<PAGE>
PAINEWEBBER GLOBAL INCOME FUND ANNUAL REPORT
PERFORMANCE AT A GLANCE
The graph depicts the performance of PaineWebber Global Income Fund (Class B)
versus the Salomon Smith Barney World Government Bond Index. It is important to
note PaineWebber Global Income Fund is a professionally managed mutual fund
while the Index is not available for investment and is unmanaged. The comparison
is shown for illustrative purposes only.
Comparison of the change of a $10,000 investment in PaineWebber Global Income
Fund (Class B) and the Salomon Smith Barney World Government Bond Index, from
March 31, 1987 to October 31, 1999
[LINE CHART]
PaineWebber Global Salomon Bros. World
Income Fund (B)* Gov't Bond Index
------------------ -------------------
March 1987 $10,189 $9,754
October 1987 $10,573 $10,653
October 1988 $12,858 $11,797
October 1989 $13,329 $13,399
October 1990 $16,037 $14,510
October 1991 $17,223 $15,812
October 1992 $18,243 $16,670
October 1993 $20,175 $17,870
October 1994 $19,809 $18,711
October 1995 $22,006 $20,266
October 1996 $23,899 $21,599
October 1997 $25,092 $23,314
October 1998 $27,479 $24,338
October 1999 $26,888 $26,124
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.
- ------------------------------------------------------
AVERAGE ANNUAL % TOTAL RETURNS, PERIODS ENDED 10/31/99
- ------------------------------------------------------
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years Inception(0)
<S> <C> <C> <C> <C> <C>
Class A* -2.44 6.24 N/A 6.29
Class B** -3.29 5.39 7.24 8.15
Before Deducting Class C+ -2.93 5.72 N/A 5.01
Maximum Sales Charge
Class Y+++ -2.10 6.57 N/A 6.56
Class A* -6.34 5.37 N/A 5.77
After Deducting Class B** -7.90 5.08 7.24 8.15
Maximum Sales Charge
Class C+ -3.62 5.72 N/A 5.01
SSB World Gov't Bond Index -2.46 6.46 8.40 8.02++
</TABLE>
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.
(0) Inception: since commencement of issuance on July 1, 1991 for Class A
shares, March 20, 1987 for Class B shares, July 2, 1992 for Class C shares
and August 26, 1991 for Class Y shares.
* 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.
+++ 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 that may invest in PaineWebber mutual funds, as well as
the trustee of the PaineWebber 401(k) Plus Plan. Class Y shares do not
bear initial or contingent deferred sales charges or ongoing distribution
and service fees.
++ The inception return for the SSB World Government Bond Index matches that
of Class B (March 20, 1987 through October 31, 1999).
1
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND ANNUAL REPORT
- --------------------------------------------------------------------------------
PAINEWEBBER
GLOBAL INCOME FUND:
Investment Goals:
Primarily high current income consistent with prudent investment risk;
secondarily capital appreciation
Portfolio Managers:
Stuart Waugh and William
W. King, Mitchell Hutchins
Asset Management Inc.
Commencement:
July 1, 1991 (Class A),
March 20, 1987 (Class B),
July 2, 1992 (Class C),
August 26, 1991 (Class Y)
Dividend Payments:
Monthly
- --------------------------------------------------------------------------------
December 15, 1999
Dear Shareholder,
We are pleased to present you with the annual report for PaineWebber Global
Income Fund (the "Fund") for the fiscal year ended October 31, 1999.
MARKET OVERVIEW
[GRAPHIC OMITTED] Developed bond markets, as measured by the Salomon Smith
Barney World Government Bond Index (WGBI), returned +1.33% on a currency-hedged
basis for the 12 months ended October 31, 1999. Among the larger countries in
the Index, Japan had a return of +2.93%, the United Kingdom +2.71%, Germany
+2.23% and the United States -1.44%. European markets in aggregate had a return
of 2.21%. Growing evidence of resurgence in global economic growth has put
upward pressure on interest rates this year, causing bond returns to be modest.
Higher commodity prices, most notably oil, have caused inflation rates in most
developed countries to accelerate moderately although broader price pressures
have thus far remained subdued.
The WGBI lost 2.46% on an unhedged basis for the twelve-month period ended
October 31, 1999. The worse outcome for the unhedged index was almost entirely a
reflection of the depreciation of European currencies versus the dollar.
Emerging market debt did well, achieving a return of 19.98% as measured by the
JP Morgan Emerging Markets Bond Index Plus. Improving world economic growth and
higher commodity prices are especially helpful to many of these natural resource
based economies.
PERFORMANCE ATTRIBUTION
Over the last 12 months, compared to the WGBI (unhedged), the PaineWebber Global
Income Fund benefited from its shorter portfolio duration in an environment of
rising bond yields. (Duration is a measure of a bond portfolio's interest-rate
risk.) The Fund also benefited from a smaller exposure to European currencies
than the Index, and from a modest allocation to emerging-market securities.
Contrarily, the Fund was hurt by having a smaller exposure to the Japanese yen
and bond market, both of which performed well over the 12-month period.
2
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND ANNUAL REPORT
CURRENCY EXPOSURE*
As of 10/31/99 Portfolio %
- --------------------------------------------------------------------------------
U.S. Dollar 55.9
Unhedged--Europe 35.6
Unhedged--Australia, Canada, Japan & New Zealand 6.7
Hedged 1.8
- --------------------------------------------------------------------------------
Total 100.00
As of 4/30/99 Portfolio %
- --------------------------------------------------------------------------------
U.S. Dollar 60.5
Unhedged--Europe 24.7
Unhedged--Australia, Canada, Japan & New Zealand 12.1
Hedged 2.7
- --------------------------------------------------------------------------------
Total 100.0
* Weightings represent percentages of portfolio assets as of October 31,
1999, unless indicated otherwise. The Fund's portfolio is actively managed
and its composition will vary over time.
OUTLOOK
GLOBAL ECONOMY
The prospects for the world's economies have improved considerably in the past
six months, surprising many market participants. The United States, which has
been an engine of growth for several years, continued to perform exceptionally
well and will almost certainly achieve a record for the longest expansion early
next year. European economies, which were slow to rebound from the slump caused
by the emerging markets crisis, have picked up strongly in recent months led by
a sharp rebound in export orders and improving employment conditions.
Also surprising has been the performance of the Japanese economy. Expectations a
year ago were that Japan would remain mired in recession this year. In fact, the
Japanese economy has grown at a 2% pace through the third quarter of 1999. The
outlook for the future remains uncertain, however, as the country faces
long-term structural problems. Most commodity prices have been trending up for
the past few quarters and crude oil prices are at their highest levels since the
Gulf War. These developments bode well for emerging-market economies.
DURATION STRATEGY
Yields have risen substantially in the past twelve months and are at levels that
we believe represent attractive long-term value. However, we are presently
cautious about the near term outlook. Reflecting this view, the Fund's overall
duration is currently low, at about four years.
Characteristics 10/31/99 4/30/99
- --------------------------------------------------------------------------------
Net Assets ($mm) $ 358.1 $ 423.6
Weighted Average Duration 4.0 yrs 4.0 yrs
Weighted Average Maturity 7.3 yrs 6.9 yrs
- --------------------------------------------------------------------------------
3
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND ANNUAL REPORT
MARKET ALLOCATION
The Fund's primary market concentrations are in European bonds and U.S.
government and corporate bonds (see table below). We have increased the Fund's
allocation to Europe since the last reporting period but are still avoiding
exposure to Japan.
ASSET ALLOCATION*
As of 10/31/99 %
- --------------------------------------------------------------------------------
U.S. Treasurys and Corporates 42.4
Europe 35.3
Emerging Mkt. Investment Grade 6.3
Emerging Mkt. Noninvestment Grade 6.2
Australia, Canada & New Zealand 7.7
Cash Equivalents 2.1
- --------------------------------------------------------------------------------
Total 100.0
As of 4/30/99 %
- --------------------------------------------------------------------------------
U.S. Treasurys and Corporates 49.6
Europe 31.0
Emerging Mkt. Investment Grade 2.1
Emerging Mkt. Noninvestment Grade 6.7
Australia, Canada & New Zealand 8.3
Cash Equivalents 2.3
- --------------------------------------------------------------------------------
Total 100.0
* Weightings represent percentages of portfolio assets as of October 31,
1999, unless indicated otherwise. The Fund's portfolio is actively managed
and its composition will vary over time.
CURRENCY STRATEGY
In the past six months the yen has been by far the strongest currency among the
major currencies. The euro, introduced in January, has been weak in spite of
rapidly improving prospects for growth. Strong stock market and corporate
performance in the United States are supporting the dollar, but a deteriorating
current account deficit, which is expected to soon reach record levels in
relation to gross domestic product (GDP), is a longer-term detriment. The dollar
could be vulnerable to changes in investors' perceptions about the
attractiveness of U.S. financial markets.
The Fund is now underweighted in foreign currencies relative to the unhedged
WGBI. While we intend to vary currency exposures depending on economic
developments and technical analysis, our general bias is to increase allocations
to foreign currencies.
CREDIT AND EMERGING MARKET STRATEGY
Since the last report, we slightly increased overall allocations to
emerging-market securities. As of fiscal year end, the Fund's allocation to
these markets was 12.5% and concentrated primarily in investment grade countries
and BB credits. The overall credit quality of the Fund is very high with more
than 93% of the investments being investment grade and over 70% of the Fund's
investments in securities rated AA or better. The average rating of the Fund is
AA.
4
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND ANNUAL REPORT
Credit Quality* 10/31/99 4/30/99
- --------------------------------------------------------------------------------
A1/P1 4.7% 3.5%
AAA 60.1 61.5
AA 8.2 16.2
A 16.8 9.4
BBB 3.9 3.1
BB 4.8 4.3
B 1.5 2.0
- --------------------------------------------------------------------------------
Total 100.0 100.0
* Weightings represent percentages of portfolio assets as of October 31,
1999, unless indicated otherwise. The Fund's portfolio is actively managed
and its composition will vary over time.
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 Review on PaineWebber
Global Income Fund or another fund in the PaineWebber Family of Funds,(1) please
contact your Financial Advisor.
Sincerely,
/s/ Margo Alexander
MARGO ALEXANDER
Chairman and Chief Executive Officer
Mitchell Hutchins Asset Management Inc.
/s/ Brian M. Storms
BRIAN M. STORMS
President and Chief Operating Officer
Mitchell Hutchins Asset Management Inc.
/s/ Stuart Waugh
STUART WAUGH
Managing Director
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, 1999, and reflects our views
at the time of its writing. Of course, these views may change in response to
changing circumstances. We encourage you to consult your Financial Advisor
regarding your personal investment program.
(1) Mutual funds are sold by prospectus only. The prospectuses for the funds
contain more complete information regarding risks, charges and expenses, and
should be read carefully before investing.
5
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
PERFORMANCE RESULTS (unaudited)
<TABLE>
<CAPTION>
Net Asset Value Total Return(1)
--------------------------------------- ---------------------------------------------
12 Months 6 Months
10/31/99 04/30/99 10/31/98 Ended 10/31/99 Ended 10/31/99
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $9.76 $10.18 $10.58 (2.44)% (1.39)%
- -----------------------------------------------------------------------------------------------------------------------------------
Class B Shares 9.72 10.14 10.54 (3.29) (1.82)
- -----------------------------------------------------------------------------------------------------------------------------------
Class C Shares 9.76 10.17 10.58 (2.93) (1.54)
- -----------------------------------------------------------------------------------------------------------------------------------
</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
- -----------------------------------------------------------------------------------------------------------------------------------
1997 10.44 10.14 -- 0.5914 0.0899 3.84
- -----------------------------------------------------------------------------------------------------------------------------------
1998 10.14 10.58 -- 0.6125 0.0814 10.74
- -----------------------------------------------------------------------------------------------------------------------------------
01/01/99-10/31/99 10.58 9.76 -- 0.2999 0.1704 (3.33)
- -----------------------------------------------------------------------------------------------------------------------------------
Totals: $0.3198 $5.1004 $0.6595
- -----------------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return as of 10/31/99: 66.34%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Performance Summary Class B 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>
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
- -----------------------------------------------------------------------------------------------------------------------------------
1998 10.11 10.54 -- 0.5249 0.0699 9.73
- -----------------------------------------------------------------------------------------------------------------------------------
01/01/99-10/31/99 10.54 9.72 -- 0.2536 0.1440 (4.04)
- -----------------------------------------------------------------------------------------------------------------------------------
Totals: $0.6487 $8.8537 $0.5753
- -----------------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return as of 10/31/99: 168.88%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Performance Summary Class C 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>
07/02/92-12/31/92 $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
- -----------------------------------------------------------------------------------------------------------------------------------
1998 10.13 10.58 -- 0.5540 0.0736 10.22
- -----------------------------------------------------------------------------------------------------------------------------------
01/01/99-10/31/99 10.58 9.76 -- 0.2732 0.1551 (3.74)
- -----------------------------------------------------------------------------------------------------------------------------------
Totals: $0.3098 $4.0842 $0.6061
- -----------------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return as of 10/31/99: 43.13%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Figures assume reinvestment of all dividends, capital gains and other
distributions at net asset value on the payable dates and do not include
sales charges; results would be lower if sales charges were included.
Note: The Fund offers Class Y shares to a limited group of eligible investors,
including participants in certain investment programs that are sponsored
by PaineWebber and may invest in PaineWebber mutual funds. For the one
year, five years ended October 31, 1999, and since inception, August 26,
1991 through October 31, 1999, Class Y shares had a total return of
(2.10)%, 37.46% and 68.23%, respectively. Class Y shares do not have
initial or contingent deferred sales charges or ongoing distribution and
service fees.
The data above represents past performance of the Fund's shares, which is no
guarantee of future results. The principal value of an investment in the Fund
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost.
6
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000)* Dates Rates Value
- ------------- -------------------- -------------- ------------
<S> <C> <C> <C> <C>
Long-Term Debt Securities--82.57%
Australia--0.96%
US$ 3,400 Principal Financial Group ..................... 08/15/09 8.200% $ 3,449,803
------------
Brazil--0.59%
US$ 3,236 Federal Republic of Brazil, DCB ............... 04/15/12 7.000@ 2,111,490
------------
Canada--2.68%
13,850 Government of Canada .......................... 09/01/01 7.000 9,591,212
------------
Germany--7.52%
26,365 Federal Republic of Germany ................... 07/15/03 to 07/04/09 3.250 to 6.500 26,935,518
------------
Hungary--1.10%
962,000 Government of Hungary ......................... 01/12/01 to 06/12/01 13.500 3,943,375
------------
Italy--3.57%
10,647 Republic of Italy ............................. 04/01/04 8.500 12,766,089
------------
Japan--1.25%
US$ 4,520 Sony Corporation (3) .......................... 03/04/03 6.125 4,458,297
------------
Korea--0.54%
US$ 1,860 Republic of Korea ............................. 04/15/08 8.875 1,929,750
------------
Luxembourg--1.16%
US$ 4,570 Tyco International Group ...................... 01/15/09 6.125 4,158,252
------------
Mexico--4.05%
US$ 5,786 Pemex Finance Limited ......................... 11/15/03 6.125 5,641,350
US$ 4,300 United Mexican States ......................... 02/17/09 10.375 4,375,250
US$ 5,145 United Mexican States Series B, DISC (1) ...... 12/31/19 5.875@ 4,495,444
------------
14,512,044
------------
Netherlands--7.24%
24,179 Government of Netherlands ..................... 09/15/01 to 01/15/28 5.500 to 8.750 25,908,634
------------
Panama--0.59%
US$ 2,827 Republic of Panama, PDI (2) ................... 07/17/16 6.500@ 2,120,030
------------
Philippines--0.63%
US$ 2,235 Republic of Philippines ....................... 10/21/24 9.500 2,268,525
------------
Poland--3.11%
14,975 Republic of Poland ............................ 06/12/04 10.000 3,194,099
US$ 13,100 Republic of Poland, PAR ....................... 10/27/24 3.000# 7,958,250
------------
11,152,349
------------
Trinidad & Tobago--1.05%
US$ 3,800 Republic of Trinidad & Tobago (4) ............. 10/01/09 9.875 3,775,524
------------
Turkey--0.88%
US$ 3,150 Republic of Turkey ............................ 11/05/04 11.875 3,161,813
------------
United Kingdom--12.06%
23,915 United Kingdom Gilt ........................... 08/27/02 to 12/07/03 6.500 to 10.000 43,169,519
------------
United States--33.59%
3,070 Associates Corporation of North America ....... 11/01/03 5.750 2,955,882
3,560 CIT Group Incorporated ........................ 02/15/04 5.500 3,363,630
10,300 Clorox Corporation ............................ 07/15/01 8.800 10,705,511
NZD 10,390 Federal National Mortgage Association ......... 06/20/02 7.250 5,289,338
6,925 Federal National Mortgage Association ......... 05/15/08 6.000 6,624,573
4,145 FMR Corporation ............................... 06/15/29 7.570 4,125,622
</TABLE>
7
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
PORTFOLIO OF INVESTMENTS (concluded)
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000)* Dates Rates Value
- ------------- -------------------- -------------- ------------
<S> <C> <C> <C> <C>
Long-Term Debt Securities (concluded)
10,000 Ford Motor Capital Corporation BV ............. 07/01/01 9.500% $ 10,464,560
5,815 General Motors Acceptance Corporation ......... 11/10/03 5.750 5,589,238
1,935 Phillip Morris Companies ...................... 02/01/07 7.200 1,847,608
23,519 U.S. Treasury Inflation Index Notes ........... 01/15/08 to 04/15/28 3.625 21,918,708
13,090 U.S. Treasury Bonds (3) ....................... 11/25/27 to 02/15/29 5.250 to 6.125 12,462,945
31,400 U.S. Treasury Notes (3) ....................... 11/30/00 to 05/31/02 4.625 to 6.500 31,416,375
3,507 Wells Fargo Company (3) ....................... 09/03/02 6.500 3,496,714
------------
120,260,704
------------
Total Long-Term Debt Securities (cost--$308,904,568) ........ 295,672,928
------------
Short-Term Debt Securities--15.34%
Australia--2.58%
14,580 Australia Treasury Bills ...................... 12/09/99 4.750+ 9,255,045
------------
Germany--2.69%
9,130 Federal Republic of Germany ................... 12/17/99 4.250 9,615,372
------------
Netherlands--2.24%
7,425 Government of Netherlands ..................... 05/15/00 9.000 8,027,217
------------
United States--7.83%
9,692 Banc One Corporation .......................... 09/01/00 6.250 9,679,313
9,500 Federal Home Loan Bank ........................ 08/09/00 5.710 9,483,897
8,900 U.S. Treasury Notes (3) ....................... 08/31/00 5.125 8,869,411
------------
28,032,621
------------
Total Short-Term Debt Securities (cost--$55,947,333) ......... 54,930,255
------------
Repurchase Agreement--0.86%
3,086 Repurchase agreement dated 10/29/99 with
Banc One Capital Market Inc.,
collateralized by $2,498,000 U.S.
Treasury Bonds, 8.875%, due 08/15/17
(value--$3,149,229); proceeds:
$3,087,337 (cost--$3,086,000) ............... 11/01/99 5.200 3,086,000
------------
Total Investments (cost--$367,937,901)--98.77% ............... 353,689,183
Other assets in excess of liabilities--1.23% ................. 4,390,362
------------
Net Assets--100.00% .......................................... $358,079,545
============
</TABLE>
- ----------
Note: The Portfolio of Investments is listed by the issuer's country of origin.
* In local currency unless otherwise indicated.
# Reflects rate at October 31, 1999 on step coupon rate instrument.
@ Floating rate securities -- the interest rates shown are the current rates
as of October 31, 1999.
+ Interest rate shown is discount rate at date of purchase.
(1) Issued with additional 7,915,000 recoverable rights attached maturing on
06/30/03 with no market value.
(2) Interest may be capitalized.
(3) Security, or portion thereof, was on loan at October 31, 1999.
(4) Illiquid security representing 1.05% of net assets.
DCB Debt Conversion Bond.
DISC Discount Bond.
NZD New Zealand Dollars.
PAR Par Bond.
PDI Past Due Interest Bond.
See accompanying notes to financial statements
8
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
Forward Foreign Currency Contracts
<TABLE>
<CAPTION>
Unrealized
Contract to Appreciation
Deliver In Exchange for Maturity Dates (Depreciation)
----------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
British Pounds .................. 6,225,000 US$ 10,350,930 11/29/99 $ 119,775
British Pounds .................. 5,925,000 US$ 9,523,253 12/08/99 (215,957)
Euro ............................ 584,000 US$ 624,471 11/19/99 9,422
U.S. Dollars .................... 5,077,013 EUR 4,725,000 11/04/99 (106,056)
U.S. Dollars .................... 9,549,365 EUR 8,745,000 11/19/99 (339,428)
-----------
$ (532,244)
===========
</TABLE>
- ----------
Currency Type Abbreviations:
EUR - Euro
US$ - United States Dollars
Investments by Type of Issuer
Percent of Net Assets
-----------------------------
Long-term Short-term
--------- ----------
Government and other public issuers ........... 67.32% 12.64%
Bank and other financial institutions ......... 9.34 2.70
Industrial .................................... 5.91 --
Repurchase agreement .......................... -- 0.86
----- -----
82.57% 16.20%
===== =====
See accompanying notes to financial statements
9
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1999
<TABLE>
<S> <C>
Assets
Investments in securities, at value (cost--$367,937,901) .......................................... $ 353,689,183
Investments of cash collateral received for securities loaned, at value (cost--$47,368,453) ....... 47,368,453
Cash .............................................................................................. 15,567
Foreign currency (cost--$272,092) ................................................................. 271,586
Receivable for investments sold ................................................................... 15,530,208
Interest receivable ............................................................................... 6,705,065
Receivable for shares of beneficial interest sold ................................................. 245,742
Unrealized appreciation on forward foreign currency contracts ..................................... 129,197
Other assets ...................................................................................... 70,498
-------------
Total assets ...................................................................................... 424,025,499
-------------
Liabilities
Collateral for securities loaned .................................................................. 47,368,453
Payable for investments purchased ................................................................. 15,563,693
Payable for shares of beneficial interest repurchased ............................................. 1,602,628
Unrealized depreciation on forward foreign currency contracts ..................................... 661,441
Payable to affiliates ............................................................................. 323,534
Accrued expenses and other liabilities ............................................................ 426,205
-------------
Total liabilities ................................................................................. 65,945,954
-------------
Net Assets
Beneficial interest--$0.001 par value (unlimited amount authorized) ............................... 390,334,287
Distributions in excess of net investment income .................................................. (171,420)
Accumulated net realized losses from investment transactions ...................................... (17,276,785)
Net unrealized depreciation of investments, other assets, liabilities and forward contracts
denominated in foreign currencies ............................................................... (14,806,537)
-------------
Net assets ........................................................................................ $ 358,079,545
=============
Class A:
Net assets ........................................................................................ $ 314,474,972
-------------
Shares outstanding ................................................................................ 32,205,176
-------------
Net asset value and redemption value per share .................................................... $ 9.76
=============
Maximum offering price per share (net asset value plus sales charge of 4.00% of offering price) ... $ 10.17
=============
Class B:
Net assets ........................................................................................ $ 12,187,100
-------------
Shares outstanding ................................................................................ 1,254,147
-------------
Net asset value and offering price per share ...................................................... $ 9.72
=============
Class C:
Net assets ........................................................................................ $ 21,682,016
-------------
Shares outstanding ................................................................................ 2,221,023
-------------
Net asset value and offering price per share ...................................................... $ 9.76
=============
Class Y:
Net assets ........................................................................................ $ 9,735,457
-------------
Shares outstanding ................................................................................ 997,283
-------------
Net asset value, offering price and redemption value per share .................................... $ 9.76
=============
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the
Year Ended
October 31, 1999
----------------
<S> <C>
Investment income:
Interest (net of foreign withholding taxes--$36,939) ..................................... $ 28,374,684
------------
Expenses:
Investment advisory and administration fees .............................................. 3,144,895
Service fees--Class A .................................................................... 905,780
Service and distribution fees--Class B ................................................... 221,111
Service and distribution fees--Class C ................................................... 186,104
Transfer agency and related services fees ................................................ 320,758
Custody and accounting ................................................................... 242,310
Reports and notices to shareholders ...................................................... 134,846
Legal and audit .......................................................................... 95,365
State registration fees .................................................................. 26,671
Trustees' fees ........................................................................... 10,500
Other expenses ........................................................................... 5,766
------------
5,294,106
Less: Fee waiver from adviser ............................................................ (16,266)
------------
Net expenses ............................................................................. 5,277,840
------------
Net investment income .................................................................... 23,096,844
------------
Realized and unrealized gains (losses) from investment activities:
Net realized gains (losses) from:
Investment transactions ................................................................ 2,841,862
Foreign currency transactions .......................................................... (4,929,554)
Net change in unrealized appreciation (depreciation) of:
Investments ............................................................................ (30,384,008)
Other assets, liabilities and forward contracts denominated in foreign currencies ...... (1,262,397)
------------
Net realized and unrealized losses from investment activities ............................ (33,734,097)
------------
Net decrease in net assets from operations ............................................... $(10,637,253)
============
</TABLE>
See accompanying notes to financial statements
11
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Years Ended
October 31,
-------------------------------
1999 1998
------------- -------------
<S> <C> <C>
From operations:
Net investment income ............................................................... $ 23,096,844 $ 32,039,065
Net realized losses from investments and foreign currency transactions .............. (2,087,692) (3,166,160)
Net change in unrealized appreciation/depreciation of investments, other assets,
liabilities and forward contracts denominated in foreign currencies ............... (31,646,405) 16,750,259
------------- -------------
Net increase (decrease) in net assets resulting from operations ..................... (10,637,253) 45,623,164
------------- -------------
Dividends and distributions to shareholders:
From net investment income--Class A ................................................. (11,711,650) (21,497,232)
From net investment income--Class B ................................................. (631,462) (2,563,608)
From net investment income--Class C ................................................. (732,369) (1,401,794)
From net investment income--Class Y ................................................. (342,651) (488,585)
In excess of net investment income--Class A ......................................... (2,470,298) (1,981,230)
In excess of net investment income--Class B ......................................... (119,488) (207,140)
In excess of net investment income--Class C ......................................... (153,577) (126,752)
In excess of net investment income--Class Y ......................................... (75,412) (46,367)
From paid in capital--Class A ....................................................... (5,969,172) (3,423,822)
From paid in capital--Class B ....................................................... (288,728) (357,965)
From paid in capital--Class C ....................................................... (371,100) (219,044)
From paid in capital--Class Y ....................................................... (182,224) (80,128)
------------- -------------
Total dividends and distributions to shareholders ................................... (23,048,131) (32,393,667)
------------- -------------
From beneficial interest transactions:
Net proceeds from the sale of shares ................................................ 151,934,535 199,708,865
Cost of shares repurchased .......................................................... (255,256,106) (390,939,942)
Proceeds from dividends reinvested .................................................. 15,238,771 20,788,759
------------- -------------
Net decrease in net assets from beneficial interest transactions .................... (88,082,800) (170,442,318)
------------- -------------
Net decrease in net assets .......................................................... (121,768,184) (157,212,821)
Net assets:
Beginning of year ................................................................... 479,847,729 637,060,550
------------- -------------
End of year ......................................................................... $ 358,079,545 $ 479,847,729
============= =============
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Investment Series ("Trust") was organized under Massachusetts
law by a Declaration of Trust dated December 22, 1986 and is registered with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended, as a non-diversified open-end management investment company. The Trust
currently has one series, PaineWebber Global Income Fund (the "Fund"). The
Fund's primary investment objective is high current income consistent with
prudent investment risk; capital appreciation is a secondary objective.
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-- The Fund calculates its net asset value based
on the current market value, when available, for its portfolio securities. The
Fund normally obtains market quotations for its securities from independent
pricing services and broker-dealers. Independent pricing services use last
reported sale prices, current market quotations or valuations from computerized
"matrix" systems that derive values based on comparable securities. A matrix
system incorporates parameters such as security quality, maturity and coupon,
and/ or research and evaluations by its staff, including review of broker-dealer
market price quotations, if available, in determining the valuation of the
portfolio securities. Securities traded in the over-the-counter ("OTC") market
and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") normally are valued at
the last sale price on Nasdaq prior to valuation. Other OTC securities are
valued at the last bid price available prior to valuation. Securities which are
listed on U.S. and foreign stock exchanges normally are valued at the last sale
price on the day the securities are 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 valued on the exchange designated as the
primary market by Mitchell Hutchins Asset Management, Inc. ("Mitchell
Hutchins"), a wholly owned asset management subsidiary of PaineWebber
Incorporated ("PaineWebber") and investment adviser and administrator of the
Fund. If a market value is not available from an independent pricing source for
a particular security, that security is valued at fair value as determined in
good faith by or under the direction of the Trust's board of trustees (the
"board"). The amortized cost method of valuation, which approximates market
value, generally is used to value short-term debt instruments with sixty days or
less remaining to maturity, unless the board determines that this does not
represent fair value. All investments quoted in foreign currencies will be
valued daily in U.S. dollars on the basis of the foreign currency exchange rates
prevailing at the time such valuation is determined by the Fund's custodian.
Foreign currency exchange rates are generally determined prior to the
close of 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.
13
<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.
14
<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 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, 1999, the Fund owed Mitchell Hutchins $229,441 in
investment advisory and administration fees. Mitchell Hutchins waived a portion
of its investment advisory and administration fees in connection with the Fund's
investment of cash collateral from security lending in the Mitchell Hutchins
Private Money Market Fund LLC. For the year ended October 31, 1999, Mitchell
Hutchins waived $16,266.
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, 1999, the Fund owed Mitchell Hutchins $92,144 in
service and distribution fees.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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, 1999, it earned $51,443 in sales charges.
SECURITY LENDING
The Fund may lend securities up to 331/3% 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 retain 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 is compensated for the lending of its
securities, which is included in interest income, 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, 1999, the Fund earned $105,359 as compensation for lending its
securities, and PaineWebber earned $35,084 in compensation as the Fund's lending
agent. At October 31, 1999, the Fund owed PaineWebber $1,949 in compensation.
At October 31, 1999, the Fund's custodian held cash having an aggregate
value of $47,368,453 as collateral for portfolio securities loaned having a
market value of $45,382,019.
As of October 31, 1999 the Fund invested the cash collateral in the
following money market funds:
Number of Shares Value
- ---------------- -----------
8,373,261 Liquid Assets Portfolio .......................... $ 8,373,261
35,802,762 Mitchell Hutchins Private Money Market Fund LLC .. 35,802,762
3,192,430 Temp Fund Portfolio .............................. 3,192,430
-----------
Total investments of cash collateral received for securities
loaned (cost--$47,368,453) ....................................... $47,368,453
===========
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, 1999, 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, 1999, PaineWebber received from PFPC, Inc., not the Fund,
approximately 53% of the total transfer agency and related service fees
collected by PFPC, Inc. from the Fund.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at October
31, 1999 was substantially the same as the cost of securities for financial
statement purposes.
At October 31, 1999, the components of the net unrealized depreciation of
investments were as follows:
Gross appreciation (investments having an excess of value
over cost) ............................................... $1,593,186
Gross depreciation (investments having an excess of cost
over value) .............................................. (15,841,904)
------------
Net unrealized depreciation of investments ................. $(14,248,718)
============
For the year ended October 31, 1999, total aggregate purchases and sales
of portfolio securities, excluding short-term securities, were as follows:
Purchases .................................................. $236,288,852
Sales ...................................................... $305,892,214
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, 1999, the Fund had a capital loss carryforward of
$17,248,634 available as a reduction, to the extent provided in the regulations,
of any future net realized capital gains which expires as follows: $1,494,819 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, 1999, distributions in
excess of net investment income were increased by $4,700,445, accumulated net
realized losses from investment transactions were increased by $4,929,554 and
beneficial interest was decreased by $9,629,999. Permanent "book/tax"
differences were primarily attributable to the foreign currency gains/losses.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
SHARES OF BENEFICIAL INTEREST
There are an unlimited number 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>
Year Ended
October 31, 1999:
Shares sold ............... 14,109,640 $ 145,289,001 60,221 $ 611,036 71,317 $ 736,205 514,266 $ 5,298,293
Shares repurchased ........ (23,208,621) (237,511,862) (612,534) (6,215,142) (650,756) (6,650,592) (477,606) (4,878,510)
Dividends reinvested ...... 1,292,664 13,082,832 61,875 627,737 93,162 943,121 57,930 585,081
Shares converted from
Class B to Class A ...... 1,425,279 14,470,718 (1,431,266) (14,470,718) -- -- -- --
----------- ------------- ---------- ------------ ---------- ------------ -------- -----------
Net increase (decrease) ... (6,381,038) $ (64,669,311) (1,921,704) $(19,447,087) (486,277) $ (4,971,266) 94,590 $ 1,004,864
=========== ============= ========== ============ ========== ============ ======== ===========
Year Ended
October 31, 1998:
Shares sold ............... 18,902,084 $ 192,414,767 95,631 $ 972,655 294,545 $ 3,016,400 322,167 $ 3,305,043
Shares repurchased ........ (34,229,342) (348,903,208) (2,351,256) (23,943,212) (1,309,976) (13,377,478) (460,229) (4,716,044)
Dividends reinvested ...... 1,667,329 17,033,158 187,992 1,912,285 122,674 1,249,744 58,095 593,572
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) (79,967) $ (817,429)
=========== ============= ========== ============ ========== ============ ======== ===========
</TABLE>
18
<PAGE>
[This Page Intentionally Left Blank.]
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 A
------------------------------------------------------------
For the Years Ended October 31,
------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ............................ $ 10.58 $ 10.27 $ 10.46 $ 10.35 $ 9.99
-------- -------- -------- -------- --------
Net investment income@ ........................................ 0.57 0.62 0.69 0.72 0.77
Net realized and unrealized gains (losses) from investments
and foreign currency@ ....................................... (0.82) 0.32 (0.19) 0.13 0.31
-------- -------- -------- -------- --------
Net increase (decrease) from investment transactions .......... (0.25) 0.94 0.50 0.85 1.08
-------- -------- -------- -------- --------
Dividends from net investment income .......................... (0.33) (0.50) (0.54) (0.74) (0.72)
Distributions in excess of net investment income .............. (0.07) (0.05) (0.06) -- --
Distributions from paid in capital ............................ (0.17) (0.08) (0.09) -- --
-------- -------- -------- -------- --------
Total dividends and distributions to shareholders ............. (0.57) (0.63) (0.69) (0.74) (0.72)
-------- -------- -------- -------- --------
Net asset value, end of year .................................. $ 9.76 $ 10.58 $ 10.27 $ 10.46 $ 10.35
======== ======== ======== ======== ========
Total investment return(1) .................................... (2.44)% 9.51% 4.99% 8.60% 11.09%
======== ======== ======== ======== ========
Ratios/Supplemental data:
Net assets, end of year (000's) ............................... $314,475 $408,190 $486,718 $549,932 $663,022
Expenses to average net assets, net of waivers from
adviser (3) ................................................. 1.19% 1.24% 1.21% 1.27% 1.24%(2)
Net investment income to average net assets, net of
waivers from adviser (3) .................................... 5.58% 6.07% 6.66% 6.88% 7.47%(2)
Portfolio turnover rate ....................................... 63% 93% 172% 126% 113%
</TABLE>
- ----------
@ Calculated using the average monthly shares outstanding.
(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%.
(3) During the year ended October 31, 1999, Mitchell Hutchins waived a portion
of its advisory and administration fees. The ratios excluding the waiver
would be the same since the fee waiver represents less than 0.005%.
20
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
<TABLE>
<CAPTION>
Class B
------------------------------------------------------------
For the Years Ended October 31,
------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ............................ $ 10.54 $ 10.24 $ 10.44 $ 10.31 $ 9.96
-------- -------- -------- -------- --------
Net investment income@ ........................................ 0.48 0.51 0.58 0.64 0.69
Net realized and unrealized gains (losses) from investments
and foreign currency@ ....................................... (0.82) 0.33 (0.17) 0.15 0.30
-------- -------- -------- -------- --------
Net increase (decrease) from investment transactions .......... (0.34) 0.84 0.41 0.79 0.99
-------- -------- -------- -------- --------
Dividends from net investment income .......................... (0.28) (0.43) (0.48) (0.66) (0.64)
Distributions in excess of net investment income .............. (0.06) (0.04) (0.05) -- --
Distributions from paid in capital ............................ (0.14) (0.07) (0.08) -- --
-------- -------- -------- -------- --------
Total dividends and distributions to shareholders ............. (0.48) (0.54) (0.61) (0.66) (0.64)
-------- -------- -------- -------- --------
Net asset value, end of year .................................. $ 9.72 $ 10.54 $ 10.24 $ 10.44 $ 10.31
======== ======== ======== ======== ========
Total investment return(1) .................................... (3.29)% 8.53% 4.11% 7.95% 10.24%
======== ======== ======== ======== ========
Ratios/Supplemental data:
Net assets, end of year (000's) ............................... $ 12,187 $ 33,478 $103,312 $307,577 $484,534
Expenses to average net assets, net of waivers from
adviser (3) ................................................. 2.11% 2.13% 1.99% 1.99% 2.00%(2)
Net investment income to average net assets, net of
waivers from adviser (3) .................................... 4.64% 5.16% 5.83% 6.14% 6.71%(2)
Portfolio turnover rate ....................................... 63% 93% 172% 126% 113%
</TABLE>
<TABLE>
<CAPTION>
Class C
------------------------------------------------------------
For the Years Ended October 31,
------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ............................ $ 10.58 $ 10.26 $ 10.45 $ 10.33 $ 9.98
-------- -------- -------- -------- --------
Net investment income@ ........................................ 0.52 0.56 0.63 0.67 0.71
Net realized and unrealized gains (losses) from investments
and foreign currency@ ....................................... (0.82) 0.33 (0.18) 0.14 0.31
-------- -------- -------- -------- --------
Net increase (decrease) from investment transactions .......... (0.30) 0.89 0.45 0.81 1.02
-------- -------- -------- -------- --------
Dividends from net investment income .......................... (0.30) (0.46) (0.50) (0.69) (0.67)
Distributions in excess of net investment income .............. (0.06) (0.04) (0.06) -- --
Distributions from paid in capital ............................ (0.16) (0.07) (0.08) -- --
-------- -------- -------- -------- --------
Total dividends and distributions to shareholders ............. (0.52) (0.57) (0.64) (0.69) (0.67)
-------- -------- -------- -------- --------
Net asset value, end of year .................................. $ 9.76 $ 10.58 $ 10.26 $ 10.45 $ 10.33
======== ======== ======== ======== ========
Total investment return(1) .................................... (2.93)% 9.01% 4.48% 8.12% 10.49%
======== ======== ======== ======== ========
Ratios/Supplemental data:
Net assets, end of year (000's) ............................... $ 21,682 $ 28,633 $ 36,935 $ 50,928 $ 71,329
Expenses to average net assets, net of waivers from
adviser (3) ................................................. 1.69% 1.77% 1.69% 1.73% 1.75%(2)
Net investment income to average net assets, net of
waivers from adviser (3) .................................... 5.08% 5.54% 6.17% 6.40% 6.96%(2)
Portfolio turnover rate ....................................... 63% 93% 172% 126% 113%
</TABLE>
21
<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,
--------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ............................. $ 10.58 $ 10.27 $ 10.49 $ 10.35 $ 9.99
-------- -------- -------- -------- --------
Net investment income@ ......................................... 0.60 0.65 0.71 0.75 0.78
Net realized and unrealized gains (losses) from investments
and foreign currency@ ........................................ (0.82) 0.32 (0.21) 0.17 0.32
-------- -------- -------- -------- --------
Net increase (decrease) from investment transactions ........... (0.22) 0.97 0.50 0.92 1.10
-------- -------- -------- -------- --------
Dividends from net investment income ........................... (0.35) (0.52) (0.56) (0.78) (0.74)
Distributions in excess of net investment income ............... (0.07) (0.05) (0.06) -- --
Distributions from paid in capital ............................. (0.18) (0.09) (0.10) -- --
-------- -------- -------- -------- --------
Total dividends and distributions to shareholders .............. (0.60) (0.66) (0.72) (0.78) (0.74)
-------- -------- -------- -------- --------
Net asset value, end of year ................................... $ 9.76 $ 10.58 $ 10.27 $ 10.49 $ 10.35
======== ======== ======== ======== ========
Total investment return(1) ..................................... (2.10)% 9.89% 5.20% 9.25% 11.39%
======== ======== ======== ======== ========
Ratios/Supplemental data:
Net assets, end of year (000's) ................................ $ 9,735 $ 9,547 $ 10,096 $ 13,077 $ 16,613
Expenses to average net assets, net of waivers from
adviser (3) .................................................. 0.85% 0.96% 0.94% 0.96% 0.95%(2)
Net investment income to average net assets, net of
waivers from adviser (3) ..................................... 5.86% 6.35% 6.93% 7.19% 7.77%(2)
Portfolio turnover rate ........................................ 63% 93% 172% 126% 113%
</TABLE>
- ----------
@ Calculated using the average monthly shares outstanding.
(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%.
(3) During the year ended October 31, 1999, Mitchell Hutchins waived a portion
of its advisory and administration fees. The ratios excluding the waiver
would be the same since the fee waiver represents less than 0.005%.
22
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of
PaineWebber Investment Series
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of PaineWebber Global Income Fund (a
series of PaineWebber Investment Series and hereafter referred to as the "Fund")
at October 31, 1999, 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, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
New York, NY 10036
December 22, 1999
23
<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,
1999) 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 classified on a per share basis as
follows:
Class A Class B Class C Class Y
------- ------- ------- -------
Ordinary Income.................... $0.3963 $0.3354 $0.3608 $0.4212
Distribution from paid in capital.. $0.1704 $0.1440 $0.1551 $0.1809
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need
not be reported as taxable income. Some retirement trusts (e.g., corporate,
Keogh and 403 (b) (7) plans) may need this information for their annual
information reporting.
Since the Fund's fiscal year is not the calendar year, another
notification will be sent with respect to calendar year 1999. 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 2000. Shareholders are advised to consult their own
tax advisers with respect to the tax consequences of their investment in the
Fund.
24
<PAGE>
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<PAGE>
[This Page Intentionally Left Blank.]
<PAGE>
BOARD OF TRUSTEES
E. Garrett Bewkes, Jr.
Chairman
Margo N. Alexander
Richard Q. Armstrong
Richard R. Burt
Mary C. Farrell
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
Brian M. Storms
PRINCIPAL OFFICERS
Margo N. Alexander
President
Victoria E. Schonfeld
Vice President
Dianne E. O'Donnell
Vice President and Secretary
Paul H. Schubert
Vice President and Treasurer
Dennis L. McCauley
Vice President
Stuart Waugh
Vice President
INVESTMENT ADVISER, ADMINISTRATOR AND DISTRIBUTOR
Mitchell Hutchins Asset Management Inc.
51 West 52nd Street
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 Financial Advisor or
corresponding firm. Read the prospectus carefully before investing.
<PAGE>
PaineWebber offers a family of 28 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 Strategy 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
PaineWebber
(C)1999 PaineWebber Incorporated
Member SIPC
All rights reserved
[GRAPHIC OMITTED] PaineWebber
==========================================================================
GLOBAL INCOME
FUND
OCTOBER 31, 1999
ANNUAL REPORT
