<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
SEMI ANNUAL REPORT
PaineWebber Emerging Markets Equity Fund
FUND PROFILE
GOAL:
Long-term capital appreciation
PORTFOLIO MANAGER:
Schroder Capital Management
TOTAL NET ASSETS:
$31 million (as of April 30, 1997)
DIVIDEND PAYMENT:
Annually
June 16, 1997
Dear Shareholder,
We are pleased to present your with the semiannual report for the PaineWebber
Emerging Markets Equity Fund. This is our first report to you as the Fund's
new sub-adviser (effective February 25, 1997). Schroder Capital Management
International Inc. is a wholly-owned indirect subsidiary of Schroders plc, the
parent of an investment banking and investment management group of companies
that dates its origins to 1804. the investment management operations of the
Schroder Group are located in 18 countries worldwide including 10 offices in
emerging markets. The Schroder Group has been managing international investment
portfolios since the early years of this century.
MARKET AND PORTFOLIO REVIEW
- ------------------------------------------------------------------------------
As of April 30, 1997, the Fund was approximately 87% invested in equities
and 13% in cash and other assets. For the six months ended April 30, 1997, the
Fund's total return, reflecting reinvested distributions but not the Fund's
sales charges, was 10.6%, for Class A shares, 10.2% for Class B shares, 10.1%
for Class C shares and 10.7% for Class Y shares. The total return experienced
by Fund shareholders who purchased or redeemed shares during the period may be
lower due to the Fund's sales charge. For example, after deducting the maximum
applicable sales charges, the Fund's total return for the six-month period was
5.6% for Class A shares, 5.2% for Class B shares, 9.1% for Class C shares and
10.7% for Class Y shares. The Morgan Stanley Capital International Emerging
Markets Free (ex Malaysia) Index returned 14.4% during that time.
OUR STRATEGY
The Fund's approach is to target companies that offer sustainable growth. We
focus on companies that have professional management and a strong domestic
market share in their business or a powerful franchise. The primary attraction
of emerging markets is the high growth rates that they offer relative to the
developed world. We search for companies, for example, that will benefit from
rising living standards and increased infrastructure development. We believe
our extensive network of analysts located in 10 emerging market offices
around the world can identify attractively priced securities across a broad
capitalization range.
Over the last six months the Fund's weighting in Asian markets has
declined from 44% to 40%, while the weighting in Latin America has risen
from 31% to 34%. Within Asia, we have further
1
<PAGE>
SEMIANNUAL REPORT
reduced our exposure to Thailand due to the economic crises while we have
added to Taiwan which is benefiting from economic recovery and strong
liquidity. Elsewhere, we have added to South Africa following last year's
currency crises in anticipation of lower interest rates and economic recovery
next year. We have also added to our Portuguese holdings while selling Turkish
stocks. The former is benefiting from an improving interest rate environment
while the latter is suffering from continued political uncertainty.
AROUND THE WORLD
- ------------------------------------------------------------------------------
LATIN AMERICA
In Latin America, economic recovery and improved portfolio flows to the
region provided the background for continuing outperformance. Against this
backdrop, the markets began to consolidate in March as a change in U.S.
monetary policy was anticipated. Should interest rates rise again, the impact
on Latin American economies should not be as severe as in 1994, because the
extent of increases are not likely to be great. Argentina, usually most
affected by increases in U.S. rates, should see their impact moderated by the
presence of domestic pension funds which did not exist in 1994, the strength
of economic recovery and a fairer valuation of the peso. We added YPF Sociedad
Anonima (0.7% of total net assets), the oil conglomerate, as a result of
improving operating performance.
The Brazilian market benefited from the decision to allow President
Cardoso to stand for reelection and a revaluation of state-controlled
companies in anticipation of privatization. Telebras (2.6% of total net
assets) rose 54% during the period. As long as momentum on the reform process
and privatization continues, our outlook for Brazil remains positive. Mexico
was initially helped by lower domestic interest rates, but uncertainty over
U.S. rates and a dispute with the U.S. over drug certification led to a
partial reversal.
In Chile evidence of slower growth led to a decline in interest rates
and, in turn, strong market performance.
AFRICA
South Africa has seen a recovery both in the market and currency since the
lows reached in November. Following the currency depreciation, we expect
interest rates to begin to fall later this year. With this improving economic
picture we have been increasing our holdings in South Africa (2.4% of total
assets).
PAINEWEBBER EMERGING MARKETS EQUITY FUND
Top Ten Holdings*
(% of net assets as of April 30, 1997)
Global Telesystems
Russia 2.9%
Telecomunicacoes Brasileiras S.A.
Brazil 2.6%
Korea Electric Power Corporation
Korea 1.8%
R.O.C. Taiwan Fund
Taiwan 1.8%
Petroleo Brasileiro S.A. (Petrobras) Brazil 1.7%
Siliconware Precision Industries Company
Taiwan 1.6%
Pohang Iron & Steel Company Ltd.
Korea 1.5%
Telecomunicacoes de San Paulo S.A. (Telesp)
Brazil 1.5%
Telekomunikasi
Indonesia 1.3%
Light Servicos de Eletricidade S.A.
Brazil 1.3%
* Holding subject to change
2
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
SEMIANNUAL REPORT
EASTER EUROPE
Poland, weak at the end of 1996, rebounded in early 1997 on the back of
continuing positive macroeconomic news. Hungary remained the strongest
regional market buoyed by improving domestic demand and an increase in demand
from European Union and Central European countries; economic growth is
expected to increase to 3% in 1997 and inflation to fall to 17%
MEDITERRANEAN EUROPE
Turkey's political crises continues with the military taking a more aggressive
stance to ensure a secular government. As a result, the macroeconomic picture
remains mixed, and we have reduced our holdings there (1.7% of total net
assets). The Greek market rallied during the period, reacting to its
significant underperformance over the previous two year which left the market
cheap compared to its peers. Although the macroeconomic performance of Greece
is improving, the high budget deficit remains a concern to investors.
EMERGING ASIA
Once again Asian markets experienced mixed performance over the last six
months. The direction of interest rate changes, both domestically and in the
U.S., had a major effect on investor sentiment. At the same time, slower than
expected Asian export growth remained a negative factor, with the strength of
the U.S. dollar continuing to be an issued for regional competitiveness. Over
the period, the best market performances were seen in Taiwan and India, in
contrast to poor returns from Thailand and Korea.
In India, the government passed a budget which was well received by
investors. The recent political problems caused by the Congress party's
withdrawal of support for the government have now been resolved with the
appointment of a new Prime Minister and the passing of the budget. Following
good performance in the Philippines at the beginning of the period, we have
reduced our weighting due to concerns about the health of the real estate
market. Investor confidence failed to return to Thailand as fears of a
currency devaluation and a crisis in the banking sector lowered sentiment
further. The General Election saw the New Aspiration Party gain control, but
they have had little success in bolstering the country's faltering economy.
In Korea, the recovery in global demand for electronics proved positive.
Exports, however, were impacted by the weakness of the Korean yen. Liquidity
problems were eased somewhat by the expansion of the foreign ownership limit
to 23%. We maintained a large weighting in Chinese stocks over the period. As
interest rates are eased, economic activity in China is beginning to recover.
3
<PAGE>
SEMIANNUAL REPORT
OUTLOOK
- ------------------------------------------------------------------------------
The outlook for emerging markets globally remains good with strong
economic growth expected in most regions of the world. While parts of Asia are
suffering a cyclical downturn, we believe they will recover. By contrast, the
two largest economies in the region, China and India are seeing an
acceleration in growth. Elsewhere, Latin America continues to recover, Eastern
Europe growth remains strong, and other European markets are benefiting from
an improving interest rate environment.
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.
Sincerely,
/s/ Margo N. Alexander /s/ John Troiano
MARGO N. ALEXANDER JOHN TROIANO
President Portfolio Manager
Mitchell Hutchins Asset PaineWebber Emerging Markets
Management Inc. Equity Fund
The views expressed in this report were those of the Fund's portfolio managers
as of the dates specified, and may not reflect the views of the portfolio
managers on the date this report is first published or anytime thereafter.
These views are intended to assist shareholders of the Fund in understanding
their investment in the Fund and do not constitute investment advice;
investors should consult their own investment executives as to their
individual investment programs.
4
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
PERFORMANCE RESULTS--(unaudited)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN(1)
-------------------------------- -----------------------------
12 MONTHS 6 MONTHS
04/30/97 10/31/96 04/30/96 ENDED 04/30/97 ENDED 04/30/97
- -------------- ---------- ---------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Class A Shares $10.46 $9.46 $10.26 1.95% 10.57%
- -------------- ---------- ---------- ---------- -------------- --------------
Class B Shares 10.27 9.32 10.14 1.28 10.19
- -------------- ---------- ---------- ---------- -------------- --------------
Class C Shares 10.26 9.32 10.14 1.18 10.09
- -------------- ---------- ---------- ---------- -------------- --------------
</TABLE>
PERFORMANCE SUMMARY CLASS A SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
--------------------
CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN(1)
- ----------------- ----------- -------- --------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
01/19/94-12/31/94 $12.00 $10.49 -- -- (12.58)%
- ----------------- ----------- -------- --------------- -------------- ----------
1995 10.49 9.26 -- $0.0517 (11.20)
- ----------------- ----------- -------- --------------- -------------- ----------
1996 9.26 9.71 -- -- 4.86
- ----------------- ----------- -------- --------------- -------------- ----------
01/01/97-04/30/97 9.71 10.46 -- -- 7.72
- ----------------- ----------- -------- --------------- -------------- ----------
Total: $0.0000 $0.0517
- ----------------- ----------- -------- --------------- -------------- ----------
CUMULATIVE TOTAL RETURN AS OF 04/30/97: (12.32)%
- ----------------- ----------- -------- ------------------------------ ----------
</TABLE>
PERFORMANCE SUMMARY CLASS B SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
--------------------
CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN(1)
- ----------------- ----------- -------- --------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
12/05/95-12/31/95 $9.13 $ 9.18 -- -- 0.55%
- ----------------- ----------- -------- --------------- -------------- ---------
1996 9.18 9.56 -- -- 4.14
- ----------------- ----------- -------- --------------- -------------- ---------
01/01/97-04/30/97 9.56 10.27 -- -- 7.43
- ----------------- ----------- -------- --------------- -------------- ---------
Total: $0.0000 $0.0000
- ----------------- ----------- -------- --------------- -------------- ---------
CUMULATIVE TOTAL RETURN AS OF 04/30/97: 12.49%
- ----------------- ----------- -------- ------------------------------ ---------
</TABLE>
PERFORMANCE SUMMARY CLASS C SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
--------------------
CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN(1)
- ----------------- ----------- -------- --------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
01/19/94-12/31/94 $12.00 $10.42 -- -- (13.17)%
- ----------------- ----------- -------- --------------- -------------- ----------
1995 10.42 9.18 -- $0.0034 (11.87)
- ----------------- ----------- -------- --------------- -------------- ----------
1996 9.18 9.55 -- -- 4.03
- ----------------- ----------- -------- --------------- -------------- ----------
01/01/97-04/30/97 9.55 10.27 -- -- 7.43
- ----------------- ----------- -------- --------------- -------------- ----------
Total: $0.0000 $0.0034
- ----------------- ----------- -------- --------------- -------------- ----------
CUMULATIVE TOTAL RETURN AS OF 04/30/97: (14.47)%
- ----------------- ----------- -------- ------------------------------ ----------
</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.
Note: The Fund offers Class Y shares to a limited group of eligible investors
including the INSIGHT Investment Advisory Program participants. For the six
months ended April 30, 1997, and since inception, January 19, 1994 through
April 30, 1997, Class Y shares have a total return of 10.73% and (11.58)%,
respectively. Class Y shares do not have initial or contingent deferred sales
charges or ongoing distribution and service fees.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
5
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
PERFORMANCE RESULTS--(unaudited)
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
% RETURN WITHOUT SALES % RETURN AFTER DEDUCTING
CHARGE MAXIMUM SALES CHARGE
--------------------------- --------------------------
CLASS A* B** C*** A* B** C***
--------- ------- --------- --------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Twelve Months Ended 03/31/97 6.63% 5.88% 5.88% (1.85)% 0.88% 4.88%
- ---------------------------- --------- ------- --------- --------- ------- --------
Commencement of Operations
Through 03/31/97 (4.06)% 9.30% (4.77)% (5.44)% 6.35% (4.77)%
- ---------------------------- --------- ------- --------- --------- ------- --------
</TABLE>
* Maximum sales charge for Class A shares is 4.5% of the public offering
price. Class A shares bear ongoing 12b-1 service fees.
** Maximum contigent 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% and is
reduced to 0% after 1 year. Class C shares bear ongoing 12b-1
distribution and service fees.
+ Commencement of operations dates are January 19, 1994, December 5, 1995
and January 19, 1994 for Class A, Class B and Class C, respectively.
Note: The Fund offers Class Y shares to certain eligible investors including
the INSIGHT Investment Advisory Program participants. For the twelve months
ended March 31, 1997, and since inception, January 19, 1994 through March 31,
1997, Class Y shares have an average annual total return of 6.91% and
(3.80)%, respectively. Class Y shares do not have initial or contingent
deferred sales charges or ongoing distribution and service fees.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
6
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<S> <C> <C>
COMMON STOCKS--76.31%
ARGENTINA--4.36%
BANKS--0.78%
6,300 Banco de Galicia y Buenos Aires S.A. de
C.V. ADR................................ $ 153,267
24,642 IRSA Inversiones y Representaciones
S.A. Class B ........................... 86,749
-------------
240,016
-------------
DISTRIBUTORS--0.13%
10,450 Siderar S.A.+........................... 40,968
-------------
DIVERSIFIED INDUSTRIALS--0.66%
25,192 Perez Companc S.A. Class B.............. 204,328
-------------
OIL & GAS--1.05%
71,420 Astra Cia Argentina de Petroleo S.A.
Class B ................................ 123,569
7,267 YPF Sociedad Anonima Series D ADR ...... 200,751
-------------
324,320
-------------
REAL ESTATE--0.27%
4,500 Cresud S.A. C.I.F.yA. ADR .............. 82,687
-------------
TELECOMMUNICATIONS--1.47%
43,200 Telecom Argentina S.A................... 213,861
7,300 Telefonica de Argentina S.A. Class B
ADR..................................... 242,725
-------------
456,586
-------------
Total Argentina Common Stock ......................... 1,348,905
-------------
BRAZIL--5.74%
MEDIA--0.24%
3,950 Aracruz Celulose S.A. ADR............... 74,556
-------------
RETAIL--0.29%
6,700 Makro Atacadista S.A. GDR*+............. 87,937
-------------
SERVICES--0.26%
1,801 Companhia Energetica de Minas Gerais
(CEMIG) ADR ............................ 81,045
-------------
TELECOMMUNICATIONS--2.59%
4,900,000 Telecomunicacoes Brasileiras S.A.
(Telebras) ............................. 527,551
BRAZIL--(CONTINUED)
2,400 Telecomunicacoes Brasileiras S.A.
(Telebras) ADR ......................... $ 275,400
-------------
802,951
-------------
UTILITY--ELECTRIC, GAS & WATER--2.36%
2,140,000 Companhia Paulista de Forca e Luz ...... 332,057
960,000 Light Servicos de Electricidade S.A. ... 398,985
-------------
731,042
-------------
Total Brazil Common Stock ............................ 1,777,531
-------------
CHILE--3.62%
BANKS--0.40%
3,700 Banco BHIF ADR ......................... 74,000
3,100 Banco Santander Chile Series A ADS .... 49,600
-------------
123,600
-------------
BREWERY--0.27%
3,700 Compania Cervecerias Unidas S.A. ADR ... 82,325
-------------
CHEMICALS--0.28%
4,900 AFP Providia S.A. ADS................... 88,200
-------------
DIVERSIFIED INDUSTRIES--0.26%
5,000 Maderas Y Sinteticos S.A. ADR........... 80,000
-------------
EXTRACTIVE INDUSTRIES--0.25%
1,300 Sociedad Quimica Y Minera de Chile S.A.
Series B ADR............................ 77,025
-------------
FOOD STORES--0.36%
4,600 Santa Isabel S.A. ADS................... 112,125
-------------
HOLDING & OTHER INVESTMENT COMPANIES--0.15%
14,600 Five Arrows Chile Fund.................. 47,012
-------------
PAPER & PACKAGING--0.31%
4,100 Cristalerias de Chile S.A. ADR.......... 95,325
-------------
TELECOMMUNICATIONS--0.28%
2,725 Compania de Telecomunicaciones de Chile
S.A. ADR................................ 88,222
-------------
UTILITY--ELECTRIC, GAS & WATER--1.06%
2,700 Chilectra S.A. ADR...................... 167,400
5,600 Chilgener S.A. ADR ..................... 159,600
-------------
327,000
-------------
Total Chile Common Stock.............................. 1,120,834
7
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------- -------------
<S> <C>
COMMON STOCKS--(continued)
CHINA--1.22%
TRANSPORTATION--0.77%
438,000 Qingling Motors Company Class H......... $ 240,302
-------------
UTILITY--ELECTRIC, GAS & WATER--0.45%
5,700 Huaneng Power International
Incorporated ADR........................ 138,225
-------------
Total China Common Stock.............................. 378,527
-------------
COLOMBIA--0.50%
BANKS--0.42%
7,200 Banco Industrial Colombiano ADS ....... 130,500
-------------
TIRE & RUBBER--0.08%
32,000 Pisos Asfalto y Vinitos Colo (PAVCO) ... 25,575
-------------
Total Colombia Common Stock........................... 156,075
-------------
CROATIA--1.08%
HOUSEHOLD DURABLE GOODS--0.38%
3,370 Zagrebacka Banka GDR.................... 119,214
-------------
PHARMACEUTICALS--0.70%
13,200 Pliva dd GDR............................ 216,480
-------------
Total Croatia Common Stock............................ 335,694
-------------
CZECH REPUBLIC--0.35%
TELECOMMUNICATIONS--0.35%
1,010 SPT Telecom A.S.*....................... 106,735
-------------
EGYPT--0.71%
BANKS--0.71%
9,700 Commercial International Bank GDR ...... 218,250
-------------
GHANA--0.38%
METALS & MINING--0.38%
9,900 Ashanti Goldfields Company Limited GDR 117,563
-------------
GREECE--1.09%
BANKS--0.08%
340 Alpha Credit Bank ...................... $ 24,156
-------------
BUILDING PRODUCTS--CEMENT--0.30%
1,150 Titan Cement Company S.A. .............. 92,175
-------------
FOOD, BEVERAGES & TOBACCO--0.71%
6,790 Hellenic Bottling Company S.A........... 220,533
-------------
Total Greece Common Stock............................. 336,864
-------------
HONG KONG--5.07%
CONGLOMERATE--0.72%
238,016 Guangdong Investments Limited........... 222,761
-------------
FINANCIAL SERVICES--0.49%
248,000 Min Xin Holdings........................ 152,869
-------------
MISCELLANEOUS MANUFACTURING--0.76%
200 KTP Holdings Limited*................... 9
42,000 Shanghai Industrial Holdings Limited ... 236,390
-------------
236,399
-------------
RAILROAD TRANSPORTATION--0.65%
8,400 Guangshen Railway Company Limited ADR* . 199,500
-------------
REAL ESTATE--1.92%
500,000 China OverSeas Land & Investment ....... 282,386
42,328 Henderson China Holding Limited* ....... 72,946
84,000 New World Infrastructure
Limited* (1)+ .......................... 237,475
-------------
592,807
-------------
TRANSPORTATION--0.07%
38,000 GZI Transportation Ltd.................. 22,810
-------------
UTILITY--ELECTRIC, GAS & WATER--0.46%
276,000 Beijing Datang Power Generation
Company Limited ........................ 143,407
-------------
Total Hong Kong Common Stock ......................... 1,570,553
-------------
8
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
NUMBER OF
SHARES VALUE
- ------------- -------------
COMMON STOCKS--(continued)
HUNGARY--1.84%
BUILDING MATERIALS/CONSTRUCTION--0.17%
1,071 Pannonplast Muanya RT................... $ 53,381
-------------
CHEMICALS & ALLIED PRODUCTS--0.75%
5,200 Borsodchem RT GDR ...................... 188,500
1,200 Borsodchem RT GDR+...................... 43,500
-------------
232,000
-------------
PHARMACEUTICALS--0.92%
3,800 Gedeon Richter RT GDR .................. 285,950
-------------
Total Hungary Common Stock............................ 571,331
-------------
INDIA--4.92%
ENGINEERING--2.52%
6,600 Larsen & Toubro Limited GDR+............ 93,654
10,100 Larsen & Toubro Limited GDS............. 143,319
13,600 Steel Authority India GDR+.............. 115,600
18,580 Tata Engineering & Locomotive Company
Limited GDR ............................ 227,141
16,392 Tata Engineering & Locomotive Company
Limited GDR+............................ 200,392
-------------
780,106
-------------
FINANCIAL--0.46%
14,000 Industrial Credit & Investment India
GDR*+................................... 141,750
-------------
HOLDING & OTHER INVESTMENT COMPANIES--0.52%
40,000 India Fund (Class A).................... 162,074
-------------
UTILITY--ELECTRIC, GAS & WATER--1.42%
10,700 BSES Limited GDR*+ ..................... 251,450
5,900 BSES Limited GDR* ...................... 138,650
150 Tata Electric Companies GDR............. 48,750
-------------
438,850
-------------
Total India Common Stock.............................. 1,522,780
-------------
INDONESIA--4.37%
BANKS--0.83%
355,910 P.T. Bank Internasional Indonesia ...... $ 256,314
-------------
BUILDING MATERIALS--0.35%
172,140 P.T. Mulia Industrindo.................. 108,030
-------------
FOOD, BEVERAGES & TOBACCO--1.06%
49,000 P.T. Gudang Garam....................... 205,679
13,000 P.T. Hanjaya Mandala Sampoerna.......... 52,294
35,000 P.T. Indofoods Sukses Makmur ........... 72,377
-------------
330,350
-------------
MOTOR ENGINEERING--0.26%
21,500 P.T. Astra International Inc............ 78,745
-------------
TELECOMMUNICATIONS--1.33%
284,000 Telekomunikasi Indonesia*............... 411,975
-------------
UTILITY--ELECTRIC, GAS & WATER--0.54%
65,000 P. T. London Sumartra .................. 167,181
-------------
Total Indonesia Common Stock ......................... 1,352,595
-------------
ISRAEL--2.21%
DIVERSIFIED INDUSTRIES--0.72%
8,500 Tadiran Limited ADR..................... 222,062
-------------
PHARMACEUTICALS--0.54%
3,300 Teva Pharmaceutical Industries Limited
ADR..................................... 167,475
-------------
RETAIL--0.23%
24,000 Super Sol Limited....................... 71,559
-------------
TELECOMMUNICATIONS--0.72%
10,200 ECI Telecommunications Limited.......... 223,125
-------------
Total Israel Common Stock............................... 684,221
9
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
NUMBER OF
SHARES VALUE
- ------------- -------------
COMMON STOCKS--(continued)
KOREA--5.18%
BANKS--0.72%
1,520 Housing and Commercial Bank, Korea* .... $ 28,342
13,770 Shinhan Bank............................ 193,644
-------------
221,986
-------------
INSURANCE--0.38%
340 Samsung Fire & Marine Insurance ....... 117,266
-------------
METALS & MINING--1.51%
19,200 Pohang Iron & Steel Company Limited ADR 463,200
193 Seah Steel Corporation.................. 4,803
-------------
468,003
-------------
TELECOMMUNICATIONS--0.75%
193 SK Telecom Company Limited.............. 149,969
8,652 SK Telecom Company Limited ADR.......... 82,194
-------------
232,163
-------------
UTILITY--ELECTRIC, GAS & WATER--1.82%
18,950 Korea Electric Power Corporation ....... 565,101
-------------
Total Korea Common Stock.............................. 1,604,519
-------------
MAURITIUS--0.95%
FOOD, BEVERAGES & TOBACCO--0.95%
9,000 Vina Concha Y Toro S.A. ADR ............ 293,625
-------------
MEXICO--9.99%
BANKS--0.33%
48,000 Grupo Financiero Banamex................ 102,808
-------------
BUILDING & CONSTRUCTION--1.07%
65,000 Grupo Industrial Saltillo, S.A. de
C.V..................................... 191,814
41,000 Consorico Ara, S.A. de C.V. ............ 139,307
-------------
331,121
-------------
BUILDING MATERIALS--0.90%
85,200 Cemex S.A. de C.V. ..................... 278,764
-------------
CONSTRUCTION--0.89%
18,600 Empresas Ica Sociedad Controladora,
S.A. de C.V. ADR (1) ................... 276,675
-------------
MEXICO--(CONTINUED)
DIVERSIFIED INDUSTRIALS--0.64%
36,000 Alfa, S.A. de C.V. Series A (1)......... $ 197,521
-------------
DIVERSIFIED INDUSTRIES--0.51%
24,000 Desc--Sociedad de Fomento Industrial,
S.A. de C.V. Series B*.................. 157,050
-------------
ELECTRICAL APPLIANCES--0.41%
8,000 Acer Computec Latino Americano, S.A. de
C.V. ADR*+ ............................. 126,800
-------------
FOOD, BEVERAGE & TOBACCO--1.29%
73,000 Fomento Economico Mexicano, S.A. de
C.V. Series B (1) ...................... 344,492
45,000 Sistema Argos, S.A. de C.V. Series B* .. 53,344
-------------
397,836
-------------
MEDIA--0.57%
11,000 Grupo Televisa, S.A. de C.V............. 127,075
2,200 Grupo Televisa, S.A. de C.V. GDS ....... 50,875
-------------
177,950
-------------
METALS--0.66%
12,500 Tubos De Acero de Mexico, S.A. de C.V.
ADR..................................... 204,687
-------------
METALS & MINING--0.26%
23,000 Grupo Mexico, S.A. de C.V. Series B* ... 80,174
-------------
PAPER & RELATED PRODUCTS--0.56%
47,000 Kimberly Clark de Mexico S.A. de C.V. .. 174,479
-------------
RETAIL--1.25%
12,353 Cifra, S.A. de C.V. .................... 18,654
240,000 Cifra, S.A. de C.V. Series C*........... 368,464
-------------
387,118
-------------
TELECOMMUNICATIONS--0.65%
4,900 Telefonos de Mexico, S.A. de C.V. ADR . 202,125
-------------
Total Mexico Common Stock............................. 3,095,108
10
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
NUMBER OF
SHARES VALUE
- ------------- -------------
COMMON STOCKS--(continued)
PAKISTAN--0.10%
CHEMICALS--0.05%
3,608 Engro Chemicals......................... $ 13,552
-------------
OIL & GAS--0.05%
2,127 Pakistan State Oil Company Limited ..... 16,032
-------------
Total Pakistan Common Stock........................... 29,584
-------------
PERU--1.34%
BANKS--0.32%
4,798 Credicorp Limited ADR................... 100,750
-------------
BUILDING & CONSTRUCTION--0.09%
17,889 Cementos Norte Pacasmayo S.A.*.......... 27,387
-------------
METALS & MINING--0.48%
15,947 Compania de Minas Buenaventura S.A. ... 149,896
-------------
TELECOMMUNICATIONS--0.45%
27,503 Telefonica Del Peru Class B............. 66,255
3,000 Telefonica Del Peru Class B ADS......... 72,000
-------------
138,255
-------------
Total Peru Common Stock............................... 416,288
-------------
PHILIPPINES--2.99%
BANKS--0.71%
10,819 Metropolitan Bank & Trust Company ...... 221,550
-------------
FINANCE--0.15%
6,800 Benpres Holdings Corporation GDR* ...... 46,580
-------------
HOLDING & OTHER INVESTMENT COMPANIES--0.04%
6,576 First Philippine Holdings Corporation
Class B................................. 11,471
-------------
OIL & GAS--0.10%
82,000 Petron Corporation...................... 30,163
-------------
REAL ESTATE--0.49%
210,287 Ayala Land Incorporated Class B......... 151,515
-------------
PHILIPPINES--(CONTINUED)
TELECOMMUNICATIONS--0.99%
2,600 Philippine Long Distance Telephone
Company................................. $ 148,388
1,400 Philippine Long Distance Telephone
Company ADR............................. 78,050
2,500 Philippine Long Distance Telephone
Company GDS............................. 80,000
-------------
306,438
-------------
UTILITY--ELECTRIC--0.51%
25,470 Manila Electric Company Class B......... 158,403
-------------
Total Philippines Common Stock ....................... 926,120
-------------
POLAND--0.02%
BUILDING MATERIALS--0.02%
428 Krosno S.A.............................. 6,630
-------------
PORTUGAL--3.33%
BANKS--0.40%
6,290 Banco Espirito Santo e Comercial de
Lisboa.................................. 123,919
-------------
CONSTRUCTION--0.68%
18,672 Engil Sociedad de Constrcao Civil S.A. 209,973
-------------
RETAIL--1.05%
5,449 Estabelecimentos Jeronimo Martins &
Filho, SGPS, S.A........................ 325,968
-------------
TELECOMMUNICATIONS--1.20%
5,730 Portugal Telecom S.A. .................. 211,105
1,870 Telecel Comunicacaoes Pessoais S.A. .... 161,023
-------------
372,128
-------------
Total Portugal Common Stock........................... 1,031,988
-------------
RUSSIA--2.90%
TELECOMMUNICATIONS--2.90%
50,000 Global Telesystems ADR ................. 900,000
-------------
11
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
NUMBER OF
SHARES VALUE
- ------------- -------------
COMMON STOCKS--(concluded)
SLOVAKIA--0.67%
BANKS--0.07%
600 SKB Banka GDR+.......................... $ 21,150
-------------
BUILDING MATERIALS--0.04%
419 Plastika Nitra*......................... 10,725
-------------
METALS & MINING--0.44%
6,221 VSZ A.S. ............................... 137,171
-------------
UTILITY--ELECTRIC, GAS & WATER--0.12%
861 Nafta................................... 37,841
-------------
Total Slovakia Common Stock........................... 206,887
-------------
SOUTH AFRICA--2.36%
BREWERY--0.37%
3,900 South African Brewery Limited........... 114,900
-------------
INDUSTRIAL MACHINERY & EQUIPMENT--0.43%
12,200 Barlow Limited ......................... 134,443
-------------
METALS & MINING--1.02%
2,200 Anglo American Corporation of South
Africa Limited ......................... 140,515
24,800 Gencor Limited.......................... 104,298
17,300 Gencor Limited ADR ..................... 72,227
-------------
317,040
-------------
OIL EXPLORATION & PRODUCTION--0.54%
12,915 Sasol................................... 165,558
-------------
Total South Africa Common Stock ...................... 731,941
-------------
TAIWAN--5.65%
ELECTRONICS--1.60%
26,600 Siliconware Precision Industries
Company GDR*+........................... 495,425
-------------
HOLDING & OTHER INVESTMENT COMPANIES--1.76%
42,400 R.O.C. Taiwan Fund...................... 545,900
-------------
METALS & MINING--1.05%
14,452 China Steel Corporation GDS*............ 324,809
-------------
TAIWAN--(CONTINUED)
MISCELLANEOUS MANUFACTURING--0.47%
7,000 Teco Electric & Machinery Limited GDR .. $ 146,125
-------------
TRANSPORTATION--0.77%
13,000 Evergreen Marine Corporation GDR*+ ..... 236,925
-------------
Total Taiwan Common Stock............................. 1,749,184
-------------
THAILAND--0.22%
TELECOMMUNICATIONS--0.22%
44,600 TelecomAsia Corporation plc*............ 67,440
-------------
TURKEY--1.65%
BANKS--0.28%
1,344,296 Akbank, T.A.S. ......................... 86,262
-------------
HOUSEHOLD DURABLES--0.44%
3,300,000 Trakya Cam Sanayii A.S.................. 136,303
-------------
RETAIL--0.93%
285,000 Migros Turk T.A.S. ..................... 289,036
-------------
Total Turkey Common Stock ............................ 511,601
-------------
VENEZUELA--1.50%
ENGINEERING--0.08%
4,200 Venezolana de Prer GDS.................. 17,010
1,872 Venprecar GDS*.......................... 7,582
-------------
24,592
-------------
TELECOMMUNICATIONS--0.53%
5,600 Compania Anonima Nacional Telecom de
Venezuela (CANTV) ADR................... 164,150
-------------
UTILITY--ELECTRIC, GAS & WATER--0.89%
254,790 Electricidad de Caracas................. 276,565
-------------
Total Venezuela Common Stock ........................ 465,307
-------------
Total Common Stock (cost--$21,707,350) ................ 23,634,680
12
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
NUMBER OF
SHARES VALUE
- ------------- -------------
PREFERRED STOCKS--10.42%
BRAZIL--10.42%
BANKS--1.76%
28,000,000 Banco Bradesco S.A...................... $ 231,688
425,000 Banco Itau S.A. ........................ 229,783
2,290,000 Uniao de Bancos Brasileiros S.A.
(Unibanco) ............................. 84,602
-------------
546,073
-------------
BUILDING PRODUCTS--CEMENT--0.59%
520,000 Companhia Cimento Portland Itau (CIA)* . 183,357
-------------
FINANCE--DIVERSIFIED--0.53%
137,000,000 Usinas Siderurgicas de Minas Gerais
S.A. (Usiminas) ........................ 162,313
-------------
FOOD, BEVERAGE & TOBACCO--0.60%
275,000 Companhia Cervejaria Brahma ............ 187,083
-------------
METALS & MINING--0.75%
9,100 Companhia Vale do Rio Doce ............. 231,885
-------------
OIL & GAS--1.73%
2,547,000 Petroleo Brasileiro S.A. (Petrobras) .. 535,265
-------------
TELECOMMUNICATIONS--2.50%
461,000 Telecomunicacoes do Parana S.A.
(Telepar)............................... 316,436
1,610,000 Telecomunicacoes de San Paulo S.A.
(Telesp)................................ 457,189
-------------
773,625
-------------
TEXTILE MILL PRODUCTS--0.38%
280,000 Coteminas............................... 117,424
-------------
BRAZIL--(CONCLUDED)
UTILITY--ELECTRIC, GAS & WATER--1.58%
3,448,000 Companhia Energetica de Minas Gerais
(CEMIG) ................................ $ 157,211
710,000 Centrais Eletricas Brasileiras S.A.
(Eletrobas) ............................ 331,133
-------------
488,344
-------------
Total Preferred Stocks (cost--$2,860,744) .......... 3,225,369
-------------
RIGHTS--0.03%
NUMBER OF
RIGHTS
- -------------
GREECE--0.03%
BANKING--0.03%
1,360 Alpha Credit Bank, rights expiring
05/09/97* (cost $0)..................... 10,011
-------------
WARRANTS--0.04%
NUMBER OF
WARRANTS
- -------------
HONG KONG--0.01%
7,600 GZI Transportation Ltd., warrants
expiring 01/29/99* ..................... 1,217
-------------
INDONESIA--0.03%
25,372 P.T. Bank Internasional, warrants
expiring 01/17/00*...................... 8,092
-------------
Total Warrants (cost--$5,127)......................... 9,309
-------------
</TABLE>
13
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
PRINCIPLE
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------------------------------------------------------------------ ---------- ---------- -------------
<S> <C> <C> <C>
CONVERTIBLE BONDS--0.84%
CHINA--0.08%
TRANSPORTATION--0.08%
$ 24 Qingling Motors Limited+ .......................................... 01/22/02 3.500% $ 24,480
-------------
PHILIPPINES--0.09%
BANKS--0.09%
25 Metropolitan Bank & Trust Company .................................... 09/10/00 2.750 29,000
-------------
TAIWAN--0.67%
ELECTRONICS--0.67%
141 Compal Electronics Incorporated+ ................................... 11/21/03 1.000 206,565
-------------
Total Convertible Bonds (cost--$193,903) ................................ 260,045
-------------
REPURCHASE AGREEMENT--16.17%
5,009 Repurchase Agreement dated 04/30/97 with State Street Bank & Trust
Company, collateralized by $5,114,173 U.S. Treasury Notes, 6.250%
due 03/31/99; proceeds: $5,009,696 (cost--$5,009,000) ........... 05/01/97 5.000 5,009,000
-------------
NUMBER OF
SHARES
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED--4.65%
1,093,522 Liquid Assets Portfolio ............................................................. 1,093,552
279,653 TempCash Portfolio..................................................................... 279,653
66,895 TempFund Portfolio ..................................................................... 66,895
-------------
Total Investments of Cash Collateral for Securities Loaned (cost--$1,440,100) ................ 1,440,100
-------------
Total Investments (cost--$31,216,224)--108.46% ................................................ 33,588,514
Liabilities in excess of other assets--(8.46)% ................................................ (2,620,024)
-------------
Net Assets--100.00% ........................................................................... $30,968,490
=============
</TABLE>
- ------------
Note: The Portfolio of Investments is listed by the security issuer's country
of origin.
* Non-income producing security
(1) Security, or portion thereof, was on loan at April 30, 1997.
+ Security exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
ADR American Depositary Receipts
ADS American Depositary Shares
GDR Global Depositary Receipts
GDS Global Depositary Shares
See accompanying notes to financial statements
14
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1997 (unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments, at value (cost -$26,207,224).................................................................... $ 28,579,514
Repurchase agreement, at value (cost -$5,009,000)............................................................ 5,009,000
Cash denominated in foreign currencies, at value (cost -$378,637)............................................ 378,409
Receivable for investments sold.............................................................................. 617,674
Receivable for shares of beneficial interest sold ........................................................... 4,163
Dividends and interest receivable............................................................................ 145,637
Deferred organizational expenses............................................................................. 94,561
Other assets................................................................................................. 32,743
-------------
Total assets................................................................................................. 34,861,701
-------------
LIABILITIES
Payable for shares of beneficial interest repurchased........................................................ 53,876
Payable for investments purchased............................................................................ 2,187,297
Collateral for securities loaned............................................................................. 1,440,100
Payable to affiliate......................................................................................... 23,906
Accrued expenses and other liabilities....................................................................... 188,032
-------------
Total liabilities............................................................................................ 3,893,211
-------------
NET ASSETS
Beneficial interest -$0.001 par value outstanding (unlimited amount authorized).............................. 44,737,436
Accumulated net investment loss.............................................................................. (94,566)
Accumulated net realized losses from investments............................................................. (16,032,467)
Net unrealized appreciation of investments and other assets and liabilities denominated in foreign
currencies.................................................................................................. 2,358,087
-------------
Net assets................................................................................................... $ 30,968,490
=============
CLASS A:
Net assets................................................................................................... $ 12,596,523
-------------
Shares outstanding........................................................................................... 1,203,963
-------------
Net asset and redemption value per share..................................................................... $ 10.46
=============
Maximum offering price per share (net asset value plus sales charge of 4.50% of offering price) ............. $ 10.95
=============
CLASS B:
Net assets................................................................................................... $ 1,223,075
-------------
Shares outstanding........................................................................................... 119,054
--------------
Net asset value and offering price per share................................................................. $ 10.27
=============
CLASS C:
Net assets................................................................................................... $ 5,818,458
-------------
Shares outstanding........................................................................................... 566,822
-------------
Net asset value and offering price per share................................................................. $ 10.26
=============
CLASS Y:
Net assets................................................................................................... $ 11,330,434
-------------
Shares outstanding........................................................................................... 1,075,676
-------------
Net asset value, offering price and redemption value per share............................................... $ 10.53
=============
</TABLE>
See accompanying notes to financial statements
15
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED
APRIL 30, 1997
(UNAUDITED)
----------------
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $26,566) ........... $ 324,754
Interest............................................................ 35,047
----------------
359,801
----------------
EXPENSES:
Investment advisory and administration fees......................... 240,049
Service fees--Class A .............................................. 16,811
Service and distribution fees--Class B.............................. 5,298
Service and distribution fees--Class C.............................. 32,896
Custody and accounting.............................................. 58,289
Reports and notices to shareholders ................................ 45,632
Legal and audit..................................................... 35,838
State registration fees ............................................ 28,951
Amortization of organizational expenses ............................ 27,954
Transfer agency fees and expenses................................... 26,895
Trustees' fees and expenses ........................................ 6,750
Other expenses...................................................... 14,305
----------------
539,668
Less: Fee waivers .................................................. (126,903)
----------------
Net expenses........................................................ 412,765
----------------
Net investment loss................................................. (52,964)
----------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT
TRANSACTIONS:
Net realized gains (losses) from:
Investment transactions............................................ 82,056
Foreign currency transactions...................................... (39,774)
Net change in unrealized appreciation/depreciation of:
Investments ....................................................... 3,300,918
Other assets and liabilities denominated in foreign currencies .... (717)
----------------
NET REALIZED AND UNREALIZED GAINS FROM INVESTMENT TRANSACTIONS .... 3,342,483
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............... $3,289,519
================
</TABLE>
See accompanying notes to financial statements
16
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FOUR FOR THE
APRIL 30, 1997 MONTHS ENDED YEAR ENDED
(UNAUDITED) OCTOBER 31, 1996 JUNE 30, 1996
-------------- ---------------- ---------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment loss............................................. $ (52,964) $ (207,229) $ (342,237)
Net realized gains (losses) from investment transactions ....... 82,056 (745,976) (6,654,434)
Net realized losses from foreign currency transactions ......... (39,774) (37,271) (191,127)
Net change in unrealized appreciation/depreciation of:
Investments.................................................... 3,300,918 (1,584,591) 8,571,981
Other assets and liabilities denominated in foreign
currencies..................................................... (717) 29,067 (50,722)
-------------- ---------------- ---------------
Net increase (decrease) in net assets resulting from
operations..................................................... 3,289,519 (2,546,000) 1,333,461
-------------- ---------------- ---------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares ........................... 7,429,531 1,986,965 13,661,073
Cost of shares repurchased...................................... (14,877,813) (10,470,673) (32,764,223)
-------------- ---------------- ---------------
Net decrease in net assets from beneficial interest
transactions................................................... (7,448,282) (8,483,708) (19,103,150)
-------------- ---------------- ---------------
Net decrease in net assets ..................................... (4,158,763) (11,029,708) (17,769,689)
NET ASSETS:
Beginning of period............................................. 35,127,253 46,156,961 63,926,650
-------------- ---------------- ---------------
End of period................................................... $ 30,968,490 $ 35,127,253 $ 46,156,961
============== ================ ===============
</TABLE>
See accompanying notes to financial statements
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (unaudited)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Emerging Markets Equity Fund (the "Fund") is a diversified
series of PaineWebber Investment Trust II (the "Trust"), which is registered
with the Securities and Exchange Commission under the Investment Company Act
of 1940, as amended, as an open-end management investment company.
Organizational costs have been deferred and are being amortized using the
straight-line method over a period of benefit not to exceed 60 months from
the date the Fund commenced operations.
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, 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 initial
issuance. All classes of shares have equal voting privileges, except that
Class A, Class B and Class C shares have exclusive voting rights with respect
to their service and/or distribution plan.
At a meeting held on December 13, 1995, the Trust's board of trustees
elected to change the Trust's fiscal year end from June 30th to October 31st,
effective October 31, 1996.
The preparation of financial statements in accordance with generally
accepted accounting principles requires the Fund's management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
Valuation of Investments--Securities which are listed on U.S. and foreign
stock exchanges are valued at the last sale price on the day the securities
are being valued or, lacking any sales on such day, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are generally valued on the exchange designated by Mitchell
Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly owned
subsidiary of PaineWebber Incorporated ("PaineWebber"), and investment
adviser and administrator of the Fund, or Schroder Capital Management
International Inc. ("Schroder"), the sub-adviser to the Fund, as the primary
market. Securities traded in the over-the-counter ("OTC") market and listed
on The Nasdaq Stock Market, Inc. ("Nasdaq") are valued at the last trade
price on Nasdaq prior to the time of valuation; other OTC securities are
valued at the last bid price available prior to the time of valuation (other
than certain short term debt instruments). The amortized cost method of
valuation, which approximates market value, generally is used to value
short-term debt instruments with 60 days or less remaining to maturity unless
the Trust's board of trustees determines that this does not represent fair
value. Securities and assets for which market quotations are not readily
available (including restricted securities subject to limitations as to their
sale) are valued at fair value as determined in good faith by or under the
direction of the Trust's board of trustees.
All investments quoted in foreign currencies are 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.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (unaudited)
Foreign currency exchange rates are generally determined prior to the close
of regular trading on 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 regular
trading on the NYSE, which will not be reflected in a computation of the
Fund's net asset value. If events materially affecting the value of such
investments or currency exchange rates occur during such time period, the
investments are valued at their fair value as determined in good faith by or
under the direction of the Trust's board of trustees.
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 and
foreign exchange transactions are calculated using the identified cost
method. Dividend income is recorded on the ex-dividend date (except in the
case of certain foreign dividends which are recorded as soon after the
ex-dividend date as the Fund, using reasonable diligence, becomes aware of
such dividends). 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 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 books 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, (2) purchases and sales of investment securities, income and
expenses--at the exchange rates prevailing on the respective dates of such
transactions.
Although the net asset value per share and market values of the Fund's
securities are presented at the foreign exchange rates at the end of the
period, the Fund does not generally isolate the effect of fluctuations in
foreign exchange rates from the effect of the unrealized changes in market
prices of securities. However, the Fund does isolate the effect of
fluctuations in foreign exchange rates when
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (unaudited)
determining the realized gain or loss upon the sale or maturity of foreign
currency denominated debt obligations pursuant to federal income tax
regulations. Certain foreign exchange gains and losses included in realized
and unrealized gains and losses are included in or are a reduction of
ordinary income in accordance with federal income tax regulations. Net
realized foreign currency gain (loss) is treated as ordinary income for
income tax reporting purpose.
Dividends and Distributions--Dividends and distributions to shareholders
are recorded on the ex-dividend date. The amount of dividends and
distributions are determined in accordance with federal income tax
regulations, which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassifications.
CONCENTRATION OF RISK
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. These risks are greater with respect to
securities of issuers located in emerging market countries in which the Fund
is authorized to invest. The ability of the issuers of debt securities held
by the Fund to meet their obligations may be affected by economic and
political developments in a specific industry, country or region.
INVESTMENT ADVISER AND ADMINISTRATOR
The Trust's board of trustees has approved an investment advisory and
administration contract ("Advisory Contract") with Mitchell Hutchins, under
which Mitchell Hutchins serves as investment adviser and administrator of the
Fund. In accordance with a superceded Advisory Contract, Mitchell Hutchins
was entitled to receive compensation from the Fund, computed daily and paid
monthly, at an annual rate of 1.62% of the Fund's average daily net assets up
to $100 million and 1.50% above $100 million from November 1, 1996 through
February 24, 1997. Effective February 25, 1997, under a new advisory
contract, the annual percentage rate at which the investment advisory and
administrative fee is payable to Mitchell Hutchins was reduced to a rate of
1.20%. At April 30, 1997 the Fund owed Mitchell Hutchins $15,477 in
investment advisory and administration fees. Mitchell Hutchins is voluntarily
waiving part of its management fee and has waived $126,903 for the six months
ended April 30, 1997. Mitchell Hutchins may discontinue these voluntary
waivers at any time.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (unaudited)
Effective February 25, 1997 under a separate contract with Mitchell
Hutchins ("Sub-Advisory Contract"), Schroder serves as the Fund's
sub-adviser. Under the Sub-Advisory Contract, Mitchell Hutchins (not the
Fund) pays Schroder a fee, computed daily and paid monthly, at the annual
rate of 0.70% of the Fund's average daily net assets.
Prior to February 25, 1997, Emerging Markets Management (EMM) served as
the Fund's sub-adviser pursuant to a sub-advisory contract with Mitchell
Hutchins. Mitchell Hutchins (not the Fund) paid EMM a fee, computed daily and
paid monthly, at an annual rate of 1.12% of the Fund's average daily net
assets up to $100 million and 0.90% of the Fund's average daily net assets
equal to or in excess of $100 million.
DISTRIBUTION PLAN
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 the annual
rate of 0.25% of the average daily net assets of Class A, Class B and Class C
shares and monthly distribution fees at the annual rate of 0.75% of the
average daily net assets of Class B and Class C shares.
Mitchell Hutchins also receives the proceeds of the initial sales charges
paid upon the purchase of Class A shares and the contingent deferred sales
charges paid upon certain redemptions of Class A, Class B and Class C shares.
Mitchell Hutchins has informed the Fund that for the six months ended April
30, 1997, for the four months ended October 31, 1996, and for the year ended
June 30, 1996 it had earned approximately $6,000, $4,000, and $27,000 in
sales charges, respectively.
SECURITY LENDING
The Fund may lend 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 and dividends, 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
for lending its securities from interest earned on the cash or U.S.
government securities held as collateral, net of fee rebates paid to the
borrower plus reasonable administrative and custody fees. The Fund's lending
agent is PaineWebber, who received $673 as compensation from the Fund for the
six months ended April 30, 1997.
As of April 30, 1997, the Fund's custodian held cash and cash equivalents
having an aggregate value of $1,440,100 as collateral for portfolio
securities loaned having a market value of $1,329,235.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (unaudited)
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at April 30,
1997 was substantially the same as the cost of securities for financial
statement purposes.
At April 30, 1997, the components of the net unrealized appreciation of
investments were as follows:
<TABLE>
<CAPTION>
<S> <C>
Gross appreciation (investments having an excess of value over cost)..... $ 3,960,955
Gross depreciation (investments having an excess of cost over value)..... (1,588,665)
-------------
Net unrealized appreciation of investments............................... $ 2,372,290
=============
</TABLE>
For the six months ended April 30, 1997, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $14,305,363 and
$25,712,442, respectively.
FEDERAL INCOME 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.
At October 31, 1996, the Fund had a net capital loss carryforward of
$15,753,361. This carryforward loss is available as a reduction, to the
extent provided in the regulations, of future net realized capital gains and
will expire between October 31, 2002 and October 31, 2004. To the extent that
such losses are used to offset future capital gains, it is probable that the
gains so offset will not be distributed to shareholders.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(unaudited)
SHARES OF BENEFICIAL INTEREST
At April 30, 1997, 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 CLASS C CLASS Y
--------------------------- ---------------------- ---------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- --------------- ---------- ----------- ------------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Six months ended
April 30, 1997:
Shares sold ............ 75,964 $ 783,828 27,287 $ 272,502 606,455 $ 6,074,615 28,852 $ 298,586
Shares repurchased...... (456,815) (4,550,642) (2,518) (24,796) (885,695) (8,785,028) (149,040) (1,517,347)
----------- --------------- ---------- ----------- ------------- -------------- ----------- -------------
Net increase
(decrease)............. (380,851) $ (3,766,814) 24,769 $ 247,706 (279,240) $ (2,710,413) (120,188) $(1,218,761)
=========== =============== ========== =========== ============= ============== =========== =============
Four months ended
October 31, 1996:
Shares sold............. 15,395 $ 148,762 16,082 $ 153,631 164,114 $ 1,567,621 11,872 $ 116,951
Shares repurchased...... (485,631) (4,703,565) (15,952) (151,768) (481,729) (4,627,446) (99,846) (987,894)
----------- --------------- ---------- ----------- ------------- -------------- ----------- -------------
Net increase
(decrease)............. (470,236) $ (4,554,803) 130 $ 1,863 (317,615) $ (3,059,825) (87,974) $ (870,943)
=========== =============== ========== =========== ============= ============== =========== =============
Year ended
June 30, 1996:
Shares sold ............ 310,914 $ 3,098,378 100,302 $ 985,160 631,864 $ 6,160,591 349,064 $ 3,416,944
Shares repurchased......(1,653,023) (15,971,690) (6,147) (60,876) (1,385,687) (13,506,039) (330,645) (3,225,618)
----------- --------------- ---------- ----------- ------------- -------------- ----------- -------------
Net increase
(decrease).............(1,342,109) $(12,873,312) 94,155 $ 924,284 (753,823) $ (7,345,448) 18,419 $ 191,326
=========== =============== ========== =========== ============= ============== =========== =============
</TABLE>
23
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------
FOR THE
FOR THE FOUR
SIX MONTHS MONTHS
ENDED ENDED FOR THE YEARS ENDED FOR THE
APRIL 30, OCTOBER JUNE 30, PERIOD ENDED
1997 31, ------------------- JUNE 30,
(UNAUDITED) 1996 1996 1995** 1994+
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................... $ 9.46 $ 10.06 $ 9.73 $ 10.79 $12.00
------------ ------------- --------- --------- --------------
NET INVESTMENT INCOME (LOSS) ..... (0.02) (0.13) (0.14) (0.04) 0.04
NET REALIZED AND UNREALIZED GAINS
(LOSSES) FROM INVESTMENT AND
FOREIGN CURRENCY TRANSACTIONS ... 1.02 (0.47) 0.47 (0.97) (1.25)
------------ ------------- --------- --------- --------------
NET INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS............ 1.00 (0.60) 0.33 (1.01) (1.21)
------------ ------------- --------- --------- --------------
DIVIDENDS FROM NET INVESTMENT
INCOME........................... -- -- -- (0.05) --
------------ ------------- --------- --------- --------------
NET ASSET VALUE, END OF PERIOD ... $ 10.46 $ 9.46 $ 10.06 $ 9.73 $ 10.79
============ ============= ========= ========= ==============
TOTAL INVESTMENT RETURN (1) ...... 10.57% (5.96)% 3.39% (9.29)% (10.08)%
============ ============= ========= ========= ==============
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD
(000'S).......................... $12,597 $14,992 $20,680 $33,043 $46,758
EXPENSES, NET OF FEE WAIVERS, TO
AVERAGE NET ASSETS............... 2.44%* 2.44%* 2.44% 2.44% 2.47%*
EXPENSES, BEFORE FEE WAIVERS, TO
AVERAGE NET ASSETS............... 3.37%* 3.48%* 3.42% 2.54% 2.47%*
NET INVESTMENT INCOME (LOSS),
NET OF FEE WAIVERS, TO AVERAGE
NET ASSETS....................... (0.25)%* (1.42)%* (0.52)% (0.76)% 0.72%*
NET INVESTMENT INCOME (LOSS),
BEFORE FEE WAIVERS, TO AVERAGE
NET ASSETS....................... (1.18)%* (2.46)%* (1.50)% (0.86)% 0.72%*
PORTFOLIO TURNOVER................ 45% 22% 69% 76% 8%
AVERAGE COMMISSION RATE PAID (2) . $0.0006 $0.0024 -- -- --
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------
FOR THE
SIX MONTHS FOR THE
ENDED FOUR MONTHS FOR THE
APRIL 30, ENDED PERIOD ENDED
1997 OCTOBER 31, JUNE 30,
(UNAUDITED) 1996 1996++
------------ ------------- --------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD ....................... $9.32 $9.94 $ 9.13
NET INVESTMENT INCOME (LOSS) ..... (0.03) (0.07) (0.01)
NET REALIZED AND UNREALIZED GAINS
(LOSSES) FROM INVESTMENT AND
FOREIGN CURRENCY TRANSACTIONS ... 0.98 (0.55) 0.82
------------ ------------- --------------
NET INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS............ 0.95 (0.62) 0.81
------------ ------------- --------------
DIVIDENDS FROM NET INVESTMENT
INCOME........................... -- -- --
------------ ------------- --------------
NET ASSET VALUE, END OF PERIOD ... $ 10.27 $ 9.32 $ 9.94
============ ============= ==============
TOTAL INVESTMENT RETURN (1) ...... 10.19% (6.24)% 8.87%
============ ============= ==============
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD
(000'S).......................... $ 1,223 $ 879 $ 936
EXPENSES, NET OF FEE WAIVERS, TO
AVERAGE NET ASSETS............... 3.19%* 3.19%* 3.19%*
EXPENSES, BEFORE FEE WAIVERS, TO
AVERAGE NET ASSETS............... 4.19%* 4.23%* 4.97%*
NET INVESTMENT INCOME (LOSS),
NET OF FEE WAIVERS, TO AVERAGE
NET ASSETS....................... (0.81)%* (2.12)%* (0.21)%*
NET INVESTMENT INCOME (LOSS),
BEFORE FEE WAIVERS, TO AVERAGE
NET ASSETS....................... (1.81)%* (3.16)%* (1.99)%*
PORTFOLIO TURNOVER................ 45% 22% 69%
AVERAGE COMMISSION RATE PAID (2) . $0.0006 $0.0024 --
<FN>
- ------------
+ FOR THE PERIOD JANUARY 19, 1994 (COMMENCEMENT OF OPERATIONS) TO JUNE 30,
1994.
++ FOR THE PERIOD DECEMBER 5, 1995 (COMMENCEMENT OF OFFERING OF SHARES) TO
JUNE 30, 1996.
* ANNUALIZED
** INVESTMENT ADVISORY FUNCTIONS FOR THE FUND WERE TRANSFERRED FROM KIDDER
PEABODY ASSET MANAGEMENT INC. TO MITCHELL HUTCHINS ON FEBRUARY 13, 1995.
(1) TOTAL INVESTMENT RETURN IS CALCULATED ASSUMING A $1,000 INVESTMENT ON
THE FIRST DAY OF EACH PERIOD REPORTED, REINVESTMENT OF ALL DIVIDENDS AT
NET ASSET VALUE ON THE PAYABLE DATES AND A SALE AT NET ASSET VALUE ON
THE LAST DAY OF EACH PERIOD REPORTED. THE FIGURES DO NOT INCLUDE SALES
CHARGES; RESULTS FOR EACH CLASS (EXCEPT CLASS Y) WOULD BE LOWER IF SALES
CHARGES WERE INCLUDED. TOTAL INVESTMENT RETURN FOR PERIODS OF LESS THAN
ONE YEAR HAVE NOT BEEN ANNUALIZED.
(2) EFFECTIVE FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, THE
FUND IS REQUIRED TO DISCLOSE THE AVERAGE COMMISSION RATE PAID PER SHARE
OF COMMON STOCK INVESTMENTS PURCHASED OR SOLD.
24
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
CLASS C
- -------------------------------------------------------------
FOR THE
SIX MONTHS FOR THE
ENDED FOUR MONTHS FOR THE YEARS ENDED FOR THE
APRIL 30, ENDED JUNE 30, PERIOD ENDED
1997 OCTOBER 31, -------------------- JUNE 30,
(UNAUDITED) 1996 1996 1995** 1994+
- ------------ ------------- --------- ---------- ------------
<S> <C> <C> <C> <S>
$9.32 $ 9.94 $ 9.67 $ 10.75 $12.00
- ------------ ------------- --------- ---------- ------------
(0.07) (0.22) (0.24) (0.17) --
1.01 (0.40) 0.51 (0.90) (1.25)
- ------------ ------------- --------- ---------- ------------
0.94 (0.62) 0.27 (1.07) (1.25)
- ------------ ------------- --------- ---------- ------------
-- -- -- (0.01) --
- ------------ ------------- --------- ---------- ------------
$10.26 $ 9.32 $ 9.94 $ 9.67 $10.75
============ ============= ========= ========== ============
10.09% (6.24)% 2.79% (10.01)% 10.42%
============ ============= ========= ========== ============
$5,819 $ 7,882 $11,561 $18,551 $26,721
3.19%* 3.19%* 3.19% 3.19% 3.22%*
4.13%* 4.23%* 4.17% 3.29% 3.22%*
(1.03)%* (2.16)%* (1.28)% (1.50)% (0.03)%*
(1.97)%* (3.20)%* (2.26)% (1.60)% (0.03)%*
45% 22% 69% 76% 8%
$0.0006 $0.0024 -- -- --
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
CLASS Y
- --------------------------------------------------------------
FOR THE
SIX MONTHS FOR THE
ENDED FOUR MONTHS FOR THE YEARS ENDED FOR THE
APRIL 30, ENDED JUNE 30, PERIOD ENDED
1997 OCTOBER 31, ------------------- JUNE 30,
(UNAUDITED) 1996 1996 1995** 1994+
- ------------ ------------- --------- --------- --------------
<C> <C> <C> <C> <C>
$ 9.51 $ 10.11 $ 9.75 $ 10.80 $ 12.00
- ------------ ------------- --------- --------- --------------
0.01 (0.05) (0.01) 0.01 0.05
1.01 (0.55) 0.37 (0.99) (1.25)
- ------------ ------------- --------- --------- --------------
1.02 (0.60) 0.36 (0.98) (1.20)
- ------------ ------------- --------- --------- --------------
-- -- -- (0.07) --
- ------------ ------------- --------- --------- --------------
$ 10.53 $ 9.51 $ 10.11 $ 9.75 $ 10.80
============ ============= ========= ========= ==============
10.73% (5.93)% 3.69% (9.03)% (10.00)%
============ ============= ========= ========= ==============
$11,330 $11,375 $12,979 $12,332 $15,435
2.19%* 2.19%* 2.19% 2.19% 2.22%*
3.12%* 3.23%* 3.29% 2.29% 2.22%*
0.06%* (1.13)%* (0.15)% (0.51)% 0.97%*
(0.87)%* (2.17)%* (1.25)% (0.61)% 0.97%*
45% 22% 69% 76% 8%
$0.0006 $0.0024 -- -- --
</TABLE>
25
<PAGE>
This Page Intentionally Left Blank.
26
<PAGE>
TRUSTEES
E. Garrett Bewkes, Jr.
Chairman
Margo N. Alexander
Richard Q. Armstrong
Richard R. Burt
Mary C. Farrell
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
PRINCIPAL OFFICERS
Margo N. Alexander
President
Victoria E. Schonfeld
Vice President
Dianne E. O'Donnell
Vice President and Secretary
Paul H. Schubert
Vice President and Treasurer
INVESTMENT ADVISER,
ADMINISTRATOR AND DISTRIBUTOR
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
INVESTMENT SUB-ADVISER
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, NY 10019
This report is not be used in connection with the offering of share 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 investment executive or
correspondent firm. Read the prospectus carefully before investing.
The financial information included herein is taken from the records of the
Fund without examination by independent accountants who do not express an
opinion thereon.
<PAGE>
PaineWebber offers a family of 22 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 Capital Appreciation Fund
o Financial Services Growth Fund
o Growth Fund
o Growth and Income Fund
o Small Cap Fund
o Utility Income Fund
ASSET ALLOCATION FUNDS
o Balanced Fund
o Tactical Allocation Fund
GLOBAL FUNDS
o Asia Pacific Growth Fund
o Emerging Markets Equity Fund
o Global Equity Fund
o Global Income Fund
PAINEWEBBER MONEY MARKET FUND
PAINEWEBBER
(copyright) 1997 PaineWebber Incorporated
Member SIPC
PAINEWEBBER
FPO
EMERGING MARKETS
EQUITY FUND
APRIL 30, 1997
SEMIANNUAL REPORT
