<PAGE>
PAINEWEBBER GLOBAL EQUITY FUND ANNUAL REPORT
PERFORMANCE AT A GLANCE
- ------------------------------------------------------------------------------
The graph depicts the performance of PaineWebber Global Equity Fund versus
the Morgan Stanley Capital International World Index. It is important to note
that PaineWebber Global Equity 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 Equity
Fund (Class A) and the MSCI World Index from November 30, 1991 through
October 31, 1997.
PaineWebber Global Equity Class A MSCI World Index
--------------------------------- ----------------
Nov-91 $ 9,551 $10,000
Oct-92 $10,382 $ 9,966
Oct-93 $13,046 $12,724
Oct-94 $14,504 $13,763
Oct-95 $14,751 $15,144
Oct-96 $16,842 $17,693
Oct-97 $18,336 $20,745
Past performance is not predictive of future performance.
The performance of the other classes will vary from the performance of the
class shown based on the difference in sales charges and fees paid by
shareholders investing in different classes.
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
Twelve Months Five Years Commencement of Operations
Ended 10/31/97 Ended 10/31/97 Through 10/31/97+
-------------- -------------- --------------------------
<S> <C> <C> <C> <C>
Class A* 8.87% 12.04% 10.76%
% Return Without Deducting
Maximum Sales Charge Class B** 8.05% N/A 8.63%
Class C*** 8.05% N/A 9.74%
Class A* 3.98% 11.00% 9.90%
% Return After Deducting
Maximum Sales Charge Class B** 3.05% N/A 7.38%
Class C*** 7.05% N/A 9.74%
</TABLE>
* Maximum sales charge for Class A shares is 4.5% 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 1% and is
reduced to 0% after 1 year. Class C shares bear ongoing 12b-1 distribution
and service fees.
+ Commencement of operations dates are November 14, 1991, August 25, 1995
and May 10, 1993 for Class A, Class B and Class C, respectively.
Note: The Fund offers Class Y shares to certain eligible investors, including
the trustees of the PaineWebber Savings Investment Plan and INSIGHT
Investment Advisory Program participants. For the one year ended October 31,
1997 and since inception, May 10, 1993 through October 31, 1997, Class Y
shares had an average annual total return of 9.31% and 10.92%, respectively.
Class Y shares do not have initial or contingent deferred sales charges or
ongoing distribution and service fees.
The investment return and principal value of an investment in the Fund will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
1
<PAGE>
ANNUAL REPORT PAINEWEBBER EMERGING MARKETS EQUITY FUND
PERFORMANCE AT A GLANCE
- -------------------------------------------------------------------------------
The graph depicts the performance of PaineWebber Emerging Markets Equity Fund
versus the MSCI Emerging Markets Free Index and IFC Global Composite Index.
Going forward, we will compare the Fund's performance to the MSCI Emerging
Markets Free Index, as the new subadviser believes the Index is more
representative of the Fund. It is important to note that PaineWebber Emerging
Markets Equity Fund is a professionally managed mutual fund while the indices
are not available for investment and are unmanaged. The comparison is shown
for illustrative purposes only.
Comparison of the change of a $10,000 investment in PaineWebber Emerging
Markets Equity Fund (Class A, C and Y) and the MSCI Emerging Markets Free
Index and the IFC Global Composite Index from January 31, 1994 through
October 31, 1997.
<TABLE>
<CAPTION>
PAINEWEBBER PAINEWEBBER PAINEWEBBER
EMERGING MARKETS EMERGING MARKETS EMERGING MARKETS MSCI IFC
EQUITY FUND EQUITY FUND EQUITY FUND EMERGING MARKETS GLOBAL COMPOSITE
CLASS A CLASS C CLASS Y FREE INDEX INDEX
---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Jan-94 $9,549 $10,000 $10,000 $10,000 $10,000
Oct-94 $9,485 $ 9,884 $ 9,950 $10,314 $10,682
Oct-95 $7,630 $ 7,887 $ 8,029 $ 8,164 $ 8,471
Oct-96 $7,534 $ 7,737 $ 7,946 $ 8,516 $ 9,088
Oct-97 $7,479 $ 7,613 $ 7,904 $ 7,638 $ 8,253
</TABLE>
Past performance is not predictive of future performance.
The performance of the classes vary based on the difference in sales charges
and fees paid by shareholders in different classes.
Class B shares are not shown because they were first offered at a later date.
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
Twelve Months Commencement of Operations
Ended 10/31/97 Through 10/31/97+
-------------- --------------------------
<S> <C> <C> <C>
Class A* (0.74)% (6.13)%
% Return Without Deducting
Maximum Sales Charge Class B** (1.39)% 0.34%
Class C*** (1.61)% (6.85)%
Class A* (5.25)% (7.27)%
% Return After Deducting
Maximum Sales Charge Class B** (6.39)% (1.76)%
Class C*** (2.61)% (6.85)%
</TABLE>
* Maximum sales charge for Class A shares is 4.5% 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 1% and is
reduced to 0% after 1 year. Class C shares bear ongoing 12b-1 distribution an
service fees.
+ Commencement of operations dates are January 19, 1994, December 5, 1995
and January 19, 1994 for Class A, Class B and Class C, respectively.
Note: The Fund offers Class Y (formerly Class C) shares to certain eligible
investors, including the trustee of the PaineWebber Savings Investment Plan
and INSIGHT Investment Advisory Program participants. For the twelve months
ended October 31, 1997 and since inception, January 19, 1994 through October
31, 1997, Class Y shares had an average annual total return of (0.53)% and
(5.90)%, respectively. Class Y shares do not have initial or contingent
deferred sales charges or ongoing distribution and service fees.
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.
2
<PAGE>
PAINEWEBBER GLOBAL EQUITY FUND & EMERGING MARKETS EQUITY FUND ANNUAL REPORT
December 15, 1997
Dear Shareowner,
Enclosed is the Annual Report for PaineWebber Global Equity Fund and
PaineWebber Emerging Markets Equity Fund for the year ended October 31, 1997.
Global Equity has been managed by GE Investment Management Inc. since the
Fund commenced operations, while Emerging Markets Equity has been managed by
Schroder Capital Management International Inc. since February 25, 1997. As
Schroder Capital took over Emerging Markets Equity in late February, we will
highlight the returns for the fiscal year, as well as for Schroder Capital's
tenure.
WORLDWIDE ECONOMIC OVERVIEW
- -------------------------------------------------------------------------------
[LOGO]
The driving force in worldwide stock markets recently has been the
volatility in Asian markets. In October, the catalyst for dismal stock
performance can be traced to Hong Kong. While the currency crisis was
originally restricted to Thailand and its neighboring countries--the
Philipines, Indonesia and Malaysia--turmoil spread through the region,
finally reaching the North Asian markets of Korea, Taiwan and Hong Kong in
the closing weeks of October 1997. The outcome of the currency turmoil has
led Asian economies, with the exception of the Hong Kong dollar, to abandon
their fixed exchange rates and subsequently devalue their currencies
significantly.
While Hong Kong has historically been considered a safe and stable
refuge in the Pacific region, speculators attacked Hong Kong's currency
following the Taiwanese government's decision to devalue its currency in
late-October. Although both the Hong Kong monetary authority and China have
pledged to defend the peg, this pressure has forced Hong Kong to raise
interest rates to defend its currency's value, leading to significant
downward pressure on the real estate market and associated company share
prices.
Investors feared that if Hong Kong was susceptible to currency
devaluation, then many emerging market countries also would come under
attack. Investors then liquidated funds from emerging economies, and interest
rates increased to stem the flight of capital. Higher interest rates
generally equate to slower economies, less demand for U.S. and European
exports, lower corporate earnings and, finally, lower stock prices. However,
in our view, these high interest rate levels should force governments and
corporations to restructure the financial sector-a strong, long-term positive
for the Pacific region as a whole. Additionally, the currency devaluations
within Asia have enhanced the competitiveness of their products in the global
marketplace.
October marked the worst month in 1997 for emerging markets. In Latin
America, Brazil's stock market drop in October continued through the
beginning of November until the government announced its emergency fiscal
package on the 10th of November. The package removed the short-term threat to
its currency, the real, and caused the market to recover, but may push the
economy into recession in 1998. However, the
PAINEWEBBER GLOBAL EQUITY FUND
- - GOAL: Long-term growth of capital
- - PORTFOLIO MANAGERS/SUBADVISER: Ralph Layman with Michael Solecki, GE
Investment Management
- - TOTAL NET ASSETS: $494.2 million as of October 31, 1997
- - DIVIDEND PAYMENTS: Annually, if any
3
<PAGE>
privatization program remains on track. On a more positive note, Mexico's
strong economic growth is continuing, with industrial production rising 13%
in September. Chile's economic weakness can be attributed in large part to
concerns over both interest rates, which may have to rise, and the outlook
for exports, which have a heavy dependence on Asia.
Among the developed markets, Japan's performance was the worst, partly
due to its dependence on exports to the Asian region. For the year, the
Japanese stock market is down 18.2% in US$ and remains some 60% below its
1989 peak. A quick turnaround is not foreseen, as government economic
stimulation programs have failed to revive the economy and financial
institutions are coming under increased pressure from bankruptcies and bad
loans.
In the United States, the economic scenario remained positive. The
economy advanced in the third quarter, fueled by the largest increase in
consumer spending in over five years and the lowest inflation rate since
1964. The outlook for inflation is mixed. While wage pressures may gather
steam in the near term, global deflation is expected to continue-keeping a
cap on prices. The inability of companies to raise prices because of existing
global competition presents an offset, but neither is good for corporate
earnings.
PORTFOLIO REVIEW
- -------------------------------------------------------------------------------
PAINEWEBBER GLOBAL EQUITY FUND
[LOGO]
For the fiscal year ended October 31, 1997, the Fund's total return (the
net asset value change with dividends reinvested), without deducting sales
charges, was 8.87% for Class A shares, 8.05% for Class B shares, 8.05% for
Class C shares and 9.31% for Class Y shares. In comparison, the Fund
underperformed the Morgan Stanley Capital World Index and the Lipper Peer
Group Average, which were up 16,74% and 15.59% for the same period,
respectively.
If you had purchased or redeemed Fund shares during the period, the
Fund's total return for the period may be lower for all classes except Class
Y; for example, after deducting the maximum applicable sales charges, the
Fund's total return for the period was 3.98% for Class A shares, 3.05% for
Class B shares, 7.05% for Class C shares and 9.31% for Class Y shares.
The Continental European and U.S. markets were both strong regional
performers for the year ended October 31, 1997. The Fund was overweighted in
Continental Europe, benefiting from the region's outperformance. However,
this was not enough to offset its underweighted position in the U.S. market
(23.4% of net assets as of October 31, 1997) versus the MSCI World Index
weighting of 8.4% during the same period. Additionally, the Fund was also
negatively impacted by the poor relative performance of certain U.K.-based
global companies.
The Fund's performance was helped by its underweighting and favorable
stock selection in Japan (8.4% of net assets). Examples of the global
companies that performed well during the period are NTT Data Corp., Honda
Motor Co. and Sony Corp. GE Investment Management's global research team
identified these companies through its worldwide search for portfolio
candidates that are priced inexpensively relative to their long-term growth
rates.
PAINEWEBBER GLOBAL EQUITY FUND
Top Five Countries (as a % of net assets as of October 31, 1997)(*)
United States 23.4%
United Kingdom 12.0%
France 11.3%
Japan 8.4%
Germany 5.4%
(*) Allocations are subject to change
PAINEWEBBER GLOBAL EQUITY FUND
Top Five Holdings (as a % of net assets as of October 31, 1997)(+)
Airtouch Communications, Inc. 2.9%
Siebe PLC 2.5%
Allied Signal Inc. 2.5%
Sony Corp. 2.4%
Sampo Insurance Co. Ltd. 1.9%
(+) Holdings are subject to change
4
<PAGE>
PAINEWEBBER GLOBAL EQUITY FUND & EMERGING MARKETS EQUITY FUND ANNUAL REPORT
- --------------------------------------------------------------------------------
EMERGING MARKETS EQUITY FUND
For the fiscal year ended October 31, 1997, the Fund's total return (the
net asset value change), without deducting sales charges, was (0.74)% for
Class A shares, (1.39)% for Class B shares, (1.61)% for Class C shares and
(0.53)% for Class Y shares. In comparison, the Fund outperformed its
benchmark, the Morgan Stanley Capital International Emerging markets Free
Index, which was down 10.31%, but underperformed the Lipper Emerging Markets
Fund Average, which was up 3.10% for the same period.
For shareowners who purchased or redeemed Fund shares during the period,
the Fund's total return for the period may be lower for all classes except
Class Y; for example, after deducting the maximum applicable sales charges,
the Fund's total return for the period was (5.25)% for Class A shares,
(6.39)% for Class B shares, (2.61)% for Class C shares and (0.53)% for Class
Y shares.
As we mentioned earlier, for your information, we are also disclosing
the Fund's performance for the period since Schroder Capital Management
International assumed management responsibility. For the period from February
25, 1997 through the fiscal year-end, the Fund's total return (the net asset
value change), without deducting sales charges, was (11.42)% for Class A
shares, (11.80)% for Class B shares, (11.91)% for Class C shares and (11.34)%
for Class Y shares. While performance for this period was disappointing from
an asset class perspective, the Fund outperformed its benchmark by over eight
percentage points: the Index fell by 20.87%. We attribute this outperformance
to the fact that the Fund's exposure to Asia was reduced after Schroder
Capital assumed management responsibility.
For shareowners who purchased or redeemed Fund shares during the period
since Schroder Capital took over management, the Fund's total return may be
lower for all classes except Class Y; for example, after deducting the
maximum applicable sales charges, the Fund's total return for the period was
(15.41)% for Class A shares, (16.21)% for Class B shares, (12.79)% for Class
C shares and (11.34)% for Class Y shares.
HOW HAS THE FUND CHANGED SINCE FEBRUARY--The Fund's composition changed when
Schroder Capital took over management. Their goals upon assuming management
were to assess the Fund's holdings and country allocation, and to bring the
Fund in line with their policy over a period of weeks. This required country
allocation shifts, the sale of stocks that were not consistent with their
approach and, of course, purchases of companies they believed to have
sustainable competitive advantages and whose growth potential appeared
undervalued by the market.
One of the major changes Schroder Capital implemented in terms of
country allocation was reduce the Fund's exposure to Asia. Within the region,
all of the fund's Malaysian positions were sold--a market that is down a
staggering 61.6% since the end of February.
The Fund's exposure to the other Southeast Asian markets (Thailand,
Indonesia and the Philipines) was also reduced--markets that have been
affected by the currency crisis in the region.
Schroder Capital saw some opportunities in Europe and South Africa and
increased the Fund's exposure to these areas. The Fund's holdings in this
region are focused on Hungary and Poland, where fundamental trends remain
solid. Attractive valuations and falling interest rates led to Schroder
Capital to substantially increase the allocation in South Africa, now at 6.9%
of net assets, up 4.2% at the end of February.
PAINEWEBBER EMERGING MARKETS EQUITY FUND
FUND PROFILE
- - GOAL: Long-term capital appreciation
- - PORTFOLIO MANAGER/SUBADVISER: John Troiano, Schroder Capital Management
International Inc.
- - TOTAL NET ASSETS: $26.2 million as of October 31, 1997
- - DIVIDEND PAYMENTS: Annually, if any
PAINEWEBBER EMERGING MARKETS EQUITY FUND
Top Five Holdings (as a % of net assets as of October 31, 1997)*
Global Telesystems ADR 3.4%
Fomento Economico Mexicano, S.A. de C.V. Series B 2.0%
Petroleo Brasileiros S.A. (Petrobras) 1.9%
Cifra, S.A. de C.V. Series C 1.8%
Telefonos de Mexico S.A. de C.V. ADR 1.7%
* Holdings are subject to change
5
<PAGE>
ANNUAL REPORT
OUTLOOK
- ------------------------------------------------------------------------------
[LOGO]
Looking forward, we may well see continued volatility over the coming
months until the economic situation in Asia stabilizes. We expect that by
1999 the Pacific Basin region may begin to see a reacceleration of growth.
While the round of aggressive currency devaluations in Southeast Asia may pose
a short-term obstacle for the region's companies, it should eventually lead
to significant export potential for the region and increased competitiveness.
After the dramatic falls experienced by many Asian markets, the recent
correction in Latin American and improving fundamentals in Europe and Africa,
we believe that valuations in many of the emerging markets are attractive and
that favorable longer-term prospects will start to reassert themselves.
In Asia, we continue to favor India and China and are looking for
currency stability followed by falling interest rates before adding to the
Southeast Asian markets.
Generally, we continue to have a favorable outlook for Europe, as the
region's growth prospects and interest conditions are attractive. The
Continent appears to be on target to achieve economic union by January 1,
1999.
Low inflation, strong corporate profits and a healthy economy have
served as a solid foundation for the U.S. market; we remain concerned,
however, over the sustainability of earnings growth and valuations in the
U.S. market for 1998. GE Investment intends to maintain an underweighted
U.S. position in PaineWebber Global Equity Fund until valuations become more
attractive.
For a quarterly FUND PROFILE on PaineWebber Global Equity Fund,
PaineWebber Emerging Markets Equity Fund or another fund in the PaineWebber
Family of Funds, contact your Investment Executive.
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.
Sincerely
/s/ Margo N. Alexander /s/ Ralph Layman /s/John Troiano
MARGO N. ALEXANDER RALPH LAYMAN JOHN TROIANO
President, Portfolio Manager, Portfolio Manager,
Mitchell Hutchins PaineWebber Global PaineWebber Emerging Markets
Asset Management Inc. Equity Fund Equity Fund
The views expressed in this report were those of the Funds' portfolio
managers as of the dates specified, and may not reflect the views of the
portfolio managers on the date this report is first published or anytime
thereafter. These views are intended to assist shareholders of the Funds in
understanding their investment in the Funds and do not constitute investment
advice; investors should consult their own investment executives as to their
individual investment programs.
PAINEWEBBER EMERGING MARKETS EQUITY FUND
SHIFTS IN REGIONAL ALLOCATION
February 28, 1997 versus October 31, 1997
(based on % of net assets)*
Since Schroder Capital assumed management of the Fund on February 25, 1997,
it has shifted the Fund's country allocation. For illustrative purposes only,
the graph below provides you with a quick summary of these moves.
31-Oct-97 25-Feb-97
--------- ---------
Asia 29.5% 46.2%
Latin America 37.2% 28.9%
Europe 15.3% 13.7%
South Africa 6.9% 4.2%
Middle East 6.2% 1.5%
* Allocations are subject to change
<PAGE>
PAINEWEBBER GLOBAL EQUITY FUND
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN(1)
---------------------------------------- -----------------------------------
12 MONTHS ENDED 6 MONTHS
10/31/97 04/30/97 10/31/96 10/31/97 ENDED 10/31/97
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Class A Shares $18.37 $17.55 $ 17.43 8.87% 4.67%
- ---------------------------------------------------------------------------------------------------------------
Class B Shares 17.69 16.97 16.93 8.05 4.24
- ---------------------------------------------------------------------------------------------------------------
Class C Shares 17.69 16.97 16.93 8.05 4.24
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS A SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------------- CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
11/14/91-12/31/91 $12.00 $12.29 -- -- 2.42%
- ---------------------------------------------------------------------------------------------------------------
1992 12.29 12.45 $ 0.1610 $ 0.0800 3.26
- ---------------------------------------------------------------------------------------------------------------
1993 12.45 16.07 0.2100 -- 30.77
- ---------------------------------------------------------------------------------------------------------------
1994 16.07 14.43 1.2530 -- (2.38)
- ---------------------------------------------------------------------------------------------------------------
1995 14.43 15.81 0.5743 -- 13.54
- ---------------------------------------------------------------------------------------------------------------
1996 15.81 17.57 0.5784 -- 14.80
- ---------------------------------------------------------------------------------------------------------------
01/01/97-10/31/97 17.57 18.37 -- -- 4.55
- ---------------------------------------------------------------------------------------------------------------
Total: $ 2.7767 $ 0.0800
- ---------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 10/31/97: 83.97%
- ---------------------------------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS B SHARES
<CAPTION>
NET ASSET VALUE
---------------------- CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
08/25/95-12/31/95 $15.83 $15.46 $ 0.5743 -- 1.29%
- ---------------------------------------------------------------------------------------------------------------
1996 15.46 17.03 0.5784 -- 13.91
- ---------------------------------------------------------------------------------------------------------------
01/01/97-10/31/97 17.03 17.69 -- -- 3.88
- ---------------------------------------------------------------------------------------------------------------
Total: $ 1.1527 $ 0.0000
- ---------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 10/31/97: 19.84%
- ---------------------------------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS C SHARES
<CAPTION>
NET ASSET VALUE
---------------------- CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
05/10/93-12/31/93 $13.80 $15.99 $ 0.2100 -- 17.39%
- ---------------------------------------------------------------------------------------------------------------
1994 15.99 14.23 1.2530 -- (3.12)
- ---------------------------------------------------------------------------------------------------------------
1995 14.23 15.46 0.5743 -- 12.67
- ---------------------------------------------------------------------------------------------------------------
1996 15.46 17.03 0.5784 -- 13.91
- ---------------------------------------------------------------------------------------------------------------
01/01/97-10/31/97 17.03 17.69 -- -- 3.88
- ---------------------------------------------------------------------------------------------------------------
Total: $ 2.6157 $ 0.0000
- ---------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 10/31/97: 51.63%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Figures assume reinvestment of all dividends and capital gain distributions,
if any, at net asset value on the payable dates and do not include sales
charges; results for each class would be lower if sales charges were
included.
Note: The Fund offers Class Y shares to a limited group of eligible investors,
including the trustee of the PaineWebber Savings Investment Plan, and INSIGHT
Investment Advisory Program Participants. For year ended October 31, 1997, and
since inception, May 10, 1993 through October 31, 1997, Class Y shares had a
total return of 9.31% and 59.06% 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.
7
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE TOTAL RETURN(1)
---------------------------------------- ------------------------------------
12 MONTHS ENDED 6 MONTHS
10/31/97 04/30/97 10/31/96 10/31/97 ENDED 10/31/97
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Class A Shares $ 9.39 $10.46 $ 9.46 (0.74)% (10.23)%
- ----------------------------------------------------------------------------------------------------------------
Class B Shares 9.19 10.27 9.32 (1.39) (10.52)
- ----------------------------------------------------------------------------------------------------------------
Class C Shares 9.17 10.26 9.32 (1.61) (10.62)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS A SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
---------------------- CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
01/19/94-12/31/94 $12.00 $10.49 -- -- (12.58)%
- ---------------------------------------------------------------------------------------------------------------
1995 10.49 9.26 -- $ 0.0517 (11.20)
- ---------------------------------------------------------------------------------------------------------------
1996 9.26 9.71 -- -- 4.86
- ---------------------------------------------------------------------------------------------------------------
01/01/97-10/31/97 9.71 9.39 -- -- (3.30)
- ---------------------------------------------------------------------------------------------------------------
Total: $ 0.0000 $ 0.0517
- ---------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 10/31/97: (21.29)%
- ---------------------------------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS B SHARES
<CAPTION>
NET ASSET VALUE
---------------------- CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
12/05/95-12/31/95 $ 9.13 $ 9.18 -- -- 0.55%
- ---------------------------------------------------------------------------------------------------------------
1996 9.18 9.56 -- -- 4.14
- ---------------------------------------------------------------------------------------------------------------
01/01/97-10/31/97 9.56 9.19 -- -- (3.87)
- ---------------------------------------------------------------------------------------------------------------
Total: $ 0.0000 $ 0.0000
- ---------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 10/31/97: 0.66%
- ---------------------------------------------------------------------------------------------------------------
PERFORMANCE SUMMARY CLASS C SHARES
<CAPTION>
NET ASSET VALUE
---------------------- CAPITAL GAINS DIVIDENDS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED PAID RETURN(1)
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
01/19/94-12/31/94 $12.00 $10.42 -- -- (13.17)%
- ---------------------------------------------------------------------------------------------------------------
1995 10.42 9.18 -- $ 0.0034 (11.87)
- ---------------------------------------------------------------------------------------------------------------
1996 9.18 9.55 -- -- 4.03
- ---------------------------------------------------------------------------------------------------------------
01/01/97-10/31/97 9.55 9.17 -- -- (3.98)
- ---------------------------------------------------------------------------------------------------------------
Total: $ 0.0000 $ 0.0034
- ---------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 10/31/97: (23.55)%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Figures assume reinvestment of all dividends and capital gain distributions,
if any, at net asset value on the payable dates and do not include sales
charges; results for each class would be lower if sales charges were
included.
Note: The Fund offers Class Y shares to a limited group of eligible investors
including the INSIGHT Investment Advisory Program participants. For the year
ended October 31, 1997 and since inception, January 19, 1994 through October 31,
1997, Class Y shares had a total return of (0.53)% and (20.56)%, 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.
8
<PAGE>
PAINEWEBBER GLOBAL EQUITY FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------- -------------
<C> <S> <C>
COMMON STOCKS--94.89%
AUSTRALIA--0.74%
BEVERAGES--0.54%
351,779 Coca Cola Amatil Ltd.......... $ 2,647,059
-------------
FOOD--0.20%
1,886,584 Burns, Philp & Co. Ltd........ 995,055
-------------
Total Australia Common Stocks.................... 3,642,114
-------------
AUSTRIA--1.25%
ENGINEERING & CONSTRUCTION--0.72%
20,030 VA Technologie AG............. 3,554,176
-------------
OIL & GAS--0.53%
18,501 OMV AG........................ 2,630,257
-------------
Total Austria Common Stocks...................... 6,184,433
-------------
BRAZIL--1.52%
BANKS--0.71%
127,809 Uniao de Banco Brasileiro S.A.
GDR......................... 3,482,795
-------------
TELECOMMUNICATIONS--0.81%
39,603 Telecomunicacoes Brasileiras
S.A. (Telebras) ADR......... 4,019,705
-------------
Total Brazil Common Stocks....................... 7,502,500
-------------
CANADA--0.34%
ENERGY--0.34%
72,208 Renaissance Energy Ltd.*...... 1,675,383
-------------
CROATIA--0.12%
PHARMACEUTICAL--0.12%
37,263 Pliva D.D. GDR................ 577,577
-------------
FINLAND--3.21%
FINANCIAL SERVICES--1.27%
1,281,372 Merita Ltd. (Series A)........ 6,266,604
-------------
MULTI-LINE INSURANCE--1.94%
322,264 Sampo Insurance Co. Ltd....... 9,593,323
-------------
Total Finland Common Stocks...................... 15,859,927
-------------
FRANCE--11.26%
AUTO PARTS--0.73%
70,476 Michelin (Class B)............ 3,615,282
-------------
AUTOMOBILES--0.93%
165,739 Renault S.A.*................. 4,611,643
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------- -------------
<C> <S> <C>
</TABLE>
FRANCE--(CONCLUDED)
<TABLE>
<C> <S> <C>
COMPUTER SOFTWARE & SERVICES--0.93%
57,838 Cap Gemini S.A. .............. $ 4,592,347
-------------
ELECTRONICS--1.21%
112,209 Schneider S.A................. 5,991,483
-------------
ENGINEERING & CONSTRUCTION--0.56%
26,674 Suez Lyonnaise des Eaux
S.A. ....................... 2,769,943
-------------
FOOD--0.87%
8,285 Carrefour S.A................. 4,323,296
-------------
MULTI-LINE INSURANCE--1.66%
119,476 AXA-UAP....................... 8,181,514
-------------
OIL--1.91%
85,070 Total S.A. (Class B).......... 9,438,703
-------------
OIL WELL EQUIPMENT & SERVICES--1.56%
139,837 Coflexip S.A. ADR............. 7,691,035
-------------
STEEL--0.90%
268,700 Usinor Sacilor................ 4,448,637
-------------
Total France Common Stocks....................... 55,663,883
-------------
GERMANY--5.05%
AUTOMOBILES--1.53%
112,715 Daimler-Benz AG............... 7,552,258
-------------
MACHINERY (DIVERSIFIED)--1.20%
14,092 Mannesmann AG................. 5,951,373
-------------
MANUFACTURING--0.50%
39,826 Siemens AG.................... 2,451,293
-------------
MEDICAL PRODUCTS & SUPPLIES--0.91%
63,965 Fresenius Medical Care AG*.... 4,508,497
-------------
STEEL--0.91%
32,134 SGL Carbon AG................. 4,511,212
-------------
Total Germany Common Stocks...................... 24,974,633
-------------
GREECE--0.17%
BANKS--0.17%
12,806 Alpha Credit Bank............. 846,070
-------------
HONG KONG--1.22%
ELECTRONICS--0.32%
576,500 Johnson Electric Holdings..... 1,573,324
-------------
</TABLE>
9
<PAGE>
PAINEWEBBER GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS--(CONTINUED)
HONG KONG--(CONCLUDED)
<TABLE>
<C> <S> <C>
FINANCIAL SERVICES--0.64%
140,281 HSBC Holdings PLC............. $ 3,175,215
-------------
RETAIL--0.26%
3,485,000 Giordano International Ltd.... 1,284,647
-------------
Total Hong Kong Common Stocks.................... 6,033,186
-------------
INDONESIA--0.81%
AUTOMOBILES--0.65%
4,326,000 P.T. Astra International
Inc......................... 3,210,000
-------------
TRANSPORTATION--0.16%
3,021,719 P.T. Steady Safe.............. 817,247
-------------
Total Indonesia Common Stocks.................... 4,027,247
-------------
ISRAEL--2.05%
COMPUTER SOFTWARE & SERVICES--0.27%
43,100 Tecnomatix Technologies
Ltd.*....................... 1,330,712
-------------
PHARMACEUTICAL--0.76%
80,860 Teva Pharmaceutical Industries
Ltd. ADR (1)................ 3,780,205
-------------
TELECOMMUNICATIONS--1.02%
182,080 ECI Telecommunications Ltd.... 5,029,960
-------------
Total Israel Common Stocks....................... 10,140,877
-------------
ITALY--4.48%
BANKS--1.47%
1,637,160 Credito Italiano (1).......... 4,366,082
383,384 Istituto Bancario San Paolo di
Torino...................... 2,908,782
-------------
7,274,864
-------------
CONGLOMERATE--0.50%
3,042,920 Montedison SPA................ 2,469,564
-------------
HOUSEHOLD FURNITURE & APPLIANCES--1.36%
300,583 Industrie Natuzzi SPA ADR..... 6,725,545
-------------
TELECOMMUNICATIONS--1.15%
1,531,261 Telecom Italia Mobile SPA..... 5,680,047
-------------
Total Italy Common Stocks........................ 22,150,020
-------------
JAPAN--8.39%
AUTOMOBILES--1.28%
188,000 Honda Motor Co................ 6,326,547
-------------
COMPUTER SOFTWARE & SERVICES--1.69%
175 NTT Data Corp. (1)............ 8,361,030
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------- -------------
<C> <S> <C>
</TABLE>
JAPAN--(CONCLUDED)
<TABLE>
<C> <S> <C>
ELECTRONICS--2.83%
139,800 Sony Corp..................... $ 11,604,503
136,000 Sumitomo Sitix Corp. (1)...... 2,395,679
-------------
14,000,182
-------------
FINANCIAL SERVICES--1.08%
198,765 Credit Saison Co. Ltd. (1).... 5,334,532
-------------
PHOTOGRAPHY & IMAGING--1.28%
260,000 Canon Inc. ................... 6,308,267
-------------
TELECOMMUNICATIONS--0.23%
333 DDI Corp...................... 1,112,306
-------------
Total Japan Common Stocks........................ 41,442,864
-------------
MEXICO--1.26%
BANKS--0.52%
276,222 Grupo Financiero Bancomer S.A.
ADR+*(1).................... 2,555,053
-------------
FOOD--0.26%
329,811 Gruma S.A. de C.V. (Series
B)*......................... 1,290,137
-------------
TELECOMMUNICATIONS--0.48%
95,420 Grupo Carso S.A. de C.V.
(Series A).................. 604,270
144,971 Grupo Carso S.A. de C.V.
ADR......................... 1,775,895
-------------
2,380,165
-------------
Total Mexico Common Stocks....................... 6,225,355
-------------
NETHERLANDS--3.67%
FINANCIAL SERVICES--1.81%
212,981 Internationale Nederlanden
Groep N.V. ................. 8,940,485
-------------
OIL WELL EQUIPMENT & SERVICES--0.78%
63,233 IHC Caland N.V. .............. 3,888,756
-------------
STEEL--1.08%
210,579 Ispat International N.V.
(Class A)*.................. 5,330,281
-------------
Total Netherlands Common Stocks.................. 18,159,522
-------------
NORWAY--0.48%
OIL WELL EQUIPMENT & SERVICES--0.48%
34,742 Petroleum Geo Services*....... 2,395,004
-------------
PAKISTAN--0.00%
BANKS--0.00%
70 Bank Commerce Al-Habib,
Ltd.*(2).................... 57
100 Soneri Bank Ltd.*(2) ......... 57
-------------
Total Pakistan Common Stocks..................... 114
-------------
</TABLE>
10
<PAGE>
PAINEWEBBER GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS--(CONTINUED)
<TABLE>
<C> <S> <C>
PANAMA--1.68%
BANKS--0.52%
64,503 Banco Latinoamericano de
Exportaciones S.A. (Class
E).......................... $ 2,563,994
-------------
BEVERAGES--1.16%
185,528 Panamerican Beverages Inc..... 5,751,368
-------------
Total Panama Common Stocks....................... 8,315,362
-------------
PERU--0.95%
TELECOMMUNICATIONS--0.95%
236,991 Telefonica Del Peru S.A.
ADR......................... 4,680,572
-------------
PHILIPPINES--0.66%
BANKS--0.24%
168,120 Metropolitan Bank & Trust
Co. ........................ 1,161,901
-------------
BEVERAGES--0.31%
1,367,423 San Miguel Corp. (Class B)
(1) ........................ 1,523,645
-------------
TELECOMMUNICATIONS--0.11%
2,584,000 Pilipino Telephone Corp.*..... 561,264
-------------
Total Philippines Common Stocks.................. 3,246,810
-------------
PORTUGAL--0.82%
BANKS--0.57%
136,932 Banco Comercial Portugues
S.A. ....................... 2,787,697
-------------
TELECOMMUNICATIONS--0.25%
13,785 Telecel-Comunicacoes Pessoais
S.A.*....................... 1,246,412
-------------
Total Portugal Common Stocks..................... 4,034,109
-------------
SOUTH AFRICA--0.71%
COMPUTER SOFTWARE & SERVICES--0.71%
838,580 Dimension Data Holdings
Ltd.*....................... 3,485,008
-------------
SPAIN--2.19%
BANKS--0.62%
109,379 Banco Santander S.A. (1) ..... 3,063,996
-------------
OIL & GAS--1.57%
185,267 Repsol S.A.................... 7,768,809
-------------
Total Spain Common Stocks........................ 10,832,805
-------------
SWEDEN--1.50%
AUTO PARTS--1.50%
184,174 Autoliv Inc. SDR.............. 7,389,189
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------- -------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
SWITZERLAND--4.94%
ELECTRICAL EQUIPMENT--1.18%
4,491 ABB AG........................ $ 5,853,294
-------------
MULTI-LINE INSURANCE--0.95%
11,418 Zurich Versicherungs.......... 4,713,161
-------------
PHARMACEUTICAL--1.83%
5,766 Novartis AG................... 9,030,415
-------------
REINSURANCE--0.28%
909 Schw Ruckversicherungs........ 1,369,099
-------------
RETAIL--0.70%
30,258 Tag Heuer International
S.A.*....................... 3,457,440
-------------
Total Switzerland Common Stocks.................. 24,423,409
-------------
UNITED KINGDOM--12.04%
ALUMINUM--0.50%
852,731 Billiton PLC.................. 2,471,483
-------------
AUTO PARTS--1.25%
1,796,757 LucasVarity PLC............... 6,164,675
-------------
BANKS--0.27%
162,175 Bank Of Scotland.............. 1,338,679
-------------
LEISURE--2.69%
306,085 Airtours PLC.................. 6,085,383
520,866 Granada Group PLC............. 7,183,322
-------------
13,268,705
-------------
MACHINERY (DIVERSIFIED)--2.49%
640,058 Siebe PLC..................... 12,295,673
-------------
MANUFACTURING--0.46%
131,020 Bodycote International PLC.... 2,270,730
-------------
METALS--1.28%
639,966 Johnson Matthey PLC........... 6,324,114
-------------
MULTI-LINE INSURANCE--0.55%
84,415 Commercial Union PLC.......... 1,189,670
161,753 Royal & Sun Alliance Insurance
Group....................... 1,550,944
-------------
2,740,614
-------------
PHARMACEUTICAL--0.47%
675,817 Medeva PLC.................... 2,347,075
-------------
PUBLISHING--0.54%
270,223 Reed International PLC........ 2,672,598
-------------
RAILROADS--0.95%
294,009 Railtrack Group PLC........... 4,700,900
-------------
</TABLE>
11
<PAGE>
PAINEWEBBER GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS--(CONCLUDED)
UNITED KINGDOM--(CONCLUDED)
<TABLE>
<C> <S> <C>
TRANSPORTATION--0.59%
236,773 Stagecoach Holdings PLC....... $ 2,895,924
-------------
Total United Kingdom Common Stocks............... 59,491,170
-------------
UNITED STATES--23.38%
BANKS--1.56%
61,575 Citicorp...................... 7,700,723
-------------
CHEMICALS--0.60%
74,884 Avery Dennison Corp........... 2,981,319
-------------
COMPUTER SOFTWARE & SERVICES--1.36%
230,418 First Data Corp. ............. 6,696,523
-------------
CONGLOMERATE--2.49%
341,185 Allied-Signal Inc............. 12,282,660
-------------
ELECTRICAL EQUIPMENT--1.69%
154,759 Harman International
Industries Inc.............. 8,356,986
-------------
ELECTRONICS--3.76%
64,015 Intel Corp.................... 4,929,155
96,594 Motorola Inc.................. 5,964,679
515,938 Sensormatic Electronics Corp.
(1)......................... 7,706,824
-------------
18,600,658
-------------
ELECTRONIC COMPONENTS & INSTRUMENTS--0.97%
128,547 Thermo Electron Corp.*........ 4,796,410
-------------
FINANCIAL SERVICES--2.01%
87,549 Morgan Stanley, Dean Witter,
Discover & Co. ............. 4,289,901
80,778 Travelers Group Inc........... 5,654,460
-------------
9,944,361
-------------
INDUSTRIAL SERVICES & SUPPLIES--1.04%
107,880 Ecolab Inc.................... 5,131,043
-------------
OFFICE EQUIPMENT & SUPPLIES--0.55%
86,860 Zebra Technologies Corp.
(Class A)*.................. 2,714,375
-------------
PHARMACEUTICAL--1.53%
128,754 R.P. Scherer Corp.*........... 7,580,392
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------- -------------
<C> <S> <C>
</TABLE>
UNITED STATES--(CONCLUDED)
<TABLE>
<C> <S> <C>
RETAIL--2.21%
89,426 Home Depot Inc................ $ 4,974,321
141,825 Sears Roebuck & Co. .......... 5,938,922
-------------
10,913,243
-------------
STEEL--0.68%
89,413 UCAR International Inc.*...... 3,352,988
-------------
TELECOMMUNICATIONS--2.93%
375,213 Airtouch Communications
Inc.*....................... 14,492,602
-------------
Total United States Common Stocks................ 115,544,283
-------------
Total Common Stocks (cost--$428,622,090)......... 468,943,426
-------------
PREFERRED STOCKS--1.36%
BRAZIL--0.97%
TELECOMMUNICATIONS--0.97%
18,272,765 Telecomunicacoes de Sao Paolo
S.A.-Telesp................. 4,773,510
-------------
GERMANY--0.39%
MEDICAL PRODUCTS & SUPPLIES--0.39%
34,150 Fresenius Medical Care AG*.... 1,941,467
-------------
Total Preferred Stocks (cost--$7,676,976)........ 6,714,977
-------------
<CAPTION>
NUMBER OF
RIGHTS
- ---------------
<C> <S> <C>
RIGHTS--0.00%
BRAZIL--0.00%
TELECOMMUNICATIONS--0.00%
792,563 Telecomunicacoes de Sao Paolo
S.A.-Telesp, rights expiring
11/12/97 (cost--$0)......... 72
-------------
</TABLE>
12
<PAGE>
PAINEWEBBER GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000'S) DATES RATES VALUE
- --------------- -------- -------- -------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENTS--2.13%
$ 1,570 Repurchase Agreement dated
10/31/97 with State Street
Bank & Trust Company,
collateralized by $1,603,126
U.S. Treasury Bills, 5.875%
due 08/15/98,
proceeds: $1,570,720........ 11/03/97 5.500% $ 1,570,000
8,940 Repurchase Agreement dated
10/31/97 with State Street
Bank & Trust Company,
collateralized by $9,122,112
U.S. Treasury Bonds, 8.875%
due 02/15/19, proceeds:
$8,944,098.................. 11/03/97 5.500 8,940,000
-------------
Total Repurchase Agreements
(cost--$10,510,000)............................ 10,510,000
-------------
<CAPTION>
NUMBER OF
SHARES
- ---------------
<C> <S> <C> <C> <C>
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED--4.16%
MONEY MARKET FUNDS--4.16%
15,255,391 Liquid Assets Portfolio........................... 15,255,391
3,500,934 Prime Portfolio................................... 3,500,934
90,473 TempCash Portfolio................................ 90,473
1,689,769 TempFund Portfolio................................ 1,689,769
-------------
Total Money Market Funds............................................. 20,536,567
-------------
Total Investments of Cash Collateral for Securities Loaned
(cost--$20,536,567)................................................ 20,536,567
-------------
Total Investments (cost--$467,345,633)--102.54%...................... 506,705,042
Liabilities in excess of other assets--(2.54)%....................... (12,529,625)
-------------
Net Assets--100.00%.................................................. $ 494,175,417
-------------
-------------
</TABLE>
- -----------------
* Non-income producing security
+ Security 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.
ADR American Depositary Receipt
GDR Global Depositary Receipt
SDR Swedish Depositary Receipt
(1) Security, or a portion thereof, was loaned at October 31, 1997.
(2) Illiquid securities
See accompanying notes to financial statements
13
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------- -------------
<C> <S> <C>
COMMON STOCKS--87.55%
ARGENTINA--4.54%
BANKS--0.78%
5,000 Banco De Galicia y Buenos
Aires S.A. de C.V. ADR...... $ 121,172
24,642 IRSA Inversiones y
Representaciones S.A. Class
B........................... 82,847
-------------
204,019
-------------
DIVERSIFIED INDUSTRIALS--0.32%
13,395 Perez Companc S.A. Class B.... 83,903
-------------
OIL EXPLORATION & PRODUCTION--1.65%
71,420 Astra Cia Argentina de
Petroleo S.A. Class B....... 111,483
10,067 YPF Sociedad Anonima Series D
ADR......................... 322,144
-------------
433,627
-------------
PROPERTY--0.31%
4,500 Cresud S.A. C.I.F.yA. ADR*.... 81,000
-------------
TELECOMMUNICATIONS--1.48%
39,900 Telecom Argentina S.A.*....... 199,621
6,730 Telefonica de Argentina S.A.
Class B ADR................. 189,281
-------------
388,902
-------------
Total Argentina Common Stocks.................... 1,191,451
-------------
BOTSWANA--0.35%
BREWERIES, PUBS, & RESTAURANTS--0.35%
78,700 Sechaba Breweries Ltd......... 90,863
-------------
BRAZIL--4.60%
ELECTRICITY--2.30%
2,140,000 Companhia Paulista de Forca e
Luz......................... 313,473
870,000 Light Servicos de Eletricidade
S.A.*....................... 288,830
-------------
602,303
-------------
ENGINEERING--0.00%
1 Mangels Industrial S.A.*...... 0
-------------
TELECOMMUNICATIONS--2.30%
4,900,000 Telecomunicacones Brasileiras
S.A. (Telebras)............. 435,531
1,650 Telecomunicacones Brasileiras
S.A. (Telebras) ADR......... 167,475
-------------
603,006
-------------
Total Brazil Common Stocks....................... 1,205,309
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------- -------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
CHILE--4.80%
ALCOHOLIC BEVERAGES--0.42%
4,000 Vina Concha Y Toro S.A. ADR... $ 109,000
-------------
BANKS--0.51%
3,700 Banco BHIF ADR................ 64,056
5,300 Banco Santander Chile Series A
ADS......................... 68,900
-------------
132,956
-------------
DIVERSIFIED INDUSTRIALS--0.23%
5,000 Maderas Y Sinteticos S.A.
ADR......................... 61,250
-------------
ELECTRICITY--1.47%
6,750 Chilectra S.A. ADR............ 182,250
7,447 Chilgener S.A. ADR............ 202,931
-------------
385,181
-------------
EXTRACTIVE INDUSTRIES--0.44%
2,200 Sociedad Quimica Y Minera de
Chile S.A. Series B ADR..... 114,125
-------------
RETAILERS, GENERAL--0.32%
4,600 Santa Isabel SA ADR........... 85,100
-------------
TELECOMMUNICATIONS--1.41%
13,325 Compania de Telecomunicaciones
de Chile S.A. ADR........... 369,769
-------------
Total Chile Common Stocks........................ 1,257,381
-------------
CHINA--1.21%
ELECTRICITY & GAS--0.48%
5,700 Huaneng Power International
Inc. ADR*................... 125,400
-------------
TRANSPORTATION--0.73%
94,000 Guangshen Railway Co. Ltd..... 29,179
250,000 Qingling Motors Co. Class H... 163,293
-------------
192,472
-------------
Total China Common Stocks........................ 317,872
-------------
CROATIA--0.49%
HEALTH/PERSONAL CARE--0.49%
8,300 Pliva dd GDR.................. 128,650
-------------
CZECH REPUBLIC--0.62%
UTILITIES--0.62%
1,415 SPT Telecom A.S.*............. 163,122
-------------
</TABLE>
14
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS--(CONTINUED)
<TABLE>
<C> <S> <C>
EGYPT--0.80%
BANKS--0.80%
9,700 Commercial International Bank
GDR......................... $ 210,975
-------------
GHANA--0.37%
EXTRACTIVE INDUSTRIES--0.37%
9,900 Ashanti Goldfields Co. Ltd.
GDR......................... 97,763
-------------
GREECE--1.50%
BEVERAGE & TOBACCO MANUFACTURING--1.07%
6,790 Hellenic Bottling Co. S.A..... 280,455
-------------
BUILDING MATERIALS & CONSTRUCTION--0.43%
2,300 Titan Cement Co. S.A.......... 112,395
-------------
Total Greece Common Stocks....................... 392,850
-------------
HONG KONG--4.26%
COMMERCE/INDUSTRIAL--1.62%
333,000 Beijing Datang Power
Generation Company Ltd.*.... 167,975
24,000 Citic Pacific Ltd............. 114,855
32,000 Shanghai Industrial Holdings
Ltd.*....................... 142,378
-------------
425,208
-------------
CONSTRUCTION--0.90%
47,000 Anhui Expressway Co. Ltd...... 8,207
88,000 Cheung Kong Infrastucture..... 227,640
-------------
235,847
-------------
FOODS--0.03%
50,000 Tingyi Cayman Island Holdings
Corp.*...................... 8,407
-------------
MISCELLANEOUS FINANCIAL--0.28%
240,000 Min Xin Holdings+*............ 72,172
-------------
REAL ESTATE--1.05%
38,000 China Resources Developement
Enterprises*................ 104,197
86,000 New World Infrastructure
Ltd.*....................... 170,187
-------------
274,384
-------------
SHIPPING--0.37%
84,000 Cosco Pacific Ltd............. 97,782
-------------
WHOLESALE--0.01%
2,000 Guangnan Holdings............. 1,837
-------------
Total Hong Kong Common Stocks.................... 1,115,637
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------- -------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
HUNGARY--2.49%
BANKS--0.18%
1,500 OTP Bank National Savings &
Commerical Bank*............ $ 46,688
-------------
BUILDING MATERIALS & CONSTRUCTION--0.23%
1,082 Pannonplast Muanya RT......... 59,523
-------------
CHEMICALS--0.56%
4,150 Borsodchem RT GDR............. 148,362
-------------
HEALTH/PERSONAL CARE--1.12%
3,150 Gedeon Richter RT GDR*........ 292,950
-------------
MISCELLANEOUS MANUFACTURING--0.16%
1,200 Borsodchem RT GDR+*........... 42,900
-------------
OILS--0.24%
2,880 Magyar Olaj Es Gazipari KT*... 62,280
-------------
Total Hungary Common Stocks...................... 652,703
-------------
INDIA--8.53%
ELECTRICAL EQUIPMENT--0.59%
15,000 Bharat Heavy Electricals
Ltd......................... 154,766
-------------
ELECTRICITY--0.21%
11,000 BSES Ltd.*.................... 55,197
-------------
ELECTRICITY & GAS--0.55%
46,000 Tata Power Co................. 145,452
-------------
ENGINEERING VEHICLES--1.39%
9,000 Bajaj Auto Ltd................ 143,217
12,450 Mahindra & Mahindra Ltd....... 123,749
11,000 Tata Engineering & Locomotive
Company Ltd. GDR............ 96,331
-------------
363,297
-------------
LEISURE & HOTELS--0.37%
6,000 Indian Hotels Co. Ltd.*....... 97,087
-------------
OIL (INTEGRATED)--1.50%
14,000 Bharat Petroleum Corp.
Ltd.*....................... 167,833
17,100 Hindustan Petroleum Corp.
Ltd.*....................... 224,508
-------------
392,341
-------------
PHARMACEUTICALS--0.30%
4,000 Ranbaxy Laboratories Ltd.*.... 77,867
-------------
TELECOMMUNICATIONS--1.53%
40,000 Mahanagar Telephone Nigam*.... 278,530
5,000 Videsh Sanchar Nigam Ltd.*.... 123,730
-------------
402,260
-------------
</TABLE>
15
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS--(CONTINUED)
INDIA--(CONCLUDED)
<TABLE>
<C> <S> <C>
TEXTILES & APPAREL--1.27%
64,000 Reliance Industries Ltd.*..... $ 331,707
-------------
TOBACCO--0.82%
14,000 ITC Ltd.*..................... 216,335
-------------
Total India Common Stocks........................ 2,236,309
-------------
INDONESIA--2.95%
COMMUNICATIONS--1.43%
4,000 Indosat....................... 9,015
395,000 Telekomunikasi Indonesia...... 367,060
-------------
376,075
-------------
FOODS--0.32%
16,500 Daya Guna Samudera............ 21,283
61,500 Indofoods Sukses Makmur....... 61,415
-------------
82,698
-------------
MISCELLANEOUS MANUFACTURING--0.33%
31,000 P.T. Gudang Garam............. 87,711
-------------
OILS--0.80%
2,000 Gulf Indonesia Resources
Ltd.*....................... 42,000
156,000 Perusahaan Perkebu*........... 167,684
-------------
209,684
-------------
REAL ESTATE--0.07%
98,000 Jaya Real Property............ 16,990
-------------
Total Indonesia Common Stocks.................... 773,158
-------------
ISRAEL--2.96%
BANKS--0.34%
57,880 Bank Leumi Le-Israel.......... 88,681
-------------
DIVERSIFIED INDUSTRIALS--1.22%
8,500 Tadiran Ltd. ADR.............. 320,875
-------------
PHARMACEUTICALS--0.59%
3,300 Teva Pharmaceutical Industries
Ltd., ADS................... 154,275
-------------
TELECOMMUNICATIONS--0.81%
7,700 ECI Telecommunications
Ltd.*....................... 212,713
-------------
Total Israel Common Stocks....................... 776,544
-------------
KOREA--3.84%
BANKS--0.52%
6,795 Kookmin Bank.................. 54,923
10,770 Shinhan Bank.................. 82,589
-------------
137,512
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------- -------------
<C> <S> <C>
</TABLE>
KOREA--(CONCLUDED)
<TABLE>
<C> <S> <C>
COMMUNICATIONS--0.23%
193 Korea Mobile Telecom Corp.*... $ 59,600
-------------
ELECTRICAL APPLIANCES--1.17%
5,700 L.G. Electronics Inc.*........ 76,787
600 L.G. Information &
Communication Ltd........... 34,321
2,610 Samsung Electronics Co........ 102,507
6,960 Samsung Electronics Co.
GDS+........................ 70,470
1,167 Samsung Electronics Co.
GDR+*....................... 24,274
-------------
308,359
-------------
ELECTRICITY & GAS--0.54%
9,950 Korea Electric Power Corp.*... 141,259
-------------
IRON & STEEL--0.53%
485 Pohang Iron & Steel Co.
Ltd......................... 21,260
7,200 Pohang Iron & Steel Co. Ltd.
ADR (1)..................... 117,000
-------------
138,260
-------------
OILS--0.66%
6,310 Ssangyong Oil Refining Co.
Ltd......................... 85,659
6,500 Yukong Ltd.................... 87,565
-------------
173,224
-------------
SECURITIES--0.19%
4,000 Daewoo Securities Co.*........ 49,326
-------------
Total Korea Common Stocks........................ 1,007,540
-------------
MEXICO--12.99%
BANKS--0.36%
48,000 Grupo Financiero Banamex*..... 95,027
-------------
BREWERIES, PUBS, & RESTAURANTS--1.96%
73,000 Fomento Economico Mexicano,
S.A. de C.V. Series B....... 513,655
-------------
BUILDING MATERIALS & MERCHANTS--1.44%
95,500 Cemex, S.A. de C.V.*.......... 378,128
-------------
BUILDING & CONSTRUCTION--1.78%
41,000 Consorico Ara, S.A. de
C.V.*....................... 150,602
65,000 Grupo Industrial Saltillo,
S.A. de C.V.*............... 209,303
16,500 Hylsamex, S.A. de C.V. (1).... 106,261
-------------
466,166
-------------
DIVERSIFIED INDUSTRIALS--1.07%
32,300 Desc--Sociedad de Fomento
Industrial, S.A. de C.V.
Series B*................... 277,352
240 Desc--Sociedad de Fomento
Industrial, S.A. de C.V.
Series C*................... 2,035
-------------
279,387
-------------
</TABLE>
16
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS--(CONTINUED)
MEXICO--(CONCLUDED)
<TABLE>
<C> <S> <C>
FOODS--0.42%
76,000 Sistema Argos, S.A. de C.V.
Series B.................... $ 110,578
-------------
MEDIA--0.66%
11,000 Grupo Televisa, S.A. de
C.V.*....................... 171,855
-------------
METALS--0.96%
12,500 Tubos De Acero de Mexico, S.A.
de C.V. ADR*................ 252,344
-------------
PAPER, PACKAGING & PRINTING--0.79%
47,000 Kimberly Clark de Mexico S.A.
de C.V...................... 206,273
-------------
RETAILERS, GENERAL--1.83%
7,962 Cifra, S.A. de C.V............ 14,604
269,000 Cifra, S.A. de C.V. Series
C........................... 465,176
-------------
479,780
-------------
TELECOMMUNICATIONS--1.72%
10,440 Telefonos de Mexico, S.A. de
C.V. ADR.................... 451,530
-------------
Total Mexico Common Stocks....................... 3,404,723
-------------
PAKISTAN--0.76%
BANKS--0.04%
4 Bank of Punjab Ltd............ 2
16,700 Faysal Bank Ltd.*............. 10,664
-------------
10,666
-------------
CHEMICALS--0.28%
11,608 Engro Chemicals Pakistan
Ltd.*....................... 36,666
16,000 Fauji Fertilizer Co. Ltd.*.... 35,631
-------------
72,297
-------------
ELECTRICITY--0.35%
69,000 Hub Power Co.*................ 92,196
-------------
OIL EXPLORATION & PRODUCTION--0.09%
2,127 Pakistan State Oil Company
Ltd.*....................... 22,959
-------------
Total Pakistan Common Stocks..................... 198,118
-------------
PERU--0.75%
BUILDING & CONSTRUCTION--0.00%
1 Cementos Norte Pacasmayo,
S.A. ....................... 1
-------------
EXTRACTIVE INDUSTRIES--0.53%
15,947 Compania de Minas Buenaventura
S.A......................... 138,619
-------------
TELECOMMUNICATIONS--0.22%
3,000 Telefonica Del Peru S.A. Class
B ADS....................... 59,250
-------------
Total Peru Common Stocks......................... 197,870
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------- -------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
PHILIPPINES--3.05%
COMMUNICATIONS--1.54%
409,000 Digital Telecommunications
Philippines, Inc.
(Digitel)*.................. $ 19,844
15,582 Philippine Long Distance
Telephone Co. (1)........... 384,599
-------------
404,443
-------------
ELECTRICITY & GAS--0.47%
40,361 Manila Electric Co. Class B
(1)......................... 122,962
-------------
MINING--0.28%
824,000 Belle Corp.*.................. 74,381
-------------
REAL ESTATE--0.76%
421,287 Ayala Land Inc. Class B (1)... 163,404
200,000 SM Prime Holdings Inc......... 34,979
-------------
198,383
-------------
Total Philippines Common Stocks.................. 800,169
-------------
POLAND--2.22%
BUILDING MATERIALS & CONSTRUCTION--0.14%
1,300 Gorazdze S.A.................. 36,743
-------------
DIVERSIFIED HOLDINGS COMPANIES--0.79%
22,000 Elektrim Spolka Akcyjna
S.A......................... 207,059
-------------
ELECTRICAL EQUIPMENT--0.45%
14,500 Bydgodsa Fabryka Kabli
S.A.*....................... 118,580
-------------
FOODS--0.84%
4,540 E. Wedel S.A.................. 218,858
-------------
Total Poland Common Stocks....................... 581,240
-------------
PORTUGAL--4.09%
BANKS--0.70%
6,290 Banco Espirito Santo e
Comercial de Lisboa, S.A.... 182,423
-------------
BUILDING MATERIALS & CONSTRUCTION--0.80%
18,672 Engil Sociedad de Constrcao
Civil S.A................... 210,770
-------------
RETAIL--1.36%
5,449 Estabelecimentos Jeronimo
Martins & Filho, SGPS,
S.A.*....................... 356,346
-------------
TELECOMMUNICATIONS--0.65%
1,870 Telecel Comunicacaoes Pessoais
S.A.*....................... 169,082
-------------
UTILITIES--0.58%
3,730 Portugal Telecom S.A.......... 153,039
-------------
Total Portugal Common Stocks..................... 1,071,660
-------------
</TABLE>
17
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS--(CONTINUED)
<TABLE>
<C> <S> <C>
RUSSIA--3.43%
ELECTRONICS--3.43%
50,000 Global Telesystems ADR* (2)... $ 900,000
-------------
SLOVAKIA--0.51%
FABRICATED METAL PRODUCTS--0.51%
6,221 VSZ A.S.*..................... 132,564
-------------
SOUTH AFRICA--6.90%
BANKS--0.63%
28,000 Amalg Banks of South Africa... 165,818
-------------
BREWERIES, PUBS, & RESTAURANTS--0.75%
7,366 South African Brewery Ltd..... 195,917
-------------
DIVERSIFIED INDUSTRIALS--1.28%
25,293 Barlow Ltd.................... 254,901
70,000 Malbak Ltd. .................. 81,745
-------------
336,646
-------------
ELECTRONIC & ELECTRICAL EQUIPMENT--0.39%
24,500 Dimension Data Holdings
Ltd.*....................... 101,818
-------------
EXTRACTIVE INDUSTRIES--1.02%
3,420 Anglo American Corporation of
South Africa Ltd. S.A....... 147,815
40,800 Billiton PLC*................. 119,539
-------------
267,354
-------------
MISCELLANEOUS FINANCIAL--0.50%
12,100 Fedsure Holdings Ltd.......... 130,743
-------------
OIL EXPLORATION & PRODUCTION--0.97%
21,215 Sasol Ltd. ................... 255,682
-------------
PAPER, PACKAGING & PRINTING--0.44%
37,000 Nampak Ltd.................... 115,325
-------------
PHARMACEUTICALS--0.24%
10,000 South African Druggist Ltd.... 62,649
-------------
RETAILERS, FOOD--0.36%
16,400 Foodcorp Ltd. ................ 93,714
-------------
RETAILERS, GENERAL--0.32%
11,000 Ellerine Holdings Ltd......... 83,429
-------------
Total South Africa Common Stocks................. 1,809,095
-------------
TAIWAN--3.81%
COMMERCE/INDUSTRIAL--0.56%
12,000 Asustek Computer Inc.*........ 146,700
-------------
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------- -------------
<C> <S> <C>
</TABLE>
TAIWAN--(CONCLUDED)
<TABLE>
<C> <S> <C>
ELECTRICAL APPLIANCES--1.54%
10,000 Acer Inc.*.................... $ 65,750
16,660 Siliconware Precision
Industries Company GDR*..... 160,353
9,000 Taiwan Semiconductor
Manufacturing Company Ltd.*
(1)......................... 178,312
-------------
404,415
-------------
IRON & STEEL--0.64%
11,152 China Steel Corp. GDS* (1).... 166,722
-------------
MISCELLANEOUS FINANCIAL--0.64%
19,400 R.O.C. Taiwan Fund............ 168,538
-------------
MISCELLANEOUS MANUFACTURING--0.43%
8,481 Teco Electric & Machinery Ltd.
GDR......................... 111,525
-------------
Total Taiwan Common Stocks....................... 997,900
-------------
THAILAND--0.80%
COMMUNICATIONS--0.33%
82,600 TelecomAsia Corp. Public
Company Ltd.*............... 36,241
27,000 Total Access Communication
Public Company Ltd.......... 51,570
-------------
87,811
-------------
ELECTRICITY & GAS--0.01%
2,000 Electricity Generating Public
Company Ltd................. 3,266
-------------
MINING--0.46%
12,000 PTT Exploration & Production
Public Comany Ltd........... 119,927
-------------
Total Thailand Common Stocks..................... 211,004
-------------
TURKEY--2.45%
HOUSEHOLD DURABLES & APPLIANCES--0.91%
3,300,000 Trakya Cam Sanayii A.S........ 238,179
-------------
RETAIL--1.54%
385,000 Migros Turk T.A.S............. 403,707
-------------
Total Turkey Common Stocks....................... 641,886
-------------
VENEZUELA--1.48%
ELECTRICITY--0.73%
145,575 Electricidad de Caracas....... 191,177
-------------
</TABLE>
18
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------- -------------
<C> <S> <C>
</TABLE>
COMMON STOCKS--(CONCLUDED)
VENEZUELA--(CONCLUDED)
<TABLE>
<C> <S> <C>
TELECOMMUNICATIONS--0.75%
4,500 Compania Anonima National
Telecom de Venezuela (CANTV)
ADR......................... $ 196,874
-------------
Total Venezuela Common Stocks.................... 388,051
-------------
Total Common Stocks (cost--$23,641,139).......... 22,952,407
-------------
PREFERRED STOCKS--8.03%
BRAZIL--8.03%
BANKS--1.13%
7,961,750 Banco Bradesco S.A.*.......... 59,219
155,000 Banco Itau S.A.*.............. 62,565
9,100 Companhia Vale do Rio Doce.... 175,818
-------------
297,602
-------------
BREWERIES, PUBS, & RESTAURANTS--0.66%
275,000 Cia Cervejaria Brahma......... 172,117
-------------
BUILDING MATERIALS & MERCHANTS--0.51%
520,000 Companhia Cimento Portland
Itau (CIA).................. 133,485
-------------
ELECTRICITY--1.48%
900,000 Centrais Electricas
Brasileiras S.A.
(Electrobras)............... 389,405
-------------
ENGINEERING--0.45%
16,100 Usinas Siderurgicas de Minas
Gerais S.A. (Usiminas)*..... 116,831
-------------
OIL EXPLORATION & PRODUCTION--1.93%
2,722,000 Petroleo Brasileiros S.A.
(Petrobras)*................ 506,154
-------------
TELECOMMUNICATIONS--1.87%
880,160 Telecomunicacoes de Sao Paulo
S.A. (Electrobras).......... 229,930
499,472 Telecomunicacoes do Parana
S.A. (Telepar).............. 260,502
-------------
490,432
-------------
Total Preferred Stocks (cost--$2,316,787)........ 2,106,026
-------------
<CAPTION>
NUMBER OF
WARRANTS VALUE
- --------------- -------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S> <C>
WARRANTS--0.02%
HONG KONG--0.02%
MISCELLANEOUS FINANCIAL--0.02%
49,600 Min Xin Holdings, warrants
expiring 12/31/99........... $ 4,619
-------------
INDONESIA--0.00%
BANKS--0.00%
25,372 P.T. Bank Internasional
Indonesia, warrants expiring
01/17/00*................... 1,436
-------------
PHILIPPINES--0.00%
MINING--0.00%
116,000 Belle Corp., warrants expiring
6/10/00*.................... 21
-------------
Total Warrants (cost--$3,825).................... 6,076
-------------
<CAPTION>
NUMBER OF
RIGHTS
- ---------------
<C> <S> <C>
RIGHTS--0.00%
BRAZIL--0.00%
RETAILERS, GENERAL--0.00%
280,000 Encorpar*..................... 0
-------------
TELECOMMUNICATIONS--0.00%
56,180 Telecom de Sao Paulo S.A.
(Telesp), rights expired
11/12/97*................... 5
24,361 Telepar-Telc do Parana S.A.,
rights expired 11/12/97..... 0
-------------
Total Rights (cost--$0).......................... 5
-------------
</TABLE>
19
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------------- ------------- ------------- -------------
<C> <S> <C> <C> <C>
CONVERTIBLE BONDS--0.25%
TAIWAN--0.25%
MISCELLANEOUS FINANCIAL--0.25%
$ 50 Compal Electronics Inc.*
(cost--$50,000)............. 11/21/03 1.000% $ 66,000
-------------
REPURCHASE AGREEMENT--1.03%
269 Repurchase Agreement dated
10/31/97 with State Street
Bank & Trust Company,
collateralized by $274,388
U.S. Treasury Notes, 5.250%
due 12/31/97;
proceeds $269,112
(cost--$269,000)............ 11/03/97 5.000% 269,000
-------------
<CAPTION>
NUMBER OF
SHARES
- ---------------
<C> <S> <C> <C> <C>
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED--3.96%
MONEY MARKET FUNDS--3.96%
906,696 Liquid Assets Portfolio........................................ 906,696
71,745 TempCash Portfolio............................................. 71,745
61,209 TempFund Portfolio............................................. 61,209
-------------
Total Money Market Funds.......................................................... 1,039,650
-------------
Total Investments of Cash Collateral for Securities Loaned (cost--$1,039,650)..... 1,039,650
-------------
Total Investments (cost--$27,320,401)-100.84%..................................... 26,439,164
Liabilities in excess of other assets--(0.84)%.................................... (221,431)
-------------
Net Assets--100.00%............................................................... $ 26,217,733
-------------
-------------
</TABLE>
- ---------------
* Non-income producing security
+ Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
ADR American Depositary Receipts
ADS American Depositary Shares
GDR Global Depositary Receipts
GDS Global Depositary Shares
(1) Security, or portion thereof, was loaned at October 31, 1997.
(2) Illiquid securities represent 3.43% of Net Assets.
See accompanying notes to financial statements
20
<PAGE>
PAINEWEBBER
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1997
<TABLE>
<CAPTION>
EMERGING
GLOBAL EQUITY MARKETS
FUND EQUITY FUND
------------- ---------------
<S> <C> <C>
ASSETS
Investments, at value (cost--$467,345,633 and
$27,320,401, respectively).................... $ 506,705,042 $ 26,439,164
Cash............................................ 7,389 27,457
Cash denominated in foreign currencies, at value
(cost--$4,668,726 and $258,567,
respectively)................................. 4,719,377 257,245
Receivable for investments sold................. 4,904,288 1,035,022
Receivable for shares of beneficial interest
sold.......................................... 7,783,486 28,554
Dividends and interest receivable............... 633,765 40,063
Deferred organizational expenses................ -- 65,818
Other assets.................................... 203,574 29,665
------------- ---------------
Total assets.................................... 524,956,921 27,922,988
------------- ---------------
LIABILITIES
Collateral for securities loaned................ 20,536,567 1,039,650
Payable for investments purchased............... 7,149,340 447,035
Payable for shares of beneficial interest
repurchased................................... 2,219,472 52,545
Payable to affiliate............................ 592,621 41,848
Accrued expenses and other liabilities.......... 283,504 124,177
------------- ---------------
Total liabilities............................... 30,781,504 1,705,255
------------- ---------------
NET ASSETS
Beneficial interest shares of $0.001 par value
outstanding (unlimited amount authorized)..... 394,574,023 42,683,959
Accumulated net investment loss................. (1,320,495) (13,175)
Accumulated net realized gains (losses) from
investments................................... 61,522,749 (15,581,164)
Net unrealized appreciation/depreciation of
investments and other assets and liabilities
denominated in foreign currencies............. 39,399,140 (871,887)
------------- ---------------
Net assets...................................... $ 494,175,417 $ 26,217,733
------------- ---------------
------------- ---------------
CLASS A:
Net assets...................................... $ 294,878,277 $ 9,221,788
------------- ---------------
Shares outstanding.............................. 16,049,098 982,584
------------- ---------------
Net asset and redemption value per share........ $18.37 $9.39
------------- ---------------
------------- ---------------
Maximum offering price per share (net asset
value plus sales charge of 4.50% of offering
price)........................................ $19.24 $9.83
----- -----
----- -----
CLASS B:
Net assets...................................... $ 87,104,059 $ 1,597,917
------------- ---------------
Shares outstanding.............................. 4,925,157 173,866
------------- ---------------
Net asset value and offering price per share.... $17.69 $9.19
------------- ---------------
------------- ---------------
CLASS C:
Net assets...................................... $ 54,509,829 $ 5,344,956
------------- ---------------
Shares outstanding.............................. 3,080,736 583,187
------------- ---------------
Net asset value and offering price per share.... $17.69 $9.17
------------- ---------------
------------- ---------------
CLASS Y:
Net assets...................................... $ 57,683,252 $ 10,053,072
------------- ---------------
Shares outstanding.............................. 3,095,965 1,063,239
------------- ---------------
Net asset value, offering price and redemption $18.63 $9.46
value per share............................... ------------- ---------------
------------- ---------------
</TABLE>
See accompanying notes to financial statements
21
<PAGE>
PAINEWEBBER
STATEMENT OF OPERATIONS FOR YEAR ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
GLOBAL EMERGING MARKETS
EQUITY FUND EQUITY FUND
------------ ----------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $786,998 and $45,181, respectively)............... $ 7,467,573 $ 620,785
Interest......................................................................................... 569,213 42,908
------------ ----------------
8,036,786 663,693
------------ ----------------
EXPENSES:
Investment advisory and administration........................................................... 4,689,662 438,676
Service fees--Class A............................................................................ 789,664 32,006
Service and distribution fees--Class B........................................................... 1,070,444 13,867
Service and distribution fees--Class C........................................................... 650,447 66,418
Custody and accounting........................................................................... 853,051 116,522
Transfer agency and related service fees......................................................... 590,480 45,926
Reports and notices to shareholders.............................................................. 222,723 92,123
Legal and audit.................................................................................. 150,632 71,676
State registration fees.......................................................................... 64,191 55,256
Trustees' fees................................................................................... 15,750 15,750
Amortization of organizational expenses.......................................................... 6,257 56,697
Other expenses................................................................................... 13,650 5,742
------------ ----------------
9,116,951 1,010,659
Less: Fee waivers................................................................................ -- (180,568)
------------ ----------------
Net expenses..................................................................................... 9,116,951 830,091
------------ ----------------
Net investment loss.............................................................................. (1,080,165) (166,398)
------------ ----------------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT TRANSACTIONS:
Net realized gains (losses) from:
Investments.................................................................................. 80,862,560 515,472
Foreign currency transactions................................................................ (1,597,745) (78,052)
Net change in unrealized appreciation/depreciation of:
Investments.................................................................................. (26,841,519) 47,391
Other assets and liabilities denominated in foreign currencies............................... 161,247 22,836
------------ ----------------
NET REALIZED AND UNREALIZED GAINS FROM INVESTMENT TRANSACTIONS................................... 52,584,543 507,647
------------ ----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................................. $ 51,504,378 $ 341,249
------------ ----------------
------------ ----------------
</TABLE>
See accompanying notes to financial statements
22
<PAGE>
PAINEWEBBER GLOBAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
FOR THE FOR THE TWO YEAR ENDED
YEAR ENDED MONTHS ENDED AUGUST 31,
OCTOBER 31, 1997 OCTOBER 31, 1996 1996
---------------- ---------------- --------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment loss............................. $ (1,080,165) $ (954,881) $ (744,913)
Net realized gains from investments............. 80,862,560 3,004,088 41,488,308
Net realized gains (losses) from foreign
currency transactions......................... (1,597,745) 1,722 (510,978)
Net changes in unrealized
appreciation/depreciation of:
Investments................................... (26,841,519) 18,083,725 4,746,601
Other assets and liabilities denominated in
foreign currencies............................ 161,247 115,996 (320,015)
---------------- ---------------- --------------
Net increase in net assets resulting from
operations.................................... 51,504,378 20,250,650 44,659,003
---------------- ---------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gains from investment
transactions--Class A......................... (10,195,197) -- (11,751,371)
Net realized gains from investment
transactions--Class B......................... (3,786,480) -- (4,530,984)
Net realized gains from investment
transactions--Class C......................... (2,275,485) -- (2,643,433)
Net realized gains from investment
transactions--Class Y......................... (2,076,082) -- (1,956,458)
---------------- ---------------- --------------
(18,333,244) -- (20,882,246)
---------------- ---------------- --------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares............ 354,354,793 34,520,774 130,337,737
Cost of shares repurchased...................... (462,072,864) (50,077,173) (271,376,430)
Proceeds from dividends reinvested.............. 17,254,508 -- 19,869,011
---------------- ---------------- --------------
Net decrease in net assets from beneficial
interest transactions......................... (90,463,563) (15,556,399) (121,169,682)
---------------- ---------------- --------------
Net increase (decrease) in net assets........... (57,292,429) 4,694,251 (97,392,925)
NET ASSETS:
Beginning of period............................. 551,467,846 546,773,595 644,166,520
---------------- ---------------- --------------
End of period................................... $494,175,417 $551,467,846 $546,773,595
---------------- ---------------- --------------
---------------- ---------------- --------------
</TABLE>
See accompanying notes to financial statements
23
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE FOUR FOR THE
YEAR ENDED MONTHS ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996 JUNE 30, 1996
---------------- ---------------- --------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment loss............................. $ (166,398) $ (207,229) $ (342,237)
Net realized gains (losses) from investments.... 515,472 (745,976) (6,654,434)
Net realized losses from foreign currency
transactions.................................. (78,052) (37,271) (191,127)
Net change in unrealized
appreciation/depreciation of:
Investments................................... 47,391 (1,584,591) 8,571,981
Other assets and liabilities denominated in
foreign currencies............................ 22,836 29,067 (50,722)
---------------- ---------------- --------------
Net increase (decrease) in net assets resulting
from operations............................... 341,249 (2,546,000) 1,333,461
---------------- ---------------- --------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares............ 19,732,492 1,986,965 13,661,073
Cost of shares repurchased...................... (28,983,261) (10,470,673) (32,764,223)
---------------- ---------------- --------------
Net decrease in net assets from beneficial
interest transactions......................... (9,250,769) (8,483,708) (19,103,150)
---------------- ---------------- --------------
Net decrease in net assets...................... (8,909,520) (11,029,708) (17,769,689)
NET ASSETS:
Beginning of period............................. 35,127,253 46,156,961 63,926,650
---------------- ---------------- --------------
End of period................................... $ 26,217,733 $ 35,127,253 $ 46,156,961
---------------- ---------------- --------------
---------------- ---------------- --------------
</TABLE>
See accompanying notes to financial statements
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The PaineWebber Global Equity Fund ("Global Equity Fund"), a diversified
series of PaineWebber Investment Trust and the PaineWebber Emerging Markets
Equity Fund ("Emerging Markets Fund"), a diversified series of PaineWebber
Investment Trust II (each a "Trust") are registered with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended, as
open-end management investment companies. Organizational costs have been
deferred and are being amortized using the straight-line method over a period
not to exceed 60 months from the date the Funds commenced operations.
Each 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 structures, ongoing
service and distribution charges and certain transfer agency expenses. In
addition, Class B shares and all corresponding dividend reinvested shares
automatically convert to Class A shares approximately six years after initial
issuance. All classes of shares have equal voting privileges, except that Class
A, Class B and Class C shares have exclusive voting rights with respect to their
service and/or distribution plan.
At meetings held on December 13, 1995, each Trust's Board elected to change
its Fund's fiscal year end. Effective October 31, 1996 the PaineWebber Global
Equity Fund's fiscal year was changed from August 31st to October 31st, and the
PaineWebber Emerging Markets Equity Fund's fiscal year was changed from June
30th to October 31st.
The preparation of financial statements in accordance with generally accepted
accounting principles requires the Funds' management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates. The following is a
summary of significant accounting policies:
VALUATION OF INVESTMENTS--Securities which are listed on U.S. and foreign
stock exchanges are valued at the last sale price on the day the securities are
being valued or, lacking any sales on such day, at the last available bid price.
In cases where securities are traded on more than one exchange, the securities
are generally valued on the exchange designated by Mitchell Hutchins Asset
Management Inc. ("Mitchell Hutchins"), a wholly-owned asset management
subsidiary of PaineWebber Incorporated ("PaineWebber") and investment adviser,
administrator and distributor of each Fund, or a Fund's sub-adviser, GE
Investment Management Incorporated ("GEIM"), for Global Equity Fund, or Schroder
Capital Management International Inc. ("Schroder"), for Emerging Markets Equity
Fund, as the primary market. Securities traded in the over-the-counter ("OTC")
market and listed on the Nasdaq Stock Market, Inc. ("Nasdaq") are valued at the
last trade price on Nasdaq prior to the time of valuation. When market
quotations are not readily available, securities are valued based upon
appraisals derived from information concerning those securities or similar
securities received from a recognized dealer in those securities. The amortized
cost method of valuation, which approximates market value, is used to value
short-term debt instruments with 60 days or less remaining to maturity unless a
Trusts' Board determines that this does not represent fair value. Securities and
assets for which market quotations are not readily available (including
restricted securities subject to limitations as to their sale) are valued at
fair value as determined in good faith by or under the direction of each Trusts'
Board.
All investments quoted in foreign currencies are valued daily in U.S. dollars
on the basis of the foreign currency exchange rates prevailing at the time such
valuation is determined by each Fund's custodian, unless a Board determines that
this does not represent fair value. Foreign currency exchange rates are
generally determined prior to the close of
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 trading on the NYSE, which will
not be reflected in a computation of each Fund's net asset value. If events
materially affecting the value of such investments or currency exchange rates
occur during such time period, the investments will be valued at their fair
value as determined in good faith by or under the direction of a Trust's Board.
REPURCHASE AGREEMENTS--Each 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 Funds have 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 Funds occasionally
participate 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 investment and
foreign exchange transactions are calculated using the identified cost method.
Dividend income is recorded on the ex-dividend date ("ex-date") (except in the
case of certain foreign dividends which are recorded as soon after the
ex-dividend date as each Fund using reasonable diligence becomes aware of such
dividends). Interest income is recorded on an accrual basis. Discounts are
accreted and premiums are amortized 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 each Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars as follows: (1) the foreign currency market value of investment
securities and other assets and liabilities stated in foreign currencies are
translated at the exchange rates prevailing at the end of the period; and (2)
purchases, sales, income and expenses are translated at the rate of exchange
prevailing on the respective dates of such transactions. The resulting exchange
gains and losses are included in the Statement of Operations.
Although the net assets and the market values of each Fund's securities are
presented at the foreign exchange rates at the end of the period, the Funds do
not generally isolate the effect of fluctuations in foreign exchange rates from
the effect of the changes in market prices of securities. However, the Funds do
isolate the effect of fluctuations in foreign exchange rates when determining
the realized gain or loss upon the sale or maturity of foreign currency
denominated debt obligation 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
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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.
DIVIDENDS AND DISTRIBUTIONS--Dividends and distributions to shareholders are
recorded on the ex-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. These risks are greater with respect to securities of issuers located
in emerging market countries in which Emerging Markets Equity Fund primarily
invests and in which Global Equity Fund is authorized to invest. The ability of
the issuers of debt securities held by a Fund to meet their obligations may be
affected by economic and political developments in a specific industry, country
or region.
INVESTMENT ADVISER AND ADMINISTRATOR
Each Fund has 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 for the Global Equity Fund, Mitchell Hutchins receives
compensation from the Fund, computed daily and paid monthly, at an annual rate
of 0.85% of the Fund's average daily net assets up to and including $500
million, 0.83% of its average daily net assets over $500 million and up to and
including $1 billion and 0.805% of its average daily net assets over $1 billion.
In accordance with a superceded Advisory Contract for the Emerging Markets
Equity Fund, Mitchell Hutchins was entitled to receive compensation from the
Fund, computed daily and paid monthly, at an annual rate of 1.62% of the Fund's
average daily net assets up to $100 million and 1.50% above $100 million from
November 1, 1996 through February 24, 1997. Effective February 25, 1997, under a
new advisory contract for Emerging Markets Equity Fund, the annual percentage
rate at which the investment advisory and administrative fee is payable to
Mitchell Hutchins was reduced to a rate of 1.20%.
Under a separate contract with Mitchell Hutchins ("Sub-Advisory Contract"),
GEIM serves as the sub-adviser to the Global Equity Fund. Under the Sub-Advisory
Contract, Mitchell Hutchins (not the Fund) pays GEIM a fee, computed daily and
paid monthly, at an annual rate of 0.31% of the Fund's average daily net assets
up to and including $500 million, 0.29% of the Fund's average daily net assets
over $500 million and up to and including $1 billion and 0.265% of the Fund's
average daily net assets over $1 billion.
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Effective February 25, 1997 under a separate contract with Mitchell Hutchins
("Sub-Advisory Contract"), Schroder serves as the sub-adviser to the Emerging
Markets Equity Fund. Under a Sub-Advisory Contract, Mitchell Hutchins (not the
Fund) pays Schroder a fee, computed daily and paid monthly, at an annual rate of
0.70% of the Fund's average daily net assets.
Prior to February 25, 1997, Emerging Markets Management ("EMM") served as the
Emerging Markets Equity Fund's sub-adviser pursuant to a sub-advisory contract
with Mitchell Hutchins. Mitchell Hutchins (not the Fund) paid EMM a fee,
computed daily and paid monthly, at an annual rate of 1.12% of the Funds average
daily net assets up to $100 million and 0.90% of the Fund's average daily net
assets equal to or in excess of $100 million.
At October 31, 1997 the Global Equity Fund and the Emerging Markets Equity
Fund owed Mitchell Hutchins $387,479 and $31,656, respectively, in investment
advisory and administrative fees. Mitchell Hutchins voluntarily waived $180,568
of its management fee for the Emerging Markets Equity Fund for the year ended
October 31, 1997. Mitchell Hutchins may discontinue these waivers at any time.
DISTRIBUTION PLAN
Mitchell Hutchins is the distributor of each 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 Class A, Class B and Class C
shares, each Fund pays Mitchell Hutchins monthly service fees at the annual rate
0.25% of the average daily net assets of Class A, Class B and Class C shares and
monthly distribution fees at the annual rate of 0.75% of the average daily net
assets of Class B and Class C shares. At October 31, 1997 the Global Equity Fund
and the Emerging Markets Equity Fund owed Mitchell Hutchins $200,461 and $9,401,
respectively, 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 charges paid by the shareholders upon certain redemptions of Class B and
Class C shares. Mitchell Hutchins has informed the Global Equity Fund and the
Emerging Markets Equity Fund that for the year ended October 31, 1997 it had
earned $384,903 and $13,269, respectively, in sales charges.
SECURITY LENDING
Each Fund may lend up to 33 1/3% of its total assets to qualified
institutions. The loans are secured at all times by cash or U.S. government
securities in an amount at least equal to the market value of the securities
loaned, plus accrued interest and dividends, determined on a daily basis and
adjusted accordingly. Each Fund will regain record ownership of loaned
securities to exercise certain beneficial rights; however, each Fund may bear
the risk of delay in recovery of, or even loss of rights in, the securities
loaned should the borrower fail financially. Each Fund receives compensation,
which is included in interest income, for lending its securities from interest
earned on the cash or U.S. government securities held as collateral, net of fee
rebates paid to the borrower plus reasonable administrative and custody fees.
Each Fund's lending agent is PaineWebber, who received compensation from the
Funds for the year ended October 31, 1997 as follows:
<TABLE>
<S> <C>
Global Equity Fund..................................................................... $ 42,125
Emerging Markets Equity Fund........................................................... $ 6,255
</TABLE>
At October 31, 1997, the Global Equity Fund and Emerging Markets Equity Fund
owed PaineWebber $4,681 and $791, respectively, in security lending fees.
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS
As of October 31, 1997, each Fund held cash and/or cash equivalents as
collateral and market values of securities loaned as follows:
<TABLE>
<CAPTION>
COLLATERAL MARKET
FOR VALUES OF
SECURITIES SECURITIES
LOANED LOANED
------------ ------------
<S> <C> <C>
Global Equity Fund.............................................................. $20,536,567 $19,148,534
Emerging Markets Equity Fund.................................................... $1,039,650 $ 976,533
</TABLE>
BANK LINE OF CREDIT
Each 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 settlement of sales or purchases of portfolio securities, the
repurchase or redemption of shares of each fund at the request of the
shareholders and other temporary or emergency purposes. In connection therewith,
each 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 a fund at rates
based on prevailing market rates in effect at the time of borrowings. For the
year ended October 31, 1997, the Funds did not borrow under the Facility.
TRANSFER AGENCY AND RELATED SERVICES FEES
Subsequent to August 1, 1997, PaineWebber provides transfer agency related
services to the Funds pursuant to a delegation of authority from PFPC Inc., the
Funds' transfer agent, and is compensated for these services by PFPC Inc., not
the Funds.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at October 31,
1997 was substantially the same as the cost of securities for financial
statement purposes.
At October 31, 1997, the components of net unrealized
appreciation/depreciation were as follows:
<TABLE>
<CAPTION>
EMERGING
GLOBAL MARKETS
EQUITY FUND EQUITY FUND
------------ -----------
<S> <C> <C>
Gross appreciation (investments having an excess of value over cost)............. $ 72,832,146 $ 3,262,759
Gross depreciation (investments having an excess of cost over value)............. (33,472,737) (4,143,996)
------------ -----------
Net appreciation (depreciation) of investments................................... $ 39,359,409 $ (881,237)
------------ -----------
------------ -----------
</TABLE>
For the year ended October 31, 1997, total aggregate purchases and sales of
portfolio securities, excluding short term securities were as follows:
<TABLE>
<CAPTION>
EMERGING
GLOBAL EQUITY MARKETS
FUND EQUITY FUND
------------- -------------
<S> <C> <C>
Purchases...................................................................... $ 462,740,245 $27,198,099
Sales.......................................................................... $ 592,374,666 $37,777,567
</TABLE>
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FEDERAL INCOME TAX STATUS
The Funds intend to distribute substantially all of their 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 their net investment income, capital gains and certain
other amounts, if any, the Funds intend not to be subject to a federal excise
tax.
At October 31, 1997 Emerging Markets Equity Fund had a capital loss
carryforward of $15,458,949. In subsequent years, the carryforward loss is
available as a reduction, to the extent provided in the regulations, of future
net realized capital gains and will expire between October 31, 2002 and October
31, 2004.
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 shareholders.
At October 31, 1997, the effect of permanent "book/tax" reclassifications
resulted in increases (decreases) to the components of net assets as follows:
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
NET INVESTMENT NET REALIZED BENEFICIAL
INCOME/LOSS GAINS (LOSSES) INTEREST
-------------- -------------- ------------
<S> <C> <C> <C>
Global Equity Fund.................. $605,095 $(102,908) $(502,187)
Emerging Markets Equity Fund........ $194,825 $ 56,165 $(250,990)
</TABLE>
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS
SHARES OF BENEFICIAL INTEREST
There is an unlimited amount of $0.001 par value shares of benefical interest
authorized. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------------------------- ------------------------- ------------------------- -------------------------
GLOBAL EQUITY FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------------- ---------- ------------- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
1997
Shares sold........... 13,610,390 $ 254,167,405 380,593 $ 6,769,009 3,594,429 $ 64,660,880 1,515,789 $ 28,757,499
Shares repurchased.... (16,445,507) (308,922,271) (1,626,421) (29,189,105) (4,630,809) (83,404,229) (2,127,743) (40,557,259)
Shares converted from
Class B to Class A... 709,755 13,463,891 (734,659) (13,463,891) -- -- -- --
Dividend reinvested... 543,143 9,521,294 205,495 3,491,361 128,017 2,175,015 116,573 2,066,838
----------- ------------- ---------- ------------- ---------- ------------- ---------- -------------
Net decrease.......... (1,582,219) $ (31,769,681) (1,774,992) $ (32,392,626) (908,363) $ (16,568,334) (495,381) $ (9,732,922)
----------- ------------- ---------- ------------- ---------- ------------- ---------- -------------
----------- ------------- ---------- ------------- ---------- ------------- ---------- -------------
TWO MONTHS ENDED
OCTOBER 31, 1996
Shares sold........... 1,301,820 $ 22,362,041 63,198 $ 1,073,212 508,932 $ 8,584,402 142,315 $ 2,501,119
Shares repurchased.... (1,854,866) (32,308,134) (262,491) (4,423,837) (592,879) (10,027,798) (189,108) (3,317,404)
Shares converted from
Class B to Class A... 24,859 427,610 (25,560) (427,610) -- -- -- --
Dividend reinvested... -- -- -- -- -- -- -- --
----------- ------------- ---------- ------------- ---------- ------------- ---------- -------------
Net decrease.......... (528,187) $ (9,518,483) (224,853) $ (3,778,235) (83,947) $ (1,443,396) (46,793) $ (816,285)
----------- ------------- ---------- ------------- ---------- ------------- ---------- -------------
----------- ------------- ---------- ------------- ---------- ------------- ---------- -------------
YEAR ENDED AUGUST 31,
1996
Shares sold........... 3,773,378 $ 63,129,065 996,490 $ 15,875,329 2,665,239 $ 42,738,539 518,809 $ 8,594,804
Shares repurchased.... (8,829,630) (146,403,118) (3,235,769) (51,584,942) (4,033,170) (64,638,426) (525,977) (8,749,944)
Shares converted from
Class B to Class A... 136,369 2,251,844 (138,655) (2,251,844) -- -- -- --
Dividend reinvested... 707,938 11,206,643 270,717 4,190,705 163,102 2,524,812 122,137 1,946,851
----------- ------------- ---------- ------------- ---------- ------------- ---------- -------------
Net increase
(decrease)........... (4,211,945) $ (69,815,566) (2,107,217) $ (33,770,752) (1,204,829) $ (19,375,075) 114,969 $ 1,791,711
----------- ------------- ---------- ------------- ---------- ------------- ---------- -------------
----------- ------------- ---------- ------------- ---------- ------------- ---------- -------------
</TABLE>
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS
SHARES OF BENEFICIAL INTEREST (CONCLUDED)
There is an unlimited amount of $0.001 par value shares of benefical interest
authorized. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
EMERGING MARKETS EQUITY -------------------------- --------------------- -------------------------- ------------------------
FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------------- -------- ----------- ----------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED OCTOBER 31,
1997
Shares sold............... 142,149 $ 1,529,954 100,932 $ 1,104,923 1,555,080 $ 16,653,992 41,839 $ 443,623
Shares repurchased........ (744,379) (7,731,787) (21,351) (225,000) (1,817,955) (19,222,120) (174,464) (1,804,354)
----------- ------------- -------- ----------- ----------- ------------- --------- -------------
Net increase (decrease)... (602,230) $ (6,201,833) 79,581 $ 879,923 (262,875) $ (2,568,128) (132,625) $ (1,360,731)
----------- ------------- -------- ----------- ----------- ------------- --------- -------------
----------- ------------- -------- ----------- ----------- ------------- --------- -------------
FOUR MONTHS ENDED OCTOBER
31, 1996
Shares sold............... 15,395 $ 148,762 16,082 $ 153,631 164,114 $ 1,567,621 11,872 $ 116,951
Shares repurchased........ (485,631) (4,703,565) (15,952) (151,768) (481,729) (4,627,446) (99,846) (987,894)
----------- ------------- -------- ----------- ----------- ------------- --------- -------------
Net increase (decrease)... (470,236) $ (4,554,803) 130 $ 1,863 (317,615) $ (3,059,825) (87,974) $ (870,943)
----------- ------------- -------- ----------- ----------- ------------- --------- -------------
----------- ------------- -------- ----------- ----------- ------------- --------- -------------
YEAR ENDED JUNE 30, 1996
Shares sold............... 310,914 $ 3,098,378 100,302 $ 985,160 631,864 $ 6,160,591 349,064 $ 3,416,944
Shares repurchased........ (1,653,023) (15,971,690) (6,147) (60,876) (1,385,687) (13,506,039) (330,645) (3,225,618)
----------- ------------- -------- ----------- ----------- ------------- --------- -------------
Net increase (decrease)... (1,342,109) $ (12,873,312) 94,155 $ 924,284 (753,823) $ (7,345,448) 18,419 $ 191,326
----------- ------------- -------- ----------- ----------- ------------- --------- -------------
----------- ------------- -------- ----------- ----------- ------------- --------- -------------
</TABLE>
32
<PAGE>
(This page has been left blank intentionally.)
33
<PAGE>
PAINEWEBBER GLOBAL EQUITY FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding in each class
throughout each period is presented below:
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------
FOR THE FOR THE
YEAR ENDED TWO MONTHS FOR THE YEARS ENDED
OCTOBER ENDED AUGUST 31,
31, OCTOBER 31, ------------------------------------------------
1997 1996 1996 1995** 1994 1993
---------- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 17.43 $ 16.81 $ 16.12 $ 16.98 $ 14.55 $ 12.87
---------- ----------- --------- --------- --------- ---------
Net investment income (loss)............ 0.00 (0.02) 0.02 0.02 0.01 0.03
Net realized and unrealized gains
(losses) from investments and foreign
currency............................... 1.52 0.64 1.24 0.37 2.63 1.89
---------- ----------- --------- --------- --------- ---------
Net increase (decrease) from investment
operations............................. 1.52 0.62 1.26 0.39 2.64 1.92
---------- ----------- --------- --------- --------- ---------
Dividends from net investment income.... -- -- -- -- -- (0.08)
Distributions from net realized gains... (0.58) -- (0.57) (1.25) (0.21) (0.16)
---------- ----------- --------- --------- --------- ---------
Total dividends and distributions....... (0.58) 0.00 (0.57) (1.25) (0.21) (0.24)
---------- ----------- --------- --------- --------- ---------
Net asset value, end of period.......... $ 18.37 $ 17.43 $ 16.81 $ 16.12 $ 16.98 $ 14.55
---------- ----------- --------- --------- --------- ---------
---------- ----------- --------- --------- --------- ---------
Total investment return (1)............. 8.87% 3.69% 8.06% 3.24% 18.23% 15.24%
---------- ----------- --------- --------- --------- ---------
---------- ----------- --------- --------- --------- ---------
Ratios/Supplemental Data:
Net assets, end of period (000's)....... $294,878 $307,267 $ 305,218 $ 360,652 $ 185,493 $ 156,451
Expenses to average net assets.......... 1.44% 1.53%* 1.48% 1.71%(2) 1.58% 1.53%
Net investment income (loss) to average
net assets............................. 0.01% (0.80)%* 0.10% 0.09%(2) 0.07% 0.22%
Portfolio turnover rate................. 86% 3% 33% 40% 51% 56%
Average commission rate paid (3)........ $ 0.0069 $ 0.0069 $ 0.0120 -- -- --
</TABLE>
- ---------------
* Annualized
** Investment Advisory functions for the Fund were transferred from Kidder
Peabody Asset Management Inc. to Mitchell Hutchins on February 13, 1995.
+ Commencement of offering of shares
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and other
distributions, if any, at net asset value on the payable dates and a sale at
net asset value on the last day of each period reported. The figures do not
include sales charges; results for each class would be lower if sales
charges were included. Total investment returns for periods of less than a
year have not been annualized.
(2) These ratios include non-recurring acquisition expenses of 0.06%, 0.00% and
0.06% for Class A, Class B and Class C shares, respectively.
(3) Effective for fiscal years beginning on or after September 1, 1995, the Fund
is required to disclose the average commission rate paid per share of common
stock investments purchased or sold.
34
<PAGE>
PAINEWEBBER GLOBAL EQUITY FUND
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------
FOR THE
PERIOD
FOR THE FOR THE AUGUST 25,
FOR THE TWO MONTHS YEAR 1995+
YEAR ENDED ENDED ENDED TO AUGUST
OCTOBER 31, OCTOBER 31, AUGUST 31, 31,
1997 1996 1996 1995
----------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period..... $ 16.93 $ 16.35 $ 15.82 $ 15.83
----------- ----------- ---------- ------------
Net investment income
(loss).................. (0.21) (0.05) (0.12) 0.00
Net realized and
unrealized gains
(losses) from
investments and foreign
currency................ 1.55 0.63 1.22 (0.01)
----------- ----------- ---------- ------------
Net increase (decrease)
from investment
operations.............. 1.34 0.58 1.10 (0.01)
----------- ----------- ---------- ------------
Dividends from net
investment income....... -- -- -- --
Distributions from net
realized gains.......... (0.58) -- (0.57) --
----------- ----------- ---------- ------------
Total dividends and
distributions........... (0.58) 0.00 (0.57) 0.00
----------- ----------- ---------- ------------
Net asset value, end of
period.................. $ 17.69 $ 16.93 $ 16.35 $ 15.82
----------- ----------- ---------- ------------
----------- ----------- ---------- ------------
Total investment return
(1)..................... 8.05% 3.55% 7.18% (0.06)%
----------- ----------- ---------- ------------
----------- ----------- ---------- ------------
Ratios/Supplemental Data:
Net assets, end of period
(000's)................. $ 87,104 $113,445 $113,235 $142,880
Expenses to average net
assets.................. 2.26% 2.34%* 2.25% 2.17%*(2)
Net investment income
(loss) to average net
assets.................. (0.80)% (1.61)%* (0.68)% (1.92)%*(2)
Portfolio turnover
rate.................... 86% 3% 33% 40%
Average commission rate
paid (3)................ $ 0.0069 $ 0.0069 $ 0.0120 --
<CAPTION>
CLASS C
-------------------------------------------------------------------------------------------
FOR THE
PERIOD
FOR THE MAY 10,
FOR THE TWO MONTHS FOR THE YEARS ENDED 1993+
YEAR ENDED ENDED AUGUST 31, TO AUGUST
OCTOBER 31, OCTOBER 31, ---------------------------------------- 31,
1997 1996 1996 1995** 1994 1993
----------- ------------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period..... $ 16.93 $ 16.35 $ 15.82 $ 16.81 $ 14.52 $ 13.80
----------- ------------- --------- --------- --------- ------------
Net investment income
(loss).................. (0.23) (0.05) (0.13) (0.11) (0.07) (0.02)
Net realized and
unrealized gains
(losses) from
investments and foreign
currency................ 1.57 0.63 1.23 0.37 2.57 0.74
----------- ------------- --------- --------- --------- ------------
Net increase (decrease)
from investment
operations.............. 1.34 0.58 1.10 0.26 2.50 0.72
----------- ------------- --------- --------- --------- ------------
Dividends from net
investment income....... -- -- -- -- -- --
Distributions from net
realized gains.......... (0.58) -- (0.57) (1.25) (0.21) --
----------- ------------- --------- --------- --------- ------------
Total dividends and
distributions........... (0.58) 0.00 (0.57) (1.25) (0.21) 0.00
----------- ------------- --------- --------- --------- ------------
Net asset value, end of
period.................. $ 17.69 $ 16.93 $ 16.35 $ 15.82 $ 16.81 $ 14.52
----------- ------------- --------- --------- --------- ------------
----------- ------------- --------- --------- --------- ------------
Total investment return
(1)..................... 8.05% 3.55% 7.18% 2.46% 17.29% 5.22%
----------- ------------- --------- --------- --------- ------------
----------- ------------- --------- --------- --------- ------------
Ratios/Supplemental Data:
Net assets, end of period
(000's)................. $ 54,510 $ 67,530 $ 66,585 $ 83,485 $ 31,837 $ 10,807
Expenses to average net
assets.................. 2.20% 2.30%* 2.27% 2.48%(2) 2.33% 2.28%
Net investment income
(loss) to average net
assets.................. (0.75)% (1.57)%* (0.70)% (0.68)%(2) (0.68)% (0.53)%
Portfolio turnover
rate.................... 86% 3% 33% 40% 51% 56%
Average commission rate
paid (3)................ $ 0.0069 $ 0.0069 $ 0.0120 -- -- --
</TABLE>
35
<PAGE>
PAINEWEBBER GLOBAL EQUITY FUND
FINANCIAL HIGHLIGHTS (CONCLUDED)
Selected data for a share of beneficial interest outstanding in each class
throughout the period is presented below:
<TABLE>
<CAPTION>
CLASS Y
-------------------------------------------------------------------------
FOR THE FOR THE
FOR THE TWO MONTHS FOR THE YEARS ENDED PERIOD
YEAR ENDED ENDED AUGUST 31, MAY 10, 1993+
OCTOBER 31, OCTOBER 31, ----------------------------- TO AUGUST 31,
1997 1996 1996 1995** 1994 1993
----------- ----------- ------- -------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 17.60 $ 16.97 $ 16.22 $ 17.03 $ 14.56 $ 13.80
----------- ----------- ------- -------- ------- -------
Net investment income (loss)....... 0.10 (0.01) 0.07 0.07 0.05 0.02
Net realized and unrealized gains
from
investments and foreign
currency.......................... 1.51 0.64 1.25 0.37 2.63 0.74
----------- ----------- ------- -------- ------- -------
Net increase from investment
operations........................ 1.61 0.63 1.32 0.44 2.68 0.76
----------- ----------- ------- -------- ------- -------
Dividends from net investment
income............................ -- -- -- -- -- --
Distributions from net realized
gains............................. (0.58) -- (0.57) (1.25) (0.21) --
----------- ----------- ------- -------- ------- -------
Total dividends and
distributions..................... (0.58) 0.00 (0.57) (1.25) (0.21) 0.00
----------- ----------- ------- -------- ------- -------
Net asset value, end of period..... $ 18.63 $ 17.60 $ 16.97 $ 16.22 $ 17.03 $ 14.56
----------- ----------- ------- -------- ------- -------
----------- ----------- ------- -------- ------- -------
Total investment return (1)........ 9.31% 3.71% 8.39% 3.54% 18.49% 5.51%
----------- ----------- ------- -------- ------- -------
----------- ----------- ------- -------- ------- -------
Ratios/Supplemental Data:
Net assets, end of period
(000's)........................... $57,683 $63,225 $61,736 $ 57,150 $28,390 $19,098
Expenses to average net assets..... 1.10% 1.18%* 1.17% 1.46%(2) 1.33% 1.28%*
Net investment income (loss) to
average net
assets............................ 0.36% (0.45)%* 0.46% 0.36%(2) 0.32% 0.47%*
Portfolio turnover rate............ 86% 3% 33% 40% 51% 56%
Average commission rate paid (3)... $0.0069 $0.0069 $0.0120 -- -- --
</TABLE>
- -----------------
* Annualized
** Investment Advisory functions for the Fund were transferred from Kidder
Peabody Asset Management Inc. to Mitchell Hutchins on February 13, 1995.
+ Commencement of offering of shares
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and other
distributions, if any, at net asset value on the payable dates and a sale at
net asset value on the last day of each period reported. Total investment
returns for periods of less than a year have not been annualized.
(2) These ratios include non-recurring acquisition expenses of 0.06% for Class Y
shares.
(3) Effective for fiscal years beginning on or after September 1, 1995, the Fund
is required to disclose the average commission rate paid per share of common
stock investments purchased or sold.
36
<PAGE>
(This page has been left blank intentionally.)
37
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding in each class
throughout each period is presented below:
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------
FOR THE FOR THE YEARS
FOR THE YEAR FOUR MONTHS ENDED
ENDED ENDED JUNE 30, FOR THE PERIOD
OCTOBER 31, OCTOBER 31, --------------------- ENDED JUNE 30,
1997*** 1996 1996 1995** 1994+
------------ ------------ --------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 9.46 $10.06 $ 9.73 $ 10.79 $12.00
------------ ------------ --------- --------- -------
Net investment income (loss)............ (0.06) (0.13) (0.14) (0.04) 0.04
Net realized and unrealized gains
(losses) from investment and foreign
currency............................... (0.01) (0.47) 0.47 (0.97) (1.25)
------------ ------------ --------- --------- -------
Net increase (decrease) from investment
operations............................. (0.07) (0.60) 0.33 (1.01) (1.21)
------------ ------------ --------- --------- -------
Dividends from net investment income.... -- -- -- (0.05) --
------------ ------------ --------- --------- -------
Net asset value, end of period.......... $ 9.39 $ 9.46 $ 10.06 $ 9.73 $10.79
------------ ------------ --------- --------- -------
------------ ------------ --------- --------- -------
Total investment return (1)............. (0.74)% (5.96)% 3.39% (9.29)% (10.08)%
------------ ------------ --------- --------- -------
------------ ------------ --------- --------- -------
Ratios/Supplemental Data:
Net assets, end of period (000's)....... $9,222 $14,992 $ 20,680 $ 33,043 $46,758
Expenses, net of fee waivers, to average
net assets............................. 2.44% 2.44%* 2.44% 2.44% 2.47%*
Expenses, before fee waivers, to average
net assets............................. 3.01% 3.48%* 3.42% 2.54% 2.47%*
Net investment income (loss), net of fee
waivers, to average net assets......... (0.40)% (1.42)%* (0.52)% (0.76)% 0.72%*
Net investment income (loss), before fee
waivers, to average net assets......... (0.97)% (2.46)%* (1.50)% (0.86)% 0.72%*
Portfolio turnover rate................. 87% 22% 69% 76% 8%
Average commission rate paid (2)........ $0.0009 $0.0024 -- -- --
<CAPTION>
CLASS B
----------------------------------------------
FOR THE
FOR THE YEAR FOUR MONTHS
ENDED ENDED FOR THE PERIOD
OCTOBER 31, OCTOBER 31, ENDED JUNE 30,
1997*** 1996 1996++
------------ ------------ ----------------
<S> <C> <C> <C>
Net asset value, beginning of period.... $ 9.32 $ 9.94 $ 9.13
------------ ------------ -----
Net investment income (loss)............ (0.10) (0.07) (0.01)
Net realized and unrealized gains
(losses) from investment and foreign
currency............................... (0.03) (0.55) 0.82
------------ ------------ -----
Net increase (decrease) from investment
operations............................. (0.13) (0.62) 0.81
------------ ------------ -----
Dividends from net investment income.... -- -- --
------------ ------------ -----
Net asset value, end of period.......... $ 9.19 $ 9.32 $ 9.94
------------ ------------ -----
------------ ------------ -----
Total investment return (1)............. (1.39)% (6.24)% 8.87%
------------ ------------ -----
------------ ------------ -----
Ratios/Supplemental Data:
Net assets, end of period (000's)....... $1,598 $ 879 $ 936
Expenses, net of fee waivers, to average
net assets............................. 3.19% 3.19%* 3.19%*
Expenses, before fee waivers, to average
net assets............................. 3.82% 4.23%* 4.97%*
Net investment income (loss), net of fee
waivers, to average net assets......... (1.25)% (2.12)%* (0.21)%*
Net investment income (loss), before fee
waivers, to average net assets......... (1.88)% (3.16)%* (1.99)%*
Portfolio turnover rate................. 87% 22% 69%
Average commission rate paid (2)........ $0.0009 $0.0024 --
</TABLE>
- ---------------
+ For the period January 19, 1994 (commencement of operations) to June 30,
1994.
++ For the period December 5, 1995 (commencement of offering of shares) to June
30, 1996.
* Annualized
** Investment Advisory functions for the Fund were transferred from Kidder
Peabody Asset Management Inc. to Mitchell Hutchins on February 13, 1995.
*** Investment Sub-Advisory functions for the Fund were transferred from
Emerging Markets Management to Schroder Capital Management International
Inc. effective February 25, 1997.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends at net
asset value on the payable dates and a sale at net asset value on the last
day of each period reported. The figures do not include sales charges;
results for each class (except Class Y) would be lower if sales charges
were included. Total investment return for periods of less than one year
have not been annualized.
(2) Effective for fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose the average commission rate paid per share of
common stock investments purchased or sold.
38
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------------------------
FOR THE FOR THE YEARS
FOR THE YEAR FOUR MONTHS ENDED
ENDED ENDED JUNE 30, FOR THE PERIOD
OCTOBER 31, OCTOBER 31, --------------------- ENDED JUNE 30,
1997*** 1996 1996 1995** 1994+
------------ ------------ --------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 9.32 $ 9.94 $ 9.67 $ 10.75 $12.00
------------ ------------ --------- --------- -------
Net investment income (loss)............ (0.14) (0.22) (0.24) (0.17) --
Net realized and unrealized gains
(losses) from investment and foreign
currency............................... (0.01) (0.40) 0.51 (0.90) (1.25)
------------ ------------ --------- --------- -------
Net increase (decrease) from investment
operations............................. (0.15) (0.62) 0.27 (1.07) (1.25)
------------ ------------ --------- --------- -------
Dividends from net investment income.... -- -- -- (0.01) --
------------ ------------ --------- --------- -------
Net asset value, end of period.......... $ 9.17 $ 9.32 $ 9.94 $ 9.67 $10.75
------------ ------------ --------- --------- -------
------------ ------------ --------- --------- -------
Total investment return (1)............. (1.61)% (6.24)% 2.79% (10.01)% (10.42)%
------------ ------------ --------- --------- -------
------------ ------------ --------- --------- -------
Ratios/Supplemental Data:
Net assets, end of period (000's)....... $5,345 $7,882 $ 11,561 $ 18,551 $26,721
Expenses, net of fee waivers, to average
net assets............................. 3.19% 3.19%* 3.19% 3.19% 3.22%*
Expenses, before fee waivers, to average
net assets............................. 3.78% 4.23%* 4.17% 3.29% 3.22%*
Net investment income (loss), net of fee
waivers, to average net assets......... (1.18)% (2.16)%* (1.28)% (1.50)% (0.03)%*
Net investment income (loss), before fee
waivers, to average net assets......... (1.77)% (3.20)%* (2.26)% (1.60)% (0.03)%*
Portfolio turnover rate................. 87% 22% 69% 76% 8%
Average commission rate paid (2)........ $0.0009 $0.0024 -- -- --
<CAPTION>
CLASS Y
----------------------------------------------------------------------
FOR THE FOR THE YEARS
FOR THE YEAR FOUR MONTHS ENDED
ENDED ENDED JUNE 30, FOR THE PERIOD
OCTOBER 31, OCTOBER 31, --------------------- ENDED JUNE 30,
1997*** 1996 1996 1995** 1994+
------------ ------------ --------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 9.51 $10.11 $ 9.75 $ 10.80 $12.00
------------ ------------ --------- --------- -------
Net investment income (loss)............ (0.02) (0.05) (0.01) 0.01 0.05
Net realized and unrealized gains
(losses) from investment and foreign
currency............................... (0.03) (0.55) 0.37 (0.99) (1.25)
------------ ------------ --------- --------- -------
Net increase (decrease) from investment
operations............................. (0.05) (0.60) 0.36 (0.98) (1.20)
------------ ------------ --------- --------- -------
Dividends from net investment income.... -- -- -- (0.07) --
------------ ------------ --------- --------- -------
Net asset value, end of period.......... $ 9.46 $ 9.51 $ 10.11 $ 9.75 $10.80
------------ ------------ --------- --------- -------
------------ ------------ --------- --------- -------
Total investment return (1)............. (0.53)% (5.93)% 3.69% (9.03)% (10.00)%
------------ ------------ --------- --------- -------
------------ ------------ --------- --------- -------
Ratios/Supplemental Data:
Net assets, end of period (000's)....... $10,053 $11,375 $ 12,979 $ 12,332 $15,435
Expenses, net of fee waivers, to average
net assets............................. 2.19% 2.19%* 2.19% 2.19% 2.22%*
Expenses, before fee waivers, to average
net assets............................. 2.69% 3.23%* 3.29% 2.29% 2.22%*
Net investment income (loss), net of fee
waivers, to average net assets......... (0.15)% (1.13)%* (0.15)% (0.51)% 0.97%*
Net investment income (loss), before fee
waivers, to average net assets......... (0.65)% (2.17)%* (1.25)% (0.61)% 0.97%*
Portfolio turnover rate................. 87% 22% 69% 76% 8%
Average commission rate paid (2)........ $0.0009 $0.0024 -- -- --
</TABLE>
39
<PAGE>
PAINEWEBBER GLOBAL EQUITY FUND
PAINEWEBBER EMERGING MARKETS EQUITY FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Boards of Trustees and Shareholders
We have audited the accompanying statement of assets and liabilities,
including the portfolios of investments, of PaineWebber Global Equity Fund and
PaineWebber Emerging Markets Equity Fund as of October 31, 1997, and the related
statement of operations for the year then ended and the statements of changes in
net assets and the financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
investments owned at October 31, 1997, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
PaineWebber Global Equity Fund and PaineWebber Emerging Markets Equity Fund at
October 31, 1997, the results of their operations for the year then ended and
the changes in their net assets and the financial highlights for each of the
indicated periods, in conformity with generally accepted accounting principles.
[ERNST & YOUNG SIGNATURE]
New York, New York
December 19, 1997
40
<PAGE>
PAINEWEBBER
TAX INFORMATION
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of each Fund's fiscal year end (October
31, 1997) as to the federal tax status of distributions received by shareholders
during such fiscal year from each Fund. Accordingly, we are advising you that
all of the distributions paid by the PaineWebber Global Equity Fund were made
from long-term capital gains in the amount of $0.5784 per share for each class
and that no distributions were paid by the PaineWebber Emerging Markets Equity
Fund.
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 reporting.
Because each Fund's fiscal year is not the calendar year, another notification
will be sent in respect of calendar year 1997. The second notification, which
will reflect the amounts to be used by calendar year taxpayers on their federal
income tax returns, will be made in conjunction with Form 1099 DIV and is mailed
in January 1998. Shareholders are advised to consult their own tax advisers with
respect to the tax consequences of their investment in each Fund.
41
<PAGE>
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
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
INVESTMENT ADVISER, ADMINISTRATOR AND DISTRIBUTOR
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
INVESTMENT SUBADVISERS
GE Investment Management Incorporated
3003 Summer Street
Stamford, Connecticut 06904
Schroder Capital Management International Inc.
787 Seventh Avenue
New York, New York 10019
A PROSPECTUS CONTAINING MORE COMPLETE INFORMATION FOR ANY OF THE FUNDS LISTED
ON THE BACK COVER CAN BE OBTAINED FROM A PAINEWEBBER INVESTMENT EXECUTIVE OR
CORRESPONDENT FIRM. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
THIS REPORT IS NOT TO BE USED IN CONNECTION WITH THE OFFERING OF SHARES OF
THE FUNDS UNLESS ACCOMPANIED OR PRECEDED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
PaineWebber offers a family of 22 funds which encompass a diversified range
of investment goals.
BOND FUNDS
- - High Income Fund
- - Investment Grade Income Fund
- - Low Duration U.S. Government Income Fund
- - Strategic Income Fund
- - U.S. Government Income Fund
TAX-FREE BOND FUNDS
- - California Tax-Free Income Fund
- - Municipal High Income Fund
- - National Tax-Free Income Fund
- - New York Tax-Free Income Fund
STOCK FUNDS
- - Capital Appreciation Fund
- - Financial Serivces Growth Fund
- - Growth Fund
- - Growth and Income Fund
- - Small Cap Fund
- - Utility Income Fund
ASSET ALLOCATION FUNDS
- - Balanced Fund
- - Tactical Allocation Fund
GLOBAL FUNDS
- - Asia Pacific Growth Fund
- - Emerging Markets Equity Fund
- - Global Equity Fund
- - Global Income Fund
PAINEWEBBER MONEY MARKET FUND
PAINEWEBBER
- -C- 1997 PaineWebber Incorporated
Member SIPC
[GRAPHIC]
PAINEWEBBER
- ----------------------------------
GLOBAL EQUITY
FUND
EMERGING
MARKETS
EQUITY FUND
OCTOBER 31, 1997
ANNUAL REPORT
