PAINEWEBBER INVESTMENT SERIES, 497, 1996-11-18

PAINEWEBBER INVESTMENT SERIES
497, 1996-11-18

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PAINEWEBBER EMERGING MARKETS EQUITY FUND
PAINEWEBBER GLOBAL EQUITY FUND
PAINEWEBBER GLOBAL INCOME FUND
CLASS Y SHARES

1285 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10019
PROSPECTUS -- OCTOBER 31, 1996

- --------------------------------------------------------------------------------

PaineWebber Global Funds are designed for investors generally seeking
long-term growth by investing mainly in foreign stocks or high current
income by investing mainly in global debt instruments. PaineWebber
Emerging Markets Equity Fund seeks long-term capital appreciation by
investing primarily in equity securities of companies in newly
industrializing countries. PaineWebber Global Equity Fund seeks long-term
growth of capital by investing primarily in U.S. and foreign equity
securities. PaineWebber Global Income Fund seeks high current income and,
secondarily, capital appreciation by investing primarily in high-quality
foreign and U.S. bonds.

This Prospectus concisely sets forth information that a prospective
investor should know about the Funds before investing. Please read it
carefully and retain a copy of this Prospectus for future reference.

A Statement of Additional Information dated October 31, 1996 has been
filed with the Securities and Exchange Commission and is legally part of
this Prospectus. The Statement of Additional Information can be obtained
without charge, and further inquiries can be made, by contacting an
individual Fund, your investment executive at PaineWebber or one of its
correspondent firms or by calling toll-free 1-800-647-1568.

- --------------------------------------------------------------------------------

THE PAINEWEBBER FAMILY OF MUTUAL FUNDS

The PaineWebber Family of Mutual Funds consists of six broad
categories, which are presented here. Generally, investors seeking to
maximize return must assume greater risk. Emerging Markets Equity Fund,
Global Equity Fund and Global Income Fund are all in the GLOBAL category.

o MONEY MARKET FUND for income and o ASSET ALLOCATION FUNDS for
stability by investing in long-term growth and income by
high-quality, short-term investing in stocks and bonds.
investments.

o BOND FUNDS for income by investing o STOCK FUNDS for long-term growth
mainly in bonds. by investing mainly in stocks.

o TAX-FREE BOND FUNDS for income o GLOBAL FUNDS for long-term growth
exempt from federal income taxes by investing mainly in foreign
and, in some cases, state and stocks or high current income by
local income taxes, by investing investing mainly in global debt
in municipal bonds. instruments.

A complete listing of the PaineWebber Family of Mutual Funds is found on
the back cover of this Prospectus.

- --------------------------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
FUNDS OR THEIR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFERING BY THE FUNDS OR THEIR DISTRIBUTOR IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE.

The Class Y shares described in this Prospectus are currently offered for
sale only to limited groups of investors, which include, for the Class Y
shares of Global Equity Fund and Global Income Fund, the trustee of the
PaineWebber Savings Investment Plan ('PW SIP'). See 'How to Buy Shares.'
Participants in the PW SIP can make further inquiries by contacting the
PaineWebber Incorporated Benefits Department, 10th Floor, 1000 Harbor
Boulevard, Weehawken, New Jersey 10187 or by calling 1-201-902-4444.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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Prospectus Page 1

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PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

PAGE
----

The Funds at a Glance................... 3

Expense Table........................... 5

Financial Highlights.................... 6

Investment Objectives & Policies........ 9

Investment Philosophy & Process......... 10

Performance............................. 12

The Funds' Investments.................. 15

How to Buy Shares....................... 19

How to Sell Shares...................... 20

Management.............................. 21

Determining the Shares' Net Asset
Value................................. 22

Dividends & Taxes....................... 23

General Information..................... 24

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Prospectus Page 2

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PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

THE FUNDS AT A GLANCE
- --------------------------------------------------------------------------------

The Funds offered by this Prospectus are not intended to provide a complete or
balanced investment program, but one or more of them may be appropriate as a
component of an investor's overall portfolio. Some common reasons to invest in
these Funds are to finance college educations, plan for retirement or diversify
a portfolio. When selling shares, investors should be aware that they may get
more or less for their shares than they originally paid for them. As with any
mutual fund, there is no assurance that the Funds will achieve their goals.

EMERGING MARKETS EQUITY FUND

GOAL: To increase the value of your investment by investing primarily in equity
securities of companies in newly industrializing countries.

INVESTMENT OBJECTIVE: Long-term capital appreciation.

RISKS: Equity securities historically have shown greater growth potential than
other types of securities, but they have also shown greater volatility. Because
the Fund invests primarily in equity securities, its price will rise and fall.
Investors in the Fund should be able to assume the special risks of investing in
foreign securities, which include possible adverse political, social and
economic developments abroad and differing characteristics of foreign economies
and markets. These risks are greater with respect to securities of issuers
located in emerging markets, in which the Fund seeks to invest most of its
assets. Most of the foreign securities held by the Fund are denominated in
foreign currencies, and the value of these investments can be adversely affected
by fluctuations in foreign currency values. The Fund may use derivatives, such
as options, futures and forward currency contracts, which may involve additional
risks. Investors may lose money by investing in the Fund; the investment is not
guaranteed.

SIZE: On September 30, 1996, the Fund had over $38.0 million in net assets.

GLOBAL EQUITY FUND

GOAL: To increase the value of your investment by investing primarily in equity
securities of U.S. and foreign companies.

INVESTMENT OBJECTIVE: Long-term growth of capital.

differing characteristics of foreign economies and markets. These risks are
greater with respect to securities of issuers located in emerging markets, in
which the Fund may invest. Most of the foreign securities held by the Fund are
denominated in foreign currencies, and the value of these investments can be
adversely affected by fluctuations in foreign currency values. The Fund may use
derivatives, such as options, futures and forward currency contracts, which may
involve additional risks. Investors may lose money by investing in the Fund; the
investment is not guaranteed.

SIZE: On September 30, 1996, the Fund had over $566.8 million in net assets.

GLOBAL INCOME FUND

GOAL: To provide high current income and, secondarily, capital appreciation by
investing primarily in high-quality foreign and U.S. bonds.

INVESTMENT OBJECTIVE: The primary investment objective is high current income
consistent with prudent investment risk; capital appreciation is a secondary
objective.

RISKS: The Fund invests primarily in bonds, which are subject to interest rate
and credit risk. Most of the foreign securities held by the Fund are denominated
in foreign currencies, and the value of these investments thus can be adversely
affected by fluctuations in foreign currency values. Interest rate risk is the
risk that interest rates will rise and bond prices will fall, lowering the value
of the Fund's investments. Credit risk is the risk that adverse changes in
economic conditions will affect an issuer's ability to pay interest and
principal. Investors in the Fund should be able to assume the special risks of
investing in foreign securities, which include possible adverse political,
social and economic developments abroad and differing characteristics of foreign
economies and markets. These risks are greater with respect to securities of
issuers located in emerging markets, in which the Fund may invest to a limited
degree. Certain investment grade bonds in which the Fund may invest have
speculative characteristics. The Fund may also invest in bonds rated below
investment grade, which are subject to greater risks of default or price
fluctuation than investment grade bonds and are considered predominantly
speculative.

--------------------
Prospectus Page 3
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PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

THE FUNDS AT A GLANCE
(Continued)
- --------------------------------------------------------------------------------

The Fund may use derivatives, such as options, futures, forward currency
contracts and interest rate protection transactions, which may involve
additional risks. As a non-diversified fund as defined in the Investment Company
Act of 1940 ('1940 Act'), the Fund is subject to greater risk than funds that

have a broader range of investments as explained below. Investors may lose money
by investing in the Fund; the investment is not guaranteed.

SIZE: On September 30, 1996, the Fund had over $937.2 million in net assets.

MANAGEMENT

Mitchell Hutchins Asset Management Inc. ('Mitchell Hutchins'), an asset
management subsidiary of PaineWebber Incorporated ('PaineWebber'), is the
investment adviser and administrator of Emerging Markets Equity Fund, Global
Equity Fund and Global Income Fund (each a 'Fund' and, collectively, the
'Funds'). Mitchell Hutchins has appointed Emerging Markets Management as the
investment sub-adviser for Emerging Markets Equity Fund and GE Investment
Management Incorporated ('GE Investment Management') as the investment
sub-adviser for Global Equity Fund.

WHO SHOULD INVEST

EMERGING MARKETS EQUITY FUND is for investors who want long-term capital
appreciation. The Fund seeks to achieve this by investing primarily in equity
securities of companies in newly industrializing countries in Asia, Latin
America, the Middle East, Southern Europe, Eastern Europe and Africa ('emerging
markets'). Over time, foreign stocks have shown greater growth potential than
many other types of securities. However, because their value tends to fluctuate
more than that of U.S. stocks, investors must be willing to tolerate volatility
in the value of the Fund's investments. These risks are greater with respect to
securities of issuers located in emerging markets. Accordingly, Emerging Markets
Equity Fund is designed for investors who are able to bear the risk that comes
with investment in equity securities of emerging market issuers.

GLOBAL EQUITY FUND is for investors who want long-term growth of capital. The
Fund seeks to achieve this by investing primarily in equity securities of U.S.
and foreign companies. Over time, foreign stocks have shown greater growth
potential than many other types of securities. However, because their value
tends to fluctuate more than that of U.S. stocks, investors must be willing to
tolerate volatility in the value of the Fund's investments. Accordingly, Global
Equity Fund is designed for investors who are able to bear the risk that comes
with investments in foreign equity securities.

GLOBAL INCOME FUND is for investors who want high current income consistent with
prudent investment risk and, secondarily, capital appreciation. The Fund seeks
to achieve this by investing primarily in high-quality debt securities issued or
guaranteed by foreign governments, by the U.S. government, by their respective
agencies or instrumentalities or by supranational organizations, or issued by
foreign or U.S. companies. Investors in the Fund should be willing to assume the
special risks of investing in foreign securities, which include possible adverse
political, social and economic developments abroad and differing characteristics
of foreign economies and markets. Accordingly, Global Income Fund is designed
for investors who are able to bear the risk that comes with investments in
foreign securities.

HOW TO PURCHASE CLASS Y SHARES

Eligible investors may purchase Class Y shares of the Funds as follows:

The price is the net asset value next calculated after PaineWebber's New York
City headquarters or the Transfer Agent receives the purchase order.

Investors do not pay an initial sales charge when they buy Class Y shares. 100%
of their purchase is immediately invested. Investors also do not pay a
redemption fee or contingent deferred sales charge when they sell Class Y
shares.

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Prospectus Page 4

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PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

EXPENSE TABLE
- --------------------------------------------------------------------------------

The following tables are intended to assist investors in understanding the
expenses associated with investing in Class Y shares of the Funds. Expenses
shown below represent those incurred for the most recent fiscal year.

<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS Y
-------
<S> <C>
Maximum Sales Charge on Purchases of Shares (as a % of
offering price)........................................... None
Sales Charge on Reinvested Dividends (as a % of offering
price).................................................... None
Exchange Fee................................................ None

ANNUAL FUND OPERATING EXPENSES (1)(2) (as a % of average net
assets)

EMERGING MARKETS EQUITY FUND
Management Fees (after fee waivers)*........................ 1.12%
12b-1 Fees.................................................. 0.00
Other Expenses (after expense reimbursements)*.............. 1.07
-------
Total Operating Expenses (after fee waivers and expense
reimbursements)*.......................................... 2.19%
-------
-------
GLOBAL EQUITY FUND
Management Fees............................................. 0.85%
12b-1 Fees.................................................. 0.00
Other Expenses.............................................. 0.32
-------
Total Operating Expenses.................................... 1.17%
-------
-------
GLOBAL INCOME FUND
Management Fees............................................. 0.73%
12b-1 Fees.................................................. 0.00
Other Expenses+............................................. 0.18
-------
Total Operating Expenses+................................... 0.91%
-------
-------
</TABLE>
- ------------------

(1) Class Y shares may be purchased by participants in the INSIGHT Investment
Advisory Program ('INSIGHT') sponsored by PaineWebber, when purchased
through that program. Participation in INSIGHT is subject to payment of an
advisory fee at the maximum annual rate of 1.50% of assets held through
INSIGHT (generally charged quarterly in advance), which may be charged to
the INSIGHT participant's PaineWebber account. This account charge is not
included in the table because non-INSIGHT participants are permitted to
purchase Class Y shares of the Funds.

(2) See 'Management' for additional information. The management fees payable to
Mitchell Hutchins by Emerging Markets Equity Fund are greater than those
paid by most funds.

* Without taking into account waivers and expense reimbursements, 'Management
Fees,' 'Other Expenses' and 'Total Operating Expenses' for Class Y shares of
Emerging Markets Equity Fund would have been 1.62%, 1.67% and 3.29%,
respectively.

+ Does not include 0.04% in non-recurring reorganization expenses that were
incurred during the fiscal year ended October 31, 1995. If those expenses
were included, 'Other Expenses' and 'Total Operating Expenses' would have
been 0.22% and 0.95%, respectively.

EXAMPLES OF EFFECT OF FUND EXPENSES

The following examples should assist investors in understanding various
costs and expenses incurred as shareholders of a Fund. The assumed 5% annual
return shown in the examples is required by regulations of the Securities and
Exchange Commission ('SEC') applicable to all mutual funds. THESE EXAMPLES
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES OF A FUND MAY BE MORE OR LESS THAN THOSE SHOWN.

An investor would pay the following expenses, directly or indirectly, on a
$1,000 investment in the Fund, assuming a 5% annual return, reinvestment of all
dividends and distributions and percentage amounts listed under 'Annual Fund
Operating Expenses' remain the same for the years shown:

EMERGING MARKETS EQUITY FUND
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------- ------- -------- -------- ---------
Class Y............................ $22 $ 69 $117 $ 252

GLOBAL EQUITY FUND
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------- ------- -------- -------- ---------
Class Y............................ $12 $ 37 $ 64 $ 142

GLOBAL INCOME FUND
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------- ------- -------- -------- ---------
Class Y............................ $ 9 $ 29 $ 50 $ 112

--------------------
Prospectus Page 5

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PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

EMERGING MARKETS EQUITY FUND

Additional Information. The financial statements and notes, as well as the
financial information in the table below relating to the fiscal year ended June
30, 1996, have been audited by Ernst & Young LLP, independent auditors. The
financial information for the prior years was audited by another independent
accounting firm, whose reports thereon were unqualified. Further information
about the Fund's performance is also included in the Annual Report to
Shareholders,
which may be obtained without charge by calling 1-800-647-1568.

<TABLE>
<CAPTION>
EMERGING MARKETS EQUITY FUND
-------------------------------------------------------------------------------
CLASS Y**
-------------------------------------------------------------------------------
FOR THE PERIOD
FOR THE YEARS ENDED JUNE 30, JAN. 19, 1994+
------------------------------------------------------------ TO
1996 1995*** JUNE 30, 1994
---------------- ---------------- --------------
<S> <C> <C> <C>
Net asset value, beginning of period.... $ 9.75 $ 10.80 $ 12.00
----------- ----------- --------------
Net investment income (loss)............ (0.01) 0.01 0.05
Net realized and unrealized gains
(losses) from investment and foreign
currency transactions................. 0.37 (0.99) (1.25)
----------- ----------- --------------
Net increase (decrease) from investment
operations............................ 0.36 (0.98) (1.20)
----------- ----------- --------------

Dividends from net investment income.... -- (0.07) --
----------- ----------- --------------
Net asset value, end of period.......... $ 10.11 $ 9.75 $ 10.80
----------- ----------- --------------
----------- ----------- --------------
Total investment return (1)............. 3.69% (9.03)% (10.00)%
----------- ----------- --------------
----------- ----------- --------------
Ratios/Supplemental Data:
Net assets, end of period (000's)....... $ 12,979 $ 12,332 $ 15,435
Expenses, net of fee waivers, to average
net assets............................ 2.19% 2.19% 2.22%*
Expenses, before fee waivers, to average
net assets............................ 3.29% 2.29% 2.22%*
Net investment income (loss), net of fee
waivers, to average net assets........ (0.15)% (0.51)% 0.97%*
Net investment income (loss), before fee
waivers, to average net assets........ (1.25)% (0.61)% 0.97%*
Portfolio turnover...................... 69% 76% 8%
</TABLE>
- ------------------
+ Commencement of offering of shares.

* Annualized.

** Formerly Class C shares.

*** 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. Total investment returns for periods of less
than one year have not been annualized.

--------------------
Prospectus Page 6

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PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------

GLOBAL EQUITY FUND

The following table provides investors with data and ratios for one Class Y
share for each of the periods shown. This information is supplemented by the
financial statements and accompanying notes appearing in Global Equity Fund's
Annual Report to Shareholders for the fiscal year ended August 31, 1996, and the
report of Ernst & Young LLP, independent auditors, appearing in the Fund's
Annual Report to Shareholders. The financial statements, accompanying notes and
auditors' report are incorporated by reference into the Statement of Additional
Information. The financial statements and notes, as well as the financial
information in the table below relating to each of the two years in the period
ended August 31, 1996, have been audited by Ernst & Young LLP, independent
auditors. The financial information for the prior years was audited by another
independent accounting firm, whose reports thereon were unqualified. Further
information about the Fund's performance is also included in the Annual Report
to Shareholders, which may be obtained without charge by calling 1-800-647-1568.

<TABLE>
<CAPTION>
GLOBAL EQUITY FUND
-------------------------------------------------------
CLASS Y**
-------------------------------------------------------
FOR THE YEARS ENDED AUGUST 31, FOR THE PERIOD
--------------------------------- MAY 10, 1993+
1996 1995*** 1994 TO AUGUST 31, 1993
-------- -------- -------- ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 16.22 $ 17.03 $ 14.56 $ 13.80
-------- -------- -------- ------------------
Net investment income................... 0.07 0.07 0.05 0.02
Net realized and unrealized gains from
investment and foreign currency
transactions.......................... 1.25 0.37 2.63 0.74
-------- -------- -------- ------------------
Net increase from investment
operations............................ 1.32 0.44 2.68 0.76
-------- -------- -------- ------------------
Dividends from net investment income.... -- -- -- --
Distributions from net realized gains... (0.57) (1.25) (0.21) --
-------- -------- -------- ------------------

Total dividends and distributions....... (0.57) (1.25) (0.21) --
-------- -------- -------- ------------------
Net asset value, end of period.......... $ 16.97 $ 16.22 $ 17.03 $ 14.56
-------- -------- -------- ------------------
-------- -------- -------- ------------------
Total investment return (1)............. 8.39% 3.54% 18.49% 5.51%
-------- -------- -------- ------------------
-------- -------- -------- ------------------
Ratios/Supplemental Data:
Net assets, end of period (000's)....... $ 61,736 $ 57,150 $ 28,390 $ 19,098
Expenses to average net assets.......... 1.17% 1.46%(2) 1.33% 1.28%*
Net investment income to average net
assets................................ 0.46% 0.36%(2) 0.32% 0.47%*
Portfolio turnover...................... 33% 40% 51% 56%
Average commission rate paid per share
of common stock investments
purchased/sold (3).................... $ 0.0120 -- -- --
</TABLE>
- ------------------
* Annualized.

** Formerly Class C shares.

*** Investment advisory functions for the Fund were transferred from Kidder
Peabody Asset Management, Inc. to Mitchell Hutchins on February 13, 1995.

+ Commencement of offering of shares.

(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates, and a sale at net
asset value on the last day of each period reported. Total investment
returns for periods of less than one year have not been annualized.

(2) These ratios include non-recurring reorganization expenses of 0.06%.

(3) Disclosure effective for fiscal years beginning on or after September 1,
1995.

--------------------
Prospectus Page 7

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PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------

GLOBAL INCOME FUND

The following table provides investors with data and ratios for one Class Y
share for each of the periods shown. This information is supplemented by the
financial statements and accompanying notes appearing in Global Income Fund's
Annual Report to Shareholders for the fiscal year ended October 31, 1995 and the
report of Price Waterhouse LLP, independent accountants, appearing in the Fund's
Annual Report to Shareholders. The financial statements, accompanying notes and
accountants' report are incorporated by reference into the Statement of
Additional Information. The financial statements and notes, as well as the
financial information in the table below, have been audited by Price Waterhouse
LLP, independent accountants. Further information about the Fund's performance
is also included in the Annual Report to Shareholders, which may be obtained
without charge by calling 1-800-647-1568. The financial statements and notes and
the financial information in the table below, as they relate to the six months
ended April 30, 1996, have been taken from the records of the Fund without
examination by the independent accountants, who do not express an opinion
thereon.

<TABLE>
<CAPTION>
GLOBAL INCOME FUND
-----------------------------------------------------------------------
CLASS Y***
-----------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS PERIOD
ENDED AUGUST 26,
APRIL 30, FOR THE YEARS ENDED OCTOBER 31, 1991+ TO
1996 ----------------------------------------- OCTOBER 31,
(UNAUDITED) 1995 1994 1993 1992 1991
----------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 10.35 $ 9.99 $ 10.97 $ 10.64 $ 10.76 $ 10.53
----------- ------- ------- ------- ------- -----------
Net investment income................... 0.36@ 0.78@ 0.75 0.71 0.81 0.17
Net realized and unrealized gains
(losses) from investment and foreign
currency transactions................. (0.05)@ 0.32@ (1.06) 0.58 (0.08) 0.32
----------- ------- ------- ------- ------- -----------

Total increase/decrease from investment
operations............................ 0.31 1.10 (0.31) 1.29 0.73 0.49
----------- ------- ------- ------- ------- -----------
Dividends from net investment income.... (0.41) (0.74) (0.34) (0.82) (0.67) (0.24)
Distributions from realized gains on
investments and foreign currency
transactions.......................... -- -- -- (0.14) (0.18) (0.02)
Distributions from paid in capital...... -- -- (0.33) -- -- --
----------- ------- ------- ------- ------- -----------
Total dividends and distributions....... (0.41) (0.74) (0.67) (0.96) (0.85) (0.26)
----------- ------- ------- ------- ------- -----------
Net asset value, end of period.......... $ 10.25 $ 10.35 $ 9.99 $ 10.97 $ 10.64 $ 10.76
----------- ------- ------- ------- ------- -----------
----------- ------- ------- ------- ------- -----------
Total investment return (1)............. 3.06% 11.39% (2.86)% 12.60% 6.98% 4.63%
----------- ------- ------- ------- ------- -----------
----------- ------- ------- ------- ------- -----------
Ratios/Supplemental Data:
Net assets, end of period (000's)..... $15,198 $16,613 $12,975 $12,043 $ 7,252 $ 2,565
Expenses to average net assets........ 0.96%* 0.95%(2) 0.88% 1.06%** 0.94% 1.09%*
Net investment income to average net
assets............................. 6.97%* 7.77%(2) 7.23% 7.00%** 8.15% 8.79%*
Portfolio turnover rate............... 68% 113% 108% 90% 92% 53%
</TABLE>
- ------------------
* Annualized.

** Includes 0.15% of interest expense related to the reverse repurchase
agreement transactions entered into during the fiscal year.

*** Formerly Class C shares.

+ Commencement of offering of shares.

@ Calculated using the average shares outstanding for the year.

(1) Total investment return is calculated assuming a $1,000 investment in Fund
shares on the first day of each period reported, reinvestment of all
dividends and other distributions at net asset value on the payable date,
and a sale at net asset value on the last day of each period reported. Total
investment returns for periods of less than one year have not been
annualized.

(2) These ratios include non-recurring reorganization expenses of 0.04%.

--------------------
Prospectus Page 8

<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------

The Funds' investment objectives may not be changed without shareholder
approval. Their other investment policies, except where noted, are not
fundamental and may be changed by the Funds' boards.

EMERGING MARKETS EQUITY FUND

Emerging Markets Equity Fund's investment objective is long-term capital
appreciation. The Fund seeks to achieve its objective through investment in a
diversified portfolio consisting primarily of equity securities of issuers in
emerging markets in Asia, Latin America, the Middle East, Southern Europe,
Eastern Europe and Africa. Under normal market conditions, the Fund invests a
minimum of 65% of its total assets in equity securities of issuers located in
emerging markets and maintains investments in at least three emerging markets.
Issuers are considered to be located in an emerging market if: (1) the principal
securities trading market for the issuer is in an emerging market country; (2)
the issuer derives 50% or more of its annual revenue from either goods produced,
sales made or services performed in emerging markets; or (3) the issuer is
organized under the laws of, and with a principal office in, an emerging market.

Emerging Markets Management attempts to spread the Fund's investments over
geographic as well as economic sectors. Generally, Emerging Markets Management
does not intend to invest more than two-thirds of the Fund's total assets in any
single region, or more than 35% in any single country. Under no circumstances
will more than 25% of the Fund's total assets be invested in any single
industry. Within each emerging market, the Fund is diversified through
investments in a number of local companies characterized by attractive valuation
relative to expected growth.

There are currently over 60 newly industrializing and developing countries that
have equity markets. A number of these emerging markets are not yet easily
accessible to foreign investors and have unattractive tax barriers or
insufficient liquidity to make significant investments by the Fund feasible or
attractive. However, many of the largest of the emerging markets have, in recent
years, liberalized access, and more are expected to do so over the coming few
years.

GLOBAL EQUITY FUND

Global Equity Fund's investment objective is long-term growth of capital. The
Fund attempts to achieve this goal by investing primarily in equity securities
issued by companies in foreign countries, as well as in the United States.

The International Equity Team at GE Investment Management selects equity
securities issued by companies located in developed and developing countries
throughout the world. The Fund normally invests in at least three countries, one

of which is typically the United States. The Fund normally invests at least 65%
of its total assets in equity securities of foreign and U.S. companies.

When the International Equity Team believes it is consistent with the Fund's
investment objective of long-term growth of capital, the Fund may invest up to
35% of its total assets in investment grade bonds issued by corporate or
governmental entities. The bonds in which the Fund invests have maturities no
longer than seven years. When the International Equity Team considers market,
economic, political or currency conditions abroad to be unstable, the Fund may
assume a temporary defensive position by investing all or a significant portion
of its assets in securities of U.S. and Canadian issuers or by holding cash or
short-term money market investments.

Under normal circumstances, at least 80% of the Fund's total assets are invested
in equity securities or bonds of issuers in countries represented in the Morgan
Stanley Capital International World Index. This is a well-known index that
reflects developed and developing markets throughout the world.

GLOBAL INCOME FUND

Global Income Fund's primary investment objective is high current income
consistent with prudent investment risk; capital appreciation is a secondary
objective. The Fund seeks to achieve these objectives by investing principally
in high-quality debt securities issued or guaranteed by foreign governments, by
the U.S. government, by their respective agencies or instrumentalities or by
supranational organizations, or issued by U.S. or foreign companies.

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PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

The Fund's portfolio consists primarily of debt securities rated within one of
the two highest grades assigned by Standard & Poor's, a division of The McGraw
Hill Companies ('S&P'), Moody's Investors Service, Inc. ('Moody's') or another
nationally recognized statistical rating organization ('NRSRO') or, if unrated,
determined by Mitchell Hutchins to be of comparable quality. Normally, at least
65% of the Fund's total assets are invested in high-quality debt securities,
denominated in foreign currencies or U.S. dollars, of issuers located in at
least three of the following countries: Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, the
Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, Thailand, the United Kingdom and the United States. No more than
40% of the Fund's assets normally are invested in securities of issuers located
in any one country. Up to 5% of the Fund's total assets may be invested in debt
securities convertible into equity securities.

The Fund may invest up to 35% of its total assets in debt securities rated below
the two highest grades assigned by an NRSRO. Except as noted below, these
securities must be rated at least BBB by S&P, Baa by Moody's or comparably rated
by another NRSRO or, if unrated, determined by Mitchell Hutchins to be of

comparable quality. Within this 35% limitation, the Fund may invest up to 20% of
its total assets in sovereign debt securities rated as low as BB by S&P, Ba by
Moody's or comparably rated by another NRSRO or, in the case of such securities
assigned a short-term debt rating, no lower than B by S&P or comparably rated by
another NRSRO or, if not so rated, determined by Mitchell Hutchins to be of
comparable quality. Mitchell Hutchins will purchase such securities for the Fund
only when it concludes that the anticipated return to the Fund on such
investment warrants exposure to the additional level of risk.

- --------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY & PROCESS
- --------------------------------------------------------------------------------

EMERGING MARKETS EQUITY FUND

In selecting equity securities for Emerging Markets Equity Fund, Emerging
Markets Management focuses primarily on asset allocation among selected emerging
markets and, as a secondary matter, on issuer selection within those markets. In
addition to considerations relating to a particular market's investment
restrictions and tax barriers, selections are made among emerging markets based
on other relevant factors, including the outlook for economic growth, currency
exchange rates, commodity prices, interest rates, political factors and the
stage of the local market cycle.

Based on these and other factors, the Fund's portfolio of securities is
evaluated and, if necessary, adjusted on at least a quarterly basis to ensure
that it conforms to the objective and policies of the Fund. Each of the emerging
markets in which the Fund may invest is also monitored on a continuous basis and
tactical shifts in portfolio allocation are made, when required, based on new
developments.

Within each emerging market, the Fund invests in a variety of companies that are
characterized by attractive valuation. Using a number of data bases and sources
of investment information, Emerging Markets Management screens each market for
companies available for investment. To be considered for investment, companies
must legally permit investment by foreigners and have a market capitalization of
over $15 million. From among this group, investments are systematically screened
for fundamental value based on a number of standards, including
price-to-earnings ratio, price-to-book value ratio, earnings momentum, dividend
yield and debt-to-equity ratio. The resulting selection of investments is
intended to provide a broad group of attractively valued investments available
to foreign investors in each emerging market.

Emerging Markets Management uses a proprietary asset allocation model to assist
in the selection of markets and individual stocks. Making use of long-term
historical data on at least 1,000 of the most actively traded stocks in the
target markets, as well as additional data for recent years and earnings
forecasts, Emerging Markets Management estimates the relationship between the
fair value and price levels of markets based on a variety of fundamental
indicators. The model evaluates markets in historical and prospective terms,
taking into consideration interest rates, inflation and currency developments.
While following a disciplined, systematic approach to investment selection,
Emerging Markets Management combines the results from computerized screening
techniques with market, industry, economic and political information.

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PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

GLOBAL EQUITY FUND

In selecting equity securities for Global Equity Fund, the International Equity
Team at GE Investment Management searches for growth companies selling at
reasonable prices, with an emphasis on undervalued medium- to large-size growth
companies with a global presence. The investment process employed by the
International Equity Team involves several steps.

First, the International Equity Team carefully screens a universe of thousands
of global stocks by comparing each company's price-to-earnings ratio with its
long-term growth. This evaluation helps eliminate companies whose stock prices
are too expensive, typically resulting in a list of several hundred stocks.
Next, this smaller group of stocks is rigorously analyzed by the International
Equity Team's experienced investment professionals. This step, which is designed
to determine whether a stock's price reflects its true value and whether the
market may eventually recognize the stock's value, reduces the universe to fewer
stocks.

Finally, the International Equity Team looks for a catalyst (such as new
management, new products or changing industry dynamics) that might cause the
market to realize that a stock is undervalued. This process typically results in
fewer than 100 stocks that the International Equity Team will buy for the Fund's
portfolio.

The strength of the Team's conviction about each company is part of what
determines the size of each holding.

The International Equity Team regularly reviews the equity securities held in
the Fund's portfolio to assess risks, such as stability in the political and
economic conditions of underlying countries, fluctuations in currency rates,
liquidity, changes in company earnings, and other relevant factors.

GLOBAL INCOME FUND

Global Income Fund's investment policies are designed to enable it to capitalize
on unique investment opportunities presented throughout the world and in
international financial markets influenced by the increasing interdependence of
economic cycles and currency exchange rates. Over the past decade, debt
securities offered by certain foreign governments provided higher investment
returns than U.S. government debt securities. Such returns reflect interest
rates and other market conditions prevailing in those countries and the effect
of gains and losses in the denominated currencies, which have had a substantial
impact on investment in foreign debt securities. A popular index used to assess
both U.S. government and foreign government debt markets is the Salomon Brothers
World Government Bond Market Index. As of December 31, 1995, more than 65% of

this index was represented by securities denominated in currencies other than
the U.S. dollar.

The Global Fixed Income Management Team at Mitchell Hutchins relies on
fundamental economic strength, credit quality and currency and interest rate
trends as the principal determinants of the various country, geographic and
industry sector weightings within the Fund's portfolio. In addition, certain of
the Fund's assets are invested in the debt securities of certain U.S.
governmental and corporate issuers. The Management Team believes that over time
investment in a composite of foreign fixed income markets and in the U.S.
government and corporate bond markets is less risky than a portfolio comprised
exclusively of foreign securities and provides investors with the potential to
earn a higher return than a portfolio invested exclusively in U.S. debt
securities.

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PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

PERFORMANCE
- --------------------------------------------------------------------------------

These charts show the total returns for Class Y shares of the Funds. Past
results are not a guarantee of future results.

EMERGING MARKETS EQUITY FUND

[BAR GRAPH]

1/19/94 -
12/31/94 1995
-------- ----
-12.33% -10.92%

As Class Y shares commenced operations on January 19, 1994, the 1994 return
represents the period from January 19, 1994 through December 31, 1994.

AVERAGE ANNUAL RETURNS
As of June 30, 1996
CLASS Y
--------
Inception Date..................... 1/19/94
One Year........................... 3.69%
Life............................... (6.47)%

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PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

GLOBAL EQUITY FUND

[BAR GRAPH]

5/10/93 -
12/31/93 1994 1995
-------- ---- ----
18.19% -2.16% 13.90%

As Class Y shares commenced operations on May 10, 1993, the 1993 return
represents the period from May 10, 1993 through December 31, 1993.

AVERAGE ANNUAL RETURNS
As of August 31, 1996
CLASS Y
--------
Inception Date..................... 5/10/93
One Year........................... 8.39%
Life............................... 10.77%

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PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

GLOBAL INCOME FUND

[BAR GRAPH]

8/26/91 -
12/31/91 1992 1993 1994 1995
-------- ---- ---- ---- ----
9.83% 1.51% 14.54% -3.74% 13.53%

As Class Y shares commenced operations on August 26, 1991, the 1991 return for
Class Y shares represents the period from August 26, 1991 through December 31,
1991.

AVERAGE ANNUAL RETURNS
As of April 30, 1996
CLASS Y
--------
Inception Date..................... 8/26/91
One Year........................... 8.36%
Life............................... 7.53%

PERFORMANCE INFORMATION

The Funds perform a standardized computation of annualized total return and may
show this return in advertisements or promotional materials. Standardized return
shows the change in value of an investment in a Fund as a steady compound annual
rate of return. Actual year-by-year returns fluctuate and may be higher or lower
than standardized return. One-, five- and ten-year periods will be shown, unless
the Fund or Class has been in existence for a shorter period. If so, returns
will be shown for the period since inception, known as 'Life.' Total return
calculations assume reinvestment of dividends and other distributions.

The Funds may use other total return presentations in conjunction with
standardized return. These may cover the same or different periods as those used
for standardized return and may include cumulative returns, average annual
rates, actual year-by-year rates or any combination thereof.

Total return information reflects past performance and does not indicate future
results. The investment return and principal value of shares of the Funds will
fluctuate. The amount investors receive when selling shares may be more or less
than what they paid. Further information about each Fund's performance is
contained in its Annual Report, which may be obtained without charge by
contacting the Fund, your PaineWebber investment executive or PaineWebber's
correspondent firms or by calling toll-free 1-800-647-1568.

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PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

THE FUNDS' INVESTMENTS
- --------------------------------------------------------------------------------

EQUITY SECURITIES include common stocks, preferred stocks and securities that
are convertible into them, including convertible debentures and notes and common
stock purchase warrants and rights. Common stocks, the most familiar type,
represent an equity (ownership) interest in a corporation. While past
performance does not guarantee future results, common stocks historically have
provided the greatest long-term growth potential in a company. However, their
prices generally fluctuate more than other securities, and reflect changes in a
company's financial condition and in overall market and economic conditions.

Preferred stock has certain fixed-income features, like a bond, but is actually
equity in a company, like common stock. Convertible securities may include
debentures, notes and preferred equity securities, which are convertible into
common stock.

BONDS (including notes and debentures) are used by corporations and governments
to borrow money from investors. The issuer pays the investor a fixed or variable
rate of interest and must repay the amount borrowed at maturity. Bonds have
varying degrees of investment risk and varying levels of sensitivity to changes
in interest rates.

RISKS

Following is a discussion of the risks that are common to each Fund:

EQUITY SECURITIES. Equity securities historically have shown greater growth
potential than other types of securities. Common stocks generally represent the
riskiest investment in a company. It is possible that investors may lose their
entire investment.

BONDS. Bonds are subject to interest rate risk and credit risk. Interest rate
risk is the risk that interest rates will rise and bond prices will fall,
lowering the value of the Fund's bond investments. Credit risk is the risk that
adverse changes in economic conditions can affect an issuer's ability to pay
principal and interest. In addition, there is a risk that bonds will be
downgraded by rating agencies. Credit ratings attempt to evaluate the safety of
principal and interest payments and do not evaluate the volatility of the
security's value or its liquidity. Rating agencies may fail to make timely
changes in credit ratings in response to subsequent events, so that an issuer's
current financial condition may be better or worse than the rating
indicates.

Debt securities rated below investment grade generally offer a higher current
yield than that available for higher grade issues, but they involve higher
risks, in that they are especially subject to adverse changes in general
economic conditions and in the industries in which the issuers are engaged, to

changes in the financial condition of the issuers and to price fluctuations in
response to changes in interest rates. During periods of economic downturn or
rising interest rates, highly leveraged issuers may experience financial stress,
which could adversely affect their ability to make payments of interest and
principal and increase the possibility of default. In addition, such issuers may
not have more traditional methods of financing available to them, and may be
unable to repay debt at maturity by refinancing. The risk of loss due to default
by such issuers is significantly greater because such securities frequently are
unsecured and subordinated to the prior payment of senior indebtedness.

FOREIGN SECURITIES. Investing in foreign securities involves more risks than
investing in securities of U.S. companies. Their value is subject to economic
and political developments in the countries where the companies operate and to
changes in foreign currency values. Values may also be affected by foreign tax
laws, changes in foreign economic or monetary policies, exchange control
regulations and regulations involving prohibitions on the repatriation of
foreign currencies. Investments in foreign countries could be affected by other
factors not present in the United States, including expropriation, confiscatory
taxation, lack of uniform accounting and auditing standards and potential
difficulties in enforcing contractual obligations and could be subject to
extended clearance and settlement periods.

In general, less information may be available about foreign companies than about
U.S. companies, and foreign companies are generally not subject to the same
accounting, auditing and financial reporting standards as are U.S. companies.
Foreign securities markets may be less liquid and subject to less regulation
than the U.S. securities markets. The costs of investing outside the United
States frequently are higher than those in the United States. These costs
include relatively higher brokerage commissions and foreign custody expenses.

INVESTING IN EMERGING MARKETS. Investing in securities issued by companies
located in emerging markets involves additional risks. These countries typically

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PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

have economic and political systems that are relatively less mature, and can be
expected to be less stable, than those of developed countries. Emerging market
countries may have policies that restrict investment by foreigners in those
countries, and there is a risk of government expropriation or nationalization of
private property. The possibility of low or nonexistent trading volume in the
securities of companies in emerging markets may also result in a lack of
liquidity and in price volatility. Issuers in emerging markets typically are
subject to a greater degree of change in earnings and business prospects than
are companies in developed markets.

CURRENCY. Currency risk is the risk that changes in foreign exchange rates may
reduce the U.S. dollar value of each Fund's foreign investments. Each Fund's
share value may change significantly when investments are denominated in foreign

currencies. Generally, currency exchange rates are determined by supply and
demand in the foreign exchange markets and the relative merits of investments in
different countries. Currency exchange rates can also be affected by the
intervention of the U.S. and foreign governments or central banks, the
imposition of currency controls, speculation or other political or economic
developments inside and outside the United States.

DERIVATIVES. Some of the instruments in which the Funds may invest may be
referred to as 'derivatives,' because their value depends on (or 'derives' from)
the value of an underlying asset, reference rate or index. These instruments
include options, futures contracts, forward currency contracts, interest rate
protection contracts and similar instruments that may be used in hedging and
related strategies. There is limited consensus as to what constitutes a
'derivative' security. The market value of derivative instruments and securities
sometimes is more volatile than that of other investments, and each type of
derivative instrument may pose its own special risks. Mitchell Hutchins and the
sub-advisers take these risks into account in the management of the Funds.

COUNTERPARTIES. The Funds may be exposed to the risk of financial failure or
insolvency of another party. To help lessen those risks, the sub-advisers and
Mitchell Hutchins, subject to the supervision of the respective boards of
trustees, monitor and evaluate the creditworthiness of the parties with which
each Fund does business.

In addition to these general risks, investments in each Fund are subject to
special risk considerations:

EMERGING MARKETS EQUITY FUND

INVESTING IN NON-CAPITALIST COUNTRIES. Emerging Markets Equity Fund may invest
in emerging markets that are formerly communist countries of Eastern Europe, the
Commonwealth of Independent States (formerly the Soviet Union) and the People's
Republic of China (collectively, 'Non-Capitalist Countries'). Upon the accession
to power of Communist regimes approximately 50 to 80 years ago, the governments
of a number of Non-Capitalist Countries expropriated a large amount of property.
The claims of many property owners against those governments were never finally
settled. There can be no assurance that the Fund's investments in Non-Capitalist
Countries, if any, would not also be expropriated, nationalized or otherwise
confiscated, in which case the Fund could lose its entire investment in the
Non-Capitalist Country involved. In addition, any change in the leadership or
policies of Non-Capitalist Countries may halt the expansion of or reverse the
liberalization of foreign investment policies now occurring.

GLOBAL EQUITY FUND

BONDS. The bonds in which Global Equity Fund may invest must be rated investment
grade except as otherwise noted below. Investment grade quality means that the
securities are rated within the four highest categories by S&P or Moody's or
comparably rated by another NRSRO. Securities in the fourth highest category
(BBB by S&P or Baa by Moody's) are investment grade, but Moody's considers
securities rated Baa to have speculative characteristics. Changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
for such securities to make principal and interest payments than is the case for
higher-rated securities. The Fund may invest in unrated securities if GE

Investment Management deems them to be of comparable quality. The Fund may
invest up to 10% of its net assets in convertible securities rated below
investment grade.

GLOBAL INCOME FUND

U.S. AND FOREIGN GOVERNMENT SECURITIES. The U.S. government securities in which
the Fund may invest include direct obligations of the U.S. government (such as
Treasury bills, notes and bonds) and obligations issued or guaranteed by U.S.
government agencies and instrumentalities. The Fund is authorized to invest in
mortgage-backed securities issued or guaranteed by the Government National
Mortgage Association, the Federal National Mortgage Association or the Federal
Home Loan Mortgage Corporation, but does not presently expect to invest more
than 10% of its total assets in such securities.

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PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

The Fund may invest in 'zero coupon' Treasury securities, which are U.S.
Treasury bills, notes and bonds that have been stripped of their unmatured
interest coupons, and receipts or certificates representing interest in such
stripped debt obligations and coupons. A zero coupon security pays no cash
interest to its holder prior to maturity. Accordingly, these securities usually
are issued and traded at a deep discount from their face or par value and are
subject to greater fluctuations of market value in response to changing interest
rates than debt obligations of comparable maturities that make current income
payments. Federal tax law requires that the holder of a zero coupon security
include in gross income each year the original issue discount that accrues on
the security for the year, even though the holder receives no interest payment
on the security during the year. For additional discussion of the tax treatment
of zero coupon Treasury securities, see 'Taxes' in the Statement of Additional
Information.

The foreign government securities in which the Fund may invest generally consist
of obligations supported by national, state or provincial governments or similar
political subdivisions. Investments in foreign government debt securities
involve special risks. The issuer of the debt or the governmental authorities
that control the repayment of the debt may be unable or unwilling to pay
interest or repay principal when due in accordance with the terms of such debt,
and the Fund may have limited legal recourse in the event of default. Political
conditions, especially a sovereign entity's willingness to meet the terms of its
debt obligations, are of considerable significance.

BONDS; LOWER-RATED BONDS. Global Income Fund is permitted to invest up to 35% of
its total assets in securities rated below the two highest grades assigned by an
NRSRO. Except as noted below, these securities must be rated at least BBB by S&P
or Baa by Moody's. These securities are investment grade but Moody's considers
securities rated Baa to have speculative characteristics. Changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity

for such securities to make principal and interest payments than is the case for
higher-rated securities. Within this 35% limitation, the Fund may invest up to
20% of its total assets in sovereign debt securities rated as low as BB by S&P,
Ba by Moody's or comparably rated by another NRSRO or, in the case of such
securities assigned a short-term debt rating, no lower than B by S&P or
comparably rated by another NRSRO. These securities, commonly referred to as
'junk bonds,' are deemed by those NRSROs to be predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal and may
involve major risk exposure to adverse conditions. Short-term debt rated B by
S&P is regarded by the rating agency as having only an adequate capacity for
timely payment. The Fund is also permitted to purchase debt securities that are
not rated by an NRSRO but Mitchell Hutchins determines to be of comparable
quality to that of rated securities in which the Fund may invest. Such
securities are included in the computation of any percentage limitations
applicable to the comparably rated securities. In the event that, due to a
downgrade of one or more debt securities, an amount in excess of 20% of the
Fund's total assets is held in securities rated below investment grade and
comparably unrated securities, Mitchell Hutchins will engage in an orderly
disposition of such securities to the extent necessary to ensure that the Fund's
holdings of such securities do not exceed 20% of the Fund's total assets.

NON-DIVERSIFIED STATUS. The Fund is 'non-diversified,' as that term is defined
in the 1940 Act, but the Fund intends to continue to qualify as a 'regulated
investment company' for federal income tax purposes. See 'Dividends and Taxes.'
This means, in general, that more than 5% of the total assets of the Fund may be
invested in securities of one issuer (including a foreign government), but only
if, at the close of each quarter of the Fund's taxable year, the aggregate
amount of such holdings does not exceed 50% of the value of its total assets and
no more than 25% of the value of its total assets is invested in the securities
of a single issuer. To the extent that the Fund's portfolio at times may include
the securities of a smaller number of issuers than if it were 'diversified' (as
defined in the 1940 Act), the Fund will at such times be subject to greater risk
with respect to its portfolio securities than an investment company that invests
in a broader range of securities, in that changes in the financial condition or
market assessment of a single issuer may cause greater fluctuation in the Fund's
total return and the price of Fund shares.

INVESTMENT TECHNIQUES AND STRATEGIES

HEDGING AND RELATED STRATEGIES. Each Fund may use certain strategies designed to
adjust the overall risk of its investment portfolio. These 'hedging' strategies
involve derivative contracts, including options (on securities, foreign
currencies, futures contracts and stock indexes) and futures contracts (on
foreign currencies, stock indexes and interest rates), and forward currency
contracts. Global Income Fund may also use these strategies to attempt to
enhance income; the use of such strategies solely to enhance income may be
considered a form of speculation. Global Income Fund also may enter into
interest rate swap

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PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

agreements and certain other interest rate protection transactions to preserve a
return or spread on a particular investment or portion of its portfolio or to
protect against an increase in the price of securities the Fund anticipates
purchasing at a later date. New financial products and risk management
techniques continue to be developed and may be used if consistent with the
Funds' investment objectives and policies. The Statement of Additional
Information for the Funds contains further information on these strategies.

The Funds might not use any hedging strategies, and there can be no assurance
that any strategy used will succeed. If Emerging Markets Management, GE
Investment Management or Mitchell Hutchins, as applicable, is incorrect in its
judgment on market values, interest rates or other economic factors in using a
hedging strategy, a Fund may have lower net income and a net loss on the
investment. Each of these strategies involves certain risks, which include:

o the fact that the skills needed to use hedging instruments are different from
those needed to select securities for the Funds;

o the possibility of imperfect correlation, or even no correlation, between
price movements of hedging instruments and price movements of the securities
or currencies being hedged;

o possible constraints placed on a Fund's ability to purchase or sell portfolio
investments at advantageous times due to the need for the Fund to maintain
'cover' or to segregate securities; and

o the possibility that a Fund is unable to close out or liquidate its hedged
position.

REPURCHASE AGREEMENTS. Each Fund may use repurchase agreements. Repurchase
agreements are transactions in which a Fund purchases securities from a bank or
recognized securities dealer and simultaneously commits to resell the securities
to the bank or dealer, usually no more than seven days after purchase, at an
agreed-upon date and price reflecting a market rate of interest unrelated to the
coupon rate or maturity of the purchased securities. Repurchase agreements carry
certain risks not associated with direct investments in securities, including a
possible decline in the market value of the underlying securities and delays and
costs to the Fund if the other party to the repurchase agreement becomes
insolvent. Each Fund intends to enter into repurchase agreements only with banks
and dealers in transactions believed by Mitchell Hutchins or a sub-adviser to
present minimum credit risks in accordance with guidelines established by the
Fund's board.

REVERSE REPURCHASE AGREEMENTS. Global Income Fund may enter into reverse
repurchase agreements with banks and broker-dealers up to an aggregate value of
not more than 10% of its total assets. Such agreements involve the sale of
securities held by the Fund subject to its agreement to repurchase the
securities at an agreed-upon date and price reflecting a market rate of
interest. Such agreements are considered to be borrowings and may be entered
into only for temporary or emergency purposes. The Fund will not purchase
securities while borrowings (including reverse repurchase agreements) in excess

of 5% of the value of its total assets are outstanding.

WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. Each Fund may purchase securities
on a 'when-issued' or delayed-delivery basis. In when-issued or delayed-delivery
transactions, delivery of the securities occurs beyond normal settlement
periods, but the Fund would not pay for such securities or start earning
interest on them until they are delivered. However, when the Fund purchases
securities on a when-issued or delayed-delivery basis, it immediately assumes
the risks of ownership, including the risk of price fluctuation. When-issued and
delayed-delivery securities will not exceed 10% of Global Equity Fund's net
assets.

LENDING PORTFOLIO SECURITIES. Each Fund may lend its securities to qualified
broker-dealers or institutional investors in an amount up to 33 1/3% of that
Fund's total assets taken at market value. Lending securities enables a Fund to
earn additional income, but could result in a loss or delay in recovering these
securities.

PORTFOLIO TURNOVER. Each Fund's portfolio turnover rate may vary greatly from
year to year and will not be a limiting factor when Mitchell Hutchins or a
sub-adviser deems portfolio changes appropriate. A higher turnover rate (100% or
higher) for a Fund will involve correspondingly greater transaction costs, which
will be borne directly by the Fund, and may increase the potential for
short-term capital gains.

DEFENSIVE POSITIONS. When Mitchell Hutchins or the sub-adviser, as applicable,
believes that unusual market or economic circumstances warrant a defensive
posture, each Fund may temporarily commit all or any portion of its assets to
cash or investment grade money market instruments of U.S. or foreign issuers,
including repurchase agreements.

ILLIQUID SECURITIES. Global Equity Fund and Global Income Fund each may invest
up to 10% of its net assets, and Emerging Markets Equity Fund up to 15% of its
net assets, in illiquid securities, including certain cover for over-the-counter
options and securities whose disposition is restricted under the federal
securities laws. The Funds do not consider securities that are eligible for
resale pursuant to SEC Rule 144A

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PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

to be illiquid securities if Mitchell Hutchins or the sub-adviser, as
applicable, has determined such securities to be liquid, based upon the trading
markets for the securities under procedures approved by the Funds' boards.

OTHER INFORMATION. Each Fund may borrow money for temporary or emergency
purposes in the following amounts of total assets: Emerging Markets Equity
Fund--33 1/3%, Global Equity Fund--20%, and Global Income Fund--10%. Each Fund
may sell securities short 'against the box' to defer realization of gains or

losses for tax or other purposes. When a security is sold against the box, the
seller owns the security. In addition, each Fund may invest up to 10% of its
total assets in the securities of other investment companies. To the extent a
Fund invests in other investment companies, the Fund's shareholders incur
duplicative fees and expenses, including investment advisory fees. For liquidity
purposes, such as clearance of portfolio transactions, the payment of dividends
and expenses and payments to selling shareholders, or pending investment, each
Fund may commit up to 35% of its total assets to cash or investment grade money
market instruments of U.S. or foreign issuers, including repurchase agreements.
Subject to this 35% limitation, Global Income Fund may acquire these securities
as an investment.

- --------------------------------------------------------------------------------
HOW TO BUY SHARES
- --------------------------------------------------------------------------------

Class Y shares are sold to eligible investors at the net asset value next
determined after the purchase order is received at PaineWebber's New York City
headquarters or, with respect to Global Equity Fund and Global Income Fund, for
purchases by the trustee of the PW SIP, by PFPC Inc., the Funds' transfer agent
('Transfer Agent'). No initial or contingent deferred sales charge is imposed,
nor are Class Y shares subject to rule 12b-1 distribution or service fees. The
Funds and Mitchell Hutchins reserve the right to reject any purchase order and
to suspend the offering of Class Y shares for a period of time. Mitchell
Hutchins, the distributor for each Fund's Class Y shares, has appointed
PaineWebber to serve as the exclusive dealer for each Fund's Class Y shares.

The following investors are eligible to buy Class Y shares of Global Equity Fund
and Global Income Fund:

o a participant in INSIGHT when Class Y shares are purchased through that
program;

o an investor who buys $10 million or more at any one time in any combination of
PaineWebber mutual funds in the Flexible PricingSM System;

o an employee benefit plan qualified under section 401 (including a salary
reduction plan qualified under section 401(k)) or 403(b) of the Internal
Revenue Code that has either

5,000 or more eligible employees or

$50 million or more in assets; and

o an investment company advised by PaineWebber or an affiliate of PaineWebber.

INSIGHT

An investor who purchases $50,000 or more of shares of the mutual funds that are
available to INSIGHT participants (which include the PaineWebber mutual funds in
the Flexible Pricing(Service Mark) System and certain other specified mutual
funds) may take part in INSIGHT, a total portfolio asset allocation program
sponsored by PaineWebber, and thus become eligible to purchase Class Y shares.
INSIGHT offers comprehensive investment services, including a personalized asset

allocation investment strategy using an appropriate combination of funds,
monitoring of investment performance and comprehensive quarterly reports that
cover market trends, portfolio summaries and personalized account information.

Participation in INSIGHT is subject to payment of an advisory fee to PaineWebber
at the maximum annual rate of 1.5% of assets held through the program (generally
charged quarterly in advance), which covers all INSIGHT investment advisory
services and program administration fees. Employees of PaineWebber and its
affiliates are entitled to a 50% reduction in the fee otherwise payable for
participation in INSIGHT. INSIGHT clients may elect to have their INSIGHT fees
charged to their PaineWebber accounts (by the automatic redemption of money
market fund shares) or, if a qualified plan, invoiced.

Please contact your PaineWebber investment executive or PaineWebber
correspondent firm or call 1-800-647-1568 for more information concerning mutual
funds that are available to INSIGHT participants or for other INSIGHT program
information.

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Prospectus Page 19
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

PURCHASES BY THE TRUSTEE OF THE PW SIP

The Class Y shares of Global Equity Fund and Global Income Fund also are offered
for sale to the trustee of the PW SIP, a defined contribution plan sponsored by
Paine Webber Group Inc. ('PW Group'). The trustee of the PW SIP purchases and
redeems these Class Y shares to implement the investment choices of individual
plan participants with respect to their PW SIP contributions. Individual plan
participants should consult the Plan Information Statement and Summary Plan
Description of the PW SIP (collectively the 'Plan Documents') for a description
of the procedures and limitations applicable to making and changing investment
choices.

Copies of the Plan Documents are available from the PaineWebber Incorporated
Benefits Department, 1000 Harbor Boulevard, 10th Floor, Weehawken, NJ 07087
(telephone 1-201-902-4444).

As described in the Plan Documents, the average net asset value per share at
which Class Y shares of Global Equity Fund and Global Income Fund are purchased
or redeemed by the trustee of the PW SIP for the accounts of individual
participants might be more or less than the net asset value per share prevailing
at the time that such participants made their investment choices or made their
contributions to the PW SIP.

ACQUISITION OF CLASS Y SHARES BY OTHERS

Each Fund is authorized to offer Class Y shares to certain other investment
advisory programs that are sponsored by PaineWebber and that may invest in
PaineWebber mutual funds. At present, however, INSIGHT participants are the only

purchasers in this category.

- --------------------------------------------------------------------------------
HOW TO SELL SHARES
- --------------------------------------------------------------------------------

Investors can sell (redeem) shares at any time. Shares will be sold at the share
price as next calculated after the order is received and accepted. Share prices
are normally calculated at the close of regular trading on the New York Stock
Exchange (currently 4:00 p.m., Eastern time).

Investors who have an account with PaineWebber or one of PaineWebber's
correspondent firms can sell their shares by contacting their investment
executive. Investors who do not have an account and have bought their shares
through PFPC Inc., the Funds' Transfer Agent, may sell shares by writing a
'letter of instruction.' The letter of instruction must include:

o the investor's name and address;

o the Fund's name;

o the Fund account number;

o the dollar amount or number of shares to be sold; and

o a guarantee of each registered owner's signature by an eligible institution,
such as a commercial bank, trust company or stock exchange member.

The letter of instruction must be mailed to PFPC Inc., Attn: PaineWebber Mutual
Funds, P.O. Box 8950, Wilmington, DE 19899.

If a shareholder wants to sell shares that were purchased recently, the Fund may
delay payment until it verifies that good payment was received. In the case of
purchases by check, this can take up to 15 days.

Because each Fund incurs fixed costs in maintaining shareholder accounts, each
Fund reserves the right to purchase back all Fund shares in any shareholder
account having a net asset value of less than $500. If the Fund elects to do so,
it will notify the shareholder of the opportunity to increase the amount
invested to $500 or more within 60 days of the notice. The Fund will not
purchase back accounts that fall below $500 solely due to a reduction in net
asset value per share.

SALES BY PARTICIPANTS IN PW SIP

The trustee of the PW SIP sells Class Y shares of Global Equity Fund and Global
Income Fund to implement the investment choices of individual plan participants
with respect to their PW SIP contributions, as described in the Plan Documents
referenced under 'How to Buy Shares' above. The price at which Class Y shares
are sold by the trustee of the PW SIP might be more or less than the price per
share at the time the participants made their investment choices.

--------------------
Prospectus Page 20

<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

MANAGEMENT
- --------------------------------------------------------------------------------

EMERGING MARKETS EQUITY FUND

The Fund is governed by a board of trustees, which oversees the Fund's
operations. It has appointed Mitchell Hutchins as investment adviser and
administrator responsible for the Fund's operations (subject to the authority of
the board of trustees). Mitchell Hutchins has appointed the investment
sub-adviser, Emerging Markets Management, to be responsible for day-to-day
management of the Fund's investments.

Antoine W. van Agtmael is primarily responsible for the day-to-day management of
the Fund's Portfolio. Mr. van Agtmael is President of Emerging Markets
Management, one of the largest, and first firms to focus exclusively on
investing in the markets of newly industrializing countries in Asia, Latin
America, the Middle East, Southern and Eastern Europe and, most recently,
Africa. Before founding Emerging Markets Management in 1987, Mr. van Agtmael was
Deputy Director of the Capital Markets Department of the International Finance
Corporation (IFC), the private sector arm of the International Bank for
Reconstruction and Development (World Bank). Mr. van Agtmael has been the
President of Emerging Markets Management for more than five years.

GLOBAL EQUITY FUND

The Fund is governed by a board of trustees, which oversees the Fund's
operations. It has appointed Mitchell Hutchins as investment adviser and
administrator responsible for the Fund's operations (subject to the authority of
the board of trustees). Mitchell Hutchins has appointed the investment
sub-adviser, GE Investment Management, to be responsible for day-to-day
management of the Fund's investments.

Ralph R. Layman is the head of the International Equity Team at GE Investment
Management and serves as portfolio manager of the Fund, primarily responsible
for the day-to-day management of the Fund's portfolio. Mr. Layman has served in
this capacity since the Fund's inception in 1991. He is a Chartered Financial
Analyst and an Executive Vice President and Senior Investment Manager of GE
Investment Management.

From 1989 to 1991, Mr. Layman served as Executive Vice President, partner and
portfolio manager of Northern Capital Management Co. Prior to 1989 when he
joined Northern, he was Vice President and portfolio manager of Templeton
Investment Counsel, Inc., and Vice President of the Templeton Emerging Markets
Fund.

Directly assisting Mr. Layman are Michael J. Solecki, Vice President of
International Equities at GE Investments, and the rest of the International
Equity Team. Mr. Solecki is a Chartered Financial Analyst and has been with GE

Investment Management for six years. From 1992 to 1995, Mr. Solecki was a senior
European analyst at GE Investment Management's London, England office. Prior to
1992, he was an international analyst with GE Investment Management. The
International Equity Team is comprised of eleven analysts, seven of whom manage
portfolios.

GLOBAL INCOME FUND

Stuart Waugh is primarily responsible for the day-to-day portfolio management of
the Fund. Mr. Waugh has been involved with the Fund since its inception, first
as an analyst and then as portfolio manager since 1993. Mr. Waugh is a vice
president of PaineWebber Investment Series and a managing director of global
fixed income investments of Mitchell Hutchins. He is a Chartered Financial
Analyst. Mr. Waugh has been employed by Mitchell Hutchins as a portfolio manager
for more than the last five years.

William King assists in the management of the Fund. Mr. King joined Mitchell
Hutchins in November 1995. Previously, he was at IBM Corporation where he was
responsible for the management of IBM Pension Fund's global bond portfolio. He
is a Chartered Financial Analyst.

Other members of Mitchell Hutchins' international fixed income group provide
input on market outlook, interest rate forecasts and other considerations
pertaining to global fixed income investments.

* * * *

Each board has determined that brokerage transactions for the Fund may be
conducted through PaineWebber or its affiliates in accordance with procedures
adopted by the board.

Personnel of Mitchell Hutchins and each sub-adviser may engage in securities
transactions for their own

--------------------
Prospectus Page 21
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

accounts pursuant to each firm's code of ethics that establishes procedures for
personal investing and restricts certain transactions.

ABOUT THE INVESTMENT ADVISER

Mitchell Hutchins, located at 1285 Avenue of the Americas, New York, New York
10019, is the asset management subsidiary of PaineWebber Incorporated, which is

wholly owned by Paine Webber Group Inc., a publicly owned financial services
holding company. On September 30, 1996, Mitchell Hutchins was adviser or
sub-adviser of 29 investment companies with 64 separate portfolios and aggregate
assets of approximately $30.6 billion.

ABOUT THE SUB-ADVISERS

Emerging Markets Management, the investment sub-adviser to Emerging Markets
Equity Fund, is located at 1001 North Nineteenth Street, Arlington, Virginia
22209, and concentrates its investment advisory activities in the area of
emerging markets. The managing partner of Emerging Markets Management is
Emerging Markets Investors Corporation, which provides its investment services
to a variety of institutional and retail clients and had total assets under
management of $3.6 billion as of September 30, 1996. Under the 1940 Act, Mr. van
Agtmael is deemed to have a controlling interest in Emerging Markets Management.

GE Investment Management, the investment sub-adviser to Global Equity Fund, is
located at 3003 Summer Street, Stamford, Connecticut 06905 and is a subsidiary
of General Electric Company. Together with its affiliate, General Electric
Investment Corporation (GE Investment Management and General Electric Investment
Corporation are collectively referred to as 'GE Investments'), GE Investment
Management is one of the largest independent investment managers in the United
States. GE Investments and its predecessors have been managing mutual fund
assets since 1935 and, as of September 30, 1996, had in excess of $56 billion in
total assets under management.

MANAGEMENT FEES & OTHER EXPENSES

Each Fund pays Mitchell Hutchins a monthly fee for its services. For the fiscal
year ended June 30, 1996, Emerging Markets Equity Fund paid advisory fees to
Mitchell Hutchins at the annual rate of 1.12% of its average daily net assets.
For the fiscal year ended August 31, 1996, Global Equity Fund paid advisory fees
to Mitchell Hutchins at the annual rate of 0.85% of its average daily net assets
(after fee waivers). For the fiscal year ended October 31, 1995, Global Income
Fund paid advisory fees to Mitchell Hutchins at the effective annual rate of
0.73% of its average daily net assets.

With respect to Emerging Markets Equity Fund, Mitchell Hutchins (not the Fund)
pays Emerging Markets Management a fee for investment sub-advisory services at
the annual rate of 1.12% of the Fund's average daily net assets. With respect
to Global Equity Fund, Mitchell Hutchins (not the Fund) pays GE Investment
Management a fee for sub-investment advisory services at the annual rate of
0.31% of the Fund's average daily net assets.

Global Income Fund pays PaineWebber an annual fee of $4.00 per active
shareholder account held at PaineWebber for services not provided by the
Transfer Agent.

- --------------------------------------------------------------------------------
DETERMINING THE SHARES'
NET ASSET VALUE
- --------------------------------------------------------------------------------

The net asset value of each Fund's shares fluctuates and is determined
separately for each class as of the close of regular trading on the New York
Stock Exchange (currently 4:00 p.m., Eastern time) each Business Day. Each

Fund's net asset value per share is determined by dividing the value of the
securities held by the Fund, plus any cash or other assets, minus all
liabilities, by the total number of Fund shares outstanding.

Each Fund values its assets based on their current market value when market
quotations are readily available. If that value is not readily available, assets
are valued at fair value as determined in good faith by or under the direction
of each Fund's board. The amortized cost method of valuation generally is used
to value debt obligations with 60 days or less remaining to maturity, unless the
board determines that this does not represent fair value. Investments
denominated in

--------------------
Prospectus Page 22
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

foreign currencies are valued daily in U.S. dollars based on the then-prevailing
exchange rates. It should be recognized that judgment plays a greater role in
valuing lower-rated debt securities in which a Fund may invest, because there is
less reliable, objective data available.

- --------------------------------------------------------------------------------
DIVIDENDS & TAXES
- --------------------------------------------------------------------------------

DIVIDENDS

Emerging Markets Equity Fund and Global Equity Fund each pays an annual dividend
from its net investment income and net short-term capital gain, if any. Each of
these Funds distributes any net realized gain from foreign currency transactions
with its dividend. Global Income Fund declares monthly dividends from its net
investment income, which may be accompanied by distributions of net realized
short-term capital gains and net realized gains from foreign currency
transactions. Each Fund also distributes annually substantially all of its net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), if any, which distribution, in the case of Global Income Fund, is
accompanied by any undistributed net realized short-term capital gains and
foreign currency gains. The Funds may make additional distributions, if
necessary, to avoid a 4% excise tax on certain undistributed income and capital
gain.

Dividends and other distributions paid on Class Y shares of each Fund are
calculated at the same time and in the same manner as dividends and other
distributions on other classes of the Fund's shares.

The Funds' dividends and other distributions are paid in additional Fund shares
of the same class at net asset value, unless the shareholder has requested cash
payments. Shareholders who wish to receive dividends and other distributions in
cash, either mailed to the shareholder by check or credited to the shareholder's

PaineWebber account, should contact their investment executive at PaineWebber or
one of its correspondent firms or complete the appropriate section of the
account application. For PW SIP participants, the Fund's Class Y dividends and
other distributions are paid in additional Class Y shares at net asset value
unless the Transfer Agent is instructed otherwise.

TAXES

Each Fund intends to continue to qualify for treatment as a regulated investment
company under the Internal Revenue Code so that it will not have to pay federal
income tax on the part of its investment company taxable income (generally
consisting of net investment income, net short-term capital gain and net gains
from certain foreign currency transactions) and the net capital gain that it
distributes to its shareholders.

Dividends from each Fund's investment company taxable income (whether paid in
cash or additional shares) are generally taxable to shareholders as ordinary
income. Distributions of each Fund's net capital gain (whether paid in cash or
additional shares) are taxable to shareholders as a long-term capital gain,
regardless of how long they have held their Fund shares. Shareholders who are
not subject to tax on their income generally will not be required to pay tax on
distributions.

YEAR-END TAX REPORTING

Following the end of each calendar year, each Fund notifies its shareholders of
the dividends and capital gain distributions paid (or deemed paid) for that
year, their share of any foreign taxes paid by the Fund that year and any
portion of those dividends that qualify for special treatment.

WITHHOLDING REQUIREMENTS

Each Fund is required to withhold 31% of all dividends, capital gain
distributions and redemption proceeds payable to individuals and certain other
non-corporate shareholders who do not provide the Fund with a correct taxpayer
identification number. Withholding at that rate also is required from dividends
and capital gain distributions payable to shareholders who otherwise are subject
to backup withholding.

TAXES ON THE SALE OR EXCHANGE OF FUND SHARES

When shareholders sell (redeem) shares, it may result in a taxable gain or loss.
This depends upon whether the shareholders receive more or less than their
adjusted basis for the shares. In addition, if a Fund's shares are bought within
30 days before or after selling other shares of the Fund (regardless of class)
at a loss, all or a portion of that loss will not be deductible

--------------------
Prospectus Page 23
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

and will increase the basis of the newly purchased shares.

Qualified profit-sharing plans such as the PW SIP generally pay no federal
income tax. Individual participants in the PW SIP should consult the plan
documents and their own advisers for information on the tax consequences
associated with participating in the PW SIP.

* * * *

Because the foregoing only summarizes some of the important tax considerations
affecting the Funds and their shareholders, the Statement of Additional
Information contains more detail. There may be other federal, state, local or
foreign tax considerations applicable to a particular investor. Accordingly,
prospective shareholders are urged to consult their tax advisers.

- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------

ORGANIZATION

EMERGING MARKETS EQUITY FUND

Emerging Markets Equity Fund is a diversified series of PaineWebber Investment
Trust II, an open-end management investment company that was formed on August
10, 1992 as a business trust under the laws of the Commonwealth of
Massachusetts. The trustees have authority to issue an unlimited number of
shares of beneficial interest of separate series, par value of $0.001 per share.

GLOBAL EQUITY FUND

Global Equity Fund is a diversified series of PaineWebber Investment Trust
('Investment Trust'), an open-end management investment company that was formed
on March 28, 1991 as a business trust under the laws of the Commonwealth of
Massachusetts. The trustees have authority to issue an unlimited number of
shares of beneficial interest of separate series, par value of $0.001 per share.
Shares of one other series have been authorized.

GLOBAL INCOME FUND

Global Income Fund is a non-diversified series of PaineWebber Investment Series,
an open-end management investment company that was formed on December 22, 1986
as a business trust under the laws of the Commonwealth of Massachusetts. The
trustees have authority to issue an unlimited number of shares of beneficial
interest of separate series, with a par value of $0.001 per share.

The shares of each Fund are divided into four classes, designated Class A, Class
B, Class C and Class Y shares. Each class represents an identical interest in
the respective Fund's investment portfolio and has the same rights, privileges
and preferences. However, each class may differ with respect to sales charges,
if any, distribution and/or service fees, if any, other expenses allocable

exclusively to each class, voting rights on matters exclusively affecting that
class, and its exchange privilege. The different sales charges and other
expenses applicable to the different classes of shares of the Funds will affect
the performance of those classes.

Each share of each Fund is entitled to participate equally in dividends, other
distributions and the proceeds of any liquidation of that Fund. However, due to
the differing expenses of the classes, dividends on the other classes are likely
to be lower than for Class Y shares, which bear the lowest expenses.

More information concerning Class A, Class B and Class C shares of the Funds may
be obtained from an investment executive at PaineWebber or one of its
correspondent firms or by calling toll-free 1-800-647-1568.

Although each Fund is offering only its own shares, it is possible that a Fund
might become liable for a misstatement in the Prospectus about another Fund. The
board of each Fund has considered this factor in approving the use of a single,
combined Prospectus.

VOTING RIGHTS

Shareholders of each Fund are entitled to one vote for each full share held and
fractional votes for fractional shares held. Voting rights are not cumulative
and, as a result, the holders of more than 50% of all the shares of any Fund (or
Investment Trust which has more than one series) may elect all of the board
members of that Fund or of Investment Trust. The shares of a Fund will be voted
together except that only the shareholders of a particular class of a Fund may
vote on matters affecting only that class, such as the terms

--------------------
Prospectus Page 24
<PAGE>
------------------------------

PaineWebber Emerging Markets Equity Fund Global Equity Fund
Global Income Fund

of a Plan as it relates to the class. The shares of all series of Investment
Trust will be voted separately, except when an aggregate vote of all the
securities is required by law.

SHAREHOLDER MEETINGS

The Funds do not intend to hold annual meetings.

Shareholders of record of no less than two-thirds of the outstanding shares of
Investment Trust or a Fund, as applicable may remove a board member through a
declaration in writing or by vote cast in person or by proxy at a meeting called
for that purpose. A meeting will be called to vote on the removal of a board
member at the written request of holders of 10% of the outstanding shares of
Investment Trust or a Fund, as applicable.

REPORTS TO SHAREHOLDERS

Each Fund sends its shareholders audited annual and unaudited semiannual
reports, each of which includes a list of the investment securities held
by the Fund as of the end of the period covered by the report. The Statement
of Additional Information is available to shareholders upon request.

CUSTODIAN & RECORDKEEPING AGENT; TRANSFER & DIVIDEND AGENT

State Street Bank and Trust Company, located at One Heritage Drive, North
Quincy, Massachusetts 02171, serves as custodian and recordkeeping agent for
Emerging Markets Equity Fund and Global Equity Fund and employs foreign
sub-custodians to provide custody of the Funds' foreign assets. Brown Brothers
Harriman & Co., 40 Water Street, Boston, Massachusetts 02109, serves as
custodian for Global Income Fund and employs foreign sub-custodians to provide
custody of the Fund's foreign assets. PFPC Inc., a subsidiary of PNC Bank, N.A.,
serves as each Fund's transfer and dividend disbursing agent. It is located at
400 Bellevue Parkway, Wilmington, DE 19809.

--------------------
Prospectus Page 25

<PAGE>
------------------------------

PAINEWEBBER EMERGING MARKETS EQUITY FUND
PAINEWEBBER GLOBAL EQUITY FUND
PAINEWEBBER GLOBAL INCOME FUND
CLASS Y SHARES

PROSPECTUS -- OCTOBER 31, 1996

o PAINEWEBBER BOND FUNDS o PAINEWEBBER STOCK FUNDS
High Income Fund Capital Appreciation Fund
Investment Grade Income Fund Financial Services Growth Fund
Low Duration U.S. Government Growth Fund
Income Fund Growth and Income Fund
Strategic Income Fund Small Cap Fund
U.S. Government Income Fund Utility Income Fund

o PAINEWEBBER TAX-FREE BOND FUNDS o PAINEWEBBER GLOBAL FUNDS
California Tax-Free Income Fund Emerging Markets Equity Fund
Municipal High Income Fund Global Equity Fund
National Tax-Free Income Fund Global Income Fund
New York Tax-Free Income Fund
o PAINEWEBBER MONEY MARKET FUND
o PAINEWEBBER ASSET ALLOCATION FUNDS
Balanced Fund
Tactical Allocation Fund

A prospectus containing more complete information for any of these funds,
including charges and expenses, can be obtained from a PaineWebber investment
executive or correspondent firm. Please read it carefully before investing. It
is important you have all the information you need to make a sound investment
decision.

--------------------