<PAGE>
PAINEWEBBER OFFERS A FAMILY OF 21 MUTUAL 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
/ / Capital Appreciation Fund
/ / Financial Services Growth Fund
/ / Growth Fund
/ / Growth and Income Fund
/ / Small Cap Fund
/ / Utility Income Fund
Asset Allocation Funds
/ / Balanced Fund
/ / Tactical Allocation Fund
Global Funds
/ / Emerging Markets Equity Fund
/ / Global Equity Fund
/ / Global Income Fund
PaineWebber Money Market Fund
[LOGO]
-C-1996 PaineWebber Incorporated
Member SIPC
[LOGO]
-----------------------------------------------
T A C T I C A L
A L L O C A T I O N
F U N D
AUGUST 31, 1996
ANNUAL REPORT
<PAGE>
ANNUAL REPORT--OCTOBER 15, 1996
- --------------------------------------------------------------------------------
DEAR SHAREHOLDER,
We are pleased to present to you the annual
report for PaineWebber Tactical Allocation Fund
(the "Fund") for the year ended August 31, 1996.
GENERAL MARKET OVERVIEW
By the end of 1995, most investors were convinced
that the Federal Reserve Board had achieved a
"soft landing" for the economy, which led to a
general consensus that the Fed would act again to
cut short-term interest rates. By early March,
however, government reports showing
higher-than-expected economic growth prompted a
shift in sentiment, which in turn caused a sharp
drop in bond prices and ensuing stock market
volatility. Several factors helped move stocks
higher despite this volatility, including an
overall positive environment for corporate
earnings and profit growth as well as strong cash
flows into equity mutual funds. Then, in July, a
spate of disappointing earnings announcements
would help contribute to the first meaningful
overall stock market correction since 1994. This
was short-lived however, and in August the
markets retraced much of the ground that had been
lost (a circumstance which underscores the
hazards of market timing).
After exceptional performance during most of
1995, the first half of 1996 was difficult for
fixed income investors. Accelerating economic
growth, reflected in strong employment, retail
sales and investment spending numbers, as well as
a suprisingly robust housing sector, combined to
convince the market that contrary to initial
expectations, the Fed would move to tighten
interest rates. The change in sentiment was
clearly reflected in the 30-year U.S. Treasury
bond, the benchmark of bond market performance,
as its yield increased from 5.95% on December 29,
1995, to 6.75% by August 31, 1996. When bond
yields increase, bond prices decrease. However,
the Federal Reserve Board's Open Market Committee
decided to keep monetary policy unchanged at the
March, May and July 1996 meetings; the Fed's
decision to do so suggested that officials did
not foresee economic growth at a pace which would
cause the economy to overheat and produce
accelerating inflation.
<PAGE>
-----------------------------------------------------------------
PORTFOLIO REVIEW
PaineWebber Tactical Allocation Fund's total
return (the net asset value change with dividends
reinvested) for the year ended August 31, 1996,
without deducting sales charges, was 17.35% for
Class A shares, 3.80% for Class B shares (from
commencement of operations on January 30, 1996
through August 31, 1996), 16.52% for Class C
shares and 17.70% for Class Y shares. For new
shareowners, the Fund's total return for this
period, after deducting the maximum applicable
sales charges, was 12.07% for Class A shares,
(1.20)% for Class B shares (from commencement of
operations), 15.52% for Class C shares and 17.70%
for Class Y shares.
The Fund employs a disciplined, model-based
approach to calculate expected returns for U.S.
stocks, bonds and cash (cash for this purpose
being investments in U.S. Treasury bills). The
expected return of the broad U.S. stock market is
compared with that of a "risk-free" asset (i.e.,
the one-year Treasury bill) to quantify an
"equity risk premium." When the premium is above
a given level, the Fund invests 100% in stocks,
and only in securities in the S&P 500 Index.
Throughout the course of the year ended August
31, 1996, the Fund's equity risk premium remained
well above the 5.5% hurdle required for a total
stock allocation. Several factors influenced the
equity risk premium's level, including the
relative consistency of dividend growth
projections and a continued moderate inflationary
environment which helped hold down the level of
short-term interest rates. These factors
indicated that the equity market was not
overvalued when compared to an alternative
"risk-free" investment. Therefore, the Fund's
assets remained fully invested in stocks during
the fiscal year, except for a limited amount of
assets kept in cash to satisfy operating needs.
Presently, we believe there is a relatively low
probability of events occuring over the short
term that could drive the equity risk premium to
ranges requiring a shift from stocks. However,
should the equity risk premium fall below the
5.50% level, the Fund would allocate a portion of
its assets to bonds or cash.
2
<PAGE>
-----------------------------------------------------------------
PORTFOLIO REVIEW
The charts below provide a history of the
equity risk premium and bond risk premium going
back to 1984.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AUGUST 1996
RISK-FREE RATE: 5.91%
EQUITY RISK
PREMIUM: 5.93%
Equity Risk Pre-
mium
<S> <C>
1/84 5.30
2/84 5.01
3/84 4.36
4/84 4.60
5/84 3.23
6/84 3.35
7/84 4.43
8/84 3.82
9/84 4.48
10/84 5.56
11/84 5.70
12/84 6.19
1/85 5.91
2/85 4.68
3/85 5.01
4/85 5.51
5/85 6.31
6/85 6.60
7/85 6.30
8/85 6.24
9/85 6.63
10/85 6.49
11/85 6.27
12/85 5.61
1/86 5.53
2/86 5.38
3/86 5.50
4/86 5.27
5/86 4.85
6/86 5.30
7/86 5.65
8/86 6.19
9/86 6.39
10/86 6.18
11/86 6.04
12/86 5.97
1/87 5.56
2/87 5.51
3/87 5.29
4/87 4.96
5/87 4.70
6/87 4.68
7/87 4.60
8/87 4.10
9/87 3.52
10/87 5.60
11/87 5.92
12/87 5.52
1/88 5.77
2/88 5.71
3/88 5.83
4/88 5.48
5/88 4.91
6/88 5.13
7/88 4.75
8/88 4.50
9/88 4.50
10/88 4.50
11/88 4.13
12/88 3.65
1/89 3.41
2/89 3.15
3/89 2.88
4/89 3.36
5/89 3.57
6/89 4.35
7/89 4.54
8/89 3.92
9/89 3.81
10/89 4.60
11/89 4.69
12/89 4.41
1/90 4.63
2/90 4.59
3/90 4.28
4/90 4.25
5/90 4.23
6/90 4.41
7/90 4.68
8/90 5.06
9/90 5.18
10/90 5.55
11/90 5.47
12/90 5.74
1/91 5.97
2/91 5.78
3/91 5.84
4/91 6.24
5/91 5.96
6/91 5.86
7/91 5.98
8/91 6.35
9/91 6.70
10/91 7.09
11/91 7.71
12/91 7.82
1/92 7.97
2/92 7.84
3/92 7.81
4/92 7.90
5/92 7.90
6/92 7.97
7/92 8.32
8/92 8.58
9/92 8.93
10/92 8.46
11/92 8.17
12/92 8.43
1/93 8.61
2/93 8.39
3/93 8.29
4/93 8.36
5/93 7.89
6/93 7.96
7/93 8.03
8/93 7.98
9/93 8.02
10/93 7.95
11/93 7.82
12/93 7.80
1/94 7.91
2/94 7.65
3/94 7.43
4/94 6.80
5/94 6.53
6/94 6.55
7/94 6.67
8/94 6.35
9/94 5.99
10/94 5.93
11/94 5.40
12/94 5.08
1/95 5.32
2/95 5.65
3/95 5.52
4/95 5.74
5/95 6.21
6/95 6.39
7/95 6.29
8/95 6.37
9/95 6.24
10/95 6.38
11/95 6.46
12/95 6.57
1/96 6.82
2/96 6.47
3/96 6.28
4/96 6.06
5/96 5.92
6/96 5.99
7/96 6.08
8/96 5.93
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AUGUST 1996
5-YEAR NOTE YIELD
(2): 6.61%
RISK-FREE RATE: 5.91%
BOND RISK PREMIUM: 0.70%
<S> <C>
Bond Risk Pre-
mium
1/84 1.570
2/84 1.600
3/84 1.350
4/84 1.410
5/84 1.460
6/84 1.400
7/84 0.870
8/84 0.780
9/84 1.000
10/84 1.300
11/84 1.510
12/84 1.800
1/85 1.700
2/85 1.800
3/85 1.820
4/85 1.850
5/85 1.750
6/85 1.940
7/85 1.920
8/85 1.760
9/85 1.760
10/85 1.580
11/85 1.280
12/85 0.960
1/86 1.130
2/86 0.730
3/86 0.730
4/86 0.840
5/86 1.310
6/86 1.160
7/86 1.130
8/86 1.170
9/86 1.370
10/86 1.150
11/86 0.930
12/86 0.920
1/87 0.910
2/87 0.940
3/87 0.970
4/87 1.380
5/87 1.410
6/87 1.340
7/87 1.470
8/87 1.380
9/87 1.330
10/87 1.730
11/87 1.410
12/87 1.240
1/88 1.190
2/88 1.090
3/88 1.300
4/88 1.240
5/88 1.100
6/88 0.960
7/88 0.930
8/88 0.730
9/88 0.540
10/88 0.330
11/88 0.330
12/88 0.180
1/89 -0.040
2/89 -0.080
3/89 -0.230
4/89 -0.190
5/89 -0.240
6/89 -0.190
7/89 -0.220
8/89 0.050
9/89 -0.130
10/89 0.010
11/89 0.160
12/89 0.130
1/90 0.370
2/90 0.470
3/90 0.420
4/90 0.530
5/90 0.430
6/90 0.430
7/90 0.490
8/90 0.850
9/90 0.850
10/90 0.860
11/90 0.670
12/90 0.910
1/91 1.240
2/91 1.260
3/91 1.420
4/91 1.700
5/91 1.530
6/91 1.630
7/91 1.590
8/91 1.630
9/91 1.510
10/91 1.680
11/91 1.860
12/91 1.840
1/92 2.290
2/92 2.290
3/92 2.430
4/92 2.610
5/92 2.390
6/92 2.250
7/92 2.250
8/92 2.170
9/92 2.270
10/92 2.400
11/92 2.450
12/92 2.450
1/93 2.230
2/93 1.930
3/93 1.960
4/93 1.900
5/93 1.740
6/93 1.610
7/93 1.630
8/93 1.420
9/93 1.420
10/93 1.380
11/93 1.530
12/93 1.620
1/94 1.520
2/94 1.620
3/94 1.810
4/94 1.560
5/94 1.400
6/94 1.460
7/94 1.370
8/94 1.250
9/94 1.350
10/94 1.330
11/94 0.920
12/94 0.680
1/95 0.750
2/95 0.700
3/95 0.610
4/95 0.580
5/95 0.280
6/95 0.370
7/95 0.540
8/95 0.440
9/95 0.390
10/95 0.290
11/95 0.300
12/95 0.210
1/96 0.360
2/96 0.510
3/96 0.700
4/96 0.750
5/96 0.810
6/96 0.720
7/96 0.640
8/96 0.700
</TABLE>
3
<PAGE>
-----------------------------------------------------------------
PORTFOLIO REVIEW
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.
Sincerely,
[SIGNATURE] [SIGNATURE]
MARGO ALEXANDER T. KIRKHAM BARNEBY
President, Managing Director and Chief
Mitchell Hutchins Asset Management Investment Officer--Quantitative
Inc. Investments,
Mitchell Hutchins Asset Management
Inc.
4
<PAGE>
-----------------------------------------------------------------
PORTFOLIO REVIEW
PAINEWEBBER TACTICAL ALLOCATION FUND
Comparison of the change of a $10,000 investment in the
PaineWebber Tactical Allocation Fund, Class C and the
Standard & Poor's 500 Composite Index.
The following graph depicts the performance of the
PaineWebber Tactical Allocation Fund versus the Standard &
Poor's 500 Composite Index. It is important to note
PaineWebber Tactical Allocation Fund is a professionally
managed mutual fund while the index is not available for
investment and is unmanaged. The comparison is shown for
illustrative purposes only.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PAINEWEBBER TACTICAL S&P 500
ALLOCATION FUND;
CLASS C INDEX
<S> <C> <C>
7/92 10,000 10,000
8/92 9,970 9,784
8/93 11,025 11,272
8/94 11,406 11,886
8/95 13,410 14,422
8/96 16,119 17,110
</TABLE>
Past performance is not predictive of future performance.
The performance of the other classes will vary from the
performance of the class shown based on the difference in
sales charges and fees paid by shareholders investing in
different classes.
<TABLE>
<CAPTION>
------------------------------------------------------
AVERAGE ANNUAL RETURN
% RETURN WITHOUT DEDUCTING % RETURN AFTER DEDUCTING
MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
-------------------------- --------------------------
Class A* B** C*** A* B** C***
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Twelve Months Ended 8/31/96 17.35% N/A 16.52% 12.07% N/A 15.52%
- -----------------------------------------------------------------------------------------
Commencement of Operations
Through 8/31/96+ 13.56% N/A 12.31% 11.99% N/A 12.31%
- -----------------------------------------------------------------------------------------
</TABLE>
*Maximum sales charge for Class A shares is 4.5% 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 1% and is reduced to 0% after 1 year. Class C
shares bear ongoing 12b-1 distribution and service fees.
+Commencement of issuance dates are May 10, 1993, January
30, 1996 and July 22, 1992 for Class A, Class B and
Class C shares, respectively.
Note: The Fund offers Class Y shares to a limited group of
eligible investors, including the trustees of the
PaineWebber Savings Investment Plan and INSIGHT Investment
Advisory Program participants. For the year ended August
31, 1996, and since inception, May 10, 1993 through August
31, 1996, Class Y shares have an average annual return of
17.70% and 13.88%, respectively. Class Y shares do not have
initial or contingent deferred sales charges or ongoing
distribution and service fees.
The investment return and 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.
5
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
TOTAL RETURN1
--------------------------
NET ASSET VALUE 6 MONTHS
------------------------------------------ 12 MONTHS ENDED
08/31/96 02/29/96 08/31/95 ENDED 08/31/96 08/31/96
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
Class A Shares $16.15 $15.77 $ 14.86 17.35% 2.41%
- --------------------------------------------------------------------------------------------
Class B Shares 16.13 15.80 -- N/A 2.09
- --------------------------------------------------------------------------------------------
Class C Shares 16.12 15.79 14.87 16.52 2.09
- --------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS A SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------ CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN1
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
05/10/93-12/31/93 $ 12.90 $ 13.49 $ 0.0440 $ 0.1980 6.48%
- -------------------------------------------------------------------------------------------
1994 13.49 12.20 0.9720 0.2340 (0.59 )
- -------------------------------------------------------------------------------------------
1995 12.20 15.16 1.0555 0.2407 35.12
- -------------------------------------------------------------------------------------------
01/01/96-08/31/96 15.16 16.15 -- -- 6.53
- -------------------------------------------------------------------------------------------
Totals: $2.0715 $ 0.6727
- -------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/96: 52.38%
- -------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS B SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------ CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN1
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
01/30/96-08/31/96 $ 15.54 $ 16.13 -- -- 3.80%
- --------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS C SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------ CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN1
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
07/22/92-12/31/92 $ 12.00 $ 12.72 $ 0.0020 $ 0.0790 6.67%
- --------------------------------------------------------------------------------------------
1993 12.72 13.51 0.0440 0.1340 7.64
- --------------------------------------------------------------------------------------------
1994 13.51 12.23 0.9720 0.1300 (1.28 )
- --------------------------------------------------------------------------------------------
1995 12.23 15.20 1.0555 0.1259 34.09
- --------------------------------------------------------------------------------------------
01/01/96-08/31/96 15.20 16.12 -- -- 6.05
- --------------------------------------------------------------------------------------------
Totals: $2.0735 $ 0.4689
- --------------------------------------------------------------------------------------------
CUMULATIVE TOTAL
RETURN AS OF 08/31/96: 61.19%
- --------------------------------------------------------------------------------------------
</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 FOR EACH CLASS WOULD BE LOWER IF SALES CHARGES WERE INCLUDED.
NOTE: THE FUND OFFERS CLASS Y SHARES TO A LIMITED GROUP OF ELIGIBLE INVESTORS,
INCLUDING THE TRUSTEE OF THE PAINEWEBBER SAVINGS INVESTMENT PLAN AND INSIGHT
INVESTMENT ADVISORY PROGRAM PARTICIPANTS. FOR THE YEAR ENDED AUGUST 31, 1996,
AND SINCE INCEPTION, MAY 10, 1993 THROUGH AUGUST 31, 1996, CLASS Y SHARES HAVE A
TOTAL RETURN OF 17.70% AND 53.79%, 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.
6
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
COMMON STOCKS - 99.85%
AGRICULTURE, FOOD & BEVERAGE - 7.80%
15,071 Archer-Daniels-Midland Company...................... $ 267,512
7,000 Campbell Soup Company............................... 455,875
70,000 Coca-Cola Company................................... 3,500,000
6,800 Conagra, Incorporated............................... 286,450
4,100 CPC International, Incorporated..................... 282,387
4,600 General Mills, Incorporated......................... 253,000
10,150 Heinz, H. J. and Company............................ 319,725
1,800 Hershey Foods Corporation........................... 156,825
6,100 Kellogg Company..................................... 411,750
43,500 Pepsico, Incorporated............................... 1,250,625
23,400 Phillip Morris Companies Incorporated............... 2,100,150
2,300 Pioneer Hi-Bred International, Incorporated......... 126,788
3,800 Quaker Oats Company................................. 124,925
3,000 Ralston Purina Company.............................. 187,500
5,200 Sysco Corporation................................... 167,050
4,600 Unilever N.V........................................ 660,100
3,000 Whitman Corporation................................. 67,125
3,300 Wrigley, Wm. Jr. Company............................ 178,613
------------
10,796,400
------------
AIRLINES - 0.36%
2,600 AMR Corporation*.................................... 213,200
2,200 Delta Air Lines, Incorporated....................... 155,925
4,300 Southwest Airlines Company.......................... 98,362
1,600 USAir Group, Incorporated*.......................... 28,600
------------
496,087
------------
ALCOHOL - 0.67%
7,100 Anheuser-Busch Companies, Incorporated.............. 537,825
1,200 Brown Forman Corporation............................ 43,500
10,400 Seagram Company Limited............................. 344,500
------------
925,825
------------
APPAREL, RETAIL - 0.55%
8,000 Gap, Incorporated................................... 280,000
2,200 Harcourt General, Incorporated...................... 105,325
7,519 Limited, Incorporated............................... 139,101
2,300 Nordstrom, Incorporated............................. 89,700
2,000 TJX Companies, Incorporated......................... 64,000
3,700 Woolworth Corporation*.............................. 78,625
------------
756,751
------------
APPAREL, TEXTILES - 0.79%
2,000 Fruit of the Loom, Incorporated*.................... 55,500
2,000 Liz Claiborne, Incorporated......................... 69,500
2,600 Nike Incorporated................................... 280,800
2,000 Reebok International Limited........................ 72,000
1,200 Russell Corporation................................. 38,400
13,400 Sara Lee Corporation................................ 422,100
900 Springs Industries, Incorporated.................... 40,612
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
</TABLE>
APPAREL, TEXTILES - (CONCLUDED)
<TABLE>
<C> <S> <C>
2,000 V. F. Corporation................................... $ 117,500
------------
1,096,412
------------
BANKS - 7.51%
11,989 Banc One Corporation................................ 460,078
4,300 Bank of Boston Corporation.......................... 226,825
10,700 Bank of New York Company Incorporated............... 298,262
10,100 BankAmerica Corporation............................. 782,750
2,400 Bankers Trust New York Corporation.................. 186,600
2,800 Barnett Banks Incorporated.......................... 183,750
4,400 Boatmen's Bancshares, Incorporated.................. 234,300
12,220 Chase Manhattan Corporation......................... 908,862
13,500 Citicorp............................................ 1,123,875
3,300 Comerica, Incorporated.............................. 160,875
6,100 Corestates Financial Corporation.................... 252,387
2,900 Fifth Third Bancorp................................. 153,700
3,900 First Bank System, Incorporated..................... 250,575
8,872 First Chicago Corporation........................... 378,169
7,985 First Union Corporation............................. 510,042
7,316 Fleet Financial Group, Incorporated................. 305,443
5,400 J.P. Morgan & Company, Incorporated................. 473,175
6,440 KeyCorp............................................. 258,405
3,650 Mellon Bank Corporation............................. 202,119
6,100 National City Corporation........................... 229,512
8,400 NationsBank Corporation............................. 715,050
10,100 Norwest Corporation................................. 380,013
9,400 PNC Bank Corporation................................ 293,750
1,800 Republic New York Corporation....................... 119,025
6,300 Suntrust Banks, Incorporated........................ 241,763
4,400 US Bancorp, Incorporated............................ 168,300
4,800 Wachovia Corporation................................ 219,600
2,767 Wells Fargo and Company............................. 688,209
------------
10,405,414
------------
CHEMICALS - 2.86%
3,200 Air Products & Chemicals, Incorporated.............. 175,200
8,000 Allied-Signal, Incorporated......................... 494,000
1,500 Avery Dennison Corporation.......................... 76,687
7,000 Dow Chemical Company................................ 558,250
2,300 Eastman Chemical Company............................ 128,512
3,900 Freeport-McMoran Copper & Gold, Incorporated........ 114,562
1,600 Goodrich, B.F. Company.............................. 60,000
2,800 Grace, W.R. & Company............................... 183,750
1,900 Great Lakes Chemical Corporation.................... 109,250
3,000 Hercules, Incorporated.............................. 149,250
3,100 International Flavors and Fragrances................ 133,300
1,500 Kerr-Mcgee Corporation.............................. 86,062
</TABLE>
7
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
</TABLE>
COMMON STOCKS - (CONTINUED)
CHEMICALS - (CONCLUDED)
<TABLE>
<C> <S> <C>
16,100 Monsanto Company.................................... $ 517,212
4,100 Morton International, Incorporated.................. 152,213
1,900 Nalco Chemical Company.............................. 61,038
8,800 Occidental Petroleum Corporation.................... 204,600
1,900 Phelps Dodge Corporation............................ 114,950
4,300 Praxair, Incorporated............................... 176,838
1,900 Rohm & Haas Company................................. 118,750
2,500 Sherwin Williams Company............................ 109,375
1,500 Sigma Aldrich Corporation........................... 79,125
3,600 Union Carbide Corporation........................... 155,700
------------
3,958,624
------------
COMPUTER HARDWARE - 4.73%
4,700 3Com Corporation*................................... 219,725
3,700 Amdahl Corporation*................................. 36,768
4,000 Apple Computer, Incorporated........................ 97,000
5,300 Bay Networks, Incorporated*......................... 145,750
2,200 Cabletron Systems, Incorporated*.................... 134,200
18,000 Cisco Systems Incorporated*......................... 949,500
7,600 Compaq Computer Corporation*........................ 430,350
4,400 Digital Equipment Corporation*...................... 169,950
6,400 EMC Corporation*.................................... 123,200
28,700 Hewlett-Packard Company............................. 1,255,625
14,900 International Business Machines..................... 1,704,187
4,300 Pitney Bowes, Incorporated.......................... 207,475
3,000 Seagate Technology, Incorporated*................... 144,000
4,700 Silicon Graphics, Incorporated*..................... 109,275
5,100 Sun Microsystems Incorporated*...................... 277,312
3,500 Tandem Computers, Incorporated*..................... 36,750
5,100 Unisys Corporation*................................. 29,963
9,100 Xerox Corporation................................... 499,363
------------
6,570,393
------------
COMPUTER SOFTWARE - 2.43%
1,300 Autodesk, Incorporated.............................. 29,900
10,175 Computer Associates International Incorporated...... 534,187
16,800 Microsoft Corporation*.............................. 2,058,000
10,000 Novell, Incorporated*............................... 104,375
18,175 Oracle Systems Corporation*......................... 640,669
------------
3,367,131
------------
CONSUMER DURABLES - 0.22%
4,500 Masco Corporation................................... 131,063
3,000 Maytag Corporation.................................. 60,375
2,300 Whirlpool Corporation............................... 112,700
------------
304,138
------------
DEFENSE/AEROSPACE - 2.20%
9,800 Boeing Company...................................... 886,900
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
</TABLE>
DEFENSE/AEROSPACE - (CONCLUDED)
<TABLE>
<C> <S> <C>
1,800 General Dynamics Corporation........................ $ 115,425
3,300 ITT Industries Incorporated......................... 75,487
5,630 Lockheed Martin Corporation......................... 473,624
6,200 McDonnell Douglas Corporation....................... 310,775
1,700 Northrop Grumman Corporation........................ 121,975
6,700 Raytheon Company.................................... 345,050
6,100 Rockwell International Corporation.................. 317,200
3,500 United Technologies Corporation..................... 394,625
------------
3,041,061
------------
DIVERSIFIED RETAIL - 2.57%
6,000 Dayton Hudson Corporation........................... 207,000
3,100 Dillard Department Stores, Incorporated............. 105,400
5,800 Federated Department Stores, Incorporated*.......... 200,825
13,600 K Mart Corporation.................................. 136,000
7,100 May Department Stores Company....................... 323,050
1,300 Mercantile Stores, Incorporated..................... 68,575
6,500 Penney, J.C., Incorporated.......................... 343,688
11,100 Sears Roebuck & Company............................. 488,400
63,900 Wal Mart Stores, Incorporated....................... 1,693,350
------------
3,566,288
------------
DRUGS & MEDICINE - 6.43%
1,800 Allergan, Incorporated.............................. 69,975
2,400 Alza Corporation*................................... 65,700
17,800 American Home Products Corporation.................. 1,054,650
7,500 Amgen, Incorporated*................................ 436,875
14,200 Bristol-Myers Squibb Company........................ 1,246,050
15,380 Lilly, Eli & Company................................ 880,505
34,200 Merck & Company, Incorporated....................... 2,244,375
18,000 Pfizer, Incorporated................................ 1,278,000
14,190 Pharmacia & Upjohn, Incorporated.................... 595,980
10,400 Schering-Plough Corporation......................... 581,100
7,600 Warner Lambert Company.............................. 452,200
------------
8,905,410
------------
ELECTRIC UTILITIES - 3.13%
5,200 American Electric Power, Incorporated............... 215,800
3,900 Baltimore Gas & Electric Company.................... 101,400
4,700 Carolina Power and Light Company.................... 163,912
5,500 Central & South West Corporation.................... 145,062
4,225 Cinergy Corporation................................. 126,750
6,400 Consolidated Edison Company of New York,
Incorporated...................................... 167,200
5,100 Dominion Resources, Incorporated.................... 190,612
4,000 DTE Energy Company.................................. 114,000
</TABLE>
8
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
</TABLE>
COMMON STOCKS - (CONTINUED)
ELECTRIC UTILITIES - (CONCLUDED)
<TABLE>
<C> <S> <C>
6,000 Duke Power Company.................................. $ 280,500
12,000 Edison International, Incorporated.................. 208,500
6,100 Entergy Corporation................................. 154,788
5,200 FPL Group, Incorporated............................. 230,100
3,300 General Public Utilities Corporation................ 103,950
7,000 Houston Industries, Incorporated.................... 152,250
4,000 Niagara Mohawk Power Corporation.................... 33,000
2,300 Northern States Power Company....................... 104,938
4,100 Ohio Edison Company................................. 86,100
11,400 Pacific Gas & Electric Company...................... 257,925
7,800 PacifiCorp.......................................... 156,975
6,000 PECO Energy Company................................. 141,000
4,200 Pennsylvania Power & Light Company.................. 94,500
6,500 Public Service Enterprise Group, Incorporated....... 176,313
18,200 Southern Company.................................... 411,775
6,300 Texas Utilities Company............................. 258,300
5,700 Unicom Corporation.................................. 131,100
3,300 Union Electric Company.............................. 123,338
------------
4,330,087
------------
ELECTRICAL POWER - 1.02%
5,984 AMP, Incorporated................................... 228,888
3,100 Cooper Industries, Incorporated..................... 125,550
6,400 Emerson Electric Company............................ 536,000
1,100 Foster Wheeler Corporation.......................... 47,437
1,400 General Signal Corporation.......................... 56,175
1,500 Grainger, W.W., Incorporated........................ 101,250
1,200 Raychem Corporation................................. 82,350
1,200 Thomas & Betts Corporation.......................... 44,100
11,500 Westinghouse Electric Corporation................... 188,313
------------
1,410,063
------------
ENERGY RESERVES & PRODUCTION - 7.18%
14,000 Amoco Corporation................................... 966,000
3,500 Burlington Resources, Incorporated.................. 149,187
18,400 Chevron Corporation................................. 1,083,300
34,900 Exxon Corporation................................... 2,839,987
1,100 Louisiana Land & Exploration Company................ 62,563
11,200 Mobil Corporation................................... 1,262,800
3,100 Oryx Energy Company*................................ 54,250
4,000 Panenergy Corporation............................... 132,500
1,500 Pennzoil Company.................................... 80,063
7,200 Phillips Petroleum Company.......................... 291,600
15,100 Royal Dutch Petroleum Company....................... 2,255,563
7,600 Texaco, Incorporated................................ 674,500
1,500 Western Atlas, Incorporated*........................ 91,125
------------
9,943,438
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
ENTERTAINMENT - 1.31%
19,100 Disney, Walt Company................................ $ 1,088,700
2,950 Harrah's Entertainment, Incorporated*............... 56,050
1,200 King World Productions, Incorporated*............... 42,300
10,900 Time Warner Incorporated............................ 363,787
8,349 Viacom, Incorporated, Class B*...................... 262,994
------------
1,813,831
------------
ENVIRONMENTAL SERVICES - 0.55%
6,100 Browning Ferris Industries, Incorporated............ 155,550
19,200 Laidlaw, Incorporated, Class B...................... 184,800
13,400 WMX Technologies, Incorporated...................... 423,775
------------
764,125
------------
FINANCIAL SERVICES - 5.48%
13,300 American Express Company............................ 581,875
3,000 Aon Corporation..................................... 151,500
1,600 Beneficial Corporation.............................. 90,200
4,764 Dean Witter, Discover & Company..................... 238,200
5,200 Federal Home Loan Mortgage Corporation.............. 459,550
30,300 Federal National Mortgage Association............... 939,300
46,600 General Electric Company............................ 3,873,625
3,900 Green Tree Financial Corporation.................... 135,525
2,800 Household International, Incorporated............... 221,900
2,200 Marsh & McLennan Companies, Incorporated............ 204,600
6,200 MBNA Corporation.................................... 188,325
4,800 Merrill Lynch & Company, Incorporated............... 294,000
2,400 Textron Incorporated................................ 204,900
------------
7,583,500
------------
FOREST PRODUCTS, PAPER - 1.74%
3,600 Alco Standard Corporation........................... 157,050
1,500 Bemis, Incorporated................................. 44,812
1,400 Boise Cascade Corporation........................... 47,250
2,700 Champion International Corporation.................. 116,100
2,600 Georgia-Pacific Corporation......................... 193,375
8,200 International Paper Company......................... 328,000
2,300 James River Corporation............................. 59,800
7,860 Kimberly Clark Corporation.......................... 616,027
3,000 Louisiana Pacific Corporation....................... 65,250
1,600 Mead Corporation.................................... 91,600
1,000 Potlatch Corporation................................ 37,625
3,020 Stone Container Corporation......................... 41,902
1,700 Temple-Inland, Incorporated......................... 83,938
2,000 Union Camp Corporation.............................. 97,000
2,800 Westvaco Corporation................................ 80,150
</TABLE>
9
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
</TABLE>
COMMON STOCKS - (CONTINUED)
FOREST PRODUCTS, PAPER - (CONCLUDED)
<TABLE>
<C> <S> <C>
5,500 Weyerhaeuser Company................................ $ 245,438
1,600 Willamette Industries, Incorporated................. 98,800
------------
2,404,117
------------
FOOD RETAIL - 0.65%
7,000 Albertson's, Incorporated........................... 296,625
4,100 American Stores Company............................. 168,612
1,700 Giant Food, Incorporated, Class A................... 57,163
1,300 Great Atlantic & Pacific Tea, Incorporated.......... 34,775
3,400 Kroger Company*..................................... 144,075
2,000 Supervalue, Incorporated............................ 56,250
4,200 Winn Dixie Stores, Incorporated..................... 144,375
------------
901,875
------------
FREIGHT, AIR, SEA, LAND - 0.09%
1,700 Federal Express Corporation*........................ 127,288
------------
GAS UTILITY - 0.52%
1,700 Columbia Gas System, Incorporated................... 95,625
2,600 Consolidated Natural Gas Company.................... 141,375
2,000 Enserch Corporation................................. 40,250
2,100 NICOR, Incorporated................................. 65,887
10,100 Noram Energy Corporation............................ 147,712
2,500 Pacific Enterprises................................. 74,688
1,400 Peoples Energy Corporation.......................... 47,600
2,300 Sonat, Incorporated................................. 101,487
------------
714,624
------------
HEAVY MACHINERY - 0.57%
5,500 Caterpillar, Incorporated........................... 378,812
1,300 Cummins Engine Company, Incorporated................ 48,912
7,200 Deere & Company..................................... 286,200
1,300 Harnischfeger Industries, Incorporated.............. 49,075
1,600 McDermott International, Incorporated............... 33,200
------------
796,199
------------
HOTELS - 0.60%
2,800 Bally Entertainment Group*.......................... 76,300
3,400 HFS, Incorporated*.................................. 203,575
1,500 Hilton Hotels Corporation........................... 160,312
3,400 ITT Corporation*.................................... 181,050
3,700 Marriott International, Incorporated................ 203,038
------------
824,275
------------
HOUSEHOLD PRODUCTS - 2.70%
4,900 American Brands, Incorporated....................... 199,062
3,800 Avon Products, Incorporated......................... 181,925
1,500 Clorox Company...................................... 140,438
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
</TABLE>
HOUSEHOLD PRODUCTS - (CONCLUDED)
<TABLE>
<C> <S> <C>
4,100 Colgate-Palmolive Company........................... $ 333,125
12,400 Gillette Company.................................... 790,500
1,400 National Services Industries, Incorporated.......... 53,200
4,400 Newell Company...................................... 136,950
19,300 Procter & Gamble Company............................ 1,715,288
4,200 Rubbermaid, Incorporated............................ 111,300
1,800 Tupperware Corporation.............................. 78,750
------------
3,740,538
------------
INDUSTRIAL SERVICES/SUPPLIES - 0.29%
6,750 CUC International, Incorporated*.................... 232,031
1,800 Ecolab, Incorporated................................ 54,675
1,500 Owens-Corning Fiberglass*........................... 54,563
2,200 Ryder Systems, Incorporated......................... 62,425
------------
403,694
------------
INFORMATION & COMPUTER SERVICES - 1.21%
8,000 Automatic Data Processing, Incorporated............. 333,000
3,100 Block, H&R, Incorporated............................ 77,500
2,000 Ceridian Corporation*............................... 85,250
2,200 Computer Sciences Corporation*...................... 154,000
2,700 Dow Jones & Company, Incorporated................... 105,637
4,900 Dun & Bradstreet Corporation........................ 282,363
6,400 First Data Corporation.............................. 499,200
2,100 Interpublic Group Companies, Incorporated........... 95,025
700 Shared Medical System Corporation................... 38,238
------------
1,670,213
------------
LEISURE - 0.78%
2,800 Brunswick Corporation............................... 59,150
9,400 Eastman Kodak Company............................... 681,500
2,400 Hasbro, Incorporated................................ 88,200
7,583 Mattel Incorporated................................. 200,002
1,200 Polaroid Corporation................................ 50,850
------------
1,079,702
------------
LIFE INSURANCE - 1.43%
5,800 American General Corporation........................ 211,700
4,900 Chubb Corporation................................... 217,437
2,200 CIGNA Corporation................................... 255,475
2,050 Jefferson-Pilot Corporation......................... 105,319
2,900 Lincoln National Corporation........................ 128,325
2,700 Providian Corporation............................... 111,712
1,950 Torchmark, Incorporated............................. 82,875
2,000 Transamerica Corporation............................ 136,250
13,159 Travelers Group Incorporated........................ 570,772
2,100 UNUM Corporation.................................... 133,350
1,100 USLIFE Corporation.................................. 32,175
------------
1,985,390
------------
LONG DISTANCE & PHONE COMPANIES - 6.97%
5,300 Alltel Corporation.................................. 149,725
</TABLE>
10
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
</TABLE>
COMMON STOCKS - (CONTINUED)
LONG DISTANCE & PHONE COMPANIES - (CONCLUDED)
<TABLE>
<C> <S> <C>
15,600 Ameritech Corporation............................... $ 805,350
45,300 AT&T Corporation.................................... 2,378,250
12,500 Bell Atlantic Corporation........................... 703,125
27,700 BellSouth Corporation............................... 1,004,125
27,200 GTE Corporation..................................... 1,071,000
19,100 MCI Communications Corporation...................... 479,887
12,400 NYNEX Corporation................................... 534,750
11,700 Pacific Telesis Group............................... 378,788
17,200 SBC Communications, Incorporated.................... 801,950
12,200 Sprint Corporation.................................. 495,625
26,200 US West, Incorporated*.............................. 623,888
10,700 WorldCom, Incorporated*............................. 224,700
------------
9,651,163
------------
MANUFACTURING - GENERAL - 0.91%
2,400 Black & Decker Corporation.......................... 94,800
900 Briggs & Stratton Corporation....................... 39,150
2,000 Case Corporation.................................... 91,000
900 Crane Company....................................... 36,000
3,100 Dover Corporation................................... 136,012
3,500 Illinois Tool Works, Incorporated................... 241,938
3,100 Ingersoll Rand Company.............................. 132,525
2,100 Parker-Hannifin Corporation......................... 81,900
1,200 Snap-On, Incorporated............................... 54,750
2,500 Stanley Works....................................... 68,750
1,100 Timken Company...................................... 41,800
4,200 Tyco International Limited.......................... 177,450
1,200 Varity Corporation*................................. 60,300
------------
1,256,375
------------
MANUFACTURING - HIGH TECHNOLOGY - 1.68%
1,737 Andrew Corporation*................................. 77,296
3,200 DSC Communications Corporation*..................... 95,200
2,300 Eaton Corporation................................... 127,362
3,500 General Instrument Corporation*..................... 95,813
1,200 Harris Corporation.................................. 73,800
3,600 Honeywell, Incorporated............................. 209,250
1,300 Johnson Controls, Incorporated...................... 91,650
1,200 Millipore Corporation............................... 45,900
16,700 Motorola, Incorporated.............................. 891,363
7,200 Northern Telecommunications Limited................. 359,100
1,200 Perkin Elmer Corporation............................ 62,250
1,000 Tektronix, Incorporated............................. 38,750
2,500 Tellabs, Incorporated*.............................. 158,438
------------
2,326,172
------------
MEDIA - 0.26%
5,300 Comcast Corporation, Class A Special................ 85,462
2,100 Scientific-Atlanta, Incorporated.................... 28,350
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
</TABLE>
MEDIA - (CONCLUDED)
<TABLE>
<C> <S> <C>
16,100 Tele-Communications, Incorporated Class A*.......... $ 239,488
------------
353,300
------------
MEDICAL PRODUCTS - 3.73%
21,900 Abbott Laboratories................................. 988,237
1,600 Bard, C.R., Incorporated............................ 49,600
1,600 Bausch & Lomb, Incorporated......................... 53,000
7,600 Baxter International, Incorporated.................. 339,150
3,600 Becton, Dickinson & Company......................... 147,150
3,300 Biomet, Incorporated*............................... 51,563
5,100 Boston Scientific Corporation*...................... 233,963
37,200 Johnson & Johnson................................... 1,832,100
2,100 Mallinckrodt Group, Incorporated.................... 85,050
6,800 Medtronic, Incorporated............................. 353,600
11,800 Minnesota Mining & Manufacturing Company............ 811,250
3,166 Pall Corporation.................................... 74,401
2,200 St. Jude Medical, Incorporated*..................... 78,925
1,700 U.S. Surgical Corporation........................... 62,050
------------
5,160,039
------------
MEDICAL PROVIDERS - 1.18%
3,100 Beverly Enterprises*................................ 31,775
12,585 Columbia Healthcare Corporation..................... 709,479
6,400 Corning, Incorporated............................... 238,400
4,600 Humana Incorporated*................................ 86,250
1,800 Manor Care, Incorporated............................ 61,875
3,200 Service Corporation International................... 180,400
6,000 Tenet Healthcare Corporation*....................... 126,000
5,200 United Healthcare Corporation....................... 200,850
------------
1,635,029
------------
MINING & METALS - 1.19%
7,100 Alcan Aluminum Limited.............................. 222,762
3,080 Allegheny Teldyne, Incorporated..................... 62,370
4,800 Aluminum Company of America......................... 298,200
1,400 Asarco, Incorporated................................ 36,225
3,000 Bethleham Steel Corporation*........................ 30,750
3,600 Crown Cork & Seal, Incorporated..................... 168,300
2,700 Cyprus Amax Minerals Company........................ 57,375
4,600 Inco Limited........................................ 148,350
1,800 Inland Steel Industries, Incorporated............... 31,050
2,400 Nucor Corporation................................... 112,200
5,200 PPG Industries, Incorporated........................ 256,750
1,800 Reynolds Metals Company............................. 96,300
2,500 USX-U.S. Steel Group, Incorporated.................. 68,750
2,550 Worthington Industries, Incorporated................ 51,638
------------
1,641,020
------------
MOTOR VEHICLES - 2.55%
20,300 Chrysler Corporation................................ 591,237
</TABLE>
11
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
</TABLE>
COMMON STOCKS - (CONTINUED)
MOTOR VEHICLES - (CONCLUDED)
<TABLE>
<C> <S> <C>
2,500 Cooper Tire & Rubber Company........................ $ 48,750
2,900 DANA Corporation.................................... 87,000
1,800 Echlin, Incorporated................................ 54,900
33,100 Ford Motor Company.................................. 1,108,850
21,300 General Motors Corporation.......................... 1,059,675
3,500 Genuine Parts Company............................... 150,063
4,300 Goodyear Tire & Rubber Company...................... 196,188
1,365 Paccar, Incorporated................................ 61,766
1,900 TRW, Incorporated................................... 175,750
------------
3,534,179
------------
OIL REFINING - 2.25%
2,700 Amerada Hess Corporation............................ 137,362
1,800 Ashland, Incorporated............................... 66,825
4,600 Atlantic Richfield Company.......................... 537,050
2,900 Coastal Corporation................................. 114,912
15,800 DuPont (E.I.) deNemours & Company................... 1,297,575
6,700 Enron Corporation................................... 268,838
2,092 Sun Company, Incorporated........................... 49,424
5,000 Tenneco, Incorporated............................... 248,750
6,800 Unocal Corporation.................................. 232,900
7,900 USX-Marathon Group.................................. 164,913
------------
3,118,549
------------
OIL SERVICES - 0.88%
4,000 Baker Hughes, Incorporated.......................... 121,000
4,900 Dresser Industries, Incorporated.................... 142,100
3,100 Halliburton Company................................. 163,137
4,500 Rowan Companies, Incorporated*...................... 69,188
6,800 Schlumberger Limited................................ 573,750
2,900 Williams Companies, Incorporated.................... 144,638
------------
1,213,813
------------
OTHER INSURANCE - 2.34%
4,298 Aetna Life & Casualty Company....................... 284,173
12,342 Allstate Corporation................................ 550,762
13,200 American International Group Incorporated........... 1,254,000
2,300 General Re Corporation.............................. 333,212
3,300 ITT Hartford Group, Incorporated.................... 174,075
3,300 Loews Corporation................................... 246,675
1,700 MGIC Investment Corporation......................... 107,738
3,500 SAFECO Corporation.................................. 115,938
2,300 St. Paul Companies, Incorporated.................... 119,025
3,400 USF&G Corporation................................... 54,825
------------
3,240,423
------------
PRECIOUS METALS - 0.66%
9,800 Barrick Gold Corporation............................ 264,600
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
</TABLE>
PRECIOUS METALS - (CONCLUDED)
<TABLE>
<C> <S> <C>
7,200 Battle Mountain Gold Company........................ $ 61,200
3,950 Engelhard Corporation............................... 80,481
1,100 FMC Corporation*.................................... 70,400
4,000 Homestake Mining Company............................ 66,000
2,921 Newmont Mining Corporation.......................... 154,448
6,800 Placer Dome, Incorporated........................... 163,200
4,100 Santa Fe Pacific Gold Corporation................... 53,300
------------
913,629
------------
PUBLISHING - 0.85%
2,200 American Greetings Corporation, Class A............. 56,650
2,400 Deluxe Corporation.................................. 91,800
4,400 Donnelley, R.R. & Sons Company...................... 143,550
4,100 Gannett, Incorporated............................... 274,700
2,800 Knight Ridder, Incorporated......................... 94,500
2,800 McGraw-Hill Companies, Incorporated................. 114,800
3,200 Moore Corporation Limited........................... 56,000
2,700 New York Times Company, Class A..................... 84,375
3,000 Times Mirror Company................................ 130,125
1,900 Tribune Company..................................... 136,563
------------
1,183,063
------------
RAILROADS - 1.07%
4,222 Burlington Northern Santa Fe, Incorporated.......... 337,760
2,200 Consolidated Rail, Incorporated..................... 149,875
5,700 CSX Corporation..................................... 288,562
3,500 Norfolk Southern Corporation........................ 291,813
5,700 Union Pacific Corporation........................... 415,388
------------
1,483,398
------------
REAL PROPERTY - 0.15%
1,200 Armstrong World Industries, Incorporated............ 74,250
2,400 Fluor Corporation................................... 153,600
------------
227,850
------------
RESTAURANTS - 0.75%
6,100 Darden Restaurants, Incorporated.................... 48,800
19,600 McDonalds Corporation............................... 908,950
3,700 Wendy's International, Incorporated................. 74,925
------------
1,032,675
------------
SECURITIES & ASSET MANAGEMENT - 0.24%
4,200 Morgan Stanley Group, Incorporated.................. 200,550
2,900 Salomon, Incorporated............................... 130,500
------------
331,050
------------
</TABLE>
12
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
</TABLE>
COMMON STOCKS - (CONTINUED)
<TABLE>
<C> <S> <C>
SEMICONDUCTOR - 1.85%
4,400 Advanced Micro Devices, Incorporated................ $ 56,100
5,100 Applied Materials, Incorporated*.................... 123,675
23,100 Intel Corporation................................... 1,843,669
3,600 LSI Logic Corporation*.............................. 78,750
5,800 Micron Technology, Incorporated..................... 131,950
3,800 National Semiconductor Corporation*................. 69,825
5,400 Texas Instruments, Incorporated..................... 252,450
------------
2,556,419
------------
SPECIALTY RETAIL - 1.38%
2,700 Circuit City Stores, Incorporated................... 85,050
13,500 Home Depot, Incorporated............................ 717,187
900 Longs Drug Stores Corporation....................... 36,000
4,900 Lowe's Companies, Incorporated...................... 177,013
3,100 Melville Corporation................................ 130,975
1,700 Pep Boys-Manny, Moe & Jack.......................... 56,950
5,408 Price Costco, Incorporated*......................... 107,484
2,400 Rite Aid Corporation................................ 76,500
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
</TABLE>
SPECIALTY RETAIL - (CONCLUDED)
<TABLE>
<C> <S> <C>
1,800 Tandy Corporation................................... $ 79,425
7,600 Toys R Us, Incorporated*............................ 224,200
6,800 Walgreen Company.................................... 224,400
------------
1,915,184
------------
THRIFT - 0.20%
2,900 Ahmanson, H F & Company............................. 73,225
2,000 Golden West Financial Corporation................... 111,000
3,900 Great Western Financial Corporation................. 96,525
------------
280,750
------------
TOBACCO - 0.11%
5,300 UST, Incorporated................................... 159,000
------------
WIRELESS TELECOMMUNICATIONS - 0.28%
13,900 Airtouch Communications, Incorporated*.............. 382,250
------------
Total Common Stocks (cost--$121,597,176)......................... 138,278,223
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATE RATE
- --------- -------- --------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT - 0.50%
$ 690 Repurchase Agreement dated 08/30/96, with State Street Bank & Trust Company,
collateralized by $790,406 U.S. Treasury Bonds, 6.250%, due 08/15/23;
proceeds: $690,364 (cost--$690,000)........................................... 09/03/96 4.750% 690,000
------------
Total Investments (cost--$122,287,176)--100.35%.............................................. 138,968,223
Liabilities in excess of other assets--(0.35)%............................................... (488,982)
------------
Net Assets--100.00%......................................................................... $138,479,241
------------
------------
</TABLE>
- ---------------
* Non-income producing
See accompanying notes to financial statements
13
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost--$122,287,176)............................................ $138,968,223
Receivable for shares of beneficial interest sold................................................... 2,060,908
Dividends and interest receivable................................................................... 316,393
Deferred organizational expenses.................................................................... 51,949
Other assets........................................................................................ 16,722
------------
Total assets........................................................................................ 141,414,195
------------
LIABILITIES
Payable for investments purchased................................................................... 2,415,075
Payable for shares of beneficial interest repurchased............................................... 327,864
Payable to affiliate................................................................................ 143,702
Accrued expenses and other liabilities.............................................................. 48,313
------------
Total liabilities................................................................................... 2,934,954
------------
NET ASSETS
Beneficial interest--$0.001 par value (unlimited amount authorized)................................. 121,288,719
Undistributed net investment income................................................................. 105,244
Accumulated net realized gains from investment transactions......................................... 404,231
Net unrealized appreciation of investments.......................................................... 16,681,047
------------
Net assets.......................................................................................... $138,479,241
------------
------------
CLASS A:
Net assets.......................................................................................... $ 23,551,288
------------
Shares outstanding.................................................................................. 1,458,031
------------
Net asset value and redemption value per share...................................................... $16.15
------------
------------
Maximum offering price per share (net asset value plus sales charge of 4.50% of offering price)..... $16.91
------------
------------
CLASS B:
Net assets.......................................................................................... $ 28,495,038
------------
Shares outstanding.................................................................................. 1,767,032
------------
Net asset value and offering price per share........................................................ $16.13
------------
------------
CLASS C:
Net assets.......................................................................................... $ 73,630,053
------------
Shares outstanding.................................................................................. 4,568,935
------------
Net asset value and offering price per share........................................................ $16.12
------------
------------
CLASS Y:
Net assets.......................................................................................... $ 12,802,862
------------
Shares outstanding.................................................................................. 790,410
------------
Net asset value, offering price and redemption value per share...................................... $16.20
------------
------------
</TABLE>
See accompanying notes to financial statements
14
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends and interest................................................................................ $1,856,774
----------
EXPENSES:
Investment advisory and administration................................................................ 402,466
Service fees-Class A.................................................................................. 20,658
Service and distribution fees-Class B................................................................. 62,559
Service and distribution fees-Class C................................................................. 575,484
Custody and accounting................................................................................ 89,144
Transfer agency....................................................................................... 58,997
Amortization of organizational expenses............................................................... 49,604
Reports and notices to shareholders................................................................... 45,582
Legal and audit....................................................................................... 37,410
Federal and state registration........................................................................ 35,510
Trustees' fees........................................................................................ 15,750
Other expenses........................................................................................ 22,989
----------
1,416,153
----------
Net investment income................................................................................. 440,621
----------
REALIZED AND UNREALIZED GAINS FROM INVESTMENT ACTIVITIES:
Net realized gains from investment transactions....................................................... 639,897
Net change in unrealized appreciation/depreciation of investments..................................... 7,172,338
----------
NET REALIZED AND UNREALIZED GAINS FROM INVESTMENT ACTIVITIES.......................................... 7,812,235
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................................. $8,252,856
----------
----------
</TABLE>
See accompanying notes to financial statements
15
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED AUGUST 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income.................................................................. $ 440,621 $ 521,857
Net realized gains from investment transactions........................................ 639,897 4,134,795
Net change in unrealized appreciation/depreciation of investments...................... 7,172,338 3,525,426
----------- -----------
Net increase in net assets resulting from operations................................... 8,252,856 8,182,078
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class A......................................................... (21,259) (28,999)
Net investment income--Class C......................................................... (231,540) (477,902)
Net investment income--Class Y......................................................... (26,853) (61,587)
Net realized gains from investment transactions--Class A............................... (164,292) (119,229)
Net realized gains from investment transactions--Class C............................... (3,334,342) (3,841,032)
Net realized gains from investment transactions--Class Y............................... (171,644) (244,263)
----------- -----------
Total dividends and distributions to shareholders...................................... (3,949,930) (4,773,012)
----------- -----------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares................................................... 101,580,239 4,589,510
Cost of shares repurchased............................................................. (23,861,622) (28,817,534)
Proceeds from dividends reinvested..................................................... 3,902,294 4,723,579
----------- -----------
Net increase (decrease) in net assets from beneficial interest transactions............ 81,620,911 (19,504,445)
----------- -----------
Net increase (decrease) in net assets.................................................. 85,923,837 (16,095,379)
NET ASSETS:
Beginning of year...................................................................... 52,555,404 68,650,783
----------- -----------
End of year (including undistributed net investment income of $105,244 at August 31,
1996)................................................................................ $138,479,241 $52,555,404
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements
16
<PAGE>
PAINEWEBBER NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Tactical Allocation Fund (formerly Mitchell
Hutchins/Kidder, Peabody Asset Allocation Fund) (the "Fund") is a
series of PaineWebber Investment Trust (formerly Mitchell
Hutchins/Kidder, Peabody Investment Trust) (the "Trust") and is
registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended, as an open-end,
diversified management investment company. Organizational costs
have been deferred and are being amortized using the straight line
method over a period not to exceed 60 months from the date the Fund
commenced operations.
Currently, the Fund offers Class A, Class B, Class C and Class Y
shares. Each class represents interests in the same assets of the
Fund, and the classes are identical except for differences in their
sales charge structures, ongoing service and distribution charges
and certain transfer agency expenses. In addition, Class B shares
and all corresponding dividend reinvested shares automatically
convert to Class A shares approximately six years after initial
issuance. All classes of shares have equal voting privileges,
except that each class has exclusive voting rights with respect to
its service and/or distribution plan.
The preparation of financial statements in accordance with
generally accepted accounting principles requires Fund management
to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could
differ from those estimates. The following is a summary of
significant accounting policies:
VALUATION OF INVESTMENTS - Where market quotations are readily
available, portfolio securities are valued thereon, provided such
quotations adequately reflect the fair value of the securities in
the judgment of Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins"), a wholly owned subsidiary of PaineWebber Incorporated
("PaineWebber") and investment adviser, administrator and
distributor of the Fund. When market quotations are not readily
available, securities are valued based upon appraisals derived from
information concerning those securities or similar securities
received from recognized dealers in those securities. All other
securities are valued at fair value as determined in good faith by
or under the direction of the Trust's board of trustees. The
amortized cost method of valuation, which approximates market
value, is used to value debt obligations with 60 days or less
remaining to maturity, unless the Trust's board of trustees
determines that this does not represent fair value.
REPURCHASE AGREEMENTS - The Fund's custodian takes possession of
the collateral pledged for investments in repurchase agreements.
The underlying collateral is valued daily on a mark-to-market basis
to ensure that the value, including accrued interest, is at least
equal to the repurchase price. In the event of default of the
obligation to repurchase, the Fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or
bankruptcy by the other party to the agreement, realization and/or
retention of the
17
<PAGE>
PAINEWEBBER
collateral may be subject to legal proceedings. The Fund
occasionally participates in joint repurchase agreement
transactions with other funds managed by Mitchell Hutchins.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME - Investment
transactions are recorded on the trade date. Realized gains and
losses from investment transactions are calculated using the
identified cost method. Interest income is recorded on an accrual
basis. Dividend income is recorded on the ex-dividend date.
Discounts are accreted and premiums are amortized as adjustments to
interest income and the identified cost of investments.
Income, expenses (excluding class-specific expenses) and
realized/unrealized gains/ losses are allocated proportionately to
each class of shares based upon the relative net asset value of
outstanding shares (or the value of dividend-eligible shares, as
appropriate) of each class at the beginning of the day (after
adjusting for current capital share activity of the respective
classses). Class-specific expenses are charged directly to the
applicable class of shares.
DIVIDENDS AND DISTRIBUTIONS - Dividends and distributions to
shareholders are recorded on the ex-dividend date. The amount of
dividends and distributions are determined in accordance with
federal income tax regulations, which may differ from generally
accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent
these differences are permanent in nature, such amounts are
reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require
reclassification.
INVESTMENT ADVISER AND ADMINISTRATOR
The Trust's board of trustees has approved an Investment Advisory
and Administration Contract ("Advisory Contract") with Mitchell
Hutchins, under which Mitchell Hutchins serves as investment
adviser and administrator of the Fund. In accordance with the
Advisory Contract, the Fund pays Mitchell Hutchins an investment
advisory and administration fee, which is accrued daily and paid
monthly, at an annual rate of 0.50% of the Fund's average daily net
assets up to $250 million and 0.45% thereafter. At August 31, 1996,
the Fund owed Mitchell Hutchins $56,062 in investment advisory and
administration fees.
DISTRIBUTION PLANS
Mitchell Hutchins is the distributor of the Fund's shares and has
appointed PaineWebber as the exclusive dealer for the sale of those
shares. Under separate plans of distribution pertaining to Class A,
Class B and Class C shares, the Fund pays Mitchell Hutchins monthly
service fees at the annual rate of 0.25% of the average daily net
assets of Class A, Class B and Class C shares and monthly
distribution fees at the annual rate of 0.75% of the average daily
net assets of Class B and Class C shares. At August 31, 1996, the
Fund owed Mitchell Hutchins $87,640 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
18
<PAGE>
PAINEWEBBER
charges paid by shareholders upon certain redemptions of Class A,
Class B and Class C shares. Mitchell Hutchins has informed the Fund
that for the year ended August 31, 1996, it earned approximately
$481,721 in sales charges.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at
August 31, 1996 was substantially the same as the cost of
securities for financial statement purposes.
At August 31, 1996, the components of net unrealized appreciation
of investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value over
cost).......................................................... $18,639,853
Gross depreciation (investments having an excess of cost over
value)......................................................... (1,958,806)
-----------
Net unrealized appreciation of investments....................... $16,681,047
-----------
-----------
</TABLE>
For the year ended August 31, 1996, total aggregate purchases and
sales of portfolio securities, excluding short-term securities,
were as follows:
<TABLE>
<S> <C>
Purchases........................................................ $83,003,432
Sales............................................................ $ 4,660,375
</TABLE>
FEDERAL TAX STATUS
The Fund intends to distribute substantially all of its taxable
income and to comply with the other requirements of the Internal
Revenue Code applicable to regulated investment companies.
Accordingly, no provision for federal income taxes is required. In
addition, by distributing during each calendar year, substantially
all of its net investment income, capital gains and certain other
amounts, if any, the Fund intends not to be subject to a federal
excise tax.
BENEFICIAL INTEREST
There is an unlimited amount of $0.001 par value shares of
beneficial interest authorized. Transactions in shares of
beneficial interest were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
---------------------- ---------------------- ------------------------ ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- ----------- ---------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended August 31, 1996:
Shares sold....................... 1,906,617 $30,914,538 1,905,981 $31,017,232 1,800,540 $ 29,065,779 662,966 $10,582,690
Shares repurchased................ (591,622) (9,588,391) (138,949) (2,261,449) (699,659) (11,142,425) (53,691) (869,357)
Dividends reinvested.............. 12,226 184,252 -- -- 233,396 3,525,554 12,761 192,488
--------- ----------- --------- ----------- ---------- ------------ -------- -----------
Net increase...................... 1,327,221 $21,510,399 1,767,032 $28,755,783 1,334,277 $ 21,448,908 622,036 $ 9,905,821
--------- ----------- --------- ----------- ---------- ------------ -------- -----------
--------- ----------- --------- ----------- ---------- ------------ -------- -----------
Year ended August 31, 1995:
Shares sold....................... 30,699 $ 417,600 -- -- 240,419 $ 3,374,974 58,954 $ 796,936
Shares repurchased................ (42,560) (569,663) -- -- (1,923,810) (25,667,593) (196,048) (2,580,278)
Dividends reinvested.............. 11,959 148,029 -- -- 347,832 4,275,686 24,214 299,864
--------- ----------- --------- ----------- ---------- ------------ -------- -----------
Net increase (decrease)........... 98 $ (4,034) -- -- (1,335,559) $(18,016,933) (112,880) $(1,483,478)
--------- ----------- --------- ----------- ---------- ------------ -------- -----------
--------- ----------- --------- ----------- ---------- ------------ -------- -----------
</TABLE>
19
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT EACH PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
----------------------------------------- CLASS B
--------------
FOR THE YEARS FOR THE PERIOD
ENDED FOR THE PERIOD JANUARY 30,
AUGUST 31, MAY 10, 1993+ 1996+ TO
------------------------- TO AUGUST 31, AUGUST 31,
1996 1995** 1994 1993 1996
------- ------- ------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................. $ 14.86 $ 13.78 $ 13.50 $12.90 $ 15.54
------- ------- ------- ------ -------
Net investment income................ 0.18 0.22 0.24 0.08 0.02
Net realized and unrealized gains
from investment transactions....... 2.31 2.05 0.32 0.59 0.57
------- ------- ------- ------ -------
Net increase from investment
operations......................... 2.49 2.27 0.56 0.67 0.59
------- ------- ------- ------ -------
Dividends from net investment
income............................. (0.14) (0.22) (0.24) (0.07) --
Distributions from net realized gains
from investment
transactions....................... (1.06) (0.97) (0.04) -- --
------- ------- ------- ------ -------
Total dividends and distributions to
shareholders....................... (1.20) (1.19) (0.28) (0.07) --
------- ------- ------- ------ -------
Net asset value, end of period....... $ 16.15 $ 14.86 $ 13.78 $13.50 $ 16.13
------- ------- ------- ------ -------
------- ------- ------- ------ -------
Total investment return (1).......... 17.35% 18.43% 4.21% 5.17% 3.80%
------- ------- ------- ------ -------
------- ------- ------- ------ -------
Ratios/supplemental data:
Net assets, end of period
(000's)........................... $23,551 $ 1,944 $ 1,801 $3,007 $28,495
Expenses to average net assets..... 1.17% 1.46% 1.13% 1.06%* 1.84%*
Net investment income to average
net assets....................... 1.12% 1.60% 1.64% 1.71%* 0.47%*
Portfolio turnover rate............ 6% 53% 4% 0% 6%
Average commission rate paid per
share on common stock investments
purchased/sold (2)............... $0.0250 -- -- -- $0.0250
</TABLE>
- ---------------
+ Commencement of issuance of shares
* Annualized
** Investment advisory functions for the Fund were transferred from Kidder,
Peabody Asset Management, Inc. to Mitchell Hutchins on February 13, 1995.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. The figures do not
include sales charges; results for Class A, Class B and Class C shares would
be lower if sales charges were included. Total investment returns for
periods of less than one year have not been annualized.
(2) Disclosure effective for fiscal years beginning on or after September 1,
1995.
20
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
CLASS Y
CLASS C ---------------------------------------
--------------------------------------------------- FOR THE
FOR THE PERIOD FOR THE YEARS PERIOD
FOR THE YEARS JULY 22, ENDED MAY 10,
ENDED AUGUST 31, 1992+ TO AUGUST 31, 1993+ TO
----------------------------------- AUGUST 31, ------------------------- AUGUST 31,
1996 1995** 1994 1993 1992 1996 1995** 1994 1993
------- ------- ------- -------- -------------- ------- ------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................... $ 14.87 $ 13.78 $ 13.49 $ 12.12 $ 12.00 $ 14.88 $13.79 $13.52 $12.90
------- ------- ------- -------- ------- ------- ------- ------ ------
Net investment income................ 0.06 0.12 0.13 0.18 0.03 0.30 0.23 0.25 0.09
Net realized and unrealized gains
from investment transactions......... 2.32 2.06 0.33 1.34 0.09 2.24 2.09 0.33 0.60
------- ------- ------- -------- ------- ------- ------- ------ ------
Net increase from investment
operations........................... 2.38 2.18 0.46 1.52 0.12 2.54 2.32 0.58 0.69
------- ------- ------- -------- ------- ------- ------- ------ ------
Dividends from net investment
income............................... (0.07) (0.12) (0.13) (0.15) -- (0.16) (0.26) (0.27) (0.07)
Distributions from net realized gains
from investment
transactions......................... (1.06) (0.97) (0.04) -- -- (1.06) (0.97) (0.04) --
------- ------- ------- -------- ------- ------- ------- ------ ------
Total dividends and distributions to
shareholders......................... (1.13) (1.09) (0.17) (0.15) -- (1.22) (1.23) (0.31) (0.07)
------- ------- ------- -------- ------- ------- ------- ------ ------
Net asset value, end of period....... $ 16.12 $ 14.87 $ 13.78 $ 13.49 $ 12.12 $ 16.20 $14.88 $13.79 $13.52
------- ------- ------- -------- ------- ------- ------- ------ ------
------- ------- ------- -------- ------- ------- ------- ------ ------
Total investment return (1).......... 16.52% 17.57% 3.46% 12.61% 0.98% 17.70% 18.79% 4.41% 5.30%
------- ------- ------- -------- ------- ------- ------- ------ ------
------- ------- ------- -------- ------- ------- ------- ------ ------
Ratios/supplemental data:
Net assets, end of period (000's).... $73,630 $48,105 $62,970 $107,761 $50,222 $12,803 $2,506 $3,880 $3,379
Expenses to average net assets....... 1.95% 2.22% 1.88% 1.73% 1.75%* 0.95% 1.23% 0.88% 0.81%*
Net investment income to average net
assets............................... 0.35% 0.86% 0.89% 1.04% 2.42%* 1.38% 1.86% 1.90% 1.96%*
Portfolio turnover rate.............. 6% 53% 4% 0% 0% 6% 53% 4% 0%
Average commission rate paid per
share on common stock investments
purchased/sold (2)................... $0.0250 -- -- -- -- $0.0250 -- -- --
</TABLE>
21
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Trustees and Shareholders of
PaineWebber Tactical Allocation Fund
We have audited the accompanying statement of assets and
liabilities of PaineWebber Tactical Allocation Fund, including the
portfolio of investments, as of August 31, 1996, and the related
statement of operations for the year then ended, and the statement
of changes in net assets and financial highlights for each of the
two years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
The financial highlights for each of the three years in the period
ended August 31, 1994 were audited by other auditors whose report
dated October 14, 1994 expressed an unqualified opinion on the
financial highlights.
We have conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities
owned at August 31, 1996, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of PaineWebber Tactical Allocation Fund at
August 31, 1996, and the results of its operations for the year
then ended, the changes in its net assets and the financial
highlights for each of the two years in the period then ended, in
conformity with generally accepted accounting principles.
[SIGNATURE]
New York, New York
October 17, 1996
22
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
TAX INFORMATION
We are required by Subchapter M of the Internal Revenue Code of
1986, as amended, to advise you within 60 days of the Fund's fiscal
year end (August 31, 1996) as to federal tax status of
distributions received by shareholders during such fiscal year.
Accordingly, we are advising you that the following distributions
paid during the fiscal year are taxable and are derived from the
following sources:
<TABLE>
<CAPTION>
PER SHARE DATA: CLASS A CLASS B+ CLASS C CLASS Y
- -------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net investment income*.................................. $ 0.14 -- $ 0.07 $ 0.16
Short-term capital gains*............................... 0.13 -- 0.13 0.13
Long-term capital gains................................. 0.93 -- 0.93 0.93
Percentage of ordinary income dividends qualifying for
the dividends received deduction available to
corporate shareholders................................ 100% -- 100% 100%
</TABLE>
-------------------------
* Taxable as ordinary income
+ Class B commenced operations January 30, 1996
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs)
need not be reported as taxable income. Some retirement trusts
(e.g., corporate, Keogh and 403(b)(7) plans) may need this
information for their annual information reporting.
Since the Fund's fiscal year is not the calendar year, another
notification will be sent in respect of calendar year 1996. The
second notification, which will reflect the amount to be used by
calendar year taxpayers on their federal income tax returns, will
be made in conjunction with Form 1099 DIV and will be mailed in
January 1997. Shareholders are advised to consult their own tax
advisers with respect to the tax consequences of their investment
in the Fund.
23
<PAGE>
PAINEWEBBER
SHAREHOLDER INFORMATION
A special meeting of shareholders of the Fund was held on April
15, 1996. At the meeting the following proposals were approved.
(Shareholders of the Trust, comprised of the Fund and another
series, voted together as a single class with respect to the
election of board members; other matters noted below were approved
by shareholders of the Fund.)
PROPOSAL 1
<TABLE>
<CAPTION>
SHARES VOTED FOR SHARES WITHHOLD AUTHORITY
---------------- -------------------------
<S> <C> <C>
To elect ten members of its Board of Directors:
Margo N. Alexander........................... 20,303,283 1,049,607
Richard Q. Armstrong......................... 20,308,731 1,044,159
E. Garret Bewkes, Jr......................... 20,297,813 1,055,077
Richard R. Burt.............................. 20,300,802 1,052,088
Mary C. Farrell.............................. 20,307,545 1,045,345
Meyer Feldberg............................... 20,295,721 1,057,169
George W. Gowen.............................. 20,301,148 1,051,742
Frederic V. Malek............................ 20,288,858 1,064,032
Carl W. Schafer.............................. 20,298,881 1,054,009
John R. Torell III........................... 20,302,924 1,049,966
</TABLE>
PROPOSAL 2
Ratification of the selection of Ernst & Young LLP as the independent auditors
for the Fund's fiscal year ended August 31, 1996:
<TABLE>
<CAPTION>
SHARES SHARES VOTED SHARES
VOTED FOR AGAINST ABSTAIN
- ----------- ------------------- -----------
<S> <C> <C>
2,222,444 0 45,168
</TABLE>
PROPOSAL 3
Approval of the proposed changes to the Fund's fundamental investment
restrictions and policies:
For each of the following proposals, the votes were as follows:
<TABLE>
<CAPTION>
SHARES SHARES VOTED SHARES
VOTED FOR AGAINST ABSTAIN
----------- --------------- -----------
<S> <C> <C> <C>
Modification of fundamental restriction on portfolio
diversification......................................... 2,146,364 59,896 61,352
Modification of fundamental restriction on
concentration........................................... 2,146,364 59,896 61,352
Modification of fundamental restriction on senior
securities and borrowing................................ 2,146,364 59,896 61,352
Modification of fundamental restriction on making loans... 2,146,364 59,896 61,352
Modification of fundamental restriction on underwriting
securities.............................................. 2,146,364 59,896 61,352
Modification of fundamental restriction on real estate
investments............................................. 2,146,364 59,896 61,352
Modification of fundamental restriction on investing in
commodities............................................. 2,146,364 59,896 61,352
Elimination of fundamental restriction on margin
transactions............................................ 2,146,364 59,896 61,352
Elimination of fundamental restriction on short sales..... 2,146,364 59,896 61,352
</TABLE>
(Broker non-votes and abstentions are included within the "Shares Withhold
Authority" and "Shares Abstain" totals.)
24
<PAGE>
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BOARD OF TRUSTEES
TRUSTEES
E. Garrett Bewkes, Jr. Chairman Meyer Feldberg
Margo N. Alexander George W. Gowen
Richard Q. Armstrong Frederic V. Malek
Richard R. Burt Carl W. Schafer
Mary C. Farrell John R. Torell III
OFFICERS
Margo N. Alexander Julian F. Sluyters
PRESIDENT VICE PRESIDENT AND TREASURER
Victoria E. Schonfeld T. Kirkham Barneby
VICE PRESIDENT VICE PRESIDENT
Dianne E. O'Donnell
VICE PRESIDENT AND SECRETARY
INVESTMENT ADVISER,
ADMINISTRATOR AND DISTRIBUTOR
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
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 INVESTMENT EXECUTIVE OR
CORRESPONDENT FIRM. READ THE PROSPECTUS CAREFULLY BEFORE
INVESTING.
THIS REPORT IS NOT TO BE USED IN CONNECTION WITH THE
OFFERING OF SHARES OF THE FUND UNLESS ACCOMPANIED OR
PRECEDED BY AN EFFECTIVE PROSPECTUS.
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