<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND 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:
$2.0 billion as of February 28, 1999
- - DIVIDEND PAYMENTS:
Annually
April 16, 1999
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, 1999.
MARKET REVIEW
- --------------------------------------------------------------------------------
[GRAPHIC] The stock market, as measured by S&P 500 Index (the "Index"),
gained 30.27% for the six-month period ended February 28, 1999. As the period
began, the market had just lost 14.45% in August 1998. Stock prices came back
through the period, but endured considerable volatility along the way. The
Federal Reserve reduced short-term interest rates to quell investor
anxieties, and the market -- led by technology stocks -- rebounded with strong
gains at the end of 1998. Prices remained volatile, however, and the Index
posted a much lower gain in January 1999. Investors began to worry that
inflation might heat up and cause interest rates to rise again. Concerns
about decreasing demand for personal computers and a potential for year 2000
disruptions hurt technology stock prices. The Index lost 3.11% in February,
its first monthly loss since August.
PORTFOLIO REVIEWS
- --------------------------------------------------------------------------------
PERFORMANCE --
[GRAPHIC] The Fund's total return consists of the change in net asset value
with dividends reinvested. For the six-month period ended February 28, 1999,
without deducting sales charges, Class A shares gained 29.67%, Class B shares
gained 29.24%, Class C shares gained 29.18% and Class Y shares gained 29.91%.
The Fund's total return may be lower for shareowners who purchased or
redeemed Fund shares during the period. After deducting the maximum
applicable sales charges, Class A shares gained 23.83%, Class B shares gained
24.24% and Class C shares gained 28.18%. Class Y shares are not subject to
sales charges.
PORTFOLIO HIGHLIGHTS --
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 calculating 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
1
<PAGE>
SEMIANNUAL REPORT
PaineWebber
Tactical Allocation Fund
Top 10 Stocks*
- ----------------------------
Microsoft Corp. 3.7%
General Electric Co. 3.3
Intel Corp. 2.0
Merck & Co. Inc. 1.9
Wal Mart Stores Inc. 1.9
Pfizer Inc. 1.7
Exxon Corp. 1.6
International Business
Machines 1.6
Coca-Cola Co. 1.6
Cisco Systems, Inc. 1.5
- ----------------------------
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. For every 0.5% that the ERP drops
below 5.5%, the Model would signal that another 25% of the Fund's assets must
be shifted out of stocks.
Historically, the BRP has averaged 0.5%. If this spread is 0.5% or
greater, the fixed-income portion, if any, is invested in bonds; if the spread
is less than 0.5%, any fixed income portion is allocated to cash (the 30-day
Treasury bill).
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 is 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.
Throughout the six-month period, the equity risk premium remained above
the 5.5% hurdle rate -- and as a result, the Fund remained 100% invested in
equities. The ERP declined from 6.62 at the start of the period to 5.92 at the
end. This decline was attributable to increasing stock prices; there was
little change in other factors that affect the ERP, such as interest rates or
dividend growth expectations.
During the six-month period ended February 28, 1999, the Fund's
weightings in financial services and technology companies increased,
reflecting changes in the market weightings of these sectors in the S&P 500
Index (see table below).
PaineWebber Tactical Allocation Fund
Top Five Equity Sectors*
8/31/98 2/28/99
- ------------------------------------------------------------
Financial Services 18.7% Technology 20.3%
Technology 15.9 Financial Services 18.2
Consumer Cyclical 13.8 Consumer Cyclical 14.3
Healthcare 12.3 Healthcare 12.5
Consumer Noncyclical 10.8 Utilities 11.0
- ------------------------------------------------------------
Total 71.5 Total 76.3
OUTLOOK
- --------------------------------------------------------------------------------
[GRAPHIC] The economy is sending mixed signals -- auto sales look strong but
airline traffic has been weak. Unemployment is down, but inflation does not
seem to be rising. We'll be watching for a clear signal on interest rates from
the Federal Reserve, but right now it looks as if monetary policy will remain
on hold.
As the next reporting period began the Fund remained 100% invested in
equities. The Fund's next move will depend upon the interactions of the
variables in the Model -- short-term interest-rate moves, stock valuations and
changes in dividend growth expectations.
* Portfolio weightings represent percentages of net assets as of February 28,
1999 except where noted otherwise. Portfolio composition will vary over time.
2
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND SEMIANNUAL REPORT
Our ultimate objective in managing your investments is to help you
successfully meet your financial goals. We thank you for your continued
support and welcome any comments or questions you may have.
For a QUARTERLY REVIEW on PaineWebber Tactical Allocation Fund or another
fund in the PaineWebber Family of Funds,(1) please contact your Financial
Advisor.
Sincerely,
/s/ Margo Alexander /s/ T. Kirkham Barneby
MARGO ALEXANDER T. KIRKHAM BARNEBY
Chairman and Chief Managing Director and Chief
Executive Officer Investment Officer -
Mitchell Hutchins Quantitative Investments
Asset Management Inc. 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, 1999, and reflects
our views at the time of its writing. Of course, these views may change in
response to changing circumstances. We encourage you to consult your Financial
Advisor regarding your personal investment program.
(1) Mutual funds are sold by prospectus only. The prospectuses for the funds
contain more complete information regarding risks, charges and expenses, and
should be read carefully before investing.
3
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN(1)
---------------------------------- -----------------------------------
12 MONTHS 6 MONTHS
02/28/99 08/31/98 02/28/98 ENDED 02/28/99 ENDED 02/28/99
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Class A Shares $29.73 $23.55 $25.69 18.86% 29.67%
- ---------------------------------------------------------------------------------------------------------
Class B Shares 29.50 23.32 25.55 17.96 29.24
- ---------------------------------------------------------------------------------------------------------
Class C Shares 29.67 23.45 25.68 17.96 29.18
- ---------------------------------------------------------------------------------------------------------
</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
- ------------------------------------------------------------------------------------------------------------
1998 23.73 29.52 0.5825 0.1745 27.77
- ------------------------------------------------------------------------------------------------------------
01/01/99-02/28/99 29.52 29.73 -- -- 0.71
- ------------------------------------------------------------------------------------------------------------
Totals: $2.9120 $ 1.1034
- ------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/99: 195.28%
- ------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------
1998 23.63 29.32 0.5825 0.0177 26.77
- ------------------------------------------------------------------------------------------------------------
01/01/99-02/28/99 29.32 29.50 -- -- 0.61
- ------------------------------------------------------------------------------------------------------------
Totals: $0.8405 $ 0.1172
- ------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/99: 97.33%
- ------------------------------------------------------------------------------------------------------------
</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
- ---------------------------------------------------------------------------------------------------------------
1998 23.75 29.49 0.5825 0.0034 26.78
- ---------------------------------------------------------------------------------------------------------------
01/01/99-02/28/99 29.49 29.67 -- -- 0.61
- ---------------------------------------------------------------------------------------------------------------
Totals: $ 2.9032 $ 0.4731
- ---------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/28/99: 206.45%
- ---------------------------------------------------------------------------------------------------------------
</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. Total
investment return for periods of less than one year has not been annualized.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
4
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
PERFORMANCE RESULTS (UNAUDITED)(CONCLUDED)
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
% RETURN WITHOUT % RETURN AFTER
DEDUCTING 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 03/31/99 17.63% 16.72% 16.72% 12.34% 11.72% 15.72%
- ------------------------------------------------------------------------------------------------------------------------
Five Years Ended 03/31/99 24.63 N/A 23.69 23.48 N/A 23.69
- ------------------------------------------------------------------------------------------------------------------------
Commencement of Operations Through 03/31/99 20.96 25.41 18.88 20.01 25.02 18.88
- ------------------------------------------------------------------------------------------------------------------------
</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, 1999 and since inception, May 10, 1993 through
February 28, 1999, Class Y shares have a total return of 29.91% and 200.05%,
respectively. For the one year and five year periods ended March 31, 1999 and
since inception through March 31, 1999, Class Y shares have an average annual
return of 17.95%, 24.95% and 21.28%, 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, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- --------------
<C> <S> <C>
COMMON STOCKS--100.16%
AGRICULTURE, FOOD & BEVERAGE--4.49%
117,968 Archer-Daniels-Midland Co............... $ 1,784,266
56,650 Bestfoods Co.(1)........................ 2,659,009
89,100 Campbell Soup Co........................ 3,580,706
78,100 Coca-Cola Enterprises Inc............... 2,421,100
97,500 Conagra, Inc............................ 2,937,188
30,500 General Mills, Inc...................... 2,460,969
72,350 Heinz, H. J. and Co..................... 3,938,553
28,400 Hershey Foods Corp...................... 1,767,900
80,500 Kellogg Co.............................. 2,978,500
292,000 Pepsico, Inc............................ 10,986,500
48,000 Pioneer Hi-Bred International, Inc...... 1,125,000
27,100 Quaker Oats Co.......................... 1,480,338
66,900 RJR Nabisco Holdings Corp............... 1,827,206
182,400 Sara Lee Corp........................... 4,959,000
25,100 Supervalue, Inc......................... 603,969
66,200 Sysco Corp.............................. 1,870,150
491,200 The Coca-Cola Co........................ 31,406,100
127,400 Unilever N.V............................ 9,228,537
23,200 Wrigley, Wm. Jr. Co.(1)................. 2,157,600
--------------
90,172,591
--------------
AIRLINES--0.33%
36,100 AMR Corp.*.............................. 2,001,294
28,000 Delta Air Lines, Inc.................... 1,702,750
66,900 Southwest Airlines Co.(1)............... 2,015,362
17,600 US Airways Group, Inc.*................. 833,800
--------------
6,553,206
--------------
ALCOHOL--0.61%
94,800 Anheuser-Busch Companies, Inc........... 7,269,975
13,500 Brown Forman Corp....................... 890,156
7,200 Coors Adolph Co......................... 428,850
77,900 Seagram Co. Ltd.(1)..................... 3,612,613
--------------
12,201,594
--------------
APPAREL, RETAIL--0.60%
115,725 Gap, Inc................................ 7,485,961
45,819 Limited, Inc............................ 1,626,575
29,800 Nordstrom, Inc.......................... 1,199,450
64,200 TJX Companies, Inc...................... 1,833,712
--------------
12,145,698
--------------
APPAREL, TEXTILES--0.25%
16,000 Liz Claiborne, Inc...................... 539,000
58,400 Nike Inc................................ 3,131,700
26,500 V. F. Corp.(1).......................... 1,275,313
--------------
4,946,013
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- --------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
BANKS--8.33%
151,600 Bank of New York Co. Inc................ $ 5,296,525
233,343 Bank One Corp........................... 12,542,186
344,419 BankAmerica Corp.(1).................... 22,494,866
58,400 BankBoston Corp......................... 2,361,550
19,300 Bankers Trust New York Corp............. 1,679,100
58,600 BB & T Corp............................. 2,219,475
452,327 Citigroup Inc.(1)....................... 26,574,211
31,000 Comerica, Inc........................... 2,053,750
53,000 Fifth Third Bancorp..................... 3,501,313
197,304 First Union Corp.(1).................... 10,518,769
45,800 Firstar Corp.(1)........................ 3,835,750
113,432 Fleet Financial Group, Inc.............. 4,870,486
42,340 Huntington Bancshares, Inc.............. 1,344,295
90,580 KeyCorp................................. 2,921,205
51,600 Mellon Bank Corp........................ 3,489,450
31,000 Mercantile Bancorporation, Inc.......... 1,414,375
34,800 Morgan, (J.P.) & Co., Inc............... 3,878,025
65,700 National City Corp...................... 4,590,787
22,200 Northern Trust Corp..................... 1,984,125
59,300 PNC Bank Corp.(1)....................... 3,087,306
43,800 Regions Financial Corp.................. 1,664,400
23,000 Republic New York Corp.................. 1,042,188
31,900 State Street Corp....................... 2,446,331
34,700 Summit Bancorp, Inc..................... 1,340,288
63,000 Suntrust Banks, Inc..................... 4,280,063
53,350 Synovus Financial Corp.................. 1,270,397
168,640 The Chase Manhattan Corp................ 13,427,960
28,100 Union Planters Corp..................... 1,269,769
143,645 US Bancorp, Inc......................... 4,641,529
40,400 Wachovia Corp........................... 3,436,525
321,760 Wells Fargo and Co...................... 11,824,680
--------------
167,301,679
--------------
CHEMICALS--2.20%
45,800 Air Products & Chemicals, Inc........... 1,471,325
110,600 Allied-Signal, Inc...................... 4,576,075
15,600 Ashland, Inc............................ 694,200
22,600 Avery Dennison Corp..................... 1,213,337
43,500 Dow Chemical Co......................... 4,279,312
223,100 DuPont (E.I.) de Nemours & Co........... 11,447,819
17,200 Eastman Chemical Co..................... 811,625
25,200 Ecolab, Inc............................. 1,004,850
29,850 Engelhard Corp.......................... 531,703
7,600 FMC Corp.*.............................. 389,025
12,100 Great Lakes Chemical Corp............... 471,144
22,700 Hercules, Inc........................... 628,506
13,600 Kerr-McGee Corp......................... 388,450
79,300 Minnesota Mining & Manufacturing
Co.(1)................................ 5,873,156
</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>
25,800 Morton International, Inc............... $ 932,025
16,500 Nalco Chemical Co....................... 464,063
76,000 Occidental Petroleum Corp............... 1,144,750
34,700 PPG Industries, Inc..................... 1,806,569
31,200 Praxair, Inc............................ 1,090,050
32,700 Rohm & Haas Co.......................... 1,021,875
16,413 Sealed Air Corp.*(1).................... 832,960
34,200 Sherwin Williams Co..................... 822,937
34,900 Tenneco, Inc............................ 1,044,819
26,400 Union Carbide Corp...................... 1,161,600
--------------
44,102,175
--------------
COMPUTER HARDWARE--7.36%
72,000 3Com Corp.*............................. 2,263,500
28,000 Apple Computer, Inc.*(1)................ 974,750
43,200 Ascend Communications Inc.*............. 3,323,700
39,600 Cabletron Systems, Inc.*................ 321,750
314,625 Cisco Systems, Inc.*.................... 30,774,258
338,462 Compaq Computer Corp.................... 11,930,785
253,800 Dell Computer Corp.*(1)................. 20,335,725
100,000 EMC Corp.*(1)........................... 10,237,500
31,200 Gateway, Inc.*.......................... 2,267,850
206,400 Hewlett-Packard Co...................... 13,712,700
185,900 International Business Machines(1)...... 31,603,000
54,300 Pitney Bowes, Inc....................... 3,431,081
50,000 Seagate Technology, Inc.*............... 1,446,875
42,700 Silicon Graphics, Inc.*................. 680,531
75,800 Sun Microsystems Inc.*.................. 7,376,288
130,600 Xerox Corp.............................. 7,207,488
--------------
147,887,781
--------------
COMPUTER SOFTWARE--4.82%
14,200 Adobe Systems, Inc...................... 571,550
10,800 Autodesk, Inc........................... 433,350
42,500 BMC Software Inc.*...................... 1,737,188
31,500 Computer Sciences Corp.*................ 2,098,688
36,300 Compuware Corp.*........................ 2,030,531
496,500 Microsoft Corp.*........................ 74,537,062
70,000 Novell, Inc.*(1)........................ 1,356,250
193,312 Oracle Systems Corp.*(1)................ 10,801,308
56,200 Parametric Technology Corp.*............ 864,075
47,200 Peoplesoft Inc.*........................ 890,900
50,800 Unisys Corp.*........................... 1,514,475
--------------
96,835,377
--------------
CONSTRUCTION--0.19%
10,100 Armstrong World Industries, Inc......... 496,794
13,400 Centex Corp.(1)......................... 493,287
16,400 Fluor Corp.(1).......................... 577,075
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- --------------
<C> <S> <C>
</TABLE>
CONSTRUCTION (CONCLUDED)
<TABLE>
<C> <S> <C>
67,200 Masco Corp.............................. $ 1,764,000
13,900 Owens-Corning Fiberglass................ 442,194
--------------
3,773,350
--------------
CONSUMER DURABLES--0.13%
18,100 Black & Decker Corp..................... 882,375
17,800 Maytag Corp............................. 997,913
17,000 Whirlpool Corp.......................... 739,500
--------------
2,619,788
--------------
DEFENSE/AEROSPACE--0.83%
198,378 Boeing Co............................... 7,054,818
25,300 General Dynamics Corp................... 1,529,069
18,200 Goodrich, B.F. Co....................... 621,075
77,860 Lockheed Martin Corp.................... 2,934,349
15,000 Northrop Grumman Corp................... 934,687
66,800 Raytheon Co............................. 3,569,625
--------------
16,643,623
--------------
DIVERSIFIED RETAIL--3.15%
42,908 Costco Co. Inc.*........................ 3,446,049
87,600 Dayton Hudson Corp...................... 5,480,475
24,500 Dillard Department Stores, Inc.......... 609,437
40,500 Federated Department Stores, Inc.*...... 1,541,531
98,500 K Mart Corp.*........................... 1,723,750
31,400 Kohls Corp.*............................ 2,166,600
46,100 May Department Stores Co................ 2,731,425
30,700 Meyer (Fred) Inc.*...................... 1,972,475
51,200 Penney, (J.C.), Inc..................... 1,849,600
75,800 Sears Roebuck & Co...................... 3,079,375
448,800 Wal Mart Stores, Inc.(1)................ 38,765,100
--------------
63,365,817
--------------
DRUGS & MEDICINE--9.44%
13,200 Allergan, Inc........................... 1,075,800
18,300 Alza Corp.*............................. 959,606
262,400 American Home Products Corp............. 15,612,800
50,700 Amgen, Inc.*............................ 6,331,163
197,900 Bristol-Myers Squibb Co................. 24,923,031
53,750 Cardinal Health Inc..................... 3,880,078
219,060 Lilly, Eli & Co......................... 20,742,244
53,849 McKesson HBOC, Inc.(1).................. 3,661,732
474,400 Merck & Co., Inc........................ 38,782,200
124,500 Monsanto Co............................. 5,672,531
258,600 Pfizer, Inc............................. 34,119,037
101,090 Pharmacia & Upjohn Inc. ADR............. 5,509,405
292,800 Schering-Plough Corp.(1)................ 16,378,500
21,700 Sigma-Aldrich Corp...................... 572,338
</TABLE>
7
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- --------------
<C> <S> <C>
</TABLE>
COMMON STOCKS (CONTINUED)
DRUGS & MEDICINE (CONCLUDED)
<TABLE>
<C> <S> <C>
163,400 Warner Lambert Co....................... $ 11,284,813
--------------
189,505,278
--------------
ELECTRIC UTILITIES--2.14%
35,700 AES Corp................................ 1,327,594
27,200 Ameren Corp.(1)......................... 1,014,900
38,200 American Electric Power, Inc.(1)........ 1,590,075
29,900 Baltimore Gas & Electric Co............. 766,188
30,200 Carolina Power & Light Co............... 1,204,225
42,000 Central & South West Corp............... 1,042,125
31,425 Cinergy Corp............................ 917,217
46,500 Consolidated Edison of New York, Inc.... 2,173,875
39,200 Dominion Resources, Inc................. 1,514,100
29,100 DTE Energy Co........................... 1,149,450
71,706 Duke Energy Corp........................ 4,078,279
69,900 Edison International, Inc............... 1,782,450
49,200 Entergy Corp............................ 1,389,900
47,800 Firstenergy Corp........................ 1,398,150
36,000 FPL Group, Inc.......................... 1,851,750
25,000 General Public Utilities Corp........... 996,875
22,800 New Century Energies Inc................ 924,825
39,500 Niagara Mohawk Power Corp.*............. 577,688
30,600 Northern States Power Co................ 789,862
58,300 PacifiCorp.............................. 1,045,756
45,100 PECO Energy Co.......................... 1,598,231
30,400 Pennsylvania Power & Light Co........... 775,200
75,800 PG&E Corp.(1)........................... 2,387,700
45,400 Public Service Enterprise Group, Inc.... 1,725,200
56,894 Reliant Energy Inc...................... 1,525,470
139,600 Southern Co............................. 3,498,725
56,252 Texas Utilities Co...................... 2,387,194
43,500 Unicom Corp............................. 1,546,969
--------------
42,979,973
--------------
ELECTRICAL EQUIPMENT--2.94%
46,000 Corning, Inc............................ 2,461,000
15,600 Eaton Corp.............................. 1,082,250
33,600 General Instrument Corp.*............... 982,800
20,000 Harris Corp............................. 622,500
25,000 Honeywell, Inc.......................... 1,748,438
17,200 Johnson Controls, Inc................... 1,057,800
17,700 KLA-Tencor Corp. *...................... 917,081
261,860 Lucent Technologies Inc.(1)............. 26,595,156
119,000 Motorola Inc.(1)........................ 8,359,750
129,640 Northern Telecommunications Ltd.(1)..... 7,527,222
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- --------------
<C> <S> <C>
</TABLE>
ELECTRICAL EQUIPMENT (CONCLUDED)
<TABLE>
<C> <S> <C>
10,300 Perkin Elmer Corp....................... $ 975,925
18,900 Raychem Corp............................ 431,156
16,600 Scientific-Atlanta, Inc................. 538,463
46,600 Solectron Corp.*(1)..................... 2,082,438
12,300 Tektronix Inc........................... 239,850
38,600 Tellabs, Inc.*.......................... 3,090,412
36,100 Thermo Electron Corp.*.................. 498,631
--------------
59,210,872
--------------
ELECTRICAL POWER--0.62%
43,106 AMP, Inc................................ 2,292,700
21,300 Andrew Corp.*........................... 322,163
21,700 Cooper Industries, Inc.................. 949,375
86,900 Emerson Electric Co..................... 4,991,319
19,600 Grainger,W.W., Inc...................... 872,200
14,600 Phelps Dodge Corp....................... 708,100
38,000 Rockwell International Corp............. 1,688,625
13,700 Thomas & Betts Corp..................... 571,119
--------------
12,395,601
--------------
ENERGY RESERVES & PRODUCTION--4.46%
18,900 Amerada Hess Corp....................... 857,587
24,300 Anadarko Petroleum Corp................. 668,250
23,000 Apache Corp............................. 458,563
63,200 Atlantic Richfield Co................... 3,452,300
36,100 Burlington Resources, Inc............... 1,168,737
129,700 Chevron Corp............................ 9,970,687
484,400 Exxon Corp.(1).......................... 32,242,875
155,300 Mobil Corp.............................. 12,919,019
29,500 Oryx Energy Co.*(1)..................... 306,063
50,400 Phillips Petroleum Co.(1)............... 1,949,850
427,100 Royal Dutch Petroleum Co................ 18,739,012
105,500 Texaco, Inc............................. 4,912,344
60,836 Union Pacific Resources Group Inc....... 543,722
48,100 Unocal Corp............................. 1,355,819
--------------
89,544,828
--------------
ENTERTAINMENT--0.28%
118,100 Carnival Corp........................... 5,255,450
16,400 King World Productions, Inc.*........... 433,575
--------------
5,689,025
--------------
ENVIRONMENTAL SERVICES--0.33%
34,700 Browning Ferris Industries, Inc......... 1,093,050
113,757 Waste Management, Inc................... 5,559,873
--------------
6,652,923
--------------
</TABLE>
8
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- --------------
<C> <S> <C>
</TABLE>
COMMON STOCKS (CONTINUED)
<TABLE>
<C> <S> <C>
FINANCIAL SERVICES--6.62%
89,900 American Express Co..................... $ 9,754,150
33,700 AON Corp................................ 1,986,194
143,890 Associates First Capital Corp........... 5,845,531
20,500 Block, H&R, Inc......................... 930,188
13,100 Capital One Financial Corp.............. 1,671,887
168,921 Cendant Corp.*.......................... 2,797,754
22,500 Countrywide Credit Industries, Inc...... 852,188
29,300 Equifax Inc............................. 1,106,075
135,200 Federal Home Loan Mortgage Corp......... 7,959,900
206,600 Federal National Mortgage Association... 14,462,000
653,000 General Electric Co.(1)................. 65,504,062
96,145 Household International, Inc............ 3,905,891
50,850 Marsh & McLennan Companies, Inc......... 3,600,816
159,550 MBNA Corp............................... 3,869,087
28,250 Providian Corp.......................... 2,885,031
32,700 SLM Holding Corp........................ 1,402,013
32,500 South Trust Corp........................ 1,302,031
12,300 Temple-Inland Inc....................... 737,231
31,500 Textron Inc............................. 2,457,000
--------------
133,029,029
--------------
FOOD RETAIL--0.74%
48,900 Albertson's, Inc.(1).................... 2,787,300
55,100 American Stores Co...................... 1,859,625
51,200 Kroger Co.*(1).......................... 3,312,000
97,100 Safeway Inc.*........................... 5,607,525
30,100 Winn Dixie Stores, Inc.................. 1,318,756
--------------
14,885,206
--------------
FOREST PRODUCTS, PAPER--0.88%
11,700 Bemis, Inc.............................. 398,531
14,400 Boise Cascade Corp...................... 447,300
21,600 Champion International Corp............. 799,200
42,900 Fort James Corp......................... 1,281,637
18,800 Georgia-Pacific Corp.................... 1,377,100
60,500 International Paper Co.(1).............. 2,541,000
106,420 Kimberly Clark Corp..................... 5,028,345
25,700 Louisiana Pacific Corp.................. 472,238
22,400 Mead Corp............................... 681,800
14,300 Union Camp Corp......................... 956,313
25,800 Westvaco Corp........................... 577,275
38,800 Weyerhaeuser Co......................... 2,163,100
24,300 Willamette Industries, Inc.............. 885,431
--------------
17,609,270
--------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- --------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
FREIGHT, AIR, SEA & LAND--0.17%
29,200 FDX Corp.*.............................. $ 2,788,600
79,800 Laidlaw Inc............................. 613,463
--------------
3,402,063
--------------
GAS UTILITY--0.17%
16,300 Columbia Energy Corp.................... 823,150
18,800 Consolidated Natural Gas Co............. 1,032,825
9,300 NICOR, Inc.............................. 355,144
7,900 Peoples Energy Corp..................... 268,106
47,111 Sempra Energy........................... 989,331
--------------
3,468,556
--------------
HEAVY MACHINERY--0.28%
18,900 Case Corp............................... 368,550
70,900 Caterpillar, Inc........................ 3,230,381
10,700 Cummins Engine Co., Inc................. 438,700
48,800 Deere & Co.............................. 1,595,150
--------------
5,632,781
--------------
HOTELS--0.11%
29,750 Harrah's Entertainment, Inc.*........... 496,453
55,300 Hilton Hotels Corp...................... 874,431
40,300 Mirage Resorts, Inc.*................... 785,850
--------------
2,156,734
--------------
HOUSEHOLD PRODUCTS--2.60%
13,900 Alberto Culver Co....................... 333,600
52,400 Avon Products Inc.(1)................... 2,181,150
23,500 Clorox Co............................... 2,780,344
58,300 Colgate-Palmolive Co.(1)................ 4,948,213
35,300 Fortune Brands Inc...................... 1,063,413
221,100 Gillette Co............................. 11,856,487
22,300 International Flavors and
Fragrances(1)......................... 918,481
11,200 National Service Industries, Inc........ 359,800
32,400 Newell Co.(1)........................... 1,377,000
264,600 Procter & Gamble Co..................... 23,681,700
61,900 Ralston Purina Co.(1)................... 1,667,431
30,400 Rubbermaid, Inc......................... 1,005,100
--------------
52,172,719
--------------
INDUSTRIAL PARTS--0.82%
16,400 Crane Co................................ 449,975
26,500 Danaher Corp............................ 1,278,625
44,800 Dover Corp.............................. 1,523,200
49,300 Illinois Tool Works, Inc................ 3,389,375
32,650 Ingersoll Rand Co....................... 1,550,875
15,300 McDermott International, Inc............ 305,044
</TABLE>
9
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- --------------
<C> <S> <C>
</TABLE>
COMMON STOCKS (CONTINUED)
INDUSTRIAL PARTS (CONCLUDED)
<TABLE>
<C> <S> <C>
27,866 Pall Corp............................... $ 590,411
25,300 Parker-Hannifin Corp.................... 939,262
15,250 Snap-On, Inc............................ 430,813
20,800 Stanley Works........................... 505,700
44,800 United Technologies Corp................ 5,549,600
--------------
16,512,880
--------------
INDUSTRIAL SERVICES/SUPPLIES--0.02%
18,100 Ryder Systems, Inc...................... 488,700
--------------
INFORMATION & COMPUTER SERVICES--2.18%
182,600 America Online Inc.*.................... 16,239,987
120,400 Automatic Data Processing, Inc.......... 4,785,900
14,200 Ceridian Corp.*......................... 1,017,075
106,462 Computer Associates International
Inc................................... 4,471,404
33,300 Dun & Bradstreet Corp................... 1,140,525
98,100 Electronic Data Systems Corp............ 4,561,650
87,700 First Data Corp......................... 3,354,525
63,600 IMS Health Inc.......................... 2,257,800
27,700 Interpublic Group Companies, Inc........ 2,072,306
33,400 Omnicom Group Inc....................... 2,212,750
32,500 Paychex, Inc............................ 1,377,188
6,700 Shared Medical System Corp.............. 341,700
--------------
43,832,810
--------------
LEISURE--0.36%
21,400 Brunswick Corp.......................... 456,088
64,400 Eastman Kodak Co........................ 4,262,475
26,300 Hasbro, Inc............................. 973,100
57,683 Mattel, Inc.(1)......................... 1,521,389
--------------
7,213,052
--------------
LIFE INSURANCE--0.95%
28,497 Aetna Life & Casualty Co................ 2,110,559
50,288 American General Corp.(1)............... 3,683,596
41,100 CIGNA Corp.............................. 3,226,350
61,962 Conseco Inc............................. 1,854,987
21,125 Jefferson-Pilot Corp.................... 1,432,539
20,100 Lincoln National Corp................... 1,903,219
27,100 Provident Cos Inc....................... 887,525
27,900 Torchmark, Inc.......................... 927,675
24,700 Transamerica Corp....................... 1,792,294
27,500 UNUM Corp............................... 1,230,625
--------------
19,049,369
--------------
LONG DISTANCE & PHONE COMPANIES--8.12%
54,500 Alltel Corp............................. 3,263,188
219,600 Ameritech Corp.......................... 14,356,350
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- --------------
<C> <S> <C>
</TABLE>
LONG DISTANCE & PHONE COMPANIES (CONCLUDED)
<TABLE>
<C> <S> <C>
359,800 AT&T Corp.(1)........................... $ 29,548,575
308,804 Bell Atlantic Corp...................... 17,736,930
389,600 BellSouth Corp.......................... 18,019,000
34,300 Frontier Corp........................... 1,232,656
192,400 GTE Corp................................ 12,481,950
365,287 MCI WorldCom Inc.*(1)................... 30,136,178
389,702 SBC Communications, Inc................. 20,605,493
85,700 Sprint Corp.(1)......................... 7,354,131
100,171 U.S. West Inc........................... 5,340,366
84,900 Williams Companies, Inc................. 3,141,300
--------------
163,216,117
--------------
MEDIA--3.42%
140,700 CBS Corp.*.............................. 5,188,313
52,600 Clear Channel Communications*(1)........ 3,156,000
73,800 Comcast Corp., Class A.................. 5,235,187
407,600 Disney Walt, Co......................... 14,342,425
55,900 Gannett, Inc............................ 3,549,650
121,100 Mediaone Group, Inc.*(1)................ 6,599,950
12,000 Meredith Corp........................... 405,000
107,300 Tele-Communications, Inc.(1)*........... 6,739,781
244,400 Time Warner Inc......................... 15,763,800
23,600 Tribune Co.............................. 1,564,975
69,149 Viacom Inc., Class B*................... 6,111,043
--------------
68,656,124
--------------
MEDICAL PRODUCTS--3.43%
301,700 Abbott Laboratories..................... 14,010,194
10,900 Bard, C.R. Inc.......................... 614,488
11,400 Bausch & Lomb, Inc...................... 687,563
56,700 Baxter International, Inc............... 3,990,263
48,900 Becton, Dickinson & Co.................. 1,638,150
22,100 Biomet, Inc............................. 810,794
77,800 Boston Scientific Corp.*................ 2,061,700
59,900 Guidant Corp............................ 3,414,300
267,900 Johnson & Johnson....................... 22,871,962
16,300 Mallinckrodt Group, Inc................. 504,281
116,300 Medtronic, Inc.......................... 8,213,687
18,800 St. Jude Medical, Inc.*................. 472,350
128,168 Tyco International Ltd.................. 9,540,505
--------------
68,830,237
--------------
MEDICAL PROVIDERS--0.41%
127,627 Columbia/HCA Healthcare Corp............ 2,281,333
22,000 HCR Manor Care Inc.*.................... 492,250
84,000 HEALTHSOUTH Corp.*...................... 976,500
34,800 Humana Inc.*............................ 609,000
55,500 Service Corp. International............. 853,312
60,800 Tenet Healthcare Corp.*(1).............. 1,197,000
</TABLE>
10
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- --------------
<C> <S> <C>
</TABLE>
COMMON STOCKS (CONTINUED)
MEDICAL PROVIDERS (CONCLUDED)
<TABLE>
<C> <S> <C>
36,800 United Healthcare Corp.................. $ 1,814,700
--------------
8,224,095
--------------
MINING & METALS--0.49%
48,100 Alcan Aluminum Ltd...................... 1,169,431
72,200 Alcoa, Inc.............................. 2,924,100
43,880 Allegheny Teldyne, Inc.................. 905,025
7,600 Ball Corp............................... 318,250
26,900 Crown Cork & Seal, Inc.(1).............. 746,475
38,600 Freeport-McMoran Copper & Gold, Inc.*... 364,288
45,000 Inco Ltd................................ 568,125
18,000 Nucor Corp.............................. 802,125
31,300 Owens Illinois Inc.*.................... 749,244
14,500 Reynolds Metals Co...................... 619,875
24,100 USX-U.S. Steel Group, Inc............... 610,031
--------------
9,776,969
--------------
MOTOR VEHICLES--1.62%
19,400 Cooper Tire & Rubber Co................. 383,150
33,100 DANA Corp............................... 1,249,525
240,600 Ford Motor Co........................... 14,270,587
129,900 General Motors Corp..................... 10,724,869
36,950 Genuine Parts Co........................ 1,106,191
31,300 Goodyear Tire & Rubber Co............... 1,447,625
21,800 ITT Industries Inc...................... 851,563
15,500 Navistar International Corp.*........... 666,500
17,230 Paccar, Inc............................. 721,506
24,600 TRW, Inc................................ 1,162,350
--------------
32,583,866
--------------
OIL REFINING--0.40%
42,000 Coastal Corp............................ 1,344,000
65,700 Enron Corp.............................. 4,270,500
23,300 Sonat, Inc.............................. 589,781
18,692 Sunoco, Inc............................. 568,938
61,100 USX-Marathon Group...................... 1,264,006
--------------
8,037,225
--------------
OIL SERVICES--0.45%
67,860 Baker Hughes, Inc....................... 1,221,480
88,200 Halliburton Co.......................... 2,491,650
109,000 Schlumberger Ltd........................ 5,293,312
--------------
9,006,442
--------------
OTHER INSURANCE--2.38%
162,284 Allstate Corp........................... 6,085,650
246,263 American International Group Inc........ 28,058,591
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- --------------
<C> <S> <C>
</TABLE>
OTHER INSURANCE (CONCLUDED)
<TABLE>
<C> <S> <C>
32,200 Chubb Corp.............................. $ 1,923,950
33,100 Cincinnati Financial Corp............... 1,160,569
45,900 Hartford Financial Services Group
Inc................................... 2,481,469
22,400 Loews Corp.(1).......................... 1,751,400
19,500 MBIA Inc................................ 1,200,469
22,100 MGIC Investment Corp.................... 752,781
27,400 SAFECO Corp............................. 1,101,137
46,764 St. Paul Companies, Inc................. 1,513,984
14,400 The Progressive Corp.................... 1,850,400
--------------
47,880,400
--------------
PRECIOUS METALS--0.15%
75,300 Barrick Gold Corp.(1)................... 1,331,869
56,000 Homestake Mining Co..................... 514,500
36,576 Newmont Mining Corp..................... 630,936
56,600 Placer Dome, Inc.(1).................... 619,062
--------------
3,096,367
--------------
PUBLISHING--0.42%
15,200 American Greetings Corp., Class A....... 360,050
18,500 Deluxe Corp............................. 626,688
27,300 Donnelley, R.R. & Sons Co............... 935,025
19,400 Dow Jones & Co., Inc.................... 911,800
15,600 Harcourt General, Inc................... 714,675
15,800 Knight Ridder, Inc...................... 792,962
19,600 McGraw-Hill Companies, Inc.............. 2,144,975
36,100 New York Times Co., Class A............. 1,119,100
16,100 Times Mirror Co......................... 898,581
--------------
8,503,856
--------------
RAILROADS--0.45%
92,166 Burlington Northern Santa Fe, Inc....... 3,052,999
42,900 CSX Corp................................ 1,683,825
74,200 Norfolk Southern Corp................... 2,082,238
48,700 Union Pacific Corp...................... 2,282,812
--------------
9,101,874
--------------
RESTAURANTS--0.82%
30,000 Darden Restaurants, Inc................. 660,000
49,100 Marriott International Inc.(1).......... 1,767,600
134,300 McDonalds Corp.......................... 11,415,500
30,220 Tricon Global Restaurants Inc.*......... 1,873,640
27,800 Wendy's International, Inc.............. 665,462
--------------
16,382,202
--------------
</TABLE>
11
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- --------------
<C> <S> <C>
</TABLE>
COMMON STOCKS (CONCLUDED)
<TABLE>
<C> <S> <C>
SECURITIES & ASSET MANAGEMENT--1.28%
24,045 Bear Stearns Co. Inc.................... $ 1,029,427
79,950 Charles Schwab Corp..................... 5,961,272
49,700 Franklin Resources Inc.................. 1,581,081
23,200 Lehman Brothers Holdings Inc............ 1,229,600
70,500 Merrill Lynch & Co., Inc................ 5,410,875
115,000 Morgan Stanley Dean Witter & Co......... 10,407,500
--------------
25,619,755
--------------
SEMICONDUCTOR--2.75%
30,400 Advanced Micro Devices, Inc.*........... 543,400
72,900 Applied Materials, Inc.*................ 4,055,063
331,500 Intel Corp.(1).......................... 39,759,281
31,200 LSI Logic Corp.*........................ 809,250
49,000 Micron Technology, Inc.*................ 2,823,625
43,300 National Semiconductor Corp.*........... 454,650
77,200 Texas Instruments, Inc.................. 6,885,275
--------------
55,330,544
--------------
SPECIALTY RETAIL--2.14%
30,200 Autozone Inc.*.......................... 1,057,000
20,000 Circuit City Stores, Inc................ 1,085,000
23,800 Consolidated Stores Corp.*.............. 599,462
77,500 CVS Corp................................ 4,107,500
36,775 Dollar General Corp..................... 1,100,952
293,700 Home Depot Inc.(1)...................... 17,530,219
8,400 Longs Drug Stores Corp.................. 303,975
70,200 Lowe's Companies Inc.................... 4,163,737
51,500 Rite Aid Corp........................... 2,130,812
92,900 Staples, Inc.*.......................... 2,731,841
19,600 Tandy Corp.............................. 1,090,250
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- --------------
<C> <S> <C>
</TABLE>
SPECIALTY RETAIL (CONCLUDED)
<TABLE>
<C> <S> <C>
56,200 Toys R Us, Inc.*........................ $ 793,825
198,800 Walgreen Co............................. 6,361,600
--------------
43,056,173
--------------
THRIFT--0.29%
11,400 Golden West Financial Corp.............. 1,070,888
117,575 Washington Mutual, Inc.................. 4,703,000
--------------
5,773,888
--------------
TOBACCO--1.00%
484,500 Philip Morris Cos. Inc.................. 18,956,062
36,300 UST, Inc................................ 1,073,119
--------------
20,029,181
--------------
WIRELESS TELECOMMUNICATIONS--0.74%
113,900 Airtouch Communications, Inc.*.......... 10,372,018
58,700 Nextel Communications Inc.*............. 1,764,669
87,700 Sprint Corp.*........................... 2,806,400
--------------
14,943,087
--------------
Total Common Stocks (cost--$1,565,407,461)-- 100.16%..... 2,012,028,763
Liabilities in excess of other assets--(0.16)%........... (3,159,380)
--------------
Net Assets--100.00%...................................... $2,008,869,383
--------------
--------------
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Non-Income producing security.
(1) Security, or a portion thereof, was on loan at
February 28, 1999.
ADR American Depositary Receipt.
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value
(cost--$1,565,407,461).................................... $2,012,028,763
Investments of cash collateral received for securities
loaned, at value (cost--$206,014,400)..................... 206,014,400
Receivable for shares of beneficial interest sold........... 12,856,962
Dividends and interest receivable........................... 2,602,192
Other assets................................................ 786,158
--------------
Total assets................................................ 2,234,288,475
--------------
LIABILITIES
Collateral for securities loaned............................ 206,014,400
Payable for investments purchased........................... 8,393,047
Due to custodian............................................ 4,024,689
Payable for shares of beneficial interest repurchased....... 3,496,861
Payable to affiliates....................................... 1,846,378
Accrued expenses and other liabilities...................... 1,643,717
--------------
Total liabilities........................................... 225,419,092
--------------
NET ASSETS
Beneficial interest--$0.001 par value (unlimited amount
authorized)............................................... 1,558,807,089
Distributions in excess of net investment income............ (1,184,037)
Accumulated net realized gains from investment
transactions.............................................. 4,625,029
Net unrealized appreciation of investments.................. 446,621,302
--------------
Net assets.................................................. $2,008,869,383
--------------
--------------
CLASS A:
Net assets.................................................. $ 540,674,696
--------------
Shares outstanding.......................................... 18,183,824
--------------
Net asset value and redemption value per share.............. $29.73
--------------
Maximum offering price per share (net asset value plus sales
charge of 4.50% of offering price)........................ $31.13
--------------
--------------
CLASS B:
Net assets.................................................. $ 764,740,672
--------------
Shares outstanding.......................................... 25,925,691
--------------
Net asset value and offering price per share................ $29.50
--------------
--------------
CLASS C:
Net assets.................................................. $ 600,794,093
--------------
Shares outstanding.......................................... 20,247,672
--------------
Net asset value and offering price per share................ $29.67
--------------
--------------
CLASS Y:
Net assets.................................................. $ 102,659,922
--------------
Shares outstanding.......................................... 3,434,847
--------------
Net asset value, offering price and redemption value per
share..................................................... $29.89
--------------
--------------
</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,
1999
(UNAUDITED)
-------------
<S> <C>
INVESTMENT INCOME:
Dividends and interest (net of foreign withholding tax of
$57,255).................................................. $ 11,985,176
-------------
EXPENSES:
Investment advisory and administration...................... 3,810,951
Service fees--Class A....................................... 552,706
Service and distribution fees--Class B...................... 3,144,286
Service and distribution fees--Class C...................... 2,517,357
Transfer agency............................................. 545,955
Custody and accounting...................................... 499,923
Reports and notices to shareholders......................... 150,363
Federal and state registration.............................. 136,516
Legal and audit............................................. 85,156
Interest expense............................................ 67,528
Trustees' fees.............................................. 6,750
Other expenses.............................................. 10,861
-------------
11,528,352
-------------
NET INVESTMENT INCOME....................................... 456,824
-------------
REALIZED AND UNREALIZED GAINS FROM INVESTMENT ACTIVITIES:
Net realized gain from investment transactions.............. 15,991,867
Net change in unrealized appreciation of investments........ 381,098,187
-------------
NET REALIZED AND UNREALIZED GAINS FROM INVESTMENT
ACTIVITIES................................................ 397,090,054
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $397,546,878
-------------
-------------
</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
1999 ENDED
(UNAUDITED) AUGUST 31, 1998
--------------- ---------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income....................................... $ 456,824 $ 2,567,936
Net realized gains from investment transactions............. 15,991,867 24,149,522
Net change in unrealized appreciation/depreciation of
investments............................................... 381,098,187 (37,398,869)
--------------- ---------------
Net increase (decrease) in net assets resulting from
operations................................................ 397,546,878 (10,681,411)
--------------- ---------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class A.............................. (2,724,561) (1,100,266)
Net investment income--Class B.............................. (401,698) (149,598)
Net investment income--Class C.............................. (61,213) --
Net investment income--Class Y.............................. (774,047) (333,893)
Net realized gains from investment transactions--Class A.... (9,094,882) (1,616,587)
Net realized gains from investment transactions--Class B.... (13,219,722) (2,281,367)
Net realized gains from investment transactions--Class C.... (10,487,215) (1,955,927)
Net realized gains from investment transactions--Class Y.... (1,917,018) (357,325)
--------------- ---------------
Total dividends and distributions to shareholders........... (38,680,356) (7,794,963)
--------------- ---------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares........................ 529,399,704 883,807,510
Cost of shares repurchased.................................. (211,740,211) (256,918,262)
Proceeds from dividends reinvested.......................... 36,391,184 7,433,176
--------------- ---------------
Net increase in net assets from beneficial interest
transactions.............................................. 354,050,677 634,322,424
--------------- ---------------
Net increase in net assets.................................. 712,917,199 615,846,050
NET ASSETS:
Beginning of period......................................... 1,295,952,184 680,106,134
--------------- ---------------
End of period (including undistributed net investment of
income of $2,320,658, at August 31,1998).................. $2,008,869,383 $1,295,952,184
--------------- ---------------
--------------- ---------------
</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.
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.
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.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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, 1999, the Fund owed Mitchell
Hutchins $696,927 in investment advisory and administration fees.
For the six months ended February 28, 1999, the Fund paid $2,279 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, 1999, the Fund owed
Mitchell Hutchins $1,141,290 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, 1999, it earned $3,123,902 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, 1999, PaineWebber received from PFPC, Inc., not the Fund,
approximately 57% of the total transfer agency and related service fees
collected by PFPC, Inc. from the Fund.
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
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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.
For the six months ended February 28, 1999, the Fund earned $67,723 for lending
its securities and PaineWebber earned $83,074 in compensation as the Portfolio's
lending agent. At February 28, 1999, the Fund owed PaineWebber $8,161 in
compensation.
As of February 28, 1999, the Fund held cash and/or cash equivalents having an
aggregate value of $206,014,400 as collateral for portfolio securities loaned
having a market value of $196,872,531. The cash collateral was invested in the
following money market funds.
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
- ----------- -------------
<C> <S> <C>
49,358,036 Janus Investment Money Market Fund.................................................................... $ 49,358,036
20,398,589 Liquid Assets Money Market Portfolio.................................................................. 20,398,589
117,956,794 MH Money Market Fund LLC.............................................................................. 117,956,794
18,300,981 Prime Money Market Portfolio.......................................................................... 18,300,981
-------------
Total investments of cash collateral received for securities loaned (cost--$206,014,400)........................... $ 206,014,400
-------------
-------------
</TABLE>
BANK LINE OF CREDIT
The Fund may borrow up to $10 million under a short-term unsecured line of
credit with the Fund's custodian ("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, 1999,
the Fund did not borrow under the Facility and had an average daily amount of
borrowing outstanding under the Line of Credit of $2,839,996 with a related
weighted average annualized interest rate of 5.90%.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at February 28,
1999 was substantially the same as the cost of securities for financial
statement purposes.
At February 28, 1999, the components of net unrealized appreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value over
cost)............................................................... $ 498,139,111
Gross depreciation (investments having an excess of cost over
value).............................................................. (51,517,809)
-------------
Net unrealized appreciation of investments............................ $ 446,621,302
-------------
-------------
</TABLE>
For the six months ended February 28, 1999, total aggregate purchases and
sales of portfolio securities, excluding short-term securities, were as follows:
<TABLE>
<S> <C>
Purchases............................................................. $ 391,684,674
Sales................................................................. $ 72,927,155
</TABLE>
FEDERAL TAX STATUS
The Fund intends to distribute substantially all of its taxable income and to
comply with the other requirements of the Internal Revenue Code applicable to
regulated investment companies. Accordingly, no provision for federal income
taxes is required. In addition, by distributing during each calendar year,
substantially all of its net investment income, capital gains and certain other
amounts, if any, the Fund intends not to be subject to a federal excise tax.
BENEFICIAL INTEREST
There is an unlimited amount of $0.001 par value shares of beneficial interest
authorized. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------------------- ------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Six months ended February 28,
1999:
Shares sold................... 5,404,828 $150,696,361 7,177,640 $200,494,232 5,264,964 $148,082,952
Shares repurchased............ (2,325,076) (62,948,141) (2,174,452) (59,391,059) (2,346,055) (64,683,535)
Shares converted from Class B
to Class A.................. 249,290 6,970,986 (251,518) (6,970,986) -- --
Dividends reinvested.......... 404,414 11,287,184 461,158 12,787,918 364,581 10,171,796
----------- ------------ ----------- ------------ ----------- ------------
Net increase.................. 3,733,456 $106,006,390 5,212,828 $146,920,105 3,283,490 $ 93,571,213
----------- ------------ ----------- ------------ ----------- ------------
----------- ------------ ----------- ------------ ----------- ------------
Year ended August 31, 1998:
Shares sold................... 9,221,547 $238,313,556 12,709,779 $325,991,212 9,692,236 $251,254,120
Shares repurchased............ (3,202,931) (81,610,480) (2,322,552) (60,350,902) (3,317,661) (85,764,520)
Shares converted from Class B
to Class A.................. 637,860 14,988,357 (634,160) (14,988,357) -- --
Dividends reinvested.......... 111,953 2,570,453 99,977 2,285,483 82,162 1,888,083
----------- ------------ ----------- ------------ ----------- ------------
Net increase.................. 6,768,429 $174,261,886 9,853,044 $252,937,436 6,456,737 $167,377,683
----------- ------------ ----------- ------------ ----------- ------------
----------- ------------ ----------- ------------ ----------- ------------
<CAPTION>
CLASS Y
-------------------------
SHARES AMOUNT
----------- ------------
<S> <C> <C>
Six months ended February 28,
1999:
Shares sold................... 1,065,443 $ 30,126,159
Shares repurchased............ (869,186) (24,717,476)
Shares converted from Class B
to Class A.................. -- --
Dividends reinvested.......... 76,472 2,144,286
----------- ------------
Net increase.................. 272,729 $ 7,552,969
----------- ------------
----------- ------------
Year ended August 31, 1998:
Shares sold................... 2,647,231 $ 68,248,622
Shares repurchased............ (1,148,127) (29,192,360)
Shares converted from Class B
to Class A.................. -- --
Dividends reinvested.......... 29,898 689,157
----------- ------------
Net increase.................. 1,529,002 $ 39,745,419
----------- ------------
----------- ------------
</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
------------------------------------------------------------
FOR THE SIX
MONTHS
ENDED FOR THE YEARS
FEBRUARY 28, ENDED AUGUST 31,
1999 ---------------------------------------------
(UNAUDITED) 1998 1997 1996 1995** 1994
------------ ---------- -------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 23.55 $ 22.23 $ 16.15 $ 14.86 $13.78 $13.50
------------ ---------- -------- ------- ------ ------
Net investment income
(loss)...................... 0.07 0.15 0.18@ 0.18 0.22 0.24
Net realized and unrealized
gains from investments...... 6.86 1.47 6.12@ 2.31 2.05 0.32
------------ ---------- -------- ------- ------ ------
Net increase from investment
operations.................. 6.93 1.62 6.30 2.49 2.27 0.56
------------ ---------- -------- ------- ------ ------
Dividends from net investment
income...................... (0.17) (0.12) (0.14) (0.14) (0.22) (0.24)
Distributions from net
realized gains from
investment transactions..... (0.58) (0.18) (0.08) (1.06) (0.97) (0.04)
------------ ---------- -------- ------- ------ ------
Total dividends and
distributions to
shareholders................ (0.75) (0.30) (0.22) (1.20) (1.19) (0.28)
------------ ---------- -------- ------- ------ ------
Net asset value, end of
period...................... $ 29.73 $ 23.55 $ 22.23 $ 16.15 $14.86 $13.78
------------ ---------- -------- ------- ------ ------
------------ ---------- -------- ------- ------ ------
Total investment return(1).... 29.67% 7.31% 39.26% 17.35% 18.43% 4.21%
------------ ---------- -------- ------- ------ ------
------------ ---------- -------- ------- ------ ------
Ratios/supplemental data:
Net assets, end of period
(000's)..................... $540,675 $340,245 $170,759 $23,551 $1,944 $1,801
Expenses to average net
assets...................... 0.88%* 0.95% 0.99% 1.17% 1.46% 1.13%
Net investment income (loss)
to average net assets....... 0.56%* 0.74% 0.88% 1.12% 1.60% 1.64%
Portfolio turnover rate....... 4% 33% 6% 6% 53% 4%
<CAPTION>
CLASS B
---------------------------------------------------
FOR THE SIX FOR THE
MONTHS FOR THE YEARS PERIOD
ENDED ENDED JANUARY 30,
FEBRUARY 28, AUGUST 31, 1996+ TO
1999 -------------------- AUGUST 31,
(UNAUDITED) 1998 1997 1996
------------ -------- -------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 23.32 $ 22.08 $ 16.13 $ 15.54
------------ -------- -------- -----------
Net investment income
(loss)...................... (0.02) 0.00 0.03@ 0.02
Net realized and unrealized
gains from investments...... 6.80 1.43 6.09@ 0.57
------------ -------- -------- -----------
Net increase from investment
operations.................. 6.78 1.43 6.12 0.59
------------ -------- -------- -----------
Dividends from net investment
income...................... (0.02) (0.01) (0.09) --
Distributions from net
realized gains from
investment transactions..... (0.58) (0.18) (0.08) --
------------ -------- -------- -----------
Total dividends and
distributions to
shareholders................ (0.60) (0.19) (0.17) --
------------ -------- -------- -----------
Net asset value, end of
period...................... $ 29.50 $ 23.32 $ 22.08 $ 16.13
------------ -------- -------- -----------
------------ -------- -------- -----------
Total investment return(1).... 29.24% 6.49% 38.14% 3.80%
------------ -------- -------- -----------
------------ -------- -------- -----------
Ratios/supplemental data:
Net assets, end of period
(000's)..................... $764,741 $483,068 $239,836 $ 28,495
Expenses to average net
assets...................... 1.64%* 1.71% 1.74% 1.84%*
Net investment income (loss)
to average net assets....... (0.20)%* (0.02)% 0.13% 0.47%*
Portfolio turnover rate....... 4% 33% 6% 6%
</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 or program fees; results would be lower if sales
charges or program fees were included. Total investment return for periods
of less than one year has not been annualized.
# Amount shown is less than $0.005.
20
<PAGE>
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------------------------
FOR THE SIX
MONTHS
ENDED FOR THE YEARS
FEBRUARY 28, ENDED AUGUST 31,
1999 -----------------------------------------------
(UNAUDITED) 1998 1997 1996 1995** 1994
-------------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 23.45 $ 22.18 $ 16.12 $ 14.87 $ 13.78 $ 13.49
-------------- -------- -------- ------- ------- -------
Net investment income
(loss)...................... (0.03) (0.01) 0.03@ 0.06 0.12 0.13
Net realized and unrealized
gains from investments...... 6.83 1.45 6.11@ 2.32 2.06 0.33
-------------- -------- -------- ------- ------- -------
Net increase from investment
operations.................. 6.80 1.44 6.14 2.38 2.18 0.46
-------------- -------- -------- ------- ------- -------
Dividends from net investment
income...................... (0.00)# -- -- (0.07) (0.12) (0.13)
Distributions from net
realized gains from
investment transactions..... (0.58) (0.17) (0.08) (1.06) (0.97) (0.04)
-------------- -------- -------- ------- ------- -------
Total dividends and
distributions to
shareholders................ (0.58) (0.17) (0.08) (1.13) (1.09) (0.17)
-------------- -------- -------- ------- ------- -------
Net asset value, end of
period...................... $ 29.67 $ 23.45 $ 22.18 $ 16.12 $ 14.87 $ 13.78
-------------- -------- -------- ------- ------- -------
-------------- -------- -------- ------- ------- -------
Total investment return(1).... 29.18% 6.49% 38.20% 16.52% 17.57% 3.46%
-------------- -------- -------- ------- ------- -------
-------------- -------- -------- ------- ------- -------
Ratios/supplemental data:
Net assets, end of period
(000's)..................... $600,794 $397,767 $233,044 $73,630 $48,105 $62,970
Expenses to average net
assets...................... 1.65%* 1.70% 1.75% 1.95% 2.22% 1.88%
Net investment income (loss)
to average net assets....... (0.21)%* (0.01)% 0.14% 0.35% 0.86% 0.89%
Portfolio turnover rate....... 4% 33% 6% 6% 53% 4%
<CAPTION>
CLASS Y
---------------------------------------------------------------------------
FOR THE SIX
MONTHS
ENDED FOR THE YEARS
FEBRUARY 28, ENDED AUGUST 31,
1999 --------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995** 1994
-------------- ----------- ------- ---------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 23.68 $ 22.33 $ 16.20 $ 14.88 $ 13.79 $13.52
-------------- ----------- ------- ---------- ----------- ------
Net investment income
(loss)...................... 0.11 0.21 0.23@ 0.30 0.23 0.25
Net realized and unrealized
gains from investments...... 6.92 1.49 6.13@ 2.24 2.09 0.33
-------------- ----------- ------- ---------- ----------- ------
Net increase from investment
operations.................. 7.03 1.70 6.36 2.54 2.32 0.58
-------------- ----------- ------- ---------- ----------- ------
Dividends from net investment
income...................... (0.24) (0.17) (0.15) (0.16) (0.26) (0.27)
Distributions from net
realized gains from
investment transactions..... (0.58) (0.18) (0.08) (1.06) (0.97) (0.04)
-------------- ----------- ------- ---------- ----------- ------
Total dividends and
distributions to
shareholders................ (0.82) (0.35) (0.23) (1.22) (1.23) (0.31)
-------------- ----------- ------- ---------- ----------- ------
Net asset value, end of
period...................... $ 29.89 $ 23.68 $ 22.33 $ 16.20 $ 14.88 $13.79
-------------- ----------- ------- ---------- ----------- ------
-------------- ----------- ------- ---------- ----------- ------
Total investment return(1).... 29.91% 7.62% 39.55% 17.70% 18.79% 4.41%
-------------- ----------- ------- ---------- ----------- ------
-------------- ----------- ------- ---------- ----------- ------
Ratios/supplemental data:
Net assets, end of period
(000's)..................... $102,660 $ 74,872 $36,467 $ 12,803 $ 2,506 $3,880
Expenses to average net
assets...................... 0.62%* 0.67% 0.74% 0.95% 1.23% 0.88%
Net investment income (loss)
to average net assets....... 0.82%* 1.03% 1.16% 1.38% 1.86% 1.90%
Portfolio turnover rate....... 4% 33% 6% 6% 53% 4%
</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 or program fees; results would be lower if sales
charges or program fees were included. Total investment return for periods
of less than one year has not been annualized.
# Amount shown is less than $0.005.
21
<PAGE>
TRUSTEES
E. Garrett Bewkes, Jr.
CHAIRMAN
Margo N. Alexander
Richard Q. Armstrong
Richard R. Burt
Mary C. Farrell
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
PRINCIPAL OFFICERS
Margo N. Alexander
PRESIDENT
Victoria E. Schonfeld
VICE PRESIDENT
Dianne E. O'Donnell
VICE PRESIDENT AND SECRETARY
Paul H. Schubert
VICE PRESIDENT AND TREASURER
T. Kirkham Barneby
VICE PRESIDENT
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
TRUST WITHOUT EXAMINATION BY INDEPENDENT AUDITORS WHO DO NOT EXPRESS AN
OPINION THEREON.
A PROSPECTUS CONTAINING MORE COMPLETE INFORMATION FOR ANY OF THE FUNDS LISTED
ON THE BACK COVER CAN BE OBTAINED FROM A PAINEWEBBER FINANCIAL ADVISOR OR
CORRESPONDENT FIRM. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
<PAGE>
PaineWebber offers a family of 27 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
- - Tax-Managed Equity Fund
- - Utility Income Fund
ASSET ALLOCATION FUNDS
- - Balanced Fund
- - Tactical Allocation Fund
GLOBAL FUNDS
- - Asia Pacific Growth Fund
- - Emerging Markets Equity Fund
- - Global Equity Fund
- - Global Income Fund
MITCHELL HUTCHINS PORTFOLIOS
- - Aggressive Portfolio
- - Moderate Portfolio
- - Conservative Portfolio
PAINEWEBBER MONEY MARKET FUND
[LOGO]
-C- 1999 PaineWebber Incorporated
Member SIPC
[LOGO]
TACTICAL
ALLOCATION
FUND
SEMIANNUAL REPORT
FEBRUARY 28, 1999
