<PAGE>
ASSET ALLOCATION FUND
PAINEWEBBER
RECENT PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------- ------------------------------
12 MONTHS 6 MONTHS
02/28/95 08/31/94 02/28/94 ENDED 02/28/95 ENDED 02/28/95
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $ 9.80 $10.74 $12.04 -6.02% 0.21%
- --------------------------------------------------------------------------
Class B Shares 9.90 10.78 12.10 -6.68 -0.14
- --------------------------------------------------------------------------
Class D Shares 9.82 10.70 12.03 -6.69 -0.10
- --------------------------------------------------------------------------
</TABLE>
Performance Summary Class A Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
----------------
PERIOD CAPITAL GAINS
COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL RETURN/1/
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/01/91 -
12/31/91 $10.09 $11.02 -- $0.2293 11.53%
- --------------------------------------------------------------------------
1992 11.02 11.24 -- 0.3414 5.18
- --------------------------------------------------------------------------
1993 11.24 11.94 $0.7771 0.2510 15.63
- --------------------------------------------------------------------------
1994 11.94 9.32 1.2011 0.2311 -9.88
- --------------------------------------------------------------------------
01/01/95 -
02/28/95 9.32 9.80 -- -- 5.15
- --------------------------------------------------------------------------
Total: $1.9782 $1.0528
- --------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
02/28/95: 28.54%
- --------------------------------------------------------------------------
</TABLE>
Performance Summary Class B Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
----------------
PERIOD CAPITAL GAINS
COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL RETURN/1/
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12/12/86 -
12/31/86 $10.00 $ 9.76 -- -- -2.40%
- --------------------------------------------------------------------------
1987 9.76 9.27 $0.1687 $0.4407 1.21
- --------------------------------------------------------------------------
1988 9.27 9.79 -- 0.5225 11.34
- --------------------------------------------------------------------------
1989 9.79 10.03 0.1124 0.6930 10.84
- --------------------------------------------------------------------------
1990 10.03 9.60 0.0021 0.6200 1.94
- --------------------------------------------------------------------------
1991 9.60 11.01 -- 0.3478 18.52
- --------------------------------------------------------------------------
1992 11.01 11.28 -- 0.2146 4.46
- --------------------------------------------------------------------------
1993 11.28 12.02 0.7771 0.1173 14.66
- --------------------------------------------------------------------------
1994 12.02 9.43 1.2011 0.1189 -10.51
- --------------------------------------------------------------------------
01/01/95 -
02/28/95 9.43 9.90 -- -- 4.98
- --------------------------------------------------------------------------
Total: $2.2614 $3.0748
- --------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
02/28/95: 68.75%
- --------------------------------------------------------------------------
</TABLE>
Performance Summary Class D Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
----------------
PERIOD CAPITAL GAINS
COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL RETURN/1/
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/02/92 -
12/31/92 $10.86 $11.25 -- $0.1619 5.08%
- --------------------------------------------------------------------------
1993 11.25 11.94 $0.7771 0.1728 14.79
- --------------------------------------------------------------------------
1994 11.94 9.35 1.2011 0.1313 -10.48
- --------------------------------------------------------------------------
01/01/95 -
02/28/95 9.35 9.82 -- -- 5.03
- --------------------------------------------------------------------------
Total: $1.9782 $0.4660
- --------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
02/28/95: 13.40%
- --------------------------------------------------------------------------
</TABLE>
/1/ Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the payable date, and do not include sales charges;
results would be lower for Class A and Class B if sales charges were
included.
1
<PAGE>
BLUE CHIP GROWTH FUND
PAINEWEBBER
RECENT PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------- -----------------------------
12 MONTHS 6 MONTHS
02/28/95 08/31/94 02/28/94 ENDED 02/28/95 ENDED 02/28/95
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $14.54 $14.62 $15.71 1.08% 1.20%
- ------------------------------------------------------------------------
Class B Shares 14.04 14.18 15.33 0.21 0.81
- ------------------------------------------------------------------------
Class D Shares 14.20 14.35 15.50 0.14 0.73
- ------------------------------------------------------------------------
</TABLE>
Performance Summary Class A Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
----------------
PERIOD CAPITAL GAINS
COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL RETURN/1/
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/01/91 -
12/31/91 $14.40 $16.66 $ 0.0395 -- 15.98%
- --------------------------------------------------------------------------
1992 16.66 15.68 2.0542 -- 6.72
- --------------------------------------------------------------------------
1993 15.68 15.94 1.8222 -- 13.67
- --------------------------------------------------------------------------
1994 15.94 13.93 1.2702 -- -4.64
- --------------------------------------------------------------------------
01/01/95 -
02/28/95 13.93 14.54 -- -- 4.38
- --------------------------------------------------------------------------
Total: $5.1861 $0.0000
- --------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
02/28/95 40.04%
- --------------------------------------------------------------------------
</TABLE>
Performance Summary Class B Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
----------------
PERIOD CAPITAL GAINS
COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL RETURN/1/
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/18/86 -
12/31/86 $10.00 $ 9.52 -- -- -4.80%
- --------------------------------------------------------------------------
1987 9.52 9.25 $0.0248 $0.0513 -2.15
- --------------------------------------------------------------------------
1988 9.25 10.91 -- -- 17.95
- --------------------------------------------------------------------------
1989 10.91 14.23 -- -- 30.43
- --------------------------------------------------------------------------
1990 14.23 12.54 -- 0.0400 -11.59
- --------------------------------------------------------------------------
1991 12.54 16.60 0.0395 -- 32.70
- --------------------------------------------------------------------------
1992 16.60 15.48 2.0542 -- 5.90
- --------------------------------------------------------------------------
1993 15.48 15.57 1.8222 -- 12.73
- --------------------------------------------------------------------------
1994 15.57 13.47 1.2702 -- -5.34
- --------------------------------------------------------------------------
01/01/95 -
02/28/95 13.47 14.04 -- -- 4.23
- --------------------------------------------------------------------------
Total: $5.2109 $0.0913
- --------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
02/28/95: 102.43%
- --------------------------------------------------------------------------
</TABLE>
Performance Summary Class D Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
----------------
PERIOD CAPITAL GAINS
COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL RETURN/1/
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/02/92 -
12/31/92 $15.51 $15.62 $2.0542 -- 10.45%
- --------------------------------------------------------------------------
1993 15.62 15.74 1.8222 -- 12.90
- --------------------------------------------------------------------------
1994 15.74 13.63 1.2702 -- -5.35
- --------------------------------------------------------------------------
01/01/95 -
02/28/95 13.63 14.20 -- -- 4.18
- --------------------------------------------------------------------------
Total: $5.1466 $0.0000
- --------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
02/28/95: 27.08%
- --------------------------------------------------------------------------
</TABLE>
/1/ Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the payable date, and do not include sales charges;
results would be lower for Class A and Class B if sales charges were
included.
2
<PAGE>
ASSET ALLOCATION FUND
PAINEWEBBER
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1995
COMMON STOCKS - 45.37%
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
<S> <C>
Auto - Truck - 2.27%
110,000 Cummins Engine Company, Inc............................ $ 5,005,000
------------
Beverages & Bottling - 2.13%
119,950 Pepsico, Inc........................................... 4,693,044
------------
Building & Building Materials - 1.84%
427,975 Payless Cashways, Inc.*................................ 4,065,763
------------
Computer Software - 1.75%
225,000 EMC Corporation........................................ 3,853,125
------------
Conglomerates - 1.48%
85,800 Allied-Signal Inc...................................... 3,260,400
------------
Drugs & Medical Products - 1.88%
160,000 Teva Pharmaceutical Industries Ltd., ADS............... 4,150,000
------------
Fertilizers - 3.65%
90,000 Potash Corporation of Saskatchewan Inc., ADR........... 3,217,500
260,000 The Scotts Company, Class A*........................... 4,810,000
------------
8,027,500
------------
Financial Services - 2.20%
154,000 Ceridian Corporation*.................................. 4,851,000
------------
Healthcare - 3.91%
137,500 Sunrise Medical Inc.*.................................. 4,743,750
90,000 U.S. Healthcare, Inc................................... 3,870,000
------------
8,613,750
------------
Household & Consumer Products - 1.90%
65,000 Colgate-Palmolive Company.............................. 4,192,500
------------
Insurance - 1.83%
65,000 MBIA Inc............................................... 4,030,000
------------
Oil & Gas - 1.62%
125,000 Repsol, S.A., ADR...................................... 3,578,125
------------
Paper & Paper Products - 1.69%
206,775 Albany International Corp., Class A.................... 3,721,950
------------
</TABLE>
3
<PAGE>
ASSET ALLOCATION FUND
PAINEWEBBER
PORTFOLIO OF INVESTMENTS (CONCLUDED) FEBRUARY 28, 1995
COMMON STOCKS - (CONCLUDED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<S> <C>
Rails - 4.80%
95,000 Burlington Northern Inc................................. $ 5,320,000
95,000 Conrail Inc............................................. 5,248,750
-----------
10,568,750
-----------
Specialty Chemicals - 2.33%
110,000 IMC Global Group Inc.................................... 5,142,500
-----------
Specialty Retail - 2.36%
216,545 Arbor Drugs, Inc. ...................................... 5,197,080
-----------
Telecommunications - Equipment - 2.73%
150,000 Belden, Inc............................................. 3,150,000
50,000 Motorola, Inc. ......................................... 2,875,000
-----------
6,025,000
-----------
Telecommunications - Services - 2.50%
69,000 Intel Corporation....................................... 5,502,750
-----------
Tires & Rubber - 2.50%
196,545 Cooper Tire and Rubber Company.......................... 5,503,260
-----------
Total Common Stocks (cost - $91,997,223)........................... 99,981,497
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES
--------- -------------------- --------------
<S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS -
50.42%
$12,000 U.S. Treasury Bills..... 03/02/95 to 03/09/95 5.000 to 5.330% 11,992,905
99,030 U.S. Treasury Notes..... 08/31/99 to 05/15/02 6.875 to 7.500 99,130,698
------------
Total U.S. Government Obligations
(cost - $110,167,255)............. 111,123,603
------------
REPURCHASE AGREEMENT - 3.52%
7,763 Repurchase Agreement
dated 02/28/95 with
Salomon Brothers Inc.,
collateralized by
$7,655,000 U.S.
Treasury Notes, 7.500%,
due 11/15/01; proceeds:
$7,764,300 (cost -
$7,763,000)........... 03/01/95 6.030 7,763,000
------------
Total Investments (cost -
$209,927,478) - 99.31%........... 218,868,100
Other assets in excess of
liabilities - 0.69%............... 1,521,078
------------
Net Assets - 100.00%............... $220,389,178
============
</TABLE>
- -------
*Non-income producing security
ADSAmerican Depository Shares
ADRAmerican Depository Receipts
See accompanying notes to financial statements
4
<PAGE>
BLUE CHIP GROWTH FUND
PAINEWEBBER
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1995
COMMON STOCKS - 87.89%
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<S> <C>
Apparel & Footwear - 1.49%
55,000 Jones Apparel Group, Inc.*.............................. $ 1,292,500
-----------
Banking - 3.96%
60,000 Comerica Incorporated................................... 1,687,500
60,250 KeyCorp................................................. 1,747,250
-----------
3,434,750
-----------
Beverages & Bottling - 2.86%
45,000 The Coca-Cola Company................................... 2,475,000
-----------
Broadcasting/Cable TV - 6.30%
25,000 British Sky Broadcasting Group, PLC*.................... 603,125
85,000 Comcast Corporation, Class A Special.................... 1,338,750
22,000 International CableTel Incorporated*.................... 704,000
55,000 Tele-Communications, Inc., Class A*..................... 1,251,250
35,000 Viacom Inc., Class B*................................... 1,566,250
-----------
5,463,375
-----------
Cellular & Paging Communications - 1.87%
62,500 Rogers Cantel Mobile Communications Inc., Class B*...... 1,617,188
-----------
Computer Software - 0.49%
25,000 EMC Corporation......................................... 428,125
-----------
Containers & Packaging - 3.00%
62,000 Sealed Air Corporation*................................. 2,596,250
-----------
Drugs & Medical Products - 4.92%
11,575 Advanced Therapeutic Systems, ADS*...................... 321,206
45,000 ALZA Corporation, Class A*.............................. 1,023,750
35,000 Elan Corporation, plc ADS*.............................. 1,233,750
65,000 Teva Pharmaceutical Industries Ltd., ADS................ 1,685,937
-----------
4,264,643
-----------
Electronics & Instrumentation - 2.44%
45,000 Fisher Scientific International Inc..................... 1,215,000
30,000 Thermo Instrument Systems Inc.*......................... 903,750
-----------
2,118,750
-----------
Financial Services - 11.65%
70,000 Ceridian Corporation*................................... 2,205,000
34,000 Federal Home Loan Mortgage Corporation.................. 1,972,000
27,500 Federal National Mortgage Association................... 2,120,937
42,000 First Data Corporation.................................. 2,257,500
37,500 Paychex, Inc............................................ 1,537,500
-----------
10,092,937
-----------
</TABLE>
5
<PAGE>
BLUE CHIP GROWTH FUND
PAINEWEBBER
PORTFOLIO OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1995
COMMON STOCKS - (CONTINUED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<S> <C>
Funeral Services - 2.77%
85,500 Service Corporation International....................... $ 2,404,687
-----------
Health Care - 4.62%
60,000 Humana Inc.............................................. 1,425,000
20,000 U.S. Healthcare, Inc.................................... 860,000
40,000 United HealthCare Corporation*.......................... 1,720,000
-----------
4,005,000
-----------
Household & Consumer Products - 1.97%
70,000 Sunbeam-Oster Company, Inc.............................. 1,706,250
-----------
Industrial & Electronic Products - 5.98%
30,000 Emerson Electric Co..................................... 1,983,750
40,000 Kaydon Corporation...................................... 1,100,000
105,000 Mark IV Industries Inc.................................. 2,100,000
-----------
5,183,750
-----------
Insurance - 1.64%
35,000 Equitable of Iowa Companies............................. 1,163,750
12,000 Frontier Insurance Group, Inc........................... 259,500
-----------
1,423,250
-----------
Leisure & Entertainment - 1.47%
33,000 Time Warner Inc......................................... 1,274,625
-----------
Leisure: Gaming - 1.72%
62,500 Mirage Resorts, Incorporated*........................... 1,492,188
-----------
Printing & Publishing - 1.75%
27,500 Gannett Company Inc..................................... 1,512,500
-----------
Rails - 3.69%
27,500 Burlington Northern Inc................................. 1,540,000
30,000 Conrail Inc............................................. 1,657,500
-----------
3,197,500
-----------
Savings & Loan - 1.77%
40,000 Golden West Financial Corporation....................... 1,530,000
-----------
Specialty Chemicals - 4.08%
35,000 Air Products and Chemicals, Inc......................... 1,723,750
90,000 Pall Corporation........................................ 1,811,250
-----------
3,535,000
-----------
</TABLE>
6
<PAGE>
BLUE CHIP GROWTH FUND
PAINEWEBBER
PORTFOLIO OF INVESTMENTS (CONCLUDED) FEBRUARY 28, 1995
COMMON STOCKS - (CONCLUDED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- -----------
<S> <C>
Specialty Retail - 9.31%
70,000 General Nutrition Companies, Inc.*...................... 1,680,000
40,000 Heilig-Meyers Company................................... 945,000
46,666 The Home Depot, Inc..................................... 2,094,137
75,000 Staples, Inc.*.......................................... 1,818,750
55,000 Toys 'R' Us, Inc.*...................................... 1,533,125
-----------
8,071,012
-----------
Telecommunications - 1.79%
30,000 AT&T Corp............................................... $ 1,552,500
-----------
Telecommunications - Equipment - 6.35%
60,000 Amphenol Corporation, Class A*.......................... 1,477,500
50,000 ANTEC Corporation*...................................... 1,087,500
85,000 Belden, Inc............................................. 1,785,000
20,000 Motorola, Inc........................................... 1,150,000
-----------
5,500,000
-----------
Total Common Stocks (cost - $51,834,145)........................... 76,171,780
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES
--------- -------------------- --------------
U.S. GOVERNMENT OBLIGATIONS - 10.38%
<S> <C> <C> <C>
U.S. Treasury Bills
$ 9,000 (cost - $8,994,543).... 03/02/95 to 03/09/95 5.180 to 5.330% 8,994,456
-----------
REPURCHASE AGREEMENT - 2.67%
2,318 Repurchase Agreement
dated 02/28/95 with
Citicorp Securities
Inc., collateralized by
$1,970,000 U.S.
Treasury Bonds,10.750%
due 02/15/03; proceeds:
$2,318,391 (cost -
$2,318,000)........... 03/01/95 6.080 2,318,000
-----------
Total Investments (cost -
$63,146,688) - 100.94%............ 87,484,236
Liabilities in excess of other
assets - (0.94)%................... (821,249)
-----------
Net Assets - 100.00%............... $86,662,987
===========
</TABLE>
- -------
*Non-income producing security
ADSAmerican Depository Shares
See accompanying notes to financial statements
7
<PAGE>
MASTER SERIES, INC.
PAINEWEBBER
STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1995
<TABLE>
<CAPTION>
ASSET BLUE CHIP
ALLOCATION GROWTH
FUND FUND
------------ -----------
<S> <C> <C>
Assets
Investments in securities, at value (cost -
209,927,478 and 63,146,688, respectively)......... $218,868,100 $87,484,236
Cash................................................ 922 587
Dividends and interest receivable................... 756,414 60,649
Receivable for investments sold .................... 3,229,229 282,592
Receivable for Fund shares sold..................... 70,561 25,523
Other assets........................................ 36,228 20,460
------------ -----------
Total assets........................................ 222,961,454 87,874,047
------------ -----------
Liabilities
Payable for Fund shares repurchased................. 2,157,238 1,027,727
Payable to affiliates............................... 204,951 91,910
Accrued expenses and other liabilities.............. 210,087 91,423
------------ -----------
Total liabilities................................... 2,572,276 1,211,060
------------ -----------
Net Assets
Capital stock - $0.001 par value capital stock
outstanding
(3 billion shares authorized for each Fund)........ 214,891,972 60,429,124
Accumulated undistributed net investment income
(loss)............................................. 1,315,991 (59,052)
Accumulated net realized gains (losses) from
investments........................................ (4,759,407) 1,955,367
Net unrealized appreciation of investments.......... 8,940,622 24,337,548
------------ -----------
Net assets.......................................... $220,389,178 $86,662,987
============ ===========
Class A:
Net assets.......................................... $174,760,647 $50,445,093
------------ -----------
Shares outstanding.................................. 17,830,413 3,469,743
------------ -----------
Net asset and redemption value per share............ $ 9.80 $14.54
====== ======
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price)...... $10.26 $15.23
====== ======
Class B:
Net assets.......................................... $ 37,103,798 $32,772,270
------------ -----------
Shares outstanding.................................. 3,746,775 2,333,945
------------ -----------
Net asset value and offering price per share........ $9.90 $14.04
===== ======
Class D:
Net assets.......................................... $ 8,524,733 $ 3,445,624
------------ -----------
Shares outstanding.................................. 868,461 242,573
------------ -----------
Net asset value, offering price and redemption value
per share.......................................... $9.82 $14.20
===== ======
</TABLE>
See accompanying notes to financial statements
8
<PAGE>
MASTER SERIES, INC.
PAINEWEBBER
STATEMENT OF OPERATIONS FOR THE YEAR ENDED FEBRUARY 28, 1995
<TABLE>
<CAPTION>
ASSET BLUE CHIP
ALLOCATION GROWTH
FUND FUND
------------ ----------
<S> <C> <C>
Investment income:
Interest............................................. $ 7,213,871 $ 675,071
Dividends (net of foreign withholding taxes of $3,425
and $0, respectively)............................... 2,179,981 865,661
------------ ----------
9,393,852 1,540,732
------------ ----------
Expenses:
Investment advisory and administration fees.......... 1,934,650 709,713
Distribution fees--Class A........................... 472,989 134,800
Distribution fees--Class B........................... 578,407 370,630
Distribution fees--Class D........................... 109,177 36,448
Transfer agency and service fees..................... 250,078 112,520
Custody and accounting fees.......................... 107,616 43,749
Reports and notices to shareholders.................. 97,927 46,755
Legal and audit fees................................. 96,913 72,383
State registration fees.............................. 74,635 52,147
Directors' fees and expenses......................... 10,000 10,000
Other expenses....................................... 10,217 10,639
------------ ----------
3,742,609 1,599,784
------------ ----------
Net investment income (loss)......................... 5,651,243 (59,052)
------------ ----------
Realized and unrealized gains (losses) from
investment activities:
Net realized gains from investment transactions...... 10,999,295 3,488,338
Net change in unrealized appreciation of investments. (38,246,529) (3,578,885)
------------ ----------
Net realized and unrealized losses from investment
activities.......................................... (27,247,234) (90,547)
------------ ----------
Net decrease in net assets resulting from operations. $(21,595,991) $ (149,599)
============ ==========
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
ASSET ALLOCATION FUND
PAINEWEBBER
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
FEBRUARY 28,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
From operations:
Net investment income.............................. $ 5,651,243 $ 4,574,785
Net realized gains from investment transactions.... 10,999,295 32,997,618
Net change in unrealized appreciation of
investments....................................... (38,246,529) 858,500
------------ ------------
(21,595,991) 38,430,903
------------ ------------
Dividends and distributions to shareholders from:
Net investment income--Class A..................... (3,995,697) (4,225,963)
Net investment income--Class B..................... (522,731) (915,953)
Net investment income--Class D..................... (116,414) (144,171)
Net realized gains from investment transactions--
Class A........................................... (21,142,649) (12,942,762)
Net realized gains from investment transactions--
Class B........................................... (6,016,319) (5,540,761)
Net realized gains from investment transactions--
Class D........................................... (1,164,682) (683,943)
------------ ------------
(32,958,492) (24,453,553)
------------ ------------
From capital stock transactions:
Net proceeds from the sale of shares............... 11,684,195 29,699,957
Cost of shares repurchased......................... (79,584,476) (75,186,838)
Proceeds from dividends reinvested................. 30,257,775 22,328,443
------------ ------------
Net decrease in net assets resulting from share
transactions...................................... (37,642,506) (23,158,438)
------------ ------------
Net decrease in net assets......................... (92,196,989) (9,181,088)
Net Assets:
Beginning of period................................ 312,586,167 321,767,255
------------ ------------
End of period (including undistributed net
investment income of
$1,315,991 and $299,590, respectively)............ $220,389,178 $312,586,167
============ ============
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
BLUE CHIP GROWTH FUND
PAINEWEBBER
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
FEBRUARY 28,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
From operations:
Net investment loss................................ $ (59,052) $ (398,822)
Net realized gains from investment transactions.... 3,488,338 14,984,395
Net change in unrealized appreciation of
investments....................................... (3,578,885) (1,762,340)
------------ ------------
(149,599) 12,823,233
------------ ------------
Distributions to shareholders from:
Net realized gains from investment transactions--
Class A........................................... (4,610,075) (6,626,243)
Net realized gains from investment transactions--
Class B........................................... (3,246,388) (5,083,863)
Net realized gains from investment transactions--
Class D........................................... (322,587) (313,276)
------------ ------------
(8,179,050) (12,023,382)
------------ ------------
From capital stock transactions:
Net proceeds from the sale of shares............... 9,233,568 16,418,401
Cost of shares repurchased......................... (29,796,687) (29,400,285)
Proceeds from dividends reinvested................. 7,699,434 11,338,150
------------ ------------
Net decrease in net assets resulting from share
transactions...................................... (12,863,685) (1,643,734)
------------ ------------
Net decrease in net assets......................... (21,192,334) (843,883)
Net Assets:
Beginning of period................................ 107,855,321 108,699,204
------------ ------------
End of period (including accumulated net investment
loss of $59,052 and $0, respectively)............. $ 86,662,987 $107,855,321
============ ============
</TABLE>
See accompanying notes to financial statements
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
PAINEWEBBER
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Master Series, Inc. ("Master Series") is registered with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended, as an open-end, diversified series investment company which currently
offers three series of shares: PaineWebber Asset Allocation Fund ("Asset
Allocation Fund"), PaineWebber Blue Chip Growth Fund ("Blue Chip Growth Fund")
(collectively the "Funds") and PaineWebber Money Market Fund. The financial
statements for PaineWebber Money Market Fund are not included herein.
Organizational Matters - Prior to commencing their operations, the Funds had no
activities other than organizational matters and activities related to the
initial public offering and the issuance, at net asset value, of one Class B
share each of Asset Allocation Fund and Blue Chip Growth Fund to PaineWebber
Incorporated ("PaineWebber").
Prior to July 1, 1991, each Fund issued only Class B shares; subsequent to that
date, each Fund had been authorized to issue Class A and Class B shares. On
July 2, 1992, each Fund commenced issuing Class D 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
distribution charges and transfer agency expenses. In addition, Class B shares
automatically convert to Class A shares approximately six years after initial
issuance. All Classes of shares have equal rights as to voting privileges,
except that each Class has exclusive voting rights with respect to its
distribution plan.
Valuation of Investments - Where market quotations are readily available,
portfolio securities are valued thereon, provided such quotations adequately
reflect, in the judgment of Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins"), a wholly owned subsidiary of PaineWebber and investment adviser,
administrator and distributor of Master Series, the fair value of the
securities. When market quotations are not readily available, securities are
valued based upon appraisals derived from information concerning those
securities or similar securities received from recognized dealers in those
securities. All other assets are valued at fair value as determined in good
faith by or under the direction of Master Series' Board of Directors. The
amortized cost method of valuation, which approximates market value, is used to
value debt obligations with 60 days or less remaining to maturity, unless
Master Series' Board of Directors determines that this does not represent fair
value.
The ability of the issuers of the debt securities held by the Funds to meet
their obligations may be affected by economic developments, including those
particular to a specific industry, country or region.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PAINEWEBBER
Investment Transactions and Investment Income - Investment transactions are
recorded on the trade date. Realized gains and losses from investment and
foreign exchange transactions are calculated using the identified cost method.
Dividend income is recorded on the ex-dividend date. Interest income is
recorded on an accrual basis. Discounts are accreted and premiums are amortized
on a yield to maturity basis as adjustments to interest income and the
identified cost of investments.
Income, expenses (excluding class-specific expenses) and realized/unrealized
gains/losses are allocated proportionately to each Class of shares based upon
the relative net asset value of outstanding shares (or the value of dividend-
eligible shares, as appropriate) of each Class at the beginning of the day
(after adjusting for current capital share activity of the respective Classes).
Class-specific expenses are charged directly to the applicable Class of shares.
Using financial futures contracts involves various market risks. The maximum
amount at risk from the purchase of a futures contract is the contract value.
Blue Chip Growth Fund is subject to a number of guidelines which reduce this
risk by seeking to ensure that financial futures contracts are used for hedging
purposes and not for leverage. However, imperfect correlations between futures
and the portfolio securities being hedged or market disruptions do not normally
permit full control of these risks at all times.
Repurchase Agreements - The Funds' custodian takes possession of the collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a mark-to-market basis to ensure that the value, including
accrued interest, is at least equal to the repurchase price. In the event of
default of the obligation to repurchase, each Fund has the right to liquidate
the collateral and apply the proceeds in satisfaction of the obligation. Under
certain circumstances, in the event of default or insolvency by the other party
to the agreement, realization and/or retention of the collateral may be subject
to legal proceedings. Each Fund may participate in joint repurchase agreement
transactions with other funds managed by Mitchell Hutchins.
Federal Tax Status - Each Fund intends to distribute all of its taxable income
and to comply with the other requirements of the Internal Revenue Code
applicable to regulated investment companies. Accordingly, no provision for
federal income taxes is required. In addition, by distributing during each
calendar year substantially all of its net investment income, capital gains and
certain other amounts, if any, each Fund intends not to be subject to a federal
excise tax.
In accordance with Treasury Regulations, Asset Allocation Fund has elected to
defer realized losses arising after October 31, 1994. Such losses amounting to
approximately $4,700,000 have been treated for tax purposes as arising on March
1, 1995. To the extent that such losses are used to offset future capital
gains, it is probable that the gains so offset will not be distributed to
shareholders.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PAINEWEBBER
Dividends and Distributions to Shareholders - The Fund records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains 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 reclassifications. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
INVESTMENT ADVISER AND ADMINISTRATOR
The Board of Directors of Master Series 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 Contract, Mitchell Hutchins receives
compensation from each Fund, computed daily and paid monthly, in accordance
with the following schedule:
<TABLE>
<CAPTION>
ASSET BLUE CHIP
ALLOCATION GROWTH
AVERAGE DAILY NET ASSETS FUND FUND
- ------------------------ ---------- ---------
<S> <C> <C>
Up to $500 million......................................... 0.750% 0.750%
In excess of $500 million up to $1.0 billion............... 0.725 0.725
In excess of $1.0 billion up to $1.5 billion............... 0.700 0.700
In excess of $1.5 billion up to $2.0 billion............... 0.675 0.675
In excess of $2.0 billion up to $4.0 billion............... 0.650 0.650
Over $4.0 billion.......................................... 0.650 0.650
</TABLE>
At February 28, 1995, Asset Allocation Fund and Blue Chip Growth Fund owed
Mitchell Hutchins $127,944 and $50,641, respectively, in investment advisory
and administration fees.
For the year ended February 28, 1995, Asset Allocation Fund paid $7,266 in
brokerage commissions to PaineWebber for transactions executed on behalf of the
Fund.
In compliance with applicable state securities laws, Mitchell Hutchins will
reimburse each Fund if and to the extent that the aggregate operating expenses
in any fiscal year, exclusive of taxes, interest, brokerage fees, distribution
fees and extraordinary expenses, exceed limitations imposed by various state
regulations.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PAINEWEBBER
Currently, the most restrictive limitation applicable to each Fund is 2.5% of
the first $30 million of average daily net assets, 2.0% of the next $70 million
and 1.5% of any excess over $100 million. For the year ended February 28, 1995,
no reimbursements were required pursuant to the above limitation.
DISTRIBUTION PLANS
Mitchell Hutchins is the distributor of each Fund's shares and has appointed
PaineWebber as the exclusive dealer for the sale of those shares. Under
separate plans of distribution pertaining to the Class A, Class B and Class D
shares, each Fund pays Mitchell Hutchins monthly service fees at the annual
rate of 0.25% of the average daily net assets of each Class of shares and
monthly distribution fees at an annual rate of 0.75% of the average daily net
assets of the Class B and Class D shares. At February 28, 1995, Asset
Allocation Fund and Blue Chip Growth Fund owed Mitchell Hutchins $69,430 and
$38,107, respectively, in service and distribution fees.
Mitchell Hutchins also receives the proceeds of the initial sales charges paid
upon the purchase of Class A shares and the contingent deferred sales charges
paid upon certain redemptions of Class B shares. Mitchell Hutchins has informed
each Fund that for the year ended February 28, 1995, it had received the
following amounts in sales charges:
<TABLE>
<CAPTION>
ASSET BLUE CHIP
ALLOCATION GROWTH
FUND FUND
---------- ---------
<S> <C> <C>
Initial sales charges--Class A............................. $ 33,533 $ 17,277
Contingent deferred sales charges--Class B................. $149,669 $115,968
</TABLE>
TRANSFER AGENCY SERVICE FEES
Each Fund pays PaineWebber an annual fee of $4.00 per active PaineWebber
shareholder account for certain services not provided by the Funds' transfer
agent. For these services for the year ended February 28, 1995, PaineWebber
earned $100,272 and $41,294 in service fees from Asset Allocation Fund and Blue
Chip Growth Fund, respectively. At February 28, 1995, Asset Allocation Fund and
Blue Chip Growth Fund owed PaineWebber $7,577 and $3,162, respectively, for
transfer agency service fees.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PAINEWEBBER
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at February 28,
1995 was substantially the same as the cost of securities for financial
statement purposes.
At February 28, 1995, the components of net unrealized appreciation of
investments were as follows:
<TABLE>
<CAPTION>
ASSET BLUE CHIP
ALLOCATION GROWTH
FUND FUND
----------- -----------
<S> <C> <C>
Gross appreciation (investments having an excess of
value over cost).................................... $10,601,811 $25,425,068
Gross depreciation (investments having an excess of
cost over value).................................... (1,661,189) (1,087,520)
----------- -----------
Net unrealized appreciation of investments........... $ 8,940,622 $24,337,548
=========== ===========
</TABLE>
For the year ended February 28, 1995, total aggregate purchases and sales of
portfolio securities, excluding short-term securities, were as follows:
<TABLE>
<CAPTION>
ASSET BLUE CHIP
ALLOCATION GROWTH
FUND FUND
------------ -----------
<S> <C> <C>
Purchases.............................................. $249,598,640 $ 7,352,362
Sales.................................................. $318,490,030 $21,202,547
</TABLE>
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
PAINEWEBBER
CAPITAL STOCK
There are 10 billion shares of $0.001 par value common stock authorized for
Master Series, of which 3 billion is allocated to Asset Allocation Fund and 3
billion is allocated to Blue Chip Growth Fund. Transactions in shares of common
stock were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
----------------------- ----------------------- -------------------
FOR THE YEARS ENDED FEBRUARY 28,
---------------------------------------------------------------------
1995 1994 1995 1994 1995 1994
----------- ---------- ----------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSET ALLOCATION FUND
Shares sold............. 218,283 766,262 617,150 961,099 237,335 759,181
Shares repurchased...... (5,295,097) (3,853,496) (1,856,614) (2,112,892) (566,186) (359,998)
Shares converted from
Class B to Class A..... 2,514,073 6,335,780 (2,500,444) (6,321,397) -- --
Dividends reinvested in
additional Fund shares. 2,407,603 1,338,437 613,996 499,479 123,401 63,067
----------- ---------- ----------- ---------- --------- --------
Net increase (decrease)
in shares outstanding.. (155,138) 4,586,983 (3,125,912) (6,973,711) (205,450) 462,250
=========== ========== =========== ========== ========= ========
BLUE CHIP GROWTH FUND
Shares sold............. 200,368 359,520 331,698 405,563 103,204 271,468
Shares repurchased...... (1,060,754) (929,075) (870,305) (811,437) (142,432) (110,042)
Shares converted from
Class B to Class A..... 191,719 1,027,473 (197,254) (1,044,070) -- --
Dividends reinvested in
additional Fund shares. 306,364 393,024 224,404 311,117 21,762 19,274
----------- ---------- ----------- ---------- --------- --------
Net increase (decrease)
in shares outstanding.. (362,303) 850,942 (511,457) (1,138,827) (17,466) 180,700
=========== ========== =========== ========== ========= ========
</TABLE>
17
<PAGE>
ASSET ALLOCATION FUND
PAINEWEBBER
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT
EACH PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------
FOR THE YEARS ENDED FOR THE PERIOD
FEBRUARY 28, JULY 1, 1991+ TO
------------------------------- FEBRUARY 29,
1995 1994 1993 1992
-------- -------- -------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period.................. $ 12.04 $ 11.54 $ 11.01 $ 10.09
-------- -------- -------- ---------
Income from investment
operations:
Net investment income....... 0.26 0.22 0.33 0.19
Net realized and unrealized
gains (losses) from
investment transactions.... (1.07) 1.31 0.54 0.96
-------- -------- -------- ---------
Total income (loss) from
investment operations...... (0.81) 1.53 0.87 1.15
-------- -------- -------- ---------
Less dividends and
distributions from:
Net investment income....... (0.23) (0.25) (0.34) (0.23)
Net realized gains on
investments................ (1.20) (0.78) -- --
-------- -------- -------- ---------
Total dividends and
distributions.............. (1.43) (1.03) (0.34) (0.23)
-------- -------- -------- ---------
Net asset value, end of pe-
riod....................... $ 9.80 $ 12.04 $ 11.54 $ 11.01
======== ======== ======== =========
Total return(1)............. (6.02) % 13.57 % 8.09 % 11.43 %
======== ======== ======== =========
Ratios/Supplemental Data:
Net assets, end of period
(000's).................... $174,761 $216,492 $154,594 $916
Ratio of expenses to average
net assets................. 1.26 % 1.21 % 1.18 % 1.30 %*
Ratio of net investment in-
come to average net assets. 2.41 % 1.74 % 2.52 % 3.43 %*
Portfolio turnover.......... 106.76 % 68.53 % 33.17 % 83.62 %
- ---------------------
</TABLE>
+ Commencement of offering of shares.
(1) Total return is calculated assuming a $1,000 investment in Fund shares on
the first day of each period reported, reinvestment of all dividends and
capital gain distributions at net asset value on the payable date, and a
sale at net asset value on the last day of each period reported. The
figures do not include sales charges; results of Class A and Class B would
be lower if sales charges were included. Total returns for periods of less
than one year have not been annualized.
* Annualized.
18
<PAGE>
ASSET ALLOCATION FUND
PAINEWEBBER
<TABLE>
<CAPTION>
CLASS B CLASS D
- -------------------------------------------------- ------------------------------------
FOR THE
YEARS ENDED FOR THE PERIOD
FOR THE YEARS ENDED FEBRUARY 28 OR 29, FEBRUARY 28, JULY 2, 1992+ TO
- -------------------------------------------------- ----------------- FEBRUARY 28,
1995 1994 1993 1992 1991 1995 1994 1993
- ------ ------- -------- -------- -------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 12.10 $ 11.56 $ 10.99 $ 10.21 $ 9.86 $ 12.03 $ 11.54 $ 10.86
- ------- ------- -------- -------- -------- ------- ------- -------
0.44 0.26 0.30 0.35 0.59 0.19 0.14 0.13
(1.32) 1.18 0.48 0.78 0.38 (1.07) 1.30 0.71
- ------- ------- -------- -------- -------- ------- ------- -------
(0.88) 1.44 0.78 1.13 0.97 (0.88) 1.44 0.84
- ------- ------- -------- -------- -------- ------- ------- -------
(0.12) (0.12) (0.21) (0.35) (0.62) (0.13) (0.17) (0.16)
(1.20) (0.78) -- -- -- (1.20) (0.78) --
- ------- ------- -------- -------- -------- ------- ------- -------
(1.32) (0.90) (0.21) (0.35) (0.62) (1.33) (0.95) (0.16)
- ------- ------- -------- -------- -------- ------- ------- -------
$ 9.90 $ 12.10 $ 11.56 $ 10.99 $ 10.21 $ 9.82 $ 12.03 $ 11.54
======= ======= ======== ======== ======== ======= ======= =======
(6.68)% 12.62 % 7.25 % 11.24 % 10.29 % (6.69)% 12.75 % 7.78 %
======= ======= ======== ======== ======== ======= ======= =======
$37,104 $83,178 $160,115 $346,290 $403,557 $8,525 $12,916 $7,058
1.98 % 2.05 % 1.98 % 2.02 % 1.83 % 2.01 % 1.96 % 1.95 %*
1.60 % 1.00 % 2.02 % 3.25 % 5.46 % 1.62 % 0.97 % 1.91 %*
106.76 % 68.53 % 33.17 % 83.62 % 169.18 % 106.76 % 68.53 % 33.17 %
</TABLE>
19
<PAGE>
BLUE CHIP GROWTH FUND
PAINEWEBBER
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT
EACH PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------
FOR THE YEARS ENDED FOR THE PERIOD
FEBRUARY 28, JULY 1, 1991+ TO
--------------------------- FEBRUARY 29,
1995 1994 1993 1992
------- ------- ------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 15.71 $ 15.56 $ 16.78 $ 14.40
------- ------- ------- -------
Income from investment
operations:
Net investment income (loss).... 0.07 -- 0.02 0.02
Net realized and unrealized
gains from investment
transactions................... 0.03 1.97 0.81 2.40
------- ------- ------- -------
Total income (loss) from
investment operations.......... 0.10 1.97 0.83 2.42
------- ------- ------- -------
Less dividends and distributions
from:
Net investment income........... -- -- -- --
Net realized gains on
investments.................... (1.27) (1.82) (2.05) (0.04)
------- ------- ------- -------
Total dividends and
distributions.................. (1.27) (1.82) (2.05) (0.04)
------- ------- ------- -------
Net asset value, end of period.. $ 14.54 $ 15.71 $ 15.56 $ 16.78
======= ======= ======= =======
Total return(1)................. 1.08 % 12.89 % 5.15 % 16.82 %
======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period
(000's)........................ $50,445 $60,204 $46,371 $1,561
Ratio of expenses to average net
assets......................... 1.36 % 1.32 % 1.26 % 1.18 %*
Ratio of net investment income
(loss) to average net assets... 0.27 % (0.01)% 0.07 % 0.44 %*
Portfolio turnover.............. 9.28 % 24.84 % 41.07 % 34.05 %
- ---------------------
</TABLE>
+ Commencement of offering of shares.
** Dividends in excess of net investment income for financial reporting
purposes represent amounts required to be distributed under the minimum
distribution requirements of the Internal Revenue Code.
(1) Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends and capital gain
distributions at net asset value on the payable date, and a sale at net
asset value on the last day of each period reported. The figures do not
include sales charges; results of Class A and Class B would be lower if
sales charges were included. Total returns for periods of less than one
year have not been annualized.
* Annualized.
20
<PAGE>
BLUE CHIP GROWTH FUND
PAINEWEBBER
<TABLE>
<CAPTION>
CLASS B CLASS D
- ------------------------------------------------- --------------------------------------
FOR THE
YEARS ENDED FOR THE PERIOD
FOR THE YEARS ENDED FEBRUARY 28 OR 29, FEBRUARY 28, JULY 2, 1992+ TO
- ------------------------------------------------- ------------------- FEBRUARY 28,
1995 1994 1993 1992 1991 1995 1994 1993
- ------- ------- ------- -------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 15.33 $ 15.34 $ 16.71 $ 14.32 $ 13.01 $ 15.50 $ 15.48 $ 15.51
- ------- ------- ------- -------- -------- -------- -------- --------
(0.16) (0.27) (0.21) (0.07) -- (0.07) (0.05) (0.03)
0.14 2.08 0.89 2.50 1.35 0.04 1.89 2.05
- ------- ------- ------- -------- -------- -------- -------- --------
(0.02) 1.81 0.68 2.43 1.35 (0.03) 1.84 2.02
- ------- ------- ------- -------- -------- -------- -------- --------
-- -- -- -- (0.04)** -- -- --
(1.27) (1.82) (2.05) (0.04) -- (1.27) (1.82) (2.05)
- ------- ------- ------- -------- -------- -------- -------- --------
(1.27) (1.82) (2.05) (0.04) (0.04) (1.27) (1.82) (2.05)
- ------- ------- ------- -------- -------- -------- -------- --------
$ 14.04 $ 15.33 $ 15.34 $ 16.71 $ 14.32 $ 14.20 $ 15.50 $ 15.48
======= ======= ======= ======== ======== ======== ======== ========
0.21 % 12.00 % 4.25 % 16.93 % 10.43 % 0.14 % 12.10 % 13.22 %
======= ======= ======= ======== ======== ======== ======== ========
$32,772 $43,622 $61,100 $112,897 $101,573 $3,446 $4,030 $1,228
2.12 % 2.10 % 2.02 % 2.19 % 2.15 % 2.14 % 2.08 % 2.01 %*
(0.50)% (0.78)% (0.57)% (0.43)% 0.01 % (0.51)% (0.79)% (0.78)%*
9.28 % 24.84 % 41.07 % 34.05 % 24.47 % 9.28 % 24.84 % 41.07 %
</TABLE>
21
<PAGE>
MASTER SERIES, INC.
PAINEWEBBER
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of PaineWebber Master Series, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of PaineWebber Asset Allocation Fund
and PaineWebber Blue Chip Growth Fund (two of the portfolios constituting
PaineWebber Master Series, Inc., hereafter referred to as the "Funds") at
February 28, 1995, the results of each of their operations for the year then
ended, the changes in each of their net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at February 28, 1995 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
April 17, 1995
22
<PAGE>
MASTER SERIES, INC.
PAINEWEBBER
TAX INFORMATION (UNAUDITED)
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of each Fund's fiscal year end (February
28, 1995), as to the federal tax status of distributions received by
shareholders during such fiscal year. Accordingly, we are advising you that the
following distributions paid during the fiscal year by the Funds were taxable
and are derived from the following sources:
<TABLE>
<CAPTION>
ASSET BLUE
ALLOCATION CHIP
FUND FUND
PER SHARE DATA: ---------- -------
<S> <C> <C>
Net investment income*
Class A.................................................... $0.2333 --
Class B.................................................... 0.1211 --
Class D.................................................... 0.1335 --
Short-term capital gains*+................................... 0.1018 --
Long-term capital gains+..................................... 1.0971 $1.2702
Percentage of ordinary income dividends qualifying for
the dividends received deduction available to corpo-
rate shareholders........................................... 40.18% --
</TABLE>
- -------
* Taxable as ordinary income
+ Amounts apply to all classes
Distributions received by tax-exempt recipients (e.g., IRAs and Keoghs) need
not be reported as taxable income. Some retirement trusts (e.g., corporate,
Keogh and 403(b)(7) plans) may need this information for their annual
information reporting.
Because each Fund's fiscal year is not the calendar year, another notification
will be sent in respect of calendar 1995. The second notification, which will
reflect the amount to be used by calendar year taxpayers on their federal
income tax returns, will be made in conjunction with Form 1099 DIV and will be
mailed in January 1996. Shareholders are advised to consult their own tax
advisers with respect to the tax consequences of their investment in each Fund.
23
