0.9745 $4.4004
-------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 64.04%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Figures assume reinvestment of all dividends and other distributions at net
asset value on the payable dates and do not include sales charges; results
for each class would be lower if sales charges were included. Total
investment return for periods of less than one year has not been
annualized.
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. Capital gain distributions and gains realized
on the sale of Fund shares are taxable.
14
<PAGE>
PAINEWEBBER CALIFORNIA TAX-FREE INCOME FUND
PERFORMANCE RESULTS(UNAUDITED) (CONCLUDED)
PERFORMANCE SUMMARY CLASS C SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
--------------------------- CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL 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
-------------------------------------------------------------------------------------------------------------------
1996 11.17 10.94 -- 0.4713 2.31
-------------------------------------------------------------------------------------------------------------------
1997 10.94 11.37 -- 0.4487 8.24
-------------------------------------------------------------------------------------------------------------------
1998 11.37 11.19 0.3170 0.4610 5.38
-------------------------------------------------------------------------------------------------------------------
1999 11.19 10.15 0.0585 0.4585 (4.81)
-------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 10.15 10.79 -- 0.3089 9.52
-------------------------------------------------------------------------------------------------------------------
Totals: $0.9477 $4.0030
-------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 47.87%
-------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN(1)
% RETURN WITHOUT DEDUCTING % RETURN AFTER DEDUCTING
MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
--------------------------- --------------------------
CLASS CLASS
--------------------------- --------------------------
A* B** C*** A* B** C***
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Twelve Months Ended 09/30/00 7.58% 6.75% 6.93% 3.26% 1.75% 6.18%
-------------------------------------------------------------------------------------------------------------------
Five Years Ended 09/30/00 5.42 4.61 4.86 4.57 4.28 4.86
-------------------------------------------------------------------------------------------------------------------
Ten Years Ended 09/30/00 6.43 N/A N/A 6.00 N/A N/A
-------------------------------------------------------------------------------------------------------------------
Commencement of Operations Through 09/30/00+ 7.41 5.43 4.78 7.12 5.43 4.78
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Figures assume reinvestment of all dividends and other distributions at net
asset value on the payable dates and do not include sales charges; results
would be lower if sales charges were included. Total investment return for
periods of less than one year has not been annualized.
* Maximum sales charge for Class A shares is 4% of the public offering price.
Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5% and is
reduced to 0% after 6 years. Class B shares bear ongoing 12b-1 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.
Note: The Fund offers Class Y shares to a limited group of investors, including
participants in certain investment programs that are sponsored by PaineWebber
and that may invest in PaineWebber mutual funds. For the six months ended August
31, 2000 and for the period since inception, February 5, 1998 through August 31,
2000, Class Y shares had a total return of 8.96% and 11.10%, respectively. For
the twelve months ended September 30, 2000 and for the period since inception
February 5, 1998 through September 30, 2000, Class Y shares had an average
annual return of 7.85% and 3.88% respectively. Class Y shares do not have
initial or contingent deferred sales charges or ongoing distribution and service
fees.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost. Capital gain distributions and gains realized
on the sale of Fund shares are taxable.
15
<PAGE>
PAINEWEBBER NATIONAL TAX-FREE INCOME FUND
PERFORMANCE RESULTS(UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN(1)
----------------------------------------- ---------------------------------
12 MONTHS 6 MONTHS
08/31/00 02/29/00 08/31/99 ENDED 08/31/00 ENDED 08/31/00
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $11.06 $10.66 $11.09 5.67% 6.49%
-------------------------------------------------------------------------------------------------------------------
Class B Shares 11.05 10.66 11.08 4.84 5.98
-------------------------------------------------------------------------------------------------------------------
Class C Shares 11.05 10.66 11.09 5.02 6.11
-------------------------------------------------------------------------------------------------------------------
<CAPTION>
PERFORMANCE SUMMARY CLASS A SHARES
NET ASSET VALUE
------------------------ CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL RETURN(1)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12/03/84-12/31/84 $ 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
-------------------------------------------------------------------------------------------------------------------
1996 11.84 11.54 -- 0.5299 2.29
-------------------------------------------------------------------------------------------------------------------
1997 11.54 11.95 0.0836 0.5585 9.37
-------------------------------------------------------------------------------------------------------------------
1998 11.95 11.76 0.2864 0.5639 5.67
-------------------------------------------------------------------------------------------------------------------
1999 11.76 10.68 0.0657 0.5514 (4.06)
-------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 10.68 11.06 -- 0.3667 7.14
-------------------------------------------------------------------------------------------------------------------
Totals: $0.7379 $10.8091
-------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 223.15%
-------------------------------------------------------------------------------------------------------------------
<CAPTION>
PERFORMANCE SUMMARY CLASS B SHARES
NET ASSET VALUE
------------------------ CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL RETURN(1)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
-------------------------------------------------------------------------------------------------------------------
1996 11.83 11.53 -- 0.4467 1.52
-------------------------------------------------------------------------------------------------------------------
1997 11.53 11.95 0.0836 0.4676 8.62
-------------------------------------------------------------------------------------------------------------------
1998 11.95 11.75 0.2864 0.4698 4.76
-------------------------------------------------------------------------------------------------------------------
1999 11.75 10.67 0.0657 0.4615 (4.83)
-------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 10.67 11.05 -- 0.3180 6.60
-------------------------------------------------------------------------------------------------------------------
Totals: $0.7379 $4.7096
-------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 62.34%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Figures assume reinvestment of all dividends and other distributions at net
asset value on the payable dates and do not include sales charges; results
for each class would be lower if sales charges were included. Total
investment return for periods of less than one year has not been
annualized.
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. Capital gain distributions and gains realized
on the sale of Fund shares are taxable.
16
<PAGE>
PAINEWEBBER NATIONAL TAX-FREE INCOME
FUND PERFORMANCE RESULTS(UNAUDITED) (CONCLUDED)
PERFORMANCE SUMMARY CLASS C SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------ CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL 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
-------------------------------------------------------------------------------------------------------------------
1996 11.84 11.54 -- 0.4737 1.77
-------------------------------------------------------------------------------------------------------------------
1997 11.54 11.95 0.0836 0.4987 8.81
-------------------------------------------------------------------------------------------------------------------
1998 11.95 11.75 0.2864 0.5014 5.03
-------------------------------------------------------------------------------------------------------------------
1999 11.75 10.67 0.0657 0.4923 (4.57)
-------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 10.67 11.05 -- 0.3294 6.77
-------------------------------------------------------------------------------------------------------------------
Totals: $0.7014 $4.2690
-------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 45.19%
-------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN(1)
% RETURN WITHOUT DEDUCTING % RETURN AFTER DEDUCTING
MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
------------------------------ ----------------------------
CLASS CLASS
------------------------------ ----------------------------
A* B** C*** A* B** C***
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Twelve Months Ended 09/30/00 5.48% 4.56% 4.93% 1.25% (0.41)% 4.18%
-------------------------------------------------------------------------------------------------------------------
Five Years Ended 09/30/00 4.85 4.02 4.31 3.99 3.69 4.31
-------------------------------------------------------------------------------------------------------------------
Ten Years Ended 09/30/00 6.27 N/A N/A 5.84 N/A N/A
-------------------------------------------------------------------------------------------------------------------
Commencement of Operations Through 09/30/00+ 7.65 5.31 4.56 7.37 5.31 4.56
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Figures assume reinvestment of all dividends and other distributions at net
asset value on the payable dates and do not include sales charges; results
would be lower if sales charges were included. Total investment return for
periods of less than one year has not been annualized.
* Maximum sales charge for Class A shares is 4% of the public offering price.
Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5% and is
reduced to 0% after 6 years. Class B shares bear ongoing 12b-1 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.
Note: The Fund offers Class Y shares to a limited group of investors, including
participants in certain investment programs that are sponsored by PaineWebber
and that may invest in PaineWebber mutual funds. For the six months ended August
31, 2000 and since inception, November 3, 1995 through August 31, 2000, Class Y
shares had a total return of 6.62% and 26.23%, respectively. For the twelve
months ended September 30, 2000 and for the period since inception, November 3,
1995 through September 30, 2000, Class Y shares had an average annual return of
5.64% and 4.75%, respectively. Class Y shares do not have initial or contingent
deferred sales charges or ongoing distribution and service fees.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost. Capital gain distributions and gains realized
on the sale of Fund shares are taxable.
17
<PAGE>
PAINEWEBBER MUNICIPAL HIGH INCOME FUND
PERFORMANCE RESULTS(UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN(1)
----------------------------------------- -----------------------------------
12 MONTHS 6 MONTHS
08/31/00 02/29/00 08/31/99 ENDED 08/31/00 ENDED 08/31/00
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $9.91 $9.86 $10.43 1.02% 3.38%
-------------------------------------------------------------------------------------------------------------------
Class B Shares 9.91 9.85 10.43 0.24 3.08
-------------------------------------------------------------------------------------------------------------------
Class C Shares 9.91 9.85 10.43 0.50 3.22
-------------------------------------------------------------------------------------------------------------------
<CAPTION>
PERFORMANCE SUMMARY CLASS A SHARES
NET ASSET VALUE
----------------------- CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL RETURN(1)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
---------------------------------------------------------------------------------------------------------------------
1996 10.36 10.39 -- 0.5627 5.94
---------------------------------------------------------------------------------------------------------------------
1997 10.39 10.92 -- 0.5531 10.73
---------------------------------------------------------------------------------------------------------------------
1998 10.92 10.90 0.0141 0.5484 5.07
---------------------------------------------------------------------------------------------------------------------
1999 10.90 9.93 0.0589 0.5481 (3.49)
---------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 9.93 9.91 -- 0.3603 3.52
---------------------------------------------------------------------------------------------------------------------
Totals: $0.5112 $8.3654
---------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 146.04%
---------------------------------------------------------------------------------------------------------------------
<CAPTION>
PERFORMANCE SUMMARY CLASS B SHARES
NET ASSET VALUE
------------------------ CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL RETURN(1)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
-------------------------------------------------------------------------------------------------------------------
1996 10.35 10.38 -- 0.4854 5.15
-------------------------------------------------------------------------------------------------------------------
1997 10.38 10.91 -- 0.4726 9.91
-------------------------------------------------------------------------------------------------------------------
1998 10.91 10.89 0.0141 0.4641 4.27
-------------------------------------------------------------------------------------------------------------------
1999 10.89 9.93 0.0589 0.4670 (4.14)
-------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 9.93 9.91 -- 0.3106 3.00
-------------------------------------------------------------------------------------------------------------------
Totals: $0.5112 $4.6877
-------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 66.05%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Figures assume reinvestment of all dividends and other distributions at net
asset value on the payable dates and do not include sales charges; results
for each class would be lower if sales charges were included. Total
investment return for periods of less than one year has not been
annualized.
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. Capital gain distributions and gains realized
on the sale of Fund shares are taxable.
18
<PAGE>
PAINEWEBBER MUNICIPAL HIGH INCOME FUND
PERFORMANCE RESULTS(UNAUDITED) (CONCLUDED)
PERFORMANCE SUMMARY CLASS C SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------ CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL 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
-------------------------------------------------------------------------------------------------------------------
1996 10.35 10.39 -- 0.5106 5.51
-------------------------------------------------------------------------------------------------------------------
1997 10.39 10.92 -- 0.4999 10.18
-------------------------------------------------------------------------------------------------------------------
1998 10.92 10.89 0.0141 0.4932 4.45
-------------------------------------------------------------------------------------------------------------------
1999 10.89 9.93 0.0589 0.4949 (3.89)
-------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 9.93 9.91 -- 0.3275 3.18
-------------------------------------------------------------------------------------------------------------------
Totals: $0.3162 $4.2438
-------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 45.98%
-------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN(1)
% RETURN WITHOUT DEDUCTING % RETURN AFTER DEDUCTING
MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
------------------------------ ----------------------------
CLASS CLASS
------------------------------ ----------------------------
A* B** C*** A* B** C***
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Twelve Months Ended 09/30/00 1.12% 0.44% 0.60% (2.90)% (4.32)% (0.11)%
-------------------------------------------------------------------------------------------------------------------
Five Years Ended 09/30/00 5.03 4.25 4.50 4.19 3.92 4.50
-------------------------------------------------------------------------------------------------------------------
Ten Years Ended 09/30/00 6.66 N/A N/A 6.22 N/A N/A
-------------------------------------------------------------------------------------------------------------------
Commencement of Operations Through 09/30/00+ 7.02 5.63 4.69 6.69 5.63 4.69
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Figures assume reinvestment of all dividends and other distributions at net
asset value on the payable dates and do not include sales charges; results
would be lower if sales charges were included. Total investment return for
periods of less than one year has not been annualized.
* Maximum sales charge for Class A shares is 4% of the public offering price.
Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5% and is
reduced to 0% after 6 years. Class B shares bear ongoing 12b-1 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.
Note: The Fund offers Class Y shares to a limited group of investors, including
participants in certain investment programs that are sponsored by PaineWebber
and that may invest in PaineWebber mutual funds. For the six months ended August
31, 2000 and since inception, February 5, 1998 through August 31, 2000, Class Y
shares had a total return of 3.55% and 4.54%, respectively. For the twelve
months ended September 30, 2000 and for the period since inception, February 5,
1998 through September 30, 2000, Class Y shares had an average annual return of
1.37% and 1.70% respectively. Class Y shares do not have initial or contingent
deferred sales charges or ongoing 12B-1 distribution and service fees.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost. Capital gain distributions and gains realized
on the sale of Fund shares are taxable.
19
<PAGE>
PAINEWEBBER NEW YORK TAX-FREE INCOME FUND
PERFORMANCE RESULTS(UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN(1)
----------------------------------------- -----------------------------------
12 MONTHS 6 MONTHS
08/31/00 02/29/00 08/31/99 ENDED 08/31/00 ENDED 08/31/00
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $10.42 $ 9.99 $10.39 6.08% 6.77%
-------------------------------------------------------------------------------------------------------------------
Class B Shares 10.41 9.99 10.39 5.18 6.26
-------------------------------------------------------------------------------------------------------------------
Class C Shares 10.42 10.00 10.40 5.45 6.39
-------------------------------------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS A SHARES
<CAPTION>
NET ASSET VALUE
------------------------ CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL 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
-------------------------------------------------------------------------------------------------------------------
1996 10.81 10.65 -- 0.5175 3.46
-------------------------------------------------------------------------------------------------------------------
1997 10.65 11.10 -- 0.5135 9.31
-------------------------------------------------------------------------------------------------------------------
1998 11.10 11.04 0.2389 0.5022 6.29
-------------------------------------------------------------------------------------------------------------------
1999 11.04 9.98 0.0918 0.4773 (4.57)
-------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 9.98 10.42 -- 0.3106 7.66
-------------------------------------------------------------------------------------------------------------------
Totals: $0.4577 $6.7936
-------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 119.24%
-------------------------------------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS B SHARES
<CAPTION>
NET ASSET VALUE
------------------------ CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL RETURN(1)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
-------------------------------------------------------------------------------------------------------------------
1996 10.81 10.65 -- 0.4385 2.69
-------------------------------------------------------------------------------------------------------------------
1997 10.65 11.10 -- 0.4329 8.50
-------------------------------------------------------------------------------------------------------------------
1998 11.10 11.04 0.2389 0.4179 5.49
-------------------------------------------------------------------------------------------------------------------
1999 11.04 9.97 0.0918 0.3971 (5.39)
-------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 9.97 10.41 -- 0.2603 7.13
-------------------------------------------------------------------------------------------------------------------
Totals: $0.4577 $4.1988
-------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 68.93%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Figures assume reinvestment of all dividends and other distributions at net
asset value on the payable dates and do not include sales charges; results
for each class would be lower if sales charges were included. Total
investment return for periods of less than one year has not been
annualized.
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. Capital gain distributions and gains realized
on the sale of Fund shares are taxable.
20
<PAGE>
PAINEWEBBER NEW YORK TAX-FREE INCOME FUND
PERFORMANCE RESULTS(UNAUDITED) (CONCLUDED)
PERFORMANCE SUMMARY CLASS C SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------ CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL 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 16.87
-------------------------------------------------------------------------------------------------------------------
1996 10.81 10.65 -- 0.4651 2.95
-------------------------------------------------------------------------------------------------------------------
1997 10.65 11.10 -- 0.4600 8.77
-------------------------------------------------------------------------------------------------------------------
1998 11.10 11.05 0.2389 0.4466 5.86
-------------------------------------------------------------------------------------------------------------------
1999 11.05 9.98 0.0918 0.4242 (5.14)
-------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 9.98 10.42 -- 0.2773 7.30
-------------------------------------------------------------------------------------------------------------------
Totals: $0.4577 $3.8109
-------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 49.31%
-------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1)
<CAPTION>
% RETURN WITHOUT DEDUCTING % RETURN AFTER DEDUCTING
MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
------------------------------ ----------------------------
CLASS CLASS
------------------------------ ----------------------------
A* B** C*** A* B** C***
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Twelve Months Ended 09/30/00 5.77% 4.97% 5.24% 1.53% (0.03)% 4.49%
-------------------------------------------------------------------------------------------------------------------
Five Years Ended 09/30/00 5.14 4.35 4.61 4.28 4.01 4.61
-------------------------------------------------------------------------------------------------------------------
Ten Years Ended 09/30/00 6.81 N/A N/A 6.38 N/A N/A
-------------------------------------------------------------------------------------------------------------------
Commencement of Operations Through 09/30/00+ 6.68 5.75 4.88 6.32 5.75 4.88
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Figures assume reinvestment of all dividends and other distributions at net
asset value on the payable dates and do not include sales charges; results
would be lower if sales charges were included. Total investment return for
periods of less than one year has not been annualized.
* Maximum sales charge for Class A shares is 4% of the public offering price.
Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5% and is
reduced to 0% after 6 years. Class B shares bear ongoing 12b-1 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.
Note: The Fund offers Class Y shares to a limited group of investors, including
participants in certain investment programs that are sponsored by PaineWebber
and that may invest in PaineWebber mutual funds. For the six months ended August
31, 2000 and since inception, May 21, 1998 through August 31, 2000, Class Y
shares had a total return of 6.91% and 8.06%, respectively. For the twelve
months ended September 30, 2000 and for the period since inception, May 21, 1998
through September 30, 2000, Class Y shares had an average annual return of 6.14%
and 3.03%, respectively. Class Y shares do not have initial or contingent
deferred sales charges or ongoing distribution and service fees.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost. Capital gain distributions and gains realized
on the sale of Fund shares are taxable.
21
<PAGE>
<TABLE>
<CAPTION>
PAINEWEBBER CALIFORNIA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 2000 (UNAUDITED)
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
----- ----- ----- -----
<S> <C> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- 98.41%
CALIFORNIA -- 96.90%
$ 500 California Educational Facilities Authority
Fresno Pacific University Series A (1) .................... 03/01/19 6.750% $ 532,700
1,600 California Educational Facilities Authority
Los Angeles College of Chiropractic Medicine .............. 11/01/17 5.600 1,554,528
2,500 California Educational Facilities Authority
Loyola Marymount (MBIA Insured) ........................... 10/01/14 6.099# 1,165,325
2,000 California Educational Facilities Authority
University of San Francisco (MBIA Insured) ................ 10/01/16 6.000 2,151,900
1,765 California Housing Finance Agency Revenue Bonds Series G
(MBIA Insured)(3).......................................... 08/01/14 6.100 1,786,692
2,000 California Statewide Communities Development Authority
Apartment Development Revenue Bonds
Irvine Apartment Communities Series A-3 ................... 05/17/10(2) 5.100 1,974,260
3,000 California Statewide Communities Development Authority
Apartment Development Revenue Bonds
Irvine Apartment Communities Series A-4 ................... 05/15/13(2) 5.250 2,926,470
2,000 California Statewide Communities Development Authority
Certificates of Participation++ ........................... 11/01/16 7.125 2,053,960
25 California Statewide Communities Development Authority
Certificates of Participation Continuing Care University
Project ................................................... 09/01/00 3.400* 25,000
2,000 ABAG Finance Authority for Nonprofit Corporations
Certificates of Participation Rhoda Haas Goldman Plaza .... 05/15/15 5.125 1,970,420
670 Capistrano Unified School District Certificates of
Participation ............................................. 02/01/18 5.200 665,344
1,350 Contra Costa Transportation Authority Sales Tax Revenue
Bond Series A ............................................. 03/01/07 6.875 1,420,133
2,715 Del Mar Race Track Authority ................................ 08/15/11 to 08/15/13 6.200 to 6.450 2,769,888
650 Duarte Redevelopment Agency Tax Allocation Davis Addition
Project.................................................... 09/01/14 6.700 688,331
5,285 Escondido Union High School District (MBIA Insured) ......... 05/01/12 to 05/01/13 4.700 to 4.750# 2,914,450
6,140 Fontana Redevelopment Agency Tax Allocation
Jurupa Hills Redevelopment Project Series A ............... 10/01/19 to 10/01/27 5.500 to 5.600 5,790,608
1,855 Fresno Unified School District Series C (MBIA Insured) ...... 02/01/18 5.900 2,029,351
4,275 Glendale Unified School District Series B (FSA Insured) ..... 09/01/18 5.500 4,409,662
2,000 Huntington Park Public Financing Authority
Wastewater Systems Project Series A++ ..................... 10/01/25 6.200 2,026,180
560 Inglewood Redevelopment Agency Tax Allocation Merged
Redevelopment Project Series A (AMBAC Insured) ............ 05/01/16 5.250 576,274
1,695 Inglewood Unified School District Series A (FGIC Insured) ... 10/01/19 6.000 1,826,481
100 Irvine Ranch Water District ................................. 09/01/00 3.350* 100,000
100 Irvine Ranch Water District Certificates of Participation
Capital Improvement Project ............................... 09/01/00 3.350* 100,000
100 Irvine Ranch Water District Improvement District Number 182
Series A .................................................. 09/01/00 3.350* 100,000
1,500 La Mirada Redevelopment Agency Special Tax Community
Facilities District Number 89-1 ........................... 10/01/20 5.700 1,419,690
1,035 Little Lake City School District Series A (FSA Insured) ..... 07/01/25 6.125 1,104,159
2,570 Long Beach Harbor Revenue Bonds Series A (FGIC Insured) ..... 05/15/17 6.000 2,812,531
1,450 Long Beach Industrial Development Revenue Bonds
CSU Foundation Series A ................................... 02/01/23 5.250 1,305,304
22
<PAGE>
<CAPTION>
PAINEWEBBER CALIFORNIA TAX-FREE INCOME FUND
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
----- ----- ----- -----
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--(CONTINUED)
California--(concluded)
$3,000 Los Angeles County Metropolitan Transportation Authority
Sales Tax Revenue Prop C-Second Series, Series A (FSA Insured) 07/01/26 4.750% $2,706,690
5,750 Los Angeles Harbor Department Revenue Bonds Series B (3) ...... 11/01/23 to 08/01/25 5.375 to 6.625 5,824,075
2,000 Los Angeles Water and Power Electric Plant Second Issue (MBIA
Insured) .................................................... 11/15/19 4.750 1,850,140
1,920 Modesto Irrigation District Certificates of Participation
Capital Improvements Series B ............................... 07/01/22 5.300 1,852,474
1,655 Modesto Public Financing Authority
John Thurman Field Renovation Project ....................... 11/01/16 6.125 1,732,140
2,625 Mojave Water Agency Improvement District Morongo Basin (FGIC
Insured)..................................................... 09/01/15 5.750 2,785,466
2,200 M-S-R Public Power Agency San Juan Project Revenue Bonds
Series E (MBIA Insured) ..................................... 07/01/17 6.500 2,283,534
1,000 Natomas Unified School District (MBIA Insured) ................ 09/01/21 5.950 1,088,430
2,235 Orange County Community Facilities Special Tax Rancho Santa
Margarita District Number 86-2 Series A ..................... 08/15/12 to 08/15/17 5.375 to 5.550 2,141,073
3,075 Poway Community Facilities District Special Tax Number 88-1
Parkway Business Center ..................................... 08/15/06 to 08/15/15 5.400 to 6.750 3,272,641
4,425 Riverside County Public Financing Authority Tax Allocation
Revenue Bonds Redevelopment Projects Series A ............... 10/01/11 to 10/01/16 5.200 to 5.250 4,244,137
1,180 Rohnert Park Community Development Agency Tax Allocation
(AMBA Insured)............................................... 08/01/20 6.500 1,205,618
5,500 Sacramento Power Authority Cogeneration Project Revenue Bonds
(MBIA Insured) .............................................. 07/01/15 5.875 5,886,540
2,200 Salinas Certificates of Participation Capital Improvement
Projects Series A ........................................... 10/01/28 5.700 2,179,804
2,300 San Diego County Certificates of Participation Burnham
Institute ................................................... 09/01/29 6.250 2,355,131
2,500 San Diego County Certificates Water Utility Fund Net Systems
Revenue (FGIC Insured) ...................................... 08/01/28 4.750 2,240,475
6,000 San Diego Industrial Development Revenue Bonds
San Diego Gas & Electric Series A (MBIA Insured) ............ 09/01/18 6.100 6,239,160
3,000 San Francisco City and County Airport Commission International
Airport Revenue Bonds Second Series Issue 8A (FGIC Insured) (3) 05/01/20 6.250 3,136,680
3,600 San Francisco City and County Airport Commission International
Airport Revenue Bonds Second Series Issue 15B (MBIA Insured). 05/01/28 4.500 3,086,532
3,850 San Francisco City and County Airport Commission International
Airport Revenue Bonds Second Series Issue 16A (FSA Insured) (3) 05/01/13 5.500 4,019,939
4,250 San Jose Unified School District Santa Clara County Series B
(FGIC Insured) .............................................. 08/01/17 5.200# 1,677,900
960 San Ysidro School District (AMBAC Insured) .................... 08/01/21 6.125 1,066,109
5,485 Santa Ana Financing Authority Revenue Bonds South Harbor
Boulevard Series B (MBIA Insured)+........................... 09/01/19 5.125 5,429,217
1,000 South Orange County Public Financing Authority
Special Tax Revenue Senior Lien Series A (MBIA Insured) ..... 09/01/13 6.200 1,069,090
5,740 Torrance Redevelopment Agency Tax Allocation Senior Lien
Series C (MBIA Insured) ..................................... 09/01/18 5.450 5,914,840
-----------
123,487,476
-----------
23
<PAGE>
<CAPTION>
PAINEWEBBER CALIFORNIA TAX-FREE INCOME FUND
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
----- ----- ----- -----
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES - (concluded)
U. S. VIRGIN ISLANDS--1.51%
$2,050 Virgin Islands Water & Power Authority ......................... 07/01/13 to 07/01/18 5.125 to 5.500% $ 1,931,227
-------------
Total Investments (cost--$124,620,843)--98.41% ......................... 125,418,703
Other assets in excess of liabilities--1.59% ........................... 2,021,717
------------
Net Assets--100.00% .................................................... $ 127,440,420
=============
</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 date. The interest rate shown is the current rate as
of August 31, 2000.
+ Entire principal amount pledged as collateral for futures transactions.
++ Illiquid securities representing 3.20% of net assets.
# Yield to maturity at purchase date on zero coupon bond.
(1) Purchased on a forward commitment basis.
(2) Maturity date reflects earliest date bond will be put back to issuer.
(3) Security subject to alternative minimum tax.
AMBAC American Municipal Bond Assurance Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Incorporated.
MBIA Municipal Bond Investors Assurance.
FUTURES CONTRACTS
<TABLE>
<CAPTION>
NUMBER OF IN EXPIRATION UNREALIZED
CONTRACTS CONTRACTS TO SELL EXCHANGE FOR DATE DEPRECIATION
--------- ----------------------------------------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
20 Municipal Bond Futures .................. $1,961,091 September 2000 $(36,872)
=========
</TABLE>
See accompanying notes to financial statements
24
<PAGE>
PAINEWEBBER NATIONAL TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 2000(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------- -------- -----
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--98.80%
ALABAMA--2.00%
$ 4,090 Birmingham Alabama Series B .......................................... 06/01/24 5.250% $ 3,908,036
1,000 Courtland Industrial Development Board Industrial
Development Revenue Champion International ......................... 12/01/13 7.200 1,045,320
-----------
4,953,356
-----------
ALASKA--0.53%
1,460 Alaska Industrial Development & Export Authority Power Revenue
Upper Lynn Canal Regional Power .................................... 01/01/12 5.700 1,305,240
-----------
ARIZONA--2.70%
3,700 Phoenix General Obligation ........................................... 07/01/16 6.250 4,132,382
2,500 Tucson Arizona Airport Authority Lockheed Aermod Center
Incorporated ....................................................... 09/01/19 8.700 2,555,550
-----------
6,687,932
-----------
ARKANSAS--0.78%
2,000 Little Rock Arkansas Capital Improvement Revenue Parks &
Recreation Project Series A ........................................ 01/01/18 5.700 1,931,940
-----------
CALIFORNIA--9.02%
160 California State (FGIC Insured) ...................................... 11/01/12 7.000 178,402
1,500 California Statewide Community Development Authority Certificates
Participation(1) ................................................... 11/01/16 7.125 1,540,470
11,500 East Bay California Municipal Utility District Water
Systems Revenue .................................................... 06/01/28 4.750# 10,308,830
2,665 Escondido California Union High School District Capital Appreciation
Refunding (MBIA Insured) ........................................... 11/01/13 4.730# 1,390,917
2,370 Escondido California Union High School District Capital Appreciation
Refunding (MBIA Insured) ........................................... 11/01/12 4.780# 1,316,653
1,920 Long Beach Aquarium of the Pacific California Revenue ................ 07/01/23 6.125 1,821,638
1,000 San Diego County California Certificates Participation Burnham ....... 09/01/29 6.250 1,023,970
4,500 Sacramento Power Authority Cogeneration Project Revenue .............. 07/01/15 5.875 4,816,260
-----------
22,397,140
-----------
COLORADO--1.48%
3,150 Black Hawk Colorado Device Tax Revenue ............................... 12/01/12 to 12/01/21 5.500 to 5.625 2,845,712
805 Colorado Housing Finance Authority ................................... 08/01/23 7.200 836,250
-----------
3,681,962
-----------
CONNECTICUT--0.60%
1,500 Mashantucket Western Pequot Tribe Connecticut Special Revenue ........ 09/01/12 5.700 1,488,435
-----------
FLORIDA--2.18%
2,000 Hillsborough County Florida Industrial Development
Authority Pollution Control Revenue ................................ 05/01/22 8.000 2,146,160
3,000 Plant City Utility Systems Revenue (MBIA Insured) .................... 10/01/15 6.000 3,271,620
-----------
5,417,780
-----------
</TABLE>
25
<PAGE>
PAINEWEBBER NATIONAL TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------- -------- -----
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--(CONTINUED)
GEORGIA--4.39%
$ 5,000 Conyers Water and Sewage Revenue (AMBAC Insured) .................... 07/01/15 6.600% $ 5,380,050
5,000 Hall County School District (Pre-refunded with U.S. Government
to 12/01/04 @ 102) (AMBAC Insured) ................................ 12/01/14 6.700 5,522,000
-----------
10,902,050
-----------
HAWAII--0.42%
1,000 Hawaii State Department Budget and Finance Special Purpose
Revenue (MBIA Insured) ............................................ 05/01/26 6.200 1,043,630
-----------
IDAHO--0.36%
870 Idaho Housing Agency (FHA Insured) .................................. 07/01/24 7.500 898,493
-----------
ILLINOIS--12.68%
14,500 Illinois Board of Education Chicago School Reform (AMBAC Insured) ... 12/01/17 to 12/01/30 5.250 to 5.800 14,114,755
4,335 Illinois Development Finance Authority Citizens Utilities ........... 08/01/20 7.150 4,416,758
3,625 Illinois Development Finance Authority Revenue Refunding Community
Rehabilitation Providers A ........................................ 07/01/09 to 07/01/15 5.900 to 6.000 3,439,208
1,000 Illinois Educational Facilities Authority Revenue Augustana
College Refunding ................................................. 10/01/13 5.000 929,040
660 Illinois Health Facilities Authority Revenue Evangelical Hospital ... 04/15/17 6.750 741,833
2,500 Chicago Series A2 (AMBAC Insured) ................................... 01/01/15 6.250 2,757,375
2,000 Metropolitan Pier & Exposition Authority (Illinois) McCormick Place
Convention Complex ................................................ 07/01/26 7.000 2,382,380
1,170 Northern Illinois University (Pre-refunded with U.S. Government
to 10/01/09 @ 100) ................................................ 04/01/13 10.400 1,586,520
1,000 Regional Transportation Authority (Pre-refunded with U.S. Government
Securities to 06/01/04 @ 102) (FGIC Insured) ...................... 06/01/14 7.100 1,107,830
-----------
31,475,699
-----------
INDIANA--6.02%
3,000 Indiana Health Facility Finance Authority Methodist Hospital
of Indiana ........................................................ 09/01/15 5.750 3,154,380
3,240 Dyer Indiana Redevelopment Authority Economic ....................... 07/15/14 6.875 3,469,036
2,550 East Chicago Indiana Multi School Building Corporation
(AMBAC Insured) ................................................... 07/15/14 5.500 2,573,026
6,000 Indianapolis Indiana Airport Authority Revenue Special
Facility United Air Lines Project Series A ........................ 11/15/31 6.500 5,744,940
-----------
14,941,382
-----------
KANSAS--1.95%
4,800 Kansas State Department Transportation Highway Revenue .............. 03/01/13 5.375 4,848,624
-----------
MASSACHUSETTS--2.10%
5,680 Massachusetts State Turnpike Authority Metropolitan Highway Systems
Revenue (MBIA Insured) ............................................ 01/01/27 5.000 5,205,834
-----------
MICHIGAN--0.81%
1,915 Royal Oak Hospital Finance Authority William Beaumont Hospital ...... 01/01/19 6.625 1,995,660
-----------
</TABLE>
26
<PAGE>
PAINEWEBBER NATIONAL TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------- -------- -----
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--(CONTINUED)
MISSISSIPPI--1.36%
$ 3,600 Mississippi Business Finance Corporation Mississippi Pollution
Control Revenue ................................................... 05/01/22 5.900% $ 3,378,204
-----------
NEW HAMPSHIRE--0.73%
1,275 New Hampshire Higher Educational & Health Facilities Authority
New Hampshire College ............................................. 01/01/07 5.950 1,293,653
500 New Hampshire Industrial Development Authority Central Maine
Power Company ..................................................... 05/01/14 7.375 522,045
-----------
1,815,698
-----------
NEW JERSEY--4.72%
2,500 New Jersey Economic Development Authority Economic
Development Revenue ............................................... 04/01/18 6.375 2,477,675
1,600 New Jersey Economic Development Authority Water Facilities Revenue
(Elizabethtown Water Company Project A) ........................... 09/01/00 3.900* 1,600,000
1,890 New Jersey Housing General Resolution Series A ...................... 11/01/04 6.700 1,952,313
5,000 New Jersey State Turnpike Authority (MBIA Insured)+ ................. 01/01/16 6.500 5,680,350
-----------
11,710,338
-----------
NEW YORK--7.27%
365 New York State Energy Research & Development Authority Electric
Facilities Revenue Series B ....................................... 09/01/19 7.150 382,027
430 New York State Energy Research & Development Unrefunded Balance
Series B .......................................................... 02/01/22 7.150 450,060
2,400 New York State Environmental Facilities Corporation State Water
Pollution Control ................................................. 06/15/14 6.875 2,597,904
1,675 New York City Municipal Water Finance Authority Water & Sewer
Systems Revenue Series A .......................................... 06/15/12 7.100 1,725,066
4,500 New York City Series D .............................................. 08/01/17 5.375 4,510,845
4,350 Long Island Power Authority New York Electric Systems Revenue
General Series A .................................................. 12/01/29 5.500 4,166,821
1,000 Port Authority of New York & New Jersey Kennedy International
Airport Cogeneration Project 4th Installment Project .............. 10/01/11 6.750 1,030,640
3,100 Triborough Bridge & Tunnel Authority ................................ 01/01/10 7.100 3,186,273
-----------
18,049,636
-----------
NORTH CAROLINA--0.40%
980 North Carolina Housing Finance Agency ............................... 03/01/18 6.200 990,525
-----------
NORTH DAKOTA--0.13%
325 North Dakota State Housing Finance Agency Revenue ................... 07/01/16 6.300 331,802
-----------
</TABLE>
27
<PAGE>
PAINEWEBBER NATIONAL TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------- -------- -----
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--(CONTINUED)
OHIO--5.65%
$ 6,000 Ohio State Water Development Authority Solid Waste Disposal Revenue
Bay Shore Power Project ........................................... 09/01/20 5.875% $ 4,819,200
1,145 Butler County Transportation Improvement District (FSA Insured) ..... 04/01/11 6.000 1,245,874
6,000 Cleveland Airport Special Revenue Refunding Continental
Airlines Incorporated ............................................. 12/01/08 5.500 5,595,420
445 Cleveland Ohio Public Power Systems Revenue Prerefunded
First Mortgage Series B ........................................... 11/15/17 7.000 467,170
1,805 Cleveland Ohio Public Power Systems Revenue Unrefunded
First Mortgage Series B ........................................... 11/15/17 7.000 1,889,149
-----------
14,016,813
-----------
PENNSYLVANIA--2.92%
3,365 Beaver County Pennsylvania Pollution Control Revenue ................ 06/01/21 7.000 3,487,453
2,565 Northumberland County Pennsylvania Authority Guaranteed
Lease Revenue Mountain View Manor Project ......................... 10/01/20 7.000 2,566,616
1,245 Philadelphia Pennsylvania Authority Industrial Development 1st
Crime Prevention Association ...................................... 04/01/09 6.000 1,184,443
-----------
7,238,512
-----------
SOUTH CAROLINA--3.41%
1,500 South Carolina State Housing Finance Development Single Family
Mortgage Purchase ................................................. 07/01/18 5.500 1,508,370
1,000 Charleston Waterworks & Sewer Revenue (AMBAC Insured) ............... 01/01/16 6.000 1,022,880
7,600 Piedmont Municipal Power Agency (MBIA Insured) ...................... 01/01/23 4.000 5,938,640
-----------
8,469,890
-----------
TEXAS--19.02%
355 Texas State Prerefunded Water Development Board ..................... 08/01/18 5.750 374,522
1,245 Texas State Public Property Finance Corporation Mental
Health Revenue .................................................... 09/01/03 5.400 1,222,428
8,000 Texas State Turnpike Authority North Thruway Revenue
President George Bush Turnpike (FGIC Insured) ..................... 01/01/25 5.000 7,345,920
1,085 Texas State Water Development Board ................................. 08/01/18 5.750 1,102,089
3,510 Texas State Water Financial Assistance .............................. 08/01/35 5.500 3,428,884
5,000 Dallas County Texas Utility And Reclamation District Series B ....... 02/15/29 5.875 5,051,450
5,704 Harris County Lease (1) ............................................. 05/15/02 to 05/01/14 5.400 to 5.900 5,765,963
7,648 Harris County Texas Lease Mulworth Project (1) ...................... 05/01/20 5.625 7,310,392
710 Harris County Toll Road Authority (AMBAC Insured) ................... 08/15/17 6.500 747,900
1,315 Hereford Texas Independent School District Public Facility
School Facility Lease Revenue ..................................... 08/15/13 5.125 1,263,807
4,500 Houston Texas Community College Systems Participation Institute
Private Placement (1) ............................................. 06/15/25 7.875 4,708,710
5,000 Lower Colorado River Authority Texas Revenue Refunding Series B ..... 05/15/13 6.000 5,360,450
1,500 Port Arthur Texas Navigation District (AMBAC Insured) ............... 03/01/12 0.010 827,475
1,295 San Antonio Texas Certificate of Obligation Series A ................ 02/01/15 5.250 1,287,178
1,425 San Antonio Texas General Obligation Series A ....................... 02/01/15 5.250 1,416,393
-----------
47,213,561
-----------
</TABLE>
28
<PAGE>
PAINEWEBBER NATIONAL TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------- -------- -----
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--(CONCLUDED)
UTAH--0.14%
$ 345 Utah State Housing Finance Agency (FHA Insured) ..................... 01/01/11 6.450% $ 352,680
-----------
VIRGINIA--2.81%
600 Hampton Roads Medical College ....................................... 11/15/16 6.875 625,404
500 Peninsula Ports Authority Virginia Hospital Facility Revenue
(FHA Insured) ..................................................... 08/01/23 8.700 535,000
4,500 Pittsylvania County Virginia Industrial Development Authority
Revenue ........................................................... 01/01/10 7.650 4,782,870
1,000 Pittsylvania County Virginia Industrial Development Authority
Revenue ........................................................... 01/01/14 7.500 1,037,480
-----------
6,980,754
-----------
WYOMING--1.64%
4,000 Sweetwater County Solid Waste Disposal Revenue FMC
Corporation Project ............................................... 06/01/24 7.000 4,065,440
-----------
U. S. VIRGIN ISLANDS--0.58%
1,525 Virgin Islands Water & Power Authority Water Systems Revenue ........ 07/01/12 to 07/01/17 5.250 to 5.500 1,435,748
-----------
Total Investments (cost--$245,673,311)--98.80% ................................. 245,224,758
Other assets in excess of liabilities--1.20% ................................... 2,974,596
-----------
Net Assets--100.00% ............................................................ $248,199,354
===========
</TABLE>
------------------
# Zero coupon bond interest rate reflects yield to maturity at date of
purchase.
* 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 rate shown are the
current rates as of August 31, 2000.
+ Entire principal amount pledged as collateral for future transactions.
(1) Illiquid securities representing 7.80% of net assets.
AMBAC American Municipal Bond Assurance Corporation.
FGIC Financial Guaranty Insurance Company.
FHA Financial Housing Authority.
FSA Financial Security Assurance.
MBIA Municipal Bond Investors Assurance.
FUTURES CONTRACTS
<TABLE>
<CAPTION>
NUMBER OF IN EXPIRATION UNREALIZED
CONTRACTS CONTRACTS TO SELL EXCHANGE FOR DATE DEPRECIATION
--------- ------------------------------------------------------------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
35 Municipal Bond Futures ............................................ $3,360,625 September 2000 $(136,092)
==========
</TABLE>
See accompanying notes to financial statements
29
<PAGE>
PAINEWEBBER MUNICIPAL HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 2000(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------- -------- -----
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--98.15%
ALABAMA--2.06%
$ 2,000 Courtland Alabama Industrial Development Board Solid Waste Disposal
Revenue Refunding Champion International Corporation Project ...... 08/01/29 6.000% $ 1,887,580
-----------
ALASKA--1.31%
1,445 Alaska Industrial Development & Export Authority Power Revenue
Upper Lynn Canal Regional Power ................................... 01/01/32 5.875 1,201,734
-----------
ARKANSAS--1.05%
1,000 Little Rock Arkansas Capital Improvement Revenue Parks &
Recreation Projects Series A ....................................... 01/01/18 5.700 965,970
-----------
CALIFORNIA--8.09%
2,000 California Statewide Community Development Authority Certificates
Participation (1) .................................................. 11/01/16 7.125 2,053,960
350 Duarte California Redevelopment Agency Tax Allocation Refunding
Davis Addition Project ............................................. 09/01/14 6.700 370,640
2,985 Lake Elsinore California Public Financing Authority Local Agency
Revenue ............................................................ 09/01/20 7.100 3,179,204
1,000 Long Beach Aquarium of the Pacific California Revenue ................ 07/01/23 6.125 948,770
800 Poway Community Facilities District Parkway Business Center .......... 08/15/15 6.750 855,592
-----------
7,408,166
-----------
COLORADO--4.33%
1,500 Black Hawk Colorado Device Tax Revenue ............................... 12/01/21 5.625 1,337,130
2,500 Hyland Hills Metropolitan Park and Recreation District ............... 12/15/15 6.750 2,626,000
-----------
3,963,130
-----------
GEORGIA--1.23%
100 Burke County Georgia Development Authority Pollution Control
Revenue Daily Georgia Power Company Plant .......................... 09/01/00 4.300* 100,000
1,000 Development Authority of Effingham County Fort Howard Paper
(assumed by Fort James Corporation) ................................ 10/01/05 7.900 1,023,560
-----------
1,123,560
-----------
ILLINOIS--2.65%
1,100 Chicago Illinois O'Hare International Airport Special Facility
Revenue United Air Lines Project Series A .......................... 09/01/16 5.350 962,423
750 Illinois Educational Facilities Authority Revenue Augustana
College ............................................................ 10/01/18 5.250 685,305
750 Illinois Educational Facilities Authority Revenue Columbia
College ............................................................ 12/01/17 6.875 774,630
-----------
2,422,358
-----------
INDIANA--6.58%
1,300 Crawfordsville Economic Development Authority Kroger Company ......... 11/01/12 7.700 1,375,712
2,500 Indianapolis Airport Authority Federal Express ....................... 01/15/17 7.100 2,641,300
2,000 Wabash Solid Waste Disposal Jefferson Smurfit Corporation Project .... 06/01/26 7.500 2,010,940
-----------
6,027,952
-----------
</TABLE>
30
<PAGE>
PAINEWEBBER MUNICIPAL HIGH INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------- -------- -----
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--(CONTINUED)
KANSAS--0.23%
$ 250 Shawnee County Kansas Certificates of Participation Community
Mental Health Center Incorporated .................................. 07/01/19 5.350% $ 206,085
-----------
KENTUCKY--3.06%
2,200 Ashland Sewage and Solid Waste Ashland Incorporated Project .......... 02/01/22 7.125 2,283,864
440 Russell Health Financing Authority Franciscan Sisters of the
Poor Health System ................................................. 07/01/15 8.100 516,028
-----------
2,799,892
-----------
LOUISIANA--3.39%
1,000 Pointe Coupee Parish Gulf States Utilities ........................... 03/01/13 6.700 1,009,200
2,000 West Feliciana Parish Gulf States Utilities .......................... 12/01/14 7.700 2,091,340
-----------
3,100,540
-----------
MICHIGAN--0.11%
100 Delta County Michigan Economic Development Corporation
Environmental Improvement Revenue .................................. 09/01/00 4.300* 100,000
-----------
MISSISSIPPI--2.47%
2,400 Jones County Mississippi Solid Waste Disposal Revenue
International Paper Company Project ................................ 10/01/21 5.800 2,258,232
-----------
NEW HAMPSHIRE--5.23%
1,690 New Hampshire Higher Educational & Health Facilities Authority
Revenue New Hampshire College ...................................... 01/01/16 6.300 1,657,637
3,000 New Hampshire Industrial Development Authority Central Maine
Power Company ...................................................... 05/01/14 7.375 3,132,270
-----------
4,789,907
-----------
NEW JERSEY--8.92%
4,000 New Jersey Economic Development Authority Kapkowski Road
Landfill ........................................................... 04/01/18 6.500 3,942,120
2,320 New Jersey Economic Development Authority Special Facility
Revenue Continental Airlines Incorporated Project .................. 09/15/19 6.250 2,203,745
1,960 New Jersey Economic Development Authority Vineland Cogeneration
L.P. Project ....................................................... 06/01/19 7.875 2,022,210
-----------
8,168,075
-----------
NEW YORK--5.66%
3,500 Port Authority of New York & New Jersey Kennedy International
Airport Cogeneration Project 4th Installment Project ............... 10/01/11 6.750 3,607,240
1,750 Suffolk County New York Industrial Development Agency Nissequogue
Cogen Partners Facility ............................................ 01/01/13 5.300 1,579,742
-----------
5,186,982
-----------
</TABLE>
31
<PAGE>
PAINEWEBBER MUNICIPAL HIGH INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------- -------- -----
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--(CONTINUED)
OHIO--3.51%
$ 4,000 Ohio State Water Development Authority Bay Shore Power Project ....... 09/01/20 5.875% $ 3,212,800
-----------
PENNSYLVANIA--6.81%
1,500 Beaver County Industrial Development Authority Toledo Edison ......... 05/01/20 7.750 1,610,055
1,000 Northeastern Pennsylvania Hospital and Education Authority
College Revenue (Kings College) .................................... 07/15/18 6.000 992,340
1,350 Northumberland County Pennsylvania Authority Guaranteed
Lease Revenue Career and Arts Center Project........................ 09/15/20 6.650 1,313,307
1,000 Northumberland County Pennsylvania Authority Guaranteed
Lease Revenue Mountain View Manor Project .......................... 10/01/20 7.000 1,000,630
1,430 Philadelphia Pennsylvania Authority Industrial Development Revenue
First Mortgage Crime Prevention Association ........................ 04/01/19 6.125 1,315,514
-----------
6,231,846
-----------
TEXAS--12.85%
1,000 Dallas-Fort Worth Texas International Airport Facility Improvement
Corporation Revenue American Airlines Incorporated ................. 05/01/35 6.375 977,630
203 Department of Transport Project State of Texas Municipal Bond (1) .... 09/15/12 7.000 209,251
1,875 El Paso International Airport Marriott Hotel ......................... 03/01/22 7.875 1,922,831
1,891 Harris County Texas Lease Agreement (1) .............................. 05/01/14 5.800 1,914,824
2,945 Harris County Texas Lease Mulworth Project (1) ....................... 05/01/20 5.625 2,814,648
2,000 Houston Texas Airport Systems Revenue Special Facilities
Continental Airlines ............................................... 07/15/17 6.125 1,833,660
2,000 Houston Texas Community College Systems .............................. 06/15/25 7.875 2,092,760
-----------
11,765,604
-----------
UTAH--0.79%
2,500 Tooele County Utah Hazardous Waste Disposal Revenue
(assumed by Laidlaw Incorporated) .................................. 08/01/10 6.750 721,325
-----------
VIRGINIA--7.92%
3,360 Alexandria Virginia Redevelopment and Housing Authority Multi-Family
Housing Revenue Mortgage Buckingham Village Apartments ............. 01/01/29 5.500 3,089,419
500 Peninsula Ports Authority Virginia Hospital Facility Revenue
(FHA Insured) ...................................................... 08/01/23 8.700 535,000
3,500 Pittsylvania County Virginia Industrial Development Authority
Revenue ............................................................ 01/01/14 7.500 3,631,180
-----------
7,255,599
-----------
WASHINGTON--1.53%
1,500 Pilchuck Development Public Corporation Revenue Special Facilities
Airport Revenue (assumed by B.F. Goodrich Company) ................. 08/01/23 6.000 1,401,030
-----------
WEST VIRGINIA--2.23%
1,900 Harrison County Commercial Development Bonds Kroger Company .......... 11/01/14 8.100 2,042,747
-----------
</TABLE>
32
<PAGE>
PAINEWEBBER MUNICIPAL HIGH INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------- -------- -----
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--(CONTINUED)
WISCONSIN--5.12%
$ 1,000 Green Bay Wisconsin Redevelopment Authority Industrial Development
Revenue Fort James Project ......................................... 05/01/19 5.600% $ 925,760
3,900 Janesville Industrial Development Revenue Bonds
Simmons Manufacturing Company Paramount Communications ............. 10/15/17 7.000 3,765,957
-----------
4,691,717
-----------
U. S. VIRGIN ISLANDS--1.02%
1,000 Virgin Islands Water and Power Authority Water Systems
Revenue Refunding .................................................. 07/01/17 5.500 932,340
-----------
Total Investments (cost--$94,069,460)--98.15% .................................. 89,865,171
Other assets in excess of liabilities--1.85% ................................... 1,696,018
-----------
Net Assets--100.00% ............................................................ $91,561,189
===========
</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, 2000.
(1) Illiquid securities representing 7.6% of net assets.
FHA Federal Housing Authority.
See accompanying notes to financial statements
33
<PAGE>
PAINEWEBBER NEW YORK TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 2000(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------- -------- -----
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--99.30%
NEW YORK--91.32%
$ 1,000 New York State (AMBAC Insured) ....................................... 06/15/10 6.000% $ 1,060,970
1,000 New York State Series A .............................................. 03/15/11 5.700 1,041,450
1,175 New York State Dormitory Authority Lease Revenue
State University Dormitory Facilities Series C ..................... 07/01/11 5.750 1,258,731
1,000 New York State Dormitory Authority Revenue Bonds
City University of New York + ...................................... 07/01/16 5.625 1,031,200
40 New York State Dormitory Authority Revenue Bonds
Fordam University (AMBAC Insured) .................................. 07/01/15 7.200 40,888
1,000 New York State Dormitory Authority Revenues
City University of New York ........................................ 07/01/28 5.000 888,190
1,000 New York State Dormitory Authority Revenues
Mental Health Services Facilities Improvement G .................... 08/15/13 5.250 1,016,260
1,000 New York State Dormitory Authority Revenues
State University Educational Facilities ............................ 05/15/17 5.000 943,650
2,400 New York State Energy Research & Development
Consolidated Edison Company ........................................ 08/15/20 6.100 2,463,024
180 New York State Energy Research & Development Authority
Electric Facility Revenue, Series A * .............................. 12/01/20 7.150 188,397
100 New York State Energy Research & Development Authority
Electric & Gas Corporation ......................................... 09/01/00 4.200 100,000
80 New York State Energy Research & Development
Long Island Lighting * ............................................. 02/01/22 7.150 83,732
250 New York State Energy Research & Development
Niagra Mohawk (FGIC Insured) ....................................... 10/01/13 6.625 260,362
1,500 New York State Environmental Facilities Corp.
Spring Valley Water (AMBAC Insured) ................................ 08/01/24 6.150 1,553,175
70 New York State Environmental Facilities Corp.
State Water Pollution Control ...................................... 06/15/10 7.250 72,856
10 New York State Housing Finance Agency ................................ 09/15/12 7.300 10,463
1,250 New York State Local Government Assistance Corp.
Refunding Series B ................................................. 04/01/20 4.875 1,145,763
800 New York State Medical Care Facilities Finance Agency
Pooled Equipment Loan Program ...................................... 09/01/00 4.100# 800,000
1,500 New York State Thruway Authority General Revenue
Refunding Series E ................................................. 01/01/15 5.250 1,503,180
1,000 New York State Thruway Authority Highway & Bridge Trust Fund
Series C ........................................................... 04/01/18 5.000 932,320
1,000 Metropolitan Transportation Authority New York Commuter
Facilities Revenue Series A ........................................ 07/01/28 5.250 950,180
1,500 Triborough Bridge & Tunnel Authority ................................. 01/01/12 to 01/01/17 5.500 to 6.000 1,608,695
1,000 Erie County Water Revenue Authority (AMBAC Insured) .................. 12/01/14 6.750 1,140,710
700 Essex County New York Industrial Development Agency
Environmental Improvement Revenue, Series A * ...................... 09/01/00 6.450# 700,000
1,000 Huntington New York Refunding ........................................ 04/01/13 5.500 1,021,440
300 Nassau County New York Industrial Development Agency
Civic Facility Winthrop University Hospital Association ............ 09/01/00 4.200# 300,000
</TABLE>
34
<PAGE>
PAINEWEBBER NEW YORK TAX-FREE INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
--------- -------- -------- -----
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--(CONCLUDED)
NEW YORK--(CONCLUDED)
$ 1,500 New York City Series D ............................................... 08/01/17 5.375% $ 1,503,615
2,100 New York City Series J (FGIC Insured) ................................ 02/15/26 5.500 2,074,443
500 New York City Industrial Development Agency Special
Facility Revenue * ................................................. 07/01/19 5.400 441,195
1,835 New York City Industrial Development Bonds
Japan Airlines Company * ........................................... 11/01/15 6.000 1,948,513
185 New York City Municipal Water Finance Authority Water & Sewer
Systems Revenue .................................................... 06/15/12 7.100 190,530
1,250 New York City Municipal Water Finance Authority Water & Sewer
Systems Revenue (MBIA Insured) ..................................... 06/15/27 5.500 1,230,087
1,025 Niagara Falls (FGIC Insured) ......................................... 06/15/08 5.500 1,063,725
60 Oneida Herkimer New York Solid Waste ................................. 04/01/14 6.750 61,056
1,000 Port Authority of New York & New Jersey Kennedy
International Airport Cogeneration Project * ....................... 10/01/11 6.750 1,030,640
1,250 Suffolk County New York Industrial Development Agency
Industrial Development Revenue Nissequoque * ....................... 01/01/13 5.300 1,128,388
-----------
32,787,828
-----------
PUERTO RICO--7.46%
2,700 Puerto Rico Commonwealth Highway & Transportation Authority .......... 07/01/13 to 07/01/36 5.000 to 6.250 2,679,238
-----------
U. S. VIRGIN ISLANDS--0.52%
200 Virgin Islands Water and Power Authority Water Systems
Revenue Refunding .................................................. 07/01/17 5.500 186,468
-----------
Total Investments (cost--$35,140,618)--99.30% .................................. 35,653,534
Other assets in excess of liabilities--0.70% ................................... 250,429
-----------
Net Assets--100.00% ............................................................ $ 35,903,963
===========
</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, 2000.
* Security subject to Alternative Minimum Tax.
+ Entire principal amount pledged as collateral for futures transactions.
AMBAC American Municipal Bond Assurance Corporation.
FGIC Federal Guaranty Insurance Corporation.
MBIA Municipal Bond Investors Assurance.
<TABLE>
<CAPTION>
FUTURES CONTRACTS
NUMBER OF IN EXPIRATION UNREALIZED
CONTRACTS CONTRACTS TO SELL EXCHANGE FOR DATE DEPRECIATION
--------- -------------------------------------------------------------------- ------------ -------------- ------------
<S> <C> <C> <C>
9 Municipal Bond Futures ............................................. $861,531 September 2000 $(37,624)
========
</TABLE>
See accompanying notes to financial statements
35
<PAGE>
PAINEWEBBER
STATEMENTS OF ASSETS AND LIABILITIES AUGUST 31, 2000 (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 --
$124,620,843, $245,673,311, $94,069.460 and
$35,140,618, respectively) ........................................ $125,418,703 $245,224,758 $89,865,171 $35,653,534
Cash .................................................................. 78,524 46,270 55,320 16,976
Interest receivable ................................................... 2,186,503 3,289,370 1,704,987 400,852
Receivable for shares of beneficial interest sold ..................... 15,000 428 84,682 --
Other assets .......................................................... 27,437 110,794 101,723 56,292
------------ ------------ ----------- -----------
Total assets .......................................................... 127,726,167 248,671,620 91,811,883 36,127,654
------------ ------------ ----------- -----------
LIABILITIES
Payable to affiliates ................................................. 72,266 184,144 81,531 23,730
Payable for shares of beneficial interest repurchased ................. 61,504 107,204 85,807 128,262
Dividends payable ..................................................... 31,178 64,258 25,741 8,235
Variation margin payable .............................................. 10,000 17,500 -- 4,500
Accrued expenses and other liabilities ................................ 110,799 99,160 57,615 58,964
------------ ------------ ----------- -----------
Total liabilities ..................................................... 285,747 472,266 250,694 223,691
------------ ------------ ----------- -----------
NET ASSETS
Beneficial interest - $0.001 par value (unlimited
number authorized) ................................................ 127,691,002 249,775,588 96,549,961 35,790,836
Accumulated net realized losses from investments
and futures transactions .......................................... (1,011,570) (991,589) (784,483) (362,165)
Net unrealized appreciation (depreciation) of
investments and futures ........................................... 760,988 (584,645) (4,204,289) 475,292
------------ ------------ ----------- -----------
Net assets ............................................................ $127,440,420 $248,199,354 $91,561,189 $35,903,963
============ ============ =========== ===========
CLASS A:
Net assets ............................................................ $100,183,749 $194,110,625 $61,311,444 $23,330,416
------------ ------------ ----------- -----------
Shares outstanding .................................................... 9,279,816 17,557,625 6,184,596 2,239,608
------------ ------------ ----------- -----------
Net asset value and redemption value per share ........................ $10.80 $11.06 $9.91 $10.42
====== ====== ===== ======
Maximum offering price per share (net asset value plus
sales charge of 4.00% of offering price) .......................... $11.25 $11.52 $10.32 $10.85
====== ====== ====== ======
CLASS B:
Net assets ............................................................ $ 10,568,755 $ 16,329,437 $12,646,041 $ 3,132,841
------------ ------------ ----------- -----------
Shares outstanding .................................................... 978,414 1,477,434 1,276,150 300,853
------------ ------------ ----------- -----------
Net asset value and offering price per share .......................... $10.80 $11.05 $9.91 $10.41
====== ====== ===== ======
CLASS C:
Net assets ............................................................ $ 16,201,616 $ 37,102,257 $17,380,250 $ 9,340,317
------------ ------------ ----------- -----------
Shares outstanding .................................................... 1,501,799 3,356,154 1,753,555 896,480
------------ ------------ ----------- -----------
Net asset value and offering price per share .......................... $10.79 $11.05 $9.91 $10.42
====== ====== ===== ======
CLASS Y:
Net assets ............................................................ $ 486,300 $ 657,035 $ 223,454 $ 100,389
------------ ------------ ----------- -----------
Shares outstanding .................................................... 45,067 59,421 22,525 9,637
------------ ------------ ----------- -----------
Net asset value, offering price and redemption value per share ........ $10.79 $11.06 $9.92 $10.42
====== ====== ===== ======
</TABLE>
See accompanying notes to financial statements
36
<PAGE>
PAINEWEBBER
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED AUGUST 31, 2000 (UNAUDITED)
----------------------------------------------------
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 ................................................................ $ 3,594,155 $ 7,474,884 $3,145,470 $1,011,215
----------- ----------- ---------- ----------
EXPENSES:
Investment advisory and administration .................................. 316,230 625,586 284,484 108,353
Service fees--Class A ................................................... 124,403 243,914 78,460 29,210
Service and distribution fees--Class B .................................. 51,694 81,019 67,175 16,956
Service and distribution fees--Class C .................................. 60,832 143,414 68,898 34,775
Custody and accounting .................................................. 31,623 56,961 25,707 10,018
Legal and audit ......................................................... 24,542 20,688 32,825 26,256
Transfer agency and service fees ........................................ 19,411 51,334 18,652 9,256
Reports and notices to shareholders ..................................... 14,659 19,491 18,680 10,210
State registration ...................................................... 13,777 10,145 22,725 18,444
Trustees' fees .......................................................... 5,250 5,250 5,250 5,250
Other expenses .......................................................... 5,885 628 7,414 3,264
----------- ----------- ---------- ----------
668,306 1,258,430 630,270 271,992
Less: Fee waivers from adviser .......................................... (126,492) -- -- (52,035)
----------- ----------- ---------- ----------
Net expenses ............................................................ 541,814 1,258,430 630,270 219,957
----------- ----------- ---------- ----------
Net investment income ................................................... 3,052,341 6,216,454 2,515,200 791,258
----------- ----------- ---------- ----------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT ACTIVITIES:
Net realized gains (losses) from:
Investment transactions ............................................. 162,655 156,025 (1,505) (254,098)
Futures transactions ................................................ (40,010) (317,937) (7,037) (47,502)
Net change in unrealized appreciation/depreciation of:
Investments ......................................................... 7,344,204 9,301,642 485,891 1,811,890
Futures ............................................................. (31,340) (57,061) -- (41,467)
----------- ----------- ---------- ----------
NET REALIZED AND UNREALIZED GAINS FROM INVESTMENT ACTIVITIES ............ 7,435,509 9,082,669 477,349 1,468,823
----------- ----------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................... $10,487,850 $15,299,123 $2,992,549 $2,260,081
=========== =========== ========== ==========
</TABLE>
See accompanying notes to financial statements
37
<PAGE>
PAINEWEBBER CALIFORNIA TAX-FREE INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
AUGUST 31, 2000 FOR THE YEAR ENDED
(UNAUDITED) FEBRUARY 29, 2000
--------------- ------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ................................................................. $ 3,052,341 $ 6,641,874
Net realized gains (losses) from investments and futures transactions ................. 122,645 (1,122,554)
Net change in unrealized appreciation/depreciation of investments and futures ......... 7,312,864 (11,590,598)
------------ ------------
Net increase (decrease) in net assets resulting from operations ....................... 10,487,850 (6,071,278)
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class A ........................................................ (2,465,323) (5,361,682)
Net investment income--Class B ........................................................ (215,913) (491,047)
Net investment income--Class C ........................................................ (360,445) (773,393)
Net investment income--Class Y ........................................................ (10,660) (15,752)
Net realized gains from investment transactions--Class A .............................. -- (599,558)
Net realized gains from investment transactions--Class B .............................. -- (64,598)
Net realized gains from investment transactions--Class C .............................. -- (100,156)
Net realized gains from investment transactions--Class Y .............................. -- (2,021)
------------ ------------
Total dividends and distributions to shareholders ..................................... (3,052,341) (7,408,207)
------------ ------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares .................................................. 3,401,853 18,450,258
Cost of shares repurchased ............................................................ (11,811,643) (34,005,085)
Proceeds from dividends reinvested .................................................... 1,606,060 3,827,113
------------ ------------
Net decrease in net assets derived from beneficial interest transactions .............. (6,803,730) (11,727,714)
------------ ------------
Net increase (decrease) in net assets ................................................. 631,779 (25,207,199)
NET ASSETS:
Beginning of period ................................................................... 126,808,641 152,015,840
------------ ------------
End of period ......................................................................... $127,440,420 $126,808,641
============ ============
</TABLE>
See accompanying notes to financial statements
38
<PAGE>
PAINEWEBBER NATIONAL TAX-FREE INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
AUGUST 31, 2000 FOR THE YEAR ENDED
(UNAUDITED) FEBRUARY 29, 2000
--------------- ------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ................................................................. $ 6,216,454 $ 13,267,744
Net realized losses from investments and futures transactions ......................... (161,912) (287,049)
Net change in unrealized appreciation/depreciaition of investments and futures ........ 9,244,581 (24,707,007)
------------ ------------
Net increase (decrease) in net assets resulting from operations ....................... 15,299,123 (11,726,312)
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class A ........................................................ (4,973,134) (10,449,658)
Net investment income--Class B ........................................................ (350,537) (806,364)
Net investment income--Class C ........................................................ (875,317) (1,983,504)
Net investment income--Class Y ........................................................ (17,466) (28,218)
Net realized gains from investment transactions--Class A .............................. -- (1,236,145)
Net realized gains from investment transactions--Class B .............................. -- (106,332)
Net realized gains from investment transactions--Class C .............................. -- (264,368)
Net realized gains from investment transactions--Class Y .............................. -- (3,422)
------------ ------------
Total dividends and distributions to shareholders ..................................... (6,216,454) (14,878,011)
------------ ------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares .................................................. 7,765,591 22,849,614
Cost of shares repurchased ............................................................ (22,936,881) (54,948,445)
Proceeds from dividends reinvested .................................................... 4,065,290 9,647,018
------------ ------------
Net decrease in net assets derived from beneficial interest transactions .............. (11,106,000) (22,451,813)
------------ ------------
Net decrease in net assets ............................................................ (2,023,331) (49,056,136)
NET ASSETS:
Beginning of period ................................................................... 250,222,685 299,278,821
------------ ------------
End of period ......................................................................... $248,199,354 $250,222,685
============ ============
</TABLE>
See accompanying notes to financial statements
39
<PAGE>
PAINEWEBBER MUNICIPAL HIGH INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
AUGUST 31, 2000 FOR THE YEAR ENDED
(UNAUDITED) FEBRUARY 29, 2000
--------------- ------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ................................................................. $ 2,515,200 $ 5,339,015
Net realized losses from investments and futures transactions ......................... (8,542) (708,753)
Net change in unrealized appreciation/depreciaition of investments and futures ........ 485,891 (9,090,940)
------------ ------------
Net increase (decrease) in net assets resulting from operations ....................... 2,992,549 (4,460,678)
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class A ........................................................ (1,729,409) (3,474,079)
Net investment income--Class B ........................................................ (318,371) (755,561)
Net investment income--Class C ........................................................ (460,321) (1,085,799)
Net investment income--Class Y ........................................................ (7,099) (23,576)
Net realized gains from investment transactions--Class A .............................. -- (384,910)
Net realized gains from investment transactions--Class B .............................. -- (92,792)
Net realized gains from investment transactions--Class C .............................. -- (125,455)
Net realized gains from investment transactions--Class Y .............................. -- (3,653)
------------ ------------
Total dividends and distributions to shareholders ..................................... (2,515,200) (5,945,825)
------------ ------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares .................................................. 3,979,899 27,422,935
Cost of shares repurchased ............................................................ (10,908,675) (34,015,541)
Proceeds from dividends reinvested .................................................... 1,383,489 3,412,560
------------ ------------
Net decrease in net assets derived from beneficial interest transactions .............. (5,545,287) (3,180,046)
------------ ------------
Net decrease in net assets ............................................................ (5,067,938) (13,586,549)
NET ASSETS:
Beginning of period ................................................................... 96,629,127 110,215,676
------------ ------------
End of period ......................................................................... $ 91,561,189 $ 96,629,127
============ ============
</TABLE>
See accompanying notes to financial statements
40
<PAGE>
PAINEWEBBER NEW YORK TAX-FREE INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
AUGUST 31, 2000 FOR THE YEAR ENDED
(UNAUDITED) FEBRUARY 29, 2000
--------------- ------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ................................................................. $ 791,258 $ 1,720,373
Net realized gains (losses) from investments and futures transactions ................. (301,600) 118,560
------------ ------------
Net change in unrealized appreciation/depreciaition of investments and futures ........ 1,770,423 (3,767,514)
------------ ------------
Net increase (decrease) in net assets resulting from operations ....................... 2,260,081 (1,928,581)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class A ........................................................ (534,809) (1,103,964)
Net investment income--Class B ........................................................ (65,100) (178,638)
Net investment income--Class C ........................................................ (189,311) (436,077)
Net investment income--Class Y ........................................................ (2,038) (1,694)
Net realized gains from investment transactions--Class A .............................. -- (210,252)
Net realized gains from investment transactions--Class B .............................. -- (35,470)
Net realized gains from investment transactions--Class C .............................. -- (93,939)
Net realized gains from investment transactions--Class Y .............................. -- (566)
------------ ------------
Total dividends and distributions to shareholders ..................................... (791,258) (2,060,600)
------------ ------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares .................................................. 1,466,111 3,333,884
Cost of shares repurchased ............................................................ (3,454,572) (9,812,265)
Proceeds from dividends reinvested .................................................... 511,398 1,372,977
------------ ------------
Net decrease in net assets derived from beneficial interest transactions .............. (1,477,063) (5,105,404)
------------ ------------
Net decrease in net assets ............................................................ (8,240) (9,094,585)
NET ASSETS:
Beginning of period ................................................................... 35,912,203 45,006,788
------------ ------------
End of period ......................................................................... $ 35,903,963 $ 35,912,203
============ ============
</TABLE>
See accompanying notes to financial statements
41
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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.
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 accounting
principles generally accepted in the United States 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--Each Fund calculates its net asset value based on
the current market value for its portfolio securities. The Funds normally obtain
market values for their securities from independent pricing sources. Independent
pricing sources may use reported last sale prices, current market quotations or
valuations from computerized "matrix" systems that derive values based on
comparable securities. Securities traded in the over-the-counter ("OTC") market
and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") normally are valued at
the last sale price on Nasdaq prior to valuation. Other OTC securities are
valued at the last bid price available prior to valuation. Securities which are
listed on U.S. and foreign stock exchanges normally are valued at the last sale
price on the day the securities are valued or, lacking any sales on such day, at
the last available bid price. In cases where securities are traded on more than
one exchange, the securities are valued on the exchange designated as the
primary market by Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"),
the investment adviser and administrator of the Funds. Mitchell Hutchins is a
wholly owned subsidiary of PaineWebber Incorporated ("PaineWebber"), a wholly
owned subsidiary of Paine Webber Group Inc. ("PW Group"). If a market value is
not available from an independent pricing source for a particular security, that
security is valued at fair value as determined in good faith by or under the
direction of the Funds' board of trustees (the "board"). The amortized cost
method of valuation, which approximates market value, generally is used to value
short-term debt instruments with sixty days or less remaining to maturity,
unless the board determines that this does not represent fair value.
42
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are
recorded on the trade date. Realized gains and losses from investment
transactions are calculated 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.
FUTURES CONTRACTS--Upon entering into a financial futures contract, the
Funds are required to pledge to a broker an amount of cash and/or municipal
securities equal to a certain percentage of the contract amount. This amount is
known as the "initial margin." Subsequently, payments, known as "variation
margin," are made or received by the Funds each day, depending on the daily
fluctuations in the value of the underlying financial futures contracts. Such
variation margin is recorded for financial statement purposes on a daily basis
as unrealized gain or loss until the financial futures contract is closed, at
which time the net gain or loss is reclassified to realized.
Using financial futures contracts involves various market risks. The
maximum amount at risk from the purchase of a futures contract is the contract
value. The Funds use financial futures contracts in strategies intended to
enhance income or for hedging purposes. However, imperfect correlations between
futures contracts and the portfolio securities being hedged, or market
disruptions, do not normally permit full control of these risks at all times.
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 primarily in municipal obligations of
their respective states. This concentration of investments may subject these
Funds to greater risks. 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.
BANK LINE OF CREDIT
Each Fund may participate with other funds managed by Mitchell Hutchins in
a $200 million committed credit facility ("Facility") to be utilized for
temporary financing until the settlement of sale or purchase of portfolio
securities, the repurchase or redemption of shares of the Funds at the request
of the shareholders and other temporary or emergency purposes. In connection
therewith, each Fund has agreed to pay a commitment fee, pro rata, based on the
relative asset size of the Funds in the Facility. Interest is charged to each
Fund at rates based on prevailing market rates in effect at the time of
borrowings. For the six months ended August 31, 2000, the Funds did not borrow
under the Facility.
43
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
INVESTMENT ADVISER AND ADMINISTRATOR
Each Trust's board 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, 2000, California Tax-Free Income Fund, National Tax-Free Income
Fund, Municipal High Income Fund and New York Tax-Free Income Fund owed Mitchell
Hutchins $32,134, $105,391, $46,645 and $10,203, respectively, in investment
advisory and administration fees. For the six months ended August 31, 2000,
Mitchell Hutchins voluntarily waived $126,492 and $52,035 in investment advisory
and administration fees from the California Tax-Free Income Fund and New York
Tax-Free Income Fund, respectively.
On July 12, 2000, PW Group and UBS AG ("UBS") announced that they had
entered into an agreement and plan of merger under which PW Group will merge
into a wholly owned subsidiary of UBS. If all required approvals are obtained
and the required conditions are satisfied, PW Group and UBS expect to complete
the transaction in the fourth quarter of 2000. UBS, with headquarters in
Zurich, Switzerland, is an internationally diversified organization with
operations in many areas of the financial services industry.
DISTRIBUTION PLANS
Mitchell Hutchins is the distributor of 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, 2000,
California Tax-Free Income Fund, National Tax-Free Income Fund, Municipal High
Income Fund and New York Tax-Free Income Fund owed Mitchell Hutchins $40,132,
$78,753, $34,886 and $13,527, respectively, in service and distribution fees.
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, 2000, it earned $61,533, $50,784, $60,657 and
$28,169 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.
TRANSFER AGENCY SERVICE FEES
PaineWebber provides transfer agency related services to each Fund pursuant
to a delegation of authority from PFPC Inc., each Funds' transfer agent, and is
compensated for these services by PFPC Inc., not the Funds. For the six months
ended August 31, 2000, PaineWebber received from PFPC Inc., not the Funds,
approximately 48%, 47%, 53% and 53% of the total transfer agency and related
service fees collected by PFPC Inc. from the California Tax-Free Income Fund,
National Tax-Free Income Fund, Municipal High Income Fund and New York Tax-Free
Income Fund, respectively.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at August 31,
2000 was substantially the same as the cost of securities for financial
statement purposes.
44
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
At August 31, 2000 the components of net unrealized
appreciation/(depreciation) 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) .. $ 2,505,654 $ 5,744,778 $ 1,212,966 $ 973,985
Gross depreciation (investments having an excess of cost over value) .. (1,707,794) (6,193,331) (5,417,255) (461,069)
----------- ----------- ----------- --------
Net unrealized appreciation (depreciation) of investments ............. $ 797,860 $ (448,553) $(4,204,289) $ 512,916
=========== =========== =========== =========
</TABLE>
For the six months ended August 31, 2000, 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 ............................................................. $10,584,433 $10,533,635 $4,927,560 $ 922,080
Sales ................................................................. $15,708,350 $20,368,001 $5,032,631 $3,199,510
</TABLE>
FEDERAL 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, 2000, California Tax-Free Income Fund had $87,023 of
capital loss carryforwards available, which will expire by February 28, 2008. To
the extent that any net capital loss carryforwards are used, as provided in the
regulations, to offset future capital gains, it is probable that the gains so
offset will not be distributed. In accordance with U.S. Treasury regulations,
California Tax-Free Income Fund, National Tax-Free Income Fund, Municipal High
Income Fund and New York Tax-Free Income Fund have elected to defer $1,051,063,
$904,221, $774,879 and $56,267, respectively, of realized capital losses arising
after October 31, 1999. Such losses are treated for tax purposes as arising on
March 1, 2000.
45
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SHARES OF BENEFICIAL INTEREST
There is an unlimited number 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, 2000:
Shares sold ................................ 158,082 $ 1,642,500 117,371 $ 1,233,675 40,063 $ 421,059
Shares repurchased ......................... (840,785) (8,682,175) (141,861) (1,481,001) (158,066) (1,643,464)
Shares converted from Class B to
Class A .................................. 45,142 469,933 (45,111) (469,933) -- --
Dividends reinvested ....................... 119,234 1,243,884 11,777 122,939 22,415 233,741
---------- ------------ -------- ----------- -------- -----------
Net increase (decrease) .................... (518,327) $ (5,325,858) (57,824) $ (594,320) (95,588) $ (988,664)
========== ============ ======== =========== ======== ===========
YEAR ENDED FEBRUARY 29, 2000:
Shares sold ................................ 915,972 $ 9,834,294 369,791 $ 3,968,324 410,125 $ 4,394,795
Shares repurchased ......................... (2,399,039) (25,341,594) (261,113) (2,778,906) (538,948) (5,693,149)
Shares converted from Class B to
Class A .................................. 328,699 3,511,832 (328,493) (3,511,832) -- --
Dividends reinvested ....................... 282,005 2,976,203 26,168 275,576 53,599 565,072
---------- ------------ -------- ----------- -------- -----------
Net increase (decrease) .................... (872,363) $ (9,019,265) (193,647) $(2,046,838) (75,224) $ (733,282)
========== ============ ======== =========== ======== ===========
NATIONAL TAX-FREE INCOME FUND
SIX MONTHS ENDED AUGUST 31, 2000:
Shares sold ................................ 463,717 $ 4,963,476 191,923 $ 2,075,317 63,340 $ 689,909
Shares repurchased ......................... (1,526,144) (16,452,832) (150,573) (1,629,041) (434,211) (4,700,871)
Shares converted from Class B to
Class A .................................. 107,249 1,158,067 (107,249) (1,158,067) -- --
Dividends reinvested ....................... 298,039 3,225,611 12,589 136,179 63,384 685,947
---------- ------------ -------- ----------- -------- -----------
Net decrease ............................... (657,139) $ (7,105,678) (53,310) $ (575,612) (307,487) $(3,325,015)
========== ============ ======== =========== ======== ===========
YEAR ENDED FEBRUARY 29, 2000:
Shares sold ................................ 1,126,295 $ 12,518,003 429,819 $ 4,792,132 438,033 $ 4,934,806
Shares repurchased ......................... (3,655,632) (40,601,475) (289,243) (3,222,795) (996,202) (10,951,170)
Shares converted from Class B to
Class A .................................. 699,252 7,834,170 (698,899) (7,834,170) -- --
Dividends reinvested ....................... 679,864 7,531,233 35,090 389,642 153,137 1,695,260
---------- ------------ -------- ----------- -------- -----------
Net increase (decrease) .................... (1,150,221) $(12,718,069) (523,233) $(5,875,191) (405,032) $(4,321,104)
========== ============ ======== =========== ======== ===========
<CAPTION>
CLASS Y
------------------------
SHARES AMOUNT
-------- ----------
<S> <C> <C>
CALIFORNIA TAX-FREE INCOME FUND
SIX MONTHS ENDED AUGUST 31, 2000:
Shares sold ................................ 9,982 $ 104,619
Shares repurchased ......................... (479) (5,003)
Shares converted from Class B to
Class A .................................. -- --
Dividends reinvested ....................... 526 5,496
-------- ---------
Net increase (decrease) .................... 10,029 $ 105,112
======== =========
YEAR ENDED FEBRUARY 29, 2000:
Shares sold ................................ 23,563 $ 252,845
Shares repurchased ......................... (17,454) (191,436)
Shares converted from Class B to
Class A .................................. -- --
Dividends reinvested ....................... 970 10,262
-------- ---------
Net increase (decrease) .................... 7,079 $ 71,671
======== =========
NATIONAL TAX-FREE INCOME FUND
SIX MONTHS ENDED AUGUST 31, 2000:
Shares sold ................................ 3,451 $ 36,889
Shares repurchased ......................... (14,391) (154,137)
Shares converted from Class B to
Class A .................................. -- --
Dividends reinvested ....................... 1,621 17,553
-------- ---------
Net decrease ............................... (9,319) $ (99,695)
======== =========
YEAR ENDED FEBRUARY 29, 2000:
Shares sold ................................ 54,252 $ 604,673
Shares repurchased ......................... (15,676) (173,005)
Shares converted from Class B to
Class A .................................. -- --
Dividends reinvested ....................... 2,811 30,883
-------- ---------
Net increase (decrease) .................... 41,387 $ 462,551
======== =========
</TABLE>
46
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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, 2000:
Shares sold ................................ 234,982 $ 2,296,155 123,053 $ 1,205,669 40,974 $ 401,454
Shares repurchased ......................... (569,891) (5,582,292) (204,741) (1,998,722) (329,838) (3,222,997)
Shares converted from Class B to
Class A .................................. 79,895 783,297 (79,969) (783,297) -- --
Dividends reinvested ....................... 92,104 902,421 16,999 166,587 31,361 307,403
---------- ------------ -------- ----------- -------- -----------
Net decrease ............................... (162,910) $ (1,600,419) (144,658) $(1,409,763) (257,503) $(2,514,140)
========== ============ ======== =========== ======== ===========
YEAR ENDED FEBRUARY 29, 2000:
Shares sold ................................ 1,755,817 $ 18,009,982 437,111 $ 4,559,798 420,773 $ 4,403,449
Shares repurchased ......................... (2,104,312) (21,542,166) (421,705) (4,311,469) (730,607) (7,562,182)
Shares converted from Class B to
Class A .................................. 353,637 3,687,065 (352,821) (3,687,065) -- --
Dividends reinvested ....................... 204,441 2,120,435 40,698 421,854 81,474 843,969
---------- ------------ -------- ----------- -------- -----------
Net increase (decrease) .................... 209,583 $ 2,275,316 (296,717) $(3,016,882) (228,360) $(2,314,764)
========== ============ ======== =========== ======== ===========
NEW YORK TAX-FREE INCOME FUND
SIX MONTHS ENDED AUGUST 31, 2000:
Shares sold ................................ 103,647 $ 1,062,739 12,725 $ 129,713 23,577 $ 239,295
Shares repurchased ......................... (196,890) (2,000,202) (65,608) (668,427) (77,289) (780,118)
Shares converted from Class B to
Class A .................................. 18,010 181,571 (17,979) (181,571) -- --
Dividends reinvested ....................... 32,469 330,478 2,178 22,170 15,388 156,690
---------- ------------ -------- ----------- -------- -----------
Net increase (decrease) .................... (42,764) $ (425,414) (68,684) $ (698,115) (38,324) $ (384,133)
========== ============ ======== =========== ======== ===========
YEAR ENDED FEBRUARY 29, 2000:
Shares sold ................................ 197,037 $ 2,031,833 58,905 $ 613,987 58,584 $ 616,585
Shares repurchased ......................... (615,402) (6,440,717) (88,166) (927,749) (234,040) (2,416,919)
Shares converted from Class B to
Class A .................................. 155,800 1,620,075 (155,863) (1,620,075) -- --
Dividends reinvested ....................... 82,217 850,245 9,486 98,981 40,781 421,578
---------- ------------ -------- ----------- -------- -----------
Net increase (decrease) .................... (180,348) $ (1,938,564) (175,638) $(1,834,856) (134,675) $(1,378,756)
========== ============ ======== =========== ======== ===========
<CAPTION>
CLASS Y
------------------------
SHARES AMOUNT
-------- ----------
<S> <C> <C>
MUNICIPAL HIGH INCOME FUND
SIX MONTHS ENDED AUGUST 31, 2000:
Shares sold ................................ 7,821 $ 76,621
Shares repurchased ......................... (10,598) (104,664)
Shares converted from Class B to
Class A .................................. -- --
Dividends reinvested ....................... 722 7,078
-------- ---------
Net decrease ............................... (2,055) $ (20,965)
======== =========
YEAR ENDED FEBRUARY 29, 2000:
Shares sold ................................ 43,599 $ 449,706
Shares repurchased ......................... (59,615) (599,724)
Shares converted from Class B to
Class A .................................. -- --
Dividends reinvested ....................... 2,542 26,302
-------- ---------
Net increase (decrease) .................... (13,474) $(123,716)
======== =========
NEW YORK TAX-FREE INCOME FUND
SIX MONTHS ENDED AUGUST 31, 2000:
Shares sold ................................ 3,458 $ 34,364
Shares repurchased ......................... (575) (5,825)
Shares converted from Class B to
Class A .................................. -- --
Dividends reinvested ....................... 202 2,060
-------- ---------
Net increase (decrease) .................... 3,085 $ 30,599
======== =========
YEAR ENDED FEBRUARY 29, 2000:
Shares sold ................................ 7,061 $ 71,479
Shares repurchased ......................... (2,598) (26,880)
Shares converted from Class B to
Class A .................................. -- --
Dividends reinvested ....................... 214 2,173
-------- ---------
Net increase (decrease) .................... 4,677 $ 46,772
======== =========
</TABLE>
47
<PAGE>
PAINEWEBBER CALIFORNIA TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout
each period is presented below:
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS FOR THE YEARS FOR THE
ENDED YEAR ENDED YEAR
AUGUST 31, ENDED FEBRUARY 28, ENDED
2000 FEBRUARY 29, ---------------------------- FEBRUARY 29,
(UNAUDITED) 2000 1999 1998 1997 1996
----------- ------------ ------ ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................... $10.17 $11.18 $11.39 $10.91 $11.02 $10.68
------ ------ ------ ------ ------ ------
Net investment income .................................. 0.26 0.51 0.52 0.51 0.52 0.57
Net realized and unrealized gains (losses) from
investments and futures .............................. 0.63 (0.95) 0.11 0.48 (0.11) 0.34
------ ------ ------ ------ ------ ------
Net increase (decrease) from investment operations ..... 0.89 (0.44) 0.63 0.99 0.41 0.91
------ ------ ------ ------ ------ ------
Dividends from net investment income ................... (0.26) (0.51) (0.52) (0.51) (0.52) (0.57)
Distributions from net realized gains from investment
transactions ......................................... -- (0.06) (0.32) -- -- --
------ ------ ------ ------ ------ ------
Total dividends and distributions to shareholders ...... (0.26) (0.57) (0.84) (0.51) (0.52) (0.57)
------ ------ ------ ------ ------ ------
Net asset value, end of period ......................... $10.80 $10.17 $11.18 $11.39 $10.91 $11.02
====== ====== ====== ====== ====== ======
Total investment return (1) ............................ 8.91% (3.96)% 5.90% 9.26% 3.92% 8.68%
====== ====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of period (000's) ...................... $100,184 $99,668 $119,266 $120,804 $127,040 $151,684
Expenses to average net assets, net of waivers from
adviser .............................................. 0.73%* 0.75% 0.83% 0.98% 0.97% 0.94%
Expenses to average net assets, before waivers from
adviser .............................................. 0.93%* 0.95% 0.96% 0.98% 0.97% 0.94%
Net investment income to average net assets, net of
waivers from adviser ................................. 4.95%* 4.85% 4.59% 4.56% 4.85% 5.21%
Net investment income to average net assets, before
waivers from adviser ................................. 4.75%* 4.65% 4.46% 4.56% 4.85% 5.21%
Portfolio turnover rate ................................ 9% 24% 45% 107% 73% 32%
</TABLE>
-----------------------
* Annualized.
(1) Total investment return is calculated assuming a $10,000 investment on
the first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. The figures do not
include any applicable sales charges; results would be lower if they were
included. Total investment return for a period of less than one year has
not been annualized.
48
<PAGE>
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS FOR THE YEARS FOR THE
ENDED YEAR ENDED YEAR
AUGUST 31, ENDED FEBRUARY 28, ENDED
2000 FEBRUARY 29, ---------------------------- FEBRUARY 29,
(UNAUDITED) 2000 1999 1998 1997 1996
----------- ------------ ------ ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................... $10.18 $11.18 $11.39 $10.92 $11.03 $10.69
------ ------ ------ ------ ------ ------
Net investment income .................................. 0.22 0.43 0.43 0.42 0.44 0.48
Net realized and unrealized gains (losses) from
investments and futures .............................. 0.62 (0.94) 0.11 0.47 (0.11) 0.34
------ ------ ------ ------ ------ ------
Net increase (decrease) from investment operations ..... 0.84 (0.51) 0.54 0.89 0.33 0.82
------ ------ ------ ------ ------ ------
Dividends from net investment income ................... (0.22) (0.43) (0.43) (0.42) (0.44) (0.48)
Distributions from net realized gains from investment
transactions ......................................... -- (0.06) (0.32) -- -- --
------ ------ ------ ------ ------ ------
Total dividends and distributions to shareholders ...... (0.22) (0.49) (0.75) (0.42) (0.44) (0.48)
------ ------ ------ ------ ------ ------
Net asset value, end of period ......................... $10.80 $10.18 $11.18 $11.39 $10.92 $11.03
====== ====== ====== ====== ====== ======
Total investment return (1) ............................ 8.38% (4.60)% 5.06% 8.33% 3.14% 7.86%
====== ====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of period (000's) ...................... $10,569 $10,547 $13,756 $16,783 $20,943 $27,175
Expenses to average net assets, net of waivers from
adviser .............................................. 1.49%* 1.52% 1.59% 1.75% 1.74% 1.70%
Expenses to average net assets, before waivers from
adviser .............................................. 1.69%* 1.72% 1.72% 1.75% 1.74% 1.70%
Net investment income to average net assets, net of
waivers from adviser ................................. 4.18%* 4.06% 3.81% 3.79% 4.08% 4.45%
Net investment income to average net assets, before
waivers from adviser ................................. 3.98%* 3.86% 3.68% 3.79% 4.08% 4.45%
Portfolio turnover rate ................................ 9% 24% 45% 107% 73% 32%
<CAPTION>
CLASS C
------------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS FOR THE YEARS FOR THE
ENDED YEAR ENDED YEAR
AUGUST 31, ENDED FEBRUARY 28, ENDED
2000 FEBRUARY 29, ---------------------------- FEBRUARY 29,
(UNAUDITED) 2000 1999 1998 1997 1996
----------- ------------ ------ ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................... $10.17 $11.17 $11.38 $10.90 $11.02 $10.67
------ ------ ------ ------ ------ ------
Net investment income .................................. 0.23 0.46 0.46 0.45 0.47 0.51
Net realized and unrealized gains (losses) from
investments and futures .............................. 0.62 (0.94) 0.11 0.48 (0.12) 0.35
------ ------ ------ ------ ------ ------
Net increase (decrease) from investment operations ..... 0.85 (0.48) 0.57 0.93 0.35 0.86
------ ------ ------ ------ ------ ------
Dividends from net investment income ................... (0.23) (0.46) (0.46) (0.45) (0.47) (0.51)
Distributions from net realized gains from investment
transactions ......................................... -- (0.06) (0.32) -- -- --
------ ------ ------ ------ ------ ------
Total dividends and distributions to shareholders ...... (0.23) (0.52) (0.78) (0.45) (0.47) (0.51)
------ ------ ------ ------ ------ ------
Net asset value, end of period ......................... $10.79 $10.17 $11.17 $11.38 $10.90 $11.02
====== ====== ====== ====== ====== ======
Total investment return (1) ............................ 8.53% (4.36)% 5.35% 8.71% 3.30% 8.22%
====== ====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of period (000's) ...................... $16,202 $16,237 $18,682 $16,522 $17,624 $22,155
Expenses to average net assets, net of waivers from
adviser .............................................. 1.24%* 1.26% 1.33% 1.50% 1.49% 1.46%
Expenses to average net assets, before waivers from
adviser .............................................. 1.44%* 1.46% 1.47% 1.50% 1.49% 1.46%
Net investment income to average net assets, net of
waivers from adviser ................................. 4.44%* 4.34% 4.08% 4.05% 4.34% 4.69%
Net investment income to average net assets, before
waivers from adviser ................................. 4.24%* 4.14% 3.94% 4.05% 4.34% 4.69%
Portfolio turnover rate ................................ 9% 24% 45% 107% 73% 32%
</TABLE>
49
<PAGE>
PAINEWEBBER CALIFORNIA TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
CLASS Y
----------------------------------------------------------
FOR THE
SIX MONTHS FOR THE FOR THE FEBRUARY 5,
ENDED YEAR YEAR 1998+
AUGUST 31, ENDED ENDED THROUGH
2000 FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 2000 1999 1998
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period..................... $10.17 $11.18 $11.38 $11.42
------ ------ ------ ------
Net investment income.................................... 0.27 0.54 0.55 0.04
Net realized and unrealized gains (losses) from
investments and futures................................ 0.62 (0.95) 0.12 (0.04)
------ ------ ------ ------
Net increase (decrease) from investment operations....... 0.89 (0.41) 0.67 0.00
------ ------ ------ ------
Dividends from net investment income..................... (0.27) (0.54) (0.55) (0.04)
Distributions from net realized gains from investment
transactions........................................... -- (0.06) (0.32) --
------ ------ ------ ------
Total dividends and distributions to shareholders........ (0.27) (0.60) (0.87) (0.04)
------ ------ ------ ------
Net asset value, end of period........................... $10.79 $10.17 $11.18 $11.38
====== ====== ====== ======
Total investment return (1).............................. 8.96% (3.73)% 6.28% (0.34)%
====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of period (000's) ....................... $486 $356 $312 $114
Expenses to average net assets, net of waivers from
adviser................................................ 0.45%* 0.48% 0.55% 0.76%*
Expenses to average net assets, before waivers from
adviser................................................ 0.65%* 0.68% 0.71% 0.76%*
Net investment income to average net assets, net of
waivers from adviser................................... 5.22%* 5.16% 4.87% 5.07%*
Net investment income to average net assets, before
waivers from adviser................................... 5.02%* 4.96% 4.71% 5.07%*
Portfolio turnover rate.................................. 9% 24% 45% 107%
</TABLE>
---------------
+ Commencement of issuance of shares.
* Annualized.
(1) Total investment return is calculated assuming a $10,000 investment on
the first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. The figures do not
include any applicable program fees; results would be lower if they were
included. Total investment return for a period of less than one year has
not been annualized.
50
<PAGE>
(This page has been left blank intentionally.)
51
<PAGE>
PAINEWEBBER NATIONAL TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS FOR THE YEARS FOR THE
ENDED YEAR ENDED YEAR
AUGUST 31, ENDED FEBRUARY 28, ENDED
2000 FEBRUARY 29, ------------------------------ FEBRUARY 29,
(UNAUDITED) 2000 1999 1998 1997 1996
----------- ------------ -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $10.66 $11.73 $11.97 $11.55 $11.64 $11.26
------ ------ ------ ------ ------ ------
Net investment income............................... 0.28 0.55 0.56 0.56 0.55 0.58
Net realized and unrealized gains (losses) from
investments and futures........................... 0.40 (1.00) 0.05 0.50 (0.09) 0.39
------ ------ ------ ------ ------ ------
Net increase (decrease) from investment operations.. 0.68 (0.45) 0.61 1.06 0.46 0.97
------ ------ ------ ------ ------ ------
Dividends from net investment income................ (0.28) (0.55) (0.56) (0.56) (0.55) (0.59)
Distributions from net realized gains from
investment transactions........................... -- (0.07) (0.29) (0.08) -- --
------ ------ ------ ------ ------ ------
Total dividends and distributions to shareholders... (0.28) (0.62) (0.85) (0.64) (0.55) (0.59)
------ ------ ------ ------ ------ ------
Net asset value, end of period...................... $11.06 $10.66 $11.73 $11.97 $11.55 $11.64
====== ====== ====== ====== ====== ======
Total investment return (1)......................... 6.49% (3.91)% 5.31% 9.48% 4.14% 8.75%
====== ====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of period (000's)................... $194,111 $194,134 $227,151 $229,040 $263,425 $315,899
Expenses to average net assets...................... 0.88%* 0.87% 0.94% 0.95% 0.91% 0.93%(2)
Net investment income to average net assets......... 5.10%* 4.96% 4.72% 4.77% 4.85% 5.06%(2)
Portfolio turnover rate............................. 4% 29% 43% 79% 81% 74%
</TABLE>
-----------------------
* Annualized
(1) Total investment return is calculated assuming a $10,000 investment on
the first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. The figures do not
include any applicable sales charges; results would be lower if they were
included. Total investment return for periods of less than one year has
not been annualized.
(2) These ratios include non-recurring acquisition expenses of 0.03%.
52
<PAGE>
PAINEWEBBER NATIONAL TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS FOR THE YEARS FOR THE
ENDED YEAR ENDED YEAR
AUGUST 31, ENDED FEBRUARY 28, ENDED
2000 FEBRUARY 29, --------------------------- FEBRUARY 29,
(UNAUDITED) 2000 1999 1998 1997 1996
----------- ------------ ------- ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $10.66 $11.73 $11.97 $11.55 $11.64 $11.26
------ ------ ------ ------ ------ ------
Net investment income............................... 0.24 0.46 0.47 0.47 0.46 0.49
Net realized and unrealized gains (losses) from
investments and futures........................... 0.39 (1.00) 0.05 0.50 (0.09) 0.39
------ ------ ------ ------ ------ ------
Net increase (decrease) from investment operations.. (0.63) (0.54) 0.52 0.97 0.37 0.88
------ ------ ------ ------ ------ ------
Dividends from net investment income................ (0.24) (0.46) (0.47) (0.47) (0.46) (0.50)
Distributions from net realized gains from
investment transactions........................... -- (0.07) (0.29) (0.08) -- --
------ ------ ------ ------ ------ ------
Total dividends and distributions to shareholders... (0.24) (0.53) (0.76) (0.55) (0.46) (0.50)
------ ------ ------ ------ ------ ------
Net asset value, end of period...................... $11.05 $10.66 $11.73 $11.97 $11.55 $11.64
====== ====== ====== ====== ====== ======
Total investment return (1)......................... 5.98% (4.68)% 4.48% 8.62% 3.35% 7.94%
====== ====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of period (000's)................... $16,329 $16,310 $24,085 $32,815 $40,949 $51,546
Expenses to average net assets...................... 1.63%* 1.66% 1.72% 1.73% 1.67% 1.68%(2)
Net investment income to average net assets......... 4.33%* 4.14% 3.93% 3.98% 4.09% 4.31%(2)
Portfolio turnover rate............................. 4% 29% 43% 79% 81% 74%
<CAPTION>
CLASS C
------------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS FOR THE YEARS FOR THE
ENDED YEAR ENDED YEAR
AUGUST 31, ENDED FEBRUARY 28, ENDED
2000 FEBRUARY 29, --------------------------- FEBRUARY 29,
(UNAUDITED) 2000 1999 1998 1997 1996
----------- ------------ ------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $10.66 $11.73 $11.97 $11.55 $11.64 $11.26
------ ------ ------ ------ ------ ------
Net investment income .............................. 0.25 0.49 0.50 0.50 0.49 0.52
Net realized and unrealized gains (losses) from
investments and futures........................... 0.39 (1.00) 0.05 0.50 (0.09) 0.39
------ ------ ------ ------ ------ ------
Net increase (decrease) from investment operations.. 0.64 (0.51) 0.55 1.00 0.40 0.91
------ ------ ------ ------ ------ ------
Dividends from net investment income................ (0.25) (0.49) (0.50) (0.50) (0.49) (0.53)
Distributions from net realized gains from
investment transactions........................... -- (0.07) (0.29) (0.08) -- --
------ ------ ------ ------ ------ ------
Total dividends and distributions to shareholders... (0.25) (0.56) (0.79) (0.58) (0.49) (0.53)
------ ------ ------ ------ ------ ------
Net asset value, end of period...................... $11.05 $10.66 $11.73 $11.97 $11.55 $11.64
====== ====== ====== ====== ====== ======
Total investment return (1)......................... 6.11% (4.42)% 4.76% 8.92% 3.61% 8.19%
====== ====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of period (000's)................... $37,102 $39,045 $47,722 $49,647 $59,652 $75,076
Expenses to average net assets...................... 1.40%* 1.39% 1.47% 1.47% 1.42% 1.45%(2)
Net investment income to average net assets......... 4.58%* 4.43% 4.20% 4.26% 4.34% 4.57%(2)
Portfolio turnover rate............................. 4% 29% 43% 79% 81% 74%
</TABLE>
-----------------------
* Annualized
(1) Total investment return is calculated assuming a $10,000 investment on
the first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. The figures do not
include any applicable sales charges; results would be lower if they were
included. Total investment return for periods of less than one year has
not been annualized.
(2) These ratios include non-recurring acquisition expenses of 0.03%.
53
<PAGE>
PAINEWEBBER NATIONAL TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
CLASS Y
---------------------------------------------------------------------
FOR THE
FOR THE FOR THE PERIOD
SIX MONTHS FOR THE YEARS NOVEMBER 3,
ENDED YEAR ENDED 1995+
AUGUST 31, ENDED FEBRUARY 28, THROUGH
2000 FEBRUARY 29, ---------------------------- FEBRUARY 29,
(UNAUDITED) 2000 1999 1998 1997 1996
----------- ------------ ------ ------------ ------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $10.66 $11.73 $11.98 $11.55 $11.65 $11.62
------ ------ ------ ------ ------ ------
Net investment income............................... 0.29 0.58 0.59 0.59 0.58 0.19
Net realized and unrealized gains (losses) from
investments and futures........................... 0.41 (1.00) 0.04 0.51 (0.10) 0.01
------ ------ ------ ------ ------ ------
Net increase (decrease) from investment operations.. 0.70 (0.42) 0.63 1.10 0.48 0.20
------ ------ ------ ------ ------ ------
Dividends from net investment income................ (0.30) (0.58) (0.59) (0.59) (0.58) (0.17)
Distributions from net realized gains from
investment transactions........................... -- (0.07) (0.29) (0.08) -- --
------ ------ ------ ------ ------ ------
Total dividends and distributions to
shareholders...................................... (0.30) (0.65) (0.88) (0.67) (0.58) (0.17)
------ ------ ------ ------ ------ ------
Net asset value, end of period...................... $11.06 $10.66 $11.73 $11.98 $11.55 $11.65
====== ====== ====== ====== ====== ======
Total investment return (1)......................... 6.62% (3.72)% 5.49% 9.87% 4.32% 1.70%
====== ====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of period (000's)................... $657 $733 $821 $241 $246 $341
Expenses to average net assets...................... 0.64%* 0.65% 0.71% 0.68% 0.65% 0.64%(2)*
Net investment income to average net assets......... 5.33%* 5.23% 4.95% 5.04% 5.13% 5.19%(2)*
Portfolio turnover rate............................. 4% 29% 43% 79% 81% 74%
</TABLE>
-------------------
+ Commencement of issuance of shares.
* Annualized.
(1) Total investment return is calculated assuming a $10,000 investment on
the first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. The figures do not
include any applicable program fees; results would be lower if they were
included. Total investment return for periods of less than one year has
not been annualized.
(2) These ratios include non-recurring acquisition expenses of 0.03%.
54
<PAGE>
(This page has been left blank intentionally.)
55
<PAGE>
PAINEWEBBER MUNICIPAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest
outstanding throughout each period is presented below:
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS FOR THE YEARS FOR THE
ENDED YEAR ENDED YEAR
AUGUST 31, ENDED FEBRUARY 28, ENDED
2000 FEBRUARY 29, ------------------------------ FEBRUARY 29,
(UNAUDITED) 2000 1999 1998 1997 1996
----------- ------------- -------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................. $ 9.86 $10.88 $10.96 $10.39 $10.29 $ 9.92
----------- ------------- -------- ------------ ------- ------------
Net investment income ................................. 0.28 0.55 0.55 0.55 0.56 0.62
Net realized and unrealized gains (losses) from
investments and futures ............................. 0.05 (0.96) (0.07) 0.57 0.10 0.37
----------- ------------- -------- ------------ ------- ------------
Net increase (decrease) from investment operations .... 0.33 (0.41) 0.48 1.12 0.66 0.99
----------- ------------- -------- ------------ ------- ------------
Dividends from net investment income .................. (0.28) (0.55) (0.55) (0.55) (0.56) (0.62)
Distributions from net realized gains from
investment transactions ............................. -- (0.06) (0.01) -- -- --
----------- ------------- -------- ------------ ------- ------------
Total dividends and distributions to shareholders ..... (0.28) (0.61) (0.56) (0.55) (0.56) (0.62)
----------- ------------- -------- ------------ ------- ------------
Net asset value, end of period ........................ $ 9.91 $ 9.86 $10.88 $10.96 $10.39 $10.29
=========== ============= ======== ============ ======= ============
Total investment return (1) ........................... 3.38% (3.91)% 4.80% 11.06% 6.61% 10.18%
=========== ============= ======== ============ ======= ============
Ratios/Supplemental data:
Net assets, end of period (000's) ..................... $61,311 $62,568 $66,771 $59,288 $52,593 $57,280
Expenses to average net assets ........................ 1.12%* 1.05% 1.12% 1.22% 1.15% 1.10%
Net investment income to average net assets ........... 5.51%* 5.27% 5.02% 5.15% 5.49% 5.94%
Portfolio turnover rate ............................... 5% 19% 26% 22% 64% 48%
</TABLE>
-------------------
* Annualized.
(1) Total investment return is calculated assuming a $10,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. The figures do not
include any applicable sales charges; results would be lower if they
were included. Total investment return for periods of less than one year
has not been annualized.
56
<PAGE>
PAINEWEBBER MUNICIPAL HIGH INCOME FUND
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS FOR THE YEARS FOR THE
ENDED YEAR ENDED YEAR
AUGUST 31, ENDED FEBRUARY 28, ENDED
2000 FEBRUARY 29, ------------------------------- FEBRUARY 29,
(UNAUDITED) 2000 1999 1998 1997 1996
----------- ------------- -------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................. $ 9.85 $10.87 $10.96 $10.39 $10.29 $ 9.92
----------- ------------- -------- ------------ ------- ------------
Net investment income ................................. 0.24 0.47 0.47 0.47 0.48 0.54
Net realized and unrealized gains (losses) from
investments and futures ............................. 0.06 (0.96) (0.08) 0.57 0.10 0.37
----------- ------------- -------- ------------ ------- ------------
Net increase (decrease) from investment operations .... 0.30 (0.49) 0.39 1.04 0.58 0.91
----------- ------------- -------- ------------ ------- ------------
Dividends from net investment income .................. (0.24) (0.47) (0.47) (0.47) (0.48) (0.54)
Distributions from net realized gains from
investment transactions ............................. -- (0.06) (0.01) -- -- --
----------- ------------- -------- ------------ ------- ------------
Total dividends and distributions to shareholders ..... (0.24) (0.53) (0.48) (0.47) (0.48) (0.54)
----------- ------------- -------- ------------ ------- ------------
Net asset value, end of period ........................ $ 9.91 $ 9.85 $10.87 $10.96 $10.39 $10.29
=========== ============= ======== ============ ======= ============
Total investment return (1) ........................... 3.08% (4.65)% 3.87% 10.23% 5.82% 9.36%
=========== ============= ======== ============ ======= ============
Ratios/Supplemental data:
Net assets, end of period (000's) ..................... $12,646 $13,999 $18,675 $18,097 $19,427 $23,868
Expenses to average net assets ........................ 1.89%* 1.81% 1.88% 1.98% 1.90% 1.85%
Net investment income to average net assets ........... 4.74%* 4.48% 4.24% 4.39% 4.73% 5.19%
Portfolio turnover rate ............................... 5% 19% 26% 22% 64% 48%
<CAPTION>
CLASS C
--------------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS FOR THE YEARS FOR THE
ENDED YEAR ENDED YEAR
AUGUST 31, ENDED FEBRUARY 28, ENDED
2000 FEBRUARY 29, ------------------------------- FEBRUARY 29,
(UNAUDITED) 2000 1999 1998 1997 1996
----------- ------------- -------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................. $ 9.85 $10.88 $10.96 $10.39 $10.29 $ 9.92
----------- ------------- -------- ------------ ------- ------------
Net investment income ................................. 0.25 0.50 0.49 0.50 0.51 0.56
Net realized and unrealized gains (losses) from
investments and futures ............................. 0.06 (0.97) (0.07) 0.57 0.10 0.37
----------- ------------- -------- ------------ ------- ------------
Net increase (decrease) from investment operations .... 0.31 (0.47) 0.42 1.07 0.61 0.93
----------- ------------- -------- ------------ ------- ------------
Dividends from net investment income .................. (0.25) (0.50) (0.49) (0.50) (0.51) (0.56)
Distributions from net realized gains from
investment transactions ............................. -- (0.06) (0.01) -- -- --
----------- ------------- -------- ------------ ------- ------------
Total dividends and distributions to shareholders ..... (0.25) (0.56) (0.50) (0.50) (0.51) (0.56)
----------- ------------- -------- ------------ ------- ------------
Net asset value, end of period ........................ $ 9.91 $ 9.85 $10.88 $10.96 $10.39 $10.29
=========== ============= ======== ============ ======= ============
Total investment return (1) ........................... 3.22% (4.49)% 4.25% 10.51% 6.08% 9.64%
=========== ============= ======== ============ ======= ============
Ratios/Supplemental data:
Net assets, end of period (000's) ..................... $17,380 $19,819 $24,355 $21,982 $16,967 $20,700
Expenses to average net assets ........................ 1.63%* 1.55% 1.62% 1.72% 1.66% 1.60%
Net investment income to average net assets ........... 5.01%* 4.76% 4.52% 4.64% 4.98% 5.45%
Portfolio turnover rate ............................... 5% 19% 26% 22% 64% 48%
</TABLE>
--------------------
* Annualized.
(1) Total investment return is calculated assuming a $10,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. The figures do not
include any applicable sales charges; results would be lower if they
were included. Total investment return for periods of less than one year
has not been annualized.
57
<PAGE>
PAINEWEBBER MUNICIPAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
CLASS Y
------------------------------------------------------
FOR THE
FOR THE PERIOD
SIX MONTHS FOR THE FOR THE FEBRUARY 5,
ENDED YEAR YEAR 1998
AUGUST 31, ENDED ENDED THROUGH
2000 FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 2000 1999 1998
----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................. $ 9.86 $10.88 $10.97 $10.98
----------- ------------ ------------ -------------
Net investment income................................. 0.29 0.57 0.58 0.04
Net realized and unrealized gains
(losses) from investments and futures .............. 0.06 (0.96) (0.08) (0.01)
----------- ------------ ------------ -------------
Net increase (decrease) from investment operations ... 0.35 (0.39) 0.50 0.03
----------- ------------ ------------ -------------
Dividends from net investment income ................. (0.29) (0.57) (0.58) (0.04)
Distributions from net realized gains from
investment transactions ............................ -- (0.06) (0.01) --
----------- ------------ ------------ -------------
Total dividends and distributions to shareholders .... (0.29) (0.63) (0.59) (0.04)
----------- ------------ ------------ -------------
Net asset value, end of period ....................... $ 9.92 $ 9.86 $10.88 $10.97
=========== ============ ============ =============
Total investment return (1) .......................... 3.55% (3.73)% 4.96% (0.09)%
=========== ============ ============ =============
Ratios/Supplemental data:
Net assets, end of period (000's) .................... $223 $242 $414 $56
Expenses to average net assets ....................... 0.87%* 0.86% 0.87% 1.00%*
Net investment income to average net assets .......... 5.75%* 5.45% 5.28% 5.44%*
Portfolio turnover rate .............................. 5% 19% 26% 22%
</TABLE>
-------------------
+ Commencement of issuance of shares.
* Annualized.
(1) Total investment return is calculated assuming a $10,000 investment on
the first day of each period reported, reinvestment of all dividends
and distributions at net asset value on the payable dates and a sale at
net asset value on the last day of each period reported. The figures do
not include any applicable program fees; results would be lower if they
were included. Total investment return for periods of less than one year
has not been annualized.
58
<PAGE>
(This page has been left blank intentionally.)
59
<PAGE>
PAINEWEBBER NEW YORK TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS FOR THE YEARS FOR THE
ENDED YEAR ENDED YEAR
AUGUST 31, ENDED FEBRUARY 28, ENDED
2000 FEBRUARY 29, --------------------------- FEBRUARY 29,
(UNAUDITED) 2000 1999 1998 1997 1996
----------- ------------ ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................. $ 9.99 $11.03 $11.12 $10.66 $10.71 $10.27
------ ------ ------ ------ ------ ------
Net investment income................................. 0.24 0.48 0.53 0.51 0.51 0.54
Net realized and unrealized gains (losses)
from investments and futures........................ 0.43 (0.95) 0.15 0.46 (0.05) 0.45
------ ------ ------ ------ ------ ------
Net increase (decrease) from investment operations.... 0.67 (0.47) 0.68 0.97 0.46 0.99
------ ------ ------ ------ ------ ------
Dividends from net investment income.................. (0.24) (0.48) (0.53) (0.51) (0.51) (0.55)
Distributions from net realized gains from investment
transactions........................................ -- (0.09) (0.24) -- -- --
------ ------ ------ ------ ------ ------
Total dividends and distributions to shareholders..... (0.24) (0.57) (0.77) (0.51) (0.51) (0.55)
------ ------ ------ ------ ------ ------
Net asset value, end of period........................ $10.42 $ 9.99 $11.03 $11.12 $10.66 $10.71
====== ====== ====== ====== ====== ======
Total investment return (1)........................... 6.77% (4.33)% 6.24% 9.36% 4.49% 9.83%
====== ====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of period (000's)..................... $23,331 $22,810 $27,171 $23,694 $23,160 $28,734
Expenses to average net assets, net of waivers from
adviser............................................. 1.02%* 1.02% 1.02% 1.02% 1.02% 1.02%
Expenses to average net assets, before waivers from
adviser............................................. 1.31%* 1.34% 1.27% 1.28% 1.50% 1.15%
Net investment income to average net assets, net of
waivers from adviser................................ 4.58%* 4.56% 4.46% 4.74% 4.91% 5.11%
Net investment income to average net assets, before
waivers from adviser................................ 4.29%* 4.24% 4.21% 4.48% 4.42% 4.98%
Portfolio turnover rate............................... 3% 19% 44% 34% 40% 13%
</TABLE>
-----------------
* Annualized.
(1) Total investment return is calculated assuming a $10,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. The figures do not
include any applicable sales charges; results would be lower if they were
included. Total investment return for periods of less than one year has
not been annualized.
60
<PAGE>
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS FOR THE YEARS FOR THE
ENDED YEAR ENDED YEAR
AUGUST 31, ENDED FEBRUARY 28, ENDED
2000 FEBRUARY 29, ------------------------ FEBRUARY 29,
(UNAUDITED) 2000 1999 1998 1997 1996
----------- ------------ ------ ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................. $ 9.99 $11.03 $11.12 $10.65 $10.71 $10.27
------ ------ ------ ------ ------ ------
Net investment income................................. 0.20 0.40 0.44 0.43 0.44 0.47
Net realized and unrealized gains (losses)
from investments and futures........................ 0.42 (0.95) 0.15 0.47 (0.06) 0.44
------ ------ ------ ------ ------ ------
Net increase (decrease) from investment operations.... 0.62 (0.55) 0.59 0.90 0.38 0.91
------ ------ ------ ------ ------ ------
Dividends from net investment income.................. (0.20) (0.40) (0.44) (0.43) (0.44) (0.47)
Distributions from net realized gains from investment
transactions........................................ -- (0.09) (0.24) -- -- --
------ ------ ------ ------ ------ ------
Total dividends and distributions to shareholders..... (0.20) (0.49) (0.68) (0.43) (0.44) (0.47)
------ ------ ------ ------ ------ ------
Net asset value, end of period........................ $10.41 $ 9.99 $11.03 $11.12 $10.65 $10.71
====== ====== ====== ====== ====== ======
Total investment return (1)........................... 6.26% (5.05)% 5.40% 8.65% 3.62% 9.01%
====== ====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of period (000's)..................... $3,133 $3,692 $6,013 $7,829 $9,462 $11,862
Expenses to average net assets, net of waivers from
adviser............................................. 1.77%* 1.77% 1.77% 1.77% 1.76% 1.77%
Expenses to average net assets, before waivers from
adviser............................................. 2.07%* 2.09% 2.02% 2.05% 2.27% 1.89%
Net investment income to average net assets, net of
waivers from adviser................................ 3.84%* 3.77% 3.70% 3.99% 4.16% 4.36%
Net investment income to average net assets, before
waivers from adviser................................ 3.54%* 3.45% 3.45% 3.70% 3.65% 4.24%
Portfolio turnover rate............................... 3% 19% 44% 34% 40% 13%
</TABLE>
<TABLE>
<CAPTION>
CLASS C
-----------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS FOR THE YEARS FOR THE
ENDED YEAR ENDED YEAR
AUGUST 31, ENDED FEBRUARY 28, ENDED
2000 FEBRUARY 29, --------------------------- FEBRUARY 29,
(UNAUDITED) 2000 1999 1998 1997 1996
----------- ------------ ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $10.00 $11.04 $11.12 $10.66 $10.71 $10.28
------ ------ ------ ------ ------ ------
Net investment income................................... 0.21 0.42 0.47 0.46 0.46 0.49
Net realized and unrealized gains (losses)
from investments and futures.......................... 0.42 (0.95) 0.16 0.46 (0.05) 0.43
------ ------ ------ ------ ------ ------
Net increase (decrease) from investment operations...... 0.63 (0.53) 0.63 0.92 0.41 0.92
------ ------ ------ ------ ------ ------
Dividends from net investment income.................... (0.21) (0.42) (0.47) (0.46) (0.46) (0.49)
Distributions from net realized gains from investment
transactions.......................................... -- (0.09) (0.24) -- -- --
------ ------ ------ ------ ------ ------
Total dividends and distributions to shareholders....... (0.21) (0.51) (0.71) (0.46) (0.46) (0.49)
------ ------ ------ ------ ------ ------
Net asset value, end of period.......................... $10.42 $10.00 $11.04 $11.12 $10.66 $10.71
====== ====== ====== ====== ====== =======
Total investment return (1)............................. 6.39% (4.80)% 5.78% 8.82% 3.98% 9.17%
====== ====== ====== ====== ====== =======
Ratios/Supplemental data:
Net assets, end of period (000's)....................... $9,340 $9,344 $11,802 $12,966 $13,786 $17,849
Expenses to average net assets, net of waivers from
adviser............................................... 1.52%* 1.52% 1.52% 1.52% 1.52% 1.52%
Expenses to average net assets, before waivers from
adviser............................................... 1.81%* 1.83% 1.77% 1.78% 2.04% 1.64%
Net investment income to average net assets, net of
waivers from adviser.................................. 4.08%* 4.06% 3.97% 4.24% 4.41% 4.61%
Net investment income to average net assets, before
waivers from adviser.................................. 3.79%* 3.75% 3.72% 3.98% 3.89% 4.50%
Portfolio turnover rate................................. 3% 19% 44% 34% 40% 13%
</TABLE>
-----------------
* Annualized.
(1) Total investment return is calculated assuming a $10,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. The figures do not
include any applicable sales charges; results would be lower if they were
included. Total investment return for periods of less than one year has
not been annualized.
61
<PAGE>
PAINEWEBBER NEW YORK TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
CLASS Y
-----------------------------------------
FOR THE FOR THE
SIX MONTHS FOR THE PERIOD
ENDED YEAR MAY 21, 1998+
AUGUST 31, ENDED THROUGH
2000 FEBRUARY 29, FEBRUARY 28,
(UNAUDITED) 2000 1999
----------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period......................................... $ 9.99 $11.03 $11.08
------ ------ ------
Net investment income........................................................ 0.25 0.50 0.40
Net realized and unrealized gains (losses) from investments and futures...... 0.43 (0.95) 0.19
------ ------ ------
Net increase (decrease) from investment operations........................... 0.68 (0.45) 0.59
------ ------ ------
Dividends from net investment income......................................... (0.25) (0.50) (0.40)
Distributions from net realized gains from investment transactions........... -- (0.09) (0.24)
------ ------ ------
Total dividends and distributions to shareholders............................ (0.25) (0.59) (0.64)
------ ------ ------
Net asset value, end of period............................................... $10.42 $ 9.99 $11.03
====== ====== ======
Total investment return (1).................................................. 6.91% (4.10)% 5.39%
====== ====== ======
Ratios/Supplemental data:
Net assets, end of period (000's)............................................ $100 $65 $21
Expenses to average net assets, net of waivers from adviser.................. 0.77%* 0.77% 0.77%*
Expenses to average net assets, before waivers from adviser.................. 1.00%* 1.05% 1.03%*
Net investment income to average net assets, net of waivers from adviser..... 4.81%* 4.92% 4.71%*
Net investment income to average net assets, before waivers from adviser..... 4.58%* 4.64% 4.44%*
Portfolio turnover rate...................................................... 3% 19% 44%
</TABLE>
-----------------
+ Commencement of issuance of shares.
* Annualized.
(1) Total investment return is calculated assuming a $10,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. The figures do not
include any applicable program fees; results would be lower if they were
included. Total investment return for periods of less than one year has
not been annualized.
62
<PAGE>
(This page has been left blank intentionally.)
63
<PAGE>
...............................................................................
TRUSTEES
E. Garrett Bewkes, Jr.
CHAIRMAN
Margo N. Alexander
Richard Q. Armstrong
Richard R. Burt
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
Brian M. Storms
PRINCIPAL OFFICERS
Margo N. Alexander
PRESIDENT
Amy Doberman
VICE PRESIDENT
Dianne E. O'Donnell
VICE PRESIDENT AND SECRETARY
Paul H. Schubert
VICE PRESIDENT AND TREASURER
Elbridge T. Gerry III
VICE PRESIDENT
William W. Veronda
VICE PRESIDENT
INVESTMENT ADVISER,
ADMINISTRATOR AND DISTRIBUTOR
Mitchell Hutchins Asset Management Inc.
51 West 52nd Street
New York, New York 10019
A PROSPECTUS CONTAINING MORE COMPLETE INFORMATION FOR ANY OF THE FUNDS LISTED ON
THE BACK COVER CAN BE OBTAINED FROM A PAINEWEBBER FINANCIAL ADVISOR OR
CORRESPONDENT FIRM. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
THE FINANCIAL INFORMATION INCLUDED HEREIN IS TAKEN FROM THE RECORDS OF THE FUNDS
WITHOUT EXAMINATION BY INDEPENDENT AUDITORS WHO DO NOT EXPRESS AN OPINION
THEREON.
THIS REPORT IS NOT TO BE USED IN CONNECTION WITH THE OFFERING OF SHARES OF THE
FUNDS UNLESS ACCOMPANIED OR PRECEDED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
PAINEWEBBER
SEMIANNUAL REPORT
---------------------------------------------------
TAX-FREE
BOND FUNDS
CALIFORNIA TAX-FREE INCOME FUND
NATIONAL TAX-FREE INCOME FUND
MUNICIPAL HIGH INCOME FUND
NEW YORK TAX-FREE INCOME FUND
AUGUST 31, 2000
--
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