----------
PaineWebber offers a family of 26 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
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
(C)2000 PaineWebber Incorporated
All Rights Reserved.
PAINEWEBBER
============================
TACTICAL
ALLOCATION
FUND
AUGUST 31, 2000
ANNUAL REPORT
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
ANNUAL REPORT
PERFORMANCE AT A GLANCE
================================================================================
Comparison of the change of a $10,000 investment in PaineWebber Tactical
Allocation Fund (Class C) and the S&P500 Index from July 22, 1992 through
August 31, 2000.
The graph depicts the performance of PaineWebber Tactical Allocation Fund (Class
C) versus the S&P 500 Index. It is important to note PaineWebber Tactical
Allocation Fund is a professionally managed mutual fund while the Index is not
available for investment and is unmanaged. The comparison is shown for
illustrative purposes only.
[The table below represents a line chart in the printed piece]
PaineWebber
Tactical
Allocation Fund
(Class C) S&P 500 Index
7/1/92 10000 10000
8/1/92 10316.7 10408
9/1/92 10100 10195.68
10/1/92 10208.3 10315.99
11/1/92 10233.3 10351.06
12/1/92 10550 10703
1/1/93 10667.1 10834.64
2/1/93 10734.2 10925.65
3/1/93 10868.3 11074.24
4/1/93 11073.8 11307.91
5/1/93 10771.6 11034.26
6/1/93 11040.2 11328.87
7/1/93 11053.2 11361.73
8/1/93 10985.8 11316.28
9/1/93 11373.6 11745.17
10/1/93 11276.6 11654.73
11/1/93 11487.8 11895.98
12/1/93 11361.1 11782.97
1/1/94 11481.6 11925.54
2/1/94 11855.5 12331.01
3/1/94 11515.6 11996.84
4/1/94 10997.4 11474.98
5/1/94 11116.5 11621.86
6/1/94 11278.2 11811.3
7/1/94 10981.5 11521.92
8/1/94 11331.6 11899.84
9/1/94 11767.1 12386.54
10/1/94 11454.4 12084.31
11/1/94 11702.5 12355
12/1/94 11249.1 11905.28
1/1/95 11334.3 12081.47
2/1/95 11584.5 12394.38
3/1/95 11973.8 12876.53
4/1/95 12306.9 13256.38
5/1/95 12641.2 13646.12
6/1/95 13114.9 14190.6
7/1/95 13387.7 14519.82
8/1/95 13815.7 15000.43
9/1/95 13834.3 15037.93
10/1/95 14404.6 15672.53
11/1/95 14330.1 15616.11
12/1/95 14945 16300.1
1/1/96 15199.2 16614.69
2/1/96 15679.2 17179.59
3/1/96 15789.2 17339.36
4/1/96 15919.2 17505.81
5/1/96 16129.2 17763.15
6/1/96 16519.1 18219.66
7/1/96 16559.1 18288.9
8/1/96 15799.2 17480.53
9/1/96 16119.2 17849.37
10/1/96 16999.1 18852.5
11/1/96 17449.1 19372.83
12/1/96 18739 20835.48
1/1/97 18339.8 20422.94
2/1/97 19454.7 21697.33
3/1/97 19565.2 21868.74
4/1/97 18731.5 20972.12
5/1/97 19836.4 22222.06
6/1/97 21011.5 23579.83
7/1/97 21925.4 24629.13
8/1/97 23642.9 26587.14
9/1/97 22277 25098.26
10/1/97 23462.1 26471.14
11/1/97 22638.6 25587
12/1/97 23653 26771.68
1/1/98 24026.2 27232.15
2/1/98 24268.9 27531.71
3/1/98 25978.6 29516.74
4/1/98 27273.5 31028
5/1/98 27435.3 31344.49
6/1/98 27071.2 30805.36
7/1/98 28113.1 32056.06
8/1/98 27779.3 31716.26
9/1/98 23722.7 27133.26
10/1/98 25209.8 28872.51
11/1/98 27222.9 31216.95
12/1/98 28841.5 33108.7
1/1/99 30459.4 35015.76
2/1/99 31678.2 36479.42
3/1/99 30645.3 35344.91
4/1/99 31833.1 36758.71
5/1/99 33031.2 38181.27
6/1/99 32204.9 37280.19
7/1/99 33940.2 39349.24
8/1/99 32845.3 38121.55
9/1/99 32638.8 37930.94
10/1/99 31698.8 36891.63
11/1/99 33661.3 39226.87
12/1/99 34301.7 40023.18
1/1/2000 35827.8 42376.54
2/1/2000 34825.8 40249.24
3/1/2000 34541 39488.53
4/1/2000 36249.6 43350.5
5/1/2000 35732.8 42045.65
6/1/2000 35405.9 41183.72
7/1/2000 35859.4 42196.84
8/1/2000 35405.9 41538.57
9/1/2000 37061.7 44118.11
Past performance is no guarantee of future performance. The performance of the
other classes will vary from the performance of the class shown because of
differences in sales charges and fees paid by shareholders investing in
different classes.
--------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN, PERIODS ENDED 8/31/00
--------------------------------------------------------------------------------
6 Months 1 Year 5 Years Inception(o)
--------------------------------------------------------------------------------
Before Deducting CLASS A* 7.69% 14.37% 22.70% 19.18%
Maximum Sales Charge CLASS B** 7.28 13.54 N/A 20.85
CLASS C+ 7.30 13.55 21.79 17.51
CLASS Y++ 7.84 14.72 23.04 19.51
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
After Deducting CLASS A* 2.83 9.22 21.57 18.43
Maximum Sales Charge CLASS B** 2.28 8.54 N/A 20.62
CLASS C+ 6.30 12.55 21.79 17.51
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
S&P 500 Index 11.72 16.31 24.03 19.58
Lipper Flexible Portfolio
Funds Median 7.33 13.13 14.28 17.53
--------------------------------------------------------------------------------
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.
o Inception: since commencement of issuance on May 10, 1993 for Class A,
January 30, 1996 for Class B, 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 12b-1 distribution
and service fees.
1
<PAGE>
ANNUAL REPORT
PAINEWEBBER
TACTICAL ALLOCATION FUND
INVESTMENT GOAL:
Total return consisting of long-term capital 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
October 16, 2000
Dear Shareholder,
We are pleased to present you with the annual report for PaineWebber Tactical
Allocation Fund (the "Fund") for the fiscal year ended August 31, 2000.
MARKET REVIEW
================================================================================
[GRAPHIC OMITTED]
There was a great deal of volatility in the financial markets during the
year, in part because of the ongoing tug of war between interest rate
expectations and the outlook for corporate profits. Technology stocks led the
equity markets during the first half of the fiscal year. By spring the air came
out of the dot-com balloon due to valuation concerns. An ever-smaller number of
stocks accounted for most of the market's gains, while day-to-day market price
fluctuations became more volatile. Daily price swings of one or two percent of
value became the norm in the latter part of the period.
The NASDAQ Composite Index, buffeted by shifting values among dot-com
enterprises, nonetheless ended the fiscal year up 53.55%. The Dow Jones
Industrial Average (the "Dow") was up 5.17% and the S&P 500 Index was up 16.31%.
All three indexes rebounded from negative returns in the first half of the
fiscal year.
2
<PAGE>
ANNUAL REPORT
PORTFOLIO HIGHLIGHTS
The Fund's equity allocation changed several times during the Fund's fiscal
year, when the Fund's Tactical Allocation Model dictated a shift in the
allocation between equities and bonds or cash. Performance was helped in the
first three months of the period by a steady 100% allocation in stocks. After a
brief 75% equity allocation in December, the Fund held equities at 50% from
January through June. In four of these six months this allocation helped Fund
performance but had a negative impact in March and June. In July, we shifted to
a 75% equity allocation, which we held through August.
The Fund underperformed the S&P 500 Index by 1.94% for the fiscal year.* The
Fund's allocation shifts detracted from performance for the year as a whole,
mainly by not capturing the full extent of the large gain of the S&P 500 in
March (when the Fund held a 50% allocation in equities). Allocation shifts
benefited the Fund in most other months, however, helping to avoid some of the
losses sustained by the Index. Despite lagging the S&P 500, the Fund
outperformed the median for its peer group, the Lipper Flexible Portfolio Funds
universe.
--------------------------------------------------------------------------------
HOW THE FUND WORKS
The Fund attempts to outperform the S&P 500 Index over the long term, with less
volatility over the course of a full market cycle, by shifting assets between
stocks and bonds or cash based on the Tactical Allocation Model (the "Model").
Management employs the Model to determine the Fund's asset mix between an equity
portion designed to track the performance of the Index and a fixed-income
portion consisting of either bonds (generally five-year U.S. Treasury notes) or
cash (generally 30-day U.S. Treasury bills).
The Model is a systematic, quantitative approach to calculating the risk premium
of stocks and bonds. The risk premium is the difference between the expected
rate of return of equities versus the expected return of a risk-free investment,
such as the one-year Treasury bill. Changes in the allocation are dictated by
changes in the Equity Risk Premium (ERP). When the ERP is 5.5% or more, the
stock allocation is 100%. At 5.0% to 5.5%, the stock allocation is 75%. And, at
4.5% to 5.0%, the allocation is 50%. 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. The portion of the Fund, if any, that is not invested in
equities is invested in either bonds or cash. The decision to invest in bonds
(five-year U.S. Treasury notes) or cash (30-day U.S. Treasury bills) is
determined by the Bond Risk Premium. The BRP is the difference between the
yield-to-maturity of the five-year U.S. Treasury note and the one-year U.S.
Treasury bill. When the BRP is less than 0.5%, as it was at year-end, the
non-equity portion of the Fund, if any, is in cash; if the spread is 0.5% or
greater, the fixed income portion, if any, is invested in bonds.
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.
--------------------------------------------------------------------------------
* The statement refers to Class A shares of PaineWebber Tactical Allocation
Fund.
3
<PAGE>
ANNUAL REPORT
PORTFOLIO STATISTICS
CHARACTERISTICS(1) 8/31/00 2/29/00
--------------------------------------------------------------------------------
Net Assets ($bln) $3.0 $2.8
Number of Securities 473 474
Equity Risk Premium 5.05% 4.67%
Bond Risk Premium 0.16% 0.47%
Stocks 76% 50%
Bonds 0% 0%
Cash 24% 50%
--------------------------------------------------------------------------------
TOP FIVE EQUITY SECTORS(1) 8/31/00 2/29/00
--------------------------------------------------------------------------------
Technology 22.0% Technology 12.1%
Financial Services 14.5 Financial Services 5.6
Consumer Cyclicals 8.3 Consumer Cyclicals 4.2
Healthcare 7.9 Healthcare 3.2
Utilities 6.2 Utilities 3.2
--------------------------------------------------------------------------------
Total 58.9 Total 28.3
TOP TEN EQUITY HOLDINGS(1) 8/31/00 2/29/00
--------------------------------------------------------------------------------
General Electric 3.3% Microsoft 2.0%
Intel 2.9 Cisco Systems 1.9
Cisco Systems 2.7 General Electric 1.9
Microsoft 2.1 Intel 1.6
Exxon Mobil 1.6 Exxon Mobil 1.1
Pfizer 1.6 Wal Mart Stores 0.9
Citigroup 1.5 Oracle Systems 0.9
Oracle Systems 1.5 Lucent Technologies 0.8
IBM 1.3 IBM 0.8
EMC 1.2 Citigroup 0.7
--------------------------------------------------------------------------------
Total 19.7 Total 12.6
(1) Weightings represent percentages of net assets as of the dates indicated.
Changes in sector weightings and stock holdings reflect changes in the S&P
500 Index for the period ended 8/31/00, weightings also reflect the Fund's
current stock allocation.
4
<PAGE>
ANNUAL 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,(2) please contact your Financial Advisor.
Sincerely,
/s/ MARGO ALEXANDER /s/ T. KIRKHAM BARNEBY
----------------------- --------------------------------------------
MARGO ALEXANDER T. KIRKHAM BARNEBY
Chairman Managing Director and Chief
Mitchell Hutchins Asset Investment Officer--Quantitative Investments
Management Inc. Mitchell Hutchins Asset Management Inc.
/s/ BRIAN M. STORMS
---------------------------------------
BRIAN M. STORMS
Chief Executive Officer and President
Mitchell Hutchins Asset Management Inc.
This letter is intended to assist shareholders in understanding how the Fund
performed during the fiscal year ended August 31, 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.
(2) 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.
5
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN(1)
------------------------------------------ -----------------------------------
12 MONTHS 6 MONTHS
08/31/00 02/29/00 08/31/99 ENDED 08/31/00 ENDED 08/31/00
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $35.59 $33.05 $31.79 14.37% 7.69%
----------------------------------------------------------------------------------------------------------------------------
Class B Shares 34.92 32.55 31.41 13.54 7.28
----------------------------------------------------------------------------------------------------------------------------
Class C Shares 35.14 32.75 31.60 13.55 7.30
----------------------------------------------------------------------------------------------------------------------------
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
----------------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 34.24 35.59 -- -- 3.94
----------------------------------------------------------------------------------------------------------------------------
Totals: $ 3.6086 $ 1.1236
----------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 261.11%
----------------------------------------------------------------------------------------------------------------------------
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
----------------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 33.76 34.92 -- -- 3.44
----------------------------------------------------------------------------------------------------------------------------
Totals: $ 1.5371 $ 0.1172
----------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 138.55%
----------------------------------------------------------------------------------------------------------------------------
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
----------------------------------------------------------------------------------------------------------------------------
01/01/00-08/31/00 33.97 35.14 -- -- 3.44
----------------------------------------------------------------------------------------------------------------------------
Totals: $ 3.5998 $ 0.4731
----------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 08/31/00: 270.62%
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Figures assume reinvestment of all dividends and capital gain distributions
at net asset value on the payable dates and do not include sales charges;
results for each class would be lower if sales charges were included. Total
investment return for periods of less than one year has not been
annualized.
The data above represents past performance of the Fund's shares, which is
no guarantee of future results. The principal value of an investment in the
Fund will fluctuate, so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
6
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
PERFORMANCE RESULTS (UNAUDITED) (CONCLUDED)
AVERAGE ANNUAL TOTAL RETURN(1)
<TABLE>
<CAPTION>
% RETURN WITHOUT DEDUCTING % RETURN AFTER DEDUCTING
MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
------------------------------------ ------------------------------------
CLASS CLASS
----------------------------------------------------------------------------------------------------------------------------
A* B** C*** A* B** C***
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Twelve Months Ended 09/30/00 14.89% 14.04% 14.06% 9.70% 9.04% 13.06%
----------------------------------------------------------------------------------------------------------------------------
Five Years Ended 09/30/00 21.11 N/A 20.21 19.99 N/A 20.21
----------------------------------------------------------------------------------------------------------------------------
Commencement of Operations
Through 09/30/00+ 18.56 19.81 16.97 17.82 19.59 16.97
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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 year ended August 31, 2000 and since inception, May 10, 1993 through
August 31, 2000, Class Y shares have a total return of 14.72% and 268.41%,
respectively. For the one year and five year periods ended September 30,
2000 and since inception, May 10, 1993, through September 30, 2000, Class Y
shares have an average annual return of 15.21%, 21.44% and 18.88%,
respectively. Class Y shares do not have initial or contingent deferred
sales charges or ongoing 12b-1 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.
7
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 2000
NUMBER OF
SHARES VALUE
-------- --------------
COMMON STOCKS--76.06%+
AGRICULTURE, FOOD & BEVERAGE--2.11%
113,580 Archer-Daniels-Midland Co. ...................... $ 1,000,920
47,350 Bestfoods Co. ................................... 3,344,094
73,400 Campbell Soup Co. (1) ........................... 1,862,525
427,900 Coca-Cola Co. ................................... 22,518,237
73,500 Coca-Cola Enterprises, Inc. (1) ................. 1,368,938
86,100 Conagra, Inc. (1) ............................... 1,576,706
50,600 General Mills, Inc. ............................. 1,625,525
60,750 Heinz, H. J. and Co. ............................ 2,316,094
24,000 Hershey Foods Corp. (1) ......................... 1,024,500
70,000 Kellogg Co. ..................................... 1,623,125
57,000 Nabisco Group Holdings Corp. .................... 1,599,563
249,000 PepsiCo, Inc. ................................... 10,613,625
22,800 Quaker Oats Co. ................................. 1,548,975
151,500 Sara Lee Corp. (1) .............................. 2,821,687
24,500 Supervalue, Inc. ................................ 365,969
57,500 Sysco Corp. ..................................... 2,432,969
99,038 Unilever N.V .................................... 4,679,545
19,700 Wrigley, Wm. Jr. Co. (1) ........................ 1,459,031
--------------
63,782,028
--------------
AIRLINES--0.14%
26,900 AMR Corp.* ...................................... 882,656
21,300 Delta Air Lines, Inc. ........................... 1,054,350
85,450 Southwest Airlines Co. .......................... 1,933,307
11,800 US Airways Group, Inc.* ......................... 401,200
--------------
4,271,513
--------------
ALCOHOL--0.38%
76,900 Anheuser-Busch Companies, Inc. .................. 6,060,681
11,900 Brown Forman Corp. .............................. 630,700
6,300 Coors Adolph Co. ................................ 375,244
75,400 Seagram Co. Ltd. ................................ 4,538,137
--------------
11,604,762
--------------
APPAREL & RETAIL--0.22%
148,187 Gap, Inc. ....................................... 3,324,946
75,738 Limited, Inc. ................................... 1,514,760
10,500 Liz Claiborne, Inc. ............................. 461,344
24,900 Nordstrom, Inc. (1) ............................. 429,525
53,200 TJX Companies, Inc. ............................. 1,000,825
--------------
6,731,400
--------------
APPAREL & TEXTILES--0.08%
48,000 Nike, Inc. ...................................... 1,899,000
22,100 V. F. Corp. ..................................... 505,538
--------------
2,404,538
--------------
BANKS--5.25%
68,800 Amsouth Bancorporation .......................... 1,255,600
126,900 Bank of New York Company, Inc. .................. 6,654,319
198,643 Bank One Corp. .................................. 7,002,166
286,719 BankAmerica Corp. ............................... 15,357,386
67,900 BB&T Corp. (1) .................................. 1,837,544
37,400 Charter One Financial, Inc. ..................... 888,250
224,910 Chase Manhattan Corp. ........................... 12,566,846
778,053 Citigroup, Inc. ................................. 45,418,863
27,400 Comerica, Inc. (1) .............................. 1,542,962
80,150 Fifth Third Bancorp ............................. 3,701,928
169,304 First Union Corp. ............................... 4,899,234
168,212 Firstar Corp. ................................... 4,016,061
156,058 FleetBoston Financial Corp. ..................... 6,661,726
43,706 Huntington Bancshares, Inc. ..................... 737,539
28,200 J.P. Morgan & Co., Inc. ......................... 4,714,687
77,180 KeyCorp. (1) .................................... 1,558,071
84,900 Mellon Financial Corp. .......................... 3,841,725
105,700 National City Corp. ............................. 2,213,094
38,300 Northern Trust Corp. ............................ 3,229,169
24,290 Old Kent Financial Corp. (1) .................... 712,001
50,400 PNC Bank Corp. .................................. 2,970,450
39,900 Regions Financial Corp. (1) ..................... 867,825
30,600 SouthTrust Corp. ................................ 862,538
27,800 State Street Corp. .............................. 3,273,450
32,300 Summit Bancorp, Inc. (1) ........................ 894,306
52,500 Suntrust Banks, Inc. ............................ 2,592,187
49,550 Synovus Financial Corp. ......................... 975,516
24,700 Union Planters Corp. ............................ 748,719
130,845 US Bancorp, Inc. ................................ 2,845,879
35,100 Wachovia Corp. .................................. 2,011,669
278,260 Wells Fargo and Co.* ............................ 12,017,354
--------------
158,869,064
--------------
CHEMICALS--1.16%
40,200 Air Products & Chemicals, Inc. (1) .............. 1,459,762
14,300 Ashland, Inc. ................................... 504,075
19,500 Avery Dennison Corp. ............................ 1,054,219
117,500 Dow Chemical Co. ................................ 3,077,031
181,000 DuPont (E.I.) de Nemours & Co. .................. 8,122,375
13,900 Eastman Chemical Co. ............................ 599,438
22,700 Ecolab, Inc. (1) ................................ 883,881
23,450 Engelhard Corp. ................................. 439,688
5,900 FMC Corp.* (1) .................................. 400,094
29,200 Goodyear Tire & Rubber Co. ...................... 682,550
10,400 Great Lakes Chemical Corp. (1) .................. 351,000
20,700 Hercules, Inc. .................................. 274,275
52,500 Illinois Tool Works, Inc. (1) ................... 2,943,281
16,885 Kerr-McGee Corp. (1) ............................ 1,066,921
68,100 Minnesota Mining & Manufacturing Co. ............ 6,333,300
30,700 PPG Industries, Inc. ............................ 1,243,350
27,700 Praxair, Inc. ................................... 1,225,725
8
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
NUMBER OF
SHARES VALUE
-------- --------------
COMMON STOCKS--(CONTINUED)
CHEMICALS--(CONCLUDED)
38,220 Rohm & Haas Co. ................................. $ 1,105,991
14,813 Sealed Air Corp.* ............................... 760,092
29,700 Sherwin-Williams Co. ............................ 683,100
23,800 Union Carbide Corp. ............................. 953,487
18,300 Vulcan Materials Co. ............................ 810,919
--------------
34,974,554
--------------
COMPUTER HARDWARE--7.65%
18,500 Adaptec, Inc.* .................................. 453,250
56,600 Apple Computer, Inc.* ........................... 3,449,062
32,000 Cabletron Systems, Inc.* ........................ 1,198,000
1,204,900 Cisco Systems, Inc.* ............................ 82,686,262
294,562 Compaq Computer Corp. ........................... 10,033,518
446,200 Dell Computer Corp.* ............................ 19,465,475
375,900 EMC Corp.* ...................................... 36,838,200
55,900 Gateway, Inc.* .................................. 3,806,790
173,200 Hewlett-Packard Co. ............................. 20,913,900
22,600 Lexmark International Group, Inc.* .............. 1,532,563
52,900 Network Appliance, Inc.* ........................ 6,189,300
98,000 Palm, Inc.* ..................................... 4,312,000
44,900 Pitney Bowes, Inc. .............................. 1,641,656
39,600 Seagate Technology, Inc.* ....................... 2,351,250
274,800 Sun Microsystems, Inc.* ......................... 34,882,425
116,200 Xerox Corp. ..................................... 1,866,463
--------------
231,620,114
--------------
COMPUTER SOFTWARE--5.96%
20,900 Adobe Systems, Inc. ............................. 2,717,000
42,900 BMC Software, Inc.* ............................. 1,158,300
32,700 Citrix Systems, Inc.* (1) ....................... 719,400
102,362 Computer Associates International, Inc. ......... 3,249,993
64,500 Compuware Corp.* ................................ 681,281
306,900 IBM Corp. ....................................... 40,510,800
13,900 Mercury Interactive Corp.* ...................... 1,698,406
911,600 Microsoft Corp.* ................................ 63,641,075
17,200 NCR Corp.* (1) .................................. 694,450
58,500 Novell, Inc.* ................................... 716,625
491,836 Oracle Systems Corp.* ........................... 44,726,336
48,700 Parametric Technology Corp.* .................... 651,363
48,500 Peoplesoft, Inc.* ............................... 1,564,125
22,946 Sabre Holdings Corp.* ........................... 639,620
20,600 Sapient Corp.* .................................. 1,081,500
34,700 Siebel Systems, Inc.* ........................... 6,864,094
55,100 Unisys Corp.* ................................... 716,300
67,900 Veritas Software Co.* (1) ....................... 8,186,194
--------------
180,216,862
--------------
CONSTRUCTION--0.08%
12,600 Centex Corp. .................................... 363,825
14,900 Fluor Corp. (1) ................................. 446,069
80,900 Masco Corp. ..................................... 1,577,550
--------------
2,387,444
--------------
CONSUMER DURABLES--0.09%
15,700 Black & Decker Corp. ............................ 628,981
17,000 Grainger,W.W., Inc. ............................. 490,875
36,200 Leggett & Platt, Inc. ........................... 640,287
14,100 Maytag Corp. .................................... 537,563
13,500 Whirlpool Corp. ................................. 513,000
--------------
2,810,706
--------------
DEFENSE & AEROSPACE--0.57%
157,078 Boeing Co. ...................................... 8,423,308
34,900 General Dynamics Corp. .......................... 2,196,519
19,200 Goodrich, B.F. Co. (1) .......................... 783,600
75,160 Lockheed Martin Corp. (1) ....................... 2,132,665
12,500 Northrop Grumman Corp. (1) ...................... 972,656
60,400 Raytheon Co., Class B ........................... 1,679,875
22,000 TRW Inc. ........................................ 1,005,125
--------------
17,193,748
--------------
DIVERSIFIED RETAIL--1.71%
77,816 Costco Wholesale Corp.* (1) ..................... 2,679,788
38,600 Federated Department Stores, Inc.* .............. 1,066,325
47,700 J.C. Penney, Inc. (1) ........................... 667,800
88,200 K Mart Corp.* ................................... 617,400
56,900 Kohls Corp.* .................................... 3,186,400
59,150 May Department Stores Co. ....................... 1,356,753
62,400 Sears Roebuck & Co. ............................. 1,946,100
158,600 Target Corp. .................................... 3,687,450
772,100 Wal Mart Stores, Inc. ........................... 36,626,494
--------------
51,834,510
--------------
DRUGS & MEDICINE--5.60%
22,700 Allergan, Inc. .................................. 1,659,938
226,000 American Home Products Corp. .................... 12,246,375
178,000 Amgen, Inc.* (1) ................................ 13,494,625
25,900 Biogen, Inc.* ................................... 1,790,338
341,600 Bristol-Myers Squibb Co. ........................ 18,104,800
47,950 Cardinal Health, Inc. ........................... 3,922,909
195,460 Lilly, Eli & Co. ................................ 14,268,580
49,849 McKesson HBOC, Inc. ............................. 1,243,109
36,400 Medimmune, Inc. * ............................... 3,062,150
398,100 Merck & Co., Inc. ............................... 27,817,238
1,089,825 Pfizer, Inc. .................................... 47,134,931
222,159 Pharmacia & Upjohn, Inc. ........................ 13,010,186
253,500 Schering-Plough Corp. ........................... 10,171,688
9
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
NUMBER OF
SHARES VALUE
-------- --------------
COMMON STOCKS--(CONTINUED)
DRUGS & MEDICINE--(CONCLUDED)
15,700 Sigma-Aldrich Corp. ............................. $ 456,281
17,100 Watson Pharmaceuticals, Inc.* (1) ............... 1,054,856
--------------
169,438,004
--------------
ELECTRIC UTILITIES--1.44%
73,800 AES Corp.* (1) .................................. 4,704,750
23,400 Ameren Corp. (1) ................................ 946,237
54,440 American Electric Power, Inc. ................... 1,919,010
27,425 Cinergy Corp. ................................... 805,609
20,100 CMS Energy Corp. ................................ 525,113
36,800 Consolidated Edison, Inc. (1) ................... 1,152,300
25,800 Constellation Energy Group, Inc. (1) ............ 986,850
27,500 CP & L Energy, Inc. (1) ......................... 1,017,500
40,700 Dominion Resources, Inc. (1) .................... 2,157,100
25,400 DTE Energy Co. (1) .............................. 882,650
63,106 Duke Energy Corp. ............................... 4,721,118
57,500 Edison International, Inc. (1) .................. 1,189,531
40,600 Entergy Corp. ................................... 1,235,762
40,500 FirstEnergy Corp. ............................... 1,002,375
17,100 Florida Progress Corp. .......................... 887,063
30,400 FPL Group, Inc. ................................. 1,622,600
22,700 GPU Inc. ........................................ 695,188
32,100 Niagara Mohawk Holdings, Inc.* .................. 413,288
29,300 PECO Energy Co. ................................. 1,411,894
66,800 PG&E Corp. ...................................... 1,933,025
15,100 Pinnacle West Capital Corp. (1) ................. 621,931
25,800 PPL Corp. ....................................... 864,300
37,400 Public Service Enterprise Group, Inc. ........... 1,355,750
51,394 Reliant Energy, Inc. ............................ 1,908,002
35,811 Sempra Energy ................................... 698,315
111,300 Southern Co. .................................... 3,332,044
46,252 Texas Utilities Co. ............................. 1,615,929
31,100 Unicom Corp. (1) ................................ 1,420,881
59,830 Xcel Energy, Inc. (1) ........................... 1,499,489
--------------
43,525,604
--------------
ELECTRICAL EQUIPMENT--4.99%
117,100 ADC Telecommunications, Inc.* ................... 4,793,781
78,547 Agilent Technologies, Inc. * .................... 4,737,366
14,500 Andrew Corp.* ................................... 429,563
26,600 Comverse Technology, Inc.* ...................... 2,445,537
50,200 Corning, Inc. ................................... 16,462,462
24,800 Danaher Corp. ................................... 1,393,450
35,600 Dover Corp. ..................................... 1,739,950
13,100 Eaton Corp. (1) ................................. 869,513
138,475 Honeywell, Inc. ................................. 5,339,942
15,700 Johnson Controls, Inc. (1) ...................... 838,969
32,400 KLA-Tencor Corp. * .............................. 2,126,250
564,230 Lucent Technologies, Inc. (1) ................... 23,591,867
8,300 Millipore Corp. ................................. 505,263
34,275 Molex, Inc. (1) ................................. 1,810,148
372,674 Motorola, Inc. .................................. 13,439,556
513,260 Nortel Networks Corp. (1) ....................... 41,862,769
36,200 PE Corp. ........................................ 3,561,175
128,500 Qualcomm, Inc.* ................................. 7,693,937
25,800 Sanmina Corp.* .................................. 3,044,400
27,800 Scientific-Atlanta, Inc. ........................ 2,166,662
103,500 Solectron Corp.* ................................ 4,689,844
8,600 Tektronix, Inc. ................................. 655,213
71,100 Tellabs, Inc.* .................................. 3,994,931
30,200 Teradyne, Inc.* ................................. 1,957,338
31,000 Thermo Electron Corp.* .......................... 720,750
--------------
150,870,636
--------------
ELECTRICAL POWER--0.24%
17,700 Cooper Industries, Inc. ......................... 625,031
8,600 Cummins Engine Co., Inc. (1) .................... 305,300
73,800 Emerson Electric Co. (1) ........................ 4,884,638
33,100 Rockwell International Corp. .................... 1,338,481
--------------
7,153,450
--------------
ENERGY RESERVES & PRODUCTION--3.12%
16,900 Amerada Hess Corp. (1) .......................... 1,156,594
42,136 Anadarko Petroleum Corp. (1) .................... 2,771,285
21,500 Apache Corp. .................................... 1,354,500
38,000 Burlington Resources, Inc. (1) .................. 1,493,875
112,600 Chevron Corp. ................................... 9,514,700
601,463 Exxon Mobil Corp. ............................... 49,094,417
65,400 Occidental Petroleum Corp. (1) .................. 1,414,275
44,300 Phillips Petroleum Co. (1) ...................... 2,741,062
370,100 Royal Dutch Petroleum Co., ADR .................. 22,645,494
26,000 Tosco Corp. ..................................... 793,000
42,700 Unocal Corp. .................................... 1,425,113
--------------
94,404,315
--------------
ENTERTAINMENT--0.66%
105,100 Carnival Corp. .................................. 2,095,431
264,183 Viacom, Inc., Class B* .......................... 17,782,818
--------------
19,878,249
--------------
ENVIRONMENTAL SERVICES--0.08%
34,300 Allied Waste Industries, Inc.* (1) .............. 315,131
107,757 Waste Management, Inc. (1) ...................... 2,040,648
--------------
2,355,779
--------------
FINANCIAL SERVICES--5.23%
232,200 American Express Co. ............................ 13,728,825
44,450 AON Corp. ....................................... 1,658,541
10
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
NUMBER OF
SHARES VALUE
-------- --------------
COMMON STOCKS--(CONTINUED)
FINANCIAL SERVICES--(CONCLUDED)
126,690 Associates First Capital Corp. .................. $ 3,563,156
34,000 Capital One Financial Corp. ..................... 2,050,625
125,921 Cendant Corp.* .................................. 1,660,583
47,600 CIT Group, Inc. ................................. 833,000
20,500 Countrywide Credit Industries, Inc. ............. 776,438
121,000 Federal Home Loan Mortgage Corp. ................ 5,097,125
174,700 Federal National Mortgage Association ........... 9,390,125
1,711,700 General Electric Co. ............................ 100,455,394
17,500 H&R Block, Inc. ................................. 627,813
82,345 Household International, Inc. ................... 3,952,560
46,550 Marsh & McLennan Companies, Inc. ................ 5,527,812
145,350 MBNA Corp. ...................................... 5,132,672
24,650 Providian Financial Corp. ....................... 2,833,209
27,400 USA Education, Inc. ............................. 1,073,737
--------------
158,361,615
--------------
FOOD RETAIL--0.31%
73,682 Albertson's, Inc. ............................... 1,584,163
145,000 Kroger Co.* (1) ................................. 3,289,687
86,000 Safeway, Inc.* .................................. 4,240,875
26,800 Winn Dixie Stores, Inc. ......................... 373,525
--------------
9,488,250
--------------
FOREST PRODUCTS & PAPER--0.51%
10,300 Bemis, Inc. (1) ................................. 345,050
11,700 Boise Cascade Corp. ............................. 349,537
36,200 Fort James Corp. ................................ 1,144,825
30,900 Georgia-Pacific Corp. ........................... 826,575
84,528 International Paper Co. ......................... 2,694,330
96,120 Kimberly Clark Corp. ............................ 5,623,020
19,100 Mead Corp. ...................................... 512,119
32,800 Pactiv Corp.* ................................... 360,800
10,000 Temple-Inland, Inc. ............................. 424,375
19,200 Westvaco Corp. .................................. 525,600
41,300 Weyerhaeuser Co. ................................ 1,912,706
20,600 Willamette Industries, Inc. (1) ................. 628,300
--------------
15,347,237
--------------
FREIGHT, AIR, SEA & LAND--0.07%
50,900 FedEx Corp.* .................................... 2,053,815
--------------
GAS UTILITY--0.15%
13,900 Columbia Energy Group ........................... 975,606
5,300 Eastern Enterprises ............................. 335,225
40,000 El Paso Energy Corp. (1) ........................ 2,330,000
20,300 Keyspan Corp. ................................... 699,081
8,500 NICOR, Inc. (1) ................................. 313,438
--------------
4,653,350
--------------
HEAVY MACHINERY--0.07%
34,000 American Power Conversion Corp.* ................ 809,625
41,700 Deere & Co. ..................................... 1,373,494
--------------
2,183,119
--------------
HOTELS--0.10%
22,550 Harrah's Entertainment, Inc.* ................... 639,856
66,900 Hilton Hotels Corp. ............................. 669,000
42,000 Marriott International, Inc. (1) ................ 1,659,000
--------------
2,967,856
--------------
HOUSEHOLD PRODUCTS--1.04%
10,900 Alberto Culver Co. (1) .......................... 308,606
41,600 Avon Products, Inc. ............................. 1,630,200
41,000 Clorox Co. ...................................... 1,483,687
100,100 Colgate-Palmolive Co. ........................... 5,098,844
28,900 Fortune Brands, Inc. ............................ 736,950
181,000 Gillette Co. .................................... 5,430,000
18,700 International Flavors and Fragrances ............ 481,525
47,457 Newell Rubbermaid, Inc. ......................... 1,230,916
226,300 Procter & Gamble Co. ............................ 13,988,169
54,000 Ralston Purina Co. (1) .......................... 1,221,750
--------------
31,610,647
--------------
INDUSTRIAL PARTS--0.44%
61,200 Caterpillar, Inc. ............................... 2,249,100
33,150 Genuine Parts Co. (1) ........................... 681,647
28,650 Ingersoll Rand Co. .............................. 1,305,366
16,100 ITT Industries, Inc. ............................ 541,363
22,966 Pall Corp. ...................................... 490,898
20,000 Parker-Hannifin Corp. (1) ....................... 696,250
11,550 Snap-On, Inc. (1) ............................... 355,884
16,800 Stanley Works ................................... 449,400
25,300 Textron, Inc. (1) ............................... 1,418,381
81,600 United Technologies Corp. ....................... 5,094,900
--------------
13,283,189
--------------
INDUSTRIAL SERVICES & SUPPLIES--0.55%
292,652 Tyco International, Ltd. ........................ 16,681,164
--------------
INFORMATION & COMPUTER SERVICES--2.10%
398,000 America Online, Inc.* ........................... 23,332,750
108,400 Automatic Data Processing, Inc. ................. 6,463,350
25,600 Ceridian Corp.* ................................. 619,200
29,000 Computer Sciences Corp.* ........................ 2,292,812
26,700 Convergys Corp.* (1) ............................ 1,044,637
28,300 Dun & Bradstreet Corp. .......................... 933,900
80,700 Electronic Data Systems Corp. ................... 4,019,869
24,900 Equifax, Inc. ................................... 633,394
71,700 First Data Corp. ................................ 3,419,194
11
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
NUMBER OF
SHARES VALUE
-------- --------------
COMMON STOCKS--(CONTINUED)
INFORMATION & COMPUTER SERVICES--(CONCLUDED)
51,900 IMS Health, Inc. ................................ $ 979,612
52,100 Interpublic Group Companies, Inc. (1) ........... 1,992,825
30,800 Omnicom Group, Inc. ............................. 2,569,875
64,425 Paychex, Inc. ................................... 2,874,966
20,800 Quintiles Transnational Corp.* (1) .............. 289,900
94,100 Yahoo, Inc.* (1) ................................ 11,433,150
12,800 Young & Rubicam, Inc.* .......................... 748,800
--------------
63,648,234
--------------
LEISURE--0.25%
17,700 Brunswick Corp. ................................. 331,875
54,500 Eastman Kodak Co. ............................... 3,392,625
52,900 Harley Davidson, Inc. ........................... 2,635,081
32,750 Hasbro, Inc. .................................... 403,235
75,983 Mattel, Inc. .................................... 750,332
--------------
7,513,148
--------------
LIFE INSURANCE--0.45%
24,697 Aetna Life & Casualty Co. ....................... 1,381,489
45,600 AFLAC, Inc. ..................................... 2,462,400
42,588 American General Corp. .......................... 3,100,939
28,600 CIGNA Corp. ..................................... 2,781,350
58,962 Conseco, Inc. (1) ............................... 497,492
33,400 Lincoln National Corp. .......................... 1,803,600
22,500 Torchmark, Inc. (1) ............................. 631,406
41,957 UNUM Provident Corp. ............................ 909,942
--------------
13,568,618
--------------
LONG DISTANCE & PHONE COMPANIES--3.99%
649,817 AT&T Corp. ...................................... 20,469,236
324,900 BellSouth Corp. ................................. 12,122,831
24,750 Centurytel, Inc. ................................ 713,109
153,040 Global Crossing Ltd.* (1) ....................... 4,600,765
282,907 Qwest Communications International, Inc. * (1) .. 14,605,074
588,624 SBC Communications, Inc. ........................ 24,575,052
151,500 Sprint Corp. .................................... 5,075,250
470,910 Verizon Communications .......................... 20,543,449
496,080 WorldCom, Inc.* ................................. 18,106,920
--------------
120,811,686
--------------
MEDIA--1.53%
66,000 Clear Channel Communications* ................... 4,776,750
156,100 Comcast Corp., Class A* ......................... 5,814,725
359,400 Disney, Walt Co. ................................ 13,994,137
10,200 Meredith Corp. .................................. 278,588
227,800 Time Warner, Inc. ............................... 19,476,900
54,157 Tribune Co. ..................................... 1,932,728
--------------
46,273,828
--------------
MEDICAL PRODUCTS--1.97%
268,400 Abbott Laboratories ............................. 11,742,500
19,900 Alza Corp.* ..................................... 1,504,937
9,400 Bard, C.R., Inc. (1) ............................ 458,838
9,600 Bausch & Lomb, Inc. ............................. 343,200
50,600 Baxter International, Inc. ...................... 4,212,450
44,400 Becton, Dickinson & Co. ......................... 1,337,550
31,500 Biomet, Inc. (1) ................................ 1,065,094
71,300 Boston Scientific Corp.* ........................ 1,350,244
53,300 Guidant Corp. ................................... 3,587,756
240,800 Johnson & Johnson ............................... 22,138,550
12,200 Mallinckrodt Group, Inc. ........................ 549,763
207,300 Medtronic, Inc. (1) ............................. 10,624,125
15,100 St. Jude Medical, Inc.* ......................... 598,337
--------------
59,513,344
--------------
MEDICAL PROVIDERS--0.31%
98,427 Columbia/HCA Healthcare Corp. ................... 3,395,731
72,400 HEALTHSOUTH Corp.* .............................. 443,450
56,600 Tenet Healthcare Corp.* ......................... 1,754,600
28,500 United Healthcare Corp. ......................... 2,693,250
11,500 Wellpoint Health Networks, Inc.* ................ 992,594
--------------
9,279,625
--------------
MINING & METALS--0.31%
39,400 Alcan Aluminum, Ltd. ............................ 1,292,812
150,224 Alcoa, Inc. ..................................... 4,994,948
16,090 Allegheny Technologies, Inc. .................... 349,958
25,600 Crown Cork & Seal, Inc. ......................... 331,200
34,100 Inco Ltd.* ...................................... 609,537
15,500 Nucor Corp. (1) ................................. 569,625
27,900 Owens Illinois, Inc.* ........................... 364,444
14,800 Phelps Dodge Corp.* (1) ......................... 658,600
19,800 USX-U.S. Steel Group, Inc. ...................... 344,025
--------------
9,515,149
--------------
MOTOR VEHICLES--0.61%
28,800 DANA Corp. (1) .................................. 711,000
100,178 Delphi Automotive Systems Corp. ................. 1,646,676
327,623 Ford Motor Co. .................................. 7,924,381
93,400 General Motors Corp. ............................ 6,742,312
11,800 Navistar International Corp.* ................... 442,500
14,230 PACCAR, Inc. .................................... 603,886
25,353 Visteon Corp. ................................... 397,725
--------------
18,468,480
--------------
OIL REFINING--0.88%
37,300 Coastal Corp. ................................... 2,569,038
108,900 Conoco, Inc. .................................... 2,845,012
126,600 Enron Corp. ..................................... 10,745,175
12
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
NUMBER OF
SHARES VALUE
-------- --------------
COMMON STOCKS--(CONTINUED)
OIL REFINING--(CONCLUDED)
17,292 Sunoco, Inc. .................................... $ 470,126
96,000 Texaco, Inc. .................................... 4,944,000
55,800 USX-Marathon Group .............................. 1,531,013
76,900 Williams Companies, Inc. ........................ 3,542,206
--------------
26,646,570
--------------
OIL SERVICES--0.57%
57,760 Baker Hughes, Inc. .............................. 2,111,850
76,300 Halliburton Co. ................................. 4,043,900
17,700 Rowan Co., Inc.* ................................ 548,700
98,300 Schlumberger Ltd. (1) ........................... 8,386,219
36,882 Transocean Sedco Forex, Inc. .................... 2,203,699
--------------
17,294,368
--------------
OTHER INSURANCE--1.77%
128,984 Allstate Corp. .................................. 3,748,597
399,567 American International Group, Inc. .............. 35,611,409
30,300 Chubb Corp. ..................................... 2,319,844
28,000 Cincinnati Financial Corp. ...................... 1,088,500
37,200 Hartford Financial Services Group, Inc. ......... 2,478,450
17,725 Jefferson-Pilot Corp. ........................... 1,173,173
17,600 Loews Corp. ..................................... 1,424,500
17,200 MBIA, Inc. ...................................... 1,130,900
18,300 MGIC Investment Corp. ........................... 1,076,269
12,700 Progressive Corp. (1) ........................... 962,819
23,800 SAFECO Corp. .................................... 626,238
37,564 St. Paul Companies, Inc. ........................ 1,788,985
--------------
53,429,684
--------------
PRECIOUS METALS--0.09%
72,400 Barrick Gold Corp. .............................. 1,153,875
54,700 Homestake-Mining Co. ............................ 304,269
32,476 Newmont Mining Corp. ............................ 602,836
62,700 Placer Dome, Inc. ............................... 556,462
--------------
2,617,442
--------------
PUBLISHING--0.31%
15,000 Deluxe Corp. .................................... 330,000
23,100 Donnelley, R.R. & Sons Co. ...................... 594,825
16,100 Dow Jones & Company, Inc. (1) ................... 1,007,256
46,400 Gannett, Inc. (1) ............................... 2,627,400
13,000 Harcourt General, Inc. .......................... 771,063
14,400 Knight Ridder, Inc. ............................. 786,600
34,100 McGraw-Hill Companies, Inc. ..................... 2,112,069
30,400 New York Times Co., Class A ..................... 1,191,300
--------------
9,420,513
--------------
RAILROADS--0.18%
74,766 Burlington Northern Santa Fe, Inc. .............. 1,672,889
39,000 CSX Corp. (1) ................................... 931,125
67,400 Norfolk Southern Corp. .......................... 1,082,613
43,600 Union Pacific Corp. ............................. 1,733,100
--------------
5,419,727
--------------
RESTAURANTS--0.32%
23,300 Darden Restaurants, Inc. (1) .................... 412,119
230,700 McDonalds Corp. ................................. 6,892,162
32,100 Starbucks Corp.* ................................ 1,175,662
26,520 Tricon Global Restaurants, Inc.* ................ 772,395
21,500 Wendy's International, Inc. ..................... 405,813
--------------
9,658,151
--------------
SECURITIES & ASSET MANAGEMENT--1.65%
23,212 Bear Stearns & Co. (1) .......................... 1,556,655
237,700 Charles Schwab Corp. (1) ........................ 9,077,169
45,900 Franklin Resources, Inc. ........................ 1,744,200
21,900 Lehman Brothers Holdings, Inc. .................. 3,175,500
68,500 Merrill Lynch & Co., Inc. ....................... 9,932,500
197,600 Morgan Stanley Dean Witter & Co. ................ 21,254,350
41,300 Stilwell Financial, Inc.* ....................... 1,997,887
23,600 T. Rowe Price & Associates, Inc. (1) ............ 1,067,900
--------------
49,806,161
--------------
SEMICONDUCTOR--6.23%
53,600 Advanced Micro Devices, Inc.* ................... 2,016,700
69,200 Altera Corp.* ................................... 4,485,025
61,400 Analog Devices, Inc.* ........................... 6,170,700
139,900 Applied Materials, Inc.* ........................ 12,075,119
37,300 Broadcom Corp. * (1) ............................ 9,325,000
37,900 Conexant Systems, Inc. * ........................ 1,409,406
1,159,900 Intel Corp. ..................................... 86,847,512
161,500 JDS Uniphase Corp.* ............................. 20,104,227
54,000 Linear Technology Corp. ......................... 3,884,625
53,400 LSI Logic Corp.* ................................ 1,919,063
49,000 Maxim Integrated Productions, Inc.* ............. 4,296,687
96,200 Micron Technology, Inc.* ........................ 7,864,350
31,000 National Semiconductor Corp.* ................... 1,379,500
22,900 Novellus Systems, Inc.* ......................... 1,409,781
8,800 Perkinelmer, Inc. (1) ........................... 791,450
294,000 Texas Instruments, Inc. ......................... 19,679,625
55,800 Xilinx, Inc.* ................................... 4,959,225
--------------
188,617,995
--------------
SPECIALTY RETAIL--1.37%
24,000 Autozone, Inc.* (1) ............................. 540,000
49,200 Bed, Bath & Beyond, Inc.* ....................... 864,075
35,600 Best Buy Company, Inc.* (1) ..................... 2,198,300
13
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
NUMBER OF
SHARES VALUE
-------- --------------
COMMON STOCKS--(CONCLUDED)
SPECIALTY RETAIL--(CONCLUDED)
35,600 Circuit City Stores, Inc. ....................... $ 923,375
68,000 CVS Corp. ....................................... 2,524,500
57,666 Dollar General Corp. ............................ 1,185,757
400,550 Home Depot, Inc. ................................ 19,251,435
66,500 Lowe's Companies, Inc. .......................... 2,980,031
57,100 Office Depot, Inc.* ............................. 417,544
32,500 Radioshack Corp. ................................ 1,917,500
84,400 Staples, Inc.* .................................. 1,297,650
25,400 Tiffany & Co. ................................... 1,057,275
39,100 Toys R Us, Inc.* (1) ............................ 711,131
174,600 Walgreen Co. .................................... 5,739,975
--------------
41,608,548
--------------
THRIFT--0.16%
27,900 Golden West Financial Corp. (1) ................. 1,328,738
96,475 Washington Mutual, Inc. (1) ..................... 3,376,625
--------------
4,705,363
--------------
TOBACCO--0.41%
395,200 Philip Morris Companies, Inc. ................... 11,707,800
29,600 UST, Inc. (1) ................................... 640,100
--------------
12,347,900
--------------
WIRELESS TELECOMMUNICATIONS--0.60%
54,800 Alltel Corp. .................................... 2,770,825
131,600 Nextel Communications, Inc.* (1) ................ 7,295,575
159,100 Sprint Corp.* (1) ............................... 7,984,832
--------------
18,051,232
--------------
Total Common Stocks
(cost--$1,697,095,204) ...................................... 2,301,173,288
--------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES
-------- -------- --------
<S> <C> <C> <C>
SHORT-TERM U.S. GOVERNMENT OBLIGATION--23.87%
$ 723,017 U.S. Treasury Bills (cost--$722,301,018) (1) .................. 09/07/00 5.930 to 6.040%@ 722,301,018
--------------
REPURCHASE AGREEMENT--0.09%
2,777 Repurchase Agreement dated 08/31/00 with Dresdner Bank,
collateralized by $2,822,000 U.S. Treasury Notes, 5.75%
due 06/30/01 (value -- $2,832,724); proceeds:
$2,777,509 (cost--$2,777,000) ............................... 09/01/00 6.600 2,777,000
--------------
Total Investments (cost--$2,422,173,222)--100.02% ........................... 3,026,251,306
Liabilities in excess of other assets--(0.02)% .............................. (549,022)
--------------
Net Assets--100.00% ......................................................... $3,025,702,284
==============
</TABLE>
----------
* Non-Income producing security.
@ Interest rates shown are the discount rates at date of purchase.
(1) Security, or a portion thereof, was on loan at August 31, 2000.
ADR American Depositary Receipt.
+ The common stock portion of the portfolio is intended to track the S&P 500
Index. Since the Fund had a target allocation of 75% of the portfolio to
common stocks, it represents approximately 75% of the Fund's assets.
See accompanying notes to financial statements
14
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2000
ASSETS
Investments in securities, at value (cost--$2,422,173,222) .... $3,026,251,306
Investments of cash collateral received for securities
loaned, at value (cost--$871,953,435) ....................... 871,953,435
Cash .......................................................... 878
Receivable for shares of beneficial interest sold ............. 5,870,445
Dividends and interest receivable ............................. 3,135,260
Other assets .................................................. 673,574
--------------
Total assets .................................................. 3,907,884,898
--------------
LIABILITIES
Collateral for securities loaned .............................. 871,953,435
Payable for shares of beneficial interest repurchased ......... 5,849,638
Payable for investments purchased ............................. 847,453
Payable to affiliates ......................................... 2,982,639
Accrued expenses and other liabilities ........................ 549,449
--------------
Total liabilities ............................................. 882,182,614
--------------
NET ASSETS
Beneficial interest--$0.001 par value
(unlimited amount authorized) ............................... 2,145,528,865
Accumulated undistributed net investment income ............... 35,339,257
Accumulated net realized gains from investment transactions ... 240,756,078
Net unrealized appreciation of investments .................... 604,078,084
--------------
Net assets .................................................... $3,025,702,284
==============
CLASS A:
Net assets .................................................... $ 866,955,957
--------------
Shares outstanding ............................................ 24,358,195
--------------
Net asset value and redemption value per share ................ $ 35.59
==============
Maximum offering price per share (net asset value
plus sales charge of 4.50% of offering price) ............... $ 37.27
==============
CLASS B:
Net assets .................................................... $1,091,106,718
--------------
Shares outstanding ............................................ 31,244,328
--------------
Net asset value and offering price per share .................. $ 34.92
==============
CLASS C:
Net assets .................................................... $ 868,544,544
--------------
Shares outstanding ............................................ 24,718,783
--------------
Net asset value and offering price per share .................. $ 35.14
==============
CLASS Y:
Net assets .................................................... $ 199,095,065
--------------
Shares outstanding ............................................ 5,542,651
--------------
Net asset value, offering price and redemption
value per share ............................................. $ 35.92
==============
See accompanying notes to financial statements
15
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
STATEMENT OF OPERATIONS
FOR THE
YEAR ENDED
AUGUST 31, 2000
--------------
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $90,077) .......... $ 22,857,405
Interest ....................................................... 50,076,037
------------
72,933,442
------------
EXPENSES:
Investment advisory and administration ......................... 12,616,827
Service fees--Class A .......................................... 1,967,523
Service and distribution fees--Class B ......................... 10,199,321
Service and distribution fees--Class C ......................... 8,091,186
Transfer agency ................................................ 1,711,680
Custody and accounting ......................................... 1,693,566
Federal and state registration ................................. 384,476
Reports and notices to shareholders ............................ 290,088
Legal and audit ................................................ 140,894
Interest expense ............................................... 41,031
Trustees' fees ................................................. 13,500
Other expenses ................................................. 184,963
------------
37,335,055
Less: Fee waiver from adviser .................................. (336,961)
------------
Net expenses ................................................... 36,998,094
------------
Net investment income .......................................... 35,935,348
------------
REALIZED AND UNREALIZED GAINS FROM INVESTMENT ACTIVITIES:
Net realized gains from investment transactions ................ 274,200,450
Net change in unrealized appreciation of investments ........... 48,680,000
------------
NET REALIZED AND UNREALIZED GAINS FROM INVESTMENT ACTIVITIES ... 322,880,450
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........... $358,815,798
============
See accompanying notes to financial statements
16
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED AUGUST 31,
--------------------------------
2000 1999
-------------- --------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ...................................... $ 35,935,348 $ 1,198,127
Net realized gains from investment transactions ............ 274,200,450 35,156,348
Net change in unrealized appreciation of investments ....... 48,680,000 489,874,969
-------------- --------------
Net increase in net assets resulting from operations ....... 358,815,798 526,229,444
-------------- --------------
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 ... (3,096,714) (1,917,018)
-------------- --------------
Total dividends and distributions to shareholders .......... (57,394,141) (38,680,356)
-------------- --------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares ....................... 883,445,360 1,246,391,035
Cost of shares repurchased ................................. (749,724,431) (530,096,507)
Proceeds from dividends reinvested ......................... 54,372,714 36,391,184
-------------- --------------
Net increase in net assets from beneficial
interest transactions .................................... 188,093,643 752,685,712
-------------- --------------
Net increase in net assets ................................. 489,515,300 1,240,234,800
NET ASSETS:
Beginning of year .......................................... 2,536,186,984 1,295,952,184
-------------- --------------
End of year (including undistributed net investment
income of $35,339,257 at August 31, 2000) ................ $3,025,702,284 $2,536,186,984
============== ==============
</TABLE>
See accompanying notes to financial statements
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 accounting
principles generally accepted in the United States 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"),
the investment adviser and administrator of the Fund. Mitchell Hutchins is a
wholly owned asset management subsidiary of PaineWebber Incorporated
("PaineWebber"), a wholly owned subsidiary of Paine Webber Group Inc. ("PW
Group"). 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
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
on an accrual basis. Dividend income is recorded on the ex-dividend date.
Discounts are accreted and premiums are amortized as adjustments to interest
income and the identified cost of investments.
Income, expenses (excluding class-specific expenses) and
realized/unrealized gains/losses are allocated proportionately to each class of
shares based upon the relative net asset value of outstanding shares (or the
value of dividend-eligible shares, as appropriate) of each class at the
beginning of the day (after adjusting for current capital share activity of the
respective classes). Class-specific expenses are charged directly to the
applicable class of shares.
DIVIDENDS AND DISTRIBUTIONS--Dividends and distributions to shareholders
are recorded on the ex-dividend date. The amount of dividends and distributions
are determined in accordance with federal income tax regulations, which may
differ from accounting principles generally accepted in the United States. 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 August 31, 2000, the Fund owed Mitchell
Hutchins $1,138,851 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 year ended
August 31, 2000, Mitchell Hutchins waived $336,961.
For the year ended August 31, 2000, the Fund paid no brokerage commissions
to PaineWebber for transactions executed on behalf of the Fund.
On July 12, 2000, PW Group and UBS AG ("UBS") announced that they had
entered into an agreement and plan of merger under which PW Group will merge
into a wholly owned subsidiary of UBS. If all required approvals are obtained
and the required conditions are satisfied, PW Group and UBS expect to complete
the transaction in the fourth quarter of 2000. UBS, with headquarters in Zurich,
Switzerland, is an internationally diversified organization with operations in
many areas of the financial services industry.
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 August 31, 2000, the Fund owed
Mitchell Hutchins $1,804,819 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
year ended August 31, 2000, it earned $6,283,025 in sales charges.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 year ended
August 31, 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 33 1/3% of its total assets to qualified
institutions. The loans are secured at all times by cash or U.S. government
securities in an amount at least equal to the market value of the securities
loaned, plus accrued interest, determined on a daily basis and adjusted
accordingly. The Fund will regain record ownership of loaned securities to
exercise certain beneficial rights however, the Fund may bear the risk of delay
in recovery of, or even loss of rights in, the securities loaned should the
borrower fail financially. The Fund receives compensation, which is included in
interest income, for lending its securities from interest earned on the cash or
U.S. government securities held as collateral, net of fee rebates paid to the
borrower plus reasonable administrative and custody fees. For the year ended
August 31, 2000, the Fund earned $1,964,551 for lending its securities and
PaineWebber earned $692,987 in compensation as the Fund's lending agent. At
August 31, 2000, the Fund owed PaineWebber $38,969 in compensation.
As of August 31, 2000, the Fund held cash and/or cash equivalents having an
aggregate value of $871,953,435 as collateral for portfolio securities loaned
having a market value of $856,521,427. The cash collateral was invested in the
following money market funds:
NUMBER OF
SHARES VALUE
----------- ------------
56,323,885 AIM Liquid Assets Portfolio ....................... $ 56,323,885
509,191 AIM Prime Money Market Portfolio .................. 509,191
712,166,490 Mitchell Hutchins Private Money Market Fund LLC ... 712,166,490
100,083,624 Provident Temporary Cash Portfolio ................ 100,083,624
2,870,245 Scudder Institutional Fund Inc. ................... 2,870,245
------------
Total investments of cash collateral received
for securities loaned (cost-- $871,953,435) .................... $871,953,435
============
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
$1,679,277 with a related weighted average annualized interest rate of 6.42%.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at August 31,
2000 was substantially the same as the cost of securities for financial
statement purposes.
At August 31, 2000, the components of net unrealized appreciation of
investments were as follows:
Gross appreciation (investments having
an excess of value over cost) ...................... $658,684,781
Gross depreciation (investments having
an excess of cost over value) ..................... (54,606,697)
------------
Net unrealized appreciation of investments ........... $604,078,084
============
For the year ended August 31, 2000, total aggregate purchases and sales of
portfolio securities, excluding short-term securities, were as follows:
Purchases ............................................ $2,520,014,086
Sales ................................................ 3,079,625,395
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
YEAR ENDED ------------------------- ------------------------- ------------------------- ------------------------
AUGUST 31, 2000: SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold ......... 8,903,032 $299,120,599 7,934,947 $261,530,276 6,783,889 $225,558,900 2,868,207 $97,235,585
Shares
repurchased ....... (7,719,643) (259,521,614) (7,393,283) (242,104,550) (5,927,604) (197,982,074) (1,481,463 (50,116,193)
Shares converted
from Class B
to Class A ........ 607,819 20,231,362 (616,542) (20,231,362) -- -- -- --
Dividends
reinvested ........ 464,362 15,430,750 602,857 19,761,597 484,157 15,967,532 95,992 3,212,835
---------- ------------ ---------- ------------ ---------- ------------ ---------- -----------
Net increase ........ 2,255,570 $ 75,261,097 527,979 $ 18,955,961 1,340,442 $ 43,544,358 1,482,736 $50,332,227
========== ============ ========== ============ ========== ============ ========== ===========
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>
21
<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
PERIOD
JANUARY 30,
FOR THE YEARS FOR THE YEARS 1996+ TO
ENDED AUGUST 31, ENDED AUGUST 31, AUGUST 31,
--------------------------------------------------- -----------------------------------------
2000 1999 1998 1997 1996 2000 1999 1998 1997 1996
-------- -------- -------- -------- ------- ---------- -------- -------- -------- -------
<S> <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 $ 31.41 $ 23.32 $ 22.08 $ 16.13 $ 15.54
-------- -------- -------- -------- ------- ---------- -------- -------- -------- -------
Net investment income
(loss) ................ 0.60@ 0.15 0.15 0.18@ 0.18 0.33@ (0.04) -- 0.03@ 0.02
Net realized and
unrealized gains from
investments ........... 3.92@ 8.84 1.47 6.12@ 2.31 3.88@ 8.73 1.43 6.09@ 0.57
-------- -------- -------- -------- ------- ---------- -------- -------- -------- -------
Net increase from
investment operations . 4.52 8.99 1.62 6.30 2.49 4.21 8.69 1.43 6.12 0.59
-------- -------- -------- -------- ------- ---------- -------- -------- -------- -------
Dividends from net
investment income ..... (0.02) (0.17) (0.12) (0.14) (0.14) -- (0.02) (0.01) (0.09) --
Distributions from net
realized gains from
investment
transactions .......... (0.70) (0.58) (0.18) (0.08) (1.06) (0.70) (0.58) (0.18) (0.08) --
-------- -------- -------- -------- ------- ---------- -------- -------- -------- -------
Total dividends and
distributions to
shareholders .......... (0.72) (0.75) (0.30) (0.22) (1.20) (0.70) (0.60) (0.19) (0.17) --
-------- -------- -------- -------- ------- ---------- -------- -------- -------- -------
Net asset value, end of
period ................ $ 35.59 $ 31.79 $ 23.55 $ 22.23 $ 16.15 $ 34.92 $ 31.41 $ 23.32 $ 22.08 $ 16.13
======== ======== ======== ======== ======= ========== ======== ======== ======== =======
Total investment
return(1) ............. 14.37% 38.65% 7.31% 39.26% 17.35% 13.54% 37.61% 6.49% 38.14% 3.80%
======== ======== ======== ======== ======= ========== ======== ======== ======== =======
Ratios/supplemental
data:
Net assets, end of period
(000's) ............... $866,956 $702,580 $340,245 $170,759 $23,551 $1,091,107 $964,933 $483,068 $239,836 $28,495
Expenses to average net
assets, net of waivers
from adviser(2) ....... 0.84% 0.84% 0.95% 0.99% 1.17% 1.60% 1.59% 1.71% 1.74% 1.84%*
Net investment income
(loss) to average net
assets, net of waivers
from adviser(2) ....... 1.77% 0.56% 0.74% 0.88% 1.12% 1.00% (0.20)% (0.02)% 0.13% 0.47%*
Portfolio turnover ...... 122% 6% 33% 6% 6% 122% 6% 33% 6% 6%
</TABLE>
----------
+ Commencement of issuance of shares.
* Annualized.
@ Calculated using the average shares outstanding for the year.
(1) Total investment return is calculated assuming a $10,000 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 years ended August 31, 2000 and 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.
22
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
<TABLE>
<CAPTION>
CLASS C CLASS Y
---------------------------------------------------- ----------------------------------------------------
FOR THE YEARS FOR THE YEARS
ENDED AUGUST 31, ENDED AUGUST 31,
---------------------------------------------------- ----------------------------------------------------
2000 1999 1998 1997 1996 2000 1999 1998 1997 1996
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 31.60 $ 23.45 $ 22.18 $ 16.12 $ 14.87 $ 31.99 $ 23.68 $ 22.33 $ 16.20 $ 14.88
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
0.34@ (0.06) (0.01) 0.03@ 0.06 0.71@ 0.22 0.21 0.23@ 0.30
3.90@ 8.79 1.45 6.11@ 2.32 3.95@ 8.91 1.49 6.13@ 2.24
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
4.24 8.73 1.44 6.14 2.38 4.66 9.13 1.70 6.36 2.54
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-- (0.00)# -- -- (0.07) (0.03) (0.24) (0.17) (0.15) (0.16)
(0.70) (0.58) (0.17) (0.08) (1.06) (0.70) (0.58) (0.18) (0.08) (1.06)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
(0.70) (0.58) (0.17) (0.08) (1.13) (0.73) (0.82) (0.35) (0.23) (1.22)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
$ 35.14 $ 31.60 $ 23.45 $ 22.18 $ 16.12 $ 35.92 $ 31.99 $ 23.68 $ 22.33 $ 16.20
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
13.55% 37.58% 6.49% 38.20% 16.52% 14.72% 39.03% 7.62% 39.55% 17.70%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
$868,545 $738,781 $397,767 $233,044 $ 73,630 $199,095 $129,893 $ 74,872 $ 36,467 $ 12,803
1.60% 1.60% 1.70% 1.75% 1.95% 0.56% 0.58% 0.67% 0.74% 0.95%
1.01% (0.20)% (0.01)% 0.14% 0.35% 2.09% 0.82% 1.03% 1.16% 1.38%
122% 6% 33% 6% 6% 122% 6% 33% 6% 6%
</TABLE>
23
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Shareholders and Trustees of
PaineWebber Tactical Allocation Fund
We have audited the accompanying statement of assets and liabilities of
PaineWebber Tactical Allocation Fund, including the portfolio of investments, as
of August 31, 2000, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years then
ended and the financial highlights for each of the periods indicated therein.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We have conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned at August 31, 2000, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
PaineWebber Tactical Allocation Fund at August 31, 2000, and the results of its
operations for the year then ended, the changes in its net assets for each of
the two years then ended and the financial highlights for each of the indicated
periods, in conformity with accounting principles generally accepted in the
United States.
New York, New York /s/ Ernst & Young LLP
October 17, 2000
24
<PAGE>
PAINEWEBBER TACTICAL ALLOCATION FUND
TAX INFORMATION (UNAUDITED)
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the Fund's fiscal year end (August 31,
2000) as to federal tax status of distributions received by shareholders during
such fiscal year. Accordingly, we are advising you that the following
distributions paid during the fiscal year are taxable and are derived from the
following sources:
PER SHARE DATA: CLASS A CLASS B CLASS C CLASS Y
------------- ------- ------- ------- -------
Net investment income* .......... $0.0202 -- -- $0.0303
Short-term capital gains* ....... 0.0154 $0.0154 $0.0154 0.0154
Long-term capital gains ......... 0.6812 0.6812 0.6812 0.6812
Percentage of ordinary income
dividends qualifying for the
dividends received deduction
available to corporate
shareholders .................. 52.37% 52.37% 52.37% 52.37%
----------
* Taxable as ordinary income.
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need
not be reported as taxable income. Some retirement trusts (e.g., corporate,
Keogh and 403(b)(7) plans) may need this information for their annual
information reporting.
Since the Fund's fiscal year is not the calendar year, another notification
will be sent in respect of calendar year 2000. The second notification, which
will reflect the amount to be used by calendar year taxpayers on their federal
income tax returns, will be made in conjunction with Form 1099 DIV and will be
mailed in January 2001. Shareholders are advised to consult their own tax
advisers with respect to the tax consequences of their investment in the Fund.
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
PRINCIPAL OFFICERS
Margo N. Alexander Paul H. Schubert
PRESIDENT VICE PRESIDENT AND TREASURER
Amy Doberman T. Kirkham Barneby
VICE PRESIDENT VICE PRESIDENT
Dianne E. O'Donnell
VICE PRESIDENT AND SECRETARY
INVESTMENT ADVISER,
ADMINISTRATOR AND
DISTRIBUTOR
Mitchell Hutchins Asset Management Inc.
51 West 52nd Street
New York, New York 10019-6114
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.
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.
