<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) and the Salomon Smith Barney World Government Bond Index from
October 31, 1990 through October 31, 2000.
FUND PLOT POINT CALCULATOR
Plot Points from Finance Worksheet
PW Global Income Fund (Class B)
Oct-90 10,000
Nov-90 10,099
Dec-90 10,176
Jan-91 10,391
Feb-91 10,401
Mar-91 10,045
Apr-91 10,156
May-91 10,127
Jun-91 9,955
Jul-91 10,179
Aug-91 10,326
Sep-91 10,669
Oct-91 10,739
Nov-91 10,859
Dec-91 11,270
Jan-92 11,096
Feb-92 11,096
Mar-92 11,025
Apr-92 11,117
May-92 11,366
Jun-92 11,501
Jul-92 11,599
Aug-92 11,651
Sep-92 11,461
Oct-92 11,376
Nov-92 11,194
Dec-92 11,312
Jan-93 11,464
Feb-93 11,736
Mar-93 11,888
Apr-93 11,987
May-93 12,054
Jun-93 12,109
Jul-93 12,265
Aug-93 12,513
Sep-93 12,479
Oct-93 12,580
Nov-93 12,689
Dec-93 12,903
Jan-94 13,080
Feb-94 12,750
Mar-94 12,433
Apr-94 12,303
May-94 12,256
Jun-94 12,148
Jul-94 12,255
Aug-94 12,255
Sep-94 12,243
Oct-94 12,352
Nov-94 12,364
Dec-94 12,401
Jan-95 12,501
Feb-95 12,727
Mar-95 12,927
Apr-95 13,058
May-95 13,236
Jun-95 13,240
Jul-95 13,370
Aug-95 13,444
Sep-95 13,583
Oct-95 13,722
Nov-95 13,890
Dec-95 14,038
Jan-96 14,109
Feb-96 13,990
Mar-96 14,021
Apr-96 14,105
May-96 14,147
Jun-96 14,273
Jul-96 14,428
Aug-96 14,477
Sep-96 14,640
Oct-96 14,902
Nov-96 15,113
Dec-96 15,039
Jan-97 14,934
Feb-97 14,887
Mar-97 14,795
Apr-97 14,865
May-97 15,037
Jun-97 15,151
Jul-97 15,221
Aug-97 15,172
Sep-97 15,484
Oct-97 15,646
Nov-97 15,595
Dec-97 15,616
Jan-98 15,760
Feb-98 15,843
Mar-98 15,847
Apr-98 15,992
May-98 16,058
Jun-98 16,062
Jul-98 16,177
Aug-98 16,385
Sep-98 17,025
Oct-98 17,135
Nov-98 17,116
Dec-98 17,293
Jan-99 17,306
Feb-99 16,924
Mar-99 16,938
Apr-99 16,951
May-99 16,698
Jun-99 16,577
Jul-99 16,671
Aug-99 16,612
Sep-99 16,774
Oct-99 16,716
Nov-99 16,536
Dec-99 16,612
Jan-00 16,428
Feb-00 16,503
Mar-00 16,702
Apr-00 16,392
May-00 16,453
Jun-00 16,761
Jul-00 16,738
Aug-00 16,661
Sep-00 16,662
Oct-00 16,519
INDEX PLOT POINT CALCULATOR
Copy data from Lipper worksheet Calculator
SSB World Government Bond Index
Oct-90 4.46 $10,000
Nov-90 1.66 $10,166
Dec-90 0.99 $10,267
Jan-91 2.50 $10,523
Feb-91 0.03 $10,526
Mar-91 -3.63 $10,144
Apr-91 1.54 $10,301
May-91 -0.13 $10,287
Jun-91 -1.05 $10,179
Jul-91 2.14 $10,397
Aug-91 1.94 $10,599
Sep-91 3.91 $11,013
Oct-91 1.05 $11,129
Nov-91 1.56 $11,302
Dec-91 5.20 $11,890
Jan-92 -1.78 $11,678
Feb-92 -0.56 $11,613
Mar-92 -1.06 $11,490
Apr-92 0.72 $11,573
May-92 3.07 $11,928
Jun-92 2.80 $12,262
Jul-92 2.33 $12,548
Aug-92 2.80 $12,899
Sep-92 1.00 $13,028
Oct-92 -2.72 $12,674
Nov-92 -1.59 $12,472
Dec-92 0.60 $12,547
Jan-93 1.74 $12,765
Feb-93 1.97 $13,017
Mar-93 1.54 $13,217
Apr-93 2.11 $13,496
May-93 1.00 $13,631
Jun-93 -0.21 $13,602
Jul-93 0.30 $13,643
Aug-93 2.99 $14,051
Sep-93 1.19 $14,218
Oct-93 -0.17 $14,194
Nov-93 -0.72 $14,092
Dec-93 0.85 $14,212
Jan-94 0.81 $14,327
Feb-94 -0.65 $14,234
Mar-94 -0.14 $14,214
Apr-94 0.12 $14,231
May-94 -0.88 $14,106
Jun-94 1.44 $14,309
Jul-94 0.80 $14,423
Aug-94 -0.35 $14,373
Sep-94 0.72 $14,476
Oct-94 1.60 $14,708
Nov-94 -1.37 $14,506
Dec-94 0.28 $14,547
Jan-95 2.10 $14,852
Feb-95 2.56 $15,233
Mar-95 5.94 $16,138
Apr-95 1.85 $16,436
May-95 2.81 $16,898
Jun-95 0.59 $16,998
Jul-95 0.24 $17,038
Aug-95 -3.44 $16,452
Sep-95 2.23 $16,819
Oct-95 0.75 $16,945
Nov-95 1.13 $17,137
Dec-95 1.05 $17,317
Jan-96 -1.24 $17,102
Feb-96 -0.51 $17,015
Mar-96 -0.14 $16,991
Apr-96 -0.40 $16,923
May-96 0.02 $16,926
Jun-96 0.79 $17,060
Jul-96 1.92 $17,388
Aug-96 0.39 $17,455
Sep-96 0.41 $17,527
Oct-96 1.87 $17,855
Nov-96 1.32 $18,090
Dec-96 -0.81 $17,944
Jan-97 -2.67 $17,465
Feb-97 -0.75 $17,334
Mar-97 -0.76 $17,202
Apr-97 -0.88 $17,051
May-97 2.72 $17,515
Jun-97 1.19 $17,723
Jul-97 -0.78 $17,585
Aug-97 -0.06 $17,574
Sep-97 2.13 $17,948
Oct-97 2.08 $18,322
Nov-97 -1.53 $18,041
Dec-97 -0.30 $17,987
Jan-98 0.97 $18,162
Feb-98 0.81 $18,309
Mar-98 -0.99 $18,128
Apr-98 1.60 $18,418
May-98 0.23 $18,460
Jun-98 0.15 $18,488
Jul-98 0.13 $18,512
Aug-98 2.72 $19,015
Sep-98 5.32 $20,027
Oct-98 2.96 $20,620
Nov-98 -1.41 $20,329
Dec-98 2.01 $20,738
Jan-99 -0.92 $20,547
Feb-99 -3.21 $19,887
Mar-99 0.25 $19,937
Apr-99 -0.04 $19,929
May-99 -1.68 $19,594
Jun-99 -1.75 $19,251
Jul-99 2.45 $19,723
Aug-99 0.46 $19,814
Sep-99 1.56 $20,123
Oct-99 -0.05 $20,113
Nov-99 -1.05 $19,902
Dec-99 -0.24 $19,854
Jan-00 -2.13 $19,431
Feb-00 -0.72 $19,291
Mar-00 3.10 $19,889
Apr-00 -3.27 $19,239
May-00 0.78 $19,389
Jun-00 2.43 $19,860
Jul-00 -1.69 $19,524
Aug-00 -0.75 $19,378
Sep-00 -0.20 $19,339
Oct-00 -1.27 $19,093
GROWTH OF $10000 GRAPH
<TABLE>
<CAPTION>
Linked to Column C of Fund worksheet Linked to Column C of Index worksheet
PaineWebber Global Income Fund (B) SSB World Government Bond Index
<S> <C> <C>
Oct-90 $10,000 $10,000
Nov-90 $10,099 $10,166
Dec-90 $10,176 $10,267
Jan-91 $10,391 $10,523
Feb-91 $10,401 $10,526
Mar-91 $10,045 $10,144
Apr-91 $10,156 $10,301
May-91 $10,127 $10,287
Jun-91 $9,955 $10,179
Jul-91 $10,179 $10,397
Aug-91 $10,326 $10,599
Sep-91 $10,669 $11,013
Oct-91 $10,739 $11,129
Nov-91 $10,859 $11,302
Dec-91 $11,270 $11,890
Jan-92 $11,096 $11,678
Feb-92 $11,096 $11,613
Mar-92 $11,025 $11,490
Apr-92 $11,117 $11,573
May-92 $11,366 $11,928
Jun-92 $11,501 $12,262
Jul-92 $11,599 $12,548
Aug-92 $11,651 $12,899
Sep-92 $11,461 $13,028
Oct-92 $11,376 $12,674
Nov-92 $11,194 $12,472
Dec-92 $11,312 $12,547
Jan-93 $11,464 $12,765
Feb-93 $11,736 $13,017
Mar-93 $11,888 $13,217
Apr-93 $11,987 $13,496
May-93 $12,054 $13,631
Jun-93 $12,109 $13,602
Jul-93 $12,265 $13,643
Aug-93 $12,513 $14,051
Sep-93 $12,479 $14,218
Oct-93 $12,580 $14,194
Nov-93 $12,689 $14,092
Dec-93 $12,903 $14,212
Jan-94 $13,080 $14,327
Feb-94 $12,750 $14,234
Mar-94 $12,433 $14,214
Apr-94 $12,303 $14,231
May-94 $12,256 $14,106
Jun-94 $12,148 $14,309
Jul-94 $12,255 $14,423
Aug-94 $12,255 $14,373
Sep-94 $12,243 $14,476
Oct-94 $12,352 $14,708
Nov-94 $12,364 $14,506
Dec-94 $12,401 $14,547
Jan-95 $12,501 $14,852
Feb-95 $12,727 $15,233
Mar-95 $12,927 $16,138
Apr-95 $13,058 $16,436
May-95 $13,236 $16,898
Jun-95 $13,240 $16,998
Jul-95 $13,370 $17,038
Aug-95 $13,444 $16,452
Sep-95 $13,583 $16,819
Oct-95 $13,722 $16,945
Nov-95 $13,890 $17,137
Dec-95 $14,038 $17,317
Jan-96 $14,109 $17,102
Feb-96 $13,990 $17,015
Mar-96 $14,021 $16,991
Apr-96 $14,105 $16,923
May-96 $14,147 $16,926
Jun-96 $14,273 $17,060
Jul-96 $14,428 $17,388
Aug-96 $14,477 $17,455
Sep-96 $14,640 $17,527
Oct-96 $14,902 $17,855
Nov-96 $15,113 $18,090
Dec-96 $15,039 $17,944
Jan-97 $14,934 $17,465
Feb-97 $14,887 $17,334
Mar-97 $14,795 $17,202
Apr-97 $14,865 $17,051
May-97 $15,037 $17,515
Jun-97 $15,151 $17,723
Jul-97 $15,221 $17,585
Aug-97 $15,172 $17,574
Sep-97 $15,484 $17,948
Oct-97 $15,646 $18,322
Nov-97 $15,595 $18,041
Dec-97 $15,616 $17,987
Jan-98 $15,760 $18,162
Feb-98 $15,843 $18,309
Mar-98 $15,847 $18,128
Apr-98 $15,992 $18,418
May-98 $16,058 $18,460
Jun-98 $16,062 $18,488
Jul-98 $16,177 $18,512
Aug-98 $16,385 $19,015
Sep-98 $17,025 $20,027
Oct-98 $17,135 $20,620
Nov-98 $17,116 $20,329
Dec-98 $17,293 $20,738
Jan-99 $17,306 $20,547
Feb-99 $16,924 $19,887
Mar-99 $16,938 $19,937
Apr-99 $16,951 $19,929
May-99 $16,698 $19,594
Jun-99 $16,577 $19,251
Jul-99 $16,671 $19,723
Aug-99 $16,612 $19,814
Sep-99 $16,774 $20,123
Oct-99 $16,716 $20,113
Nov-99 $16,536 $19,902
Dec-99 $16,612 $19,854
Jan-00 $16,428 $19,431
Feb-00 $16,503 $19,291
Mar-00 $16,702 $19,889
Apr-00 $16,392 $19,239
May-00 $16,453 $19,389
Jun-00 $16,761 $19,860
Jul-00 $16,738 $19,524
Aug-00 $16,661 $19,378
Sep-00 $16,662 $19,339
Oct-00 $16,519 $19,093
</TABLE>
(sidebar)
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.
(end sidebar)
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 10/31/00
---------------------------------------------------------------------------------------------------------------------------------
6 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION(O)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Before Deducting Class A* 0.77% -1.18% 3.78% NA 5.46%
Maximum Sales Charge Class B** 0.37 -2.27 2.88 5.15% 7.43
Class C+ 0.53 -1.66 3.29 NA 4.18
Class Y# 0.96 -0.81 4.13 NA 5.73
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
After Deducting Class A* -3.28 -5.16 2.94 NA 5.01
Maximum Sales Charge Class B** -4.52 -6.92 2.57 5.15 7.43
Class C+ -0.20 -2.36 3.29 NA 4.18
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
Salomon Smith Barney World
Gov't Bond Index (U.S. $, Unhedged) -0.76 -5.08 2.41 6.68 7.00
Lipper Global Income Funds Median -0.21 -2.04 2.91 5.36 6.27
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Past performance is no guarantee of future performance. 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. Returns for periods of one year or less are cumulative. The performance
data quoted assume reinvestment of all dividends and capital gains. Lipper peer
group data calculated by Lipper Inc.; used with permission. The Lipper Median
is the return of the fund that places in the middle of the peer group.
(o) 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. Inception returns for the Index and
the Lipper Median are shown as of nearest month-end of oldest share class:
March 31, 1987.
* 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 12b-1 distribution
and service fees.
1
<PAGE>
ANNUAL REPORT PAINEWEBBER GLOBAL INCOME FUND
December 15, 2000
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, 2000.
(sidebar)
PAINEWEBBER GLOBAL INCOME FUND
INVESTMENT GOALS:
Primarily, high current income consistent with prudent investment risk;
secondarily, capital appreciation
SUBADVISORS:
Rogge Global Partners plc and Fischer Francis Trees & Watts, Inc. (and
affiliates)
COMMENCEMENT:
July 1, 1991 (Class A)
March 20, 1987 (Class B)
July 2, 1992 (Class C)
August 26, 1991 (Class Y)
DIVIDEND PAYMENTS:
Monthly
(end sidebar)
MARKET REVIEW
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
The fiscal year ended October 31, 2000 started with a positive economic
backdrop for most of the world's developed economies. As the year progressed,
however, higher commodity prices, particularly oil prices, generated a modest
increase in inflation. As a result, central banks in many developed countries
raised interest rates in an effort to keep inflation from accelerating.
During the second half of the fiscal year, higher oil prices and interest
rates began to take their toll on economic growth in many areas of the world. In
the United States, the pace of economic growth slowed significantly. The U.S.
unemployment rate rose slightly and consumer spending weakened. Business
purchases declined to their lowest level since the emerging market crisis of
1998.
In many parts of Europe and the United Kingdom, business sentiment
indicators declined from the high levels reached earlier in the fiscal year.
Nevertheless, they remained above their long-term averages. The economic
downturn in Europe was more limited than in the United States. During the
period, the euro, much of Europe's single currency, continued to decline against
the U.S. dollar and the yen.
Even though consumer spending continued to be weak, economic data in Japan
indicated stronger economic growth. Much of the upturn in economic growth was
attributed to increased business investment, especially in the high technology
industry. During the period, Japan's central bank reversed its zero
interest-rate policy and boosted short-term interest rates by 0.25%.
PORTFOLIO REVIEW
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
During the period, the Fund outperformed its benchmark. Following a
difficult year, there were two major investment decisions affecting the Fund's
performance. The first was our overweight position in European currencies
(including both the euro and non-euro currencies of Sweden and Norway) which
underperformed the U.S. dollar and had a negative impact on the relative
performance of the Fund. On the positive side, our
2
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND ANNUAL REPORT
substantial underweight position in Japanese bonds, which were among the worst
performing bond markets in local currency terms, added value to the portfolio.
At the end of the fiscal period, the Fund's largest regional allocation was
to Europe, including the United Kingdom. European investments accounted for
38.1%* of net assets. In Europe, yield curves flattened as markets continued to
factor in expected higher interest rates in response to the weakness of the
euro.
The Fund's second- largest regional allocation was to the United States at
32.7%.* The U.S. portion of the Fund was invested in U.S. Treasury and corporate
bonds, areas that performed relatively well. As signs of an economic slowdown
became increasingly apparent, yields on intermediate-term bonds declined. In
contrast, yields on short-term and long-term bonds rose.
The Fund's commitment to Japan was 8.8%.* In Japan, yields on short-,
intermediate-, and long-term bonds rose as a result of the Bank of Japan's tight
monetary policy.
Rising oil prices and a more favorable U.S. interest rate environment were
positive for emerging market debt. Relatively stable U.S. interest rates and
higher oil prices generally favor emerging market sovereign credits. Oil
exporters such as Mexico and Malaysia benefited from higher export revenues. In
contrast, the performance of South Korea's fixed-income securities was weakened
by its dependence on energy imports. At 3.1%,* Mexico accounted for the largest
allocation to emerging markets. Malaysia followed with a 2.3%* allocation.
OUTLOOK
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Although the U.S. Federal Reserve Board (the "Fed") took no action on
interest rates for several months, it maintained its tightening bias. Going
forward, we believe the Fed will lower short-term interest rates, as the pace of
economic growth continues to slow.
We find Europe the most attractive market due to its strong fundamentals
and increasing level of corporate restructuring. We therefore hold long duration
positions in many of these bond markets including both euro and non-euro markets
including Denmark and Norway.
We also find the Japanese bond market the least attractive and hold a large
underweight position versus the benchmark due primarily to the massive amounts
of government debt which are needed to pay for the government's efforts to
stimulate growth.
* Weightings represent percentages of net assets as of October 31, 2000. The
Fund's portfolio is actively managed and its composition will vary over
time.
3
<PAGE>
ANNUAL REPORT PAINEWEBBER GLOBAL INCOME FUND
PORTFOLIO STATISTICS
CHARACTERISTICS* 10/31/00 4/30/00
--------------------------------------------------------------------------------
Net Assets ($mm) $ 253.1 $ 292.4
Weighted Average Maturity 9.0 yrs 9.2 yrs
--------------------------------------------------------------------------------
ASSET ALLOCATION* 10/31/00 4/30/00
--------------------------------------------------------------------------------
Europe 38.1% 40.2%
U.S. Treasurys and Corporates 32.7 38.5
Japan 8.8 -
Emerging Market Investment Grade 7.1 6.5
Australia, Canada & New Zealand 5.3 5.8
Emerging Market Noninvestment Grade 4.0 5.6
Cash Equivalents 2.1 3.4
Other 1.9 -
--------------------------------------------------------------------------------
Total 100.0 100.0
CURRENCY EXPOSURE* 10/31/00 4/30/00
--------------------------------------------------------------------------------
U.S. Dollar 53.1% 53.9%
Unhedged-Europe 28.1 26.9
Unhedged-Australia, Canada, Japan, Korea & New Zealand 13.0 9.2
Hedged 5.8 10.0
--------------------------------------------------------------------------------
Total 100.0 100.0
CREDIT QUALITY* 10/31/00 4/30/00
--------------------------------------------------------------------------------
A1/P1 2.0% 6.7%
AAA 50.2 59.5
AA 28.6 9.3
A 8.0 14.0
BBB 7.1 4.9
BB 2.8 3.4
B 1.3 2.2
--------------------------------------------------------------------------------
Total 100.0 100.0
* Weightings represent percentages of net assets as of October 31, 2000. The
Fund's portfolio is actively managed and its composition will vary over
time.
4
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND ANNUAL REPORT
PROPOSED MERGER AND NEW FUND MANAGEMENT
--------------------------------------------------------------------------------
On October 6, 2000, the Fund's board of trustees unanimously approved the
submission to shareholders of the merger of the PaineWebber Global Income Fund
into the PACE Global Fixed Income Investments. The proposed merger will be
submitted to shareholders at a meeting to be held in January 2001. If approved
by the Fund's shareholders, the merger is expected to become effective in
February 2001.
On October 6, 2000, the board of trustees for the Fund approved the
termination of the then existing Investment Advisory and Administration Contract
with Mitchell Hutchins and approved new interim investment management
arrangements that became effective on October 10, 2000, including new interim
sub-advisory contracts with Rogge Global Partners plc and Fischer Francis Trees
& Watts, Inc. and its affiliates, which assumed day-to-day portfolio management
responsibilities for the Fund effective October 10, 2000.
More information about the proposed merger for the Fund, and new investment
management arrangements and the related investment strategy changes is set out
in the October 10, 2000 supplement to the prospectus dated March 1, 2000, and
additional information is being provided to shareholders in proxy solicitation
materials that were mailed in December 2000.
5
<PAGE>
ANNUAL REPORT PAINEWEBBER GLOBAL INCOME FUND
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. For additional information,
visit us at www.painewebber.com.
Sincerely,
/s/ BRIAN M. STORMS
BRIAN M. STORMS
President and Chief Executive Officer
Mitchell Hutchins Asset Management Inc.
Rogge Global Partners plc
Portfolio Management Team, PaineWebber Global Income Fund
Fischer Francis Trees & Watts, Inc. (and affiliates)
Portfolio Management Team, PaineWebber Global Income Fund
This letter is intended to assist shareholders in understanding how the Fund
performed during the fiscal year ended October 31, 2000, and reflects 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.
6
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
PERFORMANCE RESULTS (unaudited)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN(1)
------------------------------------ ----------------------------------
12 Months 6 Months
10/31/00 04/30/00 10/31/99 Ended 10/31/00 Ended 10/31/00
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A Shares $9.10 $9.31 $9.76 (1.18)% 0.77%
--------------------------------------------------------------------------------------------
Class B Shares 9.05 9.25 9.72 (2.27) 0.37
--------------------------------------------------------------------------------------------
Class C Shares 9.10 9.31 9.76 (1.66) 0.53
--------------------------------------------------------------------------------------------
</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
--------------------------------------------------------------------------------------------------------------
1999 10.58 9.61 - 0.3892 0.1704 (3.93)
--------------------------------------------------------------------------------------------------------------
01/01/00 - 10/31/00 9.61 9.10 - 0.0862 0.3720 (0.56)
--------------------------------------------------------------------------------------------------------------
Totals: $ 0.3198 $ 5.2759 $ 1.0315
--------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 10/31/00: 64.38%
--------------------------------------------------------------------------------------------------------------
</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. Total
investment return for periods of less than one year has not been
annualized.
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.
7
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
PERFORMANCE RESULTS (unaudited) (continued)
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
-----------------------------------------------------------------------------------------------------------
1999 10.54 9.56 - 0.3276 0.1440 (4.89)
-----------------------------------------------------------------------------------------------------------
01/01/00 - 10/31/00 9.56 9.05 - 0.0714 0.3080 (1.40)
-----------------------------------------------------------------------------------------------------------
Totals: $0.6487 $ 8.9991 $ 0.8833
-----------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 10/31/00: 165.71%
-----------------------------------------------------------------------------------------------------------
</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
----------------------------------------------------------------------------------------------------------
1999 10.58 9.61 - 0.3545 0.1551 (4.41)
----------------------------------------------------------------------------------------------------------
01/01/00 - 10/31/00 9.61 9.10 - 0.0791 0.3411 (0.96)
----------------------------------------------------------------------------------------------------------
Totals: $0.3098 $ 4.2446 $ 0.6217
----------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 10/31/00: 40.75%
----------------------------------------------------------------------------------------------------------
</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. Total
investment return for periods of less than one year has not been
annualized.
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 year
ended October 31, 2000 and since inception, August 26, 1991 through
October 31, 2000, Class Y shares had a total return of (0.81)% and 68.86%,
respectively. Class Y shares do not have initial or contingent deferred
sales charges or ongoing 12b-1 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.
8
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
PERFORMANCE RESULTS (unaudited) (concluded)
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
% RETURN WITHOUT DEDUCTING % RETURN AFTER DEDUCTING
MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
--------------------------------------------- ---------------------------------------------
CLASS A* B** C*** A* B** C***
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Twelve Months Ended 09/30/00 (0.67)% (1.76)% (1.16)% (4.64)% (6.44)% (1.86)%
------------------------------------------------------------------------------------------------------------------------------
Five Years Ended 09/30/00 4.17 3.24 3.63 3.32 2.92 3.63
------------------------------------------------------------------------------------------------------------------------------
Ten Years Ended 09/30/00 N/A 5.46 N/A N/A 5.46 N/A
------------------------------------------------------------------------------------------------------------------------------
Commencement of Operations
Through 09/30/00+ 5.61 7.55 4.33 5.15 7.55 4.33
------------------------------------------------------------------------------------------------------------------------------
</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 5.0% and is
reduced to 0% after 6 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 1 year. Class C shares bear ongoing 12b-1 distribution
and service fees.
+ Commencement of operations dates are July 1, 1991, March 20, 1987 and July
2, 1992 for Class A, Class B and Class C shares, respectively.
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 twelve
months ended September 30, 2000, for the five years ended September 30,
2000 and since inception August 26, 1991 through September 30, 2000, Class
Y shares have an average annual total return of (0.31)%, 4.48% and 5.87%,
respectively. Class Y shares do not have initial or contingent deferred
sales charges or ongoing 12b-1 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.
9
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000)* DATES RATES VALUE
----------- ---------------------- ---------------- --------------
<S> <C> <C> <C>
LONG-TERM DEBT SECURITIES - 78.01%
AUSTRALIA - 1.73%
US$ 4,354 National Australia Bank ........................... 05/19/10 7.434% $ 4,377,956
-------------
BRAZIL - 1.27%
US$ 1,970 Federal Republic of Brazil ........................ 05/15/27 10.125 1,477,500
US$ 2,326 Federal Republic of Brazil, DCB ................... 04/15/12 7.689@ 1,729,963
-------------
3,207,463
-------------
FRANCE - 2.86%
8,588 Government of France .............................. 10/25/07 to 04/25/29 5.500 7,249,694
-------------
GERMANY - 6.22%
US$ 5,750 Deutsche Ausgleichbank ............................ 06/23/05 7.000 5,801,911
12,645 Federal Republic of Germany ....................... 02/17/04 to 07/04/09 3.250 to 4.000 9,953,283
-------------
15,755,194
-------------
ITALY - 7.77%
10,647 Republic of Italy ................................. 04/01/04 8.500 9,906,045
US$ 9,744 Republic of Italy ................................. 05/02/02 6.750 9,772,744
-------------
19,678,789
-------------
JAPAN - 8.79%
2,430,000 Government of Japan ............................... 06/20/08 to 06/22/20 1.500 to 2.200 22,247,958
-------------
KOREA - 0.77%
US$ 1,860 Republic of Korea ................................. 04/15/08 8.875 1,939,050
-------------
MALAYSIA - 2.30%
US$ 3,025 Republic of Malaysia .............................. 06/01/09 8.750 3,153,562
US$ 3,092 Petroliam Nasional Berhad** ....................... 10/15/26 7.625 2,663,449
-------------
5,817,011
-------------
MEXICO - 3.07%
US$ 5,015 PEMEX Finance Limited ............................. 11/15/03 6.125 4,914,895
US$ 2,820 United Mexican States Series B, DISC (1) .......... 12/31/19 7.603@ 2,862,300
-------------
7,777,195
-------------
NETHERLANDS - 3.92%
11,977 Government of Netherlands (2) ..................... 01/15/28 5.500 9,913,807
-------------
POLAND - 2.18%
14,975 Republic of Poland ................................ 06/12/04 10.000 2,658,856
US$ 3,090 Republic of Poland, PDI ........................... 10/27/14 6.000# 2,854,388
-------------
5,513,244
-------------
QATAR - 1.16%
US$ 3,060 State of Qatar** .................................. 06/15/30 9.750 2,945,250
-------------
SPAIN - 2.73%
8,275 Government of Spain ............................... 07/30/05 4.950 6,911,327
-------------
</TABLE>
10
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000)* DATES RATES VALUE
------------- ---------------------- ------------------ ---------------
<S> <C> <C> <C>
LONG-TERM DEBT SECURITIES - (CONCLUDED)
TRINIDAD & TOBAGO - 1.62%
US$ 2,000 Republic of Trinidad & Tobago** ......... 10/01/09 9.875% $ 2,080,000
US$ 2,000 Republic of Trinidad & Tobago (3) ....... 07/01/20 9.750 2,020,000
------------
4,100,000
------------
UNITED KINGDOM - 8.60%
13,935 United Kingdom Gilt ..................... 08/27/02 to 12/07/03 6.500 to 10.000 21,761,240
------------
UNITED STATES - 23.02%
2,921 Abbey National Capital Trust ............ 06/30/30++ 8.963 2,909,807
14,340 Federal National Mortgage Association ... 01/15/02 to 08/15/02 6.625 to 6.750 14,381,748
4,145 FMR Corp. ............................... 06/15/29 7.570 3,980,995
5,815 General Motors Acceptance Corp. ......... 11/10/03 5.750 5,597,792
2,745 HSBC Capital Funding LP** ............... 06/30/30++ 10.176 3,040,815
4,067 Morgan Stanley Dean Witter & Co. ........ 06/15/05 7.750 4,151,297
8,352 U.S. Treasury Bonds (2) ................. 11/15/27 6.125 8,538,367
12,419 U.S. Treasury Inflation Index Notes ..... 07/15/02 to 04/15/28 3.625 12,183,058
3,507 Wells Fargo Co. ......................... 09/03/02 6.500 3,492,323
------------
Total Long-Term Debt Securities (cost - $213,972,516)........ 58,276,202
------------
SHORT-TERM DEBT SECURITIES - 19.94% 197,471,380
------------
CANADA - 3.61%
13,850 Government of Canada .................... 09/01/01 7.000 9,146,894
------------
GERMANY - 3.08%
9,180 Federal Republic of Germany ............. 02/21/01 5.250 7,790,287
------------
HUNGARY - 0.67%
520,000 Government of Hungary ................... 06/12/01 13.500 1,707,667
------------
NETHERLANDS - 2.93%
8,484 Government of Netherlands ............... 09/15/01 8.750 7,404,993
------------
UNITED STATES - 9.65%
7,050 Clorox Corp. ............................ 07/15/01 8.800 7,139,859
9,500 Federal Home Loan Bank .................. 01/26/01 4.875 9,459,302
200 U.S. Treasury Bills ..................... 03/22/01 6.065+ 195,237
7,656 U.S. Treasury Notes ..................... 11/30/00 4.625 7,644,340
------------
Total Short-Term Debt Securities (cost - $54,643,350)........ 24,438,738
------------
Total Investments (cost - $268,615,866) - 97.95%............. 50,488,579
------------
Other assets in excess of liabilities - 2.05% ............... 247,959,959
Net Assets - 100.00% ........................................ 5,176,893
------------
$253,136,852
============
</TABLE>
11
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
------------
Note: The Portfolio of Investments is listed by the issuer's country of origin.
* In local currency unless otherwise indicated.
** Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified Institutional buyers.
# Reflects rate at October 31, 2000 on step coupon rate instrument.
@ Floating rate securities - the interest rates shown are the current rates
as of October 31, 2000.
+ Interest rate shown is discount rate at date of purchase.
++ Maturity date shown is the callable date for perpetual rewriting
securities.
(1) Issued with additional 4,168,000 recoverable rights attached maturing on
06/30/03 with no market value.
(2) Security, or portion thereof, was on loan at October 31, 2000.
(3) Illiquid security representing 0.80% of net assets, which is valued at fair
value pursuant to the Fund's procedures under the direction of the Board of
Trustees.
DCB Debt Conversion Bond.
DISC Discount Bond.
PDI Past Due Interest Bond.
FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
UNREALIZED
CONTRACT TO APPRECIATION
DELIVER IN EXCHANGE FOR MATURITY DATES (DEPRECIATION)
------------- ----------------- ------------------ ---------------
<S> <C> <C> <C> <C>
British Pounds ......... 8,185,000 US$ 12,150,633 11/29/00 $ 269,209
Euro ................... 6,029,000 US$ 5,261,508 11/21/00 140,143
Euro ................... 1,069,000 US$ 915,599 11/21/00 7,531
Euro ................... 2,713,000 US$ 2,323,685 11/21/00 19,113
Euro ................... 534,500 US$ 447,377 11/21/00 (6,657)
U.S. Dollars ........... 983,833 EUR 1,069,000 11/21/00 (75,765)
U.S. Dollars ........... 5,548,670 EUR 6,029,000 11/21/00 (427,305)
U.S. Dollars ........... 449,221 EUR 534,500 02/26/01 6,705
U.S. Dollars ........... 1,600,753 JPY 170,000,000 02/26/01 (11,589)
----------
$ (78,615)
==========
</TABLE>
------------
CURRENCY TYPE ABBREVIATIONS:
EUR - Euro
JPY - Japanese Yen
US$ - United States Dollars
INVESTMENTS BY TYPE OF ISSUER
<TABLE>
<CAPTION>
PERCENT OF NET ASSETS
----------------------------
<S> <C> <C>
Long-term Short-term
--------- ----------
Government and other public issuers ........... 71.00% 17.12%
Bank and other financial institutions.......... 5.96 -
Industrial .................................... 1.05 2.82
------ ------
78.01% 19.94%
===== =====
</TABLE>
FUTURES CONTRACTS
-----------------
<TABLE>
<CAPTION>
NUMBER OF IN UNREALIZED
CONTRACTS CONTRACTS TO RECEIVE EXCHANGE FOR EXPIRATION DATE DEPRECIATION
----------- ------------------------------------- -------------- ----------------- -------------
<S> <C> <C> <C> <C>
82 U.S. 5 Year Treasury Notes .......... $82,987 December 2000 $(42,281)
========
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 2000
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities, at value (cost - $268,615,866) ................................ $ 247,959,959
Investments of cash collateral received for securities loaned, at value (cost -
$7,105,624) ............................................................................ 7,105,624
Cash (included in interest bearing account) .............................................. 23,937,697
Foreign currency (cost - $267,789) ....................................................... 273,139
Interest receivable ...................................................................... 4,909,654
Receivable for shares of beneficial interest sold ........................................ 4,778
Unrealized appreciation on forward foreign currency contracts ............................ 442,701
Due from broker .......................................................................... 109,000
Other assets ............................................................................. 51,800
-------------
Total assets ............................................................................. 284,794,352
-------------
LIABILITIES
Payable for investments purchased ........................................................ 22,268,719
Collateral for securities loaned ......................................................... 7,105,624
Payable for shares of beneficial interest repurchased .................................... 1,235,017
Unrealized depreciation on forward foreign currency contracts ............................ 521,316
Payable to affiliates .................................................................... 227,328
Variation margin payable ................................................................. 5,125
Accrued expenses and other liabilities ................................................... 294,371
-------------
Total liabilities ........................................................................ 31,657,500
-------------
NET ASSETS
Beneficial interest - $0.001 par value (unlimited amount authorized) ..................... 295,151,478
Undistributed net investment income ...................................................... 78,615
Accumulated net realized losses from investment transactions ............................. (21,562,578)
Net unrealized depreciation of investments, other assets, liabilities and forward
contracts denominated in foreign currencies ............................................ (20,530,663)
-------------
Net assets ............................................................................... $ 253,136,852
=============
CLASS A:
Net assets ............................................................................... $ 226,989,298
-------------
Shares outstanding ....................................................................... 24,930,355
-------------
Net asset value and redemption value per share ........................................... $9.10
=====
Maximum offering price per share (net asset value plus sales charge of 4.00% of offering
price) ................................................................................. $9.48
=====
CLASS B:
Net assets ............................................................................... $ 4,407,875
-------------
Shares outstanding ....................................................................... 486,987
-------------
Net asset value and offering price per share ............................................. $9.05
=====
CLASS C:
Net assets ............................................................................... $ 16,147,851
-------------
Shares outstanding ....................................................................... 1,774,368
-------------
Net asset value and offering price per share ............................................. $9.10
=====
CLASS Y:
Net assets ............................................................................... $ 5,591,828
-------------
Shares outstanding ....................................................................... 614,648
-------------
Net asset value, offering price and redemption value per share ........................... $9.10
=====
</TABLE>
See accompanying notes to financial statements
13
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
OCTOBER 31, 2000
-----------------
<S> <C>
INVESTMENT INCOME:
Interest (net of foreign withholding taxes - $11,590) ............................... $ 21,654,131
-------------
EXPENSES:
Investment advisory and administration fees ......................................... 2,252,885
Service fees - Class A .............................................................. 669,764
Service and distribution fees - Class B ............................................. 68,703
Service and distribution fees - Class C ............................................. 139,156
Transfer agency and related services fees ........................................... 345,426
Custody and accounting .............................................................. 240,686
Reports and notices to shareholders ................................................. 131,021
Professional fees ................................................................... 96,090
State registration fees ............................................................. 48,080
Trustees' fees ...................................................................... 10,500
Other expenses ...................................................................... 11,083
-------------
4,013,394
Less: Fee waiver from adviser ....................................................... (7,793)
-------------
Net expenses ........................................................................ 4,005,601
-------------
NET INVESTMENT INCOME ............................................................... 17,648,530
-------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT ACTIVITIES:
Net realized losses from:
Investment transactions ............................................................ (4,285,793)
Foreign currency transactions ...................................................... (11,607,383)
Net change in unrealized appreciation (depreciation) of:
Investments ........................................................................ (6,407,189)
Other assets, liabilities and forward contracts denominated in foreign currencies.... 683,063
-------------
NET REALIZED AND UNREALIZED LOSSES FROM INVESTMENT ACTIVITIES ....................... (21,617,302)
-------------
NET DECREASE IN NET ASSETS FROM OPERATIONS .......................................... $ (3,968,772)
=============
</TABLE>
See accompanying notes to financial statements
14
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Years Ended
October 31,
-----------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income .............................................................. $ 17,648,530 $ 23,096,844
Net realized losses from investments and foreign currency transactions ............. (15,893,176) (2,087,692)
Net change in unrealized appreciation/depreciation of investments, other assets,
liabilities and forward contracts denominated in foreign currencies ............... (5,724,126) (31,646,405)
-------------- --------------
Net decrease in net assets resulting from operations ............................... (3,968,772) (10,637,253)
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income - Class A ............................................... (5,186,923) (11,711,650)
From net investment income - Class B ............................................... (127,127) (631,462)
From net investment income - Class C ............................................... (326,668) (732,369)
From net investment income - Class Y ............................................... (150,394) (342,651)
In excess of net investment income - Class A ....................................... - (2,470,298)
In excess of net investment income - Class B ....................................... - (119,488)
In excess of net investment income - Class C ....................................... - (153,577)
In excess of net investment income - Class Y ....................................... - (75,412)
From paid in capital - Class A ..................................................... (10,250,471) (5,969,172)
From paid in capital - Class B ..................................................... (197,531) (288,728)
From paid in capital - Class C ..................................................... (654,735) (371,100)
From paid in capital - Class Y ..................................................... (281,504) (182,224)
-------------- --------------
Total dividends and distributions to shareholders .................................. (17,175,353) (23,048,131)
-------------- --------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares ............................................... 124,834,634 151,934,535
Cost of shares repurchased ......................................................... (220,032,339) (255,256,106)
Proceeds from dividends reinvested ................................................. 11,399,137 15,238,771
-------------- --------------
Net decrease in net assets from beneficial interest transactions ................... (83,798,568) (88,082,800)
-------------- --------------
Net decrease in net assets ......................................................... (104,942,693) (121,768,184)
NET ASSETS:
Beginning of year .................................................................. 358,079,545 479,847,729
-------------- --------------
End of year ........................................................................ $ 253,136,852 $ 358,079,545
============== ==============
</TABLE>
See accompanying notes to financial statements
15
<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 accounting
principles generally accepted in the United States of America 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 values for its securities from independent pricing
sources. Independent pricing sources may use last sale prices, current market
quotations or valuations from computerized "matrix" systems that derive values
based on comparable 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"), the investment manager and administrator
of the Fund, or by the Fund's sub-advisers. Mitchell Hutchins is a wholly owned
asset management subsidiary of PaineWebber Incorporated ("PaineWebber"), which
is an indirect wholly owned subsidiary of UBS AG. 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. If events
materially affecting the value of such securities or currency exchange rates
during such time period occur, the securities will be valued at their fair value
as determined in good faith by or under the direction of the board.
16
<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) purchases and sales of investment securities, income and
expenses-at the rates of exchange prevailing on the respective dates of such
transactions.
Although the net assets and the market values of the Fund'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.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Risks may arise with respect to entering into forward contracts from the
potential inability of counterparties to meet the terms of their forward
contracts and from unanticipated movements in the value of foreign currencies
relative to the U.S. dollar.
Fluctuations in the value of forward contracts are recorded for book
purposes as unrealized gains or losses by the Fund. Realized gains and losses
include net gains and losses recognized by the Fund on contracts which have
matured.
Futures Contracts-Using financial futures contracts involves various market
risks. The maximum amount at risk from the purchase of a futures contract is the
contract value. The Fund primarily uses financial futures contracts for hedging
purposes or to manage the average duration of the Fund. However, imperfect
correlations between futures contracts and the Fund securities being hedged, or
market disruptions, do not normally permit full control of these risks at all
times.
Upon entering into a financial futures contract, the Fund is required to
pledge to a broker an amount equal to a certain percentage of the contract
amount. This amount is known as the "initial margin." Subsequent payments, known
as "variation margin," are made or received by the Fund each day, depending on
the daily fluctuations in the value of the underlying financial futures
contracts. Such variation margin is recorded for financial statement purposes on
a daily basis as an unrealized gain or loss until the financial futures contract
is closed, at which time the net gain or loss is reclassified to realized.
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.
At October 31, 2000, the Fund had approximately $23,937,697 in an interest
bearing account with a single institution, Brown Brothers Harriman, the Fund's
custodian.
INVESTMENT MANAGER AND ADMINISTRATOR, SUB-ADVISORS
The Trust's board has approved an Interim Investment Management and
Administration Contract ("Advisory Contract") with Mitchell Hutchins, under
which Mitchell Hutchins serves as investment manager and administrator of the
Fund. The Advisory Contract authorizes Mitchell Hutchins to retain one or more
sub-advisers for the management of the Fund's investment portfolio. In
accordance with the Advisory Contract, the Fund pays Mitchell Hutchins an
investment management and administration fee, which is accrued daily and paid
monthly, in accordance with the following schedule:
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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
The Trust's board approved two Interim Sub-Advisory Contracts - one between
Mitchell Hutchins and Rogge Global Partners plc and the second between Mitchell
Hutchins and Fischer Francis Trees & Watts, Inc. and its affiliates ("FFTW").
Under its Advisory Contract relating to the Fund, Mitchell Hutchins' primary
portfolio management responsibility is to identify appropriate sub-advisers to
manage the Fund's assets and to review and monitor the performance of those
sub-advisers. Mitchell Hutchins has initially allocated the Fund's assets
between Rogge Global Partners and FFTW in approximately equal portions. The
relative values allocated to each sub-adviser may change over time. Mitchell
Hutchins (not the Fund) pays a fee to the sub-advisers.
At October 31, 2000, the Fund owed Mitchell Hutchins $163,972 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, 2000, Mitchell
Hutchins waived $7,793.
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, 2000, the Fund owed Mitchell Hutchins $63,191 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, 2000, it earned $22,693 in sales charges.
SECURITY LENDING
The Fund may lend securities up to 331|M/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, 2000, the Fund earned $35,489 as compensation
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS
for lending its securities, and PaineWebber earned $11,832 in compensation as
the Fund's lending agent. At October 31, 2000, the Fund owed PaineWebber $165
in compensation.
At October 31, 2000, the Fund's custodian held cash having an aggregate
value of $7,105,624 as collateral for portfolio securities loaned having a
market value of $6,582,353.
As of October 31, 2000, the Fund invested the cash collateral in the
following money market funds:
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE
------------------ -------------
<S> <C> <C>
2,151,688 AIM Liquid Assets Portfolio .............................. $2,151,688
4,718,589 Mitchell Hutchins Private Money Market Fund LLC .......... 4,718,589
235,347 Scudder Institutional Fund Incorporated .................. 235,347
----------
Total investments of cash collateral received for securities loaned (cost -
$7,105,624) ................................................................. $7,105,624
==========
</TABLE>
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, 2000, 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, 2000, 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.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at October
31, 2000 was substantially the same as the cost of securities for financial
statement purposes.
At October 31, 2000, the components of the net unrealized depreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value over cost) ..... $ 1,741,015
Gross depreciation (investments having an excess of cost over value) ..... (22,396,922)
-------------
Net unrealized depreciation of investments ............................... $ (20,655,907)
=============
</TABLE>
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
For the year ended October 31, 2000, total aggregate purchases and sales
of portfolio securities, excluding short-term securities, were as follows:
Purchases ........................................ $127,506,019
Sales ............................................ $169,570,197
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, 2000, the Fund had a capital loss carryforward of
$21,604,858 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, $15,753,815 in 2003 and $4,356,224 in 2008. 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, 2000, undistributed net investment
income was decreased by $223,142, accumulated net realized losses from
investment transactions were decreased by $11,607,383 and beneficial interest
was decreased by $11,384,241. Permanent "book/tax" differences were primarily
attributable to the foreign currency gains/losses.
21
<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
---------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
YEAR ENDED
OCTOBER 31, 2000:
Shares sold ................. 13,037,484 $ 122,457,102 58,652 $ 555,348
Shares repurchased .......... (21,947,659) (206,592,243) (277,087) (2,598,245)
Dividends reinvested ........ 1,068,314 10,046,244 21,619 202,840
Shares converted from
Class B to Class A ......... 567,040 5,419,139 (570,344) (5,419,139)
----------- -------------- -------- -------------
Net decrease ................ (7,274,821) $ (68,669,758) (767,160) $ (7,259,196)
========== ============== ======== =============
YEAR ENDED
OCTOBER 31, 1999:
Shares sold ................. 14,109,640 $ 145,289,001 60,221 $ 611,036
Shares repurchased .......... (23,208,621) (237,511,862) (612,534) (6,215,142)
Dividends reinvested ........ 1,292,664 13,082,832 61,875 627,737
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)
========== ============== ========== =============
<CAPTION>
CLASS C CLASS Y
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
YEAR ENDED
OCTOBER 31, 2000:
Shares sold ................. 17,204 $ 160,809 175,109 $ 1,661,375
Shares repurchased .......... (541,263) (5,119,097) (602,680) (5,722,754)
Dividends reinvested ........ 77,404 727,493 44,936 422,560
Shares converted from
Class B to Class A ......... - - - -
-------- ------------ -------- ------------
Net decrease ................ (446,655) $ (4,230,795) (382,635) $ (3,638,819)
======== ============ ======== ============
YEAR ENDED
OCTOBER 31, 1999:
Shares sold ................. 71,317 $ 736,205 514,266 $ 5,298,293
Shares repurchased .......... (650,756) (6,650,592) (477,606) (4,878,510)
Dividends reinvested ........ 93,162 943,121 57,930 585,081
Shares converted from
Class B to Class A ......... - - - -
-------- ------------ -------- ------------
Net increase (decrease) ..... (486,277) $ (4,971,266) 94,590 $ 1,004,864
======== ============ ====== ============
</TABLE>
PROPOSED MERGER
On October 6, 2000, the board of trustees of the Trust unanimously
approved the submission to shareholders of the merger of the Fund into PACE
Global Fixed Income Investments, a series of PaineWebber PACE Select Advisors
Trust ("PACE Trust"). The proposed merger will be submitted to shareholders at
a meeting expected to be held in January 2001. If approved by the Fund's
shareholders, the merger is expected to become effective in February 2001.
22
<PAGE>
(This page has been left blank intentionally.)
23
<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,
---------------------------------------------------------------
2000+ 1999 1998 1997 1996
------------ ------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................................. $ 9.76 $ 10.58 $ 10.27 $ 10.46 $ 10.35
------- ------- ------- ------- --------
Net investment income@ ............................................. 0.56 0.57 0.62 0.69 0.72
Net realized and unrealized gains (losses) from investments and
foreign currency@ ................................................. (0.67) (0.82) 0.32 (0.19) 0.13
------- ------- ------- ------- -------
Net increase (decrease) from investment transactions ............... (0.11) (0.25) 0.94 0.50 0.85
------- ------- ------- ------- -------
Dividends from net investment income ............................... (0.18) (0.33) (0.50) (0.54) (0.74)
Distributions in excess of net investment income ................... - (0.07) (0.05) (0.06) -
Distributions from paid in capital ................................. (0.37) (0.17) (0.08) (0.09) -
------- ------- ------- ------- -------
Total dividends and distributions to shareholders .................. (0.55) (0.57) (0.63) (0.69) (0.74)
------- ------- ------- ------- -------
Net asset value, end of year ....................................... $ 9.10 $ 9.76 $ 10.58 $ 10.27 $ 10.46
======= ======= ======= ======= =======
Total investment return(1) ......................................... (1.18)% (2.44)% 9.51% 4.99% 8.60%
======= ======= ======= ======= =======
Ratios/Supplemental data:
Net assets, end of year (000's) .................................... $226,989 $314,475 $408,190 $486,718 $549,932
Expenses to average net assets, net of waivers from adviser(2) ..... 1.29% 1.19% 1.24% 1.21% 1.27%
Net investment income to average net assets, net of waivers from
adviser(2) ........................................................ 5.92% 5.58% 6.07% 6.66% 6.88%
Portfolio turnover rate ............................................ 55% 63% 93% 172% 126%
</TABLE>
------------
@ Calculated using the average monthly shares outstanding for the year.
+ Investment advisory functions for this Fund were transferred from Mitchell
Hutchins Asset Management Inc. to Rogge Global Partners plc and Fischer
Francis Trees & Watts, Inc. (and affiliates) on October 10, 2000.
(1) Total investment return is calculated assuming a $10,000 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 any applicable sales charges; results would be lower if they were
included.
(2) During the years ended October 31, 2000 and 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%.
24
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
<TABLE>
<CAPTION>
CLASS B CLASS C
-------------------------------------------------------------- ------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31, FOR THE YEARS ENDED OCTOBER 31,
-------------------------------------------------------------- ------------------------------------------------------------
2000+ 1999 1998 1997 1996 2000+ 1999 1998 1997 1996
------------ ----------- ----------- ------------ ------------ ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9.72 $ 10.54 $ 10.24 $ 10.44 $ 10.31 $ 9.76 $ 10.58 $ 10.26 $ 10.45 $ 10.33
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
0.44 0.48 0.51 0.58 0.64 0.51 0.52 0.56 0.63 0.67
(0.66) (0.82) 0.33 (0.17) 0.15 (0.67) (0.82) 0.33 (0.18) 0.14
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
(0.22) (0.34) 0.84 0.41 0.79 (0.16) (0.30) 0.89 0.45 0.81
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
(0.14) (0.28) (0.43) (0.48) (0.66) (0.16) (0.30) (0.46) (0.50) (0.69)
- (0.06) (0.04) (0.05) - - (0.06) (0.04) (0.06) -
(0.31) (0.14) (0.07) (0.08) - (0.34) (0.16) (0.07) (0.08) -
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
(0.45) (0.48) (0.54) (0.61) (0.66) (0.50) (0.52) (0.57) (0.64) (0.69)
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
$ 9.05 $ 9.72 $ 10.54 $ 10.24 $ 10.44 $ 9.10 $ 9.76 $ 10.58 $ 10.26 $ 10.45
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
(2.27)% (3.29)% 8.53% 4.11% 7.95% (1.66)% (2.93)% 9.01% 4.48% 8.12%
====== ======= ======= ======= ======= ======= ======= ======= ======= =======
$ 4,408 $12,187 $33,478 $103,312 $307,577 $16,148 $21,682 $28,633 $36,935 $50,928
2.20% 2.11% 2.13% 1.99% 1.99% 1.78% 1.69% 1.77% 1.69% 1.73%
4.92% 4.64% 5.16% 5.83% 6.14% 5.44% 5.08% 5.54% 6.17% 6.40%
55% 63% 93% 172% 126% 55% 63% 93% 172% 126%
</TABLE>
25
<PAGE>
PAINEWEBBER GLOBAL INCOME FUND
<TABLE>
<CAPTION>
Selected data for a share of beneficial interest outstanding throughout
each year is presented below:
CLASS Y
----------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
----------------------------------------------------------
2000+ 1999 1998 1997 1996
------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year .................................. $ 9.76 $ 10.58 $ 10.27 $ 10.49 $ 10.35
------- -------- ------- -------- --------
Net investment income@ .............................................. 0.59 0.60 0.65 0.71 0.75
Net realized and unrealized gains (losses) from investments and
foreign currency@ .................................................. (0.67) (0.82) 0.32 (0.21) 0.17
------- -------- ------- -------- --------
Net increase (decrease) from investment transactions ................ (0.08) (0.22) 0.97 0.50 0.92
------- -------- ------- -------- --------
Dividends from net investment income ................................ (0.19) (0.35) (0.52) (0.56) (0.78)
Distributions in excess of net investment income .................... - (0.07) (0.05) (0.06) -
Distributions from paid in capital .................................. (0.39) (0.18) (0.09) (0.10) -
------- -------- ------- -------- --------
Total dividends and distributions to shareholders ................... (0.58) (0.60) (0.66) (0.72) (0.78)
------- -------- ------- -------- --------
Net asset value, end of year ........................................ $ 9.10 $ 9.76 $ 10.58 $ 10.27 $ 10.49
======= ======== ======= ======== ========
Total investment return(1) .......................................... (0.81)% (2.10)% 9.89% 5.20% 9.25%
======= ======== ======= ======== ========
Ratios/Supplemental data:
Net assets, end of year (000's) ..................................... $ 5,592 $ 9,735 $ 9,547 $ 10,096 $ 13,077
Expenses to average net assets, net of waivers from adviser(2) ...... 0.92% 0.85% 0.96% 0.94% 0.96%
Net investment income to average net assets, net of waivers from
adviser(2) ......................................................... 6.28% 5.86% 6.35% 6.93% 7.19%
Portfolio turnover rate ............................................. 55% 63% 93% 172% 126%
</TABLE>
------------
@ Calculated using the average monthly shares outstanding for the year.
+ Investment advisory functions for this Fund were transferred from Mitchell
Hutchins Asset Management Inc. to Rogge Global Partners plc and Fischer
Francis Trees & Watts, Inc. (and affiliates) on October 10, 2000.
(1) Total investment return is calculated assuming a $10,000 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 any applicable program fees; results would be lower if they were
included.
(2) During the years ended October 31, 2000 and 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%.
26
<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, 2000, 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 accounting principles generally accepted in the United States
of America. 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 auditing standards generally accepted in the
United States of America, 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, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
As described in the notes to the financial statements, on October 6, 2000, the
Board of Trustees approved a merger, subject to shareholder approval, whereby
the Fund would be merged into the PACE Global Fixed Income Investments.
PricewaterhouseCoopers LLP
New York, NY 10036
December 27, 2000
27
<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, 2000) 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:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Ordinary Income ........................... $ 0.1755 $ 0.1454 $ 0.1604 $ 0.1867
Distribution from paid in capital ......... $ 0.3720 $ 0.3080 $ 0.3411 $ 0.3953
</TABLE>
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need
not be reported as taxable income. Some retirement trusts (e.g., corporate,
Keogh and 403(b)(7) plans) may need this information for their annual
information reporting.
Since the Fund's fiscal year is not the calendar year, another
notification will be sent with respect to calendar year 2000. 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 2001. Shareholders are advised to
consult their own tax advisers with respect to the tax consequences of their
investment in the Fund.
28
<PAGE>
(This page has been left blank intentionally.)
29
<PAGE>
(This page has been left blank intentionally.)
30
<PAGE>
--------------------------------------------------------------------------------
BOARD OF TRUSTEES
E. Garrett Bewkes, Jr. Meyer Feldberg
Chairman
George W. Gowen
Margo N. Alexander
Frederic V. Malek
Richard Q. Armstrong
Carl W. Schafer
Richard R. Burt
Brian M. Storms
PRINCIPAL OFFICERS
Brian M. Storms Dianne E. O'Donnell
President Vice President and Secretary
Amy R. Doberman Paul H. Schubert
Vice President Vice President and Treasurer
INVESTMENT MANAGER,
ADMINISTRATOR AND DISTRIBUTOR
Mitchell Hutchins Asset Management Inc.
51 West 52nd Street
New York, New York 10019-6114
This report is not to be used in connection 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
correspondent firm. Read the prospectus carefully before investing.
<PAGE>
PaineWebber offers a family of 26 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 Enhanced S&P 500 Fund
o Enhanced Nasdaq-100 Fund
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
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
PAINEWEBBER MONEY MARKET FUND
PAINEWEBBER
(Copyright)2000 PaineWebber Incorporated
All Rights Reserved.
PAINEWEBBER
---------------------------------------
GLOBAL INCOME FUND
OCTOBER 31, 2000
A N N U A L R E P O R T
