PAINEWEBBER TACTICAL ALLOCATION FUND SEMIANNUAL REPORT
April 15, 2000
Dear Shareholder,
We are pleased to present you with the semiannual report for PaineWebber
Tactical Allocation Fund (the "Fund") for the six-month period ended
February 29, 2000
MARKET REVIEW
================================================================================
Technology stocks continued to lead the equity markets during the six months
ended February 29, 2000. The NASDAQ Composite, one of the most technology-heavy
of the major market indices, surged 71.45% for the period. On the other hand,
the Standard and Poor's 500 Index (S&P 500) gained only 4.10% for the period,
and the Dow Jones Industrial Average (Dow) lost 5.73%.
Other trends of recent years also continued: an ever-smaller number of
stocks accounted for most of the market's gains, and day-to-day price
fluctuations became more volatile. In January 2000, the market briefly rewarded
investors who owned more cyclical, value-oriented stocks, but high-growth
technology stocks resumed their predominance in February.
- ---------------------------------------------
PAINEWEBBER
TACTICAL ALLOCATION FUND
INVESTMENT GOAL:
Total return consisting of long-term
captial appreciation and current
income
PORTFOLIO MANAGER:
Kirk Barneby, Mitchell Hutchins
Asset Management Inc.
COMMENCEMENT:
May 10, 1993 (Class A)
January 30, 1996 (Class B)
July 22, 1992 (Class C)
May 10, 1993 (Class Y)
DIVIDEND PAYMENTS:
Annually
- ---------------------------------------------
PORTFOLIO REVIEW
================================================================================
Average Annual Total Return, Periods Ended 2/29/00
6 Months 1 Year 5 Years Inception#
- --------------------------------------------------------------------------------
Before Deducting Class A* 6.21% 13.57% 24.54% 19.43%
Maximum Sales Charge Class B** 5.83 12.68 N/A 21.59
Class C+ 5.83 12.71 23.60 17.68
Class Y++ 6.39 13.86 24.87 19.76
- --------------------------------------------------------------------------------
After Deducting Class A* 1.42 8.46 23.39 18.63
Maximum Sales Charge Class B** 0.83 7.68 N/A 21.32
Class C+ 4.83 11.71 23.60 17.68
- --------------------------------------------------------------------------------
S&P 500 Index 4.10 11.73 25.13 19.24
Lipper Flexible Portfolio
Funds Median 5.84 11.12 15.97 12.88
- --------------------------------------------------------------------------------
Past performance is no guarantee of future performance. The investment return
and 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. Six-month and one-year returns are cumulative.
# Inception: since commencement of issuance on May 10, 1993 for Class A shares,
January 30, 1996 for Class B shares, July 22, 1992 for Class C shares and May
10, 1993 for Class Y shares. Index and Lipper median inception returns are as
of oldest share class inception.
* Maximum sales charge for Class A shares is 4.5% of the public offering price.
Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5% and is
reduced to 0% after six years. Class B shares bear ongoing 12b-1 distribution
and service fees.
+ Maximum contingent deferred sales charge for Class C shares is 1% and is
reduced to 0% after one year. Class C shares bear ongoing 12b-1 distribution
and service fees.
++ 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 that may invest in PaineWebber mutual funds, as well as the
trustee of the PaineWebber 401(k) Plus Plan. Class Y shares do not bear
initial or contingent deferred sales charges or ongoing distribution and
service fees.
1
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PAINEWEBBER TACTICAL ALLOCATION FUND SEMIANNUAL REPORT
PORTFOLIO HIGHLIGHTS
The Fund's equity allocation decreased twice during the period--the first
reporting period since April 1998 that the Fund did not maintain a 100%
allocation to equities. The first decrease occurred in December 1999, when the
Fund's Tactical Allocation Model dictated a shift to 75% equities, 25% cash; at
the beginning of 2000, the Model further reduced the equity weighting to 50%
equities, with the non-stock portion moving to the five-year U.S. Treasury note
(see the graph below). In a recent interview excerpted below, Portfolio Manager
Kirk Barneby put these changes in perspective.
Q: WHAT PROMPTED THE SHIFT AWAY FROM STOCKS SINCE DECEMBER 1999?
The Fund's Equity Risk Premium (ERP) declined to less than 5.0%, the
threshold for a 75% allocation to stocks. The decline is primarily attributable
to the stock market's appreciation and projected dividend growth relative to the
recently higher level of short-term interest rates. Stated another way, the
stock market is more fully valued than it was when the Fund's ERP was above
5.0%. Based on a bond risk premium of 0.47%, cash is relatively more attractive
than bonds.
Q: BEFORE DECEMBER 1999, WHEN WAS THE LAST TIME THE FUND WAS NOT FULLY
INVESTED IN STOCKS?
The Fund was not fully invested in stocks April 1998 through May 1998, when
its allocation was 75% stocks and 25% cash, and December 1994 through February
1995, when its asset allocation was 75% stocks and 25% bonds.
Q: WHY DID THE FUND MOVE INTO CASH FROM BONDS?
When the yield spread between the five-year Treasury note and the one-year
Treasury bill is less than 50 basis points (0.50%), which it
[Table below represents bar chart in its printed form]
ALLOCATION SHIFTS--SEPTEMBER 1999 THROUGH FEBRUARY 2000
Stocks Bonds Cash ERP BRP
(left axis) (left axis) (left axis) (right axis) (right axis)
Sep-99 100 0 0 5.81 0.76
Oct-99 100 0 0 5.9 0.59
Nov-99 100 0 0 5.52 0.53
Dec-99 75 0 25 5.18 0.41
Jan-00 50 50 0 4.8 0.52
Feb-00 50 0 50 4.67 0.47
2
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PAINEWEBBER TACTICAL ALLOCATION FUND SEMIANNUAL REPORT
is, the Fund is required to fulfill the non-stock allocation with 30-day
Treasury bills. If the spread were equal to or greater than 50 basis points, the
Fund would purchase five-year Treasury notes as the safe harbor investment.
Q: DOES THE SHIFT AWAY FROM STOCKS SIGNAL THE END OF THIS LEG OF THE
BULL MARKET?
Not necessarily--the Fund is still 50% invested in stocks. When the equity
risk premium is between 4.5% and 5.0%, the Model views the stock market as
having little likelihood of producing significantly positive returns. The Model
views the market as being somewhat more at risk of a significant or prolonged
downturn, causing the Fund's asset allocation to be increasingly cautious. It is
possible, of course, that the equity risk premium may shortly return to 5.0% or
higher, requiring the Fund to increase its investment in stocks. Of course,
there can be no assurance that the Model will correctly anticipate future market
corrections or bear markets, or indicate the correct time to shift assets into
or out of stocks, bonds or cash.
Q: COULD THERE BE FURTHER SHIFTS IN ASSET ALLOCATION?
Yes. The Fund's allocation could dip further into Treasury bills or change
its non-stock allocation to Treasury notes. Or, if the equity risk premium rises
above 5.0%, the Fund could return to a 75% stock investment. A further shift
away from stocks (ERP below 4.5%) would depend upon the stock market's reaction
to continuing short-term interest rate moves, stock valuations and changes in
dividend growth expectations.
Q: HOW OFTEN CAN THE FUND'S ASSET ALLOCATION CHANGE?
By prospectus, changes to the Fund's asset allocation may only be made on the
first business day of each month. Historically, and in general, true bear
markets have been anticipated by several months based on changes in the outlook
for earnings and/or the level of short-term interest rates or market valuations.
We have found that intra-month adjustments create additional costs and tax
consequences and have not generally been necessary to position the portfolio to
avoid market downturns or capture returns.
Q: WHAT ARE THE CAPITAL GAIN IMPLICATIONS OF THE SHIFTS?
Any capital gains distribution created by an allocation shift would be paid
in year 2000 at the end of the calendar year (December 2000). A lot can happen
between now and then. For example, the net amount of realized capital gains per
share will depend upon the number of outstanding shares in the Fund at calendar
year-end and the Fund may realize offsetting losses or additional gains during
the year.
In reallocating the stock portfolio, we attempt to minimize the capital gain
tax liability for shareholders by selling lots with the most advantageous
embedded gain profiles first.
Q: IS THE FUND STILL A GOOD LONG-TERM INVESTMENT?
We believe it is. The fundamental reasons for owning the Fund haven't
changed--stock market participation when the model suggests the potential
rewards
3
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND SEMIANNUAL REPORT
for owning equities may outweigh the risks. The Fund seeks to perform
better than the S&P 500 with less volatility over the course of a full market
cycle. Since the Fund's inception in 1992, however, there hasn't been a
significant, long-term down market that would provide the Fund's Model with the
opportunity to generate incremental return with lesser volatility.
However, we believe there have been significant benefits in owning the Fund
through a partial cycle. For example, the Fund stayed fully invested in stocks
during the temporary volatility in the third quarter of 1998, during the near
correction in March-April 1997, during July 1996 and during the correction in
October 1997--times when many investors trimmed stock allocations and then
missed sharp market recoveries.
- --------------------------------------------------------------------------------
HOW THE FUND WORKS
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 expected risk
premiums--the anticipated return advantage--of stocks and bonds relative to
cash. The decision process 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) and, as a result, the
portfolio's weighting, if any, in stocks and bonds.
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 may 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 BRP. 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.
- --------------------------------------------------------------------------------
4
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PAINEWEBBER TACTICAL ALLOCATION FUND SEMIANNUAL REPORT
PORTFOLIO STATISTICS
CHARACTERISTICS(1) 2/29/00 8/31/99
- --------------------------------------------------------------------------------
Total Net Assets ($bln) $2.8 $2.5
Number of Securities 474 465
12-Month Beta2 0.86 1.00
Equity Risk Premium 4.67% 5.81%
Bond Risk Premium 0.47% 0.76%
Stocks 50% 100%
Bonds 0% 0%
Cash & Equivalents 50% 0%
- --------------------------------------------------------------------------------
TOP FIVE EQUITY SECTORS(1) 2/29/00 8/31/99
- --------------------------------------------------------------------------------
Technology 12.1% Technology 25.2%
Financial Services 5.6 Financial Services 16.6
Consumer Cyclical 4.2 Consumer Cyclical 12.5
Healthcare 3.2 Healthcare 11.2
Utilities 3.2 Utilities 9.7
- --------------------------------------------------------------------------------
Total 28.3 Total 75.2
TOP TEN EQUITY HOLDINGS(1) 2/29/00 8/31/99
- --------------------------------------------------------------------------------
Microsoft Corp. 2.0% Microsoft Corp. 4.4%
Cisco Systems, Inc. 1.9 General Electric Co. 3.4
General Electric Co. 1.9 Intel Corp. 2.5
Intel Corp. 1.6 IBM Corp. 2.1
Exxon Mobil Corp. 1.1 Cisco Systems, Inc. 2.0
Wal Mart Stores, Inc. 0.9 Wal Mart Stores, Inc. 1.8
Oracle Systems Corp. 0.9 Lucent Technologies, Inc. 1.8
Lucent Technologies, Inc. 0.8 Exxon Mobil Corp. 1.8
IBM Corp. 0.8 Merck & Co., Inc. 1.5
Citigroup, Inc. 0.7 Citigroup, Inc. 1.4
- --------------------------------------------------------------------------------
Total 12.6 Total 22.7
(1) Weightings represent percentages of portfolio assets. Changes in sector
weightings and stock holdings reflect changes in the S&P 500 Index for the
period ended 2/29/00, weightings also reflect the Fund's 50% stock
allocation.
(2) Source: Lipper Analytical Services, Inc. Beta is a measure of a stock
portfolio's risk relative to the overall market, as measured by the S&P 500
Index. The market has a Beta of 1. If a portfolio has a Beta greater than 1,
it is riskier than the market; if it has a Beta less than 1, it is less
risky than the market. The Fund's 12-month Beta as of 2/29/00 reflects the
impact of the 75% stock allocation in December 1999 and the 50% stock
allocation in January 2000.
5
<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,3 please contact your Financial Advisor.
Sincerely,
/s/ MARGO ALEXANDER /s/ T. KIRKHAM BARNEBY
- ------------------- ----------------------
MARGO ALEXANDER T. KIRKHAM BARNEBY
Chairman and Chief Executive Officer Managing Director and Chief
Mitchell Hutchins Asset Management Inc. Investment Officer-
Quantitative Investments,
Mitchell Hutchins Asset Management Inc.
/s/ BRIAN M. STORMS
- -------------------
BRIAN M. STORMS
President and Chief Operating Officer
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 29, 2000, 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.
(3) 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.
6
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
PERFORMANCE RESULTS (UNAUDITED)
NET ASSET VALUE TOTAL RETURN(1)
------------------------------ --------------------
12 MONTHS 6 MONTHS
ENDED ENDED
02/29/00 08/31/99 02/28/99 02/29/00 02/29/00
- --------------------------------------------------------------------------------
Class A Shares $33.05 $31.79 $29.73 13.57% 6.21%
- --------------------------------------------------------------------------------
Class B Shares 32.55 31.41 29.50 12.68 5.83
- --------------------------------------------------------------------------------
Class C Shares 32.75 31.60 29.67 12.71 5.83
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS A SHARES
NET ASSET VALUE
-------------------
CAPITAL
GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
1999 29.52 34.24 0.6966 0.0202 18.49
- --------------------------------------------------------------------------------
01/01/00-02/29/00 34.24 33.05 -- -- (3.48)
- --------------------------------------------------------------------------------
Totals: $ 3.6086 $ 1.1236
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/29/00: 235.34%
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS B SHARES
NET ASSET VALUE
-------------------
CAPITAL
GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
1999 29.32 33.76 0.6966 -- 17.59
- --------------------------------------------------------------------------------
01/01/00-02/29/00 33.76 32.55 -- -- (3.58)
- --------------------------------------------------------------------------------
Totals: $ 1.5371 $ 0.1172
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/29/00: 122.36%
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS C SHARES
NET ASSET VALUE
-------------------
CAPITAL
GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
1999 29.49 33.97 0.6966 -- 17.62
- --------------------------------------------------------------------------------
01/01/00-02/29/00 33.97 32.75 -- -- (3.59)
- --------------------------------------------------------------------------------
Totals: $ 3.5998 $ 0.4731
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 02/29/00: 245.41%
- --------------------------------------------------------------------------------
(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.
7
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
PERFORMANCE RESULTS (UNAUDITED) (CONCLUDED)
AVERAGE ANNUAL TOTAL RETURN
% RETURN % RETURN
WITHOUT DEDUCTING AFTER DEDUCTING
MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
---------------------- ---------------------
CLASS CLASS
- --------------------------------------------------------------------------------
A* B** C*** A* B** C***
- --------------------------------------------------------------------------------
Twelve Months Ended 03/31/00 14.72% 13.86% 13.87% 9.54% 8.86% 12.87%
- --------------------------------------------------------------------------------
Five Years Ended 03/31/00 25.05 N/A 24.12 23.91 N/A 24.12
- --------------------------------------------------------------------------------
Commencement of Operations
Through 03/31/00 20.02 22.52 18.21 19.22 22.27 18.21
- --------------------------------------------------------------------------------
* Maximum sales charge for Class A shares in 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 29, 2000 and since inception, May 10, 1993 through
February 29, 2000, Class Y shares have a total return of 6.39% and 241.64%,
respectively. For the one year and five year periods ended March 31, 2000
and since inception, May 10, 1993, through March 31, 2000. Class Y shares
have an average annual return of 15.06%, 25.39% and 20.35%, 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.
8
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
PORTFOLIO OF INVESTMENTS FEBRUARY 29, 2000 (UNAUDITED)
NUMBER OF
SHARES VALUE
--------- -----------
COMMON STOCKS--49.41%+
AGRICULTURE, FOOD & BEVERAGE--1.39%
73,171 Archer-Daniels-Midland Co. .......................... $ 736,283
32,950 Bestfoods Co. ....................................... 1,381,841
50,500 Campbell Soup Co. (1) ............................... 1,432,937
291,000 Coca-Cola Co. ....................................... 14,095,312
50,400 Coca-Cola Enterprises, Inc. (1) ..................... 1,178,100
58,600 Conagra, Inc. ....................................... 959,575
36,000 General Mills, Inc. ................................. 1,185,750
42,350 Heinz, H. J. and Co. ................................ 1,352,553
16,500 Hershey Foods Corp. ................................. 724,969
48,000 Kellogg Co. ......................................... 1,215,000
41,200 Nabisco Group Holdings Corp. ........................ 355,350
171,500 PepsiCo, Inc. ....................................... 5,530,875
15,900 Quaker Oats Co. ..................................... 857,606
107,900 Sara Lee Corp. ...................................... 1,618,500
17,700 Supervalue, Inc. .................................... 304,219
38,700 Sysco Corp. ......................................... 1,269,844
67,638 Unilever N.V ........................................ 3,077,529
13,700 Wrigley, Wm. Jr. Co. ................................ 926,463
-----------
38,202,706
-----------
AIRLINES--0.11%
17,600 AMR Corp.* .......................................... 930,600
15,900 Delta Air Lines, Inc. ............................... 725,437
59,350 Southwest Airlines Co. .............................. 1,094,266
9,000 US Airways Group, Inc.* ............................. 168,188
-----------
2,918,491
-----------
ALCOHOL--0.26%
54,200 Anheuser-Busch Companies, Inc. (1)3,475,575
8,300 Brown Forman Corp., Class B ......................... 395,287
4,500 Coors Adolph Co. .................................... 197,438
51,000 Seagram Co. Ltd. .................................... 2,996,250
-----------
7,064,550
-----------
APPAREL, RETAIL--0.26%
101,087 Gap, Inc. ........................................... 4,883,765
25,719 Limited, Inc. ....................................... 874,446
7,500 Liz Claiborne, Inc. ................................. 280,781
17,100 Nordstrom, Inc. ..................................... 364,444
37,300 TJX Companies, Inc. ................................. 594,469
-----------
6,997,905
-----------
APPAREL, TEXTILES--0.05%
33,500 Nike, Inc. .......................................... 952,656
15,300 V. F. Corp. ......................................... 377,719
-----------
1,330,375
-----------
BANKS--2.98%
46,900 Amsouth Bancorpation ................................ 680,050
86,100 Bank of New York Co. Inc. ........................... 2,868,206
135,643 Bank One Corp. ...................................... 3,501,285
201,319 BankAmerica Corp. ................................... 9,273,256
41,300 BB&T Corp. .......................................... 970,550
97,040 Chase Manhattan Corp. ............................... 7,726,810
397,440 Citigroup, Inc. (1) ................................. 20,542,680
19,000 Comerica, Inc. ...................................... 701,813
36,300 Fifth Third Bancorp ................................. 1,889,869
116,604 First Union Corp. ................................... 3,439,818
115,212 Firstar Corp. ....................................... 2,052,214
107,958 FleetBoston Financial Corp. ......................... 2,941,855
27,824 Huntington Bancshares, Inc. ......................... 580,826
54,180 KeyCorp ............................................. 917,674
59,600 Mellon Financial Corp. .............................. 1,795,450
20,500 Morgan, (J.P.) & Co., Inc. .......................... 2,275,500
73,700 National City Corp. (1) ............................. 1,418,725
26,100 Northern Trust Corp. ................................ 1,474,650
14,300 Old Kent Financial Corp. ............................ 374,481
34,700 PNC Bank Corp. ...................................... 1,342,456
26,800 Regions Financial Corp. ............................. 542,700
20,400 SouthTrust Corp. .................................... 467,925
18,800 State Street Corp. .................................. 1,370,050
21,400 Summit Bancorp, Inc. ................................ 512,263
37,700 Suntrust Banks, Inc. ................................ 1,915,631
33,350 Synovus Financial Corp. ............................. 546,106
17,300 Union Planters Corp. (1) ............................ 473,588
86,345 US Bancorp, Inc. .................................... 1,581,193
24,100 Wachovia Corp. ...................................... 1,378,219
193,060 Wells Fargo and Co.* ................................ 6,383,046
-----------
81,938,889
-----------
CHEMICALS--0.99%
27,500 Air Products & Chemicals, Inc. ...................... 708,125
9,900 Ashland, Inc. ....................................... 308,138
13,300 Avery Dennison Corp. ................................ 807,144
25,800 Dow Chemical Co. .................................... 2,799,300
123,100 DuPont (E.I.) de Nemours & Co ....................... 6,216,550
9,800 Eastman Chemical Co. ................................ 352,188
15,600 Ecolab, Inc. ........................................ 440,700
16,050 Engelhard Corp. ..................................... 218,681
4,000 FMC Corp.* .......................................... 193,250
19,500 Goodyear Tire & Rubber Co. .......................... 442,406
7,400 Great Lakes Chemical Corp. .......................... 215,063
13,500 Hercules, Inc. ...................................... 222,750
35,600 Illinois Tool Works, Inc. ........................... 1,840,075
11,385 Kerr-McGee Corp. .................................... 509,479
47,300 Minnesota Mining & Manufacturing Co. ................ 4,168,312
9
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
NUMBER OF
SHARES VALUE
--------- -----------
COMMON STOCKS--(CONTINUED)
CHEMICALS--(CONCLUDED)
74,900 Monsanto Co. ........................................ $ 2,907,056
20,700 PPG Industries, Inc. ................................ 1,022,062
19,000 Praxair, Inc. ....................................... 641,250
25,920 Rohm & Haas Co. ..................................... 1,046,520
10,013 Sealed Air Corp.* ................................... 497,521
20,800 Sherwin-Williams Co. ................................ 397,800
15,900 Union Carbide Corp. ................................. 853,631
12,300 Vulcan Materials Co. ................................ 492,000
-----------
27,300,001
-----------
COMPUTER HARDWARE--5.04%
40,800 3Com Corp.* ......................................... 3,998,400
12,200 Adaptec, Inc.* ...................................... 500,200
19,000 Apple Computer, Inc.* (1) ........................... 2,177,875
21,500 Cabletron Systems, Inc.* ............................ 1,053,500
403,450 Cisco Systems, Inc.* ................................ 53,331,047
200,962 Compaq Computer Corp. ............................... 4,998,929
299,700 Dell Computer Corp.* (1) ............................ 12,231,506
120,000 EMC Corp.* .......................................... 14,280,000
37,400 Gateway, Inc.* (1) .................................. 2,571,250
120,200 Hewlett-Packard Co. ................................. 16,166,900
15,100 Lexmark International Group, Inc.* .................. 1,800,675
17,600 Network Appliance, Inc.* ............................ 3,322,000
31,600 Pitney Bowes, Inc. .................................. 1,564,200
24,800 Seagate Technology, Inc.* ........................... 1,236,900
23,100 Silicon Graphics, Inc.* ............................. 226,669
184,200 Sun Microsystems, Inc.* (1) ......................... 17,545,050
79,300 Xerox Corp. ......................................... 1,719,819
-----------
138,724,920
-----------
COMPUTER SOFTWARE--4.21%
14,200 Adobe Systems, Inc. ................................. 1,448,400
7,400 Autodesk, Inc. ...................................... 330,688
28,700 BMC Software, Inc.* ................................. 1,320,200
21,100 Citrix Systems, Inc.* ............................... 2,224,731
63,562 Computer Associates International, Inc. ............. 4,087,831
42,500 Compuware Corp.* .................................... 940,312
212,500 IBM Corp. ........................................... 21,675,000
608,400 Microsoft Corp.* .................................... 54,375,750
11,700 NCR Corp. ........................................... 443,869
39,400 Novell, Inc.* ....................................... 1,302,662
335,736 Oracle Systems Corp.* ............................... 24,928,398
31,900 Parametric Technology Corp.* ........................ 966,969
31,800 Peoplesoft, Inc.* ................................... 657,863
36,800 Unisys Corp.* ....................................... 1,101,700
-----------
115,804,373
-----------
CONSTRUCTION--0.05%
8,300 Centex Corp. ........................................ 163,406
9,900 Fluor Corp. ......................................... 281,532
54,400 Masco Corp. ......................................... 972,400
-----------
1,417,338
-----------
CONSUMER DURABLES--0.07%
10,900 Black & Decker Corp. ................................ 359,019
11,300 Grainger,W.W., Inc. ................................. 483,781
24,500 Leggett & Platt, Inc. ............................... 411,906
10,400 Maytag Corp. ........................................ 274,950
9,200 Whirlpool Corp. ..................................... 499,675
-----------
2,029,331
-----------
DEFENSE & AEROSPACE--0.30%
110,278 Boeing Co. .......................................... 4,066,502
24,000 General Dynamics Corp. .............................. 1,038,000
13,900 Goodrich, B.F. Co. .................................. 332,731
47,860 Lockheed Martin Corp. ............................... 834,559
8,700 Northrop Grumman Corp. .............................. 395,306
40,800 Raytheon Co. (1) .................................... 754,800
14,700 TRW Inc. ............................................ 705,600
-----------
8,127,498
-----------
DIVERSIFIED RETAIL--1.35%
52,316 Costco Wholesale Corp.* ............................. 2,596,182
14,000 Dillard's, Inc. ..................................... 243,250
25,100 Federated Department Stores, Inc.* .................. 920,856
60,400 K Mart Corp.* ....................................... 532,275
19,300 Kohls Corp.* ........................................ 1,463,181
39,950 May Department Stores Co.* (1) ...................... 1,046,191
32,300 Penney, (J.C.), Inc. ................................ 508,725
45,200 Sears Roebuck & Co. ................................. 1,245,825
52,100 Target Corp. ........................................ 3,073,900
524,600 Wal Mart Stores, Inc. ............................... 25,541,462
-----------
37,171,847
-----------
DRUGS & MEDICINE--3.29%
15,600 Allergan, Inc. ...................................... 784,875
154,000 American Home Products Corp. ........................ 6,699,000
120,400 Amgen, Inc.* ........................................ 8,209,775
17,700 Biogen Inc.* (1) .................................... 1,910,494
233,600 Bristol-Myers Squibb Co. ............................ 13,271,400
33,250 Cardinal Health, Inc. ............................... 1,371,562
128,560 Lilly, Eli & Co. .................................... 7,641,285
33,949 McKesson HBOC, Inc. ................................. 657,762
275,300 Merck & Co., Inc. ................................... 16,948,156
456,200 Pfizer, Inc. ........................................ 14,655,425
61,190 Pharmacia & Upjohn, Inc., ADR (1) ................... 2,914,174
173,300 Schering-Plough Corp. ............................... 6,043,837
10
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
NUMBER OF
SHARES VALUE
--------- -----------
COMMON STOCKS--(CONTINUED)
DRUGS & MEDICINE--(CONCLUDED)
12,400 Sigma-Aldrich Corp. ................................. $ 294,500
101,100 Warner Lambert Co. .................................. 8,650,369
11,600 Watson Pharmaceuticals, Inc.* ....................... 464,000
-----------
90,516,614
-----------
ELECTRIC UTILITIES--0.82%
24,200 AES Corp.* (1) ...................................... 2,028,262
16,400 Ameren Corp. ........................................ 492,000
22,700 American Electric Power, Inc. ....................... 638,438
18,800 Carolina Power & Light Co. .......................... 559,300
25,100 Central & South West Corp. .......................... 421,994
18,825 Cinergy Corp. ....................................... 402,384
14,900 CMS Energy Corp. .................................... 249,575
26,100 Consolidated Edison, Inc. ........................... 719,381
17,700 Constellation Energy Group, Inc. .................... 526,575
28,300 Dominion Resources, Inc. ............................ 1,038,256
17,500 DTE Energy Co. ...................................... 528,281
42,706 Duke Energy Corp. ................................... 2,071,241
40,700 Edison International, Inc. .......................... 1,070,919
29,700 Entergy Corp. ....................................... 601,425
28,200 FirstEnergy Corp. ................................... 526,988
11,400 Florida Progress Corp. .............................. 485,925
21,100 FPL Group, Inc. ..................................... 814,988
15,200 GPU Corp. ........................................... 378,100
14,300 New Century Energies Inc. ........................... 386,994
24,200 Niagara Mohawk Holdings, Inc.* ...................... 284,350
18,700 Northern States Power Co. ........................... 328,419
21,600 PECO Energy Co. ..................................... 805,950
45,800 PG&E Corp. .......................................... 944,625
10,800 Pinnacle West Capital Corp. ......................... 298,350
17,600 PP&L Resources Inc. ................................. 354,200
25,500 Public Service Enterprise Group, Inc. ............... 739,500
35,094 Reliant Energy, Inc. ................................ 721,620
28,511 Sempra Energy ....................................... 513,198
78,400 Southern Co. ........................................ 1,739,500
32,652 Texas Utilities Co. ................................. 1,065,271
25,400 Unicom Corp. ........................................ 960,437
-----------
22,696,446
-----------
ELECTRICAL EQUIPMENT--3.49%
35,400 ADC Telecommunications Inc.* (1) .................... 1,588,575
10,100 Andrew Corp.* ....................................... 249,975
9,000 Comverse Technology, Inc.* .......................... 1,771,875
32,100 Corning, Inc. (1) ................................... 6,034,800
17,100 Danaher Corp. ....................................... 697,894
24,300 Dover Corp. ......................................... 937,069
9,000 Eaton Corp. ......................................... 674,437
93,375 Honeywell, Inc. ..................................... 4,493,672
10,400 Johnson Controls, Inc. .............................. 555,100
21,300 KLA-Tencor Corp.* ................................... 1,660,069
369,530 Lucent Technologies, Inc. ........................... 21,987,035
5,500 Millipore Corp. ..................................... 293,906
18,600 Molex Inc. .......................................... 1,039,275
83,658 Motorola, Inc. ...................................... 14,263,689
157,480 Nortel Networks Corp. (1) ........................... 17,559,020
24,300 PE Corp. ............................................ 2,563,650
83,800 Qualcomm, Inc.* ..................................... 11,936,262
9,300 Scientific-Atlanta, Inc. ............................ 954,994
34,600 Solectron Corp.* .................................... 2,266,300
5,800 Tektronix, Inc. ..................................... 336,400
47,500 Tellabs, Inc.* ...................................... 2,280,000
20,200 Teradyne Inc.* ...................................... 1,757,400
19,700 Thermo Electron Corp.* .............................. 307,813
-----------
96,209,210
-----------
ELECTRICAL POWER--0.15%
11,900 Cooper Industries, Inc. ............................. 359,975
5,400 Cummins Engine Co., Inc. ............................ 179,888
51,400 Emerson Electric Co. ................................ 2,341,912
22,700 Rockwell International Corp. ........................ 1,027,175
7,600 Thomas & Betts Corp. ................................ 170,525
-----------
4,079,475
-----------
ENERGY RESERVES & PRODUCTION--2.09%
11,400 Amerada Hess Corp. .................................. 576,413
15,400 Anadarko Petroleum Corp. ............................ 473,550
13,800 Apache Corp. ........................................ 503,700
38,000 Atlantic Richfield Co. .............................. 2,698,000
26,200 Burlington Resources, Inc. .......................... 723,775
77,100 Chevron Corp. ....................................... 5,758,406
406,763 Exxon Mobil Corp. ................................... 30,634,338
44,400 Occidental Petroleum Corp. .......................... 713,175
30,300 Phillips Petroleum Co. .............................. 1,158,975
252,600 Royal Dutch Petroleum Co., ADR ...................... 13,261,500
31,136 Union Pacific Resources Group, Inc. ................. 278,278
29,100 Unocal Corp. ........................................ 778,425
-----------
57,558,535
-----------
ENTERTAINMENT--0.24%
73,000 Carnival Corp. ...................................... 2,103,313
82,198 Viacom, Inc., Class B* (1) .......................... 4,582,538
-----------
6,685,851
-----------
ENVIRONMENTAL SERVICES--0.04%
74,957 Waste Management, Inc. .............................. 1,124,355
-----------
11
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
NUMBER OF
SHARES VALUE
--------- -----------
COMMON STOCKS--(CONTINUED)
FINANCIAL SERVICES--3.00%
52,700 American Express Co. ................................ $ 7,071,681
30,450 AON Corp. ........................................... 637,547
86,490 Associates First Capital Corp. ...................... 1,718,989
11,700 Block, H&R, Inc. .................................... 513,338
23,300 Capital One Financial Corp. ......................... 857,731
84,221 Cendant Corp.* ...................................... 1,500,187
14,200 Countrywide Credit Industries, Inc. ................. 354,113
82,000 Federal Home Loan Mortgage Corp. .................... 3,423,500
120,800 Federal National Mortgage Association ............... 6,402,400
386,500 General Electric Co. ................................ 51,090,469
55,645 Household International, Inc. ....................... 1,777,162
14,800 Lehman Brothers Holdings, Inc. ...................... 1,073,000
31,250 Marsh & McLennan Companies, Inc.2,417,969
94,450 MBNA Corp. .......................................... 2,148,737
16,750 Providian Financial Corp. ........................... 1,085,609
19,000 SLM Holding Corp. ................................... 594,937
-----------
82,667,369
-----------
FOOD RETAIL--0.19%
50,482 Albertson's, Inc. (1) ............................... 1,236,809
99,000 Kroger Co.* ......................................... 1,472,625
60,200 Safeway, Inc.* ...................................... 2,321,462
18,900 Winn Dixie Stores, Inc. (1) ......................... 304,763
-----------
5,335,659
-----------
FOREST PRODUCTS, PAPER--0.39%
6,800 Bemis, Inc. ......................................... 202,300
7,400 Boise Cascade Corp. ................................. 220,613
11,600 Champion International Corp. ........................ 600,300
26,100 Fort James Corp. .................................... 491,006
20,500 Georgia-Pacific Corp. ............................... 711,094
49,028 International Paper Co. ............................. 1,804,843
64,020 Kimberly Clark Corp. ................................ 3,309,034
14,400 Louisiana Pacific Corp. ............................. 170,100
12,600 Mead Corp. .......................................... 377,212
23,700 Pactiv Corp.* ....................................... 197,006
6,900 Temple-Inland, Inc. ................................. 352,762
12,500 Westvaco Corp. ...................................... 344,531
27,900 Weyerhaeuser Co. .................................... 1,431,619
13,700 Willamette Industries, Inc. ......................... 464,944
-----------
10,677,364
-----------
FREIGHT, AIR, SEA & LAND--0.05%
35,600 Fedex Corp. ......................................... 1,243,775
-----------
GAS UTILITY--0.07%
9,500 Columbia Energy Group ............................... 560,500
3,300 Eastern Enterprises ................................. 190,987
26,900 El Paso Energy Corp. ................................ 996,981
5,900 NICOR, Inc. ......................................... 179,213
-----------
1,927,681
-----------
HEAVY MACHINERY--0.04%
27,900 Deere & Co. ......................................... 997,425
-----------
HOTELS--0.07%
15,650 Harrah's Entertainment, Inc.* ....................... 299,306
45,600 Hilton Hotels Corp. ................................. 319,200
29,700 Marriott International, Inc. ........................ 818,606
23,900 Mirage Resorts, Inc.* ............................... 379,413
-----------
1,816,525
-----------
HOUSEHOLD PRODUCTS--0.95%
28,900 Avon Products, Inc. ................................. 782,106
28,200 Clorox Co. .......................................... 1,140,337
68,800 Colgate-Palmolive Co. (1) ........................... 3,590,500
20,300 Fortune Brands, Inc. ................................ 444,063
126,900 Gillette Co. ........................................ 4,473,225
13,000 International Flavors and
Fragrances .......................................... 390,000
33,957 Newell Rubbermaid, Inc. ............................. 785,256
154,800 Procter & Gamble Co. ................................ 13,622,400
36,500 Ralston Purina Co. .................................. 1,033,406
-----------
26,261,293
-----------
INDUSTRIAL PARTS--0.31%
42,600 Caterpillar, Inc. ................................... 1,493,662
9,000 Crane Co. ........................................... 178,875
22,650 Genuine Parts Co. ................................... 511,041
19,850 Ingersoll Rand Co. .................................. 760,503
11,500 ITT Industries, Inc. ................................ 278,875
15,766 Pall Corp. .......................................... 311,379
13,700 Parker-Hannifin Corp. ............................... 496,625
8,250 Snap-On, Inc. ....................................... 179,953
11,600 Stanley Works ....................................... 266,800
17,900 Textron, Inc. ....................................... 1,091,900
56,700 United Technologies Corp. (1) ....................... 2,888,156
-----------
8,457,769
-----------
INDUSTRIAL SERVICES & SUPPLIES--0.28%
8,900 Ryder Systems, Inc. ................................. 165,763
199,352 Tyco International Ltd., ADR ........................ 7,562,916
-----------
7,728,679
-----------
12
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
NUMBER OF
SHARES VALUE
--------- -----------
COMMON STOCKS--(CONTINUED)
INFORMATION & COMPUTER SERVICES--1.58%
263,700 America Online Inc.* ................................ $15,558,300
73,600 Automatic Data Processing, Inc. ..................... 3,206,200
17,600 Ceridian Corp.* ..................................... 348,700
19,700 Computer Sciences Corp.* ............................ 1,552,606
19,500 Dun & Bradstreet Corp. .............................. 510,656
55,600 Electronic Data Systems Corp. ....................... 3,600,100
17,300 Equifax, Inc. ....................................... 366,544
49,500 First Data Corp. .................................... 2,227,500
36,700 IMS Health, Inc. .................................... 738,587
33,200 Interpublic Group Companies, Inc. ................... 1,334,225
20,900 Omnicom Group, Inc. ................................. 1,968,519
29,150 Paychex, Inc. ....................................... 1,459,322
13,900 Quintiles Transnational Corp.* ...................... 412,656
62,100 Yahoo, Inc.* (1) .................................... 9,916,594
8,300 Young & Rubicam Inc.* (1) ........................... 419,150
-----------
43,619,659
-----------
LEISURE--0.16%
12,300 Brunswick Corp. ..................................... 217,556
37,600 Eastman Kodak Co. ................................... 2,154,950
18,000 Harley Davidson Inc. ................................ 1,226,250
24,050 Hasbro, Inc. ........................................ 378,788
50,983 Mattel, Inc. ........................................ 490,711
-----------
4,468,255
-----------
LIFE INSURANCE--0.25%
17,997 Aetna Life & Casualty Co. ........................... 740,127
31,100 AFLAC, Inc. ......................................... 1,137,094
28,988 American General Corp. (1) .......................... 1,512,811
22,200 CIGNA Corp. ......................................... 1,638,637
39,562 Conseco, Inc. ....................................... 578,594
23,100 Lincoln National Corp. .............................. 642,469
15,900 Torchmark, Inc. ..................................... 315,019
28,957 UnumProvident Corp. ................................. 387,300
-----------
6,952,051
-----------
LONG DISTANCE & PHONE COMPANIES--3.23%
376,597 AT&T Corp. .......................................... 18,618,014
182,904 Bell Atlantic Corp. (1) ............................. 8,950,865
221,500 BellSouth Corp. ..................................... 9,026,125
16,850 Centurytel, Inc. .................................... 566,581
89,540 Global Crossing Ltd.* ............................... 4,174,803
114,400 GTE Corp. ........................................... 6,749,600
334,780 MCI WorldCom Inc.* .................................. 14,939,557
402,124 SBC Communications, Inc. ............................ 15,280,712
103,000 Sprint Corp. (1) .................................... 6,283,000
59,571 U.S. West, Inc. ..................................... 4,326,344
-----------
88,915,601
-----------
MEDIA--1.47%
89,913 CBS Corp.* .......................................... 5,355,443
39,900 Clear Channel Communications* (1) ................... 2,658,337
102,500 Comcast Corp., Class A .............................. 4,356,250
243,300 Disney, Walt Co. .................................... 8,150,550
72,200 Mediaone Group, Inc.* ............................... 5,667,700
6,700 Meredith Corp. ...................................... 191,788
151,800 Time Warner, Inc. (1) ............................... 12,978,900
28,200 Tribune Co. ......................................... 1,098,038
-----------
40,457,006
-----------
MEDICAL PRODUCTS--1.19%
181,500 Abbott Laboratories ................................. 5,944,125
12,500 Alza Corp.* ......................................... 458,594
6,400 Bard, C.R., Inc. .................................... 252,800
7,000 Bausch & Lomb, Inc. ................................. 369,250
34,400 Baxter International, Inc. .......................... 1,874,800
29,900 Becton, Dickinson & Co. ............................. 928,769
13,600 Biomet, Inc. ........................................ 448,800
49,500 Boston Scientific Corp.* (1) ........................ 903,375
36,300 Guidant Corp. (1) ................................... 2,445,712
163,800 Johnson & Johnson ................................... 11,752,650
9,100 Mallinckrodt Group, Inc. ............................ 224,087
140,900 Medtronic, Inc. ..................................... 6,824,844
10,400 St. Jude Medical, Inc.* ............................. 271,700
-----------
32,699,506
-----------
MEDICAL PROVIDERS--0.14%
68,027 Columbia/HCA Healthcare Corp. ....................... 1,313,771
49,900 HEALTHSOUTH Corp.* .................................. 243,263
38,700 Tenet Healthcare Corp.* ............................. 677,250
20,700 United Healthcare Corp. ............................. 1,058,287
8,000 Wellpoint Health Networks, Inc.* .................... 540,000
-----------
3,832,571
-----------
MINING & METALS--0.24%
26,300 Alcan Aluminum, Ltd. (1) ............................ 867,900
43,300 Alcoa, Inc. ......................................... 2,966,050
12,190 Allegheny Technologies Inc. ......................... 206,468
16,700 Crown Cork & Seal, Inc. ............................. 233,800
23,600 Inco Ltd.* .......................................... 413,000
10,700 Nucor Corp. ......................................... 531,657
18,900 Owens Illinois, Inc.* ............................... 261,056
9,800 Phelps Dodge Corp. .................................. 461,825
7,800 Reynolds Metals Co. ................................. 495,300
11,800 USX-U.S. Steel Group, Inc. .......................... 258,125
-----------
6,695,181
-----------
13
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
NUMBER OF
SHARES VALUE
--------- -----------
COMMON STOCKS--(CONTINUED)
MOTOR VEHICLES--0.51%
20,600 DANA Corp. .......................................... $ 439,038
67,778 Delphi Automotive Systems Corp. ..................... 1,131,045
143,000 Ford Motor Co. ...................................... 5,952,375
75,700 General Motors Corp. ................................ 5,757,931
8,000 Navistar International Corp.* ....................... 262,000
9,830 PACCAR, Inc. ........................................ 423,304
-----------
13,965,693
-----------
OIL REFINING--0.55%
25,500 Coastal Corp. ....................................... 1,072,594
74,000 Conoco, Inc. ........................................ 1,456,875
84,200 Enron Corp. (1) ..................................... 5,809,800
11,892 Sunoco, Inc. ........................................ 293,584
65,100 Texaco, Inc. ........................................ 3,088,181
17,600 Tosco Corp. ......................................... 470,800
37,300 USX-Marathon Group .................................. 806,613
51,400 Williams Companies, Inc. ............................ 2,149,162
-----------
15,147,609
-----------
OIL SERVICES--0.33%
38,960 Baker Hughes, Inc. .................................. 1,008,090
52,000 Halliburton Co. ..................................... 1,985,750
11,200 Rowan Co., Inc.* .................................... 281,400
64,700 Schlumberger Ltd. (1) ............................... 4,779,712
24,582 Transocean Sedco Forex, Inc. ........................ 969,453
-----------
9,024,405
-----------
OTHER INSURANCE--0.87%
95,184 Allstate Corp. ...................................... 1,856,088
181,978 American International Group, Inc. .................. 16,093,679
20,700 Chubb Corp. ......................................... 1,018,181
19,600 Cincinnati Financial Corp. .......................... 585,550
26,300 Hartford Financial Services Group, Inc. ............. 821,875
12,325 Jefferson-Pilot Corp. ............................... 641,670
13,500 Loews Corp. ......................................... 600,750
11,900 MBIA Inc. ........................................... 456,663
12,500 MGIC Investment Corp. ............................... 467,188
8,800 Progressive Corp. ................................... 523,600
16,800 SAFECO Corp. ........................................ 352,800
27,464 St. Paul Companies, Inc. ............................ 614,507
-----------
24,032,551
-----------
PRECIOUS METALS--0.07%
46,700 Barrick Gold Corp. .................................. 761,794
19,800 Freeport-McMoran Copper & Gold, Inc.* ............... 272,250
33,400 Homestake-Mining Co. ................................ 217,100
20,076 Newmont Mining Corp. ................................ 444,181
39,400 Placer Dome, Inc. ................................... 344,750
-----------
2,040,075
-----------
PUBLISHING--0.24%
9,200 American Greetings Corp., Class A ................... 158,700
9,600 Deluxe Corp. ........................................ 225,000
16,000 Donnelley, R.R. & Sons Co. .......................... 306,000
10,700 Dow Jones & Co., Inc. ............................... 667,412
32,900 Gannett, Inc. ....................................... 2,144,669
8,900 Harcourt General, Inc. .............................. 306,494
10,200 Knight Ridder, Inc. ................................. 478,125
23,200 McGraw-Hill Companies, Inc. ......................... 1,180,300
20,300 New York Times Co., Class A ......................... 857,675
7,400 Times Mirror Co. .................................... 377,400
-----------
6,701,775
-----------
RAILROADS--0.16%
54,366 Burlington Northern Santa Fe, Inc. .................. 1,070,331
26,900 CSX Corp. ........................................... 596,844
13,200 Kansas City Southern Industries, Inc. ............... 1,039,500
46,100 Norfolk Southern Corp. .............................. 625,231
29,600 Union Pacific Corp. ................................. 1,124,800
-----------
4,456,706
-----------
RESTAURANTS--0.22%
16,500 Darden Restaurants, Inc. ............................ 217,594
159,700 McDonalds Corp. ..................................... 5,040,531
18,720 Tricon Global Restaurants, Inc.* .................... 498,420
15,200 Wendy's International, Inc. ......................... 239,400
-----------
5,995,945
-----------
SECURITIES & ASSET MANAGEMENT--0.72%
16,112 Bear Stearns Co., Inc. .............................. 632,396
97,500 Charles Schwab Corp. (1) ............................ 4,076,719
31,400 Franklin Resources, Inc. ............................ 853,687
44,300 Merrill Lynch & Co., Inc. ........................... 4,540,750
132,000 Morgan Stanley Dean Witter & Co. .................... 9,297,750
15,400 T. Rowe Price & Associates Inc. (1) ................. 507,238
-----------
19,908,540
-----------
SEMICONDUCTOR--3.08%
17,600 Advanced Micro Devices, Inc.* ....................... 688,600
20,600 Analog Devices, Inc.* ............................... 3,234,200
44,600 Applied Materials, Inc.* ............................ 8,159,012
23,100 Conexant Systems, Inc. (1) .......................... 2,269,575
393,900 Intel Corp. ......................................... 44,510,700
35,100 LSI Logic Corp.* .................................... 2,248,594
32,000 Micron Technology, Inc.* (1) ........................ 3,138,000
14
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
NUMBER OF
SHARES VALUE
--------- -----------
COMMON STOCKS--(CONCLUDED)
SEMICONDUCTOR--(CONCLUDED)
20,300 National Semiconductor Corp.* ...................... $ 1,525,038
5,600 Perkinelmer, Inc. .................................. 361,900
94,500 Texas Instruments, Inc. ............................ 15,734,250
37,600 Xilinx, Inc.* ...................................... 2,998,600
-------------
84,868,469
-------------
SPECIALTY RETAIL--1.09%
17,500 Autozone, Inc.* .................................... 429,844
16,800 Bed, Bath & Beyond Inc.* ........................... 476,700
24,300 Best Buy Company, Inc.* ............................ 1,321,312
24,100 Circuit City Stores, Inc. .......................... 973,038
13,800 Consolidated Stores Corp.* ......................... 155,250
46,600 CVS Corp. (1) ...................................... 1,631,000
31,693 Dollar General Corp. ............................... 663,572
271,350 Home Depot, Inc. ................................... 15,687,422
45,200 Lowe's Companies, Inc. ............................. 2,152,650
39,700 Office Depot Inc.* ................................. 483,844
32,200 Rite Aid Corp. (1) ................................. 221,375
55,000 Staples, Inc.* ..................................... 1,485,000
22,900 Tandy Corp. ........................................ 871,631
30,100 Toys R Us, Inc.* ................................... 372,488
118,500 Walgreen Co. (1) ................................... 3,058,781
-------------
29,983,907
-------------
THRIFT--0.08%
19,400 Golden West Financial Corp. ........................ 552,900
68,875 Washington Mutual, Inc. ............................ 1,523,859
-------------
2,076,759
-------------
TOBACCO--0.22%
280,200 Philip Morris Companies, Inc. ...................... 5,621,512
20,700 UST, Inc. .......................................... 399,769
-------------
6,021,281
-------------
WIRELESS TELECOMMUNICATIONS--0.48%
37,100 Alltel Corp. ....................................... 2,151,800
42,900 Nextel Communications, Inc.* (1) ................... 5,866,575
101,100 Sprint Corp.* ...................................... 5,231,925
-------------
13,250,300
-------------
Total Common Stocks
(cost--$869,642,290) ........................................... 1,360,126,094
-------------
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES
------ -------- --------
SHORT-TERM U.S. GOVERNMENT OBLIGATIONS--50.40%
$ 1,387,593 U.S. Treasury Bills
(cost--$1,387,396,421)(1) ... 03/02/00 5.000%@ 1,387,396,421
Repurchase Agreement--0.48%
13,399 Repurchase Agreement dated
02/29/00 with Dresdner
Bank, collateralized by
$14,010,000 U.S. Treasury
Notes, 5.750% due 08/15/03
(value--$13,666,755);
Proceeds: $13,401,140 ....... 03/01/00 5.750 13,399,000
--------------
Total Investments
(cost--$2,270,437,711)--100.29% .......... 2,760,921,515
--------------
Liabilities in excess of
other assets--(0.29)% .................... (8,053,100)
--------------
Net Assets--100.00% ....................... $2,752,868,415
==============
- ----------
* Non-Income producing security
@ Interest rate shown is the discount rate at date of purchase.
(1) Security, or a portion thereof, was on loan at February 29, 2000.
ADR American Depositary Receipt.
+ The common stock portion of the portfolio is allocated in proportion to the
S&P 500 Index. Since the Fund has allocated only 50% of the portfolio to
common stocks, it represents half the weighting of the S&P 500 Index.
See accompanying notes to financial statements
15
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 (UNAUDITED)
ASSETS
Investments in securities, at value (cost--$2,270,437,711) ..... $2,760,921,515
Investments of cash collateral received for
securities loaned, at value (cost--$1,154,414,200) ........... 1,154,414,200
Cash ........................................................... 332
Receivable for shares of beneficial interest sold .............. 8,362,152
Dividends and interest receivable .............................. 1,635,371
Other assets ................................................... 972,444
--------------
Total assets ................................................... 3,926,306,014
--------------
LIABILITIES
Collateral for securities loaned ............................... 1,154,414,200
Payable for shares of beneficial interest repurchased .......... 12,421,441
Payable for investments purchased .............................. 3,902,990
Payable to affiliates .......................................... 2,660,855
Accrued expenses and other liabilities ......................... 38,113
--------------
Total liabilities .............................................. 1,173,437,599
--------------
NET ASSETS
Beneficial interest--$0.001 par value
(unlimited amount authorized) ................................ 2,078,881,458
Undistributed net investment income ............................ 10,841,321
Accumulated net realized gains from
investment transactions ...................................... 172,661,832
Net unrealized appreciation of investments ..................... 490,483,804
--------------
Net assets ..................................................... $2,752,868,415
==============
CLASS A:
Net assets ..................................................... $ 784,107,408
--------------
Shares outstanding ............................................. 23,723,755
--------------
Net asset value and redemption value per share ................. $ 33.05
==============
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) ................ $ 34.61
==============
CLASS B:
Net assets ..................................................... $1,013,053,374
--------------
Shares outstanding ............................................. 31,120,684
--------------
Net asset value and offering price per share ................... $ 32.55
==============
CLASS C:
Net assets ..................................................... $ 804,956,233
--------------
Shares outstanding ............................................. 24,577,961
--------------
Net asset value and offering price per share ................... $ 32.75
==============
CLASS Y:
Net assets ..................................................... $ 150,751,400
--------------
Shares outstanding ............................................. 4,525,845
--------------
Net asset value, offering price and redemption
value per share ............................................... $ 33.31
==============
See accompanying notes to financial statements
16
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
STATEMENT OF OPERATIONS
FOR THE SIX
MONTHS ENDED
FEBRUARY 29,
2000
(UNAUDITED)
--------------
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $11,495) ........... $ 12,917,001
Interest ........................................................ 16,100,734
------------
29,017,735
EXPENSES:
Investment advisory and administration .......................... 6,062,082
Service fees--Class A ........................................... 936,229
Service and distribution fees--Class B .......................... 4,968,081
Service and distribution fees--Class C .......................... 3,907,809
Transfer agency ................................................. 581,305
Custody and accounting .......................................... 579,990
Federal and state registration .................................. 181,579
Reports and notices to shareholders ............................. 120,984
Legal and audit ................................................. 65,976
Interest expense ................................................ 22,564
Trustees' fees .................................................. 6,750
Other expenses .................................................. 278,751
------------
17,712,100
Less: Fee waiver from adviser ................................... (131,777)
------------
Net expenses .................................................... 17,580,323
------------
Net investment income ........................................... 11,437,412
------------
REALIZED AND UNREALIZED GAINS (LOSSES)
FROM INVESTMENT TRANSACTIONS:
Net realized gains from investment transactions ................. 206,106,205
Net change in unrealized appreciation/depreciation
of investments ................................................ (64,914,280)
------------
NET REALIZED AND UNREALIZED GAINS FROM INVESTMENT TRANSACTIONS .. 141,191,925
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............ $152,629,337
============
See accompanying notes to financial statements
17
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX
MONTHS ENDED
FEBRUARY 29, FOR THE YEAR
2000 ENDED
(UNAUDITED) AUGUST 31, 1999
-------------- --------------
FROM OPERATIONS:
Net investment income ........................ $ 11,437,412 $ 1,198,127
Net realized gains from investment
transactions ............................... 206,106,205 35,156,348
Net change in unrealized appreciation/
depreciation of investments ................ (64,914,280) 489,874,969
-------------- --------------
Net increase in net assets resulting
from operations ............................ 152,629,337 526,229,444
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Class A ............... (457,809) (2,724,561)
Net investment income--Class B ............... -- (401,698)
Net investment income--Class C ............... -- (61,213)
Net investment income--Class Y ............... (134,697) (774,047)
Net realized gains from investment
transactions--Class A ...................... (15,787,602) (9,094,882)
Net realized gains from investment
transactions--Class B ...................... (21,276,711) (13,219,722)
Net realized gains from investment
transactions--Class C ...................... (16,640,608) (10,487,215)
Net realized gains from investment
transactions--Class Y ...................... (3,096,715) (1,917,018)
-------------- --------------
Total dividends and distributions
to shareholders ............................ (57,394,142) (38,680,356)
-------------- --------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares ......... 467,898,261 1,246,391,035
Cost of shares repurchased ................... (400,824,466) (530,096,507)
Proceeds from dividends reinvested ........... 54,372,441 36,391,184
-------------- --------------
Net increase in net assets from beneficial
interest transactions ...................... 121,446,236 752,685,712
-------------- --------------
Net increase in net assets ................... 216,681,431 1,240,234,800
NET ASSETS:
Beginning of period .......................... 2,536,186,984 1,295,952,184
-------------- --------------
End of period (including undistributed net
investment income of $10,841,321 at
February 29, 2000) ......................... $2,752,868,415 $2,536,186,984
============== ==============
See accompanying notes to financial statements
18
<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--The Fund calculates net asset values based on the
current market value for its portfolio's securities. The Fund normally obtains
market values for its securities from independent pricing sources. Independent
pricing sources may use reported last sale prices, current market quotations or
valuations from computerized "matrix" systems that derive values based on
comparable securities. Securities traded in the over-the-counter ("OTC") market
and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") normally are valued at
the last sale price on Nasdaq prior to valuation. Other OTC securities are
valued at the last bid price available prior to valuation. Securities which are
listed on U.S. and foreign stock exchanges normally are valued at the last sale
price on the day the securities are valued or, lacking any sales on such day, at
the last available bid price. In cases where securities are traded on more than
one exchange, the securities are valued on the exchange designated as the
primary market by Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"),
a wholly owned asset management subsidiary of PaineWebber Incorporated
("PaineWebber") and investment adviser and administrator of the Fund. If a
market value is not available from an independent pricing source for a
particular security, that security is valued at fair value as determined in good
faith by or under the direction of the Trust's board of trustees (the "board").
The amortized cost method of valuation, which approximates market value,
generally is used to value short-term debt-instruments with sixty days or less
remaining to maturity, unless the Trust's board 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.
19
<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 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 29, 2000, the Fund owed Mitchell
Hutchins $996,346 in investment advisory and administration fees. Mitchell
Hutchins waived a portion of its investment advisory and administration fees in
connection with the Fund's investment of cash collateral from security lending
in the Mitchell Hutchins Private Money Market Fund LLC. For the six months ended
February 29, 2000, Mitchell Hutchins waived $131,777.
For the six months ended February 29, 2000, the Fund paid no 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 an 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 29, 2000, the Fund owed
Mitchell Hutchins $1,610,022 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 29, 2000, it earned $3,183,031 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 29, 2000, PaineWebber received from PFPC, Inc., not the Fund,
approximately 51% 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 331/3% 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
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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. For the six months ended February 29, 2000, the
Fund earned $797,300 for lending its securities and PaineWebber earned $269,189
in compensation as the Fund's lending agent. At February 29, 2000, the Fund owed
PaineWebber $86,733 in compensation.
As of February 29, 2000, the Fund held cash and/or cash equivalents having
an aggregate value of $1,154,414,200 as collateral for portfolio securities
loaned having a market value of $1,135,064,539. The cash collateral was invested
in the following money market funds:
NUMBER OF
SHARES VALUE
- ----------- --------------
178,710,612 Liquid Assets Portfolio .......................... $ 178,710,612
775,384,506 Mitchell Hutchins Private Money Market Fund LLC .. 775,384,506
8,356,648 Prime Money Market Portfolio ..................... 8,356,648
191,962,434 Scudder Institutional Fund Inc. .................. 191,962,434
--------------
Total investments of cash collateral received
for securities loaned (cost--$1,154,414,200) ................. $1,154,414,200
==============
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. On September 28, 1999, the Fund borrowed
approximately $22,329,000 under the facility for one day at a rate of 5.738%
which resulted in $3,558 of interest expense. In addition, the Fund had an
average daily amount of borrowing outstanding under the Line of Credit of
$1,690,962 with a related weighted average annualized interest rate of 6.24%.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at February
29, 2000 was substantially the same as the cost of securities for financial
statement purposes.
At February 29, 2000, the components of net unrealized appreciation of
investments were as follows:
Gross appreciation (investments having
an excess of value over cost) .......................... $ 559,179,550
Gross depreciation (investments having
an excess of cost over value) .......................... (68,695,746)
--------------
Net unrealized appreciation of investments ............... $ 490,483,804
==============
For the six months ended February 29, 2000, total aggregate purchases and
sales of portfolio securities, excluding short-term securities, were as follows:
Purchases ................................................ $1,601,109,157
Sales .................................................... $2,919,739,711
FEDERAL TAX STATUS
The Fund intends to distribute substantially all of its taxable income and
to comply with the other requirements of the Internal Revenue Code applicable to
regulated investment companies. Accordingly, no provision for federal income
taxes is required. In addition, by distributing during each calendar year
substantially all of its net investment income, capital gains and certain other
amounts, if any, the Fund intends not to be subject to a federal excise tax.
BENEFICIAL INTEREST
There is an unlimited amount of $0.001 par value shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
SIX MONTHS ENDED ------------------------- ------------------------- ------------------------- ------------------------
FEBRUARY 29, 2000: SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ---------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold ......... 5,080,897 $167,437,105 4,361,956 $140,841,548 3,522,668 $114,790,045 1,352,989 $ 44,829,563
Shares repurchased .. (4,315,323) (142,546,577) (4,164,028) (133,327,464) (2,807,200) (92,092,033) (983,050) (32,858,392)
Shares converted
from Class B to
Class A ........... 391,195 12,857,996 (396,449) (12,857,996) -- -- -- --
Dividends
reinvested ........ 464,361 15,430,722 602,856 19,761,542 484,152 15,967,343 95,991 3,212,834
---------- ------------ ---------- ------------ ---------- ------------ --------- ------------
Net increase ........ 1,621,130 $ 53,179,246 404,335 $ 14,417,630 1,199,620 $ 38,665,355 465,930 $ 15,184,005
============ ========== ============ ========== ============ ========= ============
YEAR ENDED
AUGUST 31, 1999:
Shares sold ......... 12,182,274 $368,812,546 15,261,028 $456,532,117 11,064,843 $332,735,375 2,872,510 $ 88,310,997
Shares repurchased .. (5,539,275) (165,933,961) (5,108,195) (152,010,284) (5,015,265) (149,378,433) (2,051,185) (62,773,829)
Shares converted
from Class B to
Class A ........... 604,844 18,219,358 (610,505) (18,219,358) -- -- -- --
Dividends
reinvested ........ 404,414 11,287,184 461,158 12,787,918 364,581 10,171,796 76,472 2,144,286
---------- ------------ ---------- ------------ ---------- ------------ --------- ------------
Net increase ........ 7,652,257 $232,385,127 10,003,486 $299,090,393 6,414,159 $193,528,738 897,797 $ 27,681,454
========== ============ ========== ============ ========== ============ ========= ============
</TABLE>
22
<PAGE>
(This page has been left blank intentionally.)
23
<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 SIX FOR THE
MONTHS MONTHS PERIOD
ENDED FOR THE YEARS ENDED FOR THE YEARS JANUARY 30,
FEBRUARY 29, ENDED AUGUST 31, FEBRUARY 29, ENDED AUGUST 31, 1996+ TO
2000 --------------------------------------------- 2000 ------------------------------ AUGUST 31,
(UNAUDITED) 1999 1998 1997 1996 1995** (UNAUDITED) 1999 1998 1997 1996
--------- -------- -------- -------- ------- ------ ---------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ........... $ 31.79 $ 23.55 $ 22.23 $ 16.15 $ 14.86 $13.78 $ 31.41 $ 23.32 $ 22.08 $ 16.13 $ 15.54
-------- -------- -------- -------- ------- ------ ---------- -------- -------- -------- -------
Net investment
income (loss) .... 0.21 0.15 0.15 0.18@ 0.18 0.22 0.09 (0.04) 0.00 0.03@ 0.02
Net realized
and unrealized
gains from
investments ...... 1.77 8.84 1.47 6.12@ 2.31 2.05 1.75 8.73 1.43 6.09@ 0.57
-------- -------- -------- -------- ------- ------ ---------- -------- -------- -------- -------
Net increase from
investment
operations ....... 1.98 8.99 1.62 6.30 2.49 2.27 1.84 8.69 1.43 6.12 0.59
-------- -------- -------- -------- ------- ------ ---------- -------- -------- -------- -------
Dividends from
net investment
income ........... (0.02) (0.17) (0.12) (0.14) (0.14) (0.22) -- (0.02) (0.01) (0.09) --
Distributions from
net realized
gains from
investments
transactions ..... (0.70) (0.58) (0.18) (0.08) (1.06) (0.97) (0.70) (0.58) (0.18) (0.08) --
-------- -------- -------- -------- ------- ------ ---------- -------- -------- -------- -------
Total dividends
and distri-
butions to
shareholders ..... (0.72) (0.75) (0.30) (0.22) (1.20) (1.19) (0.70) (0.60) (0.19) (0.17) 0.00
-------- -------- -------- -------- ------- ------ ---------- -------- -------- -------- -------
Net asset value,
end of period .... $ 33.05 $ 31.79 $ 23.55 $ 22.23 $ 16.15 $14.86 $ 32.55 $ 31.41 $ 23.32 $ 22.08 $ 16.13
======== ======== ======== ======== ======= ====== ========== ======== ======== ======== =======
Total investment
return(1) ...... 6.21% 38.65% 7.31% 39.26% 17.35% 18.43% 5.83% 37.61% 6.49% 38.14% 3.80%
======== ======== ======== ======== ======= ====== ========== ======== ======== ======== =======
Ratios/supplemental
data:
Net assets, end
of period
(000's) .......... $784,107 $702,580 $340,245 $170,759 $23,551 $1,944 $1,013,053 $964,933 $483,068 $239,836 $28,495
Expenses to average
net assets, net
of waivers from
adviser(2) ....... 0.83%* 0.84% 0.95% 0.99% 1.17% 1.46% 1.59%* 1.59% 1.71% 1.74% 1.84%
Net investment
income (loss) to
average net
assets, net of
waivers from
adviser(2) ....... 1.35%* 0.56% 0.74% 0.88% 1.12% 1.60% 0.58%* (0.20)% (0.02)% 0.13% 0.47%
Portfolio turnover
rate ............. 67% 6% 33% 6% 6% 53% 67% 6% 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 any applicable sales charges or program fees; results would be lower
if they were included. Total investment return for periods of less than one
year has not been annualized.
(2) During the six months ended February 29, 2000 and during the year ended
August 31, 1999, Mitchell Hutchins waived a portion of its advisory and
administration fees. The ratios excluding the waiver would be the same since
the fee waiver represents less than 0.005%.
# Actual amount is less than $0.005.
24
<PAGE>
CLASS C
-----------------------------------------------------------
FOR THE SIX
MONTHS
ENDED FOR THE YEARS
FEBRUARY 29, ENDED AUGUST 31,
2000 ------------------------------------------------
UNAUDITED) 1999 1998 1997 1996 1995**
--------- -------- -------- -------- -------- --------
Net asset value,
beginning of
period .......... $ 31.60 $ 23.45 $ 22.18 $ 16.12 $ 14.87 $ 13.78
-------- -------- -------- -------- -------- --------
Net investment
income (loss) ... 0.10 (0.06) (0.01) 0.03@ 0.06 0.12
Net realized
and unrealized
gains from
investments ..... 1.75 8.79 1.45 6.11@ 2.32 2.06
-------- -------- -------- -------- -------- --------
Net increase from
investment
operations ...... 1.85 8.73 1.44 6.14 2.38 2.18
-------- -------- -------- -------- -------- --------
Dividends from
net investment
income .......... -- (0.00)# -- -- (0.07) (0.12)
Distributions from
net realized
gains from
investments
transactions .... (0.70) (0.58) (0.17) (0.08) (1.06) (0.97)
-------- -------- -------- -------- -------- --------
Total dividends
and distri-
butions to
shareholders .... (0.70) (0.58) (0.17) (0.08) (1.13) (1.09)
-------- -------- -------- -------- -------- --------
Net asset value,
end of period ... $ 32.75 $ 31.60 $ 23.45 $ 22.18 $ 16.12 $ 14.87
======== ======== ======== ======== ======== ========
Total investment 5.83% 37.58% 6.49% 38.20% 16.52% 17.57%
return(1) ..... ======== ======== ======== ======== ======== ========
Ratios/supplemental
data:
Net assets, end
of period $804,956 $738,781 $397,767 $233,044 $ 73,630 $ 48,105
(000's) .........
Expenses to average
net assets, net
of waivers from
adviser(2) ...... 1.58%* 1.60% 1.70% 1.75% 1.95% 2.22%
Net investment
income (loss) to
average net
assets, net of
waivers from
adviser(2) ...... 0.59%* (0.20)% (0.01)% 0.14% 0.35% 0.86%
Portfolio turnover
rate ............ 67% 6% 33% 6% 6% 53%
<TABLE>
<CAPTION>
CLASS Y
------------------------------------------------------------
FOR THE SIX
MONTHS
ENDED FOR THE YEARS
FEBRUARY 29, ENDED AUGUST 31,
2000 ------------------------------------------------
UNAUDITED) 1999 1998 1997 1996 1995**
--------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period .......... $ 31.99 $ 23.68 $ 22.33 $ 16.20 $ 14.88 $13.79
-------- -------- -------- -------- -------- ------
Net investment
income (loss) ... 0.24 0.22 0.21 0.23@ 0.30 0.23
Net realized
and unrealized
gains from
investments ..... 1.81 8.91 1.49 6.13@ 2.24 2.09
-------- -------- -------- -------- -------- ------
Net increase from
investment
operations ...... 2.05 9.13 1.70 6.36 2.54 2.32
-------- -------- -------- -------- -------- ------
Dividends from
net investment
income .......... (0.03) (0.24) (0.17) (0.15) (0.16) (0.26)
Distributions from
net realized
gains from
investments
transactions .... (0.70) (0.58) (0.18) (0.08) (1.06) (0.97)
-------- -------- -------- -------- -------- ------
Total dividends
and distri-
butions to
shareholders .... (0.73) (0.82) (0.35) (0.23) (1.22) (1.23)
-------- -------- -------- -------- -------- ------
Net asset value,
end of period ... $ 33.31 $ 31.99 $ 23.68 $ 22.33 $ 16.20 $14.88
======== ======== ======== ======== ======== ======
Total investment 6.39% 39.03% 7.62% 39.55% 17.70% 18.79%
return(1) ..... ======== ======== ======== ======== ======== ======
Ratios/supplemental
data:
Net assets, end
of period $150,752 $129,893 $ 74,872 $ 36,467 $ 12,803 $2,506
(000's) .........
Expenses to average
net assets, net
of waivers from
adviser(2) ...... 0.55%* 0.58% 0.67% 0.74% 0.95% 1.23%
Net investment
income (loss) to
average net
assets, net of
waivers from
adviser(2) ...... 1.64%* 0.82% 1.03% 1.16% 1.38% 1.86%
Portfolio turnover
rate ............ 67% 6% 33% 6% 6% 53%
</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 any applicable sales charges or program fees; results would be lower
if they were included. Total investment return for periods of less than one
year has not been annualized.
(2) During the six months ended February 29, 2000 and during the year ended
August 31, 1999, Mitchell Hutchins waived a portion of its advisory and
administration fees. The ratios excluding the waiver would be the same since
the fee waiver represents less than 0.005%.
# Actual amount is less than $0.005.
25
<PAGE>
(This page has been left blank intentionally.)
26
<PAGE>
================================================================================
TRUSTEES
E. Garrett Bewkes, Jr. Meyer Feldberg
CHAIRMAN George W. Gowen
Margo N. Alexander Frederic V. Malek
Richard Q. Armstrong Carl W. Schafer
Richard R. Burt Brian M. Storms
Mary C. Farrell
PRINCIPAL OFFICERS
Margo N. Alexander Paul H. Schubert
PRESIDENT VICE PRESIDENT AND TREASURER
Dianne E. O'Donnell T. Kirkham Barneby
VICE PRESIDENT AND SECRETARY VICE PRESIDENT
INVESTMENT ADVISER,
ADMINISTRATOR AND
DISTRIBUTOR
Mitchell Hutchins Asset Management Inc.
51 West 52nd Street
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
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
o High Income Fund
o Investment Grade Income Fund
o Low Duration U.S. Government Income Fund
o Strategic Income Fund
o U.S. Government Income Fund
TAX-FREE BOND FUNDS
o California Tax-Free Income Fund
o Municipal High Income Fund
o National Tax-Free Income Fund
o New York Tax-Free Income Fund
STOCK FUNDS
o Enhanced S&P 500 Fund
o Enhanced Nasdaq-100 Fund
o Financial Services Growth Fund
o Growth Fund
o Growth and Income Fund
o Mid Cap Fund
o Small Cap Fund
o S&P 500 Index Fund
o Strategy Fund
o Tax-Managed Equity Fund
o Utility Income Fund
ASSET ALLOCATION FUNDS
o Balanced Fund
o Tactical Allocation Fund
GLOBAL FUNDS
o Asia Pacific Growth Fund
o Emerging Markets Equity Fund
o Global Equity Fund
o Global Income Fund
PAINEWEBBER MONEY MARKET FUND
PaineWebber
SemiAnnual Report
===================
TACTICAL
ALLOCATION
FUND
FEBRUARY 29, 2000
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All Rights Reserved.
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