<PAGE>
PAINEWEBBER GLOBAL INCOME FUND ANNUAL REPORT
PERFORMANCE AT A GLANCE
Comparison of the change of a $10,000 investment in PaineWebber Global Income
Fund (Class B Shares) and the Salomon Brothers World Government Bond Index and
the Lehman Brothers U.S. Government Bond Index.
[THE FOLLOWING TABLE REPRESENTS A LINE GRAPH IN THE PRINTED MATERIALS]
PaineWebber Global Salomon Bros. World Lehman Bros.
Income Fund (B)* Gov't Bond Index U.S. Gov't Bond Index
------------------ ------------------- ---------------------
March 1987 $10,189 $9,754 $10,115
October 1987 $10,573 $10,653 $11,329
October 1988 $12,858 $11,797 $12,839
October 1989 $13,329 $13,399 $14,133
October 1990 $16,037 $14,510 $15,761
October 1991 $17,223 $15,812 $17,190
October 1992 $18,243 $16,670 $17,819
October 1993 $20,175 $17,870 $19,173
October 1994 $19,809 $18,711 $20,520
October 1995 $22,006 $20,266 $22,072
October 1996 $23,899 $21,599 $23,412
October 1997 $25,092 $23,314 $24,705
October 1998 $27,479 $24,338 $26,881
The graph depicts the performance of PaineWebber Global Income Fund (Class B
Shares) versus the Salomon Brothers World Government Bond Index and the Lehman
Brothers U.S. Government Bond Index. It is important to note PaineWebber Global
Income Fund is a professionally managed mutual fund while the Indices are not
available for investment and are unmanaged. The comparison is shown for
illustrative purposes only.
Past performance is no guarantee of future performance.
The performance of the other classes will vary from the performance of the class
shown because of differences in sales charges and fees paid by shareholders
investing in different classes.
* Class B shares converted to Class A shares after six years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS, PERIODS ENDED 10/31/98
One Year Five Years Ten Years Life****
<S> <C> <C> <C> <C> <C>
Before Deducting Class A* 9.51% 6.37% -- 7.54%
Maximum Sales Charge Class B** 8.53% 5.54% 7.89% 9.11%
Class C*** 9.01% 5.86% -- 6.32%
After Deducting Class A* 5.11% 5.50% -- 6.95%
Maximum Sales Charge Class B** 3.53% 5.23% 7.89% 9.11%
Class C*** 8.26% 5.86% -- 6.32%
</TABLE>
*Maximum sales charge for Class A shares is 4% of the public offering price.
Class A shares bear ongoing 12b-1 service fees.
**Maximum contingent deferred sales charge for Class B shares is 5% and is
reduced to 0% after six years. Class B shares bear ongoing 12b-1
distribution and service fees.
***Maximum contingent deferred sales charge for Class C shares is 0.75% and is
reduced to 0% after one year. Class C shares bear ongoing 12b-1 distribution
and service fees.
****Life: return since commencement of issuance--July 1, 1991 for Class A,
March 20, 1987 for Class B, July 2, 1992 for Class C shares.
The Fund offers Class Y shares to a limited group of eligible investors,
including participants in certain investment programs sponsored by PaineWebber
and that may invest in PaineWebber mutual funds and the trustee of the
PaineWebber 401(k) Plus Plan (previously the PaineWebber Savings Investment
Plan). For the one and five years ended October 31, 1998, and since inception on
August 26, 1991 through October 31, 1998, Class Y shares have produced average
annual returns of 9.89%, 6.69% and 7.82%, respectively. Class Y shares do not
bear initial or contingent deferred sales charges or ongoing distribution and
service fees.
The investment return and the principal value of an investment in the Fund will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
1
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND ANNUAL REPORT
December 15, 1998
Dear Shareholder,
We are pleased to present you with the annual report for the PaineWebber
Global Income Fund (the "Fund") for the fiscal year ended October 31, 1998.
PAINEWEBBER
GLOBAL INCOME FUND
FUND PROFILE
[Arrow Pointing Up] Goal:
High current income
consistent with prudent
investment risk; secondarily
capital appreciation
[Arrow Pointing Up] Portfolio Managers:
Stuart Waugh and
William W. King,
Mitchell Hutchins Asset
Management Inc.
[Arrow Pointing Up] Total Net Assets:
$479.8 million as of
October 31, 1998
[Arrow Pointing Up] Dividend Payments:
Monthly
MARKET OVERVIEW
Developed government bond markets were prime beneficiaries of the "flight to
quality" that dominated the past year as investors put safety ahead of most
other concerns. Fears of financial stresses from the collapse of emerging stock
and bond markets drove down yields in virtually all developed markets to levels
not seen in decades. Developed bond markets, as measured by the Salomon Brothers
World Government Bond Index (WGBI), returned 10.5% on a currency-hedged basis
for the 12 months ending October 31, 1998. In contrast, emerging market debt as
measured by the JP Morgan Emerging Market Bond Index Plus lost 10.1% over the
same period. The best performing markets in the WGBI were the United States and
Japan; and European markets such as Germany, France and the United Kingdom.
PORTFOLIO REVIEW
PAINEWEBBER
GLOBAL INCOME
FUND
Credit Quality
October 31, 1998(1)
AAA 66.0%
AA 11.2%
BBB 1.3%
BB 0.8%
A1/P1 2.6%
PERFORMANCE
The Fund's total return (the net asset value change with dividends
reinvested) for the fiscal year ended October 31, 1998, without deducting sales
charges, was 9.51% for Class A shares, 8.53% for Class B shares, 9.01% for Class
C shares and 9.89% for Class Y shares.
For shareowners who purchased or redeemed Fund shares during the period, the
Fund's total return may be lower. After deducting the maximum applicable sales
charges, Class A shares gained 5.11%, Class B shares gained 3.53% and Class C
shares gained 8.26%. Class Y shares are not subject to sales charges.
HIGHLIGHTS
We maintained credit quality of the Fund at a high level through the fiscal
year, which contributed to the Fund's performance as credit spreads widened in
the summer. The Fund is invested primarily in high-quality government bonds. Its
non-government bond credit exposure is primarily in U.S. corporate bonds rated
A. Positions in most markets were concentrated in intermediate maturities, which
performed well in the last half of the fiscal year, especially as the "flight to
quality" intensified during the summer and early fall. However, our duration was
shorter than the global indexes, which hurt the Fund's performance.
We avoided committing any material investment to the emerging market sector.
While this conservative stance hurt the Fund's relative performance early in the
period, it was rewarded when emerging markets collapsed after Russia defaulted
on its domestic debt in August.
(1) All weightings represent percentages of net assets as of October 31, 1998.
The portfolio is actively managed and all holdings are subject to change.
2
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND ANNUAL REPORT
OUTLOOK
PaineWebber Global Income Fund
Asset Allocation
October 31, 1998(1)
Unhedged--Europe 29.1%
Unhedged--Australia, Canada & New Zealand 6.9%
U.S. Dollar 54.3%
Hedged 9.7%
PaineWebber Global Income Fund
Asset Allocation
October 31, 1998(1)
U.S. Treasurys and
U.S. Corporates 48.6%
Europe 41.0%
Canada & New Zealand 6.1%
Cash & Cash Equivalents 2.6%
Other 1.7%
GLOBAL ECONOMY
The emerging market crisis, which started in Asia last year and spread around
the globe this year, initially had a stimulative impact on the U.S. and European
economies. Lower commodity prices and interest rates benefited both the
consumption and interest-sensitive sectors of those economies. More recently,
weak demand for developed countries' exports has caused a significant slowing in
manufacturing.
Bond valuations in the United States and Europe now appear to reflect the
prospect of the slowdown in manufacturing spreading more widely in 1999, and
most economic commentators expect below-trend growth in the developed world next
year. Continuing sharp declines in global commodity prices have further
encouraged investors to discount the prospect of inflation remaining at
historically low levels.
DURATION STRATEGY
Despite supportive growth and inflation prospects, we believe the present
historically low bond yields suggest that a cautious approach to risk is
appropriate going into 1999. Therefore, the Fund currently is being managed with
an overall duration of about four years; however, this could change.
MARKET ALLOCATION
The Fund's primary market concentrations were in government and agency bonds
in the U.S., Germany and the United Kingdom as of December.
CURRENCY STRATEGY
Monetary policy in Europe should favor stable currencies. The Fund's European
currency exposure (ex-UK sterling) is about 26% of net assets as of this
writing. While we intend to vary this exposure depending on macroeconomic
developments and technical analysis, our general bias is to overweight European
currencies. With the exception of a small trading position in the yen, the Fund
has no exposure to Japan.
EUROPEAN CURRENCY
UNIFICATION
Several European countries expect to adopt a single currency, the Euro,
effective January 1, 1999. Countries participating in the Economic and Monetary
Union expect that their exchange rates will become irrevocably fixed on that
date. The countries expected to participate are Austria, Belgium, Finland,
France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and
Spain. A newly created European Central Bank will attempt to manage monetary
policy for this region. Pre-existing national currencies will continue to be
valid until they are replaced by Euro coins and bank notes, which is expected to
occur by sometime in 2002.
CREDIT AND EMERGING MARKET STRATEGY
Across global fixed income markets, investors have changed the way they
(1) All weightings represent percentages of net assets as of October 31, 1998.
The portfolio is actively managed and all holdings are subject to change.
3
<PAGE>
ANNUAL REPORT
price riskier assets relative to government bonds. As a result, credit risk
premiums increased, in some cases indiscriminately, and created some attractive
values. We are looking to selectively increase the Fund's holdings of corporate
bonds.
Emerging market debt has begun to recover, but the Fund has not yet
established any significant positions. We are waiting for signals that Brazil
will enact the necessary fiscal reform legislation to address its long-term
solvency problems. If Brazil does not enact fiscal reform it could face capital
flight and a balance of payments crisis. Such a scenario could hurt overall
emerging-market debt valuations.
In summary, the Fund is conservatively positioned in its duration strategy
relative to most global bond indexes, has concentrated most credit risk in U.S.
corporate bonds in the single A category and has exposure to currencies in
Europe.
Our ultimate objective in managing your investments is to help you
successfully meet your financial goals. We thank you for your continued support
and welcome any comments or questions you may have.
For a quarterly Fund Profile on PaineWebber Global Income Fund or another
fund in the PaineWebber Family of Funds,2 please contact your investment
executive.
Sincerely,
/s/ Margo Alexander /s/ Stuart Waugh
Margo Alexander Stuart Waugh
President Managing Director
Mitchell Hutchins Asset Management Inc. Mitchell Hutchins Asset
Management Inc. Portfolio
Manager, Global Income Fund
/s/ William W. King
William W. King
First Vice President
Mitchell Hutchins Asset Management Inc.
Portfolio Manager, Global Income Fund
This letter is intended to assist shareholders in understanding how the Fund
performed during the fiscal year ended October 31, 1998, and reflects our views
at the time of writing this report. Of course, these views may change in
response to changing circumstances. We encourage you to consult your investment
executive regarding your personal investment program.
(2) Mutual funds are sold by prospectus only. The prospectuses for the funds
contain more complete information regarding risk, charges and expenses and
should be read carefully before investing.
4
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
PERFORMANCE RESULTS (unaudited)
<TABLE>
<CAPTION>
Net Asset Value Total Return(1)
---------------------------------------- -----------------------------------
10/31/98 04/30/98 10/31/97 12 Months 6 Months
Ended 10/31/98 Ended 10/31/98
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $10.58 $10.17 $10.27 9.51% 7.15%
- ---------------------------------------------------------------------------------------------------------------------------
Class B Shares 10.54 10.14 10.24 8.53 6.62
- ---------------------------------------------------------------------------------------------------------------------------
Class C Shares 10.58 10.16 10.26 9.01 6.97
<CAPTION>
Performance Summary Class A Shares
Net Asset Value
----------------------- Capital Gains Dividends Paid from Total
Period Covered Beginning Ending Distributed Paid Capital Return(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <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
- ---------------------------------------------------------------------------------------------------------------------------
1997 10.44 10.14 -- 0.5914 0.0899 3.84
- ---------------------------------------------------------------------------------------------------------------------------
01/01/98-10/31/98 10.14 10.58 -- 0.4347 0.0814 9.73
Totals: $0.3198 4.6227 $0.4891
- ---------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return as of 10/31/98: 70.51%
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Performance Summary Class B Shares
Net Asset Value
----------------------- Capital Gains Dividends Paid from Total
Period Covered Beginning Ending Distributed Paid Capital Return(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <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
- ---------------------------------------------------------------------------------------------------------------------------
1997 10.41 10.11 -- 0.5240 0.0804 3.06
- ---------------------------------------------------------------------------------------------------------------------------
01/01/98-10/31/98 10.11 10.54 -- 0.3733 0.0699 8.88
- ---------------------------------------------------------------------------------------------------------------------------
Totals: $0.6487 $8.4485 $0.4313
- ---------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return as of 10/31/98: 175.61%
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Performance Summary Class C Shares
Net Asset Value
----------------------- Capital Gains Dividends Paid from Total
Period Covered Beginning Ending Distributed Paid Capital Return(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <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
- ---------------------------------------------------------------------------------------------------------------------------
1997 10.43 10.13 -- 0.5482 0.0836 3.33
- ---------------------------------------------------------------------------------------------------------------------------
01/01/98-10/31/98 10.13 10.58 -- 0.3928 0.0736 9.31
Totals: $0.3098 $3.6498 $0.4510
- ---------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return as of 10/31/98: 47.45%
- ---------------------------------------------------------------------------------------------------------------------------
</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 a limited group of eligible investors,
including participants in certain investment programs that are sponsored
by PaineWebber and may invest in PaineWebber mutual funds including the
trustee of the PaineWebber 401(k) Plus Plan (previously the PaineWebber
Savings Investment Plan). For the one year and five years ended October
31, 1998, and since inception, August 26, 1991 through October 31, 1998,
Class Y shares had a total return of 9.89%, 38.21% and 71.84%,
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 OCTOBER 31, 1998
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000)* Dates Rates Value
- --------- -------- -------- -----
<S> <C> <C> <C>
Long-Term Debt Securities--94.02%
Canada--3.67%
25,650 Government of Canada ........................... 03/01/01 to 09/01/01 7.000 to 7.500% $17,608,302
-----------
Germany--10.82%
73,930 Federal Republic of Germany .................... 09/20/01 to 11/11/04 6.500 to 8.250 51,931,773
-----------
Italy--3.18%
20,615,000 Republic of Italy .............................. 04/01/04 8.500 15,228,468
-----------
Japan--0.96%
US$ 4,520 Sony Corporation ............................... 03/04/03 6.125 4,612,524
-----------
Korea--0.77%
US$ 4,000 Republic of Korea .............................. 04/15/08 8.875 3,690,000
-----------
Netherlands--7.13%
56,752 Government of Netherlands ...................... 05/15/00 to 11/15/05 6.750 to 9.000 34,219,904
-----------
Poland--1.35%
US$ 9,820 Republic of Poland, PAR ........................ 10/27/24 3.000# 6,481,200
-----------
Spain--1.98%
1,200,000 Government of Spain ............................ 03/25/00 12.250 9,508,108
-----------
Sweden--1.75%
54,000 Kingdom of Sweden .............................. 06/15/01 13.000 8,412,383
-----------
United Kingdom--14.83%
36,035 United Kingdom Gilt ............................ 07/14/00 to 12/07/15 8.000 to 13.000 71,140,933
-----------
United States--47.58%
3,070 Associates Corporation of North America ....... 11/01/03 5.750 3,071,289
9,692 Banc One Corporation .......................... 09/01/00 6.250 9,848,817
16,000 Clorox Corporation ............................ 07/15/01 8.800 17,504,336
14,000 Ford Motor Capital Corporation BV ............. 07/01/01 9.500 15,466,556
7,000 Ford Motor Credit Corporation ................. 06/15/07 7.200 7,611,737
NZD 21,525 Federal National Mortgage Association ......... 06/20/02 7.250 11,841,968
20,170 Federal National Mortgage Association(1) ...... 04/15/03 5.750 20,922,563
5,815 General Motors Acceptance Corporation ......... 01/22/03 5.875 5,879,721
4,835 Phillip Morris Companies ...................... 07/15/05 to 02/01/07 7.000 to 7.200 5,173,731
23,519 U.S. Treasury Inflation Index Bonds ........... 01/15/08 to 04/15/28 3.625 23,509,726
97,667 U.S. Treasury Notes(1) ........................ 10/31/01 to 05/15/07 6.250 to 7.500 107,479,677
-----------
228,310,121
-----------
Total Long-Term Debt Securities (cost--$434,908,996) ...... 451,143,716
-----------
Short-Term Debt Security--3.51%
United States--3.51%
16,400 U.S. Treasury Notes (cost--$16,945,313) ....... 08/15/99 8.000 16,845,883
-----------
</TABLE>
6
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Date Rate Value
- ----------
<S> <C> <C> <C>
Repurchase Agreement--0.24%
$1,144 Repurchase agreement dated 10/30/98 with State Street
Bank Corporation, collateralized by $815,000 U.S.
Treasury Bonds, 8.875%, due 08/15/17 (value--$1,170,544);
proceeds: $1,144,505 (cost--$1,144,000) ..................... 11/02/98 5.300% $1,144,000
------------
Total Investments (cost--$452,998,309)--97.77% .............................................................. 469,133,599
Other assets in excess of liabilities--2.23% ................................................................ 10,714,130
------------
Net Assets--100.00% ......................................................................................... $479,847,729
============
</TABLE>
- ----------
Note: The Portfolio of Investments is listed by the issuer's country of origin
* In local currency unless otherwise indicated
(1) Security, or portion thereof, was on loan at October 31, 1998
# Reflects rate at October 31, 1998 on step coupon rate instruments
PAR Par Bond
Forward Foreign Currency Contracts
<TABLE>
<CAPTION>
Unrealized
Contract to Appreciation
Deliver In Exchange for Maturity Dates (Depreciation)
----------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
British Pounds ............................. 4,170,000 US$ 6,980,580 11/16/98 $ 5,000
British Pounds ............................. 11,350,000 US$ 19,068,000 11/30/98 98,944
British Pounds ............................. 11,660,000 US$ 19,822,000 11/13/98 to 12/07/98 329,728
British Pounds ............................. 14,200,000 US$ 23,607,500 11/02/98 to 12/02/98 (145,376)
German Deutschemarks ....................... 18,803,000 US$ 11,444,309 12/02/98 91,897
German Deutschemarks ....................... 23,010,000 US$ 14,021,574 11/02/98 to 12/02/98 129,163
New Zealand Dollars ........................ 14,000,000 US$ 7,053,700 07/06/99 (360,003)
Polish Zloties ............................. 8,647,801 US$ 2,149,323 02/24/99 (360,560)
Swedish Kronas ............................. 56,000,000 US$ 7,039,598 04/19/99 (159,174)
U.S. Dollars ............................... 3,870,040 AUD 6,200,000 11/27/98 7,467
U.S. Dollars ............................... 14,042,655 DEM 23,374,000 12/02/98 69,522
U.S. Dollars ............................... 25,054,617 DEM 41,456,500 11/02/98 to 12/02/98 (5,826)
U.S. Dollars ............................... 11,913,090 GBP 7,100,000 11/02/98 (26,962)
U.S. Dollars ............................... 6,874,000 NZD 14,000,000 07/06/99 539,703
U.S. Dollars ............................... 2,231,403 PLN 8,647,801 02/24/99 278,480
---------------
$ 492,003
===============
</TABLE>
- ----------
Currency Type Abbreviations:
AUD - Australian Dollars
DEM - German Deutschemarks
GBP - British Pounds
NZD - New Zealand Dollars
PLN - Polish Zloties
Investments by Type of Issuer
<TABLE>
<CAPTION>
Percent of Net Assets
------------------------
Long-term Short-term
--------- ----------
<S> <C> <C>
Government and other public issuers .................................................. 79.60% 3.51%
Bank and other financial institutions ................................................ 8.73 --
Industrial ........................................................................... 5.69 --
Repurchase agreement ................................................................. -- 0.24
----- ----
94.02% 3.75%
===== ====
</TABLE>
See accompanying notes to financial statements
7
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1998
<TABLE>
<S> <C>
Assets
Investments in securities, at value (cost--$452,998,309) .......................................... $469,133,599
Investments of collateral received for securities loaned .......................................... 45,129,303
Interest receivable ............................................................................... 11,121,498
Unrealized appreciation on forward foreign currency contracts ..................................... 1,549,904
Receivable for investments sold ................................................................... 1,275,382
Receivable for shares of beneficial interest sold ................................................. 90,087
Other assets ...................................................................................... 110,491
------------
Total assets ...................................................................................... 528,410,264
------------
Liabilities
Collateral for securities loaned .................................................................. 45,129,303
Payable for shares of beneficial interest repurchased ............................................. 1,232,648
Unrealized depreciation on forward foreign currency contracts ..................................... 1,057,901
Payable to affiliates ............................................................................. 448,552
Accrued expenses and other liabilities ............................................................ 694,131
------------
Total liabilities ................................................................................. 48,562,535
------------
Net Assets
Beneficial interest--$0.001 par value (unlimited amount authorized) ............................... 488,047,086
Distributions in excess of net investment income .................................................. (4,920,578)
Accumulated net realized losses from investment transactions ...................................... (20,118,647)
Net unrealized appreciation of investments, other assets, liabilities and
forward contracts denominated in foreign currencies ............................................. 16,839,868
------------
Net assets ........................................................................................ $479,847,729
============
Class A:
Net assets ........................................................................................ $408,190,016
------------
Shares outstanding ................................................................................ 38,586,214
------------
Net asset value and redemption value per share .................................................... $10.58
======
Maximum offering price per share (net asset value plus sales charge of 4.00% of offering price) ... $11.02
======
Class B:
Net assets ........................................................................................ $33,477,532
------------
Shares outstanding ................................................................................ 3,175,851
------------
Net asset value and offering price per share ...................................................... $10.54
=======
Class C:
Net assets ........................................................................................ $28,633,444
------------
Shares outstanding ................................................................................ 2,707,300
------------
Net asset value and offering price per share ...................................................... $10.58
======
Class Y:
Net assets ........................................................................................ $9,546,737
------------
Shares outstanding ................................................................................ 902,693
------------
Net asset value, offering price and redemption value per share .................................... $10.58
======
</TABLE>
See accompanying notes to financial statements
8
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the
Year Ended
October 31, 1998
----------------
<S> <C>
Investment income:
Interest (net of foreign withholding taxes) ..................................................... $39,388,414
-----------
Expenses:
Investment advisory and administration fees ..................................................... 4,031,933
Service fees--Class A ........................................................................... 1,098,503
Service and distribution fees--Class B .......................................................... 585,086
Service and distribution fees--Class C .......................................................... 235,964
Transfer agency and related services fees ....................................................... 583,660
Custody and accounting .......................................................................... 346,157
Reports and notices to shareholders ............................................................. 201,175
Legal and audit ................................................................................. 179,634
State registration fees ......................................................................... 50,932
Trustees' fees .................................................................................. 10,500
Other expenses .................................................................................. 25,805
-----------
7,349,349
-----------
Net investment income ........................................................................... 32,039,065
-----------
Realized and unrealized gains (losses) from investment activities
Net realized gains (losses) from:
Investment transactions ....................................................................... 2,543,563
Foreign currency transactions ................................................................. (5,709,723)
Net change in unrealized appreciation/depreciation of:
Investments ................................................................................... 16,689,264
Other assets, liabilities and forward contracts denominated in foreign currencies ............. 60,995
-----------
Net realized and unrealized gains from investment activities .................................... 13,584,099
-----------
Net increase in net assets from operations ...................................................... $45,623,164
===========
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Years Ended
October 31,
1998 1997
------------- -------------
<S> <C> <C>
From operations:
Net investment income ....................................................... $ 32,039,065 $ 49,357,423
Net realized gains from investment transactions ............................. 2,543,563 4,199,590
Net realized losses from foreign currency transactions ...................... (5,709,723) (10,338,511)
Net change in unrealized appreciation/depreciation of:
Investments ............................................................... 16,689,264 (14,031,758)
Other assets, liabilities and forward contracts in foreign currencies ..... 60,995 2,416,586
------------- -------------
Net increase in net assets resulting from operations ........................ 45,623,164 31,603,330
------------- -------------
Dividends and distributions to shareholders:
From net investment income--Class A ......................................... (21,497,232) (27,840,969)
From net investment income--Class B ......................................... (2,563,608) (8,831,997)
From net investment income--Class C ......................................... (1,401,794) (2,128,744)
From net investment income--Class Y ......................................... (488,585) (630,033)
In excess of net investment income--Class A ................................. (1,981,230) (3,060,693)
In excess of net investment income--Class B ................................. (207,140) (844,584)
In excess of net investment income--Class C ................................. (126,752) (226,669)
In excess of net investment income--Class Y ................................. (46,367) (67,644)
From paid in capital--Class A ............................................... (3,423,822) (4,640,523)
From paid in capital--Class B ............................................... (357,965) (1,280,531)
From paid in capital--Class C ............................................... (219,044) (343,669)
From paid in capital--Class Y ............................................... (80,128) (102,560)
------------- --------------
Total dividends and distributions to shareholders ........................... (32,393,667) (49,998,616)
------------- -------------
From beneficial interest transactions:
Net proceeds from the sale of shares ........................................ 199,708,865 24,327,034
Cost of shares repurchased .................................................. (390,939,942) (322,360,553)
Proceeds from dividends reinvested .......................................... 20,788,759 31,974,549
------------- -------------
Net decrease in net assets from beneficial interest transactions ............ (170,442,318) (266,058,970)
------------- -------------
Net decrease in net assets .................................................. (157,212,821) (284,454,256)
Net assets:
Beginning of year ........................................................... 637,060,550 921,514,806
------------- -------------
End of year ................................................................. $ 479,847,729 $ 637,060,550
============= =============
</TABLE>
10
See accompanying notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Organization and Significant Accounting Policies
PaineWebber Investment Series ("Trust") was organized under Massachussetts
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. The Trust
currently has one series, PaineWebber Global Income Fund (the "Fund"). The Fund
seeks high current income and, secondarily, capital appreciation by investing
primarily in high-quality debt securities of foreign and U.S. issuers.
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
service and/or distribution charges, if any, and certain transfer agency and
related 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 except that Class A, Class B and Class C shares each have exclusive
voting rights with respect to their service and/or distribution plan. Class Y
shares have no service or distribution plan.
The preparation of financial statements in accordance with generally accepted
accounting principles requires Fund management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies:
Valuation of Investments--Securities may be valued by an outside pricing
service approved by a management committee under the direction of the Board of
Trustees. 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 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 (including restricted and/or illiquid 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.
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"), an asset management subsidiary of PaineWebber
Incorporated ("PaineWebber") and investment advisor, administrator and
distributor of the Fund.
Foreign currency exchange rates are generally determined prior to the close
of regular trading on the New York Stock Exchange ("NYSE"). Occasionally events
affecting the value of foreign investments and such exchange rates occur between
the time at which they are determined and the close of 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 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.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Repurchase Agreements--The Fund's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings. The Fund occasionally
participates in joint repurchase agreement transactions with other funds managed
by Mitchell Hutchins.
Investment Transactions and Investment Income--Investment transactions are
recorded on the trade date. Realized gains and losses from 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/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; and (2) purchase 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's securities are
presented at the foreign exchange rates at the end of the period, the Fund does
not generally isolate the effect of fluctuations in foreign exchange rates from
the effect of the 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 regulations. Net realized foreign currency gain (loss) is treated as
ordinary income for income tax reporting purposes. Gains/losses from translating
foreign currency denominated assets and liabilities at year-end exchange rates
are included in change in unrealized appreciation/depreciation of other assets
and liabilities denominated in foreign currencies.
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 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
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 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
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.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification.
Concentration of Risk
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 a specific industry, country or region.
Investment Adviser and Administrator
The Trust's board of trustees has approved an Investment Advisory and
Administration Contract ("Advisory Contract") with Mitchell Hutchins, under
which Mitchell Hutchins serves as investment adviser and administrator of the
Fund. In accordance with 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:
Average Daily Net Assets Annual Rate
------------------ -----------
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
At October 31, 1998, the Fund owed Mitchell Hutchins $310,698 in investment
advisory 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 separate
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,
respectively. At October 31, 1998, the Fund owed Mitchell Hutchins $135,525 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
year ended October 31, 1998, it earned $143,790 in sales charges.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Security Lending
The Fund may lend securities up to 33 1/3% of its total assets to qualified
institutions. The loans are secured at all times by cash or U.S. government
securities in an amount at least equal to the market value of the securities
loaned, plus accrued interest, determined on a daily basis and adjusted
accordingly. The Fund will regain record ownership of loaned securities to
exercise certain beneficial rights; however, the Fund may bear the risk of
delay in recovery of, or even loss of rights in, the securities loaned should
the borrower fail financially. The Fund receives compensation, which is
included in interest income, for lending its securities from interest earned on
the cash or U.S. government securities held as collateral, net of fee rebates
paid to the borrower plus reasonable administrative and custody fees. For the
year ended October 31, 1998, PaineWebber earned $49,982 in compensation as the
Fund's lending agent. At October 31, 1998, the Fund owed PaineWebber $2,329 in
compensation.
At October 31, 1998, the Fund's custodian received cash having an aggregate
value of $45,129,303 as collateral for portfolio securities loaned having a
market value of $43,427,480.
As of October 31, 1998 the Fund invested the cash collateral in the following
Money Market Funds:
Number of Shares Value
------------- ----------
21,218,284 Janus Money Market Fund ........... $21,218,284
23,908,779 Liquid Assets Portfolio ........... 23,908,779
2,240 Temp Fund Portfolio ............... 2,240
-----------
$45,129,303
===========
Bank Line of Credit
The Fund may participate with other funds managed by Mitchell Hutchins in a
$200 million committed credit facility ("Facility") to be utilized for temporary
financing until the settlement of sale or purchase of portfolio securities, the
repurchase or redemption of shares of the Fund at the request of the
shareholders and other temporary or emergency purposes. In connection therewith,
the Fund has agreed to pay a commitment fee, pro rata, based on the relative
asset size of the funds in the Facility. Interest is charged to the Fund at
rates based on prevailing market rates in effect at the time of borrowings. For
the year ended October 31, 1998, the Fund did not borrow under the Facility.
Transfer Agency Related Service Fees
PaineWebber provides transfer agency related services to the Fund pursuant to
a delegation of authority from PFPC, Inc., the Fund's transfer agent, and is
compensated for the services by PFPC, Inc., not the Fund. For the year ended
October 31, 1998, PaineWebber received from PFPC, Inc., not the Fund,
approximately 50% of the total transfer agency and related service fees
collected by PFPC, Inc. from the Fund.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Investments in Securities
For federal income tax purposes, the cost of securities owned at October 31,
1998 was substantially the same as the cost of securities for financial
statement purposes.
At October 31, 1998, 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) ..... $ 21,163,735
Gross depreciation (investments having an excess of cost over value) ..... (5,028,445)
------------
Net unrealized appreciation of investments ............................... $ 16,135,290
============
</TABLE>
For the year ended October 31, 1998, total aggregate purchases and sales of
portfolio securities, excluding short-term securities, were as follows:
<TABLE>
<S> <C>
Purchases ................................................................ $453,570,448
Sales .................................................................... $521,094,528
</TABLE>
Federal Tax Status
The Fund intends to distribute substantially all of its taxable income and to
comply with the other requirements of the Internal Revenue Code applicable to
regulated investment companies. Accordingly, no provision for federal income
taxes is required. In addition, by distributing during each calendar year
substantially all of its net investment income, capital gains and certain other
amounts, if any, the Fund intends not to be subject to a federal excise tax.
At October 31, 1998, the Fund had a capital loss carryforward of $20,067,409
available as a reduction, to the extent provided in the regulations, of any
future net realized capital gains which expires as follows: $4,313,594 in 2002
and $15,753,815 in 2003. To the extent that such losses are used to offset
future capital gains, it is probable that the gains so offset will not be
distributed.
To reflect reclassifications for the Fund arising from permanent "book/tax"
differences for the year ended October 31, 1998, distributions in excess of net
investment income was increased by $966,036, accumulated net realized losses
from investment transactions were increased by $5,476,412 and beneficial
interest was decreased by $6,442,448. Permanent "book/tax" differences were
primarily attributable to the foreign currency gains/losses.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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
--------------------------- --------------------------- ------------------------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Year Ended
October 31, 1998:
Shares sold ........... 18,902,084 $ 192,414,767 95,631 $ 972,655 294,545 $ 3,016,400
Shares repurchased .... (34,229,342) (348,903,208) (2,351,256) (23,943,212) (1,309,976) (13,377,478)
Dividends reinvested .. 1,667,329 17,033,158 187,992 1,912,285 122,674 1,249,744
Shares converted from
Class B to Class A .. 4,833,973 49,246,777 (4,847,839) (49,246,777) -- --
---------- ------------- ----------- ------------- --------- -------------
Net decrease .......... (8,825,956) $ (90,208,506) (6,915,472) $ (70,305,049) (892,757) $ (9,111,334)
========== ============= =========== ============= ========== =============
Year Ended
October 31, 1997:
Shares sold ........... 1,400,652 $ 14,315,313 266,230 $ 2,723,757 528,903 $ 5,416,951
Shares repurchased .... (21,782,669) (222,541,051) (7,236,905) (74,001,286) (2,003,842) (20,474,051)
Dividends reinvested .. 2,177,592 22,246,482 671,598 6,868,908 203,733 2,081,999
Shares converted from
Class B to Class A .. 13,047,410 134,125,097 (13,082,351) (134,125,097) -- --
---------- ------------- ----------- ------------- --------- -------------
Net decrease .......... (5,157,015) $ (51,854,159) (19,381,428) $(198,533,718) (1,271,206) $ (12,975,101)
========== ============= =========== ============= ========== =============
<CAPTION>
Class Y
------------------------
Shares Amount
------ -------
<S> <C> <C>
Year Ended
October 31, 1998:
Shares sold ........... 322,167 $ 3,305,043
Shares repurchased .... (460,229) (4,716,044)
Dividends reinvested .. 58,095 593,572
Shares converted from
Class B to Class A .. -- --
-------- -------------
Net decrease .......... (79,967) $ (817,429)
======== =============
Year Ended
October 31, 1997:
Shares sold ........... 208,671 $ 1,871,013
Shares repurchased .... (548,721) (5,344,165)
Dividends reinvested .. 75,931 777,160
Shares converted from
Class B to Class A .. -- --
-------- -------------
Net decrease .......... (264,119) $ (2,695,992)
======== =============
</TABLE>
16
<PAGE>
[This Page Intentionally Left Blank]
17
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
year is presented below:
<TABLE>
<CAPTION>
Class A
------------------------------------------------------------
For the Years Ended October 31,
------------------------------------------------------------
1998 1997 1996 1995 1994
------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........................ $ 10.27 $ 10.46 $ 10.35 $ 9.99 $ 10.97
------- ------- -------- ------- -------
Net investment income ..................................... 0.62@ 0.69@ 0.72@ 0.77@ 0.72
Net realized and unrealized gains (losses) from investments
and foreign currency .................................... 0.32@ (0.19)@ 0.13@ 0.31@ (1.05)
------- ------- -------- ------- -------
Net increase (decrease) from investment transactions ...... 0.94 0.50 0.85 1.08 (0.33)
------- ------- -------- ------- -------
Dividends from net investment income ...................... (0.50) (0.54) (0.74) (0.72) (0.33)
Distributions in excess of net investment income .......... (0.05) (0.06) -- -- --
Distributions from paid in capital ........................ (0.08) (0.09) -- -- (0.32)
------- ------- -------- ------- -------
Total dividends and distributions to shareholders ......... (0.63) (0.69) (0.74) (0.72) (0.65)
------- ------- -------- ------- -------
Net asset value, end of year .............................. $ 10.58 $ 10.27 $ 10.46 $ 10.35 $ 9.99
======= ======= ========= ======== =======
Total investment return(1) ................................ 9.51% 4.99% 8.60% 11.09% (3.10)%
======= ======= ========= ======== =======
Ratios/supplemental data:
Net assets, end of year (000's) ........................... $408,190 $486,718 $549,932 $663,022 $611,855
Expenses to average net assets ............................ 1.24% 1.21% 1.27% 1.24%(2) 1.17%
Net investment income to average net assets ............... 6.07% 6.66% 6.88% 7.47%(2) 6.94%
Portfolio turnover rate ................................... 93% 172% 126% 113% 108%
</TABLE>
- -------------------------------------------------------------------------------
@ Calculated using the average monthly shares outstanding for the year
(1) Total investment return is calculated assuming a $1,000 investment on
the first day of each year reported, reinvestment of all dividends
and distributions at net asset value on the payable dates and a sale
at net asset value on the last day of each year reported. The figures
do not include sales charges; results would be lower if sales charges
were included.
(2) These ratios include non-recurring acquisition expenses of 0.04%.
18
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
year is presented below:
<TABLE>
<CAPTION>
Class B
-------------------------------------------------------
For the Years Ended October 31,
-------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........................ $ 10.24 $ 10.44 $ 10.31 $ 9.96 $ 10.95
-------- -------- -------- -------- --------
Net investment income ..................................... 0.51@ 0.58@ 0.64@ 0.69@ 0.86
Net realized and unrealized gains (losses) from investments
and foreign currency .................................... 0.33@ (0.17)@ 0.15@ 0.30@ (1.28)
-------- -------- -------- -------- --------
Net increase (decrease) from investment transactions ...... 0.84 0.41 0.79 0.99 (0.42)
-------- -------- -------- -------- --------
Dividends from net investment income ...................... (0.43) (0.48) (0.66) (0.64) (0.29)
Distributions in excess of net investment income .......... (0.04) (0.05) -- -- --
Distributions from paid in capital ........................ (0.07) (0.08) -- -- (0.28)
-------- -------- -------- -------- --------
Total dividends and distributions to shareholders ......... (0.54) (0.61) (0.66) (0.64) (0.57)
-------- -------- -------- -------- --------
Net asset value, end of year .............................. $ 10.54 $ 10.24 $ 10.44 $ 10.31 $ 9.96
======== ======== ======== ======== ========
Total investment return(1) ................................ 8.53% 4.11% 7.95% 10.24% (3.90)%
======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of year (000's) ........................... $ 33,478 $103,312 $307,577 $484,534 $725,553
Expenses to average net assets ............................ 2.13% 1.99% 1.99% 2.00%(2) 1.94%
Net investment income to average net assets ............... 5.16% 5.83% 6.14% 6.71%(2) 6.05%
Portfolio turnover rate ................................... 93% 172% 126% 113% 108%
<CAPTION>
Class C
-------------------------------------------------------
For the Years Ended October 31,
--------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........................ $ 10.26 $ 10.45 $ 10.33 $ 9.98 $ 10.96
-------- -------- -------- -------- --------
Net investment income ..................................... 0.56@ 0.63@ 0.67@ 0.71@ 0.70
Net realized and unrealized gains (losses) from investments
and foreign currency .................................... 0.33@ (0.18)@ 0.14@ 0.31@ (1.09)
-------- -------- -------- -------- --------
Net increase (decrease) from investment transactions ...... 0.89 0.45 0.81 1.02 (0.39)
-------- -------- -------- -------- --------
Dividends from net investment income ...................... (0.46) (0.50) (0.69) (0.67) (0.30)
Distributions in excess of net investment income .......... (0.04) (0.06) -- -- --
Distributions from paid in capital ........................ (0.07) (0.08) -- -- (0.29)
-------- -------- -------- -------- --------
Total dividends and distributions to shareholders ......... (0.57) (0.64) (0.69) (0.67) (0.59)
-------- -------- -------- -------- --------
Net asset value, end of year .............................. $ 10.58 $ 10.26 $ 10.45 $ 10.33 $ 9.98
======== ======== ======== ======== ========
Total investment return(1) ................................ 9.01% 4.48% 8.12% 10.49% (3.56)%
======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of year (000's) ........................... $ 28,633 $ 36,935 $ 50,928 $ 71,329 $ 92,480
Expenses to average net assets ............................ 1.77% 1.69% 1.73% 1.75%(2) 1.68%
Net investment income to average net assets ............... 5.54% 6.17% 6.40% 6.96%(2) 6.34%
Portfolio turnover rate ................................... 93% 172% 126% 113% 108%
</TABLE>
19
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each
year is presented below:
<TABLE>
<CAPTION>
Class Y
-------------------------------------------------------------------
For the Years Ended October 31,
-------------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........................ $ 10.27 $ 10.49 $ 10.35 $ 9.99 $ 10.97
-------- -------- -------- -------- --------
Net investment income ..................................... 0.65@ 0.71@ 0.75@ 0.78@ 0.75
Net realized and unrealized gains (losses) from investments
and foreign currency .................................... 0.32@ (0.21)@ 0.17@ 0.32@ (1.06)
-------- -------- -------- -------- --------
Net increase (decrease) from investment transactions ...... 0.97 0.50 0.92 1.10 (0.31)
-------- -------- -------- -------- --------
Dividends from net investment income ...................... (0.52) (0.56) (0.78) (0.74) (0.34)
Distributions in excess of net investment income .......... (0.05) (0.06) -- -- --
Distributions from paid in capital ........................ (0.09) (0.10) -- -- (0.33)
-------- -------- -------- -------- --------
Total dividends and distributions to shareholders ......... (0.66) (0.72) (0.78) (0.74) (0.67)
-------- -------- -------- -------- --------
Net asset value, end of year .............................. $ 10.58 $ 10.27 $ 10.49 $ 10.35 $ 9.99
======== ======== ======== ======== ========
Total investment return(1) ................................ 9.89% 5.20% 9.25% 11.39% (2.86)%
======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of year (000's) ........................... $ 9,547 $ 10,096 $ 13,077 $ 16,613 $ 12,975
Expenses to average net assets ............................ 0.96% 0.94% 0.96% 0.95%(2) 0.88%
Net investment income to average net assets ............... 6.35% 6.93% 7.19% 7.77%(2) 7.23%
Portfolio turnover rate ................................... 93% 172% 126% 113% 108%
</TABLE>
- ---------
@ Calculated using the average monthly shares outstanding for the year
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each year reported, reinvestment of all dividends and
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each year reported. The figures do not
include program fees; results would be lower if program fees were
included.
(2) These ratios include non-recurring acquisition expenses of 0.04%.
20
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
REPORT OF PRICEWATERHOUSECOOPERS LLP
INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of
PaineWebber Investment Series
In our opinion, the accompanying statement of assets and liablilities, 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, 1998, 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, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
December 21, 1998
21
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
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,
1998) as to the federal tax status of distributions received by shareholders
during such fiscal year. Accordingly, we are advising you that the distributions
paid during the fiscal year by the Fund were taxable on a per share basis as
follows:
Class A Class B Class C Class Y
-------- -------- -------- --------
Ordinary Income ................. $ 0.55 $ 0.47 $ 0.50 $ 0.57
Distribution from paid in capital $ 0.08 $ 0.07 $ 0.07 $ 0.09
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need not
be reported as taxable income. Some retirements 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 1998. 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 1999. Shareholders are advised to consult their own tax advisers with
respect to the tax consequences of their investment in the Fund.
22
<PAGE>
BOARD OF TRUSTEES
E. Garrett Bewkes, Jr. Mary C. Farrell
Chairman Meyer Feldberg
Margo N. Alexander George W. Gowen
Richard Q. Armstrong Frederic V. Malek
Richard R. Burt Carl W. Schafer
PRINCIPAL OFFICERS
Margo N. Alexander Paul H. Schubert
President Vice President and Treasurer
Victoria E. Schonfeld Dennis L. McCauley
Vice President Vice President
Dianne E. O'Donnell Stuart Waugh
Vice President and Secretary Vice President
INVESTMENT ADVISER,
ADMINISTRATOR AND DISTRIBUTOR
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
This report is not to be used in conjunction with the offering of shares of the
Fund unless accompanied or preceded by an effective prospectus.
A prospectus containing more complete information for any of the Funds listed
on the back cover can be obtained from a PaineWebber investment executive or
corresponding firm. Read the prospectus carefully before investing.
<PAGE>
- ---------
PaineWebber offers a family of 27 funds which encompass a diversified range of
investment goals.
BOND FUNDS
o High Income Fund
o Investment Grade Income Fund
o Low Duration U.S. Government Income Fund
o Strategic Income Fund
o U.S. Government Income Fund
TAX-FREE BOND FUNDS
o California Tax-Free Income Fund
o Municipal High Income Fund
o National Tax-Free Income Fund
o New York Tax-Free Income Fund
STOCK FUNDS
o Financial Services Growth Fund
o Growth Fund
o Growth and Income Fund
o Mid Cap Fund
o Small Cap Fund
o S&P 500 Index Fund
o Tax-Managed Equity Fund
o Utility Income Fund
ASSET ALLOCATION FUNDS
o Balanced Fund
o Tactical Allocation Fund
GLOBAL FUNDS
o Asia Pacific Growth Fund
o Emerging Markets Equity Fund
o Global Equity Fund
o Global Income Fund
MITCHELL HUTCHINS PORTFOLIOS
o Aggressive Portfolio
o Moderate Portfolio
o Conservative Portfolio
PAINEWEBBER MONEY MARKET FUND
(copyright)1998 PaineWebber Incorporated
Member SIPC
PAINEWEBBER
GLOBAL INCOME
FUND
ANNUAL REPORT
OCTOBER 31, 1998
