PAINEWEBBER STRATEGIC INCOME FUND ANNUAL REPORT
PERFORMANCE AT A GLANCE
- --------------------------------------------------------------------------------
Comparison of the change of a $10,000 investment in PaineWebber Strategic Income
Fund (Classes A, B and C) and the Lehman Brothers Aggregate Bond Index, the
Salomon Smith Barney World Government Bond Index and the Merrill Lynch High
Yield Master Index from February 7, 1994 through November 30, 1999
The graph depicts the performance of PaineWebber Strategic Income Fund (Classes
A, B and C) versus the Lehman Brothers Aggregate Bond Index, the Salomon Smith
Barney World Government Bond Index and the Merrill Lynch High Yield Master
Index. It is important to note PaineWebber Strategic Income Fund is a
professionally managed mutual fund while the Indices are not available for
investment and are unmanaged. The comparison is shown for illustrative purposes
only.
[GRAPH]
Past performance is no guarantee of future performance. The performance of the
classes varies based on differences in sales charges and fees paid by
shareholders investing in different classes. Class Y shares are not shown
because they were first issued at a later date.
AVERAGE ANNUAL % TOTAL RETURN, PERIODS ENDED 11/30/99
- -----------------------------------------------------
<TABLE>
<CAPTION>
1 Year 5 Years Inception(0)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A* 1.56 7.96 5.22
Before Deducting Class B** 0.76 7.15 4.43
Maximum Sales Charge Class C+ 1.03 7.42 4.69
Class Y++ 1.91 N/A 0.48
- -----------------------------------------------------------------------------------
Class A* -2.52 7.08 4.48
After Deducting Class B** -3.94 6.85 4.31
Maximum Sales Charge Class C+ 0.32 7.42 4.69
Class Y++ 1.91 N/A 0.48
- -----------------------------------------------------------------------------------
LEHMAN BROTHERS AGGREGATE BOND INDEX -0.04 7.99 5.90
SALOMON SMITH BARNEY WORLD GOVERNMENT BOND INDEX -2.10 6.53 5.80
MERRILL LYNCH HIGH YIELD MASTER INDEX 1.08 9.74 7.47
- -----------------------------------------------------------------------------------
</TABLE>
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.
(0) Inception: since commencement of issuance on February 7, 1994 for Classes
A, B and C shares and February 17, 1998 for Class Y shares. Index
performance is shown as of inception of oldest share class.
* Maximum sales charge for Class A shares is 4% 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 0.75% and is
reduced to 0% after one year. Class C shares bear ongoing 12b-1
distribution and service fees.
++ The Fund offers Class Y shares to a limited group of eligible investors,
including participants in certain investment programs that are sponsored by
PaineWebber and that may invest in PaineWebber mutual funds, as well as the
trustee of the PaineWebber 401(k) Plus Plan. Class Y shares do not bear
initial or contingent deferred sales charges or ongoing distribution and
service fees.
<PAGE>
ANNUAL REPORT
PAINEWEBBER
STRATEGIC INCOME FUND
FUND PROFILE
Investment Goals:
Primarily, high current income; secondarily, capital appreciation
Allocation Manager:
Dennis L. McCauley, Mitchell Hutchins Asset Management Inc.
Commencement:
February 7, 1994
(Classes A, B and C)
February 17, 1998 (Class Y)
Dividend Payments:
Monthly
January 15, 2000
Dear Shareholder,
We are pleased to present you with the annual report for PaineWebber
Strategic Income Fund (the "Fund") for the fiscal year ended November 30, 1999.
MARKET REVIEW
- --------------------------------------------------------------------------------
[GRAPHIC]
Interest rates rose in the United States as the economy continued to expand
more briskly than anticipated. The Federal Reserve (the Fed) raised the Federal
Funds rate three times during the fiscal year, by 25 basis points each time
(bps; a basis point equals one one-hundredth of one percent). These increases
reversed the 75 bps reduction engineered in late 1998 to stave off the global
financial crisis. The 30-year Treasury bond's yield increased from 5.07% on
November 30, 1998 to 6.29% on November 30, 1999, one of its worst performances
ever. At the same time, short-term rates rose significantly, with 90-day T-bills
moving from a yield equivalent of 4.49% at the beginning of the fiscal year, to
a yield of 5.30% at its close.
Mortgage "spreads" to Treasurys narrowed for most of the year, benefiting
portfolios with mortgage exposure. (The spread is the difference in yield or
income that securities must pay to compensate for their greater risk relative to
U.S. Treasurys.) High-yield bonds achieved modest gains for the fiscal year,
gaining 1.81% as measured by the CS First Boston High Yield Bond Index.
Corporate bonds suffered from oversupply and buyers' Y2K worries, and lost 1.14%
as measured by the Lehman Brothers Corporate Bond Index.
Interest rates also rose during the fiscal year in developed countries
around the world, in response to increasing economic activity and higher
commodity prices. Emerging market bonds were the best performers last year,
benefiting from a return of investor confidence after the sharp sell-off in the
wake of the Russian debt crisis of 1998.
[GRAPH]
A sooner-than-expected return to economic stability and rising commodity prices
contributed to their strength, although spreads to U.S. Treasurys did not return
to their pre-crisis levels.
2
<PAGE>
PAINEWEBBER STRATEGIC INCOME FUND ANNUAL REPORT
PORTFOLIO REVIEW
- --------------------------------------------------------------------------------
[GRAPHIC]
The Fund allocates assets among three main sectors of the global bond
market--U.S. government/investment grade bonds, U.S. high-yield bonds and
non-U.S. bonds--and shifts emphasis among them as conditions warrant.
Through the first half of the fiscal year, the Fund maintained relatively
high allocations to the U.S. high-yield and investment-grade bond sectors. In
August 1999, spreads in the high-yield sector widened as investors withdrew,
fearful of potential Y2K problems. In response, we began reducing the Fund's
high-yield allocation and increased its allocation to the U.S. investment-grade
sector. The high-yield allocation reached a low of 38.3% in October.
By the end of the fiscal year we had increased the Fund's high-yield
allocation to 38.6%, in an effort to participate in the "January effect" that
has resulted in high-yield bond prices rising during the first quarter of each
of the last four years. We believe technical factors could make January and
February of 2000 very positive months for the high-yield market.
At fiscal year-end, the Fund's investment grade allocation stood at 42.9%,
of which 36.9% was allocated to mortgage-backed securities and 6.0% to
investment-grade corporate bonds. The Fund remained underweighted in the global
markets.
SECTOR ALLOCATION* 11/30/99 5/31/99 11/30/98
- --------------------------------------------------------------------------------
U.S. High Yield 38.6% 47.0% 47.0%
U.S. Gov't/Investment-Grade Corp. 42.9 34.7 37.0
Foreign/Emerging Markets 15.2 12.8 13.9
Cash & Equivalents 3.3 5.5 2.1
- --------------------------------------------------------------------------------
Total 100.0 100.0 100.0
CHARACTERISTICS* 11/30/99 5/31/99 11/30/98
- --------------------------------------------------------------------------------
Weighted Average Duration 5.1 yrs 5.2 yrs 5.4 yrs
Weighted Average Maturity 8.5 yrs 8.7 yrs N/A
Net Assets ($mm) $107.1 $114.8 $111.9
- --------------------------------------------------------------------------------
OUTLOOK
- --------------------------------------------------------------------------------
[GRAPHIC]
In the first half of 2000, we expect an active Fed and rising rates across
the yield curve. We look for moderating economic growth in the second half of
the year, and believe interest rates will recede in response to slowing growth
and the absence of real inflationary pressure. In this environment, we think the
spread sectors--mortgages, agencies, investment-grade corporate and high-yield
bonds--will perform well. We think the mortgage market could see further spread
narrowing in certain sub-sectors.
* Weightings represent percentages of net assets as of November 30, 1999, unless
indicated otherwise. The Fund's portfolio is actively managed and its
composition will vary over time.
3
<PAGE>
ANNUAL REPORT
Looking to 2000 and beyond, we believe the next big opportunity for the
Fund will be in the global markets, where we expect rates to rise and become
more attractive relative to rates in the U.S. If this occurs, we anticipate
increasing our global allocation. The Fund has increased its exposure to
European markets by investing in the euro currency. We believe that over time
the euro will strengthen against the dollar and enhance the Fund's return.
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 Strategic Income Fund or another fund in the PaineWebber Family of
Funds1, please contact your Financial Advisor.
Sincerely,
/s/ MARGO ALEXANDER /s/ BRIAN M. STORMS
- --------------------------------------- ---------------------------------------
MARGO ALEXANDER BRIAN M. STORMS
Chairman and Chief Executive Officer President and Chief Operating Officer
Mitchell Hutchins Asset Management Inc. Mitchell Hutchins Asset Management Inc.
/s/ DENNIS L. McCAULEY /s/ THOMAS J. LIBASSI
- --------------------------------------- ---------------------------------------
DENNIS L. McCAULEY THOMAS J. LIBASSI
Chief Investment Officer - Fixed Income Manager, High Yield Sector
Mitchell Hutchins Asset Management Inc.
Allocation Manager, PaineWebber
Strategic Income Fund
/s/ NIRMAL SINGH /s/ STUART WAUGH
- --------------------------------------- ---------------------------------------
NIRMAL SINGH STUART WAUGH
Manager, U.S. Government and Manager, Foreign and Emerging
Investment Grade Sector Markets Sector
/s/ JAMES F. KEEGAN
- ---------------------------------------
JAMES F. KEEGAN
Manager, U.S. Government and
Investment Grade Sector
This letter is intended to assist shareholders in understanding how the Fund
performed during the fiscal year ended November 30, 1999, and reflects our views
at the time of its writing. Of course, these views may change in response to
changing circumstances. We encourage you to consult your Financial Advisor
regarding your personal investment program.
1 Mutual funds are sold by prospectus only. The prospectuses for the funds
contain more complete information regarding risks, charges and expenses, and
should be read carefully before investing.
4
<PAGE>
PAINEWEBBER STRATEGIC INCOME FUND
PERFORMANCE RESULTS (unaudited)
<TABLE>
<CAPTION>
TOTAL RETURN1
NET ASSET VALUE --------------------------------
----------------------------------- 12 MONTHS 6 MONTHS
11/30/99 05/31/99 11/30/98 ENDED 11/30/99 ENDED 11/30/99
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $8.53 $8.84 $9.06 1.56% (0.02)%
Class B Shares 8.52 8.83 9.05 0.76 (0.43)
Class C Shares 8.52 8.83 9.05 1.03 (0.30)
- ----------------------------------------------------------------------------------------------
<CAPTION>
PERFORMANCE SUMMARY CLASS A SHARES
NET ASSET VALUE
-------------------------- CAPITAL GAINS PAID FROM TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID2 CAPITAL RETURN1
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
02/07/94-12/31/94 $10.00 $8.56 -- $0.5792 -- (8.76)%
1995 8.56 8.79 -- 0.9392 -- 14.12
1996 8.79 9.34 -- 0.6352 -- 14.00
1997 9.34 9.56 -- 0.7116 -- 10.32
1998 9.56 8.95 -- 0.7073 -- 0.96
01/01/99-11/30/99 8.95 8.53 -- 0.5178 $0.0536 1.70
Total: $0.0000 $4.0903 $0.0536
CUMULATIVE TOTAL RETURN AS OF 11/30/99: 34.47%
<CAPTION>
PERFORMANCE SUMMARY CLASS B SHARES
NET ASSET VALUE
-------------------------- CAPITAL GAINS PAID FROM TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID2 CAPITAL RETURN1
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
02/07/94-12/31/94 $10.00 $8.55 -- $0.5242 -- (9.41)%
1995 8.55 8.78 -- 0.8733 -- 13.29
1996 8.78 9.33 -- 0.5727 -- 13.23
1997 9.33 9.55 -- 0.6386 -- 9.48
1998 9.55 8.94 -- 0.6343 -- 0.18
01/01/99-11/30/99 8.94 8.52 -- 0.4594 $0.0476 0.96
Total: $0.0000 $3.7025 $0.0476
CUMULATIVE TOTAL RETURN AS OF 11/30/99: 28.70%
<CAPTION>
PERFORMANCE SUMMARY CLASS C SHARES
NET ASSET VALUE
-------------------------- CAPITAL GAINS PAID FROM TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID2 CAPITAL RETURN1
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2/07/94-12/31/94 $10.00 $8.56 -- $0.5424 -- (9.13)%
1995 8.56 8.79 -- 0.8951 -- 13.56
1996 8.79 9.33 -- 0.5934 -- 13.36
1997 9.33 9.56 -- 0.6638 -- 9.89
1998 9.56 8.94 -- 0.6597 -- 0.34
01/01/99-11/30/99 8.94 8.52 -- 0.4792 $0.0496 1.21
Total: $0.0000 $3.8336 $0.0496
CUMULATIVE TOTAL RETURN AS OF 11/30/99: 30.55%
</TABLE>
1 Figures assume reinvestment of all dividends and other 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.
2 Includes foreign exchange gain distributions, if any.
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
November 30, 1999, and since inception, February 17, 1998 through November 30,
1999, Class Y shares had a total return of 1.91% and 0.86%, respectively. Class
Y shares do not have initial or contingent deferred sales charges or ongoing
distribution and service fees.
The above data represents past performance of the Fund's shares, which is no
guarantee of future results. The principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost.
5
<PAGE>
PAINEWEBBER STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS NOVEMBER 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
-------- --------- --------- ---------
<S> <C> <C> <C>
U.S. GOVERNMENT AND INVESTMENT GRADE OBLIGATIONS--39.05%
U. S. GOVERNMENT OBLIGATIONS--1.65%
$ 1,800 U.S. Treasury Bonds (cost--$1,848,738) .............. 08/15/27 6.375% $ 1,768,500
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION CERTIFICATES--3.62%
3,763 GNMA (cost--$3,972,094) ............................. 06/15/17 to 11/15/17 8.000 3,874,281
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION CERTIFICATES--16.60%
NZD 4,200 FNMA ................................................ 06/20/02 7.250 2,144,611
6,000 FNMA 15 year TBA .................................... TBA 6.500 5,859,372
10,340 FNMA 30 year TBA .................................... TBA 6.000 to 7.000 9,779,512
-----------
Total Federal National Mortgage Association Certificates
(cost--$18,081,403)............................................. 17,783,495
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS--15.01%
4,000 CS First Boston Mortgage Securities Corporation,
Series 1997-C2, Class A2............................. 07/17/07 6.520 3,869,400
1,000 DLJ Commercial Mortgage Corporation,
Series 1998-CG1, Class A1B........................... 05/10/08 6.410 950,700
6,810 First Union Lehman Brothers Mortgage Trust,
Series 1997-C2, Class A3............................. 12/18/07 6.650 6,586,768
5,000 FNMA REMIC, Series 1993-87, Class J ................. 04/25/22 6.250 4,674,175
-----------
Total Collateralized Mortgage Obligations (cost--$16,763,416).... 16,081,043
-----------
CORPORATE OBLIGATION--2.17%
2,300 FUGI JGB Investment LLC (cost--$2,008,554) .......... 06/30/08 9.870(d) 2,317,250
-----------
Total U.S. Government and Investment Grade Obligations
(cost--$42,674,205)............................................. 41,824,569
-----------
GLOBAL DEBT SECURITIES--17.11%
AUSTRALIA--1.90%
2,000 Principal Financial Group ........................... 08/15/09 8.200 2,039,594
-----------
CANADA--2.91%
4,385* Government of Canada ................................ 12/01/06 7.000 3,121,970
-----------
GERMANY--2.11%
2,070* Federal Republic of Germany ......................... 07/15/04 6.750 2,262,312
-----------
KOREA--0.25%
255 Republic of Korea ................................... 04/15/08 8.875 269,981
-----------
MEXICO--3.34%
3,952 United Mexican States DISC(1) ....................... 12/31/19 6.933 to 6.943++ 3,576,560
-----------
PANAMA--0.52%
744 Republic of Panama, PDI(2) .......................... 07/17/16 6.500++ 553,296
-----------
PHILIPPINES--1.05%
1,100 Republic of Philippines ............................. 10/21/24 9.500 1,120,460
-----------
POLAND--1.27%
4,140* Republic of Poland .................................. 06/12/04 10.000 900,655
-----------
750 Republic of Poland, PAR ............................. 10/27/24 3.500(b) 465,000
-----------
TRINIDAD AND TOBAGO--0.94%
1,000 Republic of Trinidad & Tobago(c) .................... 10/01/09 9.875 1,011,170
-----------
TURKEY--0.91%
950 Republic of Turkey .................................. 11/05/04 11.875 970,188
-----------
UNITED KINGDOM--1.91%
1,265* United Kingdom Gilt ................................. 12/07/03 6.500 2,042,245
-----------
Total Global Debt Securities (cost--$18,650,962)................. 18,333,431
-----------
</TABLE>
6
<PAGE>
PAINEWEBBER STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
-------- --------- --------- ---------
<S> <C> <C> <C>
HIGH YIELD SECURITIES--40.53%
CORPORATE BONDS--36.57%
CABLE--4.35%
$ 1,000 21st Century Telecommunications Group Incorporated .. 02/15/08 12.250%+ $ 460,000
2,000 Knology Holdings Incorporated ....................... 10/15/07 11.875+ 1,240,000
1,000 NTL Communications Corporation ...................... 10/01/08 11.500 1,085,000
1,000 UIH Australia Pacific Incorporated .................. 05/15/06 14.000+ 810,000
510 United Pan-Europe Communications N.V. ** ............ 08/01/09 10.875 522,750
950 United Pan-Europe Communications N.V.** ............. 08/01/09 12.500+ 546,250
-----------
4,664,000
-----------
CHEMICALS--1.15%
700 Lyondell Chemical Company ........................... 05/01/07 9.875 719,250
500 ZSC Specialty** ..................................... 07/01/09 11.000 510,000
-----------
1,229,250
-----------
COMMUNICATIONS--FIXED--8.76%
1,000 Alestra S.A.** ...................................... 05/15/06 12.125 986,250
750 Allegiance Telecom Incorporated ..................... 05/15/08 12.875 832,500
1,000 Barak ITC ........................................... 11/15/07 12.500+ 540,000
620 Esprit Telecom Group PLC ............................ 06/15/08 10.875 623,100
500 GlobeNet Communications Group** ..................... 07/15/07 13.000 505,000
625 GST Equipment Funding Incorporated .................. 05/01/07 13.250 625,000
1,000 Hyperion Telecommunications Incorporated ............ 11/01/07 12.000 1,045,000
1,000 Metromedia Fiber Network Incorporated ............... 11/15/08 10.000 1,010,000
650 NEXTLINK Communications Incorporated ................ 06/01/09 10.750 666,250
750 Northeast Optic Network Incorporated ................ 08/15/08 12.750 795,000
750 Pathnet Incorporated ................................ 04/15/08 12.250 480,000
500 Tele1 Europe BV** ................................... 05/15/09 13.000 507,500
1,250 Viatel Incorporated ................................. 04/15/08 12.500+ 762,500
-----------
9,378,100
-----------
COMMUNICATIONS-MOBILE--1.90%
1,000# ICO Global Communications Limited ................... 08/01/05 15.000 500,000
1,000 Nextel Communications Incorporated .................. 02/15/08 9.950+ 705,000
1,500 Nextel International Incorporated ................... 04/15/08 12.125+ 825,000
-----------
2,030,000
-----------
CONSUMER MANUFACTURING--1.23%
1,000 Decora Industries Incorporated ...................... 05/01/05 11.000 860,000
500 Jafra Cosmetics International Incorporated .......... 05/01/08 11.750 460,000
-----------
1,320,000
-----------
ENERGY--2.21%
500 Key Energy Services Incorporated .................... 01/15/09 14.000 545,000
1,000 Northern Offshore ASA ............................... 05/15/05 10.000 600,000
1,000 R&B Falcon Corporation .............................. 12/15/08 9.500 987,500
267 Transcontinental Refining Corporation** ............. 12/01/03 15.000 237,889
-----------
2,370,389
-----------
FINANCIAL SERVICES--1.39%
750 Airplanes Pass-Through Trust ........................ 03/15/19 10.875 667,500
500 Olympic Financial Limited ........................... 03/15/07 11.500 507,500
625 Signet Capital Trust I .............................. 08/15/27 9.500 312,500
-----------
1,487,500
-----------
</TABLE>
7
<PAGE>
PAINEWEBBER STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
-------- --------- --------- ---------
<S> <C> <C> <C>
HIGH YIELD SECURITIES (CONTINUED)
CORPORATE BONDS (CONTINUED)
FOOD & BEVERAGE--1.87%
$ 1,000 Iowa Select Farms L.P.** ............................ 12/01/05 10.750% $ 540,000
750 Mrs. Fields Original Cookies Incorporated ........... 12/01/04 10.125 607,500
1,000 Packaged Ice Incorporated ........................... 02/01/05 9.750 860,000
-----------
2,007,500
-----------
GENERAL INDUSTRIAL--2.31%
500 Aqua Chemical Incorporated .......................... 07/01/08 11.250 270,000
750 J.B.Poindexter & Company Incorporated ............... 05/15/04 12.500 708,750
400 Jordan Telecommunication Products ................... 08/01/07 11.750+ 348,000
600 Jordan Telecommunication Products ................... 08/01/07 9.875 588,000
750 SabreLiner Corporation** ............................ 06/15/08 11.000 556,875
-----------
2,471,625
-----------
HOTELS & LODGING--0.38%
625 Silverleaf Resorts Incorporated ..................... 04/01/08 10.500 406,250
-----------
MEDIA--0.43%
1,750 Inter Act Systems Incorporated ...................... 08/01/03 14.000 455,000
-----------
METALS & MINING--0.67%
1,000 Metal Management Incorporated ....................... 05/15/08 10.000 720,000
-----------
REAL ESTATE--0.43%
625 American Architectural Products Corporation ......... 12/01/07 11.750 237,500
250 Engle Homes Incorporated ............................ 02/01/08 9.250 225,000
-----------
462,500
-----------
RESTAURANTS--0.73%
1,000 American Restaurant Group Incorporated .............. 02/15/03 11.500 780,000
-----------
RETAIL--1.14%
1,000 Advance Holding Corporation ......................... 04/15/09 12.875+ 485,000
750 Ames Department Stores Incorporated ................. 04/15/06 10.000 735,000
-----------
1,220,000
-----------
SERVICES--1.53%
1,000 Allied Waste North America Incorporated** ........... 08/01/09 10.000 913,750
750 Atlantic Express Transportation Corporation ......... 02/01/04 10.750 727,500
-----------
1,641,250
-----------
TECHNOLOGY--3.51%
500 Ampex Corporation(c)................................. 03/15/03 12.000 500,000
500 ChipPac International Limited** ..................... 08/01/09 12.750 512,500
1,000# Earthwatch Incorporated** ........................... 07/15/07 13.000+ 700,000
2,000 Electronic Retailing Systems International
Incorporated......................................... 02/01/04 13.250+ 320,000
1,000# Intersil Corporation** .............................. 08/15/09 13.250 1,200,000
500 Verio Incorporated .................................. 12/01/08 11.250 522,500
-----------
3,755,000
-----------
TRANSPORTATION--2.33%
1,000 Equimar Shipholdings Limited ........................ 07/01/07 9.875 620,000
1,000 Millenium Seacarriers Incorporated .................. 07/15/05 12.000 550,000
1,000 Stena AB ............................................ 06/15/07 8.750 855,000
750 TFM, S.A. de C.V. ................................... 06/15/09 11.750+ 472,500
-----------
2,497,500
-----------
</TABLE>
8
<PAGE>
PAINEWEBBER STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
-------- --------- --------- ---------
<S> <C> <C> <C>
HIGH YIELD SECURITIES (CONTINUED)
CORPORATE BONDS (CONCLUDED)
UTILITIES--0.25%
$ 273 Panda Funding Corporation............................ 08/20/12 11.625% $ 272,806
-----------
Total Corporate Bonds (cost--$46,826,619)....................... 39,168,670
-----------
CONVERTIBLE BONDS--0.68%
COMMUNICATIONS--FIXED--0.09%
110 GST Telecommunciations Incorporated.................. 12/15/05 13.875+ 104,500
-----------
SERVICES--0.59%
797 Waste Systems International Incorporated**........... 05/13/05 7.000 629,721
-----------
Total Convertible Bonds (cost--$889,009)......................... 734,221
-----------
<CAPTION>
Number of
Shares Value
-------- ---------
<S> <C>
COMMON STOCKS(A)--1.27%
COMMUNICATIONS--FIXED--0.64%
16,314 Viatel Incorporated .............................................................. 685,188
---------
MEDIA--0.38%
2,000 Affiliated Newspaper Investments Incorporated .................................... 400,000
---------
SERVICES--0.18%
43,575 Waste Systems International Incorporated ......................................... 196,087
---------
TECHNOLOGY--0.07%
17,000 Ampex Corporation ................................................................ 77,563
---------
Total Common Stocks (cost--$348,472).......................................................... 1,358,838
---------
PREFERRED STOCK--1.90%
ENERGY--1.90%
2,000 Centaur Funding .................................................................. 2,027,500
10,373 Orion Refining Corporation(a) .................................................... 7,085
---------
Total Preferred Stock (cost--$2,006,577)...................................................... 2,034,585
---------
<CAPTION>
NUMBER OF
WARRANTS VALUE
-------- ---------
<S> <C>
WARRANTS(A)--0.11%
CABLE--0.04%
2,000 Knology Holdings Incorporated .................................................... 10,000
1,000 UIH Australia Pacific Incorporated ............................................... 30,000
---------
40,000
---------
COMMUNICATIONS--FIXED--0.05%
750 Pathnet Incorporated ............................................................. 7,500
500 Tele1 Europe BV .................................................................. 42,500
---------
50,000
---------
ENERGY--0.01%
500 Key Energy Services Incorporated ................................................. 12,500
---------
<CAPTION>
NUMBER OF
WARRANTS VALUE
-------- ---------
<S> <C>
WARRANTS(A)--0.11%
CABLE--0.04%
2,000 Knology Holdings Incorporated .................................................... 10,000
1,000 UIH Australia Pacific Incorporated ............................................... 30,000
---------
40,000
---------
COMMUNICATIONS--FIXED--0.05%
750 Pathnet Incorporated ............................................................. 7,500
500 Tele1 Europe BV** ................................................................ 42,500
---------
50,000
---------
ENERGY--0.01%
500 Key Energy Services Incorporated ................................................. 12,500
---------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
WARRANTS VALUE
-------- ---------
<S> <C>
FINANCIAL SERVICES--0.00%
500 Olympic Financial Limited ....................................................... 500
----------
MEDIA--0.01%
1,750 Inter Act Systems Incorporated .................................................. 8,750
----------
TECHNOLOGY--0.00%
2,000 Electronic Retailing Systems International
Incorporated..................................................................... 2,000
----------
TRANSPORTATION--0.00%
1,000 Millenium Seacarriers Incorporated .............................................. 125
----------
Total Warrants (cost--$50,741)............................................................... 113,875
----------
Total High Yield Securities (cost--$50,121,418).............................................. 43,410,189
----------
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES
-------- --------- -------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS--13.98%
15,000 Federal National Mortgage Association Discount Notes
(cost--$14,972,650)............................................... 12/13/99 5.470 14,972,650
------------
REPURCHASE AGREEMENT--2.88%
$ 3,087 Repurchase Agreement dated 11/30/99 with Zions Bancorp col-
lateralized by $3,250,000 U.S. Treasury Bill, 5.280% due 05/18/00
(value--$3,149,920); proceeds:$3,087,484 (cost-$3,087,000) ..... 12/01/99 5.650 3,087,000
------------
Total Investments (cost -- $129,506,235) -- 113.55%.......................... 121,627,839
Liabilities in excess of other assets -- (13.55)%............................ (14,512,857)
------------
Net Assets -- 100.00%........................................................ $107,114,982
============
</TABLE>
- ---------------------
* Stated in local currency.
** Security exempt from registration under 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
# Security represents a unit which is composed of the stated bond with the
attached warrants or common stock.
+ Denotes a step-up bond or a zero coupon bond that converts to the noted
fixed rate at a designated future date.
++ Floating rate securities, the interest rates shown are current rates as
of November 30, 1999.
(a) Non-income producing
(b) Reflects rate at November 30, 1999, on step coupon rate instruments.
(c) Illiquid security representing 1.41% of net assets.
(d) Variable rate security -- maturity date reflects earlier of reset date or
maturity date. The interest rate shown is the current rate as of November
30, 1999.
(1) With additional 6,080,000 recoverable rights attached maturing on June
30, 2003 with no market value.
(2) Interest may be capitalized.
DISC Discount Bonds
NZD New Zealand Dollars
PAR Par Bond
PDI Past Due Interest Bond
REMIC Real Estate Mortgage Investment Conduit
TBA (To Be Assigned) Securities are purchased on a forward commitment with
approximate principal amount (generally +/- 1.0%) and generally stated
maturity date. The actual principal amount and maturity date will be
determined upon settlement when the specific mortgage pools are assigned.
10
<PAGE>
PAINEWEBBER STRATEGIC INCOME FUND
FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
UNREALIZED
CONTRACT TO MATURITY APPRECIATION
DELIVER IN EXCHANGE FOR DATE (DEPRECIATION)
----------- ------------------- -------- --------------
<S> <C> <C> <C> <C>
British Pounds................................ 990,000 US $ 1,593,582 02/29/00 $ 13,988
U.S. Dollars.................................. 6,950,883 EUR 6,769,000 01/28/00 (98,628)
U.S. Dollars.................................. 2,760,394 EUR 2,639,000 02/22/00 (84,612)
U.S. Dollars.................................. 2,111,799 KRW 2,453,372,0000 1/26/00 7,745
--------
($161,507)
========
</TABLE>
- --------------------
Currency Type Abbreviation:
EUR--Euro
KRW--South Korean Won
US$--United States Dollars
<TABLE>
<CAPTION>
FUTURES CONTRACTS
NUMBER OF EXPIRATION UNREALIZED
CONTRACTS IN EXCHANGE FOR DATE APPRECIATION
--------- --------------- ---------- -------------
<S> <C> <C> <C> <C>
52 Contracts to Deliver - 5 Year U.S. Treasury Notes $5,582,688 December 1999 $12,187
=======
</TABLE>
See accompanying notes to financial statements
11
<PAGE>
PAINEWEBBER STRATEGIC INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES NOVEMBER 30, 1999
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost--$129,506,235)........................................... $121,627,839
Foreign Currency (cost--$115)...................................................................... 107
Receivable for investments sold.................................................................... 5,881,641
Interest receivable................................................................................ 1,752,881
Receivable for shares of beneficial interest sold.................................................. 86,904
Unrealized appreciation on forward foreign currency contracts...................................... 21,733
Other assets....................................................................................... 20,680
------------
Total assets....................................................................................... 129,391,785
------------
LIABILITIES
Payable for investments purchased.................................................................. 21,641,881
Payable for shares of beneficial interest repurchased.............................................. 191,894
Unrealized depreciation on forward foreign currency contracts...................................... 183,240
Payable to affiliates.............................................................................. 123,500
Due to custodian................................................................................... 66,233
Payable for variation margin....................................................................... 8,125
Accrued expenses and other liabilities............................................................. 61,930
------------
Total liabilities.................................................................................. 22,276,803
------------
NET ASSETS
Beneficial interest--$0.001 par value (unlimited amount authorized)................................ 125,029,597
Undistributed net investment income................................................................ 170,126
Accumulated net realized losses from investments and futures transactions.......................... (10,046,414)
Net unrealized depreciation of investments, other assets, liabilities and
forward contracts denominated in foreign currencies............................................... (8,038,327)
------------
Net assets......................................................................................... $107,114,982
============
CLASS A:
Net assets......................................................................................... $ 40,688,358
------------
Shares outstanding................................................................................. 4,769,704
------------
Net asset and redemption value per share........................................................... $8.53
=====
Maximum offering price per share (net asset value plus sales charge of 4.00% of offering price).... $8.89
=====
CLASS B:
Net assets......................................................................................... $ 38,062,156
------------
Shares outstanding................................................................................. 4,466,854
------------
Net asset value and offering price per share....................................................... $8.52
=====
CLASS C:
Net assets......................................................................................... $ 27,236,683
------------
Shares outstanding................................................................................. 3,195,054
------------
Net asset value and offering price per share....................................................... $8.52
=====
CLASS Y:
Net assets......................................................................................... $ 1,127,785
-----------
Shares outstanding................................................................................. 132,262
-----------
Net asset value, offering price and redemption value per share .................................... $8.53
=====
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
PAINEWEBBER STRATEGIC INCOME FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
NOVEMBER 30, 1999
-----------------
<S> <C>
INVESTMENT INCOME:
Interest................................................................................. $ 9,635,959
Dividends................................................................................ 168,485
--------------
9,804,444
--------------
EXPENSES:
Investment advisory and administration................................................... 840,960
Service fees--Class A.................................................................... 97,242
Service and distribution fees--Class B................................................... 429,035
Service and distribution fees--Class C................................................... 220,329
Transfer agency and service fees......................................................... 70,987
Reports and notices to shareholders...................................................... 68,141
Legal and audit.......................................................................... 59,932
Custody and accounting................................................................... 57,830
State registration....................................................................... 51,088
Amortization or organizational expenses.................................................. 10,660
Trustees' fees........................................................................... 10,500
Other expenses........................................................................... 25,600
--------------
1,942,304
Less: Fee waivers from adviser........................................................... (2,499)
--------------
Net Expenses............................................................................. 1,939,805
--------------
NET INVESTMENT INCOME.................................................................... 7,864,639
--------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT TRANSACTIONS:
Net realized gains (losses) from:
Investment transactions................................................................ (1,777,256)
Foreign currency transactions.......................................................... (660,665)
Futures contracts...................................................................... 93,631
Written option transactions............................................................ (11,617)
Net change in unrealized appreciation/depreciation of:
Investments............................................................................ (3,996,137)
Futures................................................................................ 12,187
Other assets, liabilities and forward contracts denominated in foreign currencies...... (271,601)
--------------
NET REALIZED AND UNREALIZED LOSSES FROM INVESTMENT ACTIVITIES ..................................... (6,611,458)
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................................... $ 1,253,181
==============
</TABLE>
See accompanying notes to financial statements
13
<PAGE>
PAINEWEBBER STRATEGIC INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
YEARS ENDED
NOVEMBER 30,
------------------------------
1999 1998
-------------- -------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ............................................................. $ 7,864,639 $ 6,604,003
Net realized losses from investment, purchased options, foreign currency,
future contracts and written options transactions ............................... (2,355,907) (52,231)
Net change in unrealized appreciation/depreciation of investments,
other assets, liabilities and forward contracts denominated in
foreign currencies............................................................... (4,255,551) (5,901,299)
------------- -------------
Net increase in net assets resulting from operations .............................. 1,253,181 650,473
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
From net investment Income--Class A ............................................... (2,522,970) (2,333,211)
From net investment Income--Class B ............................................... (2,467,340) (2,962,496)
From net investment Income--Class C ............................................... (1,761,471) (1,873,596)
From net investment Income--Class Y ............................................... (65,569) (25,077)
From paid in capital--Class A ..................................................... (240,120) --
From paid in capital--Class B ..................................................... (230,780) --
From paid in capital--Class C ..................................................... (165,360) --
From paid in capital--Class Y ..................................................... (6,270) --
From foreign currency transactions--Class A ....................................... (168,623) --
From foreign currency transactions--Class B ....................................... (220,118) --
From foreign currency transactions--Class C ....................................... (145,985) --
From foreign currency transactions--Class Y ....................................... (4,002) --
------------- -------------
Total dividends and distributions to shareholders ................................. (7,998,608) (7,194,380
------------- -------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares .............................................. 33,578,632 53,589,392
Cost of shares repurchased ........................................................ (36,518,754) (24,924,283)
Proceeds from dividends reinvested ................................................ 4,893,143 4,110,250
------------- -------------
Net increase in net assets from beneficial interest transactions .................. 1,953,021 32,775,359
------------- -------------
Net increase (decrease) in net assets ............................................. (4,792,406) 26,231,452
NET ASSETS:
Beginning of year ................................................................. 111,907,388 85,675,936
------------- -------------
End of year (including undistributed net investment income
$170,126 and $243,848, respectively) ............................................ $ 107,114,982 $ 111,907,388
============= =============
</TABLE>
See accompanying notes to financial statements
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Strategic Income Fund (the "Fund") is a series of PaineWebber
Securities Trust ("Trust"), which was organized under Massachusetts law by a
Declaration of Trust dated December 3, 1992 and registered with the Securities
and Exchange Commission under the Investment Company Act of 1940, as amended, as
an open-end management investment company. The Fund seeks high levels of current
income and, secondarily, capital appreciation by allocating its investments
among three bond market categories: U.S. government and investment grade
corporate bonds; U.S. high yield, high risk corporate bonds; and foreign and
emerging market bonds. Costs incurred by the Fund in connection with its
organization have been deferred and amortized using the straight-line method
over a sixty month period from the commencement of operations.
Currently, the Fund offers Class A, Class B, Class C and Class Y shares.
Each class represents interests in the same assets of the Fund, and the classes
are identical except for differences in their sales charge structures, ongoing
service and distribution charges and certain transfer agency expenses. In
addition, Class B shares and all corresponding reinvested dividend shares
automatically convert to Class A shares approximately six years after issuance.
All classes of shares have equal voting privileges, except that each class has
exclusive voting rights with respect to their service and/or distribution plan.
Class Y shares have no service or distribution plan.
The preparation of financial statements in accordance with generally
accepted accounting principles requires Fund management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates. The following is a
summary of significant accounting policies:
VALUATION OF INVESTMENTS--The Fund calculates its net asset value based on
the current market value for its portfolio securities. The Fund normally obtains
market value for its securities from independent pricing sources. Independent
pricing sources may use reported last sale prices, current market quotations or
valuations from computerized "matrix" systems that derive values based on
comparable securities. Securities traded in the over-the-counter ("OTC") market
and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") normally are valued at
the last sale price on Nasdaq prior to valuation. Other OTC securities are
valued at the last bid price available prior to valuation. Securities which are
listed on U.S. and foreign stock exchanges normally are valued at the last sale
price on the day the securities are valued or, lacking any sales on such day, at
the last available bid price. In cases where securities are traded on more than
one exchange, the securities are valued on the exchange designated as the
primary market by Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"),
a wholly owned asset management subsidiary of PaineWebber Incorporated
("PaineWebber") and investment adviser and administrator of the Fund. If a
market value is not available from an independent pricing source for a
particular security, that security is valued at fair value as determined in good
faith by or under the direction of the Fund'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 board determines that this does not represent
fair value. All investments quoted in foreign currencies will be valued daily in
U.S. dollars on the basis of the foreign currency exchange rates prevailing at
the time such valuation is determined by the Fund's custodian.
Foreign currency exchange rates are generally determined prior to the close
of the New York Stock Exchange ("NYSE"). Occasionally, events affecting the
value of foreign investments and such exchange rates occur between the time at
which they are determined and the close of the NYSE, which will not be reflected
in the computation of the Fund's net asset value. If events materially affecting
the value of such securities or currency exchange rates occur during such time
period, the securities will be valued at their fair value as determined in good
faith by or under the direction of the Fund's board.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 and foreign exchange transactions are calculated using the
identified cost method. Interest income is recorded on an accrual basis.
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.
FOREIGN CURRENCY TRANSLATION--The book and records of the Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis: (1) market value of investment securities, other
assets and liabilities--at the exchange rates prevailing at the end of the
period; and (2) purchases and sales of investment securities, income and
expenses--at the rates of exchange prevailing on the respective dates of such
transactions.
Although the Fund's net assets including the market values of the Fund's
investments are presented at the foreign exchange rates at the close of the
period, the Fund does not generally isolate the effect of fluctuations in
foreign exchange rates from the effect of the changes in market prices of
securities. However, the Fund does isolate the effect of fluctuations in foreign
exchange rates when determining the gain or loss upon the sale or maturity of
foreign currency-denominated debt obligations pursuant to federal income tax
regulations.
FORWARD FOREIGN CURRENCY CONTRACTS--The Fund may enter into forward foreign
currency exchange contracts ("forward contracts") in connection with planned
purchases or sales of securities or to hedge the U.S. dollar value of portfolio
securities denominated in a particular currency.
The Fund has no specific limitation on the percentage of assets which may
be committed to such contracts. The Fund may enter into forward contracts or
maintain a net exposure to forward contracts only if (1) the consummation of the
contracts would not obligate the Fund to deliver an amount of foreign currency
in excess of the value of the position being hedged by such contacts or (2) the
Fund maintains cash, U.S. government securities or liquid debt securities in a
segregated account in an amount not less than the value of its total assets
committed to the consummation of the forward contracts and not covered as
provided in (1) above, as marked-to-market daily.
Risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their forward contracts and
from unanticipated movements in the value of foreign currencies relative to the
U.S. dollar.
Fluctuations in the value of forward contracts are recorded as unrealized
gains or losses by the Fund. Realized gains and losses included net gains and
losses recognized by the Fund on contracts which have matured.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FUTURES CONTRACTS--Upon entering into a financial futures contract, the
Fund is required to pledge to a broker an amount of cash and/or U.S. government
securities equal to a certain percentage of the contract amount. This amount is
known as the "initial margin." Subsequent payments, known as "variation margin,"
are made or received by the Fund each day, depending on the daily fluctuations
in the value of the underlying financial futures contracts. Such variation
margin is recorded for financial statement purposes on a daily basis as
unrealized gain or loss until the financial futures contract is closed, at which
time the net gain or loss is reclassified to realized gain or loss.
Using financial futures contracts involves various market risks. The
maximum amount at risk from the purchase of a futures contact is the contract
value. The Fund primarily uses financial futures contracts to manage duration or
for hedging purposes and not for leverage. However, imperfect correlations
between futures contracts and portfolio securities being hedged or, market
disruptions, do not normally permit full control of these risks at all times.
WRITTEN OPTIONS--When a Fund writes a call or a put option, an amount equal
to the premium received by the Fund is included in the Fund's Statement of
Assets and Liabilities as an asset and as an equivalent liability. The amount of
the liability is subsequently marked-to-market to reflect the current market
value of the option written. If an option which the Fund has written either
expires on its stipulated expiration date or the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or loss if the cost of a closing
purchase transaction exceeds the premium received when the option was written)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is extinguished. If a call option which the
Fund has written is exercised, the Fund realizes a capital gain or loss
(long-term or short-term, depending on the holding period of the underlying
security) from the sale of the underlying security and the proceeds from the
sale are increased by the premium originally received. If a put option which the
Fund has written is exercised, the amount of the premium originally received
reduces the cost of the security which the Fund purchases upon exercise of the
option.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS--Dividends and distributions to
shareholders are recorded on the ex-dividend date. The amount of dividends and
distributions are determined in accordance with federal income tax regulations
which may differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification.
CONCENTRATION OF RISK
The ability of the issuers of debt securities held by the Fund to meet
their obligations may be affected by economic and political developments
particular to a specific industry, country or region. Mortgage securities may
decrease in value as a result of increases in interest rates and may benefit
less than other fixed-income securities from declining interest rates because of
risk of prepayments. Investing in securities of foreign issuers and currency
transactions may involve certain considerations and risks not typically
associated with investments in the United States. These risks include
revaluation of currencies, adverse fluctuations in foreign currency values and
possible adverse political, social and economic developments, including those
particular to a specific industry, country or region, which could cause the
securities and their markets to be less liquid and prices more volatile than
those of comparable U.S. companies and U.S. government securities. These risks
are greater with respect to securities of issuers located in emerging market
countries in which the Fund is authorized to invest.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
WRITTEN OPTION ACTIVITY
Transactions in options written for year ended November 30, 1999 were as
follows:
NUMBER OF
OPTIONS PREMIUMS
--------- --------
Options outstanding at November 30, 1998.............. 0 $ 0
Options written....................................... 300 147,731
Options terminated in closing purchase transactions... 300 (147,731)
Options expired....................................... 0 0
------- --------
Options outstanding at November 30, 1999.............. 0 $ 0
======== ========
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 0.75% of the Fund's average daily net assets. At
November 30, 1999 the Fund owed Mitchell Hutchins $66,521 in investment advisory
and administration fees. For the year ended November 30, 1999, Mitchell Hutchins
voluntarily waived $2,468 in investment advisory and administration fees from
the Fund. Mitchell Hutchins also waived $31 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.
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 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% and 0.50% of the average daily net
assets of Class B shares and Class C shares, respectively. At November 30, 1999,
the Fund owed Mitchell Hutchins $56,928 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 the shareholders upon certain redemptions of
Class B and Class C shares. Mitchell Hutchins has informed the Fund that for the
year ended November 30, 1999, it earned $200,983 in sales charges.
SECURITY LENDING
The Fund may lend securities up to 331/3% of its total assets to qualified
institutions. The loans are secured at all times by cash or U.S. government
securities or irrevocable letters of credit that meet certain guidelines
established by Mitchell Hutchins, 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 November 30, 1999, the Fund earned $1,178 for
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
lending its securities and PaineWebber earned $338 as the Fund's lending agent.
At November 30, 1999, the Fund owed PaineWebber $51 for security lending fees.
There were no securities out on loan on November 30, 1999.
BANK LINE OF CREDIT
The Fund may participate with other funds managed by Mitchell Hutchins in a
$200 million committed credit facility ("Facility") to be utilized for temporary
financing until settlement of sales or purchases of portfolio securities, the
repurchase or redemption of shares of the fund at the request of the
shareholders and other temporary or emergency purposes. In connection therewith,
the Fund has agreed to pay a commitment fee, pro rata, based on the relative
asset size of the funds in the Facility. Interest is charged to the fund at
rates based on prevailing market rates in effect at the time of borrowings. For
the year ended November 30, 1999, the Fund did not borrow under the Facility.
TRANSFER AGENCY RELATED SERVICE FEES
PaineWebber provides certain 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 these services by PFPC, Inc., not the Fund. For
the year ended November 30, 1999, PaineWebber received from PFPC, Inc.,
approximately 42% of the total transfer agency and related services fees
collected by PFPC.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at November
30, 1999 was substantially the same as the cost of securities for financial
statement purposes.
At November 30, 1999, the components of net unrealized depreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value over cost)........... $ 2,433,939
Gross depreciation (investments having an excess of cost over value)........... (10,312,335)
------------
Net unrealized depreciation of investments .................................... $ (7,878,396)
============
</TABLE>
For the year ended November 30, 1999, total aggregate purchases and sales
of portfolio securities, excluding short-term securities, were as follows:
<TABLE>
<S> <C>
Purchases............................................................. $242,220,351
Sales................................................................. $241,972,984
</TABLE>
FEDERAL INCOME TAX STATUS
The Fund intends to distribute 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.
At November 30, 1999, the Fund has a net capital loss carryforward of
$10,029,452 that will expire between November 30, 2002 and November 30, 2007.
This loss carryforward is available as a reduction, to the extent provided in
the regulations, of future net realized capital gains. To the extent that such
losses are used to offset future net realized capital gains, it is probable
these gains will not be distributed.
To reflect reclassifications arising from permanent "book/tax" differences
for the year ended November 30, 1999, undistributed net investment income was
increased by $60,247, accumulated net realized losses was decreased by $582,283
and beneficial interest was decreased by $642,530. Permanent book/tax
differences are primarily attributable to foreign currency gains/losses.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS
SHARES OF BENEFICIAL INTEREST
There was 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
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
------- -------- ------- --------
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED NOVEMBER 30, 1999:
Shares sold ................................. 1,996,860 $ 17,702,363 986,007 $ 8,732,830
Shares repurchased .......................... (1,687,473) (14,905,284) (1,388,164) (12,199,690)
Shares converted from Class B to Class A..... 297,656 2,622,068 (298,015) (2,622,068)
Dividends reinvested ........................ 212,937 1,868,492 169,428 1,488,996
---------- ------------ ---------- ------------
Net increase (decrease) ..................... 819,980 $ 7,287,639 (530,744) $ (4,599,932)
========== ============ ========== ============
<CAPTION>
CLASS C CLASS Y
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
------- -------- ------- --------
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED NOVEMBER 30, 1999:
Shares sold ................................. 683,008 $ 6,042,996 123,407 $ 1,100,443
Shares repurchased .......................... (983,441) (8,649,572) (85,432) (764,208)
Shares converted from Class B to Class A..... -- -- -- --
Dividends reinvested ........................ 166,528 1,463,623 8,203 72,032
---------- ------------ ---------- ------------
Net increase (decrease) ..................... (133,905) $(1,142,953) 46,178 $ 408,267
========== ============ ========== ============
<CAPTION>
CLASS A CLASS B
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
------- -------- ------- --------
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED NOVEMBER 30, 1998:
Shares sold ................................. 2,240,724 $ 21,438,510 1,981,199 $ 18,796,882
Shares repurchased........................... (1,065,267) (10,047,449) (1,030,221) (9,736,522)
Shares converted from Class B to Class A ... 442,232 4,202,593 (442,802) (4,202,593)
Dividends reinvested ....................... 153,189 1,439,464 144,447 1,358,408
----------- ------------ ---------- ------------
Net increase ............................... 1,770,878 $ 17,033,118 652,623 $ 6,216,175
=========== ============ ========== ============
<CAPTION>
CLASS C CLASS Y+
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
------- -------- ------- --------
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED NOVEMBER 30, 1998:
Shares sold ................................ 1,311,569 $ 12,448,834 95,482 $ 905,166
Shares repurchased.......................... (529,973) (5,029,905) (11,995) (110,407)
Shares converted from Class B to Class A ... -- -- -- --
Dividends reinvested ....................... 137,074 1,288,391 2,597 23,987
---------- ------------ -------- ---------
Net increase ............................... 918,670 $ 8,707,320 86,084 $ 818,746
========== ============ ======== =========
</TABLE>
- -------------------
+ For the period February 17, 1998 through November 30, 1998
20
<PAGE>
[This Page Intentionally Left Blank]
21
<PAGE>
PAINEWEBBER STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------------------------
FOR THE PERIOD FOR THE PERIOD
FEBRUARY 1, 1996 FOR THE FEBRUARY 7, 1994+
FOR THE YEARS ENDED NOVEMBER 30, THROUGH YEAR ENDED THROUGH
------------------------------------ NOVEMBER 30, JANUARY 31, JANUARY 31,
1999 1998 1997 1996 1996 1995
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .... $ 9.06 $ 9.60 $ 9.37 $ 8.99 $ 8.60 $ 10.00
-------- ------- ------- ------- ------- -------
Net investment income ................... 0.61 0.64 0.74 0.57 0.67 0.74
Net realized and unrealized gains (losses)
from investments foreign currency,
futures contracts and written options (0.48) (0.48) 0.17 0.39 0.59 (1.49)
-------- ------- ------- ------- ------- -------
Net increase (decrease) from investment
operations .......................... 0.13 0.16 0.91 0.96 1.26 (0.75)
-------- ------- ------- ------- ------- -------
Dividends from net investment income .... (0.57) (0.70) (0.68) (0.58) (0.77) (0.65)
Distributions from paid in capital ...... (0.05) -- -- -- -- --
Distributions from foreign currency
transactions ........................ (0.04) -- -- -- (0.10) --
-------- ------- ------- ------- ------- -------
Total dividend and distributions to
shareholders ........................ (0.66) (0.70) (0.68) (0.58) (0.87) (0.65)
-------- ------- ------- ------- ------- -------
Net asset value, end of period .......... $ 8.53 $ 9.06 $ 9.60 $ 9.37 $ 8.99 $ 8.60
======== ======= ====== ======= ======= =======
Total investment return(1) .............. 1.56% 1.65% 10.04% 11.14% 15.27% (7.61)%
======== ======= ====== ======= ======= =======
Ratios/Supplemental data:
Net assets, end of period (000's) ....... $ 40,688 $ 35,778 $20,909 $ 9,944 $ 9,841 $11,148
Expenses to average net assets after
waivers from adviser(2) ............. 1.30% 1.34% 1.65% 1.89%* 1.74% 1.49%*
Net investment income to average net
assets after waivers from adviser(2) .. 7.45% 6.97% 7.35% 7.69%* 8.52% 8.06%*
Portfolio turnover ...................... 226% 192% 140% 101% 91% 117%
</TABLE>
- --------------------------------
+ Commencement of operations.
* Annualized.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each year reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates and a sale at
net asset value on the last day of each year reported. The figures do not
include sales charges; results would be lower if sales charges were
included. Total investment return for periods of less than one year has not
been annualized.
(2) During the year ended November 30, 1997 Mitchell Hutchins waived a portion
of its advisory and administration fees. If such waivers had not been made
the annualized ratios of expenses to average net assets would have been
1.66% for Class A, and 2.45% for Class B. During the year ended November 30,
1999, Mitchell Hutchins waived a portion of its advisory and administration
fees. The ratios excluding the waivers are the same since the waiver
represents less than 0.005%.
22
<PAGE>
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------------------------------------------
FOR THE PERIOD FOR THE PERIOD
FEBRUARY 1, 1996 FOR THE FEBRUARY 7, 1994+
FOR THE YEARS ENDED NOVEMBER 30, THROUGH YEAR ENDED THROUGH
------------------------------------ NOVEMBER 30, JANUARY 31, JANUARY 31,
1999 1998 1997 1996 1996 1995
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 9.05 $ 9.59 $ 9.36 $ 8.98 $ 8.60 $ 10.00
------- ------- ------- ------- ------- -------
Net investment income .................... 0.54 0.56 0.67 0.51 0.60 0.66
Net realized and unrealized gains (losses)
from investments foreign currency,
futures contracts and written options (0.47) (0.47) 0.16 0.39 0.59 (1.47)
------- ------- ------- ------- ------- -------
Net increase (decrease) from investment
operations ........................... 0.07 0.90 0.83 0.90 1.19 (0.81)
------- ------- ------- ------- ------- -------
Dividends from net investment income ..... (0.51) (0.63) (0.60) (0.52) (0.71) (0.59)
Distributions from paid in capital ....... (0.05) -- -- -- -- $ 9.36
Distributions from foreign currency
transactions ......................... (0.04) -- -- -- (0.10) --
------- ------- ------- -------- ------- -------
Total dividend and distributions to
shareholders ......................... (0.60) (0.63) (0.60) (0.52) (0.81) (0.59)
------- ------- -------- -------- ------- --------
Net asset value, end of period ........... $ 8.52 $ 9.05 $ 9.59 $ 9.36 $ 8.98 $ 8.60
======= ======= ======== ======== ======= ========
Total investment return(1) ............... 0.76% 0.87% 9.20% 10.46% 14.37% (8.22)%
======= ======= ======== ======== ======= ========
Ratios/Supplemental data:
Net assets, end of period (000's) ........ $38,062 $ 45,217 $ 41,650 $ 37,249 $ 40,653 $ 40,710
Expenses to average net assets after
waivers from adviser(2) .............. 2.08% 2.12% 2.43% 2.63%* 2.49% 2.24%*
Net investment income to average net
assets after waivers from adviser(2) ... 6.66% 5.98% 6.56% 6.93%* 7.77% 7.46%*
Portfolio turnover ....................... 226% 192% 140% 101% 91% 117%
</TABLE>
23
<PAGE>
PAINEWEBBER STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
CLASS C CLASS Y
----------------------------------------------------------------- --------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
FEBRUARY 1, FEBRUARY 7, FEBRUARY 17
1996 FOR THE 1994+ FOR THE 1998+
FOR THE YEARS ENDED THROUGH YEAR ENDED THROUGH YEAR ENDED THROUGH
NOVEMBER 30, NOVEMBER JANUARY JANUARY NOVEMBER NOVEMBER
----------------------------- 30, 31, 31, 30, 30,
1999 1998 1997 1996 1996 1995 1999 1998
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .... $ 9.05 $ 9.59 $ 9.37 $ 8.98 $ 8.60 $ 10.00 $ 9.05 $ 9.72
------- ------- ------- ------- ------- ------- ------- -------
Net investment income ................... 0.57 0.59 0.70 0.53 0.62 0.69 0.63 0.56
Net realized and unrealized gains
(losses) from investments,
foreign currency, futures
contracts and written options ........ (0.48) (0.48) 0.15 0.40 0.59 (1.48) (0.46) (0.66)
------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease) from
investment operations ................. 0.09 0.11 0.85 0.93 1.21 (0.79) 0.17 (0.10)
------- ------- ------- ------- ------- ------- ------- -------
Dividends from net investment
operations ............................ (0.53) (0.65) (0.63) (0.54) (0.73) (0.61) (0.59) (0.57)
Distribution from paid in capital ....... (0.05) -- -- -- -- -- (0.06) --
Distributions from foreign currency
transactions .......................... (0.04) -- -- -- (0.10) -- (0.04) --
------- ------- ------- ------- ------- ------- ------- -------
Total dividend and distributions to
shareholders ........................... (0.62) (0.65) (0.63) (0.54) (0.83) (0.61) (0.69) (0.57)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of period .......... $ 8.52 $ 9.05 $ 9.59 $ 9.37 $ 8.98 $ 8.60 $ 8.53 $ 9.05
======= ======= ======= ======= ======= ======= ======= =======
Total investment return(1) .............. 1.03% 1.14% 9.37% 10.80% 14.63% (8.02)% 1.91% (1.04)%
======= ======= ======= ======= ======= ======= ======= =======
Ratios/Supplemental data:
Net assets, end of period (000's) ....... $27,237 $30,133 $23,117 $17,101 $19,232 $21,208 $ 1,128 $ 779
Expenses to average net assets after
waiver from adviser(2) ............... 1.82% 1.86% 2.17% 2.38%* 2.24% 1.98%* 1.05% 1.07%*
Net investment income to average net
assets after waiver from adviser(2) ... 6.92% 6.24% 6.82% 7.19%* 8.03% 7.62%* 7.67% 7.26%*
Portfolio turnover rate ................. 226% 192% 140% 101% 91% 117% 226% 192%
</TABLE>
- ----------
+ Commencement of operations.
* Annualized.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions, if any, at net asset value on the payable dates and a sale
at net asset value on the last day of each period reported. The figures do
not include sales charges or program fees; results would be lower if sales
charges or program fees were included. Total investment return for periods
of less than one year has not been annualized.
(2) During the year ended November 30, 1997 Mitchell Hutchins waived a portion
of its advisory and administration fees. If such waivers had not been made
the annualized ratios of expenses to average net assets would have been
1.66% for Class A, and 2.18% for Class C shares. During the year ended
November 30, 1999, Mitchell Hutchins waived a portion of its advisory and
administration fees. The ratios excluding the waivers are the same since
the waiver represents less than 0.005%.
24
<PAGE>
PAINEWEBBER STRATEGIC INCOME FUND
REPORT OF PRICEWATERHOUSECOOPERS LLP
INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of
PaineWebber Strategic Income Fund
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of PaineWebber Strategic Income Fund
(the "Fund") at November 30, 1999, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
November 30, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
January 26, 2000
25
<PAGE>
PAINEWEBBER STRATEGIC INCOME FUND
TAX INFORMATION
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 period end (November
30, 1999) as to the federal tax status of distributions received by shareholders
during such fiscal year. Accordingly, we are advising you that all of the
distributions paid by the Fund during the period were classified on a per share
basis as follows:
<TABLE>
<CAPTION>
Class A Class B Class C Class Y
------- ------- ------- -------
<S> <C> <C> <C> <C>
Ordinary Income..............................$0.6149 $0.5509 $0.5726 $0.6334
Distribution from paid in capital............$0.0536 $0.0476 $0.0496 $0.0554
</TABLE>
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 reporting.
Because the Fund's fiscal year is not the calendar year, another
notification will be sent in respect of calendar year 1999. The second
notification, which reflects 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 2000. Shareholders are advised to consult their
own tax advisors with respect to the tax consequences of their investment in the
Fund.
26
<PAGE>
PAINEWEBBER STRATEGIC INCOME FUND
TRUSTEES
E. Garrett Bewkes, Jr.
CHAIRMAN Meyer Feldberg
Margo N. Alexander George W. Gowen
Richard Q. Armstrong Frederic V. Malek
Richard R. Burt Carl W. Schafer
Mary C. Farrell Brian M. Storms
OFFICERS
Margo N. Alexander Thomas J. Libassi
PRESIDENT VICE PRESIDENT
Victoria E. Schonfeld Dennis L. McCauley
VICE PRESIDENT VICE PRESIDENT
Dianne E. O'Donnell Nirmal Singh and Secretary
VICE PRESIDENT AND SECRETARY VICE PRESIDENT
Paul H. Schubert Stuart Waugh
VICE PRESIDENT AND TREASURER VICE PRESIDENT
INVESTMENT ADVISER,
ADMINISTRATOR AND DISTRIBUTOR
Mitchell Hutchins Asset Management Inc.
51 West 52nd Street
New York, New York 10019
THIS REPORT IS NOT TO BE USED IN CONNECTION WITH THE OFFERING OF SHARES OF THE
FUND UNLESS ACCOMPANIED OR PRECEDED BY AN EFFECTIVE PROSPECTUS.
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
CORRESPONDING FIRM. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
<PAGE>
PaineWebber offers a family of 28 funds which encompass a diversified range of
investment goals.
PAINEWEBBER
ANNUAL REPORT
- -------------------------------------------------------------------------------
STRATEGIC
INCOME
FUND
NOVEMBER 30, 1999
- --------------------------------------------------------------------------------
BOND FUNDS
[] High Income Fund
[] Investment Grade Income Fund
[] Low Duration U.S. Government Income Fund
[] Strategic Income Fund
[] U.S. Government Income Fund
TAX-FREE BOND FUNDS
[] California Tax-Free Income Fund
[] Municipal High Income Fund
[] National Tax-Free Income Fund
[] New York Tax-Free Income Fund
STOCK FUNDS
[] Financial Services Growth Fund
[] Growth Fund
[] Growth and Income Fund
[] Mid Cap Fund
[] Small Cap Fund
[] S&P 500 Index Fund
[] Strategy Fund
[] Tax-Managed Equity Fund
[] Utility Income Fund
ASSET ALLOCATION FUNDS
[] Balanced Fund
[] Tactical Allocation Fund
GLOBAL FUNDS
[] Asia Pacific Growth Fund
[] Emerging Markets Equity Fund
[] Global Equity Fund
[] Global Income Fund
MITCHELL HUTCHINS PORTFOLIOS
[] Aggressive Portfolio
[] Moderate Portfolio
[] Conservative Portfolio
PAINEWEBBER MONEY MARKET FUND
PAINEWEBBER
(C)2000 PaineWebber Incorporated
Member SIPC
All rights reserved
