<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
RECENT PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------- -----------------------------
12 MONTHS 6 MONTHS
10/31/95 04/30/95 10/31/94 ENDED 10/31/95 ENDED 10/31/95
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $10.35 $10.23 $9.99 11.09% 5.09%
- ------------------------------------------------------------------------
Class B Shares 10.31 10.20 9.96 10.24 4.60
- ------------------------------------------------------------------------
Class D Shares 10.33 10.22 9.98 10.49 4.73
- ------------------------------------------------------------------------
</TABLE>
Performance Summary Class A Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
----------------
PERIOD CAPITAL GAINS DIVIDENDS PAID FROM TOTAL
COVERED BEGINNING ENDING DISTRIBUTED PAID CAPITAL RETURN/1/
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
07/01/91 -
12/31/91 $10.40 $11.05 $0.0100 $0.4800 -- 11.11%
- --------------------------------------------------------------------------
1992 11.05 10.42 0.1644 0.6029 -- 1.22
- --------------------------------------------------------------------------
1993 10.42 10.97 0.1445 0.7486 -- 14.16
- --------------------------------------------------------------------------
1994 10.97 9.90 0.0009 0.3213 $0.3178 (3.89)
- --------------------------------------------------------------------------
01/01/95 -
10/31/95 9.90 10.35 -- 0.5861 -- 10.66
- --------------------------------------------------------------------------
Totals: $0.3198 $2.7389 $0.3178
- --------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
10/31/95: 36.55%
- --------------------------------------------------------------------------
</TABLE>
Performance Summary Class B Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
----------------
PERIOD CAPITAL GAINS DIVIDENDS PAID FROM TOTAL
COVERED BEGINNING ENDING DISTRIBUTED PAID CAPITAL RETURN/1/
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
03/20/87 -
12/31/87 $10.00 $10.86 $0.1800 $0.6647 -- 17.58%
- --------------------------------------------------------------------------
1988 10.86 10.64 0.1489 1.3436 -- 12.15
- --------------------------------------------------------------------------
1989 10.64 10.25 -- 0.9200 -- 5.44
- --------------------------------------------------------------------------
1990 10.25 10.87 -- 1.1300 -- 17.72
- --------------------------------------------------------------------------
1991 10.87 11.05 0.0100 0.7300 -- 10.75
- --------------------------------------------------------------------------
1992 11.05 10.41 0.1644 0.5214 -- 0.38
- --------------------------------------------------------------------------
1993 10.41 10.96 0.1445 0.6689 -- 13.36
- --------------------------------------------------------------------------
1994 10.96 9.87 0.0009 0.2852 $0.2810 (4.77)
- --------------------------------------------------------------------------
01/01/95 -
10/31/95 9.87 10.31 -- 0.5267 -- 9.95
- --------------------------------------------------------------------------
Totals: $0.6487 $6.7905 $0.2810
- --------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
10/31/95: 120.93%
- --------------------------------------------------------------------------
</TABLE>
Performance Summary Class D Shares
<TABLE>
<CAPTION>
NET ASSET VALUE
----------------
PERIOD CAPITAL GAINS DIVIDENDS PAID FROM TOTAL
COVERED BEGINNING ENDING DISTRIBUTED PAID CAPITAL RETURN/1/
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
07/02/92 -
12/31/92 $10.94 $10.42 $0.1644 $0.3744 -- 0.10%
- --------------------------------------------------------------------------
1993 10.42 10.97 0.1445 0.6973 -- 13.64
- --------------------------------------------------------------------------
1994 10.97 9.89 0.0009 0.2978 $0.2938 (4.43)
- --------------------------------------------------------------------------
01/01/95 -
10/31/95 9.89 10.33 -- 0.5467 -- 10.14
- --------------------------------------------------------------------------
Totals: $0.3098 $1.9162 $0.2938
- --------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
10/31/95: 19.74%
- --------------------------------------------------------------------------
</TABLE>
/1Figures/assume reinvestment of all dividends and capital gains distributions
at net asset value on the payable dates and do not include sales charges;
results for Class A and Class B shares would be lower if sales charges were
included.
Note: The Fund offers Class C shares to the trustee of the PaineWebber Savings
Investment Plan. For the one year ended October 31, 1995, and since inception,
August 26, 1991 through October 31, 1995, Class C shares have had a total
return of 11.39% and 36.32%, respectively. Class C shares do not have initial
or contingent sales charges or ongoing distribution and service fees.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The investment return and principal value of an
investment in the Fund will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
1
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000)* DATES RATES VALUE
---------- -------------------- ---------------- -------------
LONG-TERM DEBT SECURITIES - 74.69%
<C> <S> <C> <C> <C>
AUSTRALIA - 8.01%
New South Wales Treasury
66,040 Corp................... 04/01/97 to 12/01/01 11.500 to 12.500% $ 56,301,000
Queensland Treasury
48,500 Corp. Global Issue..... 08/15/01 12.000 42,660,975
-------------
98,961,975
-------------
CANADA - 2.34%
Ontario Hydro Global
83,684 Bonds.................. 04/11/07 to 04/11/11 10.502 to 10.551@ 21,681,773
Province of British
Columbia Residual
37,025 Bonds.................. 01/09/12 9.061 to 9.155@ 7,279,187
-------------
28,960,960
-------------
DENMARK - 1.00%
66,000 Government of Denmark... 05/15/03 8.000 12,345,622
-------------
FINLAND - 2.03%
97,000 Government of Finland... 03/15/04 9.500 25,083,852
-------------
FRANCE - 2.50%
143,050 Government of France.... 03/28/00 to 04/25/23 7.750 to 9.500 30,919,017
-------------
GERMANY - 8.92%
Federal Republic of
152,235 Germany................ 07/22/02 to 01/24/24 6.250 to 8.000 110,178,628
-------------
IRELAND - 2.50%
17,645 Republic of Ireland..... 11/15/97 to 07/11/03 9.250 to 11.500 30,873,049
-------------
NETHERLANDS - 2.87%
Government of
48,920 Netherlands............ 09/15/01 to 06/01/06 8.500 to 8.750 35,401,847
-------------
NEW ZEALAND - 1.90%
Government of New
17,460 Zealand................ 11/15/96 to 02/15/00 6.500 to 10.000 11,870,974
16,250 International Bank for
Reconstruction and
Development(1)......... 07/25/97 12.500 11,571,347
-------------
23,442,321
-------------
POLAND - 1.00%
US$ 19,300 Republic of Poland PDI.. 10/27/14 3.750** 12,400,250
-------------
SPAIN - 9.15%
13,230,600 Government of Spain..... 08/30/98 to 03/25/00 11.450 to 12.250 113,080,758
-------------
UNITED KINGDOM - 7.48%
50,359 United Kingdom Gilt..... 01/22/97 to 09/08/03 10.000 to 15.500 92,475,005
-------------
UNITED STATES - 24.99%
18,000 Chase Manhattan Corp. .. 12/01/97 7.500 18,521,928
16,000 Clorox Corporation...... 07/15/01 8.800 17,937,424
15,000 Ford Motor Credit Corp.. 07/01/01 9.500 17,181,315
General Motors
10,000 Acceptance Corp. MTN... 04/30/97 7.950 10,262,000
2,250 U.S. Treasury Bonds..... 02/15/25 7.625 2,613,514
236,870 U.S. Treasury Notes..... 12/31/96 to 08/15/05 5.625 to 8.500 242,111,610
-------------
308,627,791
-------------
Total Long-Term Debt Securities
(cost - $900,232,784)............... 922,751,075
-------------
</TABLE>
2
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000)* MATURITY DATES INTEREST RATES VALUE
--------- -------------------- ---------------- --------------
SHORT-TERM DEBT SECURITIES - 13.83%
<C> <S> <C> <C> <C>
CANADA - 0.62%
10,100 Province of Ontario..... 05/01/96 10.750% $ 7,697,573
--------------
NEW ZEALAND - 2.43%
Government of New
25,000 Zealand................ 10/15/96 14.000 17,390,499
New Zealand Treasury
19,432 Bills.................. 01/10/96 8.850@ 12,625,935
--------------
30,016,434
--------------
UNITED STATES - 10.78%
General Motors
40,000 Acceptance Corp. MTN... 07/15/96 to 09/04/96 8.375 to 8.625 40,681,960
94,500 U.S. Treasury Bills..... 11/09/95 to 04/25/96 5.120 to 6.173@ 92,527,081
--------------
133,209,041
--------------
Total Short-Term Debt Securities
(cost - $171,102,836).............. 170,923,048
--------------
REPURCHASE AGREEMENTS - 9.35%
20,400 Repurchase Agreement
dated 10/31/95, with
Citicorp Securities,
Inc., collateralized by
$18,000,000 U.S.
Treasury Bonds, 7.500%
due 11/15/16; proceeds:
$20,403,315............ 11/01/95 5.850 20,400,000
9,600 Repurchase Agreement
dated 10/31/95, with
Citicorp Securities,
Inc., collateralized by
$7,010,000 U.S.
Treasury Bonds, 13.125%
due 05/15/01; proceeds:
$9,601,560............. 11/01/95 5.850 9,600,000
30,000 Repurchase Agreement
dated 10/31/95, with
First Chicago Capital
Markets, Inc.,
collateralized by
$29,045,000 U.S.
Treasury Notes, 6.750%
due 06/30/99; proceeds:
$30,004,875............ 11/01/95 5.850 30,000,000
30,000 Repurchase Agreement
dated 10/31/95, with
Morgan Stanley Group,
Inc., collateralized by
$25,715,000 U.S.
Treasury Bonds, 7.875%
due 02/15/21; proceeds:
$30,004,875............ 11/01/95 5.850 30,000,000
25,549 Repurchase Agreement
dated 10/31/95, with
Salomon Brothers Inc.,
collateralized by
$24,876,000 U.S.
Treasury Notes 7.250%
due 02/15/98; proceeds:
$25,553,138............ 11/01/95 5.830 25,549,000
--------------
Total Repurchase Agreements (cost -
$115,549,000)..................... 115,549,000
--------------
CALL OPTION - 0.00%
5,517 German Deutschemarks,
expiring 12/29/95 at
GBP 2.300(2) (cost -
$80,542).............. 143
--------------
Total Investments (cost -
$1,186,965,162) - 97.87%......... 1,209,223,266
Other assets in excess of
liabilities - 2.13%............... 26,274,751
--------------
Net Assets - 100.00%............... $1,235,498,017
==============
</TABLE>
- -------
Note: The Portfolio of Investments is listed by the issuer's country of origin.
* In local currency unless otherwise indicated
** Reflects rate at October 31, 1995 on floating rate instrument
@ Yield to maturity
MTN Medium Term Note
PDI Past Due Interest
(1) "Supranational" security denominated in New Zealand Dollars
(2) Contract face amount denominated in U.S. dollars representing DEM 7,692,864
against British pounds
3
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
UNREALIZED
CONTRACT TO IN EXCHANGE MATURITY APPRECIATION
DELIVER FOR DATES (DEPRECIATION)
-------------- ----------------- -------------------- --------------
<S> <C> <C> <C> <C>
Australian Dollars...... 59,930,781 US$ 43,499,910 11/03/95 to 11/20/95 $(2,131,797)
Australian Dollars...... 21,780,000 US$ 16,561,512 01/16/96 22,469
Belgian Francs.......... 989,000,000 US$ 34,029,676 01/03/96 to 09/30/96 (521,444)
Belgian Francs.......... 1,268,225,540 US$ 42,874,378 12/21/95 to 09/30/96 (1,215,807)
British Pounds.......... 29,700,000 US$ 46,765,620 01/12/96 (108,695)
Canadian Dollars........ 12,840,000 US$ 9,558,408 11/14/95 (30,838)
Danish Kroners.......... 133,000,000 US$ 24,171,899 12/15/95 (180,390)
Danish Kroners.......... 244,900,000 US$ 45,383,789 11/08/95 542,620
Finnish Markkas......... 148,979,423 US$ 34,381,633 12/08/95 to 12/18/95 (714,534)
German Deutschemarks.... 17,924,300 US$ 12,104,013 12/20/95 (635,814)
German Deutschemarks.... 11,157,400 US$ 7,522,519 12/20/95 (407,685)
Greek Drachmas.......... 8,559,802,700 US$ 35,463,866 12/20/95 to 12/27/95 (1,022,558)
Italian Lira............ 9,734,166,852 US$ 5,959,998 01/10/96 (151,191)
Italian Lira............ 44,677,462,500 US$ 27,641,813 01/10/96 (407,062)
Netherland Guilders..... 32,884,900 US$ 19,792,332 12/18/95 (1,055,876)
Spanish Pesetas......... 9,782,971,500 US$ 77,324,194 12/12/95 to 01/22/96 (2,372,958)
Spanish Pesetas......... 7,163,370,000 US$ 58,338,586 11/30/95 to 01/23/96 (141,841)
U.S. Dollars............ 21,708,756 BFR 634,112,770 12/21/95 210,865
U.S. Dollars............ 2,329,166 BFR 68,000,000 01/03/96 21,416
U.S. Dollars............ 9,429,805 CAD 12,840,000 11/14/95 159,440
U.S. Dollars............ 12,496,897 DEM 17,924,300 12/20/95 242,930
U.S. Dollars............ 7,775,192 DEM 11,157,400 12/20/95 155,012
U.S. Dollars............ 24,221,453 DKK 133,000,000 12/15/95 130,835
U.S. Dollars............ 42,699,943 DKK 244,900,000 11/08/95 2,141,226
U.S. Dollars............ 26,535,655 ESP 3,235,970,000 11/30/95 (1,398)
U.S. Dollars............ 12,855,885 FIM 55,340,653 12/08/95 to 12/18/95 183,654
U.S. Dollars............ 5,978,263 ITL 9,734,166,852 01/10/96 132,926
U.S. Dollars............ 27,430,522 ITL44,677,462,500 01/10/96 618,354
U.S. Dollars............ 20,490,971 NLG 32,884,900 12/18/95 357,237
-----------
$(6,180,904)
===========
</TABLE>
- -------
CURRENCY TYPE ABBREVIATIONS:
BFR - Belgian Francs
CAD - Canadian Dollars
DEM - German Deutschemarks
DKK - Danish Kroners
ESP - Spanish Pesetas
FIM - Finnish Markkas
ITL - Italian Lira
NLG - Netherland Guilders
<TABLE>
<CAPTION>
PERCENT OF NET ASSETS
INVESTMENTS BY TYPE OF ISSUER -------------------------
LONG-TERM SHORT-TERM
--------- -----------
<S> <C> <C>
Government and other public issuers................ 69.52% 10.54%
Repurchase Agreements.............................. -- 9.35
Banks.............................................. 1.50 --
Financial institutions............................. 2.22 3.29
Other.............................................. 1.45 --
---------- ----------
74.69% 23.18%
========== ==========
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments in securities, at value (cost - $1,186,965,162).... $1,209,223,266
Cash........................................................... 183,037
Cash denominated in foreign currencies, at value (cost -
$9,930)...................................................... 8,847
Receivable for investments sold................................ 101,068,650
Interest receivable............................................ 27,480,938
Unrealized appreciation on forward foreign currency contracts.. 4,918,984
Receivable for shares of beneficial interest sold.............. 373,010
Other assets................................................... 192,830
--------------
Total assets................................................... 1,343,449,562
--------------
Liabilities
Payable for investments purchased.............................. 88,295,898
Unrealized depreciation on forward foreign currency contracts.. 11,099,888
Payable for shares of beneficial interest repurchased.......... 5,565,951
Payable to affiliates.......................................... 1,357,525
Accrued expenses and other liabilities......................... 1,632,283
--------------
Total liabilities.............................................. 107,951,545
--------------
Net Assets
Beneficial interest shares of $0.001 par value outstanding
(unlimited amount authorized)................................. 1,264,819,458
Distributions in excess of net investment income............... (2,722,403)
Accumulated net realized losses from investments............... (42,798,442)
Net unrealized appreciation of investments, other assets,
liabilities and forward contracts denominated in foreign
currencies.................................................... 16,199,404
--------------
Net assets..................................................... $1,235,498,017
==============
Class A:
Net assets..................................................... $ 663,021,948
--------------
Shares outstanding............................................. 64,073,319
--------------
Net asset value and redemption value per share................. $10.35
======
Maximum offering price per share (net asset value plus sales
charge of 4.00% of offering price)............................ $10.78
======
Class B:
Net assets..................................................... $ 484,534,473
--------------
Shares outstanding............................................. 46,982,335
--------------
Net asset value and offering price per share................... $10.31
======
Class C:
Net assets..................................................... $ 16,612,604
--------------
Shares outstanding............................................. 1,604,344
--------------
Net asset value, offering price and redemption value per share. $10.35
======
Class D:
Net assets..................................................... $ 71,328,992
--------------
Shares outstanding............................................. 6,903,724
--------------
Net asset value, offering price and redemption value per share. $10.33
======
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Investment income:
Interest (net of foreign withholding taxes)....................... $110,162,412
------------
Expenses:
Investment advisory and administration............................ 9,229,318
Service fees--Class A............................................. 1,499,377
Service and distribution fees--Class B............................ 5,822,394
Service and distribution fees--Class D............................ 538,004
Transfer agency and service fees.................................. 1,119,584
Custody and accounting............................................ 1,024,740
Reorganization expenses........................................... 444,650
Reports and notices to shareholders............................... 284,179
Legal and audit fees.............................................. 196,938
Federal and state registration fees............................... 144,039
Trustees' fees.................................................... 23,750
Other expenses.................................................... 95,668
------------
20,422,641
------------
Net investment income............................................. 89,739,771
------------
Realized and unrealized gains (losses) from investment activities:
Net realized losses from:
Investment transactions.......................................... (16,067,201)
Foreign currency transactions.................................... (954,350)
Net change in unrealized appreciation/depreciation of:
Investments...................................................... 48,868,150
Other assets, liabilities and forward contracts denominated in
foreign currencies.............................................. 5,687,668
------------
Net realized and unrealized gains from investment activities...... 37,534,267
------------
Net increase in net assets resulting from operations.............. $127,274,038
============
</TABLE>
See accompanying notes to financial statements
6
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS FOR THE YEARS ENDED OCTOBER 31,
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
From operations:
Net investment income.............................. $ 89,739,771 $ 113,786,644
Net realized losses from investment transactions... (16,067,201) (17,079,241)
Net realized losses from foreign currency
transactions...................................... (954,350) (59,719,415)
Net change in unrealized appreciation/depreciation
of investments.................................... 48,868,150 (90,644,293)
Net changes in unrealized appreciation/depreciation
of other assets, liabilities and forward contracts
denominated in foreign currencies................. 5,687,668 (15,050,480)
-------------- --------------
Net increase (decrease) in net assets resulting
from operations................................... 127,274,038 (68,706,785)
-------------- --------------
Dividends and distributions to shareholders from:
Net investment income--Class A..................... (40,376,543) (20,955,179)
Net investment income--Class B..................... (35,685,366) (25,638,320)
Net investment income--Class C..................... (782,694) (429,608)
Net investment income--Class D..................... (4,526,987) (3,358,807)
Paid in capital--Class A........................... -- (20,613,399)
Paid in capital--Class B........................... -- (25,220,157)
Paid in capital--Class C........................... -- (422,602)
Paid in capital--Class D........................... -- (3,304,025)
-------------- --------------
(81,371,590) (99,942,097)
-------------- --------------
From beneficial interest transactions:
Net proceeds from the sale of shares............... 24,154,810 113,562,148
Shares issued in connection with the acquisition of
Global Income Plus
Fund, Inc. ....................................... 230,782,432 --
Shares issued in connection with the acquisition of
Mitchell Hutchins/Kidder, Peabody Global Fixed
Income Fund....................................... 64,455,167 --
Cost of shares repurchased......................... (625,332,239) (567,552,519)
Proceeds from dividends reinvested................. 52,671,643 79,870,752
-------------- --------------
Net decrease in net assets derived from beneficial
interest transactions............................. (253,268,187) (374,119,619)
-------------- --------------
Net decrease in net assets......................... (207,365,739) (542,768,501)
Net assets:
Beginning of year.................................. 1,442,863,756 1,985,632,257
-------------- --------------
End of year ....................................... $1,235,498,017 $1,442,863,756
============== ==============
</TABLE>
See accompanying notes to financial statements
7
<PAGE>
PAINEWEBBER NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Investment Series ("Trust") was organized under Massachusetts law
by a Declaration of Trust dated December 22, 1986 and is registered with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
The Trust previously consisted of PaineWebber Global Income Fund the ("Fund"),
PaineWebber Europe Growth Fund ("Europe Growth Fund"), PaineWebber Global
Energy Fund ("Global Energy Fund") and PaineWebber Global Growth and Income
Fund ("Global Growth and Income Fund"). Effective August 25, 1995 Europe Growth
Fund and Global Growth and Income Fund were reorganized into PaineWebber Global
Equity Fund (formerly Mitchell Hutchins/Kidder, Peabody Global Equity Fund).
Effective October 13, 1995 Global Energy Fund was reorganized into PaineWebber
Growth and Income Fund.
The Fund offers Class A, Class B, Class C and Class D shares. Class C shares
are available only to the trustee of the PaineWebber Savings Investment Plan on
behalf of the Plan. Each Class represents an interest in the same assets of the
Fund and the classes are identical except for differences in their sales charge
structure, ongoing service/distribution charges and transfer agency expenses.
In addition, Class B shares along with their pro-rata reinvested dividends
shares, automatically convert to Class A shares approximately six years after
initial issuance. All classes of shares have equal rights as to voting
privileges, except that each class has exclusive voting rights with respect to
its service/distribution plan.
Effective November 10, 1995, the Fund began using industry standardized
nomenclature and Class D and Class C shares were renamed Class C and Class Y
shares, respectively.
Acquisition of Global Income Plus Fund, Inc. ("Global Income Plus Fund") - On
June 30, 1995, the Fund acquired all the net assets of Global Income Plus Fund
pursuant to a plan of reorganization approved by Global Income Plus Fund
shareholders on May 25, 1995. The acquisition was accomplished by a tax-free
exchange of 22,661,242 Class A shares of the Fund for the 26,096,317 shares of
Global Income Plus Fund outstanding on June 30, 1995. Global Income Plus Fund's
net assets at that date, valued at $230,782,432, including accumulated net
realized losses of $5,949,592, net unrealized appreciation on investments of
$5,094,121 and net unrealized foreign exchange ("F/X") losses of $1,867,298,
were combined with those of the Fund.
Acquisition of Mitchell Hutchins/Kidder, Peabody Global Fixed Income Fund
("MH/KP Global Fixed Income Fund") - On October 27, 1995, the Fund acquired all
the net assets of MH/KP Global Fixed Income Fund pursuant to a plan of
reorganization approved by MH/KP Global Fixed Income Fund shareholders on
8
<PAGE>
PAINEWEBBER
October 5, 1995. The acquisition was accomplished by tax free exchanges of
4,138,263 Class A, 776,391 Class C and 1,332,238 Class D shares of the Fund for
3,520,765 Class A, 659,996 Class C and 1,131,249 Class B shares, respectively,
of MH/KP Global Fixed Income Fund outstanding on October 27, 1995. MH/KP Global
Fixed Income Fund's net assets at that date, valued at $64,455,167, including
accumulated net realized losses of $2,407,711, net unrealized appreciation of
investments of $1,481,458 and net unrealized F/X losses of $165,549, were
combined with those of the Fund.
Valuation of Investments - Securities which are listed on U.S. and foreign
stock exchanges are valued at the last sale price on the day the securities are
being valued or, lacking any sales on such day, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are generally valued on the exchange designated by Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins"), a wholly owned subsidiary of
PaineWebber Incorporated and investment advisor of the Fund, as the primary
market. Securities traded in the over-the-counter ("OTC") market and listed on
the National Association of Securities Dealers Automated Quotation System
("NASDAQ") are valued at the last available sale price on NASDAQ prior to the
time of valuation; other OTC securities are valued at the last bid price
available in the OTC market prior to the time of valuation. The amortized cost
method of valuation generally is used to value short-term debt instruments with
sixty days or less remaining to maturity. Securities and assets for which
market quotations are not readily available, unless the Trust's Board of
Trustees determines that this does not represent fair value, (including
restricted securities subject to limitations as to their sale) are valued at
fair value as determined in good faith by or under the direction of the Trust's
Board of Trustees. All investments quoted in foreign currencies will be valued
daily in U.S. dollars on the basis of the foreign currency exchange rates
prevailing at the time such valuation is determined by the Fund's custodian.
Foreign currency exchange rates are generally determined prior to the close of
the New York Stock Exchange ("NYSE"). Occasionally events affecting the value
of foreign investments and such exchange rates occur between the time at which
they are determined and the close of the NYSE, which will not be reflected in a
computation of the Fund's net asset value on that day. If events occur
materially affecting the value of such securities or currency exchange rates
during such time period, the securities will be valued at their fair value as
determined in good faith by or under the direction of the Trust's Board of
Trustees.
Repurchase Agreements - The Fund's custodian takes possession of the collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a mark-to-market basis to ensure that the value, including
accrued interest, is at least equal to the repurchase price. In the event of
default of the
9
<PAGE>
PAINEWEBBER
obligation to repurchase, the Fund has the right to liquidate the collateral
and apply the proceeds in satisfaction of the obligation. Under certain
circumstances, in the event of default or bankruptcy by the other party to the
agreement, realization and/or retention of the collateral may be subject to
legal proceedings. The Fund occasionally participates in joint repurchase
agreement transactions with other funds managed by Mitchell Hutchins.
Investment Transactions and Investment Income - Investment transactions are
recorded on trade date. Realized gains and losses from sales of investments and
foreign exchange transactions are calculated using the identified cost method.
Interest income is recorded on an accrual basis. Discounts are accreted as
adjustments to interest income and the identified cost of investments.
Income, expenses (excluding class-specific expenses), and realized/unrealized
gains and losses are allocated proportionately to each class of shares based
upon the relative net asset value of outstanding shares (or the value of
dividend-eligible shares, as appropriate) of each class at the beginning of the
day (after adjusting for current capital share activity of the respective
classes). Class-specific expenses are charged directly to the applicable class
of shares.
Foreign Currency Translation - The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(1) market value of investment securities, other assets and liabilities--at
the exchange rates prevailing at the end of the period.
(2) purchases and sales of investment securities, income and expenses--at
the rates of exchange prevailing on the respective dates of such
transactions.
Although the net assets and the market values of the Fund are presented at the
foreign exchange rates at the end of the period, the Fund does not generally
isolate the effect of fluctuations in foreign exchange rates from the effect of
the changes in market prices of securities. However, the Fund does isolate the
effect of fluctuations in foreign exchange rates when determining the gain or
loss upon the sale or maturity of foreign currency-denominated debt obligations
pursuant to U.S. federal income tax regulations. Certain foreign exchange gains
and losses included in realized and unrealized gains and losses are included in
or are a reduction of ordinary income in accordance with federal income tax
regulations.
Forward Foreign Currency Contracts - The Fund may enter into forward foreign
currency exchange contracts ("forward contracts") in connection with planned
purchases or sales of securities or to hedge the U.S. dollar value of portfolio
securities denominated in a particular currency.
10
<PAGE>
PAINEWEBBER
The Fund has no specific limitation on the percentage of assets which may be
committed to such contracts. The Fund may enter into forward contracts or
maintain a net exposure to forward contracts only if (1) the consummation of
the contracts would not obligate the Fund to deliver an amount of foreign
currency in excess of the value of the position being hedged by such contracts
or (2) the Fund maintains cash, U.S. government securities or liquid, high-
grade debt securities in a segregated account in an amount not less than the
value of its total assets committed to the consummation of the forward
contracts and not covered as provided in (1) above, as marked-to-market daily.
Risks may arise with respect to entering into forward contracts from the
potential inability of counterparties to meet the terms of their forward
contracts and from unanticipated movements in the value of foreign currencies
relative to the U.S. dollar.
Fluctuations in the value of forward contracts are recorded for book purposes
as unrealized gains or losses by the Fund. Realized gains and losses include
net gains and losses recognized by the Fund on contracts which have matured or
the Fund has terminated by entering into offsetting commitments.
Federal Taxes - The Fund intends to distribute substantially all of its taxable
income and to comply with the other requirements of the Internal Revenue Code
applicable to regulated investment companies. Accordingly, no provision for
federal income taxes is required. In addition, by distributing during each
calendar year substantially all of its net investment income, capital gains and
certain other amounts, if any, the Fund intends not to be subject to a federal
excise tax.
Dividends and Distributions - Dividends and distributions to shareholders are
recorded on the ex-dividend date. Dividends from net investment income and
distributions from realized capital gains are determined in accordance with
federal income tax regulations, which may differ from generally accepted
accounting principles. These "book/tax" differences are either considered
temporary or permanent in nature. To the extent these differences are permanent
in nature, such amounts are reclassified within the capital accounts based on
their federal tax-basis treatment; temporary differences do not require
reclassifications. Dividends and distributions which exceed net investment
income and net realized capital gains for financial reporting purposes, but not
for tax purposes, are reported as dividends in excess of net investment income
or distributions in excess of net realized capital gains. To the extent they
exceed net investment income and net realized capital gains for tax purposes,
they are reported as distributions of paid-in-capital.
11
<PAGE>
PAINEWEBBER
CONCENTRATION OF RISK
Investing in securities of foreign issuers and currency transactions may
involve certain considerations and risks not typically associated with
investments in the United States. These risks include revaluation of
currencies, adverse fluctuations in foreign currency values and possible
adverse political, social and economic developments, including those particular
to a specific industry, country or region, which could cause the securities and
their markets to be less liquid and prices more volatile than those of
comparable U.S. companies and U.S. government securities. These risks are
greater with respect to securities of issuers located in emerging market
countries in which the Fund is authorized to invest. The ability of the issuers
of debt securities held by the Fund to meet their obligations may be affected
by economic and political developments particular to specific industry, country
or region.
INVESTMENT ADVISER AND ADMINISTRATOR
The Fund has entered into an Investment Advisory and Administration Contract
("Advisory Contract") with Mitchell Hutchins. In accordance with the Advisory
Contract, the Fund pays Mitchell Hutchins an investment advisory and
administration fee, which is accrued daily and paid monthly, in accordance with
the following schedule:
<TABLE>
<CAPTION>
ANNUAL
AVERAGE DAILY NET ASSETS RATE
- ------------------------ ------
<S> <C>
Up to $500 million...................................................... 0.750%
In excess of $500 million up to $1.0 billion............................ 0.725
In excess of $1.0 billion up to $1.5 billion............................ 0.700
In excess of $1.5 billion up to $2.0 billion............................ 0.675
Over $2.0 billion....................................................... 0.650
</TABLE>
At October 31, 1995, the Fund owed Mitchell Hutchins $739,717 for investment
advisory and administration fees.
In compliance with applicable state securities laws, Mitchell Hutchins will
reimburse the Fund if and to the extent that the aggregate operating expenses
in any fiscal year, exclusive of taxes, distribution fees, interest, brokerage
fees and extraordinary expenses, exceed limitations imposed by various state
regulations. Currently, the most restrictive limitation applicable to the Fund
is 2.5% of the first $30 million of average daily net assets, 2.0% of the next
$70 million and 1.5% of any excess over $100 million. For the year ended
October 31, 1995, no reimbursements were required pursuant to the above
limitations for the Fund.
12
<PAGE>
PAINEWEBBER
DISTRIBUTION PLANS
Mitchell Hutchins is the distributor of the Fund's shares and has appointed
PaineWebber as the exclusive dealer for the sale of those shares. Under
separate plans of distribution pertaining to the Class A, Class B and Class D
shares ("Class A Plan," "Class B Plan" and "Class D Plan," collectively
"Plans"), the Fund pays Mitchell Hutchins monthly service fees at the annual
rate of 0.25% of the average daily net assets of Class A, Class B and Class D
shares and monthly distribution fees at the annual rates of 0.75% and 0.50% of
the average daily net assets of Class B and Class D shares, respectively. At
October 31, 1995, the Fund owed Mitchell Hutchins $588,612 for service and
distribution fees.
Mitchell Hutchins also receives the proceeds of the initial sales charges paid
upon the purchase of Class A shares and the contingent deferred sales charge
paid upon certain redemptions of Class B shares. Mitchell Hutchins has informed
the Fund that for the year ended October 31, 1995, it earned the following
amount in sales charges:
<TABLE>
<S> <C>
Initial sales charges - Class A..................................... $ 43,136
Contingent deferred sales charges - Class B......................... $2,395,994
</TABLE>
TRANSFER AGENCY SERVICE FEES
The Fund pays PaineWebber an annual fee of $4.00 per active PaineWebber
shareholder account for certain services not provided by the Fund's transfer
agent. For these services for the year ended October 31, 1995, PaineWebber
earned $376,299 from the Fund. At October 31, 1995, the Fund owed PaineWebber
$29,196 for service fees.
13
<PAGE>
PAINEWEBBER
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at October 31,
1995 was substantially the same as the cost of securities for financial
statement purposes.
At October 31, 1995, the components of the net unrealized appreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value over
cost)............................................................ $30,258,728
Gross depreciation (investments having an excess of cost over
value)........................................................... (8,000,624)
-----------
Net unrealized appreciation of investments........................ $22,258,104
===========
</TABLE>
For the year ended October 31, 1995, total aggregate purchases and sales of
portfolio securities, excluding short-term securities, were as follows:
<TABLE>
<S> <C>
Purchases........................................................ $1,054,238,511
Sales............................................................ $1,520,967,338
</TABLE>
FEDERAL INCOME TAX STATUS
To reflect reclassifications arising from permanent "book/tax" differences for
the year ended October 31, 1995, accumulated net realized gain/loss was
decreased by $103,747, distributions in excess of net investment income was
increased by $602,633, and beneficial interest was decreased by $498,886.
Permanent book/tax differences are primarily attributable to foreign currency
gains/losses and the acquisitions of Global Income Plus Fund and MH/KP Global
Fixed Income Fund.
At October 31, 1995, the Fund had available a capital loss carryforward of
$41,643,329 which expires as follows: $3,629,142 in 2001, $22,260,372 in 2002
and $15,753,815 in 2003. The capital loss carryforward includes capital losses
acquired by the Fund pursuant to its reorganizations with PaineWebber Short-
Term Global Income Fund (which was acquired by the Fund in fiscal 1993), Global
Income Plus Fund and MH/KP Global Fixed Income Fund in the amounts of
$1,285,400, $6,031,866 and $2,490,780, respectively.
14
<PAGE>
PAINEWEBBER
SHARES OF BENEFICIAL INTEREST
There are an unlimited amount of $0.001 per value shares of
beneficial interest authorized. Transactions in shares of
beneficial interest were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
-------------------------- -------------------------- --------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- ------------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED
OCTOBER 31,
1995:
Shares sold..... 769,482 $ 7,829,343 1,097,002 $ 11,102,275 231,829 $ 2,358,107 283,304 $ 2,865,085
Shares issued in
connection with
the acquisition
of:
Global Income
Plus Fund...... 22,661,242 230,782,432 -- -- -- -- -- --
MH/KP Global
Fixed Income
Fund 4,138,263 42,716,735 -- -- 776,391 8,015,347 1,332,238 13,723,085
Shares
repurchased.... (32,813,653) (334,286,327) (23,655,674) (239,410,776) (779,383) (7,995,417) (4,310,582) (43,639,719)
Dividends
reinvested..... 2,518,835 25,654,246 2,254,509 22,871,888 76,872 782,695 330,949 3,362,814
Shares converted
from Class B to
Class A........ 5,525,275 55,754,624 (5,541,079) (55,754,624) -- -- -- --
----------- ------------- ----------- ------------- -------- ----------- ---------- ------------
Net increase
(decrease)..... 2,799,444 $ 28,451,053 (25,845,242) $(261,191,237) 305,709 $ 3,160,732 (2,364,091) $(23,688,735)
=========== ============= =========== ============= ======== =========== ========== ============
YEAR ENDED
OCTOBER 31,
1994:
Shares sold..... 1,514,200 $ 16,176,896 5,198,224 $ 55,716,072 281,719 $ 3,006,542 3,572,779 $ 38,662,638
Shares
repurchased.... (20,711,269) (213,693,063) (26,589,848) (275,723,807) (178,060) (1,807,652) (7,261,892) (76,327,998)
Dividends
reinvested..... 3,010,952 31,242,466 3,993,779 41,711,865 97,310 1,010,823 567,607 5,905,599
Shares converted
from Class B to
Class A........ 18,303,275 191,707,515 (18,356,029) (191,707,515) -- -- -- --
----------- ------------- ----------- ------------- -------- ----------- ---------- ------------
Net increase
(decrease)..... 2,117,158 $ 25,433,814 (35,753,874) $(370,003,385) 200,969 $ 2,209,713 (3,121,506) $(31,759,761)
=========== ============= =========== ============= ======== =========== ========== ============
</TABLE>
15
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT EACH PERIOD IS PRESENTED BELOW:
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------
FOR THE
PERIOD
FOR THE YEARS ENDED JULY 1,
OCTOBER 31, 1991+ TO
-------------------------------------------- OCTOBER 31,
1995 1994 1993 1992 1991
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............ $ 9.99 $ 10.97 $ 10.64 $ 10.75 $ 10.40
-------- -------- -------- -------- -------
Net investment
income........... 0.77@ 0.72 0.59 0.83 0.20
Net realized and
unrealized gains
(losses) from
investment and
foreign currency
transactions..... 0.31@ (1.05) 0.68 (0.12) 0.40
-------- -------- -------- -------- -------
Total
increase/decrease
from investment
operations........ 1.08 (0.33) 1.27 0.71 0.60
-------- -------- -------- -------- -------
Dividends from net
investment
income........... (0.72) (0.33) (0.80) (0.64) (0.23)
Distributions from
realized gains on
investments and
foreign currency
transactions..... -- -- (0.14) (0.18) (0.02)
Paid in capital... -- (0.32) -- -- --
-------- -------- -------- -------- -------
Total dividends and
distributions..... (0.72) (0.65) (0.94) (0.82) (0.25)
-------- -------- -------- -------- -------
Net asset value,
end of period..... $ 10.35 $ 9.99 $ 10.97 $ 10.64 $ 10.75
======== ======== ======== ======== =======
Total investment
return (1)........ 11.09% (3.10)% 12.41% 6.70% 5.79%
======== ======== ======== ======== =======
Ratios/Supplemental
Data:
Net assets, end of
period (000's)... $663,022 $611,855 $648,853 $107,033 $16,501
Expenses to
average net
assets........... 1.24%(2) 1.17% 1.32%** 1.21% 1.35%*
Net investment
income to average
net assets....... 7.47%(2) 6.94% 6.82%** 7.84% 8.59%*
Portfolio turnover
rate............. 113% 108% 90% 92% 53%
<CAPTION>
CLASS B
-------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
-------------------------------------------------------------
1995 1994 1993 1992 1991
------------ ---------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............ $ 9.96 $ 10.95 $ 10.62 $ 10.74 $ 11.07
------------ ---------- ------------- ----------- -----------
Net investment
income........... 0.69@ 0.86 0.78 0.94 0.85
Net realized and
unrealized gains
(losses) from
investment and
foreign currency
transactions..... 0.30@ (1.28) 0.40 (0.32) (0.09)
------------ ---------- ------------- ----------- -----------
Total
increase/decrease
from investment
operations........ 0.99 (0.42) 1.18 0.62 0.76
------------ ---------- ------------- ----------- -----------
Dividends from net
investment
income........... (0.64) (0.29) (0.71) (0.56) (0.97)
Distributions from
realized gains on
investments and
foreign currency
transactions..... -- -- (0.14) (0.18) (0.12)
Paid in capital... -- (0.28) -- -- --
------------ ---------- ------------- ----------- -----------
Total dividends and
distributions..... (0.64) (0.57) (0.85) (0.74) (1.09)
------------ ---------- ------------- ----------- -----------
Net asset value,
end of period..... $ 10.31 $ 9.96 $ 10.95 $ 10.62 $ 10.74
============ ========== ============= =========== ===========
Total investment
return (1)........ 10.24% (3.90)% 11.45% 5.93% 7.39%
============ ========== ============= =========== ===========
Ratios/Supplemental
Data:
Net assets, end of
period (000's)... $484,534 $725,553 $1,188,890 $1,542,255 $1,593,814
Expenses to
average net
assets........... 2.00%(2) 1.94 % 2.11%** 1.98% 1.94%
Net investment
income to average
net assets....... 6.71%(2) 6.05 % 5.97%** 7.11% 8.09%
Portfolio turnover
rate............. 113% 108 % 90% 92% 33%
</TABLE>
- -------------
*Annualized
** Includes 0.15% of interest expense related to the reverse repurchase
agreement transactions entered into during the fiscal year
+Commencement of issuance of shares
@Calculated using the average shares outstanding for the year
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
capital gain distributions at net asset value on the payable date, and a
sale at net asset value on the last day of each period reported. The
figures do not include sales charge; results of Class A and Class B would
be lower if sales charges were included. Total investment return
information for periods less than one year is not annualized.
(2) These ratios include non-recurring reorganization expenses of 0.04% for
each Class.
16
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
<TABLE>
<CAPTION>
CLASS C CLASS D
------------------------------------------------------------------------------------------------------------
FOR THE YEARS
FOR THE YEARS ENDED FOR THE PERIOD ENDED FOR THE PERIOD
OCTOBER 31, AUGUST 26, 1991+ OCTOBER 31, JULY 2, 1992+
----------------------------------------- TO OCTOBER 31, ------------------------------ TO OCTOBER 31,
1995 1994 1993 1992 1991 1995 1994 1993 1992
------- ------- ------- ------ ---------------- ------- ------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9.99 $ 10.97 $ 10.64 $10.76 $10.53 $ 9.98 $ 10.96 $ 10.64 $ 10.94
------- ------- ------- ------ ------ ------- ------- -------- -------
0.78@ 0.75 0.71 0.81 0.17 0.71@ 0.70 0.68 0.20
0.32@ (1.06) 0.58 (0.08) 0.32 0.31@ (1.09) 0.52 (0.13)
------- ------- ------- ------ ------ ------- ------- -------- -------
1.10 (0.31) 1.29 0.73 0.49 1.02 (0.39) 1.20 0.07
------- ------- ------- ------ ------ ------- ------- -------- -------
(0.74) (0.34) (0.82) (0.67) (0.24) (0.67) (0.30) (0.74) (0.21)
-- -- (0.14) (0.18) (0.02) -- -- (0.14) (0.16)
-- (0.33) -- -- -- -- (0.29) -- --
------- ------- ------- ------ ------ ------- ------- -------- -------
(0.74) (0.67) (0.96) (0.85) (0.26) (0.67) (0.59) (0.88) (0.37)
------- ------- ------- ------ ------ ------- ------- -------- -------
$ 10.35 $9.99 $10.97 $10.64 $10.76 $ 10.33 $ 9.98 $10.96 $10.64
======= ======= ======= ====== ====== ======= ======= ======== =======
11.39% (2.86)% 12.60% 6.98% 4.63% 10.49% (3.56)% 11.64% 0.61%
======= ======= ======= ====== ====== ======= ======= ======== =======
$16,613 $12,975 $12,043 $7,252 $2,565 $71,329 $92,480 $135,847 $36,598
0.95%(2) 0.88% 1.06%** 0.94% 1.09%* 1.75%(2) 1.68% 1.83%** 1.75%*
7.77%(2) 7.23% 7.00%** 8.15% 8.79%* 6.96%(2) 6.34% 6.17%** 7.02%*
113% 108% 90% 92% 53% 113% 108% 90% 92%
</TABLE>
17
<PAGE>
PAINEWEBBER REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of PaineWebber Investment Series
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of PaineWebber Global Income Fund (a
series of PaineWebber Investment Series and hereafter referred to as the
"Fund") at October 31, 1995, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at October 31, 1995 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 20, 1995
18
<PAGE>
PAINEWEBBER TAX INFORMATION--(UNAUDITED)
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the Fund's fiscal year end (October
31, 1995) as to the federal tax status of distributions received by
shareholders during such fiscal year. Accordingly, we are advising you that the
following distributions paid during the fiscal year by the Fund were derived
from the following source:
<TABLE>
<CAPTION>
PER SHARE DATA:
-------------------------------------
<S> <C>
Net investment income
Class A............................ $0.7154
Class B............................ 0.6432
Class C............................ 0.7435
Class D............................ 0.6676
</TABLE>
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need not
be reported as taxable income. Some retirement trusts (e.g., corporate, Keogh
and 403(b)(7) plans) may need this information for their annual information
reporting.
Since the Fund's fiscal year is not the calendar year, another notification
will be sent with respect to calendar year 1995. Such notification, which will
reflect the amount to be used by calendar year taxpayers on their federal
income tax returns, will be made in conjunction with Form 1099 DIV and will be
mailed in January 1996. Shareholders are advised to consult their own tax
advisers with respect to the tax consequences of their investment in the Fund.
19
