<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
PERFORMANCE RESULTS
(UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN/1/
-------------------------- -----------------------------
04/30/97 10/31/96 04/30/96 12 MONTHS 6 MONTHS
ENDED 04/30/97 ENDED 04/30/97
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $10.09 $10.46 $10.24 5.39% (0.25)%
- ------------------------------------------------------------------------
Class B Shares 10.07 10.44 10.21 4.70 (0.63)
- ------------------------------------------------------------------------
Class C Shares 10.09 10.45 10.23 4.96 (0.41)
- ------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS A SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
----------------------- CAPITAL GAINS DIVIDENDS PAID FROM TOTAL
PERIOD 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)
- -----------------------------------------------------------------------------------------
1995 9.90 10.44 -- 0.7325 -- 13.20
- -----------------------------------------------------------------------------------------
1996 10.44 10.44 -- 0.7113 -- 7.13
- -----------------------------------------------------------------------------------------
01/01/97 - 04/30/97 10.44 10.09 -- 0.2294 -- (1.16)
- -----------------------------------------------------------------------------------------
Totals: $0.3198 $3.8260 $0.3178
- -----------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
04/30/97: 47.92%
- -----------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS B SHARES
<CAPTION>
NET ASSET VALUE
----------------------- CAPITAL GAINS DIVIDENDS PAID FROM TOTAL
PERIOD 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)
- -----------------------------------------------------------------------------------------
1995 9.87 10.41 -- 0.6538 -- 12.39
- -----------------------------------------------------------------------------------------
1996 10.41 10.41 -- 0.6336 -- 6.34
- -----------------------------------------------------------------------------------------
01/01/97 - 04/30/97 10.41 10.07 -- 0.2033 -- (1.32)
- -----------------------------------------------------------------------------------------
Totals: $0.6487 $7.7545 $0.2810
- -----------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
04/30/97: 139.31%
- -----------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS C SHARES
<CAPTION>
NET ASSET VALUE
----------------------- CAPITAL GAINS DIVIDENDS PAID FROM TOTAL
PERIOD 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)
- -----------------------------------------------------------------------------------------
1995 9.89 10.42 -- 0.6801 -- 12.54
- -----------------------------------------------------------------------------------------
1996 10.42 10.43 -- 0.6592 -- 6.70
- -----------------------------------------------------------------------------------------
01/01/97 - 04/30/97 10.43 10.09 -- 0.2122 -- (1.23)
- -----------------------------------------------------------------------------------------
Totals: $0.3098 $2.9210 $0.2938
- -----------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF
04/30/97: 28.93%
- -----------------------------------------------------------------------------------------
</TABLE>
/1/FIGURES ASSUME REINVESTMENT OF ALL DIVIDENDS, CAPITAL GAINS AND OTHER
DISTRIBUTIONS AT NET ASSET VALUE ON THE PAYABLE DATES AND DO NOT INCLUDE SALES
CHARGES; RESULTS WOULD BE LOWER IF SALES CHARGES WERE INCLUDED.
NOTE: THE FUND OFFERS CLASS Y SHARES TO THE TRUSTEES OF THE PAINEWEBBER SAVINGS
INVESTMENT PLAN AND INSIGHT INVESTMENT ADVISORY PROGRAM PARTICIPANTS. FOR THE
SIX MONTHS ENDED APRIL 30, 1997 AND SINCE INCEPTION, AUGUST 26, 1991, THROUGH
APRIL 30, 1997, CLASS Y SHARES HAD A TOTAL RETURN OF (0.30)% AND 48.48%,
RESPECTIVELY. CLASS Y SHARES DO NOT HAVE INITIAL OR CONTINGENT DEFERRED SALES
CHARGES OR ONGOING DISTRIBUTION AND SERVICE FEES.
THE DATA ABOVE REPRESENTS PAST PERFORMANCE OF THE FUND'S SHARES, WHICH IS NO
GUARANTEE OF FUTURE RESULTS. THE PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND
WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST.
5
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
PORTFOLIO OF INVESTMENTS APRIL 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000)* DATES RATES VALUE
----------- -------------------- ---------------- ------------
LONG-TERM DEBT SECURITIES -- 88.15%
<C> <S> <C> <C> <C>
AUSTRALIA -- 5.26%
New South Wales Treasury
17,100 Corporation............ 12/01/01 12.000% $ 15,725,945
Queensland Treasury
Corporation Global
27,758 Issue.................. 08/14/01 to 08/15/01 8.000 to 12.000 24,119,257
------------
39,845,202
------------
CANADA -- 4.68%
10,585 Government of Canada.... 09/01/01 7.000 7,887,502
49,738 Ontario Hydro Global.... 04/11/08 to 04/11/11 10.410 to 10.460@ 14,112,097
US$ 14,461 Province of Ontario..... 02/21/06 6.000 13,405,781
------------
35,405,380
------------
CHILE -- 1.11%
Empresa Nacional de
US$ 8,500 Electricidad, S.A. .... 02/01/37 7.325 8,372,500
------------
DENMARK -- 1.89%
84,980 Government of Denmark... 05/15/03 8.000 14,300,679
------------
GERMANY -- 5.50%
Federal Republic of
63,570 Germany................ 07/22/02 to 11/11/04 7.500 to 8.000 41,657,179
------------
HUNGARY -- 1.30%
1,767,500 Government of Hungary... 05/17/98 to 04/12/99 16.500 to 23.500 9,829,117
------------
ITALY -- 9.04%
110,045,000 Republic of Italy(1).... 07/15/98 to 04/01/04 8.500 to 12.000 68,397,451
------------
NEW ZEALAND -- 5.93%
Government of New
61,346 Zealand(1)............. 02/15/00 to 03/15/02 6.500 to 10.000 44,872,671
------------
POLAND -- 1.87%
Republic of Poland,
US$ 7,275 DISC................... 10/27/24 6.938 7,070,427
US$ 8,730 Republic of Poland, PDI. 10/27/14 4.000# 7,104,038
------------
14,174,465
------------
SPAIN -- 2.99%
2,951,020 Government of Spain..... 04/30/99 to 03/25/00 9.400 to 12.250 22,663,641
------------
UNITED KINGDOM -- 7.02%
29,954 United Kingdom Gilt..... 09/30/98 to 12/07/15 7.500 to 15.500 53,121,035
------------
UNITED STATES -- 41.56%
16,000 Clorox Corporation...... 07/15/01 8.800 17,080,672
Ford Motor Credit
15,000 Corporation............ 07/01/01 9.500 16,328,985
20,257 U.S. Treasury Bonds(1).. 11/15/26 to 02/15/27 6.500 to 6.625 19,214,738
263,026 U.S. Treasury Notes(1).. 05/31/98 to 07/15/06 5.625 to 7.000 261,981,929
------------
314,606,324
------------
Total Long-Term Debt Securities
(cost -- $679,049,821)............... 667,245,644
------------
</TABLE>
6
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000)* DATES RATES VALUE
----------- -------------------- ----------------- ------------
SHORT-TERM DEBT SECURITIES -- 6.07%
<C> <S> <C> <C> <C>
HUNGARY -- 0.41%
546,000 Government of Hungary... 03/21/98 24.000% $ 3,080,862
------------
IRELAND -- 0.61%
3,000 Republic of Ireland..... 11/15/97 11.500 4,621,022
------------
POLAND -- 1.98%
Republic of Poland
51,840 Treasury Bills......... 05/14/97 to 04/02/98 19.400 to 21.650@ 15,014,354
------------
UNITED STATES -- 3.07%
The Chase Manhattan
18,000 Corporation............ 12/01/97 7.500 18,141,282
5,000 U.S. Treasury Bills(1).. 05/29/97 5.000@ 4,980,554
------------
23,121,836
------------
Total Short-Term Debt Securities
(cost -- $48,472,833)................ 45,838,074
------------
REPURCHASE AGREEMENTS -- 6.59%
29,000 Repurchase agreement
dated 04/30/97 with
Citicorp Securities,
collateralized by
$29,040,000 U.S.
Treasury Bonds, 7.125%
due 02/15/23; proceeds;
$29,004,350............ 05/01/97 5.400 29,000,000
20,917 Repurchase agreement
dated 04/30/97 with
First Chicago Capital
Markets, Inc.,
collateralized by
$21,235,000 U.S.
Treasury Notes, 6.000%
due 08/15/99; proceeds:
$20,920,123............ 05/01/97 5.375 20,917,000
------------
Total Repurchase Agreements (cost --
$49,917,000)........................ 49,917,000
------------
<CAPTION>
NUMBER
OF SHARES
(000)
-----------
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED -- 9.19%
<C> <S> <C> <C> <C>
MONEY MARKET FUNDS -- 9.19%
34,709 Liquid Assets Portfolio. 34,709,296
152 Prime Portfolio......... 151,593
34,728 TempFund Portfolio...... 34,728,022
------------
Total Investment of Cash Collateral
for Securities Loaned (cost --
$69,588,911)........................ 69,588,911
------------
Total Investments (cost --
$847,028,565) -- 110.00%............ 832,589,629
Liabilities in excess of assets --
(10.00%)............................ (75,664,910)
------------
Net Assets -- 100.00%................ $756,924,719
============
</TABLE>
- -------
NOTE:THE PORTFOLIO OF INVESTMENTS IS LISTED BY THE ISSUER'S COUNTRY OF ORIGIN
*IN LOCAL CURRENCY UNLESS OTHERWISE INDICATED
@YIELD TO MATURITY
(1)SECURITY, OR PORTION THEREOF, WAS ON LOAN AT APRIL 30, 1997
#REFLECTS RATE AT APRIL 30, 1997 ON STEP COUPON RATE INSTRUMENTS
DISCDISCOUNT BOND
PDIPAST DUE INTEREST BOND
7
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
UNREALIZED
CONTRACT TO IN EXCHANGE MATURITY APPRECIATION
DELIVER FOR DATES (DEPRECIATION)
-------------- --------------- -------------------- --------------
<S> <C> <C> <C> <C>
Australian Dollars...... 20,365,000 US$ 15,890,810 07/10/97 $ 20,036
Australian Dollars...... 14,598,000 US$ 11,094,480 05/13/97 (287,859)
Australian Dollars...... 11,600,000 US$ 9,021,320 06/30/97 (20,114)
Belgian Francs.......... 634,112,770 US$ 20,790,583 09/30/97 3,051,941
Belgian Francs.......... 610,000,000 US$ 19,871,001 07/14/97 2,806,889
British Pounds.......... 10,750,500 US$ 17,438,924 05/12/97 19,342
British Pounds.......... 9,000,000 US$ 14,680,260 05/30/97 98,891
Canadian Dollars........ 11,495,000 US$ 8,267,881 07/23/97 (5,618)
German Deutschemarks.... 34,357,291 US$ 20,987,960 05/05/97 1,156,912
German Deutschemarks.... 25,625,869 US$ 16,186,338 05/05/97 to 01/21/98 1,395,071
German Deutschemarks.... 10,822,500 US$ 6,658,402 05/05/97 411,649
Italian Lira............ 34,141,344,000 US$ 19,992,589 05/12/97 73,938
Italian Lira............ 24,860,000,000 US$ 14,576,883 05/28/97 77,545
Italian Lira............ 7,564,000,000 US$ 4,395,247 06/30/97 (11,001)
New Zealand Dollars..... 22,920,000 US$ 16,044,000 06/12/97 191,406
New Zealand Dollars..... 20,555,000 US$ 14,148,830 05/19/97 to 05/30/97 (83,611)
New Zealand Dollars..... 5,055,000 US$ 3,528,390 06/10/97 31,783
Spanish Pesetas......... 3,159,395,910 US$ 22,668,934 05/20/97 to 02/10/98 1,049,883
U.S. Dollars............ 19,879,213 BFR 610,000,000 07/14/97 (2,815,101)
U.S. Dollars............ 19,136,890 BFR 634,112,770 09/30/97 (1,398,248)
U.S. Dollars............ 27,061,694 DEM 45,179,791 05/05/97 (983,893)
U.S. Dollars............ 15,486,224 DEM 25,625,869 05/05/97 to 01/21/98 (694,957)
U.S. Dollars............ 2,698,421 ESP 382,878,890 05/20/97 (78,254)
U.S. Dollars............ 13,335,861 GBP 8,225,282 05/12/97 to 05/30/97 (5,961)
-----------
$ 4,000,669
===========
</TABLE>
- -------
CURRENCY TYPE ABBREVIATIONS:
BFR - BELGIAN FRANCS
DEM - GERMAN DEUTSCHEMARKS
ESP - SPANISH PESETAS
GBP - BRITISH POUNDS
INVESTMENTS BY TYPE OF ISSUER
<TABLE>
<CAPTION>
PERCENT OF NET ASSETS
-------------------------
LONG-TERM SHORT-TERM
---------- -----------
<S> <C> <C>
Government and other public issuers................ 80.77% 3.67%
Repurchase agreements.............................. -- 6.59
Bank and other financial institutions.............. 4.41 2.40
Money market funds................................. -- 9.19
Other.............................................. 2.97 --
---------- ----------
88.15% 21.85%
========== ==========
</TABLE>
See accompanying notes to financial statements
8
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost -- $847,028,565)....... $832,589,629
Interest receivable.............................................. 15,865,393
Unrealized appreciation on forward foreign currency contracts.... 10,385,286
Receivable for shares of beneficial interest sold................ 60,815
Other assets..................................................... 275,320
------------
Total assets..................................................... 859,176,443
------------
LIABILITIES
Collateral for securities loaned................................. 69,588,911
Payable for investments and foreign currency purchased........... 19,247,282
Unrealized depreciation on forward foreign currency contracts.... 6,384,617
Payable for shares of beneficial interest repurchased............ 3,936,331
Due to custodian................................................. 948,183
Payable to affiliate............................................. 767,024
Accrued expenses and other liabilities........................... 1,379,376
------------
Total liabilities................................................ 102,251,724
------------
NET ASSETS
Beneficial interest -- $0.001 par value (unlimited amount
authorized)..................................................... 806,888,832
Distributions in excess of net investment income................. (6,190,288)
Accumulated net realized losses from investment transactions..... (32,972,058)
Net unrealized depreciation of investments, other assets,
liabilities and forward contracts denominated in foreign
currencies...................................................... (10,801,767)
------------
Net assets....................................................... $756,924,719
============
CLASS A:
Net assets....................................................... $532,586,602
------------
Shares outstanding............................................... 52,775,331
------------
Net asset value and redemption value per share................... $10.09
======
Maximum offering price per share (net asset value plus sales
charge of 4.00% of offering price).............................. $10.51
======
CLASS B:
Net assets....................................................... $170,522,972
------------
Shares outstanding............................................... 16,938,804
------------
Net asset value and offering price per share..................... $10.07
======
CLASS C:
Net assets....................................................... $ 42,571,737
------------
Shares outstanding............................................... 4,220,492
------------
Net asset value and offering price per share..................... $10.09
======
CLASS Y:
Net assets....................................................... $ 11,243,408
------------
Shares outstanding............................................... 1,112,667
------------
Net asset value, offering price and redemption value per share... $10.10
======
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
APRIL 30, 1997
(UNAUDITED)
--------------
<S> <C>
INVESTMENT INCOME:
Interest (net of foreign withholding taxes)...................... $ 32,660,152
------------
EXPENSES:
Investment advisory and administration fees...................... 3,095,156
Service fees--Class A............................................ 682,173
Service and distribution fees--Class B........................... 1,158,545
Service and distribution fees--Class C........................... 176,352
Transfer agency and service fees................................. 424,599
Custody and accounting........................................... 296,128
Reports and notices to shareholders.............................. 292,706
Legal and audit ................................................. 163,117
State registration fees.......................................... 47,559
Trustees' fees................................................... 11,875
Other expenses................................................... 74,598
------------
6,422,808
------------
Net investment income............................................ 26,237,344
------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT ACTIVI-
TIES:
Net realized gains (losses) from:
Investment transactions......................................... 2,104,104
Foreign currency transactions................................... (8,447,673)
Net change in unrealized appreciation/depreciation of:
Investments..................................................... (27,916,719)
Other assets, liabilities and forward contracts denominated in
foreign currencies............................................. 5,410,171
------------
NET REALIZED AND UNREALIZED LOSSES FROM INVESTMENT ACTIVITIES.... (28,850,117)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $ (2,612,773)
============
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
APRIL 30, 1997 ENDED
(UNAUDITED) OCTOBER 31, 1996
-------------- ----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income........................... $ 26,237,344 $ 69,861,996
Net realized gains from investment transactions. 2,104,104 16,169,953
Net realized gains (losses) from foreign
currency transactions.......................... (8,447,673) 1,471,764
Net change in unrealized
appreciation/depreciation of:
Investments.................................... (27,916,719) (8,780,320)
Other assets, liabilities and forward contracts
denominated in foreign currencies............. 5,410,171 4,285,697
------------ --------------
Net increase (decrease) in net assets resulting
from operations................................ (2,612,773) 83,009,090
------------ --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income--Class A.................. (18,532,434) (42,572,977)
Net investment income--Class B.................. (6,877,843) (26,087,043)
Net investment income--Class C.................. (1,468,431) (3,931,619)
Net investment income--Class Y.................. (429,743) (1,138,899)
------------ --------------
(27,308,451) (73,730,538)
------------ --------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares............ 25,680,459 15,262,782
Cost of shares repurchased...................... (177,722,711) (385,467,944)
Proceeds from dividends reinvested.............. 17,373,389 46,943,399
------------ --------------
Net decrease in net assets from beneficial
interest transactions.......................... (134,668,863) (323,261,763)
------------ --------------
Net decrease in net assets...................... (164,590,087) (313,983,211)
NET ASSETS:
Beginning of period............................. 921,514,806 1,235,498,017
------------ --------------
End of period .................................. $756,924,719 $ 921,514,806
============ ==============
</TABLE>
See accompanying notes to financial statements
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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 a non-diversified open-end management investment company.
Currently, the Fund offers Class A, Class B, Class C and Class Y shares. Each
class represents interests in the same assets of the Fund, and the classes are
identical except for differences in their sales charge structure, ongoing serv-
ice and/or distribution charges, if any, and certain transfer agency expenses.
In addition, Class B shares and all corresponding reinvested dividend shares
automatically convert to Class A shares approximately six years after initial
issuance. All classes of shares have equal rights as to voting privileges, ex-
cept that Class A, Class B and Class C shares have exclusive voting rights with
respect to their service and/or distribution plan.
The preparation of financial statements in accordance with generally accepted
accounting principles requires Fund management to make estimates and assump-
tions that affect the reported amounts and disclosures in the financial state-
ments. Actual results could differ from those estimates. The following is a
summary of significant accounting policies:
Valuation of Investments--Securities which are listed on 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 as the primary market by Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins"), a wholly owned subsidiary of
PaineWebber Incorporated ("PaineWebber") and investment advisor, administrator
and distributor of the Fund. Securities traded in the over-the-counter ("OTC")
market and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") are valued at the
last available sales price, or last bid price available if no sales occur 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
(other than short-term investments that mature in sixty days or less). The am-
ortized cost method of valuation generally is used to value short-term debt in-
struments with sixty days or less remaining to maturity. Securities and assets
for which market quotations are not readily available (including restricted se-
curities subject to limitations as to their sale) are valued at fair value as
determined in good faith by a management committee 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 custo-
dian.
Foreign currency exchange rates are generally determined prior to the close of
regular trading on the New York Stock Exchange ("NYSE"). Occasionally events
affecting the value of foreign investments and such exchange rates occur be-
tween the time at which they are determined and the close of the NYSE, which
will not be reflected in the computation of the Fund's net asset value on that
day. If events occur materially affecting the value of such securities or cur-
rency exchange rates during such time period, the
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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 ac-
crued interest, is at least equal to the repurchase price. In the event of de-
fault of the obligation to repurchase, the Fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. Under cer-
tain 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 re-
corded on the 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 divi-
dend-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; and
(2) Purchases and sales of investment securities, income and expenses--at the
rates of exchange prevailing on the respective dates of such transactions.
Although the 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 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 regu-
lations.
Forward Foreign Currency Contracts--The Fund may enter into forward foreign
currency exchange contracts ("forward contracts") in connection with planned
purchases or sales of securities or to hedge the U.S. dollar value of portfolio
securities denominated in a particular currency. The Fund may also use forward
currency contracts to attempt to enhance income.
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 main-
tain a net exposure to forward contracts only if (1) the consummation of the
contracts would not obligate the Fund to deliver an amount of
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
foreign currency in excess of the value of the position being hedged by such
contracts or (2) the Fund maintains cash or liquid 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 po-
tential inability of counterparties to meet the terms of their forward con-
tracts and from unanticipated movements in the value of foreign currencies rel-
ative 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.
Dividends and Distributions--Dividends and distributions to shareholders are
recorded on the ex-dividend date. The amount of dividends and distributions are
determined in accordance with federal income tax regulations, which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these differ-
ences are permanent in nature, such amounts are reclassified within the capital
accounts based on their federal tax-basis treatment; temporary differences do
not require reclassification.
CONCENTRATION OF RISK
Investing in securities of foreign issuers and currency transactions may in-
volve certain considerations and risks not typically associated with invest-
ments in the United States. These risks include revaluation of currencies, ad-
verse fluctuations in foreign currency values and possible adverse political,
social and economic developments, including those particular to a specific in-
dustry, 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. compa-
nies 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 devel-
opments particular to specific industry, country or region.
INVESTMENT ADVISER AND ADMINISTRATOR
The Trust's board of trustees has approved an Investment Advisory and Adminis-
tration Contract ("Advisory Contract") with Mitchell Hutchins, under which
Mitchell Hutchins serves as investment adviser, administrator and distributor
of the Fund. In accordance with the Advisory Contract, the Fund pays Mitchell
Hutchins an investment advisory and administration fee, which is accrued daily
and paid monthly, 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>
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
At April 30, 1997, the Fund owed Mitchell Hutchins $467,433 in investment ad-
visory and administration fees.
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 sepa-
rate plans of service and/or distribution pertaining to the Class A, Class B
and Class C shares, the Fund pays Mitchell Hutchins monthly service fees at the
annual rate of 0.25% of the average daily net assets of Class A, Class B and
Class C shares and monthly distribution fees at the annual rates of 0.75% and
0.50% of the average daily net assets of Class B and Class C shares, respec-
tively. At April 30, 1997, the Fund owed Mitchell Hutchins $279,786 in service
and distribution fees.
Mitchell Hutchins also receives the proceeds of the initial sales charges paid
by shareholders upon the purchase of Class A shares and the contingent deferred
sales charge paid by shareholders upon certain redemptions of Class A, Class B
and Class C shares. Mitchell Hutchins has informed the Fund that for the six
months ended April 30, 1997, it earned approximately $261,636 in sales charges.
SECURITY LENDING
The Fund may lend up to 33 1/3% of its total assets to qualified institutions.
The loans are secured at all times by cash or U.S. government securities in an
amount at least equal to the market value of the securities loaned, plus ac-
crued interest, determined on a daily basis and adjusted accordingly. The Fund
may regain record ownership of loaned securities to exercise certain beneficial
rights, however, the Fund may bear the risk of delay in recovery of, or even
loss of rights in, the securities loaned should the borrower fail financially.
The Fund receives compensation, which is included in interest income, for lend-
ing its securities from interest earned on the cash or U.S. government securi-
ties held as collateral, net of fee rebates paid to the borrower plus reason-
able administrative and custody fees. The Fund's lending agent is PaineWebber,
who received $4,689 as compensation in that capacity from the Fund for the six
months ended April 30, 1997.
As of April 30, 1997, the Fund's custodian held cash and cash equivalents hav-
ing an aggregate value of $69,588,911 as collateral for portfolio securities
loaned having a market value of $62,925,619.
TRANSFER AGENCY SERVICE FEES
The Fund pays PaineWebber an annual fee of $4.00 per active PaineWebber share-
holder account for certain services not provided by the Fund's transfer agent.
For these services for the six months ended April 30, 1997, PaineWebber earned
$133,221 from the Fund. At April 30, 1997, the Fund owed PaineWebber $19,805
for transfer agency service fees.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at April 30,
1997 was substantially the same as the cost of securities for financial state-
ment purposes.
At April 30, 1997, the components of the net unrealized depreciation of in-
vestments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value over
cost).......................................................... $ 4,783,844
Gross depreciation (investments having an excess of cost over
value)......................................................... (19,222,780)
-------------
Net unrealized depreciation of investments...................... $(14,438,,936)
=============
</TABLE>
For the six months ended April 30, 1997, total aggregate purchases and sales
of portfolio securities, excluding short-term securities, were as follows:
<TABLE>
<S> <C>
Purchases.......................................................... $612,869,121
Sales.............................................................. $590,586,814
</TABLE>
FEDERAL TAX STATUS
The Fund intends to distribute all of its taxable income and to comply with
the other requirements of the Internal Revenue Code applicable to regulated in-
vestment companies. Accordingly, no provision for federal income taxes is re-
quired. In addition, by distributing during each calendar year substantially
all of its net investment income, capital gains and certain other amounts, if
any, the Fund intends not to be subject to a federal excise tax.
At October 31, 1996, the Fund had a capital loss carryforward of $26,628,489
available as a reduction, to the extent provided in the regulations, of any fu-
ture net realized capital gains which expires as follows: $10,874,673 in 2002
and $15,753,816 in 2003. To the extent that such losses are used to offset fu-
ture capital gains, it is probable that the gains so offset will not be dis-
tributed.
16
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
SHARES OF BENEFICIAL INTEREST
THERE ARE AN UNLIMITED AMOUNT OF $0.001 PAR VALUE SHARES OF BENEFICIAL INTEREST
AUTHORIZED. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST WERE AS FOLLOWS:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------------------------- --------------------------- ------------------------ ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------------- ------------ ------------- ---------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED
APRIL 30, 1997:
Shares sold..... 1,889,838 $ 19,662,738 154,417 $ 1,590,750 329,454 $ 3,378,951 101,061 $ 1,048,020
Shares
repurchased.... (9,941,799) (102,283,508) (5,952,279) (61,426,248) (1,088,839) (11,175,320) (275,776) (2,837,635)
Dividends
reinvested..... 1,118,079 11,494,054 422,196 4,343,939 108,614 1,117,171 40,603 418,225
Shares converted
from Class B to
Class A........ 7,140,028 73,742,480 (7,158,281) (73,742,480) -- -- -- --
----------- ------------- ------------ ------------- ---------- ------------ -------- -----------
Net increase
(decrease)..... 206,146 $ 2,615,764 (12,533,947) $(129,234,039) (650,771) $ (6,679,198) (134,112) $(1,371,390)
=========== ============= ============ ============= ========== ============ ======== ===========
YEAR ENDED
OCTOBER 31,
1996:
Shares sold..... 489,988 $ 5,054,421 574,699 $ 5,920,154 257,119 $ 2,664,053 157,553 $ 1,624,154
Shares
repurchased.... (20,920,168) (215,703,423) (13,308,674) (136,726,494) (2,581,113) (26,608,504) (623,126) (6,429,523)
Dividends
reinvested..... 2,543,860 26,172,036 1,623,171 16,661,502 291,533 2,997,099 108,008 1,112,762
Shares converted
from Class B to
Class A........ 6,382,186 65,618,202 (6,398,780) (65,618,202) -- -- -- --
----------- ------------- ------------ ------------- ---------- ------------ -------- -----------
Net decrease.... (11,504,134) $(118,858,764) (17,509,584) $(179,763,040) (2,032,461) $(20,947,352) (357,565) $(3,692,607)
=========== ============= ============ ============= ========== ============ ======== ===========
</TABLE>
17
<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 SIX
MONTHS ENDED FOR THE YEARS ENDED OCTOBER 31,
APRIL 30, 1997 -------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
-------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period......... $10.46 $10.35 $ 9.99 $10.97 $10.64 $10.75
------ ------ ------ ------ ------ ------
Net investment
income......... 0.34@ 0.72@ 0.77@ 0.72 0.59 0.83
Net realized and
unrealized
gains (losses)
from
investments and
foreign
currency....... (0.36)@ 0.13@ 0.31@ (1.05) 0.68 (0.12)
------ ------ ------ ------ ------ ------
Net increase
(decrease) from
investment
transactions... (0.02) 0.85 1.08 (0.33) 1.27 0.71
------ ------ ------ ------ ------ ------
Dividends from
net investment
income......... (0.35) (0.74) (0.72) (0.33) (0.80) (0.64)
Distributions
from net
realized gains
from
investments and
foreign
currency
transactions... -- -- -- -- (0.14) (0.18)
Distributions
from paid in
capital........ -- -- -- (0.32) -- --
------ ------ ------ ------ ------ ------
Total dividends
and
distributions
to
shareholders... (0.35) (0.74) (0.72) (0.65) (0.94) (0.82)
------ ------ ------ ------ ------ ------
Net asset value,
end of period.. $10.09 $10.46 $10.35 $ 9.99 $10.97 $10.64
====== ====== ====== ====== ====== ======
Total investment
return(1)...... (0.25)% 8.60% 11.09% (3.10)% 12.41% 6.70%
====== ====== ====== ====== ====== ======
Ratios/supplemental
data:
Net assets, end
of period
(000's)........ $532,587 $549,932 $663,022 $611,855 $648,853 $107,033
Expenses to
average net
assets......... 1.32%* 1.27% 1.24%(2) 1.17% 1.32%** 1.21%
Net investment
income to
average net
assets......... 6.50%* 6.88% 7.47%(2) 6.94% 6.82%** 7.84%
Portfolio
turnover rate.. 80% 126% 113% 108% 90% 92%
<CAPTION>
CLASS B
---------------------------------------------------------------------------
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED OCTOBER 31,
APRIL 30, 1997 ------------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
-------------- ---------- ------------ ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period......... $10.44 $10.31 $ 9.96 $10.95 $10.62 $10.74
------ ------ ------ ------ ------ ------
Net investment
income......... 0.29@ 0.64@ 0.69@ 0.86 0.78 0.94
Net realized and
unrealized
gains (losses)
from
investments and
foreign
currency....... (0.35)@ 0.15@ 0.30@ (1.28) 0.40 (0.32)
------ ------ ------ ------ ------ ------
Net increase
(decrease) from
investment
transactions... (0.06) 0.79 0.99 (0.42) 1.18 0.62
------ ------ ------ ------ ------ ------
Dividends from
net investment
income......... (0.31) (0.66) (0.64) (0.29) (0.71) (0.56)
Distributions
from net
realized gains
from
investments and
foreign
currency
transactions... -- -- -- -- (0.14) (0.18)
Distributions
from paid in
capital........ -- -- -- (0.28) -- --
------ ------ ------ ------ ------ ------
Total dividends
and
distributions
to
shareholders... (0.31) (0.66) (0.64) (0.57) (0.85) (0.74)
------ ------ ------ ------ ------ ------
Net asset value,
end of period.. $10.07 $10.44 $10.31 $ 9.96 $10.95 $10.62
====== ====== ====== ====== ====== ======
Total investment
return(1)...... (0.63)% 7.95% 10.24% (3.90)% 11.45% 5.93%
====== ====== ====== ====== ====== ======
Ratios/supplemental
data:
Net assets, end
of period
(000's)........ $170,523 $307,577 $484,534 $725,553 $1,188,890 $1,542,255
Expenses to
average net
assets......... 2.03%* 1.99% 2.00%(2) 1.94% 2.11%** 1.98%
Net investment
income to
average net
assets......... 5.74%* 6.14% 6.71%(2) 6.05% 5.97%** 7.11%
Portfolio
turnover rate.. 80% 126% 113% 108% 90% 92%
</TABLE>
- -------
+ COMMENCEMENT OF ISSUANCE OF SHARES
* ANNUALIZED
** INCLUDES 0.15% OF INTEREST EXPENSE RELATED TO THE REVERSE REPURCHASE
AGREEMENT TRANSACTIONS ENTERED INTO DURING THE FISCAL YEAR
@ CALCULATED USING THE AVERAGE SHARES OUTSTANDING FOR THE PERIOD
(1)TOTAL INVESTMENT RETURN IS CALCULATED ASSUMING A $1,000 INVESTMENT ON THE
FIRST DAY OF EACH PERIOD REPORTED, REINVESTMENT OF ALL DIVIDENDS AND OTHER
DISTRIBUTIONS AT NET ASSET VALUE ON THE PAYABLE DATES AND A SALE AT NET ASSET
VALUE ON THE LAST DAY OF EACH PERIOD REPORTED. THE FIGURES DO NOT INCLUDE
SALES CHARGES; RESULTS WOULD BE LOWER FOR CLASS A, CLASS B AND CLASS C SHARES
IF SALES CHARGES WERE INCLUDED. TOTAL INVESTMENT RETURN FOR PERIODS LESS THAN
ONE YEAR HAS NOT BEEN ANNUALIZED.
(2)THESE RATIOS INCLUDE NON-RECURRING ACQUISITION EXPENSES OF 0.04%.
18
<PAGE>
<TABLE>
<CAPTION>
CLASS C
- -------------------------------------------------------------------------
FOR THE SIX FOR THE PERIOD
MONTHS ENDED FOR THE YEARS ENDED OCTOBER 31, JULY 2, 1992+
APRIL 30, 1997 --------------------------------------- TO OCTOBER 31,
(UNAUDITED) 1996 1995 1994 1993 1992
- -------------- ------- ------- ------- -------- --------------
<S> <C> <C> <C> <C> <C>
$10.45 $10.33 $ 9.98 $10.96 $10.64 $10.94
------ ------ ------ ------ ------ ------
0.31@ 0.67@ 0.71@ 0.70 0.68 0.20
(0.35)@ 0.14@ 0.31@ (1.09) 0.52 (0.13)
------ ------ ------ ------ ------ ------
(0.04) 0.81 1.02 (0.39) 1.20 0.07
------ ------ ------ ------ ------ ------
(0.32) (0.69) (0.67) (0.30) (0.74) (0.21)
-- -- -- -- (0.14) (0.16)
-- -- -- (0.29) -- --
------ ------ ------ ------ ------ ------
(0.32) (0.69) (0.67) (0.59) (0.88) (0.37)
------ ------ ------ ------ ------ ------
$10.09 $10.45 $10.33 $ 9.98 $10.96 $10.64
====== ====== ====== ====== ====== ======
(0.41)% 8.12% 10.49% (3.56)% 11.64% 0.61%
====== ====== ====== ====== ====== ======
$42,572 $50,928 $71,329 $92,480 $135,847 $36,598
1.76%* 1.73% 1.75%(2) 1.68% 1.83%** 1.75%*
6.04%* 6.40% 6.96%(2) 6.34% 6.17%** 7.02%*
80% 126% 113% 108% 90% 92%
<CAPTION>
CLASS Y
- -------------------------------------------------------------------------
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED OCTOBER 31,
APRIL 30, 1997 -------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
- -------------- -------- ----------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
$10.49 $10.35 $ 9.99 $10.97 $10.64 $10.76
------ ------ ------ ------ ------ ------
0.35@ 0.75@ 0.78@ 0.75 0.71 0.81
(0.38)@ 0.17@ 0.32@ (1.06) 0.58 (0.08)
------ ------ ------ ------ ------ ------
(0.03) 0.92 1.10 (0.31) 1.29 0.73
------ ------ ------ ------ ------ ------
(0.36) (0.78) (0.74) (0.34) (0.82) (0.67)
-- -- -- -- (0.14) (0.18)
-- -- -- (0.33) -- --
------ ------ ------ ------ ------ ------
(0.36) (0.78) (0.74) (0.67) (0.96) (0.85)
------ ------ ------ ------ ------ ------
$10.10 $10.49 $10.35 $ 9.99 $10.97 $10.64
====== ====== ====== ====== ====== ======
(0.30)% 9.25% 11.39% (2.86)% 12.60% 6.98%
====== ====== ====== ====== ====== ======
$11,243 $13,077 $16,613 $12,975 $12,043 $7,252
0.99%* 0.96% 0.95%(2) 0.88% 1.06%** 0.94%
6.82%* 7.19% 7.77%(2) 7.23% 7.00%** 8.15%
80% 126% 113% 108% 90% 92%
</TABLE>
19
