<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
April 14, 1998
Dear Shareholder,
We are pleased to present you with the semiannual report for the PaineWebber
Tactical Allocation Fund (the "Fund") for the six-month period ended February
28, 1998.
GENERAL MARKET OVERVIEW
- --------------------------------------------------------------------------------
[GRAPHIC]
After an August selloff, the stock market quickly regained its footing in
September when inflation came in lower than expected. The Asian markets imploded
in October, causing a sharp selloff in equity markets worldwide. This event also
caused a "flight to quality" into the U.S. Treasury bond market, and bonds
rallied substantially. As events unfolded, investors refocused on the underlying
strength of the U.S. economy and caused the stock market to stage a comeback in
November.
Volatility returned to the stock market in December as earnings estimates were
revised downward. By the end of January, negative earnings reports stabilized
when it became evident that the long-expected slowdown in corporate earnings
growth would not be felt until later this year. The market hit a new high and
continued to advance in February. As investors scrambled to buy into the rising
market, they focused on the more liquid, large cap stocks.
Sectors that fared poorly at end of 1997 turned in outstanding performances in
early 1998. Technology stocks, consumer cyclicals such as department stores and
auto supply companies, and certain transportation stocks -most notably airlines
- - all rebounded sharply from year-end slumps. Consumer cyclicals responded to
strong, steady consumer spending. Financials continued to do reasonably well.
Energy stocks performed the worst as weakening economies in Asia drove down oil
prices. Consumer nondurables, a traditional defensive sector, continued to lag.
PORTFOLIO REVIEW
- --------------------------------------------------------------------------------
[GRAPHIC]
PERFORMANCE
The Fund's total return (the net asset value change with dividends reinvested)
for the six-month period ended February 28, 1998, without deducting sales
charges, was 17.06% for Class A shares, 16.67% for Class B shares, 16.62% for
Class C shares and 17.25% for Class Y shares.
For shareowners who purchased or redeemed Fund shares during the period the
Fund's total return may be lower; for example, after deducting the maximum
applicable sales charges, the Fund's total return for the period was 11.78% for
Class A shares, 11.67% for Class B shares, 15.62% for Class C shares and 17.25%
for Class Y shares.
SEMIANNUAL REPORT
PAINEWEBBER TACTICAL ALLOCATION FUND
FUND PROFILE
- --> GOAL:
Total return consisting of long-term capital appreciation and current
income
- --> PORTFOLIO MANAGER:
T. Kirkham Barneby,
Mitchell Hutchins Asset
Management Inc.
- --> TOTAL NET ASSETS:
$1.0 billion as of
February 28, 1998
- --> DIVIDEND PAYMENTS:
Annually
1
<PAGE>
SEMIANNUAL REPORT
PAINEWEBBER
TACTICAL
ALLOCATION
FUND
Top Five Sectors
as percent of net assets,
February 28, 1998*
Financial 17.2%
Technology 13.3%
Consumer Cyclical
13.0%
Health Care 12.6%
Consumer Non-Cyclical
10.5%
*Allocations subject
to change
PORTFOLIO POSITIONING
Management employs the Tactical Allocation Model (the "Model") to determine
the Fund's asset mix between an equity portion designed to track the performance
of the S&P 500 Index and a fixed-income portion consisting of either bonds
(five-year U.S. Treasury notes) or cash (30-day U.S. Treasury bills). The Model
is a systematic, quantitative approach to calculate the risk premium -- the
return advantage -- of stocks and bonds. The Model compares the expected return
of the stock market and of bonds with the "risk-free" asset (the one-year
Treasury bill) to determine the equity risk premium (ERP) and bond risk premium
(BRP).
Historically, the ERP has averaged about five percentage points per year. If
the ERP is 5.5% or greater, the Fund is fully invested in stocks. If the ERP
falls below the 5.5% hurdle rate, it indicates that the expected return of the
stock market does not fully compensate investors for the expected risk of owning
stocks. Therefore, some or all of the Fund's assets would be shifted to bonds or
cash, depending on the bond risk premium.
Historically, the BRP has averaged 0.5%. If this spread is 0.5% or greater,
the fixed-income portion is invested in bonds; if the spread is less than 0.5%,
the fixed income portion is allocated to cash (the 30-day Treasury bill). For
every 0.5% that the ERP drops below 5.5%, the Model would signal that another
25% of the Fund's assets should be shifted out of stocks.
The Fund's Model attempts to outperform the S&P 500 Index over the long term
with less volatility by shifting assets between stocks and bonds or cash. Of
course, as with all investment disciplines, there's no guarantee the Model will
accurately anticipate significant shifts in the markets and correctly determine
when to move into or out of stocks, bonds or cash.
The Fund was fully invested in stocks included in the S&P 500 Index for over
three years (from March 1, 1995 through March 31, 1998). During that period, the
S&P 500 Index advanced 26.9% at an annual rate. On April 1, 1998, the first
business day of the month, the Fund's Model calculated the ERP at 5.43%, below
the 5.5% threshold. This decline triggered a shift in the Fund's allocation from
a full investment in stocks to a 75% weighting in stocks. Since the BRP was less
than 0.5%, the 25% reduction in stocks was allocated to cash (the 30-day
Treasury bill).
The ERP decline can be primarily attributed to appreciation in the stock
market relative to short-term interest rates and to projected dividend growth.
Put another way, given current short-term interest rates, as of April 1, 1998,
the stock market is more fully valued than when the Fund's ERP was above 5.5%.
Thus, the Model no longer views the equity market as having a high likelihood of
producing significantly positive returns and causes the Fund's asset allocation
to be more cautious.
2
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
SEMIANNUAL REPORT
OUTLOOK
- --------------------------------------------------------------------------------
- -->
Of course, the ERP may shortly return to 5.5% or higher, requiring the Fund to
be fully invested in stocks again or it could dip further into Treasury bills or
change its non-stock allocation to Treasury notes. A further shift away from
stocks would depend upon the stock market's reaction to continuing short-term
interest rate moves, stock valuations and changes in dividend growth
expectations.
Our ultimate objective in managing your investments is to help you
successfully meet your financial goals. We thank you for your continued support
and welcome any comments or questions you may have.
For a quarterly Fund Profile on PaineWebber Tactical Allocation Fund or
another fund in the PaineWebber Family of Funds(1), please contact your
investment executive.
Sincerely,
/s/ MARGO N. 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.
This letter is intended to assist shareholders in understanding how the Fund
performed during the six-month period ended February 28, 1998, and reflects our
views at the time we are writing this report. Of course, these views may change
in response to changing circumstances. We encourage you to consult your
investment executive regarding your personal investment program.
(1)Mutual funds are sold by prospectus only. The prospectuses for the funds
contain more complete information regarding risks, charges and expenses, and
should be read carefully before investing.
3
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN(1)
---------------------------------------- -----------------------------------
12 MONTHS 6 MONTHS
02/28/98 08/31/97 02/28/97 ENDED 02/28/98 ENDED 02/28/98
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Class A Shares $25.69 $22.23 $ 19.45 33.79% 17.06%
- ---------------------------------------------------------------------------------------------------------------
Class B Shares 25.55 22.08 19.40 32.79 16.67
- ---------------------------------------------------------------------------------------------------------------
Class C Shares 25.68 22.18 19.48 32.78 16.62
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS A SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------------- CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
<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
- ---------------------------------------------------------------------------------------------------------------
1996 15.16 18.21 0.0811 0.1358 21.53
- ---------------------------------------------------------------------------------------------------------------
1997 18.21 23.73 0.1769 0.1204 32.00
- ---------------------------------------------------------------------------------------------------------------
01/01/98-02/28/98 23.73 25.69 -- -- 8.26
- ---------------------------------------------------------------------------------------------------------------
Totals: $ 2.3295 $ 0.9289
- ---------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/98: 148.42%
- ---------------------------------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS B SHARES
<CAPTION>
NET ASSET VALUE
----------------------
CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
1/30/96-12/31/96 $15.54 $ 18.18 $ 0.0811 $ 0.0879 18.06%
- ---------------------------------------------------------------------------------------------------------------
1997 18.18 23.63 0.1769 0.0116 31.05
- ---------------------------------------------------------------------------------------------------------------
01/01/98-02/28/98 23.63 25.55 -- -- 8.13
- ---------------------------------------------------------------------------------------------------------------
Totals: $ 0.2580 $ 0.0995
- ---------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/98: 67.29%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS C SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------------- CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
<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
- ---------------------------------------------------------------------------------------------------------------
1996 15.20 18.26 0.0811 0.0008 20.66
- ---------------------------------------------------------------------------------------------------------------
1997 18.26 23.75 0.1661 -- 31.01
- ---------------------------------------------------------------------------------------------------------------
01/01/98-02/28/98 23.75 25.68 -- -- 8.13
- ---------------------------------------------------------------------------------------------------------------
Totals: $ 2.3207 $ 0.4697
- ---------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/98: 159.79%
- ---------------------------------------------------------------------------------------------------------------
</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.
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
PERFORMANCE RESULTS (UNAUDITED)(CONCLUDED)
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
% RETURN WITHOUT DEDUCTING % RETURN AFTER DEDUCTING
MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
---------------------------------------- ----------------------------------------
CLASS CLASS
---------------------------------------- ----------------------------------------
A* B** C*** A* B** C***
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Twelve Months Ended 03/31/98 46.75% 45.62% 45.60 % 40.13% 40.62% 44.60 %
- ------------------------------------------------------------------------------------------------------------------
Five Years Ended 03/31/98 N/A N/A 19.75 N/A N/A 19.75
- ------------------------------------------------------------------------------------------------------------------
Commencement of Operations
Through 03/31/98 21.65 29.63 19.26 20.50 28.60 19.26
- ------------------------------------------------------------------------------------------------------------------
</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 5.0% 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 1.0% and is
reduced to 0% after 1 year. Class C shares bear ongoing 12b-1 distribution
and service fees.
+ Commencement of issuance of shares 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 participants in certain investment programs that are sponsored by
PaineWebber and may invest in PaineWebber mutual funds. For the six months ended
February 28, 1998 and since inception, May 10, 1993 through February 28, 1998,
Class Y shares have a total return of 17.25% and 151.65%, respectively. For the
year ended March 31, 1998, and since inception through March 31, 1998, Class Y
shares have an average annual total return of 47.20% and 21.97%, 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.
5
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
PORTFOLIO OF INVESTMENTS FEBRUARY 28, 1998(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
COMMON STOCKS--100.22%
AGRICULTURE, FOOD & BEVERAGE--5.38%
70,399 Archer-Daniels-Midland Co..... $ 1,579,578
17,875 Bestfoods Co.*................ 1,883,578
57,200 Campbell Soup Co.............. 3,321,175
59,000 Conagra, Inc.................. 1,770,000
19,700 General Mills, Inc............ 1,417,169
45,750 Heinz, H. J. and Co.(1)....... 2,576,297
18,100 Hershey Foods Corp............ 1,207,044
51,300 Kellogg Co.................... 2,186,662
189,100 Pepsico, Inc.................. 6,913,969
8,400 Pioneer Hi-Bred International,
Inc......................... 871,500
17,500 Quaker Oats Co................ 942,812
13,500 Ralston Purina Co............. 1,369,406
8,300 Supervalue, Inc............... 395,288
21,600 Sysco Corp.................... 1,016,550
309,500 The Coca-Cola Co.............. 21,258,781
80,400 Unilever N.V.................. 5,170,725
13,500 Whitman Corp.................. 240,469
14,700 Wrigley, Wm. Jr. Co........... 1,122,712
-------------
55,243,715
-------------
AIRLINES--0.39%
11,400 AMR Corporation*.............. 1,442,813
9,300 Delta Air Lines, Inc.......... 1,051,481
27,600 Southwest Airlines Co......... 791,775
11,500 USAir Group, Inc.*............ 728,094
-------------
4,014,163
-------------
ALCOHOL--0.33%
60,900 Anheuser-Busch Companies,
Inc.(1)..................... 2,854,688
9,600 Brown Forman Corp............. 532,800
-------------
3,387,488
-------------
APPAREL, RETAIL--0.54%
50,650 Gap, Inc...................... 2,263,422
9,600 Harcourt General, Inc......... 518,400
34,719 Limited, Inc.................. 1,006,851
9,900 Nordstrom, Inc................ 567,703
20,800 TJX Companies, Inc............ 803,400
17,400 Woolworth Corp.*.............. 413,250
-------------
5,573,026
-------------
APPAREL, TEXTILES--0.66%
10,100 Fruit of the Loom, Inc.*...... 324,463
8,900 Liz Claiborne, Inc............ 445,000
36,700 Nike Inc.(1).................. 1,610,212
7,500 Reebok International Ltd.*.... 233,906
60,500 Sara Lee Corp.(1)............. 3,418,250
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
APPAREL, TEXTILES (CONCLUDED)
<TABLE>
<C> <S> <C>
16,600 V. F. Corp.................... $ 791,613
-------------
6,823,444
-------------
BANKS--8.51%
80,928 Banc One Corp.(1)............. 4,572,426
87,100 BankAmerica Corp.(1).......... 6,750,250
12,500 Bankers Trust New York
Corp........................ 1,478,125
18,500 Bank of Boston Corp........... 1,844,219
47,900 Bank of New York Co. Inc...... 2,805,144
17,800 BB&T Corp..................... 1,104,713
57,300 Citicorp...................... 7,592,250
13,800 Comerica, Inc................. 1,391,212
25,200 Corestates Financial Corp..... 2,127,825
19,900 Fifth Third Bancorp........... 1,572,100
36,772 First Chicago Corp............ 3,022,199
79,270 First Union Corp.............. 4,176,538
34,416 Fleet Financial Group, Inc.... 2,712,411
25,500 Huntington Bancshares, Inc.... 914,813
22,500 J.P. Morgan & Co., Inc........ 2,688,750
28,040 KeyCorp....................... 1,964,552
32,200 Mellon Bank Corp.............. 2,006,462
16,900 Mercantile Bancorporation,
Inc......................... 940,063
27,600 National City Corp.(1)........ 1,800,900
117,935 NationsBank Corp.............. 8,078,547
95,600 Norwest Corp.(1).............. 3,913,625
39,000 PNC Bank Corp................. 2,164,500
7,500 Republic New York Corp........ 907,500
20,500 State Street Corp............. 1,267,156
22,700 Summit Bancorp, Inc........... 1,127,906
27,300 Suntrust Banks, Inc........... 2,013,375
22,700 Synovus Financial Corp........ 797,338
52,720 The Chase Manhattan Corp...... 6,540,575
30,915 US Bancorp, Inc............... 3,557,157
26,200 Wachovia Corp................. 2,082,900
10,966 Wells Fargo and Co............ 3,531,052
-------------
87,446,583
-------------
CHEMICALS--2.87%
13,800 Air Products & Chemicals,
Inc......................... 1,158,337
9,900 Ashland, Inc.................. 551,306
13,400 Avery Dennison Corp........... 676,700
28,300 Dow Chemical Co............... 2,589,450
141,200 DuPont (E.I.) de Nemours &
Co.......................... 8,657,325
10,300 Eastman Chemical Co........... 674,650
19,450 Engelhard Corp................ 352,531
5,200 FMC Corp.*.................... 376,350
9,600 Goodrich, B.F. Co............. 475,800
9,500 Grace, W.R. & Co.............. 797,406
8,100 Great Lakes Chemical Corp..... 393,863
</TABLE>
6
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS (CONTINUED)
CHEMICALS (CONCLUDED)
<TABLE>
<C> <S> <C>
12,600 Hercules, Inc................. $ 608,738
14,100 International Flavors and
Fragrances.................. 648,600
6,700 Kerr-Mcgee Corp............... 453,088
74,500 Monsanto Co.(1)............... 3,790,187
17,600 Morton International, Inc..... 581,900
42,900 Occidental Petroleum Corp..... 1,096,631
22,900 PPG Industries, Inc........... 1,484,206
19,900 Praxair, Inc.................. 951,469
7,900 Rohm & Haas Co................ 805,306
22,500 Sherwin Williams Co........... 752,344
22,000 Tenneco, Inc.................. 904,750
15,800 Union Carbide Corp............ 733,713
-------------
29,514,650
-------------
COMPUTER HARDWARE--5.59%
43,400 3Com Corp.*................... 1,551,550
16,400 Apple Computer, Inc.*......... 387,450
26,700 Bay Networks, Inc.*........... 904,463
20,000 Cabletron Systems, Inc.*...... 310,000
126,150 Cisco Systems, Inc.*.......... 8,310,131
189,994 Compaq Computer Corp.......... 6,091,683
6,500 Data General Corp.*........... 134,063
41,000 Dell Computer Corp.*.......... 5,734,875
18,700 Digital Equipment Corp.*...... 1,064,731
62,300 EMC Corp.*.................... 2,382,975
130,500 Hewlett-Packard Co............ 8,743,500
122,000 International Business
Machines.................... 12,741,375
36,700 Pitney Bowes, Inc............. 1,720,312
30,900 Seagate Technology,
Inc.*(1).................... 751,256
24,000 Silicon Graphics, Inc.*....... 361,500
47,000 Sun Microsystems Inc.*........ 2,238,375
22,200 Unisys Corp.*................. 396,825
40,900 Xerox Corp.................... 3,627,319
-------------
57,452,383
-------------
COMPUTER SOFTWARE--3.39%
9,200 Adobe Systems, Inc............ 406,525
6,200 Autodesk, Inc................. 293,725
68,562 Computer Associates
International Inc........... 3,230,984
302,500 Microsoft Corp.*.............. 25,636,875
44,500 Novell, Inc.*................. 467,945
122,912 Oracle Systems Corp.*......... 3,026,708
15,900 Parametric Technology
Corp.*...................... 962,944
19,200 Thermo Electron Corp.*........ 787,200
-------------
34,812,906
-------------
CONSTRUCTION, REAL PROPERTY--0.24%
6,000 Armstrong World Industries,
Inc......................... 471,000
4,300 Centex Corp................... 314,169
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
CONSTRUCTION, REAL PROPERTY (CONCLUDED)
<TABLE>
<C> <S> <C>
11,000 Fluor Corp.................... $ 517,688
21,900 Masco Corp.................... 1,190,812
-------------
2,493,669
-------------
CONSUMER DURABLES--0.12%
12,400 Maytag Corp................... 558,000
9,700 Whirlpool Corp................ 648,081
-------------
1,206,081
-------------
DEFENSE/AEROSPACE--1.82%
70,700 Allied-Signal, Inc............ 3,009,169
125,278 Boeing Co..................... 6,796,331
8,500 General Dynamics Corp......... 737,375
24,630 Lockheed Martin Corp.......... 2,874,013
8,700 Northrop Grumman Corp......... 1,209,300
43,000 Raytheon Co.(1)............... 2,528,938
20,900 Textron Inc................... 1,566,194
-------------
18,721,320
-------------
DIVERSIFIED RETAIL--2.41%
27,500 Dayton Hudson Corp............ 2,126,094
14,300 Dillard Department Stores,
Inc......................... 509,437
26,400 Federated Department Stores,
Inc.*....................... 1,237,500
62,200 K Mart Corp.*................. 831,925
29,200 May Department Stores Co...... 1,773,900
5,200 Mercantile Stores, Inc........ 342,225
31,300 Penney, J.C., Inc.(1)......... 2,212,519
49,100 Sears Roebuck & Co............ 2,605,369
282,300 Wal Mart Stores, Inc.(1)...... 13,074,018
-------------
24,712,987
-------------
DRUGS & MEDICINE--7.92%
9,000 Allergan, Inc................. 315,000
10,900 Alza Corp.*................... 407,388
81,400 American Home Products
Corp........................ 7,631,250
33,000 Amgen, Inc.*.................. 1,753,125
124,200 Bristol-Myers Squibb Co.(1)... 12,443,287
13,900 Cardinal Health Inc........... 1,138,062
138,960 Lilly, Eli & Co............... 9,145,305
150,100 Merck & Co., Inc.............. 19,147,131
162,200 Pfizer, Inc................... 14,354,700
63,690 Pharmacia & Upjohn Inc........ 2,519,736
91,900 Schering-Plough Corp.......... 6,990,144
13,300 Sigma Aldrich Corp............ 525,350
34,200 Warner Lambert Co............. 5,001,750
-------------
81,372,228
-------------
</TABLE>
7
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS (CONTINUED)
<TABLE>
<C> <S> <C>
ELECTRIC UTILITIES--2.49%
17,900 Ameren Corp................... $ 688,031
24,000 American Electric Power,
Inc......................... 1,152,000
19,600 Baltimore Gas & Electric
Co.......................... 618,625
19,000 Carolina Power & Light Co..... 793,250
26,900 Central & South West Corp..... 721,256
19,925 Cinergy Corp.................. 693,639
29,700 Consolidated Edison Co. of New
York, Inc................... 1,262,250
23,600 Dominion Resources, Inc....... 941,050
19,200 DTE Energy Co................. 705,600
44,806 Duke Power Co.(1)............. 2,489,533
48,100 Edison International, Inc..... 1,328,762
31,600 Entergy Corp.................. 914,425
30,000 Firstenergy Corp.............. 868,125
22,700 FPL Group, Inc................ 1,318,019
16,500 General Public Utilities
Corp........................ 663,094
35,794 Houston Industries, Inc....... 926,170
10,100 Northern States Power Co...... 554,869
37,600 PacifiCorp.................... 909,450
29,800 PECO Energy Co................ 588,550
22,800 Pennsylvania Power & Light
Co.......................... 510,150
55,200 PG&E Corp..................... 1,666,350
29,700 Public Service Enterprise
Group, Inc.................. 957,825
86,100 Southern Co................... 2,125,594
31,052 Texas Utilities Co............ 1,255,665
28,300 Unicom Corp................... 907,369
-------------
25,559,651
-------------
ELECTRICAL EQUIPMENT--2.26%
15,100 DSC Communications Corp.*..... 296,337
9,800 Eaton Corp.................... 941,412
19,000 General Instrument Corp.*..... 317,062
10,400 Harris Corp................... 527,150
16,000 Honeywell, Inc................ 1,268,000
10,800 Johnson Controls, Inc......... 600,075
10,700 KLA-Tencor Corp. *............ 493,872
80,480 Lucent Technologies Inc.(1)... 8,722,020
5,800 Millipore Corp................ 219,313
74,700 Motorola Inc.................. 4,164,525
65,900 Northern Telecommunications
Ltd......................... 3,513,294
6,100 Perkin Elmer Corp............. 446,444
6,600 Tektronix, Inc................ 294,525
22,800 Tellabs, Inc.*................ 1,376,550
-------------
23,180,579
-------------
ELECTRICAL POWER--4.01%
27,784 AMP, Inc...................... 1,227,705
11,655 Andrew Corp.*................. 321,969
15,400 Cooper Industries, Inc........ 864,325
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
ELECTRICAL POWER (CONCLUDED)
<TABLE>
<C> <S> <C>
55,400 Emerson Electric Co........... $ 3,535,212
409,900 General Electric Co........... 31,869,725
6,900 General Signal Corp........... 280,313
6,600 Grainger, W.W., Inc........... 638,963
10,900 Raychem Corp.................. 473,469
26,400 Rockwell International
Corp........................ 1,597,200
7,300 Thomas & Betts Corp........... 413,819
-------------
41,222,700
-------------
ENERGY RESERVES & PRODUCTION--6.50%
61,300 Amoco Corp.(1)................ 5,210,500
7,900 Anadarko Petroleum Corp....... 509,550
12,700 Apache Corp................... 431,800
40,500 Atlantic Richfield Co......... 3,148,875
23,000 Burlington Resources, Inc..... 1,029,250
82,600 Chevron Corp.(1).............. 6,700,925
309,200 Exxon Corp.................... 19,750,150
98,700 Mobil Corp.................... 7,149,581
14,000 Oryx Energy Co.*.............. 356,125
6,500 Pennzoil Co................... 435,094
33,700 Phillips Petroleum Co......... 1,651,300
269,100 Royal Dutch Petroleum Co...... 14,615,494
68,800 Texaco, Inc................... 3,839,900
32,936 Union Pacific Resources Group
Inc......................... 736,943
31,500 Unocal Corp................... 1,187,156
-------------
66,752,643
-------------
ENTERTAINMENT--2.05%
88,600 CBS Corp.*.................... 2,741,062
84,400 Disney, Walt Co............... 9,447,525
10,100 King World Productions,
Inc.*....................... 269,544
45,000 Seagram Co. Ltd............... 1,710,000
70,300 Time Warner Inc............... 4,745,250
44,549 Viacom, Inc., Class B*........ 2,138,352
-------------
21,051,733
-------------
ENVIRONMENTAL SERVICES--0.30%
24,800 Browning Ferris Industries,
Inc......................... 826,150
43,900 Laidlaw Inc................... 644,781
7,800 Safety Kleen Corp............. 209,138
56,900 Waste Management Inc.......... 1,422,500
-------------
3,102,569
-------------
FINANCIAL SERVICES--2.60%
58,200 American Express Co........... 5,241,637
21,200 AON Corp...................... 1,268,025
6,900 Beneficial Corp............... 814,200
13,900 Countrywide Credit Industries,
Inc......................... 617,681
</TABLE>
8
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES (CONCLUDED)
<TABLE>
<C> <S> <C>
87,200 Federal Home Loan Mortgage
Corp........................ $ 4,120,200
132,300 Federal National Mortgage
Association................. 8,442,394
17,300 Green Tree Financial Corp..... 396,819
13,400 Household International,
Inc......................... 1,740,325
21,100 Marsh & McLennan Companies,
Inc......................... 1,829,106
63,000 MBNA Corp..................... 2,256,188
-------------
26,726,575
-------------
FOREST PRODUCTS, PAPER--1.32%
7,300 Bemis, Inc.................... 328,956
7,900 Boise Cascade Corp............ 263,169
12,700 Champion International
Corp........................ 648,494
26,300 Fort James Corp............... 1,193,362
11,900 Georgia-Pacific Corp.......... 698,381
16,900 Ikon Office Solutions Inc..... 552,419
38,000 International Paper Co........ 1,771,750
69,420 Kimberly Clark Corp........... 3,865,826
15,000 Louisiana Pacific Corp........ 329,063
13,900 Mead Corp..................... 475,206
13,900 Stone Container Corp.*........ 156,375
7,700 Temple-Inland, Inc............ 459,113
9,300 Union Camp Corp............... 555,675
14,700 Westvaco Corp................. 477,750
25,500 Weyerhaeuser Co............... 1,273,406
14,800 Willamette Industries, Inc.... 546,675
-------------
13,595,620
-------------
FOOD RETAIL--0.49%
31,100 Albertson's, Inc.............. 1,455,869
34,800 American Stores Co............ 876,525
8,900 Giant Food, Inc., Class A..... 323,181
32,100 Kroger Co.*................... 1,356,225
19,100 Winn Dixie Stores, Inc........ 1,030,206
-------------
5,042,006
-------------
FREIGHT, AIR, SEA & LAND--0.12%
18,600 FDX Corp.*.................... 1,184,588
-------------
GAS UTILITY--0.23%
7,700 Columbia Gas System, Inc...... 587,607
12,700 Consolidated Natural Gas
Co.......................... 730,250
12,900 Pacific Enterprises........... 468,431
14,000 Sonat, Inc.................... 603,750
-------------
2,390,038
-------------
HEAVY MACHINERY--0.61%
13,000 Brunswick Corp................ 412,750
9,700 Case Corp..................... 631,106
46,700 Caterpillar, Inc.............. 2,550,987
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
HEAVY MACHINERY (CONCLUDED)
<TABLE>
<C> <S> <C>
5,200 Cummins Engine Co., Inc....... $ 300,950
31,700 Deere & Co.................... 1,779,162
7,100 Harnischfeger Industries
Inc......................... 251,163
7,500 McDermott International,
Inc......................... 295,313
-------------
6,221,431
-------------
HOTELS--0.29%
13,050 Harrah's Entertainment
Inc.*....................... 274,866
31,400 Hilton Hotels Corp............ 936,112
16,100 Marriott International,
Inc......................... 1,219,575
22,500 Mirage Resorts, Inc.*......... 514,688
-------------
2,945,241
-------------
HOUSEHOLD PRODUCTS--2.94%
16,700 Avon Products Inc............. 1,176,306
13,300 Clorox Co..................... 1,167,075
37,200 Colgate-Palmolive Co.......... 3,020,175
23,300 Fortune Brands Inc............ 924,719
70,200 Gillette Co.(1)............... 7,572,825
20,900 Newell Co..................... 958,787
7,700 Owens-Corning Fiberglass...... 235,813
168,500 Procter & Gamble Co........... 14,311,969
19,900 Rubbermaid, Inc............... 577,100
8,200 Tupperware Corp............... 220,375
-------------
30,165,144
-------------
INDUSTRIAL PARTS--1.05%
12,400 Black & Decker Corp........... 624,650
6,700 Crane Co...................... 328,300
28,500 Dover Corp.................... 1,100,812
23,950 Genuine Parts Co.............. 886,150
31,600 Illinois Tool Works, Inc...... 1,894,025
21,350 Ingersoll Rand Co............. 1,016,794
17,766 Pall Corp..................... 371,976
14,700 Parker-Hannifin Corp.......... 685,387
8,650 Snap-On, Inc.................. 367,625
11,900 Stanley Works................. 568,969
9,200 Timken Co..................... 296,700
29,300 United Technologies Corp...... 2,616,856
-------------
10,758,244
-------------
INDUSTRIAL SERVICES/SUPPLIES--0.45%
99,321 Cendant Corp.*................ 3,724,537
17,200 Ecolab, Inc................... 495,575
10,900 Ryder Systems, Inc............ 399,894
-------------
4,620,006
-------------
INFORMATION & COMPUTER SERVICES--1.25%
36,700 Automatic Data Processing,
Inc.(1)..................... 2,240,994
13,300 Block, H&R, Inc............... 625,931
</TABLE>
9
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS (CONTINUED)
INFORMATION & COMPUTER SERVICES (CONCLUDED)
<TABLE>
<C> <S> <C>
9,800 Ceridian Corp.*............... $ 456,313
20,600 Cognizant Corp................ 1,028,712
9,800 Computer Sciences Corp.*...... 1,025,937
12,600 Dow Jones & Co., Inc.......... 647,325
21,800 Dun & Bradstreet Corp......... 730,300
19,200 Equifax Inc................... 690,000
53,600 First Data Corp............... 1,822,400
26,600 HBO & Co...................... 1,439,725
16,100 Interpublic Group Companies,
Inc......................... 877,450
20,600 Omnicom Group................. 942,450
3,400 Shared Medical System Corp.... 259,888
-------------
12,787,425
-------------
LEISURE--0.50%
40,600 Eastman Kodak Co.............. 2,664,375
16,200 Hasbro, Inc................... 588,263
36,683 Mattel Inc.................... 1,552,149
6,000 Polaroid Corp................. 274,875
-------------
5,079,662
-------------
LIFE INSURANCE--1.06%
18,697 Aetna Life & Casualty Co...... 1,633,650
30,388 American General Corp.(1)..... 1,766,302
23,600 Conseco Inc................... 1,107,725
9,050 Jefferson-Pilot Corp.......... 759,069
13,000 Lincoln National Corp......... 1,088,750
12,400 Providian Corp................ 703,700
24,550 SunAmerica Inc................ 1,112,422
17,900 Torchmark, Inc................ 833,469
8,200 Transamerica Corp............. 954,788
17,500 UNUM Corp..................... 900,156
-------------
10,860,031
-------------
LONG DISTANCE & PHONE COMPANIES--6.53%
24,000 Alltel Corp................... 1,096,500
137,000 Ameritech Corp................ 5,711,188
203,800 AT&T Corp.(1)................. 12,406,325
97,202 Bell Atlantic Corp............ 8,723,879
124,600 BellSouth Corp................ 7,600,600
21,500 Frontier Corp................. 595,281
120,100 GTE Corp...................... 6,500,413
87,500 MCI Communications Corp....... 4,183,594
114,751 SBC Communications, Inc....... 8,678,044
54,200 Sprint Corp................... 3,577,200
61,100 US West Communications
Group....................... 3,181,019
127,200 WorldCom, Inc.*............... 4,857,450
-------------
67,111,493
-------------
MEDIA--0.56%
12,500 Clear Channel
Communications*............. 1,132,812
44,200 Comcast Corp., Class A
Special..................... 1,547,000
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
MEDIA (CONCLUDED)
<TABLE>
<C> <S> <C>
10,400 Scientific-Atlanta, Inc....... $ 182,000
64,000 Tele-Communications, Inc.
Class A*.................... 1,860,000
15,900 Tribune Co.................... 1,026,544
-------------
5,748,356
-------------
MEDICAL PRODUCTS--3.76%
95,600 Abbott Laboratories........... 7,152,075
7,700 Bard, C.R. Inc................ 268,538
7,500 Bausch & Lomb, Inc............ 336,094
35,200 Baxter International, Inc..... 1,993,200
15,500 Becton, Dickinson & Co........ 986,187
14,600 Biomet, Inc................... 435,262
24,400 Boston Scientific Corp.*(1)... 1,457,900
18,600 Guidant Corp.................. 1,356,637
168,400 Johnson & Johnson............. 12,714,200
9,800 Mallinckrodt Group, Inc....... 380,363
58,700 Medtronic, Inc.(1)............ 3,118,437
50,700 Minnesota Mining &
Manufacturing Co.(1)........ 4,325,344
11,900 St. Jude Medical, Inc......... 434,350
66,900 Tyco International Ltd........ 3,395,175
9,700 U.S. Surgical Corp............ 297,063
-------------
38,650,825
-------------
MEDICAL PROVIDERS--0.94%
81,127 Columbia/HCA Healthcare
Corp........................ 2,200,570
29,100 Corning, Inc.................. 1,182,187
49,500 HEALTHSOUTH Corp.*............ 1,336,500
21,200 Humana Inc.*.................. 539,275
8,700 Manor Care, Inc............... 326,794
31,600 Service Corp. International... 1,196,850
38,500 Tenet Healthcare Corp.*....... 1,436,531
23,700 United Healthcare Corp........ 1,438,294
-------------
9,657,001
-------------
MINING & METALS--0.74%
30,200 Alcan Aluminum Ltd............ 938,087
21,900 Aluminum Co. of America....... 1,606,912
16,700 Crown Cork & Seal, Inc........ 901,800
15,900 Cyprus Amax Minerals Co....... 260,363
26,200 Freeport-McMoran Copper &
Gold, Inc................... 394,638
23,000 Inco Ltd...................... 406,813
11,600 Nucor Corp.................... 597,400
18,400 Owens Illinois Inc.*.......... 706,100
8,000 Phelps Dodge Corp............. 508,000
10,000 Reynolds Metals Co............ 623,125
12,200 USX-U.S. Steel Group, Inc..... 428,525
14,200 Worthington Industries,
Inc......................... 243,175
-------------
7,614,938
-------------
</TABLE>
10
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS (CONTINUED)
<TABLE>
<C> <S> <C>
MOTOR VEHICLES AND PARTS--2.25%
83,100 Chrysler Corp................. $ 3,235,706
10,800 Cooper Tire & Rubber Co....... 249,075
13,900 DANA Corp..................... 758,419
8,600 Echlin, Inc................... 434,838
150,200 Ford Motor Co................. 8,495,687
89,100 General Motors Corp........... 6,142,331
19,900 Goodyear Tire & Rubber Co..... 1,375,588
16,100 ITT Industries Inc............ 551,425
10,100 Navistar International
Corp.*...................... 306,788
10,030 Paccar, Inc................... 635,024
16,100 TRW, Inc...................... 882,481
-------------
23,067,362
-------------
OIL REFINING--0.68%
12,400 Amerada Hess Corp............. 735,475
13,800 Coastal Corp.................. 878,025
39,900 Enron Corp.................... 1,875,300
9,492 Sun Co., Inc.................. 379,087
36,200 USX-Marathon Group............ 1,251,163
7,200 Western Atlas, Inc.*.......... 546,750
40,700 Williams Companies, Inc....... 1,330,381
-------------
6,996,181
-------------
OIL SERVICES--0.82%
21,500 Baker Hughes, Inc............. 880,156
22,500 Dresser Industries, Inc....... 1,005,469
33,200 Halliburton Co................ 1,543,800
11,400 Rowan Companies, Inc.*........ 321,338
61,900 Schlumberger Ltd.............. 4,665,712
-------------
8,416,475
-------------
OTHER INSURANCE--2.94%
53,442 Allstate Corp................. 4,983,466
87,600 American International Group
Inc......................... 10,528,425
21,400 Chubb Corp.................... 1,707,987
9,300 CIGNA Corp.................... 1,776,300
7,000 Cincinnati Financial Corp..... 945,000
9,800 General Re Corp............... 2,087,400
14,700 Hartford Financial Services
Group Inc................... 1,444,275
14,700 Loews Corp.................... 1,474,594
12,400 MBIA Inc...................... 907,525
14,300 MGIC Investment Corp.......... 1,053,731
17,900 SAFECO Corp................... 938,631
10,500 St. Paul Companies, Inc....... 930,563
9,100 The Progressive Corp.......... 1,054,463
14,800 USF&G Corp.................... 361,675
-------------
30,194,035
-------------
PRECIOUS METALS--0.21%
48,800 Barrick Gold Corp............. 942,450
22,300 Homestake Mining Co........... 223,000
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
PRECIOUS METALS (CONCLUDED)
<TABLE>
<C> <S> <C>
20,876 Newmont Mining Corp........... $ 604,099
32,800 Placer Dome, Inc.............. 422,300
-------------
2,191,849
-------------
PUBLISHING--0.72%
10,100 American Greetings Corp.,
Class A..................... 460,813
11,500 Deluxe Corp................... 391,719
18,900 Donnelley, R.R. & Sons Co..... 748,912
35,800 Gannett Inc................... 2,311,337
11,000 Knight Ridder, Inc............ 618,750
12,700 McGraw-Hill Companies, Inc.... 960,437
7,400 Meredith Corp................. 317,738
12,300 New York Times Co., Class A... 804,881
11,800 Times Mirror Co............... 726,438
-------------
7,341,025
-------------
RAILROADS--0.65%
19,522 Burlington Northern Santa Fe,
Inc......................... 1,944,879
27,200 CSX Corp...................... 1,521,500
47,600 Norfolk Southern Corp......... 1,639,225
31,100 Union Pacific Corp............ 1,586,100
-------------
6,691,704
-------------
RESTAURANTS--0.58%
20,900 Darden Restaurants, Inc....... 282,150
86,100 McDonalds Corp................ 4,713,975
19,820 Tricon Global Restaurants
Inc.*....................... 562,393
17,500 Wendy's International, Inc.... 379,531
-------------
5,938,049
-------------
SECURITIES & ASSET MANAGEMENT--1.77%
33,500 Charles Schwab Corp........... 1,264,625
12,800 Lehman Brothers Holdings
Inc......................... 807,200
41,800 Merrill Lynch & Co., Inc...... 2,991,312
74,000 Morgan Stanley, Dean Witter,
Discover & Co............... 5,156,875
143,577 Travelers Group Inc........... 8,004,418
-------------
18,224,430
-------------
SEMICONDUCTOR--2.50%
17,900 Advanced Micro Devices,
Inc.*....................... 419,531
22,780 Allegheny Teldyne, Inc........ 617,907
45,700 Applied Materials, Inc.*...... 1,682,331
204,800 Intel Corp.................... 18,368,000
17,800 LSI Logic Corp.*.............. 421,638
26,600 Micron Technology, Inc........ 882,787
20,500 National Semiconductor
Corp.*...................... 489,438
48,800 Texas Instruments, Inc........ 2,824,300
-------------
25,705,932
-------------
</TABLE>
11
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS (CONCLUDED)
<TABLE>
<C> <S> <C>
SPECIALTY RETAIL--1.63%
19,400 Autozone Inc.*................ $ 586,850
12,700 Circuit City Stores, Inc...... 490,538
13,700 Consolidated Stores Corp.*.... 563,413
26,708 Costco Companies, Inc.*....... 1,305,353
21,800 CVS Corp...................... 1,614,562
91,800 Home Depot, Inc............... 5,857,987
22,000 Lowe's Companies Inc.......... 1,285,625
8,500 Pep Boys-Manny, Moe & Jack.... 217,813
31,600 Rite Aid Corp................. 1,023,050
13,300 Tandy Corp.................... 591,850
36,000 Toys R Us, Inc.*.............. 945,000
62,100 Walgreen Co................... 2,278,294
-------------
16,760,335
-------------
THRIFT--0.36%
14,800 Ahmanson, H F & Co............ 924,075
7,200 Golden West Financial Corp.... 642,600
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<C> <S> <C>
</TABLE>
THRIFT (CONCLUDED)
<TABLE>
<C> <S> <C>
31,730 Washington Mutual, Inc........ $ 2,129,876
-------------
3,696,551
-------------
TOBACCO--1.37%
303,800 Phillip Morris Cos. Inc....... 13,196,350
23,600 UST, Inc...................... 836,325
-------------
14,032,675
-------------
WIRELESS TELECOMMUNICATIONS--0.52%
63,100 Airtouch Communications,
Inc.*....................... 2,835,556
76,600 US West Media Group*.......... 2,465,563
-------------
5,301,119
-------------
Total Common Stocks (cost--$795,486,026)....... 1,029,360,864
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATE RATE
- --------- -------------------- --------------
<C> <S> <C> <C> <C>
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED--7.31%
REPURCHASE AGREEMENT--1.49%
$15,326 Repurchase agreement dated 02/27/98 with Union
Bank of Switzerland, collateralized by
$15,233,000 U.S. Treasury Notes, 6.000% due
09/30/98 (value-$15,632,866); proceeds:
$15,333,178 (cost-$15,326,000).................. 03/02/98 5.620% 15,326,000
----------------
<CAPTION>
NUMBER OF
SHARES
- ---------
<C> <S> <C> <C> <C>
MONEY MARKET FUNDS--5.82%
21,504,871 Prime Portfolio................................... 21,504,871
351,131 TempFund Portfolio................................ 351,131
37,911,363 Liquid Assets Portfolio........................... 37,911,363
836 TempCash Portfolio................................ 836
----------------
Total Money Market Funds (cost--$59,768,201)................. 59,768,201
----------------
Total Investments of Cash Collateral for Securities Loaned
(cost--$75,094,201)........................................ 75,094,201
----------------
Total Investments (cost--$870,580,227)--107.53%.............. 1,104,455,065
Liabilities in excess of other assets--(7.53)%............... (77,296,658)
----------------
Net Assets--100.00%.......................................... $ 1,027,158,407
----------------
----------------
</TABLE>
- -----------------
<TABLE>
<S> <C>
* Non-Income producing security
(1) Security, or portion thereof, was on loan at February 28, 1998.
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1998(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost--$870,580,227).... $1,104,455,065
Receivable for shares of beneficial interest sold........... 9,477,039
Dividends and interest receivable........................... 1,935,610
Deferred organizational expenses............................ 1,927
Other assets................................................ 57,786
--------------
Total assets................................................ 1,115,927,427
--------------
LIABILITIES
Collateral for securities loaned............................ 75,094,201
Payable for investments purchased........................... 5,790,527
Due to custodian............................................ 3,638,696
Payable for shares of beneficial interest repurchased....... 1,898,847
Payable to affiliate........................................ 1,862,260
Accrued expenses and other liabilities...................... 484,489
--------------
Total liabilities........................................... 88,769,020
--------------
NET ASSETS
Beneficial interest--$0.001 par value (unlimited amount
authorized)............................................... 792,491,132
Undistributed net investment income......................... 183,568
Accumulated net realized gains from investment
transactions.............................................. 608,869
Net unrealized appreciation of investments.................. 233,874,838
--------------
Net assets.................................................. $1,027,158,407
--------------
--------------
CLASS A:
Net assets.................................................. $ 273,038,346
--------------
Shares outstanding.......................................... 10,626,893
--------------
Net asset value and redemption value per share.............. $25.69
--------------
--------------
Maximum offering price per share (net asset value plus sales
charge of 4.50% of offering price)........................ $26.90
--------------
--------------
CLASS B:
Net assets.................................................. $ 367,888,208
--------------
Shares outstanding.......................................... 14,401,301
--------------
Net asset value and offering price per share................ $25.55
--------------
--------------
CLASS C:
Net assets.................................................. $ 327,698,720
--------------
Shares outstanding.......................................... 12,759,619
--------------
Net asset value and offering price per share................ $25.68
--------------
--------------
CLASS Y:
Net assets.................................................. $ 58,533,133
--------------
Shares outstanding.......................................... 2,268,600
--------------
Net asset value, offering price and redemption value per
share..................................................... $25.80
--------------
--------------
</TABLE>
See accompanying notes to financial statements
13
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
FEBRUARY 28,
1998
(UNAUDITED)
-------------
<S> <C>
INVESTMENT INCOME:
Dividends and interest...................................... $ 6,824,484
-------------
EXPENSES:
Investment advisory and administration...................... 2,057,023
Service fees--Class A....................................... 261,410
Service and distribution fees--Class B...................... 1,483,380
Service and distribution fees--Class C...................... 1,359,419
Transfer agency............................................. 259,504
Custody and accounting...................................... 246,843
Reports and notices to shareholders......................... 127,893
Federal and state registration.............................. 126,213
Legal and audit............................................. 81,378
Interest expense............................................ 48,268
Amortization of organizational expenses..................... 4,982
Trustees' fees.............................................. 6,750
Other expenses.............................................. 78,849
-------------
6,141,912
-------------
NET INVESTMENT INCOME....................................... 682,572
-------------
REALIZED AND UNREALIZED GAINS FROM INVESTMENT ACTIVITIES:
Net realized gain from investment transactions.............. 1,161,411
Net change in unrealized appreciation/depreciation of
investments............................................... 130,952,854
-------------
NET REALIZED AND UNREALIZED GAINS FROM INVESTMENT
ACTIVITIES................................................ 132,114,265
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $132,796,837
-------------
-------------
</TABLE>
See accompanying notes to financial statements
14
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
FEBRUARY 28, FOR THE YEAR
1998 ENDED AUGUST
(UNAUDITED) 31, 1997
--------------- ---------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income....................................... $ 682,572 $ 1,298,142
Net realized gains from investment transactions............. 1,161,411 6,528,545
Net change in unrealized appreciation/depreciation of
investments............................................... 130,952,854 86,240,937
--------------- ---------------
Net increase in net assets resulting from operations........ 132,796,837 94,067,624
--------------- ---------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class A.............................. (1,100,266) (334,066)
Net investment income--Class B.............................. (149,598) (260,230)
Net investment income--Class C.............................. -- (4,451)
Net investment income--Class Y.............................. (333,893) (118,419)
Net realized gains from investment transactions--Class A.... (1,616,587) (199,505)
Net realized gains from investment transactions--Class B.... (2,281,367) (240,097)
Net realized gains from investment transactions--Class C.... (1,955,927) (451,261)
Net realized gains from investment transactions--Class Y.... (357,325) (64,412)
--------------- ---------------
Total dividends and distributions to shareholders........... (7,794,963) (1,672,441)
--------------- ---------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares........................ 311,963,560 550,623,261
Cost of shares repurchased.................................. (97,346,337) (102,944,924)
Proceeds from dividends reinvested.......................... 7,433,176 1,553,373
--------------- ---------------
Net increase in net assets from beneficial interest
transactions.............................................. 222,050,399 449,231,710
--------------- ---------------
Net increase in net assets.................................. 347,052,273 541,626,893
NET ASSETS:
Beginning of period......................................... 680,106,134 138,479,241
--------------- ---------------
End of period (including undistributed net investment of
income of $183,568 and
$1,084,753, respectively)................................. $1,027,158,407 $ 680,106,134
--------------- ---------------
--------------- ---------------
</TABLE>
See accompanying notes to financial statements
15
<PAGE>
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 have been 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 reinvested dividend shares
automatically convert to Class A shares approximately six years after issuance.
All classes of shares have equal voting privileges except that Class A, Class B,
and Class C shares each have exclusive voting rights with respect to their
respective service and/or distribution plans. Class Y shares have no service 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 that 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"), an asset management 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, Inc. ("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 securities 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 collateral may be subject
to legal proceedings. The Fund occasionally participates in joint repurchase
agreement transactions with other funds managed by Mitchell Hutchins.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are
recorded on the trade date. Realized gains and losses from investment
transactions are calculated 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. At
February 28, 1998, the Fund owed Mitchell Hutchins $746,617 in investment
advisory and administration fees.
For the six months ended February 28, 1998, the Fund paid $4,612 in brokerage
commissions to PaineWebber for transactions executed on behalf of the Fund.
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, 1998, the Fund owed
Mitchell Hutchins $1,115,643 in service and distribution fees.
Mitchell Hutchins also receives the proceeds of the initial sales charges paid
by shareholders upon the purchase of Class A shares and the contingent deferred
sales charges paid by shareholders upon certain redemptions of Class A, Class B
and Class C shares. Mitchell Hutchins has informed the Fund that for the six
months ended February 28, 1998, it earned $1,689,426 in sales charges.
TRANSFER AGENCY SERVICE FEES
PaineWebber provides transfer agency related services to the Fund pursuant to
a delegation of authority from PFPC, Inc., the Fund's transfer agent, and is
compensated for the services by PFPC, Inc., not the Fund. For the six months
ended February 28, 1998, PaineWebber received from PFPC, Inc., not the Fund,
approximately 58% of the total transfer agency and related service fees
collected by PFPC, Inc. from the Fund.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SECURITY LENDING
The Fund may lend securities 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 $15,756 in compensation in that capacity from
the Fund for the six months ended February 28, 1998. At February 28, 1998, the
Fund owed PaineWebber $2,502 in compensation.
As of February 28, 1998, the Fund held cash and/or cash equivalents having an
aggregate value of $75,094,201 as collateral for portfolio securities loaned
having a market value of $73,062,313.
BANK LINES OF CREDIT
The Fund may borrow up to $10 million under a short-term unsecured line of
credit ("Line of Credit") and may participate with other funds managed by
Mitchell Hutchins in a $200 million committed credit facility ("Facility") to be
utilized for, temporary financing until the settlement of sale or purchase of
portfolio securities, the repurchase or redemption of shares of the Fund at the
request of the shareholders and other temporary or emergency purposes.
Under the Facility arrangement, the Fund has agreed to pay a commitment fee,
pro rata, based on the relative asset size of the Funds in the Facility.
Interest is charged to the Fund at rates based on prevailing market rates in
effect at the time of borrowings. For the six months ended February 28, 1998,
the Fund did not borrow under the Facility and had an average daily amount of
borrowing outstanding under the Line of Credit arrangement of $1,495,511 with a
related weighted average annualized interest rate of 6.34%.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at February 28,
1998 was substantially the same as the cost of securities for financial
statement purposes.
At February 28, 1998, the components of net unrealized appreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value over
cost)............................................................... $ 242,020,507
Gross depreciation (investments having an excess of cost over
value).............................................................. (8,145,669)
-------------
Net unrealized appreciation of investments............................ $ 233,874,838
-------------
-------------
</TABLE>
For the six months ended February 28, 1998, total aggregate purchases and
sales of portfolio securities, excluding short-term securities, were as follows:
<TABLE>
<S> <C>
Purchases............................................................. $ 225,321,369
Sales................................................................. $ 8,462,458
</TABLE>
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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
------------------------- ------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Six months ended February 28,
1998:
Shares sold................... 3,933,981 $ 93,775,589 4,720,609 $111,133,101 3,349,841 $ 79,277,001
Shares repurchased............ (1,512,487) (35,891,999) (864,447) (20,306,882) (1,179,829) (27,892,018)
Shares converted from Class B
to Class A.................. 411,507 9,994,092 (414,657) (9,994,092) -- --
Dividends reinvested.......... 111,953 2,570,453 99,977 2,285,483 82,162 1,888,083
----------- ------------ ----------- ------------ ----------- ------------
Net increase.................. 2,944,954 $ 70,448,135 3,541,482 $ 83,117,610 2,252,174 $ 53,273,066
----------- ------------ ----------- ------------ ----------- ------------
----------- ------------ ----------- ------------ ----------- ------------
Year ended August 31, 1997:
Shares sold................... 8,395,445 $168,990,356 10,195,130 $207,328,762 7,474,383 $151,185,931
Shares repurchased............ (2,197,019) (44,557,135) (1,127,432) (22,990,205) (1,559,610) (31,328,880)
Dividends reinvested.......... 25,482 470,393 25,089 462,390 23,737 439,368
----------- ------------ ----------- ------------ ----------- ------------
Net increase.................. 6,223,908 $124,903,614 9,092,787 $184,800,947 5,938,510 $120,296,419
----------- ------------ ----------- ------------ ----------- ------------
----------- ------------ ----------- ------------ ----------- ------------
<CAPTION>
CLASS Y
-------------------------
SHARES AMOUNT
----------- ------------
<S> <C> <C>
Six months ended February 28,
1998:
Shares sold................... 1,166,501 $ 27,777,869
Shares repurchased............ (560,915) (13,255,438)
Shares converted from Class B
to Class A.................. -- --
Dividends reinvested.......... 29,898 689,157
----------- ------------
Net increase.................. 635,484 $ 15,211,588
----------- ------------
----------- ------------
Year ended August 31, 1997:
Shares sold................... 1,018,316 $ 23,118,212
Shares repurchased............ (185,400) (4,068,704)
Dividends reinvested.......... 9,790 181,222
----------- ------------
Net increase.................. 842,706 $ 19,230,730
----------- ------------
----------- ------------
</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 SIX FOR THE FOR THE SIX
MONTHS PERIOD MONTHS
ENDED FOR THE YEARS MAY 10, ENDED
FEBRUARY 28, ENDED AUGUST 31, 1993+ TO FEBRUARY 28,
1998 ---------------------------------- AUGUST 31, 1998
(UNAUDITED) 1997 1996 1995** 1994 1993 (UNAUDITED)
------------ -------- -------- ------ ------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 22.23 $ 16.15 $ 14.86 $13.78 $13.50 $12.90 $ 22.08
------------ -------- -------- ------ ------ ------ -------------
Net investment income (loss)............ 0.07 0.18@ 0.18 0.22 0.24 0.08 (0.01)
Net realized and unrealized gains from
investments........................... 3.69 6.12@ 2.31 2.05 0.32 0.59 3.67
------------ -------- -------- ------ ------ ------ -------------
Net increase from investment
operations............................ 3.76 6.30 2.49 2.27 0.56 0.67 3.66
------------ -------- -------- ------ ------ ------ -------------
Dividends from net investment income.... (0.12) (0.14) (0.14) (0.22) (0.24) (0.07) (0.01)
Distributions from net
realized gains from
investment transactions............... (0.18) (0.08) (1.06) (0.97) (0.04) -- (0.18)
------------ -------- -------- ------ ------ ------ -------------
Total dividends and distributions to
shareholders.......................... (0.30) (0.22) (1.20) (1.19) (0.28) (0.07) (0.19)
------------ -------- -------- ------ ------ ------ -------------
Net asset value, end of period.......... $ 25.69 $ 22.23 $ 16.15 $14.86 $13.78 $13.50 $ 25.55
------------ -------- -------- ------ ------ ------ -------------
------------ -------- -------- ------ ------ ------ -------------
Total investment return(1).............. 17.06% 39.26% 17.35% 18.43% 4.21% 5.17% 16.67%
------------ -------- -------- ------ ------ ------ -------------
------------ -------- -------- ------ ------ ------ -------------
Ratios/supplemental data:
Net assets, end of period (000's)....... $273,038 $170,759 $ 23,551 $1,944 $1,801 $3,007 $367,888
Expenses to average net assets.......... 0.99%* 0.99% 1.17% 1.46% 1.13% 1.06%* 1.75%*
Net investment income (loss) to average
net assets............................ 0.67%* 0.88% 1.12% 1.60% 1.64% 1.71%* (0.09)%*
Portfolio turnover rate................. 1% 6% 6% 53% 4% 0% 1%
Average commission rate paid(2)......... $0.0207 $0.0250 $0.0250 -- -- -- $0.0207
<CAPTION>
FOR THE
PERIOD
FOR THE YEAR JANUARY 30,
ENDED 1996+ TO
AUGUST 31, AUGUST 31,
1997 1996
------------ -----------
<S> <C> <C>
Net asset value, beginning of period.... $ 16.13 $ 15.54
------------ -----------
Net investment income (loss)............ 0.03@ 0.02
Net realized and unrealized gains from
investments........................... 6.09@ 0.57
------------ -----------
Net increase from investment
operations............................ 6.12 0.59
------------ -----------
Dividends from net investment income.... (0.09) --
Distributions from net
realized gains from
investment transactions............... (0.08) --
------------ -----------
Total dividends and distributions to
shareholders.......................... (0.17) --
------------ -----------
Net asset value, end of period.......... $ 22.08 $ 16.13
------------ -----------
------------ -----------
Total investment return(1).............. 38.14% 3.80%
------------ -----------
------------ -----------
Ratios/supplemental data:
Net assets, end of period (000's)....... $239,836 $28,495
Expenses to average net assets.......... 1.74% 1.84%*
Net investment income (loss) to average
net assets............................ 0.13% 0.47%*
Portfolio turnover rate................. 6% 6%
Average commission rate paid(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.
@ Calculated using the average shares outstanding for the period
(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 would be
lower if sales charges were included. Total investment return for periods
of less than one year has not been annualized.
(2) Effective for fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose the average commission rate paid per share of
common stock investments purchased or sold.
20
<PAGE>
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------------------
FOR THE SIX
MONTHS
ENDED FOR THE YEARS
FEBRUARY 28, ENDED AUGUST 31,
1998 ---------------------------------------------
(UNAUDITED) 1997 1996 1995** 1994 1993
------------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 22.18 $ 16.12 $ 14.87 $ 13.78 $ 13.49 $ 12.12
------------- -------- ------- ------- ------- --------
Net investment income (loss)............ (0.01) 0.03@ 0.06 0.12 0.13 0.18
Net realized and unrealized gains from
investments........................... 3.68 6.11@ 2.32 2.06 0.33 1.34
------------- -------- ------- ------- ------- --------
Net increase from investment
operations............................ 3.67 6.14 2.38 2.18 0.46 1.52
------------- -------- ------- ------- ------- --------
Dividends from net investment income.... -- -- (0.07) (0.12) (0.13) (0.15)
Distributions from net
realized gains from
investment transactions............... (0.17) (0.08) (1.06) (0.97) (0.04) --
------------- -------- ------- ------- ------- --------
Total dividends and distributions to
shareholders.......................... (0.17) (0.08) (1.13) (1.09) (0.17) (0.15)
------------- -------- ------- ------- ------- --------
Net asset value, end of period.......... $ 25.68 $ 22.18 $ 16.12 $ 14.87 $ 13.78 $ 13.49
------------- -------- ------- ------- ------- --------
------------- -------- ------- ------- ------- --------
Total investment return(1).............. 16.62% 38.20% 16.52% 17.57% 3.46% 12.61%
------------- -------- ------- ------- ------- --------
------------- -------- ------- ------- ------- --------
Ratios/supplemental data:
Net assets, end of period (000's)....... $327,699 $233,044 $73,630 $48,105 $62,970 $107,761
Expenses to average net assets.......... 1.73% 1.75% 1.95% 2.22% 1.88% 1.73%
Net investment income (loss) to average
net assets............................ (0.07)%* 0.14% 0.35% 0.86% 0.89% 1.04%
Portfolio turnover rate................. 1% 6% 6% 53% 4% 0%
Average commission rate paid(2)......... $0.0207 $0.0250 $0.0250 -- -- --
<CAPTION>
CLASS Y
---------------------------------------------------------
FOR THE
FOR THE SIX PERIOD
MONTHS FOR THE YEARS MAY 10,
ENDED ENDED 1993+ TO
FEBRUARY 28, AUGUST 31, AUGUST
1998 -------------------------------- 31,
(UNAUDITED) 1997 1996 1995** 1994 1993
------------ ------- ------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 22.33 $ 16.20 $ 14.88 $13.79 $13.52 $12.90
------------ ------- ------- ------ ------ --------
Net investment income (loss)............ 0.09 0.23@ 0.30 0.23 0.25 0.09
Net realized and unrealized gains from
investments........................... 3.73 6.13@ 2.24 2.09 0.33 0.60
------------ ------- ------- ------ ------ --------
Net increase from investment
operations............................ 3.82 6.36 2.54 2.32 0.58 0.69
------------ ------- ------- ------ ------ --------
Dividends from net investment income.... (0.17) (0.15) (0.16) (0.26) (0.27) (0.07)
Distributions from net
realized gains from
investment transactions............... (0.18) (0.08) (1.06) (0.97) (0.04) --
------------ ------- ------- ------ ------ --------
Total dividends and distributions to
shareholders.......................... (0.35) (0.23) (1.22) (1.23) (0.31) (0.07)
------------ ------- ------- ------ ------ --------
Net asset value, end of period.......... $ 25.80 $ 22.33 $ 16.20 $14.88 $13.79 $13.52
------------ ------- ------- ------ ------ --------
------------ ------- ------- ------ ------ --------
Total investment return(1).............. 17.25% 39.55% 17.70% 18.79% 4.41% 5.30%
------------ ------- ------- ------ ------ --------
------------ ------- ------- ------ ------ --------
Ratios/supplemental data:
Net assets, end of period (000's)....... $58,533 $36,467 $12,803 $2,506 $3,880 $3,379
Expenses to average net assets.......... 0.69%* 0.74% 0.95% 1.23% 0.88% 0.81%*
Net investment income (loss) to average
net assets............................ 0.98%* 1.16% 1.38% 1.86% 1.90% 1.96%*
Portfolio turnover rate................. 1% 6% 6% 53% 4% 0%
Average commission rate paid(2)......... $0.0207 $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.
@ Calculated using the average shares outstanding for the period
(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 would be
lower if sales charges were included. Total investment return for periods
of less than one year has not been annualized.
(2) Effective for fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose the average commission rate paid per share of
common stock investments purchased or sold.
21
<PAGE>
- --------------------------------------------------------------------------------
TRUSTEES
E. Garrett Bewkes, Jr. Mary C. Farrell
CHAIRMAN Meyer Feldberg
Margo N. Alexander George W. Gowen
Richard Q. Armstrong Frederic V. Malek
Richard R. Burt Carl W. Schafer
PRINCIPAL OFFICERS
Margo N. Alexander Paul H. Schubert
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
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.
THE FINANCIAL INFORMATION INCLUDED HEREIN IS TAKEN FROM THE RECORDS OF THE FUND
WITHOUT EXAMINATION BY INDEPENDENT AUDITORS WHO DO NOT EXPRESS AN OPINION
THEREOF.
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.
<PAGE>
PaineWebber offers a family of 26 funds which
encompass a diversified range of investment goals.
BOND FUNDS
/ / High Income Fund
/ / Investment Grade Income Fund
/ / Low Duration U.S. Government Income Fund
/ / Strategic Income Fund
/ / U.S. Government Income Fund
TAX-FREE BOND FUNDS
/ / California Tax-Free Income Fund
/ / Municipal High Income Fund
/ / National Tax-Free Income Fund
/ / New York Tax-Free Income Fund
STOCK FUNDS
/ / Financial Services Growth Fund
/ / Growth Fund
/ / Growth and Income Fund
/ / Mid Cap Fund
/ / Small Cap Fund
/ / S&P 500 Index Fund
/ / Utility Income Fund
ASSET ALLOCATION FUNDS
/ / Balanced Fund
/ / Tactical Allocation Fund
GLOBAL FUNDS
/ / Asia Pacific Growth Fund
/ / Emerging Markets Equity Fund
/ / Global Equity Fund
/ / Global Income Fund
MITCHELL HUTCHINS PORTFOLIOS
/ / Aggressive Portfolio
/ / Moderate Portfolio
/ / Conservative Portfolio
PAINEWEBBER MONEY MARKET FUND
SEMIANNUAL REPORT
TACTICAL
ALLOCATION FUND
- -C-1998 PaineWebber Incorporated
Member SIPC
FEBRUARY 28, 1998
