<PAGE>
PAINEWEBBER TAX-FREE BOND FUNDS SEMIANNUAL REPORT
October 15, 1999
Dear Shareholder,
We are pleased to present you with the semiannual report for the 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, 1999.
MARKET REVIEW
================================================================================
[GRAPHIC]
The six-month period was a cautious time for municipal investors as the effects
of rising interest rates worked their way through the markets. Amid fears of
returning inflation, the Federal Reserve increased short-term rates twice, 0.25%
on the last day of June and 0.25% again in August, in an attempt to cool what it
saw as a potentially overheating economy. Overall rates rose accordingly, and
the long Treasury bond's yield rose to 6.06% by period-end.
The other big story in the third quarter was Y2K. Fears of computer malfunctions
and uncertainty about what will occur on January 1 led many issuers to bring new
bonds to market in the third quarter rather than the fourth, before Y2K issues
moved to the forefront of investors' minds. The surge of issuance created an
oversupply of municipal bonds, which, combined with higher interest rates,
brought bond prices down during the quarter. A secondary effect of upcoming Y2K
concerns was the decision of many bond fund managers to raise cash in
anticipation of year-end liquidity needs. While we are unsure exactly what
impact "Year 2000" will have on the markets, we believe our portfolios are well
positioned to meet our liquidity needs and that we are invested in those issuers
best prepared for the turnover from 1999 to 2000.
OUTLOOK
Municipal investors remain wary of yet another 25 basis point increase before
year-end, which would effectively undo the 75 basis points of credit easing
undertaken in 1998. While the Federal Reserve's moves to inhibit inflation have
had a negative effect on the municipal market in the short term, we expect this
policy to have beneficial long-term effects. The domestic economy continues to
grow faster than expectations while keeping inflation fairly well in check. As
long as the markets anticipate Fed moves, the countering of slightly increasing
price pressures with slightly tighter money supply should prove benign for
municipal bonds.
Regardless of whether we see another increase in short-term rates before year-
end, municipal bond yields remain historically high compared to U.S. Treasury
yields, at approximately 93% of corresponding U.S.
1
<PAGE>
SEMIANNUAL REPORT
PAINEWEBBER CALIFORNIA
TAX-FREE INCOME FUND
FUND PROFILE
AS OF AUGUST 31, 1999
Investment Goal:
high current income exempt from federal income tax and California personal
income tax
Portfolio Managers:
Elbridge T. Gerry, III and
Cynthia N. Bow,
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
Treasurys. The historical 5-year average yield is about 85% of Treasurys, which
points out that municipals are now cheap relative to Treasurys. Excess supply
and Y2K-related liquidity premiums are partly responsible. Another constraining
factor is that the municipal market is now more closely tied to the "spread"
markets such as corporate bonds -- crossover buyers that move between both
markets have recently been shifting out of the municipal market and therefore
are keeping municipal prices lower.
PAINEWEBBER CALIFORNIA TAX-FREE INCOME FUND
Performance--Total % Returns for Six Months Ended 8/31/99
- --------------------------------------------------------------------------------
Before After Maximum
Sales Charges Sales Charges
- --------------------------------------------------------------------------------
Class A Shares -3.04 -6.95
Class B Shares -3.32 -8.06
Class C Shares -3.29 -4.00
Class Y Shares -2.92 -2.92
- --------------------------------------------------------------------------------
The Fund's total return consists of the change in net asset value with any
dividends reinvested. For shareowners who purchased or redeemed Fund shares
during the period, the Fund's total return may be lower because of applicable
sales charges. Class Y shares are not subject to sales charges.
HIGHLIGHTS
During the period we were able to capitalize on several inefficiencies in
structure spreads. As a result of our analysis we executed several swaps whereby
we took advantage of theoretical rich levels in premium structures and the
relative cheapness in par structures. As more "normal" spreads returned to the
market we reversed these trades, selling expensive par structures and buying
relatively cheaper premium bonds.
In recent swaps we bought bonds for California Educational Facilities
Authority -- University of Southern California (0.9%) and Fresno Unified School
District (1.4%). The Fresno deal featured a unique, 60-day extended trade
settlement date for which we were overcompensated. In addition to identifying
market inefficiencies, capitalizing on this type of underpricing is an example
of how we have successfully added value.
HIGHLIGHTS
8/31/99 2/28/99
- --------------------------------------------------------------------------------
Weighted Average Duration (years) 8.8 7.4
Weighted Average Maturity (years) 20.3 20.8
AMT Paper (%) 10.2 9.7
Total Net Assets ($mm) 141.4 152.0
- --------------------------------------------------------------------------------
* The Fund's portfolio is actively managed and its composition will vary over
time.
2
<PAGE>
PaineWebber Tax-Free Bond Funds Semiannual Report
Top Five Sectors*
As of 8/31/99 As of 2/28/99
- --------------------------------------------------------------------------------
Tax Allocation 16.4% Tax Allocation 16.0%
Lease 15.6 Lease 15.3
Power 13.4 General Obligation 13.2
General Obligation 10.7 Power 12.7
Water 9.4 Water 9.0
- --------------------------------------------------------------------------------
The Fund's exposure to Baa credits (20.7%) continued to help returns during the
period. One of the Fund's holdings, BBB-rated Fontana Redevelopment Agency
(Jurupa Hills) bonds, was pre-refunded, which effectively raised the bonds'
rating to Aaa quality. The Fund maintained its exposure by reinvesting in the
refinancing (1.1%). Additionally, we participated in the $1.588 billion, Baa
rated, Foothill/Eastern Transportation Corridor Agency Toll Road issue (3.6%).
We also purchased Baa3-rated, San Diego County Certificate of Participation --
Burnham Institute (0.9%). The Burnham Institute is recognized as a foremost
cancer research facility, with strong research talent and a solid endowment. We
determined that Burnham's credit spread was too wide for its credit quality.
Credit Quality*
8/31/99 2/28/99
- --------------------------------------------------------------------------------
Cash 0.4% 0.2%
AAA 51.6 53.3
AA 10.8 12.6
A 6.5 8.8
BBB 20.7 15.6
Non-Rated 10.0 9.5
- --------------------------------------------------------------------------------
Total 100.0 100.0
As expected, Standard & Poor's upgraded California's general obligations
during the period. California is now rated AA by both S&P and Moody's. As this
upgrade was long anticipated, it had minimal impact on the state's credit
quality spread. The demand for California state tax-exempt securities continues
unabated; their yields are therefore "rich" (bond prices are high) compared to
national levels. During the last few months we have seen this richness near or
at historical peaks. New issuance remains stable -- thus, we do not expect the
richness to change in the near term.
* Weightings represent percentages of portfolio 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 NATIONAL
TAX-FREE INCOME FUND
FUND PROFILE
AS OF AUGUST 31, 1999
Investment Goal:
high current income exempt from federal income tax
Portfolio Managers:
Elbridge T. Gerry, III and
Richard S. Murphy,
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
PAINEWEBBER NATIONAL TAX-FREE INCOME FUND
PERFORMANCE--TOTAL % RETURNS FOR SIX MONTHS ENDED 8/31/99
- --------------------------------------------------------------------------------
Before After Maximum
Sales Charges Sales Charges
- --------------------------------------------------------------------------------
Class A Shares -3.17 -7.05
Class B Shares -3.64 -8.36
Class C Shares -3.42 -4.13
Class Y Shares -3.08 -3.08
- --------------------------------------------------------------------------------
The Fund's total return consists of the change in net asset value with any
dividends reinvested. For shareowners who purchased or redeemed Fund shares
during the period, the Fund's total return may be lower because of applicable
sales charges. Class Y shares are not subject to sales charges.
HIGHLIGHTS
Higher interest rates hurt the municipal market during the period.
Investors continued to pull back from new investments, making matters worse. For
example, property and casualty insurance companies, traditional municipal buyers
in the intermediate range of the tax-free yield curve, scaled back new purchases
due to higher claims and lower profitability.
The Fund's disciplined investment approach kept its duration slightly
shorter than the benchmark, which helped performance as rates rose for the
period. The 15-20 year maturities provided the best total return for the period
and remained the focus of our investments. A typical purchase was a block of
Florida G.O. bonds with a coupon of 5.75%, due to mature in 2022 (1.7%), that
overcompensated holders for accepting a March settlement date.
As we look forward, the Fed's bias toward restricting monetary policy is
likely to keep pressure on rates to rise. We expect Y2K concerns to slow
activity and new issuance as we head toward the year's end.
CHARACTERISTICS*
8/31/99 2/28/99
- --------------------------------------------------------------------------------
Weighted Average Duration (years) 7.7 7.3
Weighted Average Maturity (years) 19.5 18.4
AMT Paper (%) 16.3 18.2
Total Net Assets ($mm) 276.3 299.3
- --------------------------------------------------------------------------------
* The Fund's portfolio is actively managed and its composition will vary over
time.
4
<PAGE>
PAINEWEBBER TAX-FREE BOND FUNDS SEMIANNUAL REPORT
TOP FIVE SECTORS*
As of 8/31/99 As of 2/28/99
- --------------------------------------------------------------------------------
Power 15.4% Power 18.7%
General Obligation 14.3 Toll 16.7
Toll 11.2 Water 11.7
Water 9.5 General Obligation 10.8
Lease 8.7 Lease 6.2
- --------------------------------------------------------------------------------
TOP FIVE STATES*
As of 8/31/99 As of 2/28/99
- --------------------------------------------------------------------------------
Texas 15.1% New York 15.8%
Illinois 12.9 Illinois 13.1
New York 12.1 Texas 11.7
New Jersey 7.5 Massachusetts 8.1
Georgia 6.4 New Jersey 6.4
- --------------------------------------------------------------------------------
CREDIT QUALITY*
8/31/99 2/28/99
- --------------------------------------------------------------------------------
SP1 & A1 3.4% 1.1%
AAA 33.5 43.8
AA 20.1 14.4
A 11.5 13.2
BBB 17.0 15.6
BB 2.6 2.7
Non-Rated 11.9 9.2
- --------------------------------------------------------------------------------
Total 100.0 100.0
* Weightings represent percentages of portfolio assets as of the dates
indicated. The Fund's portfolio is actively managed and its composition will
vary over time.
5
<PAGE>
SEMIANNUAL REPORT
PAINEWEBBER MUNICIPAL
HIGH INCOME FUND
FUND PROFILE
AS OF AUGUST 31, 1999
Investment Goal:
high current income exempt from federal income tax
Portfolio Managers:
Elbridge T. Gerry, III and 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
PAINEWEBBER MUNICIPAL HIGH INCOME FUND
================================================================================
PERFORMANCE--TOTAL % RETURNS FOR SIX MONTHS ENDED 8/31/99
- --------------------------------------------------------------------------------
Before After Maximum
Sales Charges Sales Charges
- --------------------------------------------------------------------------------
Class A Shares -1.66 -5.57
Class B Shares -1.95 -6.75
Class C Shares -1.91 -2.63
Class Y Shares -1.57 -1.57
- --------------------------------------------------------------------------------
The Fund's total return consists of the change in net asset value with any
dividends reinvested. For shareowners who purchased or redeemed Fund shares
during the period, the Fund's total return may be lower because of applicable
sales charges. Class Y shares are not subject to sales charges.
CHARACTERISTICS*
8/31/99 2/28/99
- --------------------------------------------------------------------------------
Weighted Average Duration (years) 7.0 6.9
Weighted Average Maturity (years) 18.9 18.9
AMT Paper (%) 47.3 49.4
Total Net Assets ($mm) 109.6 110.4
- --------------------------------------------------------------------------------
HIGHLIGHTS
During the period we continued to make new investments in accordance with
our long-term investment themes, among them deregulation of the power industry
and the travel and leisure industries as beneficiaries of strong economic
growth. The Fund's top five sectors illustrate our focus on these themes.
During the period we also purchased new credits in the paper products
industry, which displaced universities on the top five sectors list as of August
31, 1999. A good example is Courtland Industrial Development Board for Champion
International Corporation Project (AL) (1.7%),* due in 2029 and priced to yield
6.00%. After years of stable but low growth, Champion has refocused and begun to
enhance its performance. The company has moved away from the commodity paper
businesses such as newsprint, and now emphasizes higher-margin sectors such as
fine papers and packaging. We believe their sharper focus will lead to enhanced
performance, which in turn is likely to enhance the value of Champion debt.
* The Fund's portfolio is actively managed and its composition will vary over
time.
<PAGE>
PAINEWEBBER TAX-FREE BOND FUNDS SEMIANNUAL REPORT
TOP FIVE SECTORS*
As of 8/31/99 As of 2/28/99
- --------------------------------------------------------------------------------
Power 18.5% Power 17.9%
Leisure 10.4 Leisure 13.4
Hotel 7.8 Airlines 8.3
Paper 7.7 Hotel 8.2
Airlines 7.6 University 5.9
- --------------------------------------------------------------------------------
Our other main purchase of the period was Ohio Water Development Authority
(Bay Shore Power Project), (3.5%).* As the power industry is deregulated and
utilities lose their monopolies, they must become more competitive or perish. We
think Bay Shore is a good candidate to thrive in the new business environment.
We financed the Bay Shore holding in part with the sale of bonds issued by the
McCormick Place Convention Complex -- Metropolitan Pier and Exposition Authority
(IL), a hotel project where credit improved so greatly that it could be refunded
and escrowed to maturity with U.S. Treasury bonds. Going forward we remain
positive on the airline and travel industries, the power sector and
universities. We are reducing exposure to the financial sector and avoiding
hospitals.
CREDIT QUALITY*
8/31/99 2/28/99
- --------------------------------------------------------------------------------
Cash Equivalents 2.9% 0.7%
AAA 0.5 0.5
A 6.4 3.7
BBB 35.8 39.9
BB 12.8 14.6
B 5.5 5.7
Non-Rated 36.1 34.9
- --------------------------------------------------------------------------------
Total 100.0 100.0
* Weightings represent percentages of portfolio assets as of the dates
indicated. The Fund's portfolio is actively managed and its composition
will vary over time.
<PAGE>
SEMIANNUAL REPORT
PAINEWEBBER NEW YORK
TAX-FREE INCOME FUND
FUND PROFILE
AS OF AUGUST 31, 1999
Investment Goal:
high current income exempt from federal income tax and New York State and New
York City personal income taxes
Portfolio Managers:
Elbridge T. Gerry, III and Richard S.Murphy,
Mitchell Hutchins Asset Management Inc.
Commencement:
September 23, 1988 (Class A);
July 1, 1991 (Class B);
July 2, 1992 (Class C);
May 21, 1998 (Class Y)
Dividend Payments:
monthly
PAINEWEBBER NEW YORK TAX-FREE INCOME FUND
================================================================================
PERFORMANCE--TOTAL % RETURNS FOR SIX MONTHS ENDED 8/31/99
- --------------------------------------------------------------------------------
Before After Maximum
Sales Charges Sales Charges
- --------------------------------------------------------------------------------
Class A Shares -3.71 -7.56
Class B Shares -4.07 -8.78
Class C Shares -3.95 -4.65
Class Y Shares -3.59 -3.59
- --------------------------------------------------------------------------------
The Fund's total return consists of the change in net asset value with any
dividends reinvested. For shareowners who purchased or redeemed Fund shares
during the period, the Fund's total return may be lower because of applicable
sales charges. Class Y shares are not subject to sales charges. Characteristics*
CHARACTERISTICS*
8/31/99 2/28/99
- --------------------------------------------------------------------------------
Weighted Average Duration (years) 8.6 7.5
Weighted Average Maturity (years) 18.8 18.7
AMT Paper (%) 13.8 15.7
Total Net Assets ($mm) 39.9 45.0
- --------------------------------------------------------------------------------
HIGHLIGHTS
Higher interest rates hurt the municipal market during the period.
Investors continued to pull back from new investments making matters worse. For
example, property and casualty insurance companies, traditional municipal buyers
in the intermediate range of the tax-free yield curve, scaled back new purchases
due to higher claims and lower profitability.
The Fund continued to stress investment in 15-20 year maturity bonds. We
felt that shareholders were paid more yield for the true duration risk in the
15-20 year area than they were paid for the true duration risk in longer
maturity bonds. However, we did partly swap out of our position in New York City
Industrial Development Agency Special Facility Revenue (1.2%), backed by
American Airlines (coupon of 5.40%, due 2019) at a 22-basis point spread to the
equivalent spot on the AAA curve. This transaction boosted total return, as we
had purchased these bonds several months before at a 59-basis point spread to
the curve.
As we look forward, the Fed's bias toward restricting monetary policy is
likely to keep pressure on rates to rise. We expect Y2K concerns to slow
activity and new issuance as we head toward the year's end.
* The Fund's portfolio is actively managed and its composition will vary over
time.
<PAGE>
PAINEWEBBER TAX-FREE BOND FUNDS SEMIANNUAL REPORT
TOP FIVE SECTORS*
As of 8/31/99 As of 2/28/99
- --------------------------------------------------------------------------------
General Obligation 21.1% Power 18.4%
Power 17.4 General Obligation 18.2
Water 12.4 Water 12.2
Hospital 7.6 Sales Tax 9.6
University 6.9 Hospital 7.2
- --------------------------------------------------------------------------------
CREDIT QUALITY*
8/31/99 2/28/99
- --------------------------------------------------------------------------------
AAA 46.7% 42.9%
AA 7.2 9.9
A 28.8 29.5
BBB 12.4 13.0
Non-Rated 4.9 4.7
- --------------------------------------------------------------------------------
Total 100.0 100.0
* Weightings represent percentages of portfolio assets as of the dates
indicated. The Fund's portfolio is actively managed and its composition
will vary over time.
<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,
<TABLE>
<S> <C> <C>
/s/ MARGO ALEXANDER /s/ BRIAN M. STORMS /s/ ELBRIDGE T. GERRY, III
MARGO ALEXANDER BRIAN M. STORMS ELBRIDGE T. GERRY, III
Chairman and President and Senior Vice President
Chief Executive Officer Chief Operating Officer Mitchell Hutchins Asset
Mitchell Hutchins Asset Mitchell Hutchins Asset Management Inc.
Management Inc. Management Inc. Portfolio Manager, PaineWebber
National Tax-Free Income Fund,
PaineWebber Municipal High
Income Fund, PaineWebber
New York Tax-Free Income Fund
and PaineWebber California
Tax-Free Income Fund
/s/ CYNTHIA N. BOW /s/ RICHARD S. MURPHY /s/ WILLIAM W. VERONDA
CYNTHIA N. BOW RICHARD S. MURPHY WILLIAM W. VERONDA
Portfolio Manager Portfolio Manager Portfolio Manager
PaineWebber California PaineWebber National Tax-Free PaineWebber Municipal High
Tax-Free Income Fund Income Fund, PaineWebber Income Fund
New York Tax-Free Income Fund
</TABLE>
This letter is intended to assist shareholders in understanding how the
funds performed during the six-month period ended August 31, 1999, 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.
<PAGE>
PaineWebber California Tax-Free Income Fund
Performance Results (unaudited)
<TABLE>
<CAPTION>
Net Asset Value Total Return/1/
-------------------------------------- --------------------------------
12 Months 6 Months
08/31/99 02/28/99 08/31/98 Ended 08/31/99 Ended 08/31/99
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A
Shares $10.59 $11.18 $11.50 (0.83)% (3.04)%
- ---------------------------------------------------------------------------------------
Class B
Shares 10.60 11.18 11.50 (1.49) (3.32)
- ---------------------------------------------------------------------------------------
Class C Shares 10.58 11.17 11.49 (1.33) (3.29)
- ---------------------------------------------------------------------------------------
Performance Summary Class A Shares
<CAPTION>
Net Asset Value
----------------------
Period Capital Gains Total
Covered Beginning Ending Distributed Dividends Paid Return/1/
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
09/16/85 -
12/31/85 $ 9.57 $ 10.09 -- $0.1827 7.41%
- ---------------------------------------------------------------------------------------
1986 10.09 11.18 -- 0.7883 19.18
- ---------------------------------------------------------------------------------------
1987 11.18 10.49 -- 0.7564 0.65
- ---------------------------------------------------------------------------------------
1988 10.49 10.74 -- 0.7908 10.20
- ---------------------------------------------------------------------------------------
1989 10.74 10.95 -- 0.7384 9.11
- ---------------------------------------------------------------------------------------
1990 10.95 10.88 $0.0340 0.7362 6.68
- ---------------------------------------------------------------------------------------
1991 10.88 11.29 0.0268 0.7064 10.84
- ---------------------------------------------------------------------------------------
1992 11.29 11.29 0.1701 0.6504 7.49
- ---------------------------------------------------------------------------------------
1993 11.29 11.70 0.3052 0.6077 11.96
- ---------------------------------------------------------------------------------------
1994 11.70 10.09 0.0969 0.5844 (8.07)
- ---------------------------------------------------------------------------------------
1995 10.09 11.18 -- 0.5713 16.80
- ---------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------
01/01/99 -
08/31/99 11.20 10.59 -- 0.2553 (2.54)
- ---------------------------------------------------------------------------------------
Totals: $0.9500 $8.9199
- ---------------------------------------------------------------------------------------
Cumulative Total Return as of 08/31/99: 173.30%
- ---------------------------------------------------------------------------------------
Performance Summary Class B Shares
<CAPTION>
Net Asset Value
----------------------
Period Capital Gains Total
Covered Beginning Ending Distributed Dividends Paid Return/1/
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/01/91 -
12/31/91 $10.95 $11.29 $0.0268 $0.3043 6.20%
- ---------------------------------------------------------------------------------------
1992 11.29 11.29 0.1701 0.5631 6.67
- ---------------------------------------------------------------------------------------
1993 11.29 11.70 0.3052 0.5188 11.11
- ---------------------------------------------------------------------------------------
1994 11.70 10.10 0.0969 0.5029 (8.69)
- ---------------------------------------------------------------------------------------
1995 10.10 11.19 -- 0.4899 15.91
- ---------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------
01/01/99 -
08/31/99 11.21 10.60 -- 0.2136 (3.01)
- ---------------------------------------------------------------------------------------
Totals: $0.9160 $3.8914
- ---------------------------------------------------------------------------------------
Cumulative Total Return as of 08/31/99: 52.07%
- ---------------------------------------------------------------------------------------
</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.
11
<PAGE>
PaineWebber California Tax-Free Income Fund
Performance Results (unaudited) (concluded)
Performance Summary Class C 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 $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
- -------------------------------------------------------------------------
01/01/99 -
08/31/99 11.19 10.58 -- 0.2275 (2.86)
- -------------------------------------------------------------------------
Totals: $0.8892 $3.4631
- -------------------------------------------------------------------------
Cumulative Total Return as of
08/31/99: 37.78%
- -------------------------------------------------------------------------
</TABLE>
Average Annual Total Return/1/
<TABLE>
<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
09/30/99 (2.66)% (3.31)% (3.06)% (6.60)% (7.83)% (3.74)%
- -------------------------------------------------------------------------------------------
Five Years Ended
09/30/99 5.73 4.94 5.21 4.87 4.61 5.21
- -------------------------------------------------------------------------------------------
Ten Years Ended 09/30/99 6.18 N/A N/A 5.75 N/A N/A
- -------------------------------------------------------------------------------------------
Commencement of
Operations Through
09/30/99+ 7.40 5.17 4.49 7.09 5.17 4.49
- -------------------------------------------------------------------------------------------
</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, 1999 and for the period since inception, February 5, 1998 through
August 31, 1999, Class Y shares had a total return of (2.92)% and 2.83%,
respectively. For the twelve months ended September 30, 1999 and for the period
since inception, February 5, 1998 through September 30, 1999, Class Y shares
had an average annual return of (2.42)% and 1.55%, 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.
12
<PAGE>
PaineWebber National Tax-Free Income Fund
Performance Results (unaudited)
<TABLE>
<CAPTION>
Net Asset Value Total Return/1/
------------------------------------ -----------------------------
12 Months 6 Months
08/31/99 02/28/99 08/31/98 Ended 08/31/99 Ended 08/31/99
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $11.09 $11.73 $12.05 (1.17)% (3.17)%
- ----------------------------------------------------------------------------------
Class B Shares 11.08 11.73 12.05 (2.03) (3.64)
- ----------------------------------------------------------------------------------
Class C Shares 11.09 11.73 12.05 (1.68) (3.42)
- ----------------------------------------------------------------------------------
Performance Summary Class A Shares
<CAPTION>
Net Asset Value
------------------ Capital Gains Total
Period Covered Beginning Ending Distributed Dividends Paid Return/1/
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
12/03/84 -
12/31/84 $ 9.57 $ 9.60 -- 0.31%
- ----------------------------------------------------------------------------------
1985 9.60 10.45 -- $ 0.8903 19.00
- ----------------------------------------------------------------------------------
1986 10.45 11.39 -- 0.8246 17.38
- ----------------------------------------------------------------------------------
1987 11.39 10.74 -- 0.7823 1.30
- ----------------------------------------------------------------------------------
1988 10.74 11.06 -- 0.8244 10.98
- ----------------------------------------------------------------------------------
1989 11.06 11.23 -- 0.8041 9.11
- ----------------------------------------------------------------------------------
1990 11.23 11.15 -- 0.7843 6.55
- ----------------------------------------------------------------------------------
1991 11.15 11.56 $0.0365 0.7519 11.12
- ----------------------------------------------------------------------------------
1992 11.56 11.62 0.1314 0.7043 8.01
- ----------------------------------------------------------------------------------
1993 11.62 12.25 0.1208 0.6507 12.32
- ----------------------------------------------------------------------------------
1994 12.25 10.75 0.0135 0.6264 (7.14)
- ----------------------------------------------------------------------------------
1995 10.75 11.84 -- 0.5954 16.01
- ----------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------
01/01/99 -
08/31/99 11.76 11.09 -- 0.3575 (2.73)
- ----------------------------------------------------------------------------------
Totals: $0.6722 $10.2485
- ----------------------------------------------------------------------------------
Cumulative Total Return as of 08/31/99: 205.82%
- ----------------------------------------------------------------------------------
Performance Summary Class B Shares
<CAPTION>
Net Asset Value
------------------ Capital Gains Total
Period Covered Beginning Ending Distributed Dividends Paid Return/1/
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/01/91 -
12/31/91 $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
- ----------------------------------------------------------------------------------
01/01/99 -
08/31/99 11.75 11.08 -- 0.2982 (3.23)
- ----------------------------------------------------------------------------------
Totals: $0.6722 $4.2283
- ----------------------------------------------------------------------------------
Cumulative Total Return as of 08/31/99: 53.63%
- ----------------------------------------------------------------------------------
</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.
13
<PAGE>
PaineWebber National Tax-Free Income Fund
Performance Results (unaudited) (concluded)
Performance Summary Class C 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 $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
- ---------------------------------------------------------------------------
01/01/99 -
08/31/99 11.75 11.09 -- 0.3183 (2.98)
- ---------------------------------------------------------------------------
Totals: $0.6357 $3.7656
- ---------------------------------------------------------------------------
Cumulative Total Return as of
08/31/99: 38.25%
- ---------------------------------------------------------------------------
</TABLE>
Average Annual Total Return/1/
<TABLE>
<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
09/30/99 (2.68)% (3.44)% (3.18)% (6.60)% (7.97)% (3.86)%
- -------------------------------------------------------------------------------
Five Years Ended
09/30/99 5.60 4.79 5.06 4.75 4.46 5.06
- -------------------------------------------------------------------------------
Ten Years Ended 09/30/99 6.29 N/A N/A 5.85 N/A N/A
- -------------------------------------------------------------------------------
Commencement of
Operations Through
09/30/99+ 7.80 5.30 4.52 7.51 5.30 4.52
- -------------------------------------------------------------------------------
</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, 1999 and since inception, November 3, 1995 through August 31, 1999,
Class Y shares had a total return of (3.08)% and 19.18%, respectively. For the
twelve months ended September 30, 1999 and for the period since inception,
November 3, 1995 through September 30, 1999, Class Y shares had an average
annual return of (2.42)% and 4.53%, 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.
14
<PAGE>
PaineWebber Municipal High Income Fund
Performance Results (unaudited)
<TABLE>
<CAPTION>
Net Asset Value Total Return/1/
---------------------------------- -----------------------------
12 Months 6 Months
08/31/99 02/28/99 08/31/98 Ended 08/31/99 Ended 08/31/99
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A
Shares $10.43 $10.88 $10.99 (0.06)% (1.66)%
- ----------------------------------------------------------------------------
Class B
Shares 10.43 10.87 10.99 (0.82) (1.95)
- ----------------------------------------------------------------------------
Class C
Shares 10.43 10.88 10.99 (0.56) (1.91)
- ----------------------------------------------------------------------------
Performance Summary Class A Shares
<CAPTION>
Net Asset Value
------------------
Period Capital Gains Total
Covered Beginning Ending Distributed Dividends Paid Return/1/
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
06/23/87 -
12/31/87 $ 9.58 $ 9.40 -- $0.3131 1.46%
- ----------------------------------------------------------------------------
1988 9.40 9.90 -- 0.8091 14.45
- ----------------------------------------------------------------------------
1989 9.90 10.09 -- 0.7380 9.66
- ----------------------------------------------------------------------------
1990 10.09 9.89 -- 0.7322 5.52
- ----------------------------------------------------------------------------
1991 9.89 10.38 $0.0679 0.7144 13.32
- ----------------------------------------------------------------------------
1992 10.38 10.54 0.1406 0.6736 9.79
- ----------------------------------------------------------------------------
1993 10.54 10.97 0.2037 0.6180 12.14
- ----------------------------------------------------------------------------
1994 10.97 9.52 0.0260 0.5865 (7.77)
- ----------------------------------------------------------------------------
1995 9.52 10.36 -- 0.6079 15.55
- ----------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------
01/01/99 -
08/31/99 10.90 10.43 -- 0.3565 (1.10)
- ----------------------------------------------------------------------------
Totals: $0.4523 $7.8135
- ----------------------------------------------------------------------------
Cumulative Total Return as of 08/31/99: 143.56%
- ----------------------------------------------------------------------------
Performance Summary Class B Shares
<CAPTION>
Net Asset Value
------------------
Period Capital Gains Total
Covered Beginning Ending Distributed Dividends Paid Return/1/
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/01/91 -
12/31/91 $10.05 $10.38 $0.0679 $0.3170 7.21%
- ----------------------------------------------------------------------------
1992 10.38 10.54 0.1406 0.5930 8.95
- ----------------------------------------------------------------------------
1993 10.54 10.97 0.2037 0.5349 11.30
- ----------------------------------------------------------------------------
1994 10.97 9.52 0.0260 0.5103 (8.47)
- ----------------------------------------------------------------------------
1995 9.52 10.35 -- 0.5328 14.59
- ----------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------
01/01/99 -
08/31/99 10.89 10.43 -- 0.3028 (1.50)
- ----------------------------------------------------------------------------
Totals: $0.4523 $4.2129
- ----------------------------------------------------------------------------
Cumulative Total Return as of 08/31/99: 64.38%
- ----------------------------------------------------------------------------
</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.
15
<PAGE>
PaineWebber Municipal High Income Fund
Performance Results (unaudited) (concluded)
Performance Summary Class C 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 $10.50 $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
- ---------------------------------------------------------------------------
01/01/99 -
08/31/99 10.89 10.43 -- 0.3213 (1.33)
- ---------------------------------------------------------------------------
Totals: $0.2573 $3.7427
- ---------------------------------------------------------------------------
Cumulative Total Return as of
08/31/99: 45.25%
- ---------------------------------------------------------------------------
</TABLE>
Average Annual Total Return/1/
<TABLE>
<CAPTION>
% Return After
% Return Without Deducting
Deducting Maximum Maximum Sales
Sales Charge Charge
--------------------- ---------------------
Class Class
--------------------- ---------------------
A* B** C*** A* B** C***
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Twelve Months Ended 09/30/99 (0.90)% (1.65)% (1.39)% (4.86)% (6.36)% (2.09)%
- -----------------------------------------------------------------------------
Five Years Ended 09/30/99 6.69 5.86 6.16 5.83 5.54 6.16
- -----------------------------------------------------------------------------
Ten Years Ended 09/30/99 7.04 N/A N/A 6.60 N/A N/A
- -----------------------------------------------------------------------------
Commencement of Operations
Through 09/30/99+ 7.51 6.20 5.27 7.15 6.20 5.27
- -----------------------------------------------------------------------------
</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, 1999 and since inception, February 5, 1998 through August 31, 1999,
Class Y shares had a total return of (1.57)% and 3.22%, respectively. For the
twelve months ended September 30, 1999 and for the period since inception,
February 5, 1998 through September 30, 1999, Class Y shares had an average
annual return of (0.69)% and 1.91%, 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.
16
<PAGE>
PaineWebber New York Tax-Free Income Fund
Performance Results (unaudited)
<TABLE>
<CAPTION>
Net Asset Value Total Return/1/
-------------------------------- -----------------------------
12 Months 6 Months
08/31/99 02/28/99 08/31/98 Ended 08/31/99 Ended 08/31/99
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $10.39 $11.03 $11.26 (1.52)% (3.71)%
- ------------------------------------------------------------------------------
Class B Shares 10.39 11.03 11.26 (2.25) (4.07)
- ------------------------------------------------------------------------------
Class C Shares 10.40 11.04 11.26 (1.91) (3.95)
- ------------------------------------------------------------------------------
Performance Summary Class A Shares
<CAPTION>
Net Asset Value
------------------ Capital Gains Total
Period Covered Beginning Ending Distributed Dividends Paid Return/1/
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
09/23/88 -
12/31/88 $ 9.60 $ 9.61 -- $0.1630 1.82%
- ------------------------------------------------------------------------------
1989 9.61 9.84 -- 0.6931 9.90
- ------------------------------------------------------------------------------
1990 9.84 9.68 -- 0.6797 5.53
- ------------------------------------------------------------------------------
1991 9.68 10.22 -- 0.6637 12.85
- ------------------------------------------------------------------------------
1992 10.22 10.55 -- 0.6442 9.85
- ------------------------------------------------------------------------------
1993 10.55 11.26 $0.0253 0.5796 12.72
- ------------------------------------------------------------------------------
1994 11.26 9.68 0.1017 0.5095 (8.48)
- ------------------------------------------------------------------------------
1995 9.68 10.81 -- 0.5397 17.57
- ------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------
01/01/99 -
08/31/99 11.04 10.39 -- 0.3101 (3.16)
- ------------------------------------------------------------------------------
Totals: $0.3659 $6.3158
- ------------------------------------------------------------------------------
Cumulative Total Return as of
08/31/99: 106.67%
- ------------------------------------------------------------------------------
Performance Summary Class B Shares
<CAPTION>
Net Asset Value
------------------ Capital Gains Total
Period Covered Beginning Ending Distributed Dividends Paid Return/1/
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
07/01/91 -
12/31/91 $ 9.81 $10.22 -- $0.2930 7.25%
- ------------------------------------------------------------------------------
1992 10.22 10.55 -- 0.5654 9.02
- ------------------------------------------------------------------------------
1993 10.55 11.25 $0.0253 0.4959 11.78
- ------------------------------------------------------------------------------
1994 11.25 9.68 0.1017 0.4362 (9.08)
- ------------------------------------------------------------------------------
1995 9.68 10.81 -- 0.4616 16.71
- ------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------
01/01/99 -
08/31/99 11.04 10.39 -- 0.2569 (3.63)
- ------------------------------------------------------------------------------
Totals: $0.3659 $3.7983
- ------------------------------------------------------------------------------
Cumulative Total Return as of
08/31/99: 59.25%
- ------------------------------------------------------------------------------
</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.
17
<PAGE>
PaineWebber New York Tax-Free Income Fund
Performance Results (unaudited) (concluded)
Performance Summary Class C 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 $10.45 $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
- ---------------------------------------------------------------------------
01/01/99 -
08/31/99 11.05 10.40 -- 0.2748 (3.47)
- ---------------------------------------------------------------------------
Totals: $0.3659 $3.3842
- ---------------------------------------------------------------------------
Cumulative Total Return as of
08/31/99: 41.60%
- ---------------------------------------------------------------------------
</TABLE>
Average Annual Total Return/1/
<TABLE>
<CAPTION>
% Return After
% Return Without Deducting
Deducting Maximum Maximum Sales
Sales Charge Charge
--------------------- ---------------------
Class Class
--------------------- ---------------------
A* B** C*** A* B** C***
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Twelve Months Ended 09/30/99 (3.22)% (3.95)% (3.70)% (7.06)% (8.48)% (4.38)%
- ---------------------------------------------------------------------------------------------
Five Years Ended 09/30/99 5.95 5.13 5.43 5.09 4.80 5.43
- ---------------------------------------------------------------------------------------------
Ten Years Ended 09/30/99 6.69 N/A N/A 6.26 N/A N/A
- ---------------------------------------------------------------------------------------------
Commencement of Operations Through 09/30/99+ 6.77 5.75 4.84 6.37 5.75 4.84
- ---------------------------------------------------------------------------------------------
</TABLE>
/1/Figures assume reinvestment of all dividends and capital gain 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, 1999 and since inception, May 21, 1998 through August 31, 1999,
Class Y shares had a total return of (3.59)% and 1.61%, respectively. For the
twelve months ended September 30, 1999 and for the period since inception, May
21, 1998 through September 30, 1999, Class Y shares had an average annual
return of (2.99)% and 0.82%, 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.
18
<PAGE>
PaineWebber California Tax-Free Income Fund
Portfolio of Investments August 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- -------------------- -------------- ------------
<C> <S> <C> <C> <C>
Municipal Bonds and Notes --
102.84%
California -- 100.09%
$ 1,600 California Educational
Facilities Authority
Los Angeles College of
Chiropractic Medicine.. 11/01/17 5.600% $ 1,557,216
1,375 California Educational
Facilities Authority
University of Southern
California............. 10/01/27 5.500 1,345,107
2,000 California Housing
Finance Agency Revenue
Bonds Series G(3)...... 08/01/14 6.100 2,049,000
2,375 California State
Department of Water
Resources Central
Valley Project Revenue
Water Systems Series Q. 12/01/17 5.250 2,317,620
100 California State
Economic Development
Financing Authority
Independent Systems
Project Series C....... 09/01/99 2.550* 100,000
10,450 California State Public
Works Board Department
of Corrections Series B
(MBIA Insured)......... 11/01/19 5.625 10,497,338
2,000 California Statewide
Communities Development
Authority Apartment
Development Revenue
Bonds Irvine Apartment
Communities Series A-3. 05/15/10(2) 5.100 1,915,420
3,000 California Statewide
Communities Development
Authority Apartment
Development Revenue
Bonds Irvine Apartment
Communities Series A-4. 05/15/13(2) 5.250 2,878,020
500 California Statewide
Communities Development
Authority Certificates
of Participation St.
Joseph Health System
Group.................. 09/01/99 2.400* 500,000
2,000 ABAG Finance Authority
for Nonprofit
Corporations
Certificates of
Participation Rhoda
Haas Goldman Plaza..... 05/15/15 5.125 1,877,580
1,245 Capistrano Unified
School District
Certificates of
Participation.......... 02/01/18 5.200 1,243,045
1,350 Contra Costa
Transportation
Authority Sales Tax
Revenue Bonds Series A. 03/01/07 6.875 1,428,354
2,715 Del Mar Race Track
Authority.............. 08/15/11 to 08/15/13 6.200 to 6.450 2,810,966
650 Duarte Redevelopment
Agency Tax Allocation
Davis Addition Project. 09/01/14 6.700 669,806
5,285 Escondido Union High
School District (MBIA
Insured)............... 05/01/12 to 05/01/13 4.700 to 4.750# 2,613,128
4,940 Fontana Redevelopment
Agency Tax Allocation
Jurupa Hills
Redevelopment Project
Series A............... 10/01/27 5.500 to 5.600 4,660,070
5,300 Foothill/Eastern
Transportation Corridor
Agency
California Toll Road
Revenue Bonds.......... 01/15/40 5.750 5,091,286
1,855 Fresno Unified School
District Series C (MBIA
Insured)............... 02/01/18 5.900 1,951,163
4,275 Glendale Unified School
District Series B (FSA
Insured)............... 09/01/18 5.500 4,275,000
2,000 Huntington Park Public
Financing Authority
Wastewater Systems
Project
Series A++ ............ 10/01/25 6.200 1,960,880
1,060 Inglewood Redevelopment
Agency Tax Allocation
Merged Redevelopment
Project Series A (AMBAC
Insured)............... 05/01/13 to 05/01/16 5.250 1,043,907
1,000 Intermodal Container
Transfer Facilities
Joint Power Authority
Southern Pacific
Transfer Company Series
A...................... 11/01/14 7.700 1,024,970
1,500 La Mirada Redevelopment
Agency Special Tax
Community Facilities
District Number 89-1... 10/01/20 5.700 1,407,975
1,835 Lake Elsinore Recreation
Authority Revenue Bonds
Public Facilities
Project Series A....... 02/01/17 7.100 1,874,159
1,450 Long Beach Industrial
Development Revenue
Bonds CSU Foundation
Series A............... 02/01/23 5.250 1,304,000
1,000 Los Angeles Department
of Water & Power
Electric Plant Revenue
Bonds.................. 09/01/23 5.375 957,780
5,750 Los Angeles Harbor
Department Revenue
Bonds Series B(3)...... 11/01/23 to 08/01/25 5.375 to 6.625 5,759,573
2,200 M-S-R Public Power
Agency San Juan Project
Revenue Bonds Series E
(MBIA Insured)......... 07/01/17 6.500 2,322,584
</TABLE>
19
<PAGE>
PaineWebber California Tax-Free Income Fund
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- -------------------- -------------- ------------
<C> <S> <C> <C> <C>
Municipal Bonds and Notes
(continued)
California (concluded)
$ 6,470 Menlo Park Community
Development Agency Tax
Allocation Las Pulgas
Community Development
Project (AMBAC
Insured)............... 06/01/16 5.375% $ 6,423,545
1,930 Modesto Irrigation
District Certificates
of Participation
Capital Improvements
Series B............... 07/01/22 5.300 1,803,932
1,705 Modesto Public Financing
Authority John Thurman
Field Renovation
Project................ 11/01/16 6.125 1,693,201
2,625 Mojave Water Agency
Improvement District
Morongo Basin (FGIC
Insured)............... 09/01/15 5.750 2,689,811
1,605 Moulton Niguel Water
District (MBIA
Insured)............... 09/01/19 5.000 1,491,831
1,000 Natomas Unified School
District (MBIA
Insured)............... 09/01/21 5.950 1,054,390
1,000 Oakland General
Obligation Bonds Series
C (MBIA Insured)....... 12/15/22 5.900 1,017,780
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 2,125,946
5,000 Orange County Recovery
Certificates of
Participation Series A
(MBIA Insured)......... 07/01/26 6.000 5,126,900
1,800 Poway Community
Facilities District
Special Tax Number 88-1
Parkway Business
Center................. 08/15/06 to 08/15/15 5.400 to 6.750 1,847,712
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 4,180,885
1,180 Rohnert Park Community
Development Agency Tax
Allocation (AMBAC
Insured)............... 08/01/20 6.500 1,226,008
5,500+ Sacramento Power
Authority Cogeneration
Project Revenue Bonds.. 07/01/15 5.875 5,516,390
2,200 Salinas Capital
Improvement Projects
Certificates of
Participation Series A. 10/01/28 5.700 2,109,580
1,300 San Diego County
Certificates of
Participation Burnham
Institute.............. 09/01/29 6.250 1,293,019
1,300 San Diego Industrial
Development Revenue
Bonds San Diego Gas &
Electric Series A...... 09/01/18 6.400 1,340,300
6,000 San Diego Industrial
Development Revenue
Bonds San Diego Gas &
Electric Series A (MBIA
Insured)............... 09/01/18 6.100 6,261,900
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 3,108,000
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 3,896,161
2,650 San Jose Santa Clara
Water Financing
Authority Sewer Revenue
Bonds Series A (FGIC
Insured)............... 11/15/15 5.375 2,652,385
4,250 San Jose Unified School
District Santa Clara
County Series B (FGIC
Insured)............... 08/01/17 5.200# 1,504,713
960 San Ysidro School
District (AMBAC
Insured)............... 08/01/21 6.125 1,023,878
5,485 Santa Ana Financing
Authority Revenue Bonds
South Harbor Boulevard
Series B (MBIA
Insured)(1)............ 09/01/19 5.125 5,180,199
2,000 Santa Margarita/Dana
Point Authority Revenue
Bonds Series A (AMBAC
Insured)............... 08/01/18 5.125 1,903,380
2,000 Southern California
Public Power Authority
Transmission Project
Revenue Bonds.......... 07/01/20 5.500 1,951,420
5,740 Torrance Redevelopment
Agency Tax Allocation
Senior Lien Series C
(MBIA Insured)(1)...... 09/01/18 5.450 5,695,745
------------
141,554,958
------------
Florida -- 1.40%
2,000 Florida State Board of
Education Capital
Outlay Revenue Bonds
Series D(1)............ 06/01/22 5.750 1,976,020
------------
</TABLE>
20
<PAGE>
PaineWebber California Tax-Free Income Fund
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- -------------------- -------------- ------------
<C> <S> <C> <C> <C>
Municipal Bonds and Notes
(concluded)
U. S. Virgin Islands -- 1.35%
$ 2,050 Virgin Islands Water &
Power Authority........ 07/01/13 to 07/01/18 5.125 to 5.500% $ 1,915,367
------------
Total Investments (cost --
$148,787,445) -- 102.84%......... 145,446,345
Liabilities in excess of other
assets -- (2.84)%................. (4,018,120)
------------
Net Assets -- 100.00%.............. $141,428,225
============
</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, 1999.
+ Entire principal amount pledged as collateral for futures transactions.
++ Illiquid security representing 1.4% 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
--------- ----------------------------- ------------ ------------ ------------
<C> <S> <C> <C> <C>
5 Municipal Bond Futures....... $568,906 September 99 $(4,531)
=======
</TABLE>
See accompanying notes to financial statements
21
<PAGE>
PaineWebber National Tax-Free Income Fund
Portfolio of Investments August 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- -------------------- -------------- ------------
<C> <S> <C> <C> <C>
Municipal Bonds and Notes --
104.95%
Alabama -- 1.76%
$ 4,090 Birmingham Alabama
Series B............... 06/01/24 5.250% $ 3,790,939
1,000 Courtland Industrial
Development Board
Industrial Development
Revenue Champion
International.......... 12/01/13 7.200 1,072,930
------------
4,863,869
------------
Alaska -- 0.49%
1,460 Alaska Industrial
Development & Export
Authority Power Revenue
Upper Lynn Canal
Regional Power......... 01/01/12 5.700 1,366,034
------------
Arizona -- 2.67%
700 Maricopa County
Pollution Control
Revenue Public Service
Company Series B....... 09/01/99 3.150* 700,000
3,700 Phoenix General
Obligation............. 07/01/16 6.250 4,044,544
2,500 Tucson Arizona Airport
Authority Lockheed
Aermod Center
Incorporated........... 09/01/19 8.700 2,641,075
------------
7,385,619
------------
Arkansas -- 0.69%
2,000 Little Rock Arkansas
Capital Improvement
Revenue Parks &
Recreation Projects
Series A............... 01/01/18 5.700 1,916,500
------------
California -- 3.99%
160 California State (FGIC
Insured)............... 11/01/12 7.000 178,662
2,370 Escondido California
Union High School
District Capital
Appreciation Refunding
(MBIA Insured)......... 11/01/12 4.730# 1,179,597
2,665 Escondido California
Union High School
District Capital
Appreciation Refunding
(MBIA Insured)......... 11/01/13 4.780# 1,242,423
1,920 Long Beach Aquarium of
The Pacific California
Revenue................ 07/01/23 6.125 1,921,229
4,500 Sacramento Power
Authority Cogeneration
Project Revenue........ 07/01/15 5.875 4,513,410
2,000 San Diego County
California Certificates
Participation Burnham
Institute.............. 09/01/29 6.250 1,989,260
------------
11,024,581
------------
Colorado -- 0.95%
1,650 Black Hawk Colorado
Device Tax Revenue..... 12/01/12 to 12/01/21 5.500 to 5.625 1,530,667
1,035 Colorado Housing Finance
Authority.............. 08/01/23 7.200 1,098,011
------------
2,628,678
------------
Connecticut -- 0.53%
1,500 Mashantucket Western
Pequot Tribe
Connecticut Special
Revenue................ 09/01/12 5.700 1,453,215
------------
</TABLE>
22
<PAGE>
PaineWebber National Tax-Free Income Fund
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- -------------------- -------------- ------------
<C> <S> <C> <C> <C>
Municipal Bonds and Notes
(continued)
Florida -- 3.75%
$ 5,000 Florida State Board
Education Capital
Outlay Refunding Public
Education Series D..... 06/01/22 5.750% $ 4,940,050
2,000 Hillsborough County
Florida Industrial
Development Authority
Pollution Control
Revenue................ 05/01/22 8.000 2,212,680
3,000 Plant City Utility
Systems Revenue (MBIA
Insured)............... 10/01/15 6.000 3,208,410
------------
10,361,140
------------
Georgia -- 6.74%
1,000 Burke County Georgia
Development Authority
Pollution Control
Revenue Adjustment
Adjusted Georgia Power
Company Plant Vogtle
3Rd Georgia Power
Company Plant Vogtle-
3Th Mdy Light Rtg A1
S&P Light Rtg A........ 09/01/99 2.950* 1,000,000
3,000 Georgia Municipal
Electric Authority
Power Revenue.......... 01/01/12 6.250 3,204,840
5,000 Conyers Water and Sewage
Revenue (AMBAC
Insured)............... 07/01/15 6.600 5,470,050
8,000 Hall County School
District (Pre-refunded
with U.S. Government
Securities to 12/01/04
@ 102) (AMBAC Insured). 12/01/14 6.700 8,952,800
------------
18,627,690
------------
Hawaii -- 0.37%
1,000 Hawaii State Department
Budget and Finance
Special Purpose Revenue
(MBIA Insured)......... 05/01/26 6.200 1,020,040
------------
Idaho -- 0.39%
1,025 Idaho Housing Agency
(FHA Insured).......... 07/01/24 7.500 1,071,873
------------
Illinois -- 13.55%
2,500 Chicago Series A2 (AMBAC
Insured)............... 01/01/15 6.250 2,705,825
14,500 Illinois Board of
Education Chicago
School Reform (AMBAC
Insured)............... 12/01/17 to 12/01/30 5.250 to 5.800 13,770,185
4,335 Illinois Development
Finance Authority
Citizens Utilities..... 08/01/20 7.150 4,466,394
3,625 Illinois Development
Finance Authority
Revenue Refunding
Community
Rehabilitation
Providers A............ 07/01/09 to 07/01/15 5.900 to 6.000 3,573,228
1,000 Illinois Educational
Facilities Authority
Revenue Augustana
College Refunding...... 10/01/13 5.000 917,360
1,700 Illinois Health
Facilities Authority
Revenue (Central Dupage
Healthcorp)............ 09/01/99 3.000* 1,700,000
660 Illinois Health
Facilities Authority
Revenue Evangelical
Hospital............... 04/15/17 6.750 730,607
500 Joliet Regional Port
District Industrial
Building Revenue
(Terminal Facility Dow
Chemical).............. 09/01/99 3.300* 500,000
2,000 Metropolitan Pier &
Exposition Authority
(Illinois) McCormick
Place Convention
Complex................ 07/01/26 7.000 2,247,480
1,170 Northern Illinois
University (Pre-
refunded with U.S.
Government Securities
to 10/01/09 @ 100)..... 04/01/13 10.400 1,609,358
4,620 Regional Transportation
Authority (Pre-refunded
with U.S. Government
Securities to 06/01/04
@ 102) (FGIC Insured).. 06/01/14 7.100 5,203,368
------------
37,423,805
------------
</TABLE>
23
<PAGE>
PaineWebber National Tax-Free Income Fund
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- -------------- ----------- ------------
<C> <S> <C> <C> <C>
Municipal Bonds and Notes (continued)
Indiana -- 4.21%
$ 2,550 East Chicago Indiana Multi
School Building
Corporation (AMBAC
Insured)................. 07/15/14 5.500% $ 2,501,627
3,000 Indiana Health Facility
Finance Authority
Methodist Hospital of
Indiana.................. 09/01/15 5.750 3,073,170
6,000 Indianapolis Indiana
Airport Authority Revenue
Special Facility United
Air Lines Project Series
A........................ 11/15/31 6.500 6,065,700
------------
11,640,497
------------
Kansas -- 1.81%
5,000 Kansas State Department
Transportation Highway
Revenue.................. 03/01/13 5.375 5,012,950
------------
Massachusetts -- 5.48%
11,405 Massachusetts Bay
Transportation Authority
Massachusetts General
Transportation Systems
Series D................. 03/01/27 5.000 10,058,982
5,680 Massachusetts State
Turnpike Authority
Metropolitan Highway
Systems Revenue (MBIA
Insured)................. 01/01/27 5.000 5,074,512
------------
15,133,494
------------
Michigan -- 0.73%
1,915 Royal Oak Hospital Finance
Authority William
Beaumont Hospital........ 01/01/19 6.625 2,013,661
------------
Mississippi -- 1.22%
3,600 Mississippi Business
Finance Corporation
Mississippi Pollution
Control Revenue Refunding
Systems Energy Resources
Incorporated Project
Utah..................... 05/01/22 5.900 3,373,596
------------
New Hampshire -- 0.67%
1,275 New Hampshire Higher
Educational & Health
Facilities Authority
Revenue New Hampshire
College.................. 01/01/07 5.950 1,311,236
500 New Hampshire Industrial
Development Authority
Central Maine Power
Company.................. 05/01/14 7.375 532,295
------------
1,843,531
------------
New Jersey -- 7.87%
3,800 New Jersey Economic
Development Authority
(Dow Chemical)........... 09/01/99 3.000* 3,800,000
2,500 New Jersey Economic
Development Authority
Economic Development
Revenue.................. 04/01/18 6.375 2,523,750
1,890 New Jersey Housing General
Resolution Series A...... 11/01/04 6.700 1,979,435
12,000 New Jersey State Turnpike
Authority (MBIA
Insured)+................ 01/01/16 6.500 13,424,400
------------
21,727,585
------------
New York -- 12.70%
4,350 Long Island Power
Authority New York
Electric Systems Revenue
General Series A......... 12/01/29 5.500 4,134,806
3,000 New York City Industrial
Development Bonds
Brooklyn Navy Yard....... 10/01/36 5.750 2,835,750
1,150 New York City Municipal
Water Finance Authority.. 09/01/99 3.200* 1,150,000
3,285 New York City Municipal
Water Finance Authority
Water & Sewer Systems
Revenue.................. 06/15/12 7.100 3,484,301
4,500 New York City Series D.... 08/01/17 5.375 4,322,295
430 New York State Energy
Research & Development
Unrefunded Balance Series
B........................ 02/01/22 7.150 455,228
2,055 New York State Energy
Research & Development
Authority Electric
Facilities Revenue Series
A........................ 06/01/20 7.150 2,175,567
</TABLE>
24
<PAGE>
PaineWebber National Tax-Free Income Fund
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- -------------- ----------- ------------
<C> <S> <C> <C> <C>
Municipal Bonds and Notes (continued)
New York (concluded)
$ 365 New York State Energy
Research & Development
Authority Electric
Facilities Revenue Series
B........................ 09/01/19 7.150% $ 386,414
2,400 New York State
Environmental Facilities
Corporation State Water
Pollution Control........ 06/15/14 6.875 2,625,240
3,825 New York State Local
Government Assistance
Corporation.............. 04/01/14 6.000 4,058,363
3,100 Triborough Bridge & Tunnel
Authority................ 01/01/10 7.100 3,261,758
1,000 Port Authority of New York
& New Jersey............. 09/01/99 3.000* 1,000,000
1,000 Port Authority of New York
& New Jersey Kennedy
International Airport
Cogeneration Project 4th
Installment Project...... 10/01/11 6.750 1,078,540
1,675 New York City Municipal
Water Finance Authority
Water & Sewer Systems
Revenue Series A......... 06/15/12 7.100 1,765,215
2,550 Triborough Bridge & Tunnel
Authority New York
Revenues General Purpose. 01/01/27 5.200 2,354,390
------------
35,087,867
------------
North Carolina -- 0.37%
1,000 North Carolina Housing
Finance Agency........... 03/01/18 6.200 1,023,180
------------
North Dakota -- 0.13%
340 North Dakota State Housing
Finance Agency Revenue... 07/01/16 6.300 351,825
------------
Ohio -- 5.50%
1,145 Butler County
Transportation
Improvement District (FSA
Insured)................. 04/01/11 6.000 1,212,086
6,000 Cleveland Airport Special
Revenue Refunding
Continental Airlines
Incorporated............. 12/01/08 5.500 5,840,580
2,250 Cleveland Public Power
Systems Revenue.......... 11/15/17 7.000 2,399,737
6,000 Ohio State Water
Development Authority
Solid Waste Disposal
Revenue Bay Shore Power
Project.................. 09/01/20 5.875 5,732,100
------------
15,184,503
------------
Pennsylvania -- 2.65%
3,365 Beaver County Pennsylvania
Pollution Control
Revenue.................. 06/01/21 7.000 3,559,901
1,245 Philadelphia Pennsylvania
Authority Industrial
Development 1st Mortgage
Crime Prevention
Association.............. 04/01/09 6.000 1,219,664
2,500 Philadelphia Water &
Wastewater Revenue....... 12/15/06 5.000 2,536,400
------------
7,315,965
------------
Puerto Rico -- 0.56%
1,500 Puerto Rico Commonwealth
(MBIA Insured)........... 07/01/15 5.650 1,549,155
------------
South Carolina -- 2.98%
1,000 Charleston Waterworks &
Sewer Revenue (AMBAC
Insured)................. 01/01/16 6.000 1,035,690
7,600 Piedmont Municipal Power
Agency (MBIA Insured).... 01/01/23 4.000 5,657,592
1,500 South Carolina State
Housing Finance
Development Single Family
Mortgage Purchase........ 07/01/18 5.500 1,540,770
------------
8,234,052
------------
Texas -- 15.82%
4,850 Alliance Airport Authority
Incorporated Texas
Special Facilities
Revenue America Airlines
Incorporated Project..... 12/01/29 7.500 5,078,241
5,000 Dallas County Texas
Utility And Reclamation
District Series B........ 02/15/29 5.875 4,991,200
</TABLE>
25
<PAGE>
PaineWebber National Tax-Free Income Fund
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- -------------------- --------------- ------------
<C> <S> <C> <C> <C>
Municipal Bonds and Notes
(concluded)
Texas -- (concluded)
$6,332 Harris County Lease(1).. 05/15/02 to 05/01/14 5.400 to 5.900% $ 6,421,372
7,792 Harris County Texas
Lease Mulworth
Project(1)............. 05/01/20 5.625 7,463,921
710 Harris County Toll Road
Authority (AMBAC
Insured)............... 08/15/17 6.500 757,854
1,315 Hereford Texas
Independent School
District Public
Facility Corporation
School Facility Lease
Revenue................ 08/15/13 5.125 1,239,230
1,500 Port Arthur Texas
Navigation District
(AMBAC Insured)........ 03/01/12 5.125# 758,505
1,295 San Antonio Texas
Certificate of
Obligation Series A.... 02/01/15 5.250 1,260,268
1,425 San Antonio Texas
General Obligation
Series A............... 02/01/15 5.250 1,386,781
355 Texas State Prerefunded
Water Development
Board.................. 08/01/18 5.750 375,356
2,345 Texas State Public
Property Finance
Corporation Revenue
Mental Health.......... 09/01/03 5.400 2,342,491
8,000 Texas State Turnpike
Authority North Thruway
Revenue President
George Bush Turnpike
(FGIC Insured)......... 01/01/25 5.000 7,204,080
1,085 Texas State Water
Development Board...... 08/01/18 5.750 1,090,870
3,510 Texas State Water
Financial Assistance... 08/01/35 5.500 3,341,414
------------
43,711,583
------------
Utah -- 0.15%
390 Utah State Housing
Finance Agency (FHA
Insured)............... 01/01/11 6.450 403,751
------------
Virginia -- 2.31%
500 Peninsula Ports
Authority Virginia
Hospital Facility
Revenue (FHA Insured).. 08/01/23 8.700 551,500
4,800 Pittsylvania County
Virginia Industrial
Development Authority
Revenue................ 01/01/10 7.650 5,187,168
600 Hampton Roads Medical
College................ 11/15/16 6.875 631,086
------------
6,369,754
------------
Wyoming -- 3.40%
9,000 Sweetwater County Solid
Waste Disposal Revenue
FMC Corporation
Project................ 06/01/24 7.000 9,388,530
------------
U. S. Virgin Islands -- 0.51%
1,525 Virgin Islands Water &
Power Authority Water
Systems Revenue........ 07/01/12 to 07/01/17 5.250 to 5.500 1,405,894
------------
Total Investments (cost --
$291,309,515) -- 104.95%......... 289,914,417
Liabilities in excess of other
assets -- (4.95)%................. (13,662,884)
------------
Net Assets -- 100.00%.............. $276,251,533
============
</TABLE>
- ---------
# Annualized yield at date of purchase
* Variable rate demand notes and variable rate certificates 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, 1999.
+ Security was pledged as collateral for future transactions.
(1) Illiquid securities representing 5.03% of net assets.
AMBAC American Municipal Bond Assurance Corporation
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Authority
FSA Financial Security Assurance
GNMA Government National Mortgage Association
MBIA Municipal Bond Investors Assurance
Futures Contracts
<TABLE>
<CAPTION>
Number of In Expiration Unrealized
Contracts Contracts to Sell Exchange For Date Appreciation
--------- ---------------------------- ------------ ------------ ------------
<C> <S> <C> <C> <C>
96 Municipal Bond Futures...... $11,215,813 September 99 $188,812
========
</TABLE>
See accompanying notes to financial statements
26
<PAGE>
PaineWebber Municipal High Income Fund
Portfolio of Investments August 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- -------- -------- ------------
<C> <S> <C> <C> <C>
Municipal Bonds and Notes -- 100.26%
Alabama -- 1.93%
$2,000 Courtland Alabama Industrial
Development Board Solid Waste
Disposal Revenue
Refunding Champion International
Corporation Project................. 08/01/29 6.000% $ 1,916,940
200 Stevenson Alabama Industrial
Development Board Environmental
Improvement
Revenue Mead Corporation Project
Series B............................ 09/01/99 3.300* 200,000
------------
2,116,940
------------
Alaska -- 1.19%
1,445 Alaska Industrial Development &
Export Authority Power Revenue
Upper Lynn Canal Regional Power..... 01/01/32 5.875 1,306,453
------------
Arizona -- 1.09%
1,200 Maricopa County Pollution Control
Revenue Public Service Company
Series D............................ 09/01/99 3.150* 1,200,000
------------
Arkansas -- 1.31%
1,500 Little Rock Arkansas Capital
Improvement Revenue Parks &
Recreation Projects Series A........ 01/01/18 5.700 1,437,375
------------
California -- 8.25%
350 Duarte California Redevelopment
Agency Tax Allocation Refunding
Davis Addition Project.............. 09/01/14 6.700 360,664
3,000 Lake Elsinore California Public
Financing Authority Local Agency
Revenue............................. 09/01/20 7.100 3,121,500
1,000 Lake Elsinore California Recreation
Authority Revenue Public Facilities
Project Series A.................... 02/01/17 7.100 1,021,340
1,000 Long Beach Aquarium of the Pacific
California Revenue.................. 07/01/15 6.125 1,008,240
800 Poway Community Facilities District
Parkway Business Center............. 08/15/15 6.750 843,696
2,700 San Diego County California
Certificates Participation Burnham
Institute........................... 09/01/29 6.250 2,685,501
------------
9,040,941
------------
Colorado -- 3.63%
1,500 Black Hawk Colorado Device Tax
Revenue............................. 12/01/21 5.625 1,370,355
2,500 Hyland Hills Metropolitan Park and
Recreation District................. 12/15/15 6.750 2,607,300
------------
3,977,655
------------
Georgia -- 1.31%
400 Burke County Georgia Development
Authority Pollution Control Revenue
Power Company Plant................. 09/01/99 2.950* 400,000
1,000 Development Authority of Effingham
County Fort Howard Paper
(assumed by Fort James Corporation). 10/01/05 7.900 1,030,720
------------
1,430,720
------------
</TABLE>
27
<PAGE>
PaineWebber Municipal High Income Fund
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- -------- -------- ------------
<C> <S> <C> <C> <C>
Municipal Bonds and Notes (continued)
Illinois -- 5.33%
$1,100 Chicago Illinois O'Hare
International Airport Special
Facility Revenue
United Air Lines Project Series A.. 09/01/16 5.350% $ 1,008,546
750 Illinois Educational Facilities
Authority Revenue Augustana
College............................ 10/01/18 5.250 673,200
750 Illinois Educational Facilities
Authority Revenue Columbia College. 12/01/17 6.875 792,540
3,000 Metropolitan Pier & Exposition
Authority (Illinois) McCormick
Place
Convention Complex................. 07/01/26 7.000 3,371,220
------------
5,845,506
------------
Indiana -- 12.19%
1,300 Crawfordsville Economic Development
Authority Kroger Co. .............. 11/01/12 7.700 1,404,065
4,000 Indiana State Development Finance
Authority Inland Steel Corporation. 11/01/11 7.250 4,053,800
2,500 Indianapolis Airport Authority
Federal Express.................... 01/15/17 7.100 2,698,175
3,000 Indianapolis Indiana Airport
Authority Revenue Special
Facilities
United Air Lines Project Series A.. 11/15/31 6.500 3,032,850
2,000 Wabash Solid Waste Disposal
Jefferson Smurfit Corporation
Project............................ 06/01/26 7.500 2,172,700
------------
13,361,590
------------
Kansas -- 0.20%
250 Shawnee County Kansas Certificates
Participation Community
Mental Health Center Incorporated.. 07/01/19 5.350 221,643
------------
Kentucky -- 3.79%
2,200 Ashland Sewage and Solid Waste
Ashland Incorporated Project....... 02/01/22 7.125 2,332,088
1,250 Kenton County Airport Board Delta
Airlines........................... 02/01/21 7.125 1,319,700
440 Russell Health Financing Authority
Franciscan Sisters of the Poor
Health System...................... 07/01/15 8.100 506,779
------------
4,158,567
------------
Louisiana -- 3.17%
300 Ascension Parish Pollution Control
Revenue Shell Oil Company Project.. 09/01/99 3.000* 300,000
1,000 Pointe Coupee Parish Gulf States
Utilities.......................... 03/01/13 6.700 1,034,890
2,000 West Feliciana Parish Gulf States
Utilities.......................... 12/01/14 7.700 2,139,480
------------
3,474,370
------------
Mississippi -- 2.12%
2,400 Jones County Mississippi Solid Waste
Disposal Revenue
International Paper Company
Project............................ 10/01/21 5.800 2,320,200
------------
New Hampshire -- 4.45%
1,690 New Hampshire Higher Educational &
Health Facilities Authority Revenue
New Hampshire College.............. 01/01/16 6.300 1,683,003
3,000 New Hampshire Industrial Development
Authority Central Maine Power
Company............................ 05/01/14 7.375 3,193,770
------------
4,876,773
------------
</TABLE>
28
<PAGE>
PaineWebber Municipal High Income Fund
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- -------- -------- ------------
<C> <S> <C> <C> <C>
Municipal Bonds and Notes (continued)
New Jersey -- 6.54%
$5,000 New Jersey Economic Development
Authority Kapkowski Road Landfill.. 04/01/18 6.500% $ 5,049,150
2,000 New Jersey Economic Development
Authority Vineland Cogeneration
L.P. Project....................... 06/01/19 7.875 2,112,620
------------
7,161,770
------------
New York -- 7.71%
2,000 New York City Industrial Development
Agency Laguardia Associates L.P.
Project............................ 11/01/28 6.000 1,905,060
1,000 New York City Industrial Development
Agency Special Facilities Revenue
American Airlines Incorporated
Project............................ 08/01/24 6.900 1,048,830
100 New York City Municipal Water
Finance Authority Water & Sewer
Systems
Revenue Series C................... 09/01/99 3.200* 100,000
100 New York City Subseries A8.......... 09/01/99 3.200* 100,000
700 New York City Subseries E5.......... 09/01/99 3.000* 700,000
3,500 Port Authority New York & New Jersey
Kennedy International Airport
Cogeneration Project 4th
Installment Project................ 10/01/11 6.750 3,774,890
100 Port Authority New York & New Jersey
Special Obligation Revenue
Versatile Structure Series 2....... 09/01/99 3.000* 100,000
750 Suffolk County New York Industrial
Development Agency
Nissequogue Cogen Partners
Facility........................... 01/01/13 5.300 714,780
------------
8,443,560
------------
Ohio -- 6.27%
3,000 Dayton Emery Air Freight............ 10/01/09 6.200 3,049,920
4,000 Ohio State Water Development
Authority Bay Shore Power Project.. 09/01/20 5.875 3,821,400
------------
6,871,320
------------
Pennsylvania -- 3.67%
1,500 Beaver County Industrial Development
Authority Toledo Edison............ 05/01/20 7.750 1,653,645
1,000 Northeastern Pennsylvania Hospital
and Education Authority College
Revenue............................ 07/15/18 6.000 1,001,870
1,430 Philadelphia Pennsylvania Authority
Industrial Development Revenue
First Mortgage Crime Prevention
Association........................ 04/01/19 6.125 1,370,212
------------
4,025,727
------------
Texas -- 8.22%
212 Department of Transport Project
State of Texas Municipal Bond(1)... 09/15/12 7.000 216,369
1,875 El Paso International Airport
Marriott Hotel..................... 03/01/22 7.875 1,963,500
1,986 Harris County Texas Lease
Agreement(1)....................... 05/01/14 5.800 2,020,195
3,000 Harris County Texas Lease Mulworth
Project(1)......................... 05/01/20 5.625 2,873,760
2,000 Houston Texas Airport Systems
Revenue Special Facilities
Continental Airlines............... 07/15/17 6.125 1,928,360
------------
9,002,184
------------
Utah -- 2.38%
2,500 Tooele County Utah Hazardous Waste
Disposal Revenue................... 08/01/10 6.750 2,607,825
------------
</TABLE>
29
<PAGE>
PaineWebber Municipal High Income Fund
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- -------- -------- ------------
<C> <S> <C> <C> <C>
Municipal Bonds and Notes (concluded)
Virginia -- 6.95%
$3,360 Alexandria Virginia Redevelopment
and Housing Authority Multi Family
Housing Revenue Mortgage
Buckingham Village Apartments..... 01/01/29 5.500% $ 3,137,904
1,175 Loudoun County Industrial
Development Authority Dulles
Airport Marriott Hotel............ 09/01/15 7.125 1,252,127
500 Peninsula Ports Authority Virginia
Hospital Facility Revenue (FHA
Insured).......................... 08/01/23 8.700 551,500
2,500 Pittsylvania County Virginia
Industrial Development Authority
Revenue........................... 01/01/14 7.500 2,670,775
------------
7,612,306
------------
Washington -- 1.37%
1,500 Pilchuck Development Public
Corporation Revenue Special
Facilities Airport Revenue........ 08/01/23 6.000 1,495,935
------------
West Virginia -- 1.90%
1,900 Harrison County Commercial
Development Bonds Kroger Company.. 11/01/14 8.100 2,082,267
------------
Wisconsin -- 4.45%
1,000 Green Bay Wisconsin Redevelopment
Authority Industrial Development
Revenue Fort James Project........ 05/01/19 5.600 931,720
3,900 Janesville Industrial Development
Revenue Bonds Simmons
Manufacturing
Company Paramount Communications.. 10/15/17 7.000 3,942,042
------------
4,873,762
------------
U. S. Virgin Islands -- 0.84%
1,000 Virgin Islands Water and Power
Authority Water Systems Revenue
Refunding......................... 07/01/17 5.500 918,940
------------
Total Investments (cost -- $110,364,733) --
100.26%..................................... 109,864,329
Liabilities in excess of other assets --
(0.26)%..................................... (289,665)
------------
Net Assets -- 100.00%......................... $109,574,664
============
</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, 1999.
(1) Illiquid securities representing 4.7% of net assets.
FHA Federal Housing Authority
See accompanying notes to financial statements
30
<PAGE>
PaineWebber New York Tax-Free Income Fund
Portfolio of Investments August 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- ---------------- ------------- -----------
<C> <S> <C> <C> <C>
Municipal Bonds and Notes --
100.03%
New York -- 89.80%
$1,000 Erie County Water
Revenue Authority
(AMBAC Insured)........ 12/01/14 6.750% $ 1,121,280
1,000 Huntington New York
Refunding.............. 04/01/13 5.500 1,009,510
1,600 Long Island Power
Authority New York
Electric Systems
Revenue General
Series A............... 12/01/26 5.250 1,475,968
1,000 Metropolitan
Transportation
Authority New York
Commuter Facilities
Revenue Series A....... 07/01/28 5.250 933,910
1,000 New York City Industrial
Development Bonds
Brooklyn Navy Yards#... 10/01/36 5.750 945,250
1,900 New York City Industrial
Development Bonds Japan
Airlines Company#...... 11/01/15 6.000 1,955,119
360 New York City Municipal
Water Finance Authority
Water & Sewer Systems
Revenue Prerefunded
Series A............... 06/15/12 7.100 381,841
185 New York City Municipal
Water Finance Authority
Water & Sewer Systems
Revenue................ 06/15/12 7.100 194,964
1,500 New York City Municipal
Water Finance Authority
Water & Sewer Systems
Revenue (MBIA Insured). 06/15/27 5.500 1,462,350
1,500 New York City Series D.. 08/01/17 5.375 1,440,765
2,100 New York City Series J
(FGIC Insured)......... 02/15/26 5.500 2,048,508
500 New York City Industrial
Development Agency
Special Facility
Revenue#............... 07/01/19 5.400 461,625
1,000 New York State (AMBAC
Insured)............... 06/15/10 6.000 1,055,120
1,000 New York State Dormitory
Authority Revenue Bonds
City University of New
York+.................. 07/01/16 5.625 1,003,700
40 New York State Dormitory
Authority Revenue Bonds
Fordham University
(AMBAC Insured)........ 07/01/15 7.200 41,765
700 New York State Dormitory
Authority Revenue Bonds
State University of New
York................... 05/15/16 7.000 727,188
1,000 New York State Dormitory
Authority Revenues City
University of New York. 07/01/28 5.000 882,180
1,500 New York State Dormitory
Authority Revenues
Mental Health Services
Facilities Improvement
G...................... 08/15/13 5.250 1,470,900
800 New York State Energy
Research & Development
Central Hudson Gas &
Electric (FGIC
Insured)............... 10/01/14 7.375 826,408
2,400 New York State Energy
Research & Development
Consolidated Edison
Company................ 08/15/20 6.100 2,453,664
80 New York State Energy
Research & Development
Long Island Lighting#.. 02/01/22 7.150 84,694
250 New York State Energy
Research & Development
Niagara Mohawk (FGIC
Insured)............... 10/01/13 6.625 264,545
180 New York State Energy
Research and
Development Authority
Electric Facility
Revenue, Series A#..... 12/01/20 7.150 190,561
1,500 New York State
Environmental
Facilities Corp. Spring
Valley Water (AMBAC
Insured)............... 08/01/24 6.150 1,546,080
70 New York State
Environmental
Facilities Corp. State
Water Pollution
Control................ 06/15/10 7.250 74,747
10 New York State Housing
Finance Agency......... 09/15/12 7.300 10,695
2,250 New York State Local
Government Assistance
Corp. Refunding Series
B...................... 04/01/20 4.875 2,011,612
1,500 New York State Medical
Care Facilities
Hospital and Nursing
(Huntington Hospital).. 11/01/14 6.500 1,566,960
1,000 New York State Series A. 03/15/11 5.700 1,029,320
1,000 New York State Thruway
Authority Highway &
Bridge Trust Fund
Series C............... 04/01/18 5.000 909,690
1,025 Niagara Falls (FGIC
Insured)............... 06/15/08 5.500 1,057,677
60 Oneida Herkimer New York
Solid Waste............ 04/01/14 6.750 62,566
1,000 Port Authority of New
York & New Jersey
Kennedy International
Airport Cogeneration
Project................ 10/01/11 6.750 1,078,540
750 Suffolk County New York
Industrial Development
Agency Industrial
Development Revenue
Nisseque Cogeneration
Partners Facility#..... 01/01/13 5.300 714,780
</TABLE>
31
<PAGE>
PaineWebber New York Tax-Free Income Fund
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
--------- -------------------- --------------- ------------
<C> <S> <C> <C> <C>
Municipal Bonds and Notes
(concluded)
New York (concluded)
$1,500 Triborough Bridge &
Tunnel Authority....... 01/01/12 to 01/01/17 5.500 to 6.000% $ 1,571,060
300 New York City........... 09/01/99 3.100 to 3.200* 300,000
100 New York State Dormitory
Authority Cornell
University Series B.... 09/01/99 3.150* 100,000
285 New York State Dormitory
Authority Revenues
Metropolitan Museum of
Art Series A........... 09/01/99 3.100* 285,000
1,100 Port Authority of New
York & New Jersey...... 09/01/99 3.000* 1,100,000
-----------
35,850,542
-----------
Florida -- 1.24%
500 Florida State Board of
Education Capital
Outlay Refunding Series
D...................... 06/01/22 5.750 494,005
-----------
Puerto Rico -- 8.53%
2,700 Puerto Rico Commonwealth
Highway &
Transportation
Authority.............. 07/01/13 to 07/01/36 5.000 to 6.250 2,595,058
785 Puerto Rico Industrial
Medical & Environmental
Authority Warner
Lambert................ 05/01/14 7.600 810,717
-----------
3,405,775
-----------
U. S. Virgin Islands -- 0.46%
200 Virgin Islands Water And
Power Authority Water
Systems Revenue
Refunding.............. 07/01/17 5.500 183,788
-----------
Total Investments (cost --
$40,055,458) -- 100.03%.......... 39,934,110
Liabilities in excess of other
assets -- (0.03)%................. (10,925)
-----------
Net Assets -- 100.00%.............. $39,923,185
===========
- ---------
# Security subject to Alternative Minimum Tax
* 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, 1999.
+ Security was pledged as collateral for futures transactions
AMBAC American Municipal Bond Assurance Corporation
FGIC Federal Guaranty Insurance Corp.
MBIA Municipal Bond Investors Assurance
Futures Contracts
<CAPTION>
Number of In Expiration Unrealized
Contracts Contracts to Sell Exchange For Date Appreciation
--------- ------------------------ -------------------- --------------- ------------
<C> <S> <C> <C> <C>
4 Municipal Bond Futures.. $461,375 September 99 $4,000
======
</TABLE>
See accompanying notes to financial statements
32
<PAGE>
PaineWebber
Statements of Assets and Liabilities August 31, 1999 (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 -- $148,787,445,
$291,309,515,
$110,364,733 and
$40,055,458,
respectively).......... $145,446,345 $289,914,417 $109,864,329 $39,934,110
Cash.................... 75,593 76,845 51,695 12,326
Receivable for
investments sold....... -- -- 4,932,072 --
Interest receivable..... 2,224,424 3,853,179 1,858,095 511,903
Receivable for shares of
beneficial interest
sold................... 84,641 1,122,690 12,115 11,000
Variation margin
receivable............. 1,406 27,000 10,694 1,125
Other assets............ 28,147 105,624 99,725 41,534
------------ ------------ ------------ -----------
Total assets............ 147,860,556 295,099,755 116,828,725 40,511,998
------------ ------------ ------------ -----------
Liabilities
Payable for investments
purchased.............. 5,185,919 17,760,214 6,713,444 486,510
Payable for shares of
beneficial interest
repurchased............ 932,798 451,861 290,454 4,848
Dividends payable....... 107,291 212,121 88,036 27,888
Payable to affiliates... 81,996 207,262 100,360 26,363
Accrued expenses and
other liabilities...... 124,327 216,764 61,767 43,204
------------ ------------ ------------ -----------
Total liabilities....... 6,432,331 18,848,222 7,254,061 588,813
------------ ------------ ------------ -----------
Net Assets
Beneficial interest --
$0.001 par value
(unlimited number
authorized)............ 143,629,563 276,356,857 109,286,935 39,775,062
Accumulated net realized
gains from investments
and futures
transactions........... 1,144,293 1,100,962 788,133 265,471
Net unrealized
depreciation of
investments and
futures................ (3,345,631) (1,206,286) (500,404) (117,348)
------------ ------------ ------------ -----------
Net assets.............. $141,428,225 $276,251,533 $109,574,664 $39,923,185
============ ============ ============ ===========
Class A:
Net assets.............. $111,002,530 $210,677,894 $ 69,047,644 $24,116,366
------------ ------------ ------------ -----------
Shares outstanding...... 10,480,685 19,001,539 6,619,765 2,320,041
------------ ------------ ------------ -----------
Net asset value and
redemption value per
share.................. $10.59 $11.09 $10.43 $10.39
====== ====== ====== ======
Maximum offering price
per share (net asset
value plus sales charge
of 4.00% of offering
price)................. $11.03 $11.55 $10.86 $10.82
====== ====== ====== ======
Class B:
Net assets.............. $ 12,213,260 $ 20,009,077 $ 17,448,634 $ 4,988,092
------------ ------------ ------------ -----------
Shares outstanding. .... 1,152,388 1,805,191 1,673,571 480,023
------------ ------------ ------------ -----------
Net asset value and
offering price per
share.................. $10.60 $11.08 $10.43 $10.39
====== ====== ====== ======
Class C:
Net assets.............. $ 17,861,150 $ 45,011,773 $ 22,697,576 $10,810,530
------------ ------------ ------------ -----------
Shares outstanding...... 1,687,597 4,060,001 2,176,635 1,039,803
------------ ------------ ------------ -----------
Net asset value and
offering price per
share.................. $10.58 $11.09 $10.43 $10.40
====== ====== ====== ======
Class Y:
Net assets.............. $ 351,285 $ 552,789 $ 380,810 $ 8,197
------------ ------------ ------------ -----------
Shares outstanding...... 33,184 49,844 36,500 789
------------ ------------ ------------ -----------
Net asset value,
offering price and
redemption value per
share.................. $10.59 $11.09 $10.43 $10.39
====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements
33
<PAGE>
PaineWebber
Statements of Operations
<TABLE>
<CAPTION>
For the Six Months Ended August 31, 1999 (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.................. $ 4,046,521 $ 8,158,203 $ 3,407,607 $ 1,145,499
------------ ------------- ------------ ------------
Expenses:
Investment advisory and
administration........... 374,135 723,679 333,754 127,257
Service fees -- Class A... 146,912 275,237 85,355 31,908
Service and distribution
fees -- Class B.......... 65,123 108,067 90,023 27,568
Service and distribution
fees -- Class C.......... 70,604 177,066 92,077 42,605
Custody and accounting.... 38,764 55,650 23,813 11,664
Legal and audit........... 33,164 28,772 29,527 36,580
Transfer agency and
service fees............. 24,964 42,521 16,021 9,681
Reports and notices to
shareholders............. 23,683 30,193 17,135 12,201
State registration........ 20,838 21,456 19,263 24,030
Trustees' fees............ 5,250 5,250 5,250 5,250
Other expenses............ 11,056 1,040 286 1,566
------------ ------------- ------------ ------------
814,493 1,468,931 712,504 330,310
Less: Fee waivers from
adviser.................. (149,648) -- -- (64,202)
------------ ------------- ------------ ------------
Net expenses.............. 664,845 1,468,931 712,504 266,108
------------ ------------- ------------ ------------
Net investment income..... 3,381,676 6,689,272 2,695,103 879,391
------------ ------------- ------------ ------------
Realized and unrealized
gains (losses) from
investment activities:
Net realized gains
(losses) from:
Investment transactions.. 338,381 (158,235) 415,339 101,112
Futures transactions..... 51,240 191,558 (166,828) 3,257
Net change in unrealized
appreciation/depreciation
of:
Investments.............. (8,369,822) (16,272,879) (4,890,008) (2,587,357)
Futures.................. (14,531) 188,812 (11,156) (2,374)
------------ ------------- ------------ ------------
Net realized and
unrealized losses from
investment activities.... (7,994,732) (16,050,744) (4,652,653) (2,485,362)
------------ ------------- ------------ ------------
Net decrease in net assets
resulting from
operations............... $(4,613,056) $ (9,361,472) $(1,957,550) $(1,605,971)
============ ============= ============ ============
</TABLE>
See accompanying notes to financial statements
34
<PAGE>
PaineWebber California Tax-Free Income Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year
August 31, 1999 Ended
(unaudited) February 28, 1999
--------------- -----------------
<S> <C> <C>
From operations:
Net investment income........................ $ 3,381,676 $ 6,722,798
Net realized gains from investments and
futures transactions........................ 389,621 3,155,988
Net change in unrealized
appreciation/depreciation of investments and
futures..................................... (8,384,353) (1,817,795)
------------ ------------
Net increase (decrease) in net assets
resulting from operations................... (4,613,056) 8,060,991
------------ ------------
Dividends and distributions to shareholders
from:
Net investment income -- Class A............. (2,733,018) (5,429,352)
Net investment income -- Class B............. (252,470) (557,752)
Net investment income -- Class C............. (389,771) (724,462)
Net investment income -- Class Y............. (6,417) (11,232)
Net realized gains from investment
transactions -- Class A..................... -- (3,272,689)
Net realized gains from investment
transactions -- Class B..................... -- (400,415)
Net realized gains from investment
transactions -- Class C..................... -- (512,411)
Net realized gains from investment
transactions -- Class Y..................... -- (7,943)
------------ ------------
Total dividends and distributions to
shareholders................................ (3,381,676) (10,916,256)
------------ ------------
From beneficial interest transactions:
Net proceeds from the sale of shares......... 11,546,758 18,059,890
Cost of shares repurchased................... (15,854,556) (22,951,550)
Proceeds from dividends reinvested........... 1,714,915 5,540,671
------------ ------------
Net increase (decrease) in net assets from
beneficial interest transactions............ (2,592,883) 649,011
------------ ------------
Net decrease in net assets................... (10,587,615) (2,206,254)
Net assets:
Beginning of period.......................... 152,015,840 154,222,094
------------ ------------
End of period................................ $141,428,225 $152,015,840
============ ============
</TABLE>
See accompanying notes to financial statements
35
<PAGE>
PaineWebber National Tax-Free Income Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year
August 31, 1999 Ended
(unaudited) February 28, 1999
--------------- -----------------
<S> <C> <C>
From operations:
Net investment income........................ $ 6,689,272 $ 13,901,664
Net realized gains from investments and
futures transactions........................ 33,323 7,685,449
Net change in unrealized
appreciation/depreciation of investments and
futures..................................... (16,084,067) (6,616,634)
------------ ------------
Net increase (decrease) in net assets
resulting from operations................... (9,361,472) 14,970,479
------------ ------------
Dividends and distributions to shareholders
from:
Net investment income -- Class A............. (5,248,636) (10,791,089)
Net investment income -- Class B............. (428,021) (1,072,277)
Net investment income -- Class C............. (1,001,337) (2,024,190)
Net investment income -- Class Y............. (11,278) (14,108)
Net realized gains from investment
transactions -- Class A..................... -- (5,560,128)
Net realized gains from investment
transactions -- Class B..................... -- (614,087)
Net realized gains from investment
transactions -- Class C..................... -- (1,135,565)
Net realized gains from investment
transactions -- Class Y..................... -- (7,094)
------------ ------------
Total dividends and distributions to
shareholders................................ (6,689,272) (21,218,538)
------------ ------------
From beneficial interest transactions:
Net proceeds from the sale of shares......... 12,619,051 29,885,363
Cost of shares repurchased................... (23,933,168) (50,116,104)
Proceeds from dividends reinvested........... 4,337,573 14,014,344
------------ ------------
Net decrease in net assets from beneficial
interest transactions....................... (6,976,544) (6,216,397)
------------ ------------
Net decrease in net assets................... (23,027,288) (12,464,456)
Net assets:
Beginning of period.......................... 299,278,821 311,743,277
------------ ------------
End of period................................ $276,251,533 $299,278,821
============ ============
</TABLE>
See accompanying notes to financial statements
36
<PAGE>
PaineWebber Municipal High Income Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year
August 31, 1999 Ended
(unaudited) February 28, 1999
--------------- -----------------
<S> <C> <C>
From operations:
Net investment income........................ $ 2,695,103 $ 5,038,231
Net realized gains from investments and
futures transactions........................ 248,511 1,315,796
Net change in unrealized
appreciation/depreciation of investments and
futures..................................... (4,901,164) (2,011,365)
------------ ------------
Net increase (decrease) in net assets
resulting from operations................... (1,957,550) 4,342,662
------------ ------------
Dividends and distributions to shareholders
from:
Net investment income -- Class A............. (1,734,344) (3,208,275)
Net investment income -- Class B............. (387,478) (783,090)
Net investment income -- Class C............. (562,516) (1,030,416)
Net investment income -- Class Y............. (10,765) (16,450)
Net realized gains from investment
transactions -- Class A..................... -- (83,846)
Net realized gains from investment
transactions -- Class B..................... -- (24,705)
Net realized gains from investment
transactions -- Class C..................... -- (29,688)
Net realized gains from investment
transactions -- Class Y..................... -- (492)
------------ ------------
Total dividends and distributions to
shareholders................................ (2,695,103) (5,176,962)
------------ ------------
From beneficial interest transactions:
Net proceeds from the sale of shares......... 13,126,666 29,444,970
Cost of shares repurchased................... (10,683,550) (20,867,956)
Proceeds from dividends reinvested........... 1,568,525 3,049,335
------------ ------------
Net increase in net assets from beneficial
interest transactions....................... 4,011,641 11,626,349
------------ ------------
Net increase (decrease) in net assets........ (641,012) 10,792,049
Net assets:
Beginning of period.......................... 110,215,676 99,423,627
------------ ------------
End of period................................ $109,574,664 $110,215,676
============ ============
</TABLE>
See accompanying notes to financial statements
37
<PAGE>
PaineWebber New York Tax-Free Income Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year
August 31, 1999 Ended
(unaudited) February 28, 1999
--------------- -----------------
<S> <C> <C>
From operations:
Net investment income........................ $ 879,391 $ 1,922,946
Net realized gains from investments and
futures transactions........................ 104,369 1,227,137
Net change in unrealized
appreciation/depreciation of investments and
futures..................................... (2,589,731) (617,979)
----------- -----------
Net increase (decrease) in net assets
resulting from operations................... (1,605,971) 2,532,104
----------- -----------
Dividends and distributions to shareholders
from:
Net investment income -- Class A............. (559,213) (1,192,008)
Net investment income -- Class B............. (99,680) (248,634)
Net investment income -- Class C............. (220,096) (481,660)
Net investment income -- Class Y............. (402) (643)
Net realized gains from investment
transactions -- Class A..................... -- (609,522)
Net realized gains from investment
transactions -- Class B..................... -- (131,564)
Net realized gains from investment
transactions -- Class C..................... -- (254,029)
Net realized gains from investment
transactions -- Class Y..................... -- (417)
----------- -----------
Total dividends and distributions to
shareholders................................ (879,391) (2,918,477)
----------- -----------
From beneficial interest transactions:
Net proceeds from the sale of shares......... 1,729,581 7,383,454
Cost of shares repurchased................... (4,898,003) (8,488,955)
Proceeds from dividends reinvested........... 570,181 2,009,257
----------- -----------
Net increase (decrease) in net assets from
beneficial interest transactions............ (2,598,241) 903,756
----------- -----------
Net increase (decrease) in net assets........ (5,083,603) 517,383
Net assets:
Beginning of period.......................... 45,006,788 44,489,405
----------- -----------
End of period................................ $39,923,185 $45,006,788
=========== ===========
</TABLE>
See accompanying notes to financial statements
38
<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 distribu-
tion plan.
The preparation of financial statements in accordance with generally accepted
accounting principles requires Fund management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates. The following is
a summary of significant accounting policies:
Valuation of Investments--Each Fund calculates its net asset value based on
the current market value for its portfolio securities. The Funds normally ob-
tain market values for their securities from independent pricing sources. Inde-
pendent pricing sources may use reported last sale prices, current market quo-
tations 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 secu-
rities are valued at the last bid price available prior to valuation. Securi-
ties 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"), a wholly owned subsidiary of PaineWebber Incorporated
("PaineWebber") and investment adviser and administrator of the Funds. If a
market value is not available from an independent pricing source for a particu-
lar 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.
Investment Transactions and Investment Income--Investment transactions are re-
corded on the trade date. Realized gains and losses from investment transac-
tions are calculated on the identified cost method. Interest income is recorded
on an accrual basis. Discounts are accreted and premiums are amortized as ad-
justments to interest income and the identified cost of securities.
39
<PAGE>
Notes to Financial Statements (unaudited)
Income and expenses (excluding class-specific expenses) are allocated propor-
tionately to each class of shares based upon the relative value of dividend el-
igible 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 securi-
ties 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 mar-
gin 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 in-
come 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 ob-
ligations 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 obli-
gations 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 tempo-
rary financing until the settlement of sale or purchase of portfolio securi-
ties, the repurchase or redemption of shares of the Funds at the request of the
shareholders and other temporary or emergency purposes. In connection there-
with, each Fund has agreed to pay a commitment fee, pro rata, based on the rel-
ative 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, 1999, the Funds did not borrow under the
Facility.
Investment Adviser and Administrator
Each Trust's board of trustees has approved an Investment Advisory and Admin-
istration 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
40
<PAGE>
Notes to Financial Statements (unaudited)
Tax-Free Income Fund's average daily net assets and 0.60% of Municipal High In-
come Fund's and New York Tax-Free Income Fund's average daily net assets. At
August 31, 1999, California Tax-Free Income Fund, National Tax-Free Income
Fund, Municipal High Income Fund and New York Tax-Free Income Fund owed Mitch-
ell Hutchins $36,391, $117,180, $56,142 and $10,139, respectively, in invest-
ment advisory and administration fees. For the six months ended August 31, 1999
Mitchell Hutchins voluntarily waived $149,648 and $64,202 in investment advi-
sory and administration fees from the California Tax-Free Income Fund and New
York Tax-Free Income Fund, respectively.
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, 1999, California Tax-
Free Income Fund, National Tax-Free Income Fund, Municipal High Income Fund and
New York Tax-Free Income Fund owed Mitchell Hutchins $45,605, $90,082, $44,218
and $16,224, 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, 1999, it earned $110,216, $112,102, $67,993 and $26,201
in sales charges for the California Tax-Free Income Fund, National Tax-Free In-
come Fund, Municipal High Income Fund and New York Tax-Free Income Fund, re-
spectively.
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, 1999, PaineWebber received from PFPC Inc., not the Funds, ap-
proximately 55%, 46%, 55% and 55% 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,
1999, was substantially the same as the cost of securities for financial state-
ment purposes.
At August 31, 1999, the components of net unrealized depreciation of invest-
ments 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). $ 617,551 $ 5,069,975 $ 1,795,312 $ 849,893
Gross depreciation
(investments having an
excess of cost over value). (3,958,651) (6,465,073) (2,295,716) (971,241)
----------- ----------- ----------- ---------
Net unrealized depreciation
of investments............. $(3,341,100) $(1,395,098) $ (500,404) $(121,348)
=========== =========== =========== =========
</TABLE>
41
<PAGE>
Notes to Financial Statements (unaudited)
For the six months ended August 31, 1999, 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....................... $19,507,093 $54,896,090 $11,080,724 $3,294,927
Sales........................... $24,750,420 $51,029,590 $ 7,641,690 $7,025,475
</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 28,1999, National Tax-Free Income Fund had $394,177 of capital
loss carryforwards available relating to its acquisition on November 3, 1995 of
Mitchell Hutchins/Kidder, Peabody Municipal Bond Fund, which will expire by
February 28, 2003. 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.
42
<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 Class Y
------------------------ ---------------------- ------------------------ ------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------ -------- ------------ ---------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California Tax-Free
Income Fund
Six Months Ended August
31, 1999:
Shares sold............. 553,851 $ 6,120,776 235,229 $ 2,574,624 242,548 $ 2,665,015 17,232 $ 186,343
Shares repurchased...... (1,050,076) (11,459,852) (139,805) (1,526,240) (250,640) (2,729,473) (12,469) (138,991)
Shares converted from
Class B to Class A..... 183,385 2,013,171 (183,280) (2,013,171) -- -- -- --
Dividends reinvested.... 123,019 1,344,618 10,359 113,170 23,078 252,069 462 5,058
---------- ------------ -------- ------------ ---------- ------------ ------- ---------
Net increase (decrease). (189,821) $ (1,981,287) (77,497) $ (851,617) 14,986 $ 187,611 5,225 $ 52,410
========== ============ ======== ============ ========== ============ ======= =========
Year Ended February 28,
1999:
Shares sold............. 740,844 $ 8,433,654 420,927 $ 4,789,060 407,805 $ 4,621,823 18,991 $ 215,353
Shares repurchased...... (1,464,217) (16,586,563) (299,581) (3,416,618) (257,876) (2,917,520) (2,750) (30,849)
Shares converted from
Class B to Class A..... 403,728 4,561,700 (403,372) (4,561,700) -- -- -- --
Dividends reinvested.... 379,806 4,285,994 38,923 439,604 70,574 795,963 1,693 19,110
---------- ------------ -------- ------------ ---------- ------------ ------- ---------
Net increase (decrease). 60,161 $ 694,785 (243,103) $ (2,749,654) 220,503 $ 2,500,266 17,934 $ 203,614
========== ============ ======== ============ ========== ============ ======= =========
National Tax-Free Income
Fund
Six Months Ended August
31, 1999:
Shares sold............. 578,458 $ 6,630,333 236,289 $ 2,699,796 257,910 $ 2,982,620 26,448 $ 306,302
Shares repurchased...... (1,592,824) (18,372,476) (47,053) (1,687,062) (331,741) (3,816,737) (4,915) (56,893)
Shares converted from
Class B to Class A..... 354,831 4,088,321 (454,470) (4,088,321) -- -- -- --
Dividends reinvested.... 296,089 3,391,824 16,448 188,529 65,159 746,301 958 10,919
---------- ------------ -------- ------------ ---------- ------------ ------- ---------
Net increase (decrease). (363,446) $ (4,261,998) (248,786) $ (2,887,058) (8,672) $ (87,816) 22,491 $ 260,328
========== ============ ======== ============ ========== ============ ======= =========
Year Ended February 28,
1999:
Shares sold............. 1,202,289 $ 14,355,836 567,368 $ 6,768,383 731,376 $ 8,693,315 5,702 $ 67,829
Shares repurchased...... (2,772,759) (32,955,038) (430,222) (5,122,831) (1,010,512) (12,035,240) (251) (2,995)
Shares converted from
Class B to Class A..... 894,312 10,669,407 (894,563) (10,669,407) -- -- -- --
Dividends reinvested.... 911,223 10,789,984 69,736 825,483 200,823 2,377,551 1,801 21,326
---------- ------------ -------- ------------ ---------- ------------ ------- ---------
Net increase (decrease). 235,065 $ 2,860,189 (687,681) $ (8,198,372) (78,313) $ (964,374) 7,252 $ 86,160
========== ============ ======== ============ ========== ============ ======= =========
</TABLE>
43
<PAGE>
Notes to Financial Statements (unaudited)
Shares of Beneficial Interest (concluded)
<TABLE>
<CAPTION>
Class A Class B Class C Class Y
----------------------- --------------------- --------------------- ----------------
Shares Amount Shares Amount Shares Amount Shares Amount
--------- ------------ -------- ----------- -------- ----------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Municipal High Income
Fund
Six Months Ended August
31, 1999:
Shares sold............. 762,489 $ 8,165,726 239,256 $ 2,567,004 217,884 $ 2,349,191 4,173 $ 44,745
Shares repurchased...... (547,386) (5,874,532) (126,079) (1,358,296) (316,291) (3,378,789) (6,717) (71,933)
Shares converted from
Class B to Class A..... 175,115 1,886,269 (175,227) (1,886,269) -- -- -- --
Dividends reinvested ... 91,624 982,162 18,096 193,997 35,624 381,752 990 10,614
--------- ------------ -------- ----------- -------- ----------- ------ --------
Net increase (decrease). 481,842 $ 5,159,625 (43,954) $ (483,564) (62,783) $ (647,846) (1,554) $(16,574)
========= ============ ======== =========== ======== =========== ====== ========
Year Ended February 28,
1999:
Shares sold............. 1,135,193 $ 12,423,758 829,528 $ 9,074,526 689,391 $ 7,542,258 36,978 $404,428
Shares repurchased...... (986,808) (10,797,960) (394,045) (4,308,107) (520,751) (5,700,686) (5,599) (61,203)
Shares converted from
Class B to Class A..... 405,558 4,437,624 (405,705) (4,437,624) -- -- -- --
Dividends reinvested.... 175,957 1,923,125 36,333 396,953 65,218 712,560 1,527 16,697
--------- ------------ -------- ----------- -------- ----------- ------ --------
Net increase............ 729,900 $ 7,986,547 66,111 $ 725,748 233,858 $ 2,554,132 32,906 $359,922
========= ============ ======== =========== ======== =========== ====== ========
New York Tax-Free Income
Fund
Six Months Ended August
31, 1999:
Shares sold............. 89,049 $ 955,532 29,838 $ 321,691 42,044 $ 448,880 317 $ 3,478
Shares repurchased...... (323,880) (3,504,459) (40,009) (433,794) (87,557) (944,460) (1,436) (15,289)
Shares converted from
Class B to Class A..... 59,873 646,013 (59,891) (646,013) -- -- -- --
Dividends reinvested ... 32,279 346,925 4,910 52,743 15,837 170,158 33 354
--------- ------------ -------- ----------- -------- ----------- ------ --------
Net decrease............ (142,679) $ (1,555,989) (65,152) $ (705,373) (29,676) $ (325,422) (1,086) $(11,457)
========= ============ ======== =========== ======== =========== ====== ========
Year Ended February 28,
1999:
Shares sold............. 399,688 $ 4,460,550 146,747 $ 1,635,818 113,337 $ 1,264,677 2,017 $ 22,409
Shares repurchased...... (400,090) (4,442,034) (103,652) (1,155,003) (259,962) (2,889,290) (236) (2,628)
Shares converted from
Class B to Class A..... 220,207 2,456,208 (220,220) (2,456,208) -- -- -- --
Dividends reinvested.... 112,472 1,247,040 18,141 200,952 50,534 560,221 94 1,044
--------- ------------ -------- ----------- -------- ----------- ------ --------
Net increase (decrease). 332,277 $ 3,721,764 (158,984) $(1,774,441) (96,091) $(1,064,392) 1,875 $ 20,825
========= ============ ======== =========== ======== =========== ====== ========
</TABLE>
44
<PAGE>
[This Page Intentionally Left Blank]
45
<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 Years
Ended Ended
August 31, February 28 or 29,
1999 ------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $11.18 $11.39 $10.91 $11.02 $10.68 $11.41
------ ------ ------ ------ ------ ------
Net investment income... 0.26 0.52 0.51 0.52 0.57 0.58
Net realized and
unrealized gains
(losses) from
investments and
futures................ (0.59) 0.11 0.48 (0.11) 0.34 (0.63)
------ ------ ------ ------ ------ ------
Net increase (decrease)
from investment
operations............. (0.33) 0.63 0.99 0.41 0.91 (0.05)
------ ------ ------ ------ ------ ------
Dividends from net
investment income...... (0.26) (0.52) (0.51) (0.52) (0.57) (0.58)
Distributions from net
realized gains from
investment
transactions........... -- (0.32) -- -- -- (0.10)
------ ------ ------ ------ ------ ------
Total dividends and
distributions to
shareholders........... (0.26) (0.84) (0.51) (0.52) (0.57) (0.68)
------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $10.59 $11.18 $11.39 $10.91 $11.02 $10.68
====== ====== ====== ====== ====== ======
Total investment
return(1).............. (3.04)% 5.90% 9.26% 3.92% 8.68% (0.18)%
====== ====== ====== ====== ====== ======
Ratios/Supplemental
data:
Net assets, end of
period (000's)......... $111,003 $119,266 $120,804 $127,040 $151,684 $178,234
Expenses to average net
assets, net of waivers
from adviser........... 0.76%* 0.83% 0.98% 0.97% 0.94% 0.88%
Expenses to average net
assets, before waivers
from adviser........... 0.96%* 0.96% 0.98% 0.97% 0.94% 0.88%
Net investment income to
average net assets, net
of waivers from
adviser................ 4.64%* 4.59% 4.56% 4.85% 5.21% 5.55%
Net investment income to
average net assets,
before waivers from
adviser................ 4.44%* 4.46% 4.56% 4.85% 5.21% 5.55%
Portfolio turnover rate. 13% 45% 107% 73% 32% 11%
</TABLE>
- ---------
+ Commencement of issuance of shares.
* Annualized.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. The figures do not
include sales charges or program fees; results would be lower if sales
charges or program fees were included. Total investment return for periods
of less than one year has not been annualized.
46
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
- -------------------------------------------------------- -------------------------------------------------------
For the For the For the For the
Six Months Years Six Months Years
Ended Ended Ended Ended
August 31, February 28 or 29, August 31, February 28 or 29,
1999 ------------------------------------------- 1999 -------------------------------------------
(unaudited) 1999 1998 1997 1996 1995 (unaudited) 1999 1998 1997 1996 1995
- ----------- ------- ------- ------- ------- ------- ----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$11.18 $11.39 $10.92 $11.03 $10.69 $11.41 $11.17 $11.38 $10.90 $11.02 $10.67 $11.40
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
0.21 0.43 0.42 0.44 0.48 0.50 0.23 0.46 0.45 0.47 0.51 0.53
(0.58) 0.11 0.47 (0.11) 0.34 (0.62) (0.59) 0.11 0.48 (0.12) 0.35 (0.63)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(0.37) 0.54 0.89 0.33 0.82 (0.12) (0.36) 0.57 0.93 0.35 0.86 (0.10)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(0.21) (0.43) (0.42) (0.44) (0.48) (0.50) (0.23) (0.46) (0.45) (0.47) (0.51) (0.53)
-- (0.32) -- -- -- (0.10) -- (0.32) -- -- -- (0.10)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(0.21) (0.75) (0.42) (0.44) (0.48) (0.60) (0.23) (0.78) (0.45) (0.47) (0.51) (0.63)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$10.60 $11.18 $11.39 $10.92 $11.03 $10.69 $10.58 $11.17 $11.38 $10.90 $11.02 $10.67
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
(3.32)% 5.06% 8.33% 3.14% 7.86% (0.85)% (3.29)% 5.35% 8.71% 3.30% 8.22% (0.70)%
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
$12,213 $13,756 $16,783 $20,943 $27,175 $33,007 $17,861 $18,682 $16,522 $17,624 $22,155 $28,217
1.51%* 1.59% 1.75% 1.74% 1.70% 1.64% 1.26%* 1.33% 1.50% 1.49% 1.46% 1.40%
1.71%* 1.72% 1.75% 1.74% 1.70% 1.64% 1.46%* 1.47% 1.50% 1.49% 1.46% 1.40%
3.87%* 3.81% 3.79% 4.08% 4.45% 4.78% 4.13%* 4.08% 4.05% 4.34% 4.69% 5.05%
3.67%* 3.68% 3.79% 4.08% 4.45% 4.78% 3.93%* 3.94% 4.05% 4.34% 4.69% 5.05%
13% 45% 107% 73% 32% 11% 13% 45% 107% 73% 32% 11%
<CAPTION>
Class ClassBY
- ----------------------------------------------------------
For the
For the For the Period
Six Months Six Months For the February 5,
Ended Ended Year 1998+
August 31, August 31, Ended through
1999 1999 February 28, February 28,
(unaudited) (unaudited) 1999 1998
- ------------ ----------- ------------ ------------
<S> <C> <C> <C>
$11.18 $11.18 $11.38 $11.42
------ ------ ------ ------
0.21 0.27 0.55 0.04
(0.58) (0.59) 0.12 (0.04)
------ ------ ------ ------
(0.37) (0.32) 0.67 0.00
------ ------ ------ ------
(0.21) (0.27) (0.55) (0.04)
-- -- (0.32) --
------ ------ ------ ------
(0.21) (0.27) (0.87) (0.04)
------ ------ ------ ------
$10.60 $10.59 $11.18 $11.38
====== ====== ====== ======
(3.32)% (2.92)% 6.28% (0.34)%
====== ====== ====== ======
$12,213 $ 351 $ 312 $ 114
1.51%* 0.50%* 0.55% 0.76%*
1.71%* 0.70%* 0.71% 0.76%*
3.87%* 4.90%* 4.87% 5.07%*
3.67%* 4.70%* 4.71% 5.07%*
13% 13% 45% 107%
</TABLE>
47
<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 Years
Ended Ended
August 31, February 28 or 29,
1999 -----------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $11.73 $11.97 $11.55 $11.64 $11.26 $12.00
------ ------ ------ ------ ------ ------
Net investment income... 0.27 0.56 0.56 0.55 0.58 0.63
Net realized and
unrealized gains
(losses) from
investments and futures
....................... (0.64) 0.05 0.50 (0.09) 0.39 (0.73)
------ ------ ------ ------ ------ ------
Net increase (decrease)
from investment
operations............. (0.37) 0.61 1.06 0.46 0.97 (0.10)
------ ------ ------ ------ ------ ------
Dividends from net
investment income...... (0.27) (0.56) (0.56) (0.55) (0.59) (0.63)
Distributions from net
realized gains from
investment
transactions........... -- (0.29) (0.08) -- -- (0.01)
------ ------ ------ ------ ------ ------
Total dividends and
distributions to
shareholders........... (0.27) (0.85) (0.64) (0.55) (0.59) (0.64)
------ ------ -------- ------ ------ ------
Net asset value, end of
period................. $11.09 $11.73 $11.97 $11.55 $11.64 $11.26
====== ====== ====== ====== ====== ======
Total investment
return(1).............. (3.17)% 5.31% 9.48% 4.14% 8.75% (0.63)%
====== ====== ====== ====== ====== ======
Ratios/Supplemental
data:
Net assets, end of
period (000's)......... $210,678 $227,151 $229,040 $263,425 $315,899 $346,579
Expenses to average net
assets................. 0.87%* 0.94% 0.95% 0.91% 0.93%(/2/) 0.88%
Net investment income to
average net assets..... 4.75%* 4.72% 4.77% 4.85% 5.06%(/2/) 5.62%
Portfolio turnover rate. 18% 43% 79% 81% 74% 60%
</TABLE>
- ---------
* Annualized.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. The figures do not
include sales charges; results would be lower if sales charges 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%.
48
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
- ------------------------------------------------------------- -------------------------------------------------------------
For the For the For the For the
Six Months Years Six Months Years
Ended Ended Ended Ended
August 31, February 28 or 29, August 31, February 28 or 29,
1999 ------------------------------------------------ 1999 -------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995 (unaudited) 1999 1998 1997 1996 1995
- ----------- ------- ------- ------- ------- ------- ----------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$11.73 $11.97 $11.55 $11.64 $11.26 $11.99 $11.73 $11.97 $11.55 $11.64 $11.26 $12.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
0.23 0.47 0.47 0.46 0.49 0.54 0.24 0.50 0.50 0.49 0.52 0.57
(0.65) 0.05 0.50 (0.09) 0.39 (0.72) (0.64) 0.05 0.50 (0.09) 0.39 (0.73)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(0.42) 0.52 0.97 0.37 0.88 (0.18) (0.40) 0.55 1.00 0.40 0.91 (0.16)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(0.23) (0.47) (0.47) (0.46) (0.50) (0.54) (0.24) (0.50) (0.50) (0.49) (0.53) (0.57)
-- (0.29) (0.08) -- -- (0.01) -- (0.29) (0.08) -- -- (0.01)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(0.23) (0.76) (0.55) (0.46) (0.50) (0.55) (0.24) (0.79) (0.58) (0.49) (0.53) (0.58)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$11.08 $11.73 $11.97 $11.55 $11.64 $11.26 $11.09 $11.73 $11.97 $11.55 $11.64 $11.26
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
(3.64)% 4.48% 8.62% 3.35% 7.94% (1.29)% (3.42)% 4.76% 8.92% 3.61% 8.19% (1.13)%
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
$20,009 $24,085 $32,815 $40,949 $51,546 $58,958 $45,012 $47,722 $49,647 $59,652 $75,076 $101,642
1.65%* 1.72% 1.73% 1.67% 1.68%(/2/) 1.64% 1.39%* 1.47% 1.47% 1.42% 1.45%(/2/) 1.40%
3.95%* 3.93% 3.98% 4.09% 4.31%(/2/) 4.86% 4.23%* 4.20% 4.26% 4.34% 4.57%(/2/) 5.13%
18% 43% 79% 81% 74% 60% 18% 43% 79% 81% 74% 60%
</TABLE>
49
<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 Years November 3,
Ended Ended 1995+
August 31, February 28, through
1999 ---------------------- February 29,
(unaudited) 1999 1998 1997 1996
----------- ------ ------ ------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................ $11.73 $11.98 $11.55 $11.65 $11.62
------ ------ ------ ------ ------
Net investment income..... 0.29 0.59 0.59 0.58 0.19
Net realized and
unrealized gains (losses)
from investments and
futures.................. (0.65) 0.04 0.51 (0.10) 0.01
------ ------ ------ ------ ------
Net increase from
investment operations.... (0.36) 0.63 1.10 0.48 0.20
------ ------ ------ ------ ------
Dividends from net
investment income........ (0.28) (0.59) (0.59) (0.58) (0.17)
Distributions from net
realized gains from
investment transactions.. -- (0.29) (0.08) -- --
------ ------ ------ ------ ------
Total dividends and
distributions to
shareholders............. (0.28) (0.88) (0.67) (0.58) (0.17)
------ ------ ------ ------ ------
Net asset value, end of
period................... $11.09 $11.73 $11.98 $11.55 $11.65
====== ====== ====== ====== ======
Total investment
return(1)................ (3.08)% 5.49% 9.87% 4.32% 1.70%
====== ====== ====== ====== ======
Ratios/Supplemental data:
Net assets, end of period
(000's).................. $553 $321 $241 $246 $341
Expenses to average net
assets................... 0.67%* 0.71% 0.68% 0.65% 0.64%(/2/)*
Net investment income to
average net assets....... 4.97%* 4.95% 5.04% 5.13% 5.19%(/2/)*
Portfolio turnover rate... 18% 43% 79% 81% 74%
</TABLE>
- ---------
+ Commencement of issuance of shares.
* Annualized.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. The figures do not
include program fees; results would be lower if program fees 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%.
50
<PAGE>
[This Page Intentionally Left Blank]
51
<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 Years
Ended Ended
August 31, February 28 or 29,
1999 -------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $10.88 $10.96 $10.39 $10.29 $ 9.92 $10.77
------ ------ ------ ------ ------ ------
Net investment income... 0.27 0.55 0.55 0.56 0.62 0.59
Net realized and
unrealized gains
(losses) from
investments and
futures................ (0.45) (0.07) 0.57 0.10 0.37 (0.82)
------ ------ ------ ------ ------ ------
Net increase (decrease)
from investment
operations............. (0.18) 0.48 1.12 0.66 0.99 (0.23)
------ ------ ------ ------ ------ ------
Dividends from net
investment income...... (0.27) (0.55) (0.55) (0.56) (0.62) (0.59)
Distributions from net
realized gains from
investment
transactions........... -- (0.01) -- -- -- (0.03)
------ ------ ------ ------ ------ ------
Total dividends and
distributions to
shareholders........... (0.27) (0.56) (0.55) (0.56) (0.62) (0.62)
------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $10.43 $10.88 $10.96 $10.39 $10.29 $ 9.92
====== ====== ====== ====== ====== ======
Total investment
return(1).............. (1.66)% 4.80% 11.06% 6.61% 10.18% (2.03)%
====== ====== ====== ====== ====== ======
Ratios/Supplemental
data:
Net assets, end of
period (000's)......... $69,048 $66,771 $59,288 $52,593 $57,280 $63,287
Expenses to average net
assets................. 1.05%* 1.12% 1.22% 1.15% 1.10% 1.13%
Net investment income to
average net assets..... 5.08%* 5.02% 5.15% 5.49% 5.94% 5.96%
Portfolio turnover rate. 7% 26% 22% 64% 48% 28%
</TABLE>
- ---------
+ Commencement of issuance of shares.
* Annualized.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period, reinvestment of all dividends and distributions
at net asset value on the payable dates and a sale at net asset value on
the last day of each period reported. The figures do not include sales
charges or program fees; results would be lower if sales charges or program
fees were included. Total investment return for periods of less than one
year has not been annualized.
52
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
- -------------------------------------------------------- -------------------------------------------------------
For the For the For the For the
Six Months Years Six Months Years
Ended Ended Ended Ended
August 31, February 28 or 29, August 31, February 28 or 29,
1999 ------------------------------------------- 1999 -------------------------------------------
(unaudited) 1999 1998 1997 1996 1995 (unaudited) 1999 1998 1997 1996 1995
- ----------- ------- ------- ------- ------- ------- ----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$10.87 $10.96 $10.39 $10.29 $ 9.92 $10.76 $10.88 $10.96 $10.39 $10.29 $ 9.92 $10.77
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
0.23 0.47 0.47 0.48 0.54 0.52 0.25 0.49 0.50 0.51 0.56 0.55
(0.44) (0.08) 0.57 0.10 0.37 (0.81) (0.45) (0.07) 0.57 0.10 0.37 (0.82)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(0.21) 0.39 1.04 0.58 0.91 (0.29) (0.20) 0.42 1.07 0.61 0.93 (0.27)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(0.23) (0.47) (0.47) (0.48) (0.54) (0.52) (0.25) (0.49) (0.50) (0.51) (0.56) (0.55)
-- (0.01) -- -- -- (0.03) -- (0.01) -- -- -- (0.03)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(0.23) (0.48) (0.47) (0.48) (0.54) (0.55) (0.25) (0.50) (0.50) (0.51) (0.56) (0.58)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$10.43 $10.87 $10.96 $10.39 $10.29 $ 9.92 $10.43 $10.88 $10.96 $10.39 $10.29 $ 9.92
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
(1.95)% 3.87% 10.23% 5.82% 9.36% (2.67)% (1.91)% 4.25% 10.51% 6.08% 9.64% (2.51)%
====== ====== ====== ====== ====== ====== ====== ======= ====== ====== ====== ======
$17,449 $18,675 $18,097 $19,427 $23,868 $25,823 $22,698 $24,355 $21,982 $16,967 $20,700 $23,158
1.81%* 1.88% 1.98% 1.90% 1.85% 1.87% 1.55%* 1.62% 1.72% 1.66% 1.60% 1.63%
4.30%* 4.24% 4.39% 4.73% 5.19% 5.21% 4.58%* 4.52% 4.64% 4.98% 5.45% 5.48%
7% 26% 22% 64% 48% 28% 7% 26% 22% 64% 48% 28%
<CAPTION>
Class Class YB
- ----------------------------------------------------------
For the
For the For the Period
Six Months Six Months For the February 5,
Ended Ended Year 1998+
August 31, August 31, Ended through
1999 1999 February 28, February 28,
(unaudited) (unaudited) 1999 1998
- ------------ ----------- ------------ ------------
<S> <C> <C> <C>
$10.87 $10.88 $10.97 $10.98
------ ------ ------ ------
0.23 0.28 0.58 0.04
(0.44) (0.45) (0.08) (0.01)
------ ------ ------ ------
(0.21) (0.17) 0.50 0.03
------ ------ ------ ------
(0.23) (0.28) (0.58) (0.04)
-- -- (0.01) --
------ ------ ------ ------
(0.23) (0.28) (0.59) (0.04)
------ ------ ------ ------
$10.43 $10.43 $10.88 $10.97
====== ====== ====== ======
(1.95)% (1.57)% 4.96% (0.09)%
====== ====== ====== ======
$17,449 $381 $414 $56
1.81%* 0.86%* 0.87% 1.00%*
4.30%* 5.27%* 5.28% 5.44%*
7% 7% 26% 22%
</TABLE>
53
<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 Years
Ended Ended
August 31, February 28 or 29,
1999 -------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $11.03 $11.12 $10.66 $10.71 $10.27 $11.03
------ ------ ------ ------ ------ ------
Net investment income... 0.24 0.53 0.51 0.51 0.54 0.54
Net realized and
unrealized gains
(losses) from
investments and
futures................ (0.64) 0.15 0.46 (0.05) 0.45 (0.66)
------ ------ ------ ------ ------ ------
Net increase (decrease)
from investment
operations............. (0.40) 0.68 0.97 0.46 0.99 (0.12)
------ ------ ------ ------ ------ ------
Dividends from net
investment income...... (0.24) (0.53) (0.51) (0.51) (0.55) (0.54)
Distributions from net
realized gains from
investment
transactions........... -- (0.24) -- -- -- (0.10)
------ ------ ------ ------ ------ ------
Total dividends and
distributions to
shareholders........... (0.24) (0.77) (0.51) (0.51) (0.55) (0.64)
------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $10.39 $11.03 $11.12 $10.66 $10.71 $10.27
====== ====== ====== ====== ====== ======
Total investment
return(1).............. (3.71)% 6.24% 9.36% 4.49% 9.83% (0.83)%
====== ====== ====== ====== ====== ======
Ratios/Supplemental
data:
Net assets, end of
period (000's)......... $24,116 $27,171 $23,694 $23,160 $28,734 $32,475
Expenses to average net
assets, net of waivers
from adviser........... 1.02%* 1.02% 1.02% 1.02% 1.02% 1.01%
Expenses to average net
assets, before waivers
from adviser .......... 1.32%* 1.27% 1.28% 1.50% 1.15% 1.26%
Net investment income to
average net assets, net
of waivers from adviser
....................... 4.37%* 4.46% 4.74% 4.91% 5.11% 5.38%
Net investment income to
average net assets,
before waivers and
reimbursements from
adviser................ 4.07%* 4.21% 4.48% 4.42% 4.98% 5.13%
Portfolio turnover rate. 8% 44% 34% 40% 13% 6%
</TABLE>
- ---------
+ Commencement of issuance of shares.
* Annualized.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. The figures do not
include sales charges or program fees; results would be lower if sales
charges or program fees were included. Total investment return for periods
of less than one year has not been annualized.
54
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
- ----------------------------------------------------- -------------------------------------------------------
For the For the For the For the
Six Months Years Six Months Years
Ended Ended Ended Ended
August 31, February 28 or 29, August 31, February 28 or 29,
1999 ---------------------------------------- 1999 -------------------------------------------
(unaudited) 1999 1998 1997 1996 1995 (unaudited) 1999 1998 1997 1996 1995
- ----------- ------ ------ ------ ------- ------- ----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$11.03 $11.12 $10.65 $10.71 $10.27 $11.03 $11.04 $11.12 $10.66 $10.71 $10.28 $11.03
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
0.20 0.44 0.43 0.44 0.47 0.47 0.21 0.47 0.46 0.46 0.49 0.49
(0.64) 0.15 0.47 (0.06) 0.44 (0.66) (0.64) 0.16 0.46 (0.05) 0.43 (0.65)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(0.44) 0.59 0.90 0.38 0.91 (0.19) (0.43) 0.63 0.92 0.41 0.92 (0.16)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(0.20) (0.44) (0.43) (0.44) (0.47) (0.47) (0.21) (0.47) (0.46) (0.46) (0.49) (0.49)
-- (0.24) -- -- -- (0.10) -- (0.24) -- -- -- (0.10)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(0.20) (0.68) (0.43) (0.44) (0.47) (0.57) (0.21) (0.71) (0.46) (0.46) (0.49) (0.59)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$10.39 $11.03 $11.12 $10.65 $10.71 $10.27 $10.40 $11.04 $11.12 $10.66 $10.71 $10.28
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
(4.07)% 5.40% 8.65% 3.62% 9.01% (1.57)% (3.95)% 5.78% 8.82% 3.98% 9.17% (1.20)%
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
$4,988 $6,013 $7,829 $9,462 $11,862 $14,660 $10,811 $11,802 $12,966 $13,786 $17,849 $21,095
1.77%* 1.77% 1.77% 1.76% 1.77% 1.76% 1.52%* 1.52% 1.52% 1.52% 1.52% 1.52%
2.07%* 2.02% 2.05% 2.27% 1.89% 2.01% 1.82%* 1.77% 1.78% 2.04% 1.64% 1.75%
3.61%* 3.70% 3.99% 4.16% 4.36% 4.63% 3.86%* 3.97% 4.24% 4.41% 4.61% 4.89%
3.31%* 3.45% 3.70% 3.65% 4.24% 4.83% 3.56%* 3.72% 3.98% 3.89% 4.50% 4.65%
8% 44% 34% 40% 13% 6% 8% 44% 34% 40% 13% 6%
<CAPTION>
ClClass Yass B
- -------------------------------------------------------
For the For the
Six Months Six Months For the Period
Ended Ended May 21, 1998+
August 31, August 31, through
1999 1999 February 28,
(unaudited) (unaudited) 1999
- ------------ ----------- --------------
<S> <C> <C>
$11.03 $11.03 $11.08
------ ------ ------
0.20 0.25 0.40
(0.64) (0.64) 0.19
------ ------ ------
(0.44) (0.39) 0.59
------ ------ ------
(0.20) (0.25) (0.40)
-- -- (0.24)
------ ------ ------
(0.20) (0.25) (0.64)
------ ------ ------
$10.39 $10.39 $11.03
====== ====== ======
(4.07)% (3.59)% 5.39%
====== ====== ======
$4,988 $8 $21
1.77%* 0.77%* 0.77%*
2.07%* 1.05%* 1.03%*
3.61%* 4.62%* 4.71%*
3.31%* 4.34%* 4.44%*
8% 8% 44%
</TABLE>
55
<PAGE>
================================================================================
TRUSTEES
E. Garrett Bewkes, Jr. Mary C. Farrell
Chairman George W. Gowen
Margo N. Alexander Frederic V. Malek
Richard Q. Armstrong Carl W. Schafer
Richard R. Burt Brian M. Storms
Meyer Feldberg
PRINCIPAL OFFICERS
Margo N. Alexander Elbridge T. Gerry III
President Vice President
Dianne E. O'Donnell Richard S. Murphy
Vice President and Secretary Vice President
Victoria E. Schonfeld Cynthia N. Bow
Vice President Vice President
Paul H. Schubert William W. Veronda
Vice President and Treasurer 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.
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PaineWebber offers a family of 28 funds which encompass a diversified range of
investment goals.
BOND FUNDS
. High Income Fund
. Investment Grade Income Fund
. Low Duration U.S. Government Income Fund
. Strategic Income Fund
. U.S. Government Income Fund
TAX-FREE BOND FUNDS
. California Tax Free Income Fund
. Municipal High Income Fund
. National Tax Free Income Fund
. New York Tax-Free Income Fund
STOCK FUNDS
. Financial Services Growth Fund
. Growth Fund
. Growth and Income Fund
. Mid Cap Fund
. Small Cap Fund
. S&P 500 Index Fund
. Strategy Fund
. Tax-Managed Equity Fund
. Utility Income Fund
ASSET ALLOCATION FUNDS
. Balanced Fund
. Tactical Allocation Fund
GLOBAL FUNDS
. Asia Pacific Growth Fund
. Emerging Markets Equity Fund
. Global Equity Fund
. Global Income Fund
MITCHELL HUTCHINS PORTFOLIOS
. Aggressive Portfolio
. Moderate Portfolio
. Conservative Portfolio
PAINE WEBBER MONEY MARKET FUND
[LOGO OF PAINEWEBBER]
PaineWebber
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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, 1999
SEMIANNUAL REPORT
