<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND SEMIANNUAL REPORT
April 14, 1997
Dear Shareholder,
We are pleased to present you with the semiannual report for PaineWebber
Tactical Allocation Fund (the "Fund") for the six-month period ended
February 28, 1997.
GENERAL MARKET OVERVIEW
During the six-month period, a continuation of the economic growth and
low inflation that had prevailed over the past year helped the equity market.
Early in the period, the Standard & Poor's 500 Index, a commonly used measure
of stock market performance, reached a then-record high. In the ensuing
months, the market, although still characterized by volatility, maintained
its upward trajectory.
The market's performance was attributable to several factors, including
returning investor confidence after the summer's brief market correction, an
overall positive environment for corporate earnings and profit growth, as well
as unprecedented cash inflows into 401(k)s and equity mutual funds. Also
propelling the market during the period was a continued focus on large-
capitalization companies. Many of these companies have downsized to reduce
expenses while maintaining revenues, and have also benefited from their exposure
to foreign expansion opportunities as well as "brand name" recognition from new
equity investors.
Like the stock market, the fixed income market was characterized by
volatility during the fiscal period. Mid-period, signs of strength in employment
and housing, coupled with healthy retail and capital spending, created concern
that the Federal Reserve (the "Fed") might raise rates. However, tempered
inflation persisted and ultimately kept the Fed on hold. As the six-month period
drew to a close, moderating growth in the economy prevailed.
PORTFOLIO REVIEW
PaineWebber Tactical Allocation Fund's total return (the net asset value
change with dividends reinvested) for the six months ended February 28, 1997,
without deducting sales charges, was 21.85% for Class A shares, 21.38% for
Class B shares, 21.38% for Class C shares and 21.93% for Class Y shares. For
shareowners who purchased or redeemed Fund shares during the period, the
Fund's total return for the period may have been lower; for
PAINEWEBBER TACTICAL ALLOCATION FUND
FUND PROFILE
- - GOAL:
Total return consisting of capital appreciation and current income
- - PORTFOLIO MANAGER:
Kirk Barneby,
MH Asset
Management Inc.
- - TOTAL NET ASSETS:
$328.6 million as of
February 28, 1997
- - DIVIDEND PAYMENTS:
Annually
1
<PAGE>
example, after deducting the maximum applicable sales charges, the Fund's total
return for the period was 16.37% for Class A shares, 16.38% for Class B shares
and 20.38% for Class C shares. Over the six-month period, the Fund outperformed
the 11.72% Lipper average return of its peer group (Flexible Funds).
The Fund employs a disciplined, model-based approach to calculate an
expected return for U.S. equity market stocks. 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." The equity risk
premium identifies the expected reward to investors for the risk of owning
stocks versus "risk-free" cash investments. When the premium is above 5.5%, the
Fund invests 100% in stocks, (except for a limited amount of assets kept in cash
to satisfy operating needs).
Throughout the six-month period, the Model favored equities over bonds and
bonds over cash; given that the equity risk premium (ERP) remained above the
5.5% hurdle required for total stock allocation, the Fund's portfolio remained
fully invested in stocks.
Early in the period, an improved inflationary environment and the relative
consistency of dividend growth prospects were in large part responsible for
keeping the Fund's ERP above the 5.5% mark. The ERP remained above this level
mid-period through to the end of the period despite the equity market's
continued gain in value--a circumstance that was particularly evident in
November, as equities posted their biggest single month gain since
May of 1990.
OUTLOOK
At the end of March 1997, the Fed increased short-term interest rates by
25 basis points. We believe that this does not signal the onset of a bear
market; however, it may well produce a state of heightened uncertainty and,
as a result, volatility in equity market prices.
As of this writing, the Fund continues to remain fully invested in stocks.
We believe the outlook for stocks remains positive due to expectations for
continued moderate inflation and modest economic growth. In addition, U.S.
corporate profit growth should remain positive, although the rate of profit
growth is expected to decelerate from around 10% in 1996 to about 4% in 1997.
However, should the ERP fall below 5.5%, the Model would indicate an allocation
shift away from equities.
2
<PAGE>
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,
/s/ Margo Alexander /s/ T. Kirkham Barneby
MARGO N. ALEXANDER T. KIRKHAM BARNEBY
President, Managing Director and Chief
Mitchell Hutchins Investment Officer--Quantitative
Asset Management Inc. Investments, Mitchell Hutchins
Asset Management Inc.
Portfolio Manager, PaineWebber
Tactical Allocation Fund
3
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
TOTAL RETURN1
NET ASSET VALUE --------------------------------------------
----------------------------------------- 12 MONTHS 6 MONTHS
02/28/97 08/31/96 02/29/96 ENDED 02/28/97 ENDED 02/28/97
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Class A Shares $ 19.45 $ 16.15 $ 15.77 24.78% 21.85%
- ---------------------------------------------------------------------------------------------------------------------------------
Class B Shares 19.40 16.13 15.80 23.91 21.38
- ---------------------------------------------------------------------------------------------------------------------------------
Class C Shares 19.48 16.12 15.79 23.92 21.38
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS A SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------ CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL RETURN1
<S> <C> <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
- ----------------------------------------------------------------------------------------------------------------------------------
1996 15.16 18.21 0.0811 0.1358 21.53
- ----------------------------------------------------------------------------------------------------------------------------------
01/01/97-02/28/97 18.21 19.45 -- -- 6.81
- ----------------------------------------------------------------------------------------------------------------------------------
Totals: $ 2.1526 $ 0.8085
- ----------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/97: 85.68%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS B SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------ CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL RETURN1
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
1/30/96-12/31/96 $ 15.54 $ 18.18 $ 0.0811 $ 0.0879 18.06%
- ----------------------------------------------------------------------------------------------------------------------------------
01/01/97-02/28/97 18.18 19.40 -- -- 6.71
- ----------------------------------------------------------------------------------------------------------------------------------
Totals: $ 0.0811 $ 0.0879
- ----------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/97: 25.98%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS C SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------ CAPITAL GAINS
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID TOTAL RETURN1
<S> <C> <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
- ----------------------------------------------------------------------------------------------------------------------------------
1996 15.20 18.26 0.0811 0.0008 20.66
- ----------------------------------------------------------------------------------------------------------------------------------
01/01/97-02/28/97 18.26 19.48 -- -- 6.68
- ----------------------------------------------------------------------------------------------------------------------------------
Totals: $ 2.1546 $ 0.4697
- ----------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/97: 95.65%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
% 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 03/31/97 18.55% 17.72% 17.67% 13.21% 12.72% 16.67%
- ----------------------------------------------------------------------------------------------------------------------------------
Commencement of Operations+
Through 03/31/97 15.94 17.36 14.31 14.57 14.02 14.31
- ----------------------------------------------------------------------------------------------------------------------------------
</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.
* 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 OPERATIONS 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 INVESTORS, INCLUDING
THE TRUSTEE OF THE PAINEWEBBER SAVINGS INVESTMENT PLAN AND INSIGHT INVESTMENT
ADVISORY PROGRAM PARTICIPANTS. FOR THE SIX MONTHS ENDED FEBRUARY 28, 1997 AND
SINCE INCEPTION (MAY 10, 1993 THROUGH FEBRUARY 28, 1997), CLASS Y SHARES HAVE A
TOTAL RETURN OF 21.93% AND 87.52%, RESPECTIVELY. FOR THE YEAR ENDED MARCH 31,
1997, AND SINCE INCEPTION THROUGH MARCH 31, 1997, CLASS Y SHARES HAVE AN AVERAGE
ANNUAL RETURN OF 18.78% AND 16.24%, 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.
4
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
COMMON STOCKS - 100.39%
AGRICULTURE, FOOD & BEVERAGE - 8.01%
24,771 Archer-Daniels-Midland Company.................... $ 458,264
13,100 Campbell Soup Company............................. 1,180,637
13,400 Conagra, Incorporated............................. 710,200
8,100 CPC International, Incorporated................... 681,412
8,900 General Mills, Incorporated....................... 580,725
19,350 Heinz, H. J. and Company.......................... 805,444
6,800 Hershey Foods Corporation......................... 310,250
11,900 Kellogg Company................................... 815,150
83,700 Pepsico, Incorporated............................. 2,751,637
44,900 Phillip Morris Companies Incorporated............. 6,067,112
4,700 Pioneer Hi-Bred International, Incorporated....... 320,188
7,500 Quaker Oats Company............................... 269,063
6,200 Ralston Purina Company............................ 509,175
9,600 Sysco Corporation................................. 333,600
136,300 The Coca-Cola Company............................. 8,314,300
9,100 Unilever N.V. (1)................................. 1,733,550
3,700 Whitman Corporation............................... 86,950
6,600 Wrigley, Wm. Jr. Company.......................... 395,175
------------
26,322,832
------------
AIRLINES - 0.31%
5,600 AMR Corporation*.................................. 440,300
5,100 Delta Air Lines, Incorporated..................... 410,550
6,600 Southwest Airlines Company........................ 155,100
------------
1,005,950
------------
ALCOHOL - 0.65%
26,800 Anheuser-Busch Companies, Incorporated............ 1,192,600
2,700 Brown Forman Corporation.......................... 120,825
20,800 Seagram Company Limited........................... 811,200
------------
2,124,625
------------
APPAREL, RETAIL - 0.42%
15,200 Gap, Incorporated................................. 501,600
3,400 Harcourt General, Incorporated.................... 160,225
12,019 Limited, Incorporated............................. 228,361
5,200 Nordstrom, Incorporated........................... 191,100
4,200 TJX Companies, Incorporated....................... 175,350
6,600 Woolworth Corporation............................. 137,775
------------
1,394,411
------------
APPAREL, TEXTILES - 0.78%
4,300 Fruit of the Loom, Incorporated*.................. 175,763
3,900 Liz Claiborne, Incorporated....................... 157,950
10,300 Nike Incorporated................................. 740,312
2,900 Reebok International Limited*..................... 135,575
25,200 Sara Lee Corporation.............................. 976,500
2,200 Springs Industries, Incorporated.................. 97,075
4,300 V. F. Corporation................................. 298,850
------------
2,582,025
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
BANKS - 8.24%
22,889 Banc One Corporation (1).......................... $ 1,009,977
8,400 Bank of Boston Corporation........................ 633,150
20,200 Bank of New York Company Incorporated............. 782,750
19,700 BankAmerica Corporation........................... 2,240,875
4,900 Bankers Trust New York Corporation................ 444,675
10,300 Barnett Banks Incorporated........................ 476,375
25,900 Citicorp.......................................... 3,023,825
6,300 Comerica, Incorporated............................ 378,788
12,000 Corestates Financial Corporation.................. 631,500
6,100 Fifth Third Bancorp............................... 508,588
7,400 First Bank System, Incorporated................... 580,900
17,572 First Chicago Corporation......................... 1,027,962
15,585 First Union Corporation........................... 1,367,584
14,416 Fleet Financial Group, Incorporated............... 879,376
10,400 J.P. Morgan & Company, Incorporated............... 1,093,300
12,240 KeyCorp........................................... 654,840
7,250 Mellon Bank Corporation........................... 582,719
11,800 National City Corporation......................... 595,900
42,142 NationsBank Corporation........................... 2,523,252
19,600 Norwest Corporation............................... 975,100
17,600 PNC Bank Corporation.............................. 745,800
3,600 Republic New York Corporation..................... 334,350
11,900 Suntrust Banks, Incorporated...................... 611,362
23,920 The Chase Manhattan Corporation................... 2,394,990
8,200 US Bancorp, Incorporated.......................... 404,875
9,400 Wachovia Corporation.............................. 572,225
5,266 Wells Fargo and Company........................... 1,602,180
------------
27,077,218
------------
CHEMICALS - 3.45%
6,500 Air Products & Chemicals, Incorporated............ 481,812
15,500 Allied-Signal, Incorporated....................... 1,119,875
4,900 Avery Dennison Corporation........................ 197,838
13,500 Dow Chemical Company.............................. 1,093,500
31,000 DuPont (E.I.) de Nemours & Company................ 3,324,750
5,200 Eastman Chemical Company.......................... 286,650
3,600 Goodrich, B.F. Company............................ 146,250
4,700 Grace, W.R. & Company............................. 249,100
4,300 Great Lakes Chemical Corporation.................. 199,413
5,900 Hercules, Incorporated............................ 274,350
6,100 International Flavors and Fragrances.............. 282,887
3,200 Kerr-Mcgee Corporation............................ 200,400
31,200 Monsanto Company.................................. 1,134,900
7,400 Morton International, Incorporated................ 305,250
3,300 Nalco Chemical Company............................ 121,275
</TABLE>
5
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
</TABLE>
COMMON STOCKS - (CONTINUED)
CHEMICALS - (CONCLUDED)
<TABLE>
<C> <S> <C>
14,800 Occidental Petroleum Corporation.................. $ 377,400
8,400 Praxair, Incorporated............................. 408,450
4,000 Rohm & Haas Company............................... 368,000
5,000 Sherwin Williams Company.......................... 280,625
5,200 Sigma Aldrich Corporation......................... 159,250
6,900 Union Carbide Corporation......................... 326,025
------------
11,338,000
------------
COMPUTER HARDWARE - 4.87%
9,500 3Com Corporation*................................. 314,539
5,200 Amdahl Corporation................................ 51,350
7,100 Apple Computer, Incorporated*..................... 115,375
10,000 Bay Networks, Incorporated*....................... 190,000
8,500 Cabletron Systems, Incorporated*.................. 255,000
36,100 Cisco Systems Incorporated*....................... 2,008,062
14,900 Compaq Computer Corporation*...................... 1,180,825
9,600 Dell Computer Corporation*........................ 682,800
9,600 Digital Equipment Corporation*.................... 314,400
12,500 EMC Corporation*.................................. 450,000
55,900 Hewlett-Packard Company........................... 3,130,400
28,700 International Business Machines................... 4,125,625
8,700 Pitney Bowes, Incorporated........................ 540,488
13,500 Seagate Technology, Incorporated*................. 637,875
9,300 Silicon Graphics, Incorporated*................... 224,363
19,500 Sun Microsystems Incorporated*.................... 602,062
4,400 Tandem Computers, Incorporated*................... 55,000
18,200 Xerox Corporation................................. 1,137,500
------------
16,015,664
------------
COMPUTER SOFTWARE - 2.73%
2,700 Autodesk, Incorporated............................ 91,463
20,275 Computer Associates International Incorporated.... 881,962
65,500 Microsoft Corporation*............................ 6,386,250
15,900 Novell, Incorporated*............................. 160,987
37,075 Oracle Systems Corporation*....................... 1,455,194
------------
8,975,856
------------
CONSTRUCTION, REAL PROPERTY - 0.14%
2,900 Armstrong World Industries, Incorporated.......... 199,738
4,500 Fluor Corporation................................. 272,812
------------
472,550
------------
CONSUMER DURABLES - 0.19%
8,400 Masco Corporation................................. 295,050
3,500 Maytag Corporation................................ 77,000
4,900 Whirlpool Corporation............................. 247,450
------------
619,500
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
DEFENSE/AEROSPACE - 2.04%
19,544 Boeing Company.................................... $ 1,988,602
3,400 General Dynamics Corporation...................... 228,650
4,300 ITT Industries Incorporated....................... 111,800
10,730 Lockheed Martin Corporation....................... 949,605
11,700 McDonnell Douglas Corporation..................... 742,950
3,400 Northrop Grumman Corporation...................... 246,925
13,000 Raytheon Company.................................. 612,625
12,500 Rockwell International Corporation*............... 809,375
13,300 United Technologies Corporation................... 1,000,825
------------
6,691,357
------------
DIVERSIFIED RETAIL - 2.20%
11,600 Dayton Hudson Corporation......................... 487,200
6,000 Dillard Department Stores, Incorporated........... 180,750
11,700 Federated Department Stores, Incorporated*........ 406,575
22,200 K Mart Corporation*............................... 277,500
13,500 May Department Stores Company..................... 629,437
3,400 Mercantile Stores, Incorporated................... 163,200
12,900 Penney, J.C., Incorporated........................ 635,325
21,900 Sears Roebuck & Company........................... 1,188,075
123,400 Wal Mart Stores, Incorporated..................... 3,254,675
------------
7,222,737
------------
DRUGS & MEDICINE - 6.92%
3,300 Allergan, Incorporated............................ 112,200
4,400 Alza Corporation*................................. 124,850
34,800 American Home Products Corporation................ 2,227,200
14,700 Amgen, Incorporated*.............................. 898,538
27,500 Bristol-Myers Squibb Company...................... 3,588,750
30,380 Lilly, Eli & Company.............................. 2,654,452
66,200 Merck & Company, Incorporated..................... 6,090,400
35,400 Pfizer, Incorporated.............................. 3,243,525
27,290 Pharmacia & Upjohn Incorporated................... 1,006,319
20,200 Schering-Plough Corporation....................... 1,547,825
15,000 Warner Lambert Company............................ 1,260,000
------------
22,754,059
------------
ELECTRIC UTILITIES - 2.58%
10,800 American Electric Power, Incorporated............. 450,900
7,000 Baltimore Gas & Electric Company.................. 192,500
8,900 Carolina Power and Light Company.................. 330,412
8,400 Central & South West Corporation.................. 204,750
9,025 Cinergy Corporation............................... 311,363
12,600 Consolidated Edison Company of New York,
Incorporated.................................... 389,025
11,500 Dominion Resources, Incorporated.................. 462,875
</TABLE>
6
<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>
9,200 DTE Energy Company*............................... $ 278,300
12,300 Duke Power Company (1)............................ 544,275
17,900 Edison International, Incorporated*............... 384,850
12,900 Entergy Corporation............................... 340,237
10,500 FPL Group, Incorporated........................... 477,750
7,800 General Public Utilities Corporation*............. 273,000
9,200 Houston Industries, Incorporated.................. 213,900
7,000 Niagara Mohawk Power Corporation*................. 71,750
6,200 Northern States Power Company..................... 295,275
5,700 Ohio Edison Company............................... 128,250
9,500 PacifiCorp........................................ 195,938
10,200 PECO Energy Company............................... 229,500
6,200 Pennsylvania Power & Light Company*............... 141,825
20,800 PG&E Corporation*................................. 478,400
13,000 Public Service Enterprise Group, Incorporated..... 365,625
29,900 Southern Company.................................. 650,325
12,500 Texas Utilities Company........................... 504,687
12,000 Unicom Corporation................................ 267,000
7,400 Union Electric Company............................ 283,975
------------
8,466,687
------------
ELECTRICAL POWER - 1.03%
11,784 AMP, Incorporated................................. 458,103
6,100 Cooper Industries, Incorporated................... 269,925
12,700 Emerson Electric Company.......................... 1,257,300
2,600 Foster Wheeler Corporation........................ 101,400
2,600 General Signal Corporation........................ 113,425
3,400 Grainger,W.W., Incorporated....................... 269,450
2,900 Raychem Corporation............................... 246,862
3,200 Thomas & Betts Corporation........................ 142,800
29,700 Westinghouse Electric Corporation................. 512,325
------------
3,371,590
------------
ENERGY RESERVES & PRODUCTION - 6.95%
27,400 Amoco Corporation................................. 2,315,300
7,100 Burlington Resources, Incorporated................ 311,513
36,200 Chevron Corporation............................... 2,334,900
68,100 Exxon Corporation................................. 6,801,487
2,700 Louisiana Land & Exploration Company.............. 128,925
22,000 Mobil Corporation................................. 2,700,500
5,200 Oryx Energy Company............................... 104,000
8,100 Panenergy Corporation............................. 345,262
3,100 Pennzoil Company.................................. 177,863
14,000 Phillips Petroleum Company........................ 579,250
29,500 Royal Dutch Petroleum Company..................... 5,103,500
15,200 Texaco, Incorporated.............................. 1,502,900
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
</TABLE>
ENERGY RESERVES & PRODUCTION - (CONCLUDED)
<TABLE>
<C> <S> <C>
9,936 Union Pacific Resources Group Incorporated*....... $ 242,190
3,000 Western Atlas, Incorporated*...................... 182,625
------------
22,830,215
------------
ENTERTAINMENT - 1.48%
37,800 Disney, Walt Company.............................. 2,806,650
5,350 Harrah's Entertainment Incorporated*.............. 98,975
2,300 King World Productions, Incorporated*............. 85,388
31,700 Time Warner Incorporated.......................... 1,299,700
16,249 Viacom, Incorporated, Class B*.................... 572,777
------------
4,863,490
------------
ENVIRONMENTAL SERVICES - 0.42%
12,900 Browning Ferris Industries, Incorporated.......... 404,738
9,500 Laidlaw, Incorporated, Class B.................... 131,813
26,500 WMX Technologies, Incorporated.................... 838,062
------------
1,374,613
------------
FINANCIAL SERVICES - 2.97%
25,800 American Express Company.......................... 1,686,675
5,700 Aon Corporation................................... 361,238
3,300 Beneficial Corporation............................ 228,113
17,628 Dean Witter, Discover & Company................... 676,474
38,300 Federal Home Loan Mortgage Corporation............ 1,139,425
60,100 Federal National Mortgage Association............. 2,404,000
8,200 Green Tree Financial Corporation.................. 307,500
5,500 Household International, Incorporated............. 532,812
4,300 Marsh & McLennan Companies, Incorporated.......... 503,100
17,600 MBNA Corporation.................................. 563,200
9,100 Merrill Lynch & Company, Incorporated............. 873,600
4,900 Textron Incorporated.............................. 483,262
------------
9,759,399
------------
FOREST PRODUCTS, PAPER - 1.54%
2,600 Bemis, Incorporated............................... 107,575
3,500 Boise Cascade Corporation......................... 115,063
5,500 Champion International Corporation................ 242,687
5,400 Georgia-Pacific Corporation....................... 421,200
16,100 International Paper Company....................... 672,175
4,400 James River Corporation........................... 144,100
15,660 Kimberly Clark Corporation........................ 1,659,960
5,500 Louisiana Pacific Corporation..................... 116,875
3,400 Mead Corporation.................................. 198,050
2,500 Potlatch Corporation.............................. 108,125
3,920 Stone Container Corporation*...................... 50,960
</TABLE>
7
<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>
3,400 Temple-Inland, Incorporated....................... $ 187,425
4,500 Union Camp Corporation............................ 217,125
3,900 Westvaco Corporation.............................. 115,050
10,700 Weyerhaeuser Company.............................. 494,875
3,200 Willamette Industries, Incorporated............... 204,800
------------
5,056,045
------------
FOOD RETAIL - 0.52%
13,000 Albertson's, Incorporated......................... 458,250
7,700 American Stores Company........................... 344,575
3,300 Giant Food, Incorporated, Class A................. 107,663
2,800 Great Atlantic & Pacific Tea, Incorporated........ 83,300
6,800 Kroger Company*................................... 360,400
3,800 Supervalue, Incorporated.......................... 117,800
8,000 Winn Dixie Stores, Incorporated................... 255,000
------------
1,726,988
------------
FREIGHT, AIR, SEA, LAND - 0.10%
6,300 Federal Express Corporation*...................... 324,450
------------
GAS UTILITY - 0.35%
4,000 Columbia Gas System, Incorporated................. 235,000
5,600 Consolidated Natural Gas Company.................. 285,600
3,000 Enserch Corporation............................... 63,000
2,100 NICOR, Incorporated............................... 70,350
4,600 Noram Energy Corporation.......................... 69,000
4,300 Pacific Enterprises............................... 131,150
2,800 Peoples Energy Corporation........................ 94,850
4,700 Sonat, Incorporated............................... 216,200
------------
1,165,150
------------
HEAVY MACHINERY - 0.52%
10,800 Caterpillar, Incorporated......................... 846,450
2,700 Cummins Engine Company, Incorporated.............. 136,688
13,900 Deere & Company................................... 592,487
2,800 Harnischfeger Industries Incorporated............. 122,850
------------
1,698,475
------------
HOTELS - 0.50%
7,500 HFS, Incorporated*................................ 513,750
12,600 Hilton Hotels Corporation......................... 316,575
7,100 ITT Corporation*.................................. 401,150
7,800 Marriott International, Incorporated.............. 413,400
------------
1,644,875
------------
HOUSEHOLD PRODUCTS - 2.94%
9,400 American Brands, Incorporated..................... 494,675
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
</TABLE>
HOUSEHOLD PRODUCTS - (CONCLUDED)
<TABLE>
<C> <S> <C>
7,200 Avon Products Incorporated........................ $ 419,400
3,200 Clorox Company.................................... 382,400
8,100 Colgate-Palmolive Company......................... 838,350
30,100 Gillette Company.................................. 2,381,662
1,900 National Services Industries, Incorporated........ 72,200
8,100 Newell Company.................................... 300,713
37,300 Procter & Gamble Company.......................... 4,480,662
6,500 Rubbermaid, Incorporated.......................... 155,188
3,400 Tupperware Corporation............................ 152,150
------------
9,677,400
------------
INDUSTRIAL SERVICES/SUPPLIES - 0.37%
20,625 CUC International, Incorporated*.................. 492,422
3,100 Ecolab, Incorporated.............................. 117,412
7,900 Ikon Office Solutions Incorporated................ 325,875
3,800 Owens-Corning Fiberglass.......................... 161,025
3,600 Ryder Systems, Incorporated....................... 113,400
------------
1,210,134
------------
INFORMATION & COMPUTER SERVICES - 1.59%
15,400 Automatic Data Processing, Incorporated........... 656,425
6,000 Block, H&R, Incorporated.......................... 176,250
4,200 Ceridian Corporation*............................. 164,325
9,200 Cognizant Corporation............................. 320,850
4,900 Computer Sciences Corporation*.................... 330,750
5,700 Dow Jones & Company, Incorporated................. 228,713
8,800 Dun & Bradstreet Corporation...................... 215,600
24,600 First Data Corporation............................ 900,975
4,400 Interpublic Group Companies, Incorporated......... 220,550
35,380 Lucent Technologies Incorporated*................. 1,906,097
2,000 Shared Medical System Corporation................. 109,250
------------
5,229,785
------------
LEISURE - 0.75%
5,300 Brunswick Corporation............................. 151,713
18,300 Eastman Kodak Company............................. 1,640,137
5,100 Hasbro, Incorporated.............................. 218,025
13,183 Mattel Incorporated............................... 327,927
2,700 Polaroid Corporation.............................. 114,075
------------
2,451,877
------------
LIFE INSURANCE - 1.77%
10,900 American General Corporation...................... 472,787
9,600 Chubb Corporation................................. 562,800
4,200 CIGNA Corporation................................. 642,075
8,700 Conseco Incorporated.............................. 341,475
4,050 Jefferson-Pilot Corporation....................... 238,950
5,800 Lincoln National Corporation...................... 337,125
5,300 Providian Corporation............................. 296,138
</TABLE>
8
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
</TABLE>
COMMON STOCKS - (CONTINUED)
LIFE INSURANCE - (CONCLUDED)
<TABLE>
<C> <S> <C>
3,750 Torchmark, Incorporated........................... $ 220,781
4,500 Transamerica Corporation.......................... 394,313
34,812 Travelers Group Incorporated...................... 1,866,793
4,100 UNUM Corporation.................................. 315,188
2,600 USLIFE Corporation................................ 123,825
------------
5,812,250
------------
LONG DISTANCE & PHONE COMPANIES - 6.41%
9,800 Alltel Corporation................................ 346,675
30,900 Ameritech Corporation............................. 1,969,875
88,300 AT&T Corporation.................................. 3,520,962
24,900 Bell Atlantic Corporation (1)..................... 1,721,213
54,600 BellSouth Corporation............................. 2,559,375
8,400 Frontier Corporation.............................. 185,850
52,500 GTE Corporation................................... 2,454,375
30,000 MCI Communications Corporation.................... 1,072,500
25,000 NYNEX Corporation................................. 1,287,500
22,900 Pacific Telesis Group............................. 933,175
33,800 SBC Communications, Incorporated (1).............. 1,943,500
18,900 Sprint Corporation................................ 859,950
26,100 US West Communications Group...................... 939,600
47,400 WorldCom, Incorporated*........................... 1,262,025
------------
21,056,575
------------
MANUFACTURING - GENERAL - 3.69%
5,000 Black & Decker Corporation........................ 158,125
2,200 Briggs & Stratton Corporation..................... 95,975
4,200 Case Corporation*................................. 217,875
6,100 Dover Corporation................................. 302,713
90,000 General Electric Company.......................... 9,258,750
7,300 Illinois Tool Works, Incorporated................. 615,937
6,100 Ingersoll Rand Company............................ 289,750
4,200 Parker-Hannifin Corporation....................... 183,750
3,050 Snap-On, Incorporated............................. 118,569
4,900 Stanley Works..................................... 187,425
2,400 Timken Company.................................... 125,700
2,000 Trinova Corporation............................... 74,250
8,600 Tyco International Limited........................ 507,400
------------
12,136,219
------------
MANUFACTURING - HIGH TECHNOLOGY - 1.75%
3,637 Andrew Corporation*............................... 200,035
6,400 DSC Communications Corporation*................... 134,400
4,800 Eaton Corporation................................. 344,400
7,200 General Instrument Corporation*................... 171,000
2,700 Harris Corporation................................ 199,125
7,100 Honeywell, Incorporated........................... 504,987
3,000 Johnson Controls, Incorporated.................... 252,750
2,700 Millipore Corporation............................. 116,438
32,400 Motorola, Incorporated............................ 1,810,350
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
</TABLE>
MANUFACTURING - HIGH TECHNOLOGY - (CONCLUDED)
<TABLE>
<C> <S> <C>
14,600 Northern Telecommunications Limited............... $ 1,049,375
2,700 Perkin Elmer Corporation.......................... 191,700
2,100 Tektronix, Incorporated........................... 102,375
10,000 Tellabs, Incorporated*............................ 398,750
8,100 Thermo Electron Corporation*...................... 276,412
------------
5,752,097
------------
MEDIA - 0.33%
8,800 Comcast Corporation, Class A Special.............. 157,300
27,700 Tele-Communications, Incorporated Class A*........ 328,938
32,100 U.S. West Media Group*............................ 589,837
------------
1,076,075
------------
MEDICAL PRODUCTS - 3.92%
42,000 Abbott Laboratories............................... 2,362,500
2,900 Bard, C.R. Incorporated........................... 79,388
3,800 Bausch & Lomb, Incorporated....................... 142,025
15,200 Baxter International, Incorporated................ 699,200
6,800 Becton, Dickinson & Company....................... 334,900
4,000 Biomet, Incorporated.............................. 61,000
10,500 Boston Scientific Corporation*.................... 695,625
4,400 Guidant Corporation*.............................. 294,800
72,500 Johnson & Johnson................................. 4,177,812
4,200 Mallinckrodt Group, Incorporated.................. 178,500
13,400 Medtronic, Incorporated........................... 867,650
22,900 Minnesota Mining & Manufacturing Company.......... 2,106,800
5,466 Pall Corporation.................................. 118,886
4,300 St. Jude Medical, Incorporated.................... 169,850
15,600 Tenet Healthcare Corporation*..................... 423,150
3,900 U.S. Surgical Corporation......................... 166,237
------------
12,878,323
------------
MEDICAL PROVIDERS - 1.05%
36,527 Columbia/HCA Healthcare Corporation (1)........... 1,534,134
12,200 Corning, Incorporated............................. 459,025
8,900 HEALTHSOUTH Corporation*.......................... 358,225
8,000 Humana Incorporated*.............................. 157,000
3,600 Manor Care, Incorporated.......................... 95,850
11,200 Service Corporation International................. 324,800
10,700 United Healthcare Corporation..................... 533,662
------------
3,462,696
------------
MINING & METALS - 1.29%
11,400 Alcan Aluminum Limited............................ 408,975
8,680 Allegheny Teldyne, Incorporated*.................. 221,340
9,500 Aluminum Company of America....................... 676,875
3,700 Asarco, Incorporated.............................. 115,625
6,700 Crown Cork & Seal, Incorporated*.................. 371,850
5,300 Cyprus Amax Minerals Company...................... 123,888
</TABLE>
9
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
</TABLE>
COMMON STOCKS - (CONTINUED)
MINING & METALS - (CONCLUDED)
<TABLE>
<C> <S> <C>
9,100 Freeport-McMoran Copper & Gold, Incorporated...... $ 309,400
9,600 Inco Limited...................................... 337,200
5,300 Nucor Corporation................................. 255,062
3,900 Phelps Dodge Corporation.......................... 278,850
10,200 PPG Industries, Incorporated...................... 571,200
5,200 Reynolds Metals Company........................... 326,300
5,600 USX-U.S. Steel Group, Incorporated................ 175,700
3,350 Worthington Industries, Incorporated.............. 69,931
------------
4,242,196
------------
MOTOR VEHICLES - 2.29%
37,800 Chrysler Corporation.............................. 1,280,475
3,100 Cooper Tire & Rubber Company...................... 61,613
4,900 DANA Corporation.................................. 151,900
3,900 Echlin, Incorporated.............................. 135,038
63,700 Ford Motor Company................................ 2,094,137
41,800 General Motors Corporation........................ 2,419,175
7,200 Genuine Parts Company............................. 336,600
8,700 Goodyear Tire & Rubber Company.................... 458,925
2,965 Paccar, Incorporated.............................. 194,578
7,400 TRW, Incorporated................................. 387,575
------------
7,520,016
------------
OIL REFINING - 1.17%
5,900 Amerada Hess Corporation.......................... 314,913
3,800 Ashland, Incorporated............................. 159,125
9,300 Atlantic Richfield Company........................ 1,162,500
5,800 Coastal Corporation............................... 263,900
13,400 Enron Corporation................................. 534,325
4,692 Sun Company, Incorporated......................... 126,684
10,000 Tenneco, Incorporated............................. 393,750
12,900 Unocal Corporation................................ 498,262
14,400 USX-Marathon Group................................ 383,400
------------
3,836,859
------------
OIL SERVICES - 0.86%
7,100 Baker Hughes, Incorporated........................ 252,050
7,900 Dresser Industries, Incorporated.................. 239,963
7,000 Halliburton Company............................... 452,375
1,500 Helmerich & Payne Incorporated.................... 63,375
3,700 Rowan Companies, Incorporated*.................... 73,538
13,500 Schlumberger Limited.............................. 1,358,437
8,850 Williams Companies, Incorporated.................. 387,187
------------
2,826,925
------------
OTHER INSURANCE - 2.58%
8,797 Aetna Life & Casualty Company..................... 729,051
24,242 Allstate Corporation.............................. 1,536,337
25,400 American International Group Incorporated......... 3,073,400
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
</TABLE>
OTHER INSURANCE - (CONCLUDED)
<TABLE>
<C> <S> <C>
4,600 General Re Corporation............................ $ 780,275
6,700 ITT Hartford Group, Incorporated*................. 502,500
6,500 Loews Corporation................................. 663,813
2,600 MBIA Incorporated................................. 253,825
3,400 MGIC Investment Corporation....................... 267,325
6,400 SAFECO Corporation................................ 267,200
4,600 St. Paul Companies, Incorporated.................. 310,500
3,900 USF&G Corporation................................. 87,750
------------
8,471,976
------------
PRECIOUS METALS - 0.53%
19,200 Barrick Gold Corporation* (1)..................... 542,400
6,850 Engelhard Corporation............................. 151,556
2,500 FMC Corporation*.................................. 171,875
6,600 Homestake Mining Company.......................... 108,900
7,121 Newmont Mining Corporation........................ 338,248
13,500 Placer Dome, Incorporated......................... 290,250
7,200 Santa Fe Pacific Gold Corporation*................ 135,000
------------
1,738,229
------------
PUBLISHING - 0.81%
2,800 American Greetings Corporation, Class A........... 86,800
4,500 Deluxe Corporation................................ 142,313
8,600 Donnelley, R.R. & Sons Company.................... 265,525
8,400 Gannett, Incorporated............................. 669,900
5,200 Knight Ridder, Incorporated....................... 206,700
5,800 McGraw-Hill Companies, Incorporated............... 300,875
1,800 Meredith Corporation.............................. 88,200
4,000 Moore Corporation Limited......................... 88,500
5,600 New York Times Company, Class A................... 249,200
6,100 Times Mirror Company.............................. 314,150
6,600 Tribune Company................................... 259,050
------------
2,671,213
------------
RAILROADS - 0.94%
8,522 Burlington Northern Santa Fe, Incorporated........ 709,456
4,008 Consolidated Rail, Incorporated................... 418,836
11,700 CSX Corporation................................... 539,663
7,100 Norfolk Southern Corporation...................... 646,988
12,900 Union Pacific Corporation......................... 777,225
------------
3,092,168
------------
REAL PROPERTY - 0.02%
2,000 Centex Corporation................................ 80,750
------------
RESTAURANTS - 0.56%
8,500 Darden Restaurants, Incorporated.................. 61,625
38,500 McDonalds Corporation............................. 1,665,125
</TABLE>
10
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
</TABLE>
COMMON STOCKS - (CONCLUDED)
RESTAURANTS - (CONCLUDED)
<TABLE>
<C> <S> <C>
5,500 Wendy's International, Incorporated............... $ 114,125
------------
1,840,875
------------
SECURITIES & ASSET MANAGEMENT - 0.27%
8,700 Morgan Stanley Group, Incorporated................ 549,188
6,000 Salomon, Incorporated............................. 333,750
------------
882,938
------------
SEMICONDUCTOR - 2.69%
7,700 Advanced Micro Devices, Incorporated*............. 276,238
10,100 Applied Materials, Incorporated*.................. 511,312
44,900 Intel Corporation................................. 6,370,187
7,000 LSI Logic Corporation*............................ 241,500
11,700 Micron Technology, Incorporated................... 438,750
7,400 National Semiconductor Corporation*............... 193,325
10,600 Texas Instruments, Incorporated................... 817,525
------------
8,848,837
------------
SPECIALTY RETAIL - 1.34%
8,400 Autozone Incorporated*............................ 207,900
4,900 Circuit City Stores, Incorporated................. 153,125
6,400 CVS Corporation*.................................. 296,000
26,700 Home Depot, Incorporated.......................... 1,455,150
3,800 Longs Drug Stores Corporation..................... 96,425
9,700 Lowe's Companies Incorporated..................... 354,050
3,600 Pep Boys-Manny, Moe & Jack........................ 117,450
<CAPTION>
NUMBER OF
SHARES VALUE
- --------- ------------
<C> <S> <C>
</TABLE>
SPECIALTY RETAIL - (CONCLUDED)
<TABLE>
<C> <S> <C>
10,508 Price Costco, Incorporated*....................... $ 269,267
6,600 Rite Aid Corporation.............................. 278,025
3,800 Tandy Corporation................................. 191,425
15,200 Toys R Us, Incorporated*.......................... 395,200
13,700 Walgreen Company.................................. 585,675
------------
4,399,692
------------
THRIFT - 0.25%
5,800 Ahmanson, H F & Company........................... 238,525
3,800 Golden West Financial Corporation................. 257,450
7,300 Great Western Financial Corporation............... 320,288
------------
816,263
------------
TOBACCO - 0.09%
9,200 UST, Incorporated................................. 284,050
------------
WIRELESS TELECOMMUNICATIONS - 0.22%
27,200 Airtouch Communications, Incorporated*............ 741,200
------------
Total Common Stocks (cost--$277,562,067)....................... 329,916,379
------------
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED - 2.32%
MONEY MARKET FUNDS - 2.32%
3,336,900 Liquid Assets Portfolio........................... 3,336,900
4,304,000 TempFund Portfolio................................ 4,304,000
------------
Total Investments of Cash Collateral for Securities Loaned
(cost--$7,640,900)............................................. 7,640,900
------------
</TABLE>
Total Investments (cost--$285,202,967)--102.71%................ 337,557,279
Liabilities in excess of other assets--(2.71)%................. (8,922,208)
------------
Net Assets--100.00%............................................ $328,635,071
------------
------------
- ---------------
* Non-Income producing
(1) Portion of security was on loan at February 28, 1997
See accompanying notes to financial statements
11
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost--$285,202,967)............................................ $337,557,279
Receivable for shares of beneficial interest sold................................................... 7,627,728
Dividends and interest receivable................................................................... 615,442
Deferred organizational expenses.................................................................... 27,418
Other assets........................................................................................ 81,247
------------
Total assets........................................................................................ 345,909,114
------------
LIABILITIES
Collateral for securities loaned.................................................................... 7,640,900
Payable for investments purchased................................................................... 6,106,723
Due to custodian.................................................................................... 2,693,542
Payable for shares of beneficial interest repurchased............................................... 537,903
Payable to affiliate................................................................................ 294,975
------------
Total liabilities................................................................................... 17,274,043
------------
NET ASSETS
Beneficial interest--$0.001 par value (unlimited amount authorized)................................. 276,046,403
Distributions in excess of net investment income.................................................... (51,527)
Accumulated net realized gains from investment transactions......................................... 285,883
Net unrealized appreciation of investments.......................................................... 52,354,312
------------
Net assets.......................................................................................... $328,635,071
------------
------------
CLASS A:
Net assets.......................................................................................... $ 85,276,067
------------
Shares outstanding.................................................................................. 4,383,742
------------
Net asset value and redemption value per share...................................................... $19.45
------------
------------
Maximum offering price per share (net asset value plus sales charge of 4.50% of offering price)..... $20.37
------------
------------
CLASS B:
Net assets.......................................................................................... $ 94,900,116
------------
Shares outstanding.................................................................................. 4,891,786
------------
Net asset value and offering price per share........................................................ $19.40
------------
------------
CLASS C:
Net assets.......................................................................................... $132,325,382
------------
Shares outstanding.................................................................................. 6,791,682
------------
Net asset value and offering price per share........................................................ $19.48
------------
------------
CLASS Y:
Net assets.......................................................................................... $ 16,133,506
------------
Shares outstanding.................................................................................. 826,802
------------
Net asset value, offering price and redemption value per share...................................... $19.51
------------
------------
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED FEBRUARY 28,
1997 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends and interest............................................................................... $2,157,187
----------
EXPENSES:
Investment advisory and administration............................................................... 523,201
Service fees-Class A................................................................................. 54,821
Service and distribution fees-Class B................................................................ 261,703
Service and distribution fees-Class C................................................................ 493,136
Custody and accounting............................................................................... 63,246
Transfer agency...................................................................................... 57,347
Reports and notices to shareholders.................................................................. 36,936
Federal and state registration....................................................................... 29,897
Amortization of organizational expenses.............................................................. 24,531
Legal and audit...................................................................................... 24,481
Trustees' fees....................................................................................... 7,875
Other expenses....................................................................................... 19,619
----------
1,596,793
----------
Net investment income................................................................................ 560,394
----------
REALIZED AND UNREALIZED GAINS FROM INVESTMENT ACTIVITIES:
Net realized gains from investment transactions...................................................... 836,928
Net change in unrealized appreciation/depreciation of investments.................................... 35,673,265
----------
NET REALIZED AND UNREALIZED GAINS FROM INVESTMENT ACTIVITIES......................................... 36,510,193
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................................. $37,070,587
----------
----------
</TABLE>
See accompanying notes to financial statements
13
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
FEBRUARY 28, YEAR ENDED
1997 AUGUST 31,
(UNAUDITED) 1996
---------------- --------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income.......................................................... $ 560,394 $ 440,621
Net realized gains from investment transactions................................ 836,928 639,897
Net change in unrealized appreciation/depreciation of investments.............. 35,673,265 7,172,338
---------------- --------------
Net increase in net assets resulting from operations........................... 37,070,587 8,252,856
---------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class A................................................. (334,066) (21,259)
Net investment income--Class B................................................. (260,229) --
Net investment income--Class C................................................. (4,451) (231,540)
Net investment income--Class Y................................................. (118,419) (26,853)
Net realized gains from investment transactions--Class A....................... (199,505) (164,292)
Net realized gains from investment transactions--Class B....................... (240,098) --
Net realized gains from investment transactions--Class C....................... (451,261) (3,334,342)
Net realized gains from investment transactions--Class Y....................... (64,412) (171,644)
---------------- --------------
Total dividends and distributions to shareholders.............................. (1,672,441) (3,949,930)
---------------- --------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares........................................... 185,708,257 101,580,239
Cost of shares repurchased..................................................... (32,503,945) (23,861,622)
Proceeds from dividends reinvested............................................. 1,553,372 3,902,294
---------------- --------------
Net increase in net assets from beneficial interest transactions............... 154,757,684 81,620,911
---------------- --------------
Net increase in net assets..................................................... 190,155,830 85,923,837
NET ASSETS:
Beginning of period............................................................ 138,479,241 52,555,404
---------------- --------------
End of period (including undistributed net investment of income
$105,244 at August 31, 1996)................................................. $328,635,071 $138,479,241
---------------- --------------
---------------- --------------
</TABLE>
See accompanying notes to financial statements
14
<PAGE>
PAINEWEBBER NOTES TO FINANCIAL STATEMENTS --(UNAUDITED)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Tactical Allocation Fund (the "Fund") is a series of
PaineWebber 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 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 - Securities which are listed on stock
exchanges are valued at the last sale price on the day the
securities are being 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 by Mitchell Hutchins Asset Management Inc.
("Mitchell Hutchins"), a wholly owned subsidiary of PaineWebber
Incorporated ("PaineWebber") and investment adviser, administrator
and distributor of the Fund. Securities traded in the
over-the-counter ("OTC") market and listed on the Nasdaq Stock
Market ("Nasdaq") are valued at the last available sale price, or
last bid price available if no sale occurs, on Nasdaq prior to the
time of valuation. Where market quotations are readily available,
debt securities are valued thereon, provided such quotations
adequately reflect the fair value of the securities in the judgment
of Mitchell Hutchins. 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 is used to value short-term debt
instruments with sixty 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
15
<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
classes). 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 February 28,
1997, the Fund owed Mitchell Hutchins $117,126 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 service and/or 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
February 28, 1997, the Fund owed Mitchell Hutchins $177,849 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
16
<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 six months ended February 28, 1997, it earned
approximately $1,016,824 in sales charges.
SECURITY LENDING
The Fund may lend up to 33 1/3% of its total assets to qualified
institutions. The loans are secured at all times by cash or U.S.
government securities in an amount at least equal to the market
value of the securities loaned, plus accrued interest, determined
on a daily basis and adjusted accordingly. The Fund will regain
record ownership of loaned securities to exercise certain
beneficial rights, however, the Fund may bear the risk of delay in
recovery of, or even loss of rights in, the securities loaned
should the borrower fail financially. The Fund receives
compensation, which is included in interest income, for lending its
securities from interest earned on the cash or U.S. government
securities held as collateral, net of fee rebates paid to the
borrower plus reasonable administrative and custody fees. The
Fund's lending agent is PaineWebber, who received no compensation
in that capacity from the Fund for the six months ended February
28, 1997.
As of February 28, 1997, the Fund's custodian held cash and cash
equivalents having an aggregate value of $7,640,900 as collateral
for portfolio securities loaned having a market value of
$7,421,337.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at
February 28, 1997 was substantially the same as the cost of
securities for financial statement purposes.
At February 28, 1997, the components of net unrealized appreciation
of investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value over
cost).......................................................... $54,116,314
Gross depreciation (investments having an excess of cost over
value)......................................................... (1,762,002)
-----------
Net unrealized appreciation of investments....................... $52,354,312
-----------
-----------
</TABLE>
For the six months ended February 28, 1997, total aggregate
purchases and sales of portfolio securities, excluding short-term
securities, were as follows:
<TABLE>
<S> <C>
Purchases....................................................... $160,296,229
Sales........................................................... $ 5,168,266
</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.
17
<PAGE>
PAINEWEBBER
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>
Six months ended
February 28, 1997:
Shares sold....................... 3,599,745 $67,291,538 3,395,145 $63,121,216 2,935,905 $ 54,395,093 47,805 $ 900,410
Shares repurchased................ (699,516) (12,911,469) (295,480) (5,471,253) (736,895) (13,731,107) (21,203) (390,116)
Dividends reinvested.............. 25,482 470,393 25,089 462,390 23,737 439,368 9,790 181,221
--------- ----------- --------- ----------- ---------- ------------ -------- -----------
Net increase...................... 2,925,711 $54,850,462 3,124,754 $58,112,353 2,222,747 $ 41,103,354 36,392 $ 691,515
--------- ----------- --------- ----------- ---------- ------------ -------- -----------
--------- ----------- --------- ----------- ---------- ------------ -------- -----------
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
--------- ----------- --------- ----------- ---------- ------------ -------- -----------
--------- ----------- --------- ----------- ---------- ------------ -------- -----------
</TABLE>
18
<PAGE>
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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 FOR THE
FOR THE SIX FOR THE YEARS PERIOD FOR THE SIX PERIOD
MONTHS ENDED ENDED MAY 10, MONTHS ENDED JANUARY 30,
FEBRUARY 28, AUGUST 31, 1993+ TO FEBRUARY 28, 1996+ TO
1997 ------------------------- AUGUST 31, 1997 AUGUST 31,
(UNAUDITED) 1996 1995** 1994 1993 (UNAUDITED) 1996
------------- ------- ------- ------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................. $ 16.15 $ 14.86 $ 13.78 $ 13.50 $12.90 $ 16.13 $ 15.54
------------- ------- ------- ------- ------ ------------- -------------
Net investment income................ 0.09 0.18 0.22 0.24 0.08 0.03 0.02
Net realized and unrealized gains
from investments................... 3.43 2.31 2.05 0.32 0.59 3.41 0.57
------------- ------- ------- ------- ------ ------------- -------------
Net increase from investment
operations......................... 3.52 2.49 2.27 0.56 0.67 3.44 0.59
------------- ------- ------- ------- ------ ------------- -------------
Dividends from net investment
income............................. (0.14) (0.14) (0.22) (0.24) (0.07) (0.09) --
Distributions from net realized gains
from investment transactions....... (0.08) (1.06) (0.97) (0.04) -- (0.08) --
------------- ------- ------- ------- ------ ------------- -------------
Total dividends and distributions to
shareholders....................... (0.22) (1.20) (1.19) (0.28) (0.07) (0.17) --
------------- ------- ------- ------- ------ ------------- -------------
Net asset value, end of period....... $ 19.45 $ 16.15 $ 14.86 $ 13.78 $13.50 $ 19.40 $ 16.13
------------- ------- ------- ------- ------ ------------- -------------
------------- ------- ------- ------- ------ ------------- -------------
Total investment return (1).......... 21.85% 17.35% 18.43% 4.21% 5.17% 21.38% 3.80%
------------- ------- ------- ------- ------ ------------- -------------
------------- ------- ------- ------- ------ ------------- -------------
Ratios/supplemental data:
Net assets, end of period
(000's)........................... $85,276 $23,551 $ 1,944 $ 1,801 $3,007 $94,900 $28,495
Expenses to average net assets..... 1.00%* 1.17% 1.46% 1.13% 1.06%* 1.74%* 1.84%*
Net investment income to average
net assets....................... 1.07%* 1.12% 1.60% 1.64% 1.71%* 0.33%* 0.47%*
Portfolio turnover rate............ 2% 6% 53% 4% 0% 2% 6%
Average commission rate paid per
share on common stock
investments purchased/sold (2)... $0.0250 $0.0250 -- -- -- $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 each class would be lower if sales
charges were included. Total investment return for periods of less than one
year has not been annualized.
(2) Disclosure effective for fiscal years beginning on or after September 1,
1995.
20
<PAGE>
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------------------------
FOR THE SIX FOR THE PERIOD
MONTHS ENDED FOR THE YEARS JULY 22,
FEBRUARY 28, ENDED AUGUST 31, 1992+ TO
1997 ----------------------------------- AUGUST 31,
(UNAUDITED) 1996 1995** 1994 1993 1992
------------- ------- ------- ------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................... $ 16.12 $ 14.87 $ 13.78 $ 13.49 $ 12.12 $ 12.00
------------- ------- ------- ------- -------- -------
Net investment income................ 0.03 0.06 0.12 0.13 0.18 0.03
Net realized and unrealized gains
from investment transactions......... 3.41 2.32 2.06 0.33 1.34 0.09
------------- ------- ------- ------- -------- -------
Net increase from investment
operations........................... 3.44 2.38 2.18 0.46 1.52 0.12
------------- ------- ------- ------- -------- -------
Dividends from net investment
income............................... -- (0.07) (0.12) (0.13) (0.15) --
Distributions from net realized gains
from
investment transactions.............. (0.08) (1.06) (0.97) (0.04) -- --
------------- ------- ------- ------- -------- -------
Total dividends and distributions to
shareholders......................... (0.08) (1.13) (1.09) (0.17) (0.15) --
------------- ------- ------- ------- -------- -------
Net asset value, end of period....... $ 19.48 $ 16.12 $ 14.87 $ 13.78 $ 13.49 $ 12.12
------------- ------- ------- ------- -------- -------
------------- ------- ------- ------- -------- -------
Total investment return (1).......... 21.38% 16.52% 17.57% 3.46% 12.61% 0.98%
------------- ------- ------- ------- -------- -------
------------- ------- ------- ------- -------- -------
Ratios/supplemental data:
Net assets, end of period (000's).... $132,325 $73,630 $48,105 $62,970 $107,761 $50,222
Expenses to average net assets....... 1.76%* 1.95% 2.22% 1.88% 1.73% 1.75%*
Net investment income to average net
assets............................... 0.30%* 0.35% 0.86% 0.89% 1.04% 2.42%*
Portfolio turnover rate.............. 2% 6% 53% 4% 0% 0%
Average commission rate paid per
share on common stock investments
purchased/sold (2)................... $0.0250 $0.0250 -- -- -- --
<CAPTION>
CLASS Y
----------------------------------------------------------
FOR THE SIX FOR THE YEARS
MONTHS ENDED ENDED FOR THE PERIOD
FEBRUARY 28, AUGUST 31, MAY 10,
1997 ------------------------- 1993+ TO
(UNAUDITED) 1996 1995** 1994 AUGUST 31, 1993
------------- ------- ------- ------ ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................... $ 16.20 $ 14.88 $13.79 $13.52 $12.90
------------- ------- ------- ------ ------
Net investment income................ 0.11 0.30 0.23 0.25 0.09
Net realized and unrealized gains
from investment transactions......... 3.43 2.24 2.09 0.33 0.60
------------- ------- ------- ------ ------
Net increase from investment
operations........................... 3.54 2.54 2.32 0.58 0.69
------------- ------- ------- ------ ------
Dividends from net investment
income............................... (0.15) (0.16) (0.26) (0.27) (0.07)
Distributions from net realized gains
from
investment transactions.............. (0.08) (1.06) (0.97) (0.04) --
------------- ------- ------- ------ ------
Total dividends and distributions to
shareholders......................... (0.23) (1.22) (1.23) (0.31) (0.07)
------------- ------- ------- ------ ------
Net asset value, end of period....... $ 19.51 $ 16.20 $14.88 $13.79 $13.52
------------- ------- ------- ------ ------
------------- ------- ------- ------ ------
Total investment return (1).......... 21.93% 17.70% 18.79% 4.41% 5.30%
------------- ------- ------- ------ ------
------------- ------- ------- ------ ------
Ratios/supplemental data:
Net assets, end of period (000's).... $16,134 $12,803 $2,506 $3,880 $3,379
Expenses to average net assets....... 0.80%* 0.95% 1.23% 0.88% 0.81%*
Net investment income to average net
assets............................... 1.26%* 1.38% 1.86% 1.90% 1.96%*
Portfolio turnover rate.............. 2% 6% 53% 4% 0%
Average commission rate paid per
share on common stock investments
purchased/sold (2)................... $0.0250 $0.0250 -- -- --
</TABLE>
21
<PAGE>
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<PAGE>
PaineWebber offers a family of 22 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
/ / Asia Pacific Growth Fund
/ / Emerging Markets Equity Fund
/ / Global Equity Fund
/ / Global Income Fund
PAINEWEBBER MONEY MARKET FUND
- -C-1997 PaineWebber Incorporated
Member SIPC
Tactical Allocation Fund
SEMIAnnual Report
February 28, 1997
