PAINEWEBBER MUTUAL FUNDS
PAINEWEBBER OFFERS A FAMILY OF 22 MUTUAL
FUNDS WHICH ENCOMPASS A DIVERSIFIED RANGE OF
INVESTMENT GOALS. INVESTORS MAY EXCHANGE
THEIR FUND SHARES WITH OTHER FUNDS WITHIN
THE FAMILY.
INCOME FUNDS
PAINEWEBBER
. GLOBAL INCOME FUND
. HIGH INCOME FUND
. INVESTMENT GRADE INCOME FUND EMERGING MARKETS
. LOW DURATION U.S. GOVERNMENT INCOME FUND
. STRATEGIC INCOME FUND
. U.S. GOVERNMENT INCOME FUND EQUITY FUND
TAX-FREE INCOME FUNDS
. CALIFORNIA TAX-FREE INCOME FUND
. MUNICIPAL HIGH INCOME FUND
. NATIONAL TAX-FREE INCOME FUND
. NEW YORK TAX-FREE INCOME FUND
GROWTH FUNDS
. CAPITAL APPRECIATION FUND
. EMERGING MARKETS EQUITY FUND
. FINANCIAL SERVICES GROWTH FUND
. GLOBAL EQUITY FUND
. GROWTH FUND
. SMALL CAP GROWTH FUND
. SMALL CAP VALUE FUND
GROWTH AND INCOME FUNDS
. BALANCED FUND
. GROWTH AND INCOME FUND
. TACTICAL ALLOCATION FUND
. UTILITY INCOME FUND
PAINEWEBBER MONEY MARKET FUND
--------------
(C)1996 PAINEWEBBER INCORPORATED
PRINTED ON
LOGO RECYCLED PAPER
SEMI-ANNUAL REPORT
DECEMBER 31, 1995
<PAGE>
February 26, 1996
Dear Shareholder,
For emerging markets, 1995 was the worst year since 1990--in sharp contrast to
the U.S. stock market, which witnessed its best year since the beginning of this
decade. In the wake of the Mexican peso devaluation in December 1994, many
emerging markets plummeted until early March, then rallied strongly in the
second quarter, but were lackluster again during the second half of the year.
The shock waves caused by Mexico generally affected equity markets much more
than any positive developments in economic policies or economic growth trends.
Year-end tax selling by individual investors in mutual funds was an additional
technical factor that quickly squashed any attempt at a rally in emerging
markets. 1995 was a disappointing year for most emerging markets. Unlike
previous years, when emerging markets crowded the list of best performing
markets, this past year they were more evident among the worst performing
markets of the world.
PORTFOLIO REVIEW
The six months ended December 31, 1995 were marked by volatility in most
emerging markets. As a result, the Fund's total return for the six months ended
December 31, 1995, without deducting sales charges, was (4.83)% for Class A
shares, 0.55% for Class B shares (from commencement of operations--December 5,
1995 through December 31, 1995), (5.07)% for Class C shares (formerly Class B
shares) and (4.62)% for Class Y shares (formerly Class C shares). The Fund's
total return for this period, after deducting the maximum applicable sales
charges, was (9.13)% for Class A shares, (4.48)% for Class B shares (from
commencement of operations--December 5, 1995 through December 31, 1995), (6.02)%
for Class C shares and (4.62)% for Class Y shares. In comparison, the IFC Global
Composite Index returned (4.42)% and the IFC Emerging Markets Investable Index
returned (1.31)% for the same time period.
Several factors affected the Fund's underperformance of the Composite Index
during the second half of 1995. Performance was negatively affected by a
portfolio underweighting in South Africa (1.6% of net assets on December 31,
1995), which rose 10.1% in the fourth quarter of 1995. The Fund's overweighted
position in Korea (12.8%) also had a negative effect during the six-month
period, as the market was roiled by political scandal and declined 10.1% in the
fourth quarter alone. In addition, individual stock attribution was marginally
negative for the six-month period primarily because of the Fund's significant
overweighting in relatively neglected, less well-known stocks (which today
appear to be much better than average values), which lagged the larger, more
well-known equities.
The Fund's investment approach focuses on creating long-term value and, over the
years, Emerging Markets Management, the Fund's sub-adviser, believes that it
rarely pays to sell in a panic because markets usually recover--often quicker
and sharper than expected. Markets have been ignoring most of the good news
(such as positive earnings surprises, drops in interest rates and better than
expected growth in many countries) while reacting violently to political
disturbances. As soon as this negative sentiment changes (which can happen very
quickly, as past experience shows) a surprisingly sharp rally could follow.
1
<PAGE>
Emerging Markets Management will continue to emphasize "unpopular" markets and
new markets (in Eastern Europe and Africa) which are under-represented in the
IFC Index. A focus on smaller cap stocks in the more "mature" emerging markets,
which are also largely outside the indices, will continue. This strategy, over
time, should add significant value, as these markets and stocks (which are still
rather undiscovered, poorly followed by brokers and often inefficiently priced)
become part of the "mainstream" of emerging market investing.
Although the difficulties of 1995 will not be quickly forgotten for emerging
market investors, the Fund is well-positioned in global markets where 1996 GDP
growth is forecast to rise almost 6% on average. The Fund intends to remain
overweighted in Korea and China (through Hong Kong plays) where it is invested
in competitive firms positioned to benefit from the long-term growth potential
of the world's largest emerging market, China. Eastern Europe is another area of
significant overweighting, where the Fund is able to invest in assets at prices
below those of most of the rest of the emerging world. Valuations throughout the
emerging market universe are at price to fair value levels, comparable to those
in 1987.
We value you as a shareholder and as a client, and thank you for your continued
support. We welcome any comments or questions you may have.
Sincerely,
/s/ MARGO ALEXANDER /s/ ANTOINE W. VAN AGTMAEL
MARGO ALEXANDER ANTOINE W. VAN AGTMAEL
President, Portfolio Manager,
Mitchell Hutchins Asset Management Inc. PaineWebber Emerging Markets
Equity Fund
2
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
RECENT PERFORMANCE RESULTS (UNAUDITED)
<TABLE><CAPTION>
NET ASSET VALUE TOTAL RETURN1
---------------------------------- --------------------------------
12 MONTHS 6 MONTHS
12/31/95 06/30/95 12/31/94 ENDED 12/31/95 ENDED 12/31/95
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Class A Shares $ 9.26 $ 9.73 $10.49 (11.20)% (4.83)%
- -------------------------------------------------------------------------------------------------------------
Class B Shares2 9.18 N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------
Class C Shares3 9.18 9.67 10.42 (11.87) (5.07)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS A SHARES
<TABLE><CAPTION>
NET ASSET VALUE
-------------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN1
<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)
- ------------------------------------------------------------------------------------------------------------------------
Totals: -- $0.0517
- ------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return as of 12/31/95: (22.38)%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS B SHARES2
<TABLE><CAPTION>
NET ASSET VALUE
-------------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN1
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
12/05/95 - 12/31/95 $ 9.13 $9.18 -- -- 0.55%
- ------------------------------------------------------------------------------------------------------------------------
Totals: -- --
- ------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return as of 12/31/95: 0.55%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS C SHARES3
<TABLE><CAPTION>
NET ASSET VALUE
-------------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN1
<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)
- ------------------------------------------------------------------------------------------------------------------------
Totals: -- $0.0034
- ------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return as of 12/31/95: (23.47)%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL RETURNS
<TABLE><CAPTION>
% RETURN WITHOUT DEDUCTING % RETURN AFTER DEDUCTING
MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
------------------------------ -------------------------------
CLASS CLASS
------------------------------ -------------------------------
A* B** C*** A* B** C***
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Twelve Months Ended
12/31/95 (11.20)% N/A (11.87)% (15.17)% N/A (12.87)%
- ------------------------------------------------------------------------------------------------
Five Years Ended 12/31/95 N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------
Commencement of Operations
Through 12/31/95+ (12.19)% N/A (12.83)% (14.26)% N/A (12.83)%
- ------------------------------------------------------------------------------------------------
</TABLE>
1 Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the payable dates and do not include sales charges;
results would be lower if sales charges were included.
2 Commencement of operations was December 5, 1995 for Class B shares.
3 Formerly Class B shares.
* Maximum sales charge for Class A shares is 4.50% of the public offering
price. Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5% and is
reduced to 0% after 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 was January 19, 1994 for Class A and Class C
shares.
Note:The Fund offers Class Y (formerly Class C) shares to INSIGHT Program
participants. For the one year ended December 31, 1995, and from inception,
January 19, 1994 through December 31, 1995, Class Y shares had an average
annual total return of (10.92)% and (11.92)%, 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 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.
3
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1995 (unaudited)
- --------------------------------------------------------------------------------
COMMON STOCKS--75.73%
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Number of
Shares Value
- ---------- -----------
<C> <S> <C>
ARGENTINA--1.60%
CONSTRUCTION--0.47%
8,680 Dycasa S.A........................................................... $ 28,638
34,221 Perez Companc (Cia Naviera) Class B.................................. 181,335
-----------
209,973
-----------
FOOD & FOOD SERVICES--0.12%
1,000 Buenos Aires Embotelladora ADR....................................... 20,625
18,469 Cinba................................................................ 31,206
-----------
51,831
-----------
OIL & GAS--0.68%
94,120 Astra CIA Argentina de Petro Class B................................. 174,087
5,967 YPF Sociedad Anonima ADR............................................. 129,036
-----------
303,123
-----------
REAL ESTATE--0.26%
45,502 IRSA Inversiones y Representaciones S.A. Class B..................... 114,642
-----------
UTILITIES-ELECTRIC--0.07%
9,400 Central Costanera Class B............................................ 28,946
-----------
Total Argentina Common Stocks..................................................... 708,525
-----------
BALTICS--0.22%
DEPOSITORY INSTITUTIONS--0.22%
28,800 Hansabank............................................................ 99,072
-----------
BANGLADESH--0.19%
CHEMICALS--0.04%
8,400 Beximco Pharmaceuticals.............................................. 18,002
-----------
LEATHER PRODUCTS--0.15%
3,500 Apex Tannery......................................................... 66,229
-----------
Total Bangladesh Common Stocks.................................................... 84,231
-----------
BRAZIL--2.59%
FOOD, BEVERAGE & TOBACCO--0.13%
28,248,410 Avipal S.A........................................................... 58,124
-----------
INVESTMENT COMPANIES--1.41%
2,284 Eternity Fund........................................................ 623,984
-----------
</TABLE>
4
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Number of
Shares Value
- ---------- -----------
<C> <S> <C>
BRAZIL--(CONCLUDED)
METALS & MINING--0.27%
5,760,000 Cia Siderurgica Nacional............................................. $ 118,519
-----------
RETAIL--0.17%
37,000 Makro*............................................................... 21,317
9,200 Makro GDR*........................................................... 52,302
-----------
73,619
-----------
TELEPHONE--0.43%
4,900,000 Telebras............................................................. 189,144
-----------
UTILITIES-ELECTRIC--0.18%
3,701 Companhia Energetica de Minas Gerais ADR............................. 82,347
-----------
Total Brazil Common Stocks........................................................ 1,145,737
-----------
CHILE--2.92%
CHEMICALS--0.20%
1,900 Sociedad Quimica y Minera de Chile S.A. ADR.......................... 89,300
-----------
COMMUNICATIONS--0.73%
3,900 Compania de Telefonos de Chile ADR................................... 323,213
-----------
INVESTMENT COMPANIES--1.07%
11,700 Genesis Chile Fund................................................... 473,850
-----------
UTILITIES-ELECTRIC--0.92%
6,200 Chilectra S.A. ADR................................................... 311,550
3,300 Enersis S.A. ADR..................................................... 94,050
-----------
405,600
-----------
Total Chile Common Stocks......................................................... 1,291,963
-----------
CHINA--7.95%
AGRICULTURE--2.12%
2,344,000 CP Pokphand Company.................................................. 939,722
-----------
CHEMICALS--0.59%
426,000 Kingboard Chemical................................................... 87,046
783,000 Yizheng Chemical Fibre Company Limited............................... 176,194
-----------
263,240
-----------
</TABLE>
5
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Number of
Shares Value
- ---------- -----------
<C> <S> <C>
CHINA--(CONTINUED)
COMMUNICATIONS--0.30%
1,261,087 Champion Technology Holdings......................................... $ 132,102
-----------
CONGLOMERATES--0.10%
74,000 Guangdong Investments Limited........................................ 44,500
-----------
DISTRIBUTION-WHOLESALE TRADE--0.22%
660,000 Pacific Concord Holding.............................................. 98,157
-----------
ELECTRONICS--0.76%
131,240 Shanghai Shangling Electric Appliances Class B....................... 80,319
137,000 Varitronix International............................................. 254,245
-----------
334,564
-----------
FURNITURE & FIXTURES--0.16%
286,000 Lamex Holdings Limited............................................... 70,645
-----------
HOLDING AND OTHER INVESTMENT OFFICES--0.43%
56,000 Citic Pacific Limited................................................ 191,555
-----------
LEATHER PRODUCTS--0.12%
1,608,802 KTP Holdings Limited................................................. 54,095
-----------
MACHINERY-INDUSTRIAL--0.88%
152,000 Chen Hsong Holdings.................................................. 79,612
340,000 Dong Fang Electric Machinery......................................... 91,238
616,000 Sinocan Holdings Limited............................................. 219,075
-----------
389,925
-----------
METALS & MINING--0.16%
550,000 Singamas Container (1)............................................... 72,158
-----------
MISCELLANEOUS MANUFACTURING--0.33%
366,000 China Bicycles Class B............................................... 60,113
298,000 Lung Kee............................................................. 81,895
-----------
142,008
-----------
PACKAGING & CONTAINERS--0.32%
397,000 M. C. Packaging Limited.............................................. 141,190
-----------
REAL ESTATE--0.21%
735,500 Tian An China Investments............................................ 91,313
-----------
</TABLE>
6
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Number of
Shares Value
- ---------- -----------
<C> <S> <C>
CHINA--(CONCLUDED)
TEXTILES--0.21%
680,000 High Fashion International*.......................................... $ 33,417
199,500 Shanghai Haixin Company, Limited Class B............................. 59,850
-----------
93,267
-----------
TRANSPORTATION--0.75%
96,000 New World Infrastructure Limited*.................................... 183,744
514,000 Qingling Motors Company, Class H..................................... 149,564
-----------
333,308
-----------
TRANSPORTATION EQUIPMENT--0.29%
15,600 China Yuchai International Limited................................... 126,750
-----------
Total China Common Stocks......................................................... 3,518,499
-----------
COLOMBIA--1.40%
FOOD, BEVERAGE & TOBACCO--0.37%
26,200 Bavaria.............................................................. 75,367
25,500 Industrias Alimenticias.............................................. 90,083
-----------
165,450
-----------
HOLDING & OTHER INVESTMENT OFFICES--0.39%
9,218 Suramericana......................................................... 172,125
-----------
RETAIL--0.11%
7,208 Carulla & Cia ADS.................................................... 48,654
-----------
STONE, CLAY & GLASS PRODUCTS--0.38%
7,400 Cementos Argos....................................................... 46,308
8,200 Cementos Paz del Rio ADR............................................. 123,000
-----------
169,308
-----------
TIRE & RUBBER--0.15%
32,000 Pavco................................................................ 64,598
-----------
Total Colombia Common Stocks...................................................... 620,135
-----------
CZECH REPUBLIC--1.61%
CHEMICALS--0.55%
3,394 Deza Valasske Meririci............................................... 245,647
-----------
</TABLE>
7
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Number of
Shares Value
- ---------- -----------
<C> <S> <C>
CZECH REPUBLIC--(CONCLUDED)
MACHINERY-INDUSTRIAL--0.37%
3,666 Zavody Presneho Stro................................................. $ 162,225
-----------
MANUFACTURING--0.19%
1,731 Fatra A.S............................................................ 86,336
-----------
STONE, CLAY & GLASS PRODUCTS--0.14%
2,280 Cement Hranice A.S................................................... 60,963
-----------
UTILITIES-ELECTRIC--0.36%
3,168 Cez.................................................................. 114,526
1,240 Cez GDR.............................................................. 44,950
-----------
159,476
-----------
Total Czech Republic Common Stocks................................................ 714,647
-----------
ECUADOR--0.10%
STONE, CLAY & GLASS PRODUCTS--0.10%
256 Le Cemento Nacional de Ecuador GDR*.................................. 44,800
-----------
GHANA--0.53%
METALS & MINING--0.53%
9,700 Ashanti Goldfield Company, Limited Class S GDS*...................... 196,425
2,000 Ashanti Goldfield Company, Limited GDS*.............................. 39,950
-----------
Total Ghana Common Stocks......................................................... 236,375
-----------
GREECE--2.28%
BANKS--0.57%
4,380 Alpha Credit Bank.................................................... 253,094
-----------
CONSTRUCTION--0.90%
5,500 GEK.................................................................. 70,754
3,320 Hellenic Technodomik................................................. 72,396
19,970 Michaniki S.A........................................................ 256,900
-----------
400,050
-----------
FOOD, BEVERAGE & TOBACCO--0.69%
4,360 Chipita International................................................ 66,203
7,330 Hellenic Bottling Company............................................ 239,603
-----------
305,806
-----------
</TABLE>
8
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Number of
Shares Value
- ---------- -----------
<C> <S> <C>
GREECE--(CONCLUDED)
PLASTICS--0.03%
2,500 A.G. Petzetakis S.A.*................................................ $ 12,390
-----------
RETAIL--0.09%
3,230 Alfa-Beta Vassilopoulos.............................................. 37,465
-----------
Total Greece Common Stocks........................................................ 1,008,805
-----------
HUNGARY--2.41%
CHEMICALS--0.51%
70 Chinoin*............................................................. 17,932
8,820 Graboplast........................................................... 116,197
2,953 Primagaz Hungaria Rights*............................................ 88,614
-----------
222,743
-----------
FOOD, BEVERAGE & TOBACCO--0.05%
1,560 Sopron Brewery Limited............................................... 24,456
-----------
OIL & GAS--0.14%
7,400 Mol Magyar Olaj Es Gazipari GDR...................................... 60,125
-----------
PLASTICS--0.20%
6,590 Pannonplast Muanya................................................... 86,818
-----------
RETAIL--1.40%
19,710 Julius Meinl International A.G....................................... 621,896
-----------
STONE, CLAY & GLASS PRODUCTS--0.11%
2,276 Zalakeramia A.G.*.................................................... 49,682
-----------
Total Hungary Common Stocks....................................................... 1,065,720
-----------
INDIA--5.15%
CONSTRUCTION--0.17%
4,200 Larsen & Toubro Limited GDS.......................................... 76,104
-----------
INVESTMENT COMPANIES--0.60%
22,124 Himalayan Fund....................................................... 265,488
3,364 Himalayan Fund Warrants.............................................. 1,177
-----------
266,665
-----------
</TABLE>
9
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Number of
Shares Value
- ---------- -----------
<C> <S> <C>
INDIA--(CONCLUDED)
METALS & MINING--1.44%
8,900 Hindalco Industries Limited GDR...................................... $ 303,757
13,050 Indian Aluminum GDS.................................................. 81,563
281,000 Tata Iron & Steel Company Limited*................................... 250,090
-----------
635,410
-----------
STONE, CLAY & GLASS PRODUCTS--0.66%
6,300 India Cement Limited GDR............................................. 50,400
32,500 India Cement Limited GDS............................................. 243,750
-----------
294,150
-----------
TEXTILES--0.55%
11,800 Grasim Industries Limited GDS........................................ 241,900
-----------
TRANSPORTATION EQUIPMENT--1.34%
45,172 Tata Engineering & Locomotive Company Limited GDR.................... 593,108
-----------
UTILITIES-ELECTRIC--0.39%
526 Tata Electric Companies GDR.......................................... 173,580
-----------
Total India Common Stocks......................................................... 2,280,917
-----------
INDONESIA--3.63%
BANKS--0.25%
33,000 P. T. Bank International Indonesia................................... 109,326
-----------
CONSTRUCTION--0.10%
46,500 Petrosea............................................................. 43,724
-----------
ELECTRONICS--0.14%
121,500 P. T. Astra Graphia.................................................. 63,766
-----------
FINANCIAL SERVICES--0.25%
216,500 P. T. Dharmala Sakti Sejahtera....................................... 108,889
-----------
FOOD, BEVERAGE & TOBACCO--0.15%
32,000 C. P. Pokphand Indonesia............................................. 65,078
-----------
FOOD SERVICES--0.41%
378,250 P. T. Ultrajaya Milk Industry & Trading Company...................... 181,970
-----------
HOTELS--0.36%
131,000 P. T. Jakarta International Hotel.................................... 160,420
-----------
</TABLE>
10
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Number of
Shares Value
- ---------- -----------
<C> <S> <C>
INDONESIA--(CONCLUDED)
PAPER PRODUCTS--0.13%
63,560 Tjiwi Kimia.......................................................... $ 58,376
-----------
REAL ESTATE--0.44%
35,500 P. T. Modernland Realty Limited...................................... 37,262
245,500 P. T. Pakuwon Jati................................................... 155,686
-----------
192,948
-----------
STONE, CLAY & GLASS PRODUCTS--0.54%
35,500 Mulia Industrindo.................................................... 100,142
50,000 Semen Gresik......................................................... 139,952
-----------
240,094
-----------
TELECOMMUNICATIONS--0.34%
84,000 P. T. Bakrie & Brothers.............................................. 152,460
-----------
TEXTILES--0.32%
38,600 P. T. Indorama Synthetics............................................ 139,696
-----------
TRANSPORTATION--0.20%
43,000 P. T. Astra International............................................ 89,329
-----------
Total Indonesia Common Stocks..................................................... 1,606,076
-----------
KOREA--12.68%
BANKS--0.94%
5,600 Kwang Ju Bank........................................................ 53,347
4,138 Kwang Ju Bank New Shares............................................. 38,406
12,980 Shinhan Bank......................................................... 254,329
3,580 Shinhan Bank New Shares.............................................. 67,839
-----------
413,921
-----------
CHEMICALS--0.64%
2,810 Korea Chemical....................................................... 282,539
-----------
COMMUNICATIONS--0.37%
20 Korea Mobile Telecom................................................. 15,031
3,400 Korea Mobile Telecom GDR............................................. 150,450
-----------
165,481
-----------
</TABLE>
11
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Number of
Shares Value
- ---------- -----------
<C> <S> <C>
KOREA--(CONTINUED)
CONSTRUCTION--1.19%
10,398 Hyundai Engineering & Construction Company........................... $ 477,175
1,120 Hyundai Engineering & Construction Company New Shares................ 50,532
-----------
527,707
-----------
ELECTRONICS--2.46%
800 Samsung Display Devices.............................................. 70,641
2,892 Samsung Electronics Company.......................................... 525,649
3,675 Samsung Electronics Company GDR...................................... 234,036
1,990 Samsung Electronics Company GDS...................................... 119,400
780 Samsung Electronics Company New Shares............................... 140,767
-----------
1,090,493
-----------
FINANCIAL SERVICES--0.30%
5,140 Daewoo Securities.................................................... 133,842
-----------
FOOD, BEVERAGE & TOBACCO--0.14%
5,050 Haitai Confectionery................................................. 62,559
-----------
INSURANCE--0.21%
190 Samsung Fire & Marine Insurance...................................... 94,296
-----------
INVESTMENT COMPANIES--0.91%
18,340 Korea Fund........................................................... 403,480
-----------
METALS & MINING--2.06%
31,400 Pohang Iron & Steel Company, Limited ADR............................. 686,875
6,867 Pusan Steel Pipe Corporation ........................................ 224,843
-----------
911,718
-----------
RETAIL--0.07%
1,050 Taegu Department Store*.............................................. 23,957
382 Taegu Department Store New Shares*................................... 8,716
-----------
32,673
-----------
STONE, CLAY & GLASS PRODUCTS--0.64%
500 Keumkang Company..................................................... 37,319
8,760 Ssangyong Cement Company Limited..................................... 245,043
-----------
282,362
-----------
TRANSPORTATION--0.14%
1,760 Korea Express........................................................ 61,711
-----------
</TABLE>
12
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Number of
Shares Value
- ---------- -----------
<C> <S> <C>
KOREA--(CONCLUDED)
TRANSPORTATION EQUIPMENT--0.80%
13,700 Hyundai Motor GDR.................................................... $ 203,788
10,100 Hyundai Motor GDR+................................................... 150,238
-----------
354,026
-----------
UTILITIES-ELECTRIC--1.81%
20,150 Korea Electric Power Corporation..................................... 800,026
-----------
Total Korea Common Stocks......................................................... 5,616,834
-----------
MALAYSIA--3.11%
COMMUNICATIONS--0.21%
32,000 Technology Resources Industries Berhad............................... 94,499
-----------
CONSTRUCTION--0.70%
87,000 Ekran Berhad......................................................... 212,387
61,000 I.J.M. Corporation .................................................. 97,035
-----------
309,422
-----------
FINANCIAL SERVICES--0.13%
5,000 AMMB Holdings Berhad................................................. 57,093
-----------
HOTELS--0.23%
12,000 Genting Berhad....................................................... 100,169
-----------
INSURANCE--0.14%
8,000 Arab Malaysian Corporation........................................... 28,980
70,500 Arab Malaysian Corporation (5% Cumulative Loan Stock)................ 34,699
-----------
63,679
-----------
PACKAGING & CONTAINERS--0.75%
15,500 Kian Joo Factory Berhad.............................................. 64,082
87,000 Malaysian Pacific Industries Berhad.................................. 268,910
-----------
332,992
-----------
PAPER PRODUCTS--0.31%
85,000 Aokam Perdana........................................................ 137,221
-----------
REAL ESTATE--0.50%
18,750 O.Y.L. Industries Berhad............................................. 145,440
48,000 Sime U.E.P. Properties Berhad........................................ 75,599
-----------
221,039
-----------
</TABLE>
13
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Number of
Shares Value
- ---------- -----------
<C> <S> <C>
MALAYSIA--(CONCLUDED)
TELECOMMUNICATIONS--0.14%
8,000 Telekom Malaysia..................................................... $ 62,370
-----------
Total Malaysia Common Stocks...................................................... 1,378,484
-----------
MEXICO--5.99%
AUTOMOTIVE--0.37%
6,000 Grupo Industrial Saltillo, S.A. de C.V............................... 81,659
1,500 Grupo Industrial Saltillo, S.A. de C.V. Series CPO................... 21,581
12,000 Grupo Industrial San Luis Series CPO................................. 62,216
-----------
165,456
-----------
BANKS--0.24%
117,760 Grupo Financiero Banorte S.A. Series B............................... 106,846
-----------
COMMUNICATIONS--0.36%
5,047 Telefonos de Mexico, S.A. de C.V. Series L ADR....................... 160,873
-----------
CONSTRUCTION--0.52%
4,000 Ingenieros Civiles Asociados, S.A. de C.V.*.......................... 41,426
18,600 Ingenieros Civiles Asociados, S.A. de C.V.* ADR*..................... 190,650
-----------
232,076
-----------
FINANCIAL SERVICES--0.17%
266,000 Grupo Financiero Bancomer, S.A. de C.V. Series B..................... 74,128
-----------
FOOD, BEVERAGE & TOBACCO--0.40%
370,000 Grupo Herdez S.A. de C.V. Series B................................... 80,570
42,000 Fomento Economico Mexicano, S.A. de C.V. Series B.................... 94,398
-----------
174,968
-----------
HOLDING COMPANIES--0.31%
36,000 Desc--Sociedad de Fomento Industrial, S.A. de C.V. Series B*......... 132,054
9,214 Grupo Sidek S.A. de C.V. Series L.................................... 5,673
-----------
137,727
-----------
HOTELS--0.43%
3,400 Grupo Posada, S.A. de C.V. ADS*...................................... 26,418
415,000 Grupo Posada, S.A. de C.V. Series A*................................. 161,374
-----------
187,792
-----------
</TABLE>
14
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Number of
Shares Value
- ---------- -----------
<C> <S> <C>
MEXICO--(CONCLUDED)
MACHINERY-INDUSTRIAL--0.15%
27,800 Cydsa S.A.*.......................................................... $ 67,383
-----------
METALS & MINING--0.44%
45,000 Grupo Mexico, S.A. de C.V. Series B.................................. 190,149
200 Hylsamex, S.A. de C.V. ADR*.......................................... 4,274
-----------
194,423
-----------
NON-DEPOSITORY INSTITUTIONS--0.10%
16,000 Grupo Financiero Inbursa, S.A. de C.V. Series B...................... 43,759
-----------
PAPER PRODUCTS--0.43%
53,000 Empaques Ponderosa, S.A. de C.V. Series B............................ 95,215
14,600 Grupo Industrial Durango S.A. de C.V. ADR*........................... 96,725
-----------
191,940
-----------
RETAIL--0.56%
24,000 Cifra, S.A. de C.V. Series B*........................................ 24,949
218,000 Cifra, S.A. de C.V. Series C*........................................ 220,402
-----------
245,351
-----------
STONE, CLAY & GLASS PRODUCTS--1.11%
129,200 Cementos Mexicanos, S.A. de C.V. Series A............................ 427,038
8,875 Cementos Mexicanos, S.A. de C.V. Series B............................ 32,210
10,000 Cementos Mexicanos, S.A. de C.V. Series CPO.......................... 32,923
-----------
492,171
-----------
TIRE & RUBBER--0.30%
420,000 Industria Automotriz S.A. Series A................................... 116,500
55,263 Industria Automotriz S.A. Series B................................... 15,329
-----------
131,829
-----------
TRANSPORTATION--0.10%
4,000 Grupo Condumex S.A. Series A......................................... 14,413
4,000 Transportacion Maritima Mexicana, S.A. de C.V........................ 31,627
-----------
46,040
-----------
Total Mexico Common Stocks........................................................ 2,652,762
-----------
MOROCCO--0.33%
HOLDING COMPANIES--0.33%
3,900 Omnium Nord Africain*................................................ 148,284
-----------
</TABLE>
15
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Number of
Shares Value
- ---------- -----------
<C> <S> <C>
PAKISTAN--0.84%
BANKS--0.08%
45,100 Bank of Punjab*...................................................... $ 33,612
-----------
CHEMICALS--0.03%
3,360 Engro Chemicals...................................................... 13,895
-----------
INVESTMENT COMPANIES--0.08%
7,200 The Pakistan Fund.................................................... 33,300
-----------
OIL & GAS--0.20%
11,492 Pakistan State Oil................................................... 89,005
-----------
PAPER PRODUCTS--0.17%
26,200 Packages............................................................. 77,339
-----------
TELECOMMUNICATIONS--0.06%
280 Pakistan Telecommunications Company GDR*............................. 24,360
-----------
TEXTILES--0.16%
85,067 Nishat Mills......................................................... 72,721
-----------
UTILITIES-ELECTRIC--0.06%
1,500 Hub Power Company Limited GDR*....................................... 26,475
-----------
Total Pakistan Common Stocks...................................................... 370,707
-----------
PAPUA NEW GUINEA--0.28%
METALS & MINING--0.28%
63,545 Niugini Mining....................................................... 122,329
-----------
PERU--1.52%
BANKS--0.39%
9,956 Credicorp Limited.................................................... 171,721
-----------
COMMUNICATIONS--0.13%
27,525 Telefonica del Peru Class B.......................................... 58,957
-----------
FOOD, BEVERAGE & TOBACCO--0.27%
31,763 Cerveceri San Juan*.................................................. 27,351
28,300 Compania Embotelladora del Pacifico S.A. Class B..................... 11,511
157,886 Compania Nacional de Cerveza Class Trabajo*.......................... 78,567
-----------
117,429
-----------
MACHINERY-CONSTRUCTION--0.09%
32,898 Enrique Ferreyros Class Trabajo...................................... 38,436
-----------
</TABLE>
16
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Number of
Shares Value
- ---------- -----------
<C> <S> <C>
PERU--(CONCLUDED)
METALS & MINING--0.64%
17,662 Minas Buenaventura, S.A.*............................................ $ 113,874
5,134 Minas Buenaventura, S.A. Class Trabajo*.............................. 33,323
8,423 Minsur Class Trabajo................................................. 59,045
5,794 Southern Peru Copper................................................. 81,379
-----------
287,621
-----------
Total Peru Common Stocks.......................................................... 674,164
-----------
PHILIPPINES--1.37%
BANKS--0.19%
4,412 Metropolitan Bank & Trust Company.................................... 85,784
-----------
CONSTRUCTION--0.18%
1,340,100 Engineering Equipment, Incorporated.................................. 77,657
-----------
FOOD, BEVERAGE & TOBACCO--0.17%
22,320 San Miguel Corporation Class B....................................... 76,159
-----------
HOLDING COMPANIES--0.18%
39,920 First Philippine Holdings Corporation Class B........................ 77,618
-----------
METALS & MINING--0.14%
548,800 Philex Mining Corporation Class B.................................... 62,768
-----------
REAL ESTATE--0.33%
118,887 Ayala Land, Incorporated Class B..................................... 145,039
-----------
UTILITIES-ELECTRIC--0.18%
10,000 Manila Electric Company Class B...................................... 81,586
-----------
Total Philippines Common Stocks................................................... 606,611
-----------
PORTUGAL--1.56%
BANKS--0.43%
7,500 Banco Comercial Portugues............................................ 101,971
5,980 Banco Espirito Santo Comercial de Lisboa............................. 90,374
-----------
192,345
-----------
COMMUNICATIONS--0.11%
2,600 Portugal Telecom..................................................... 48,899
-----------
CONSTRUCTION--0.08%
3,772 Engil Sociedade de Construcao Civil, S.A.*........................... 32,333
5,200 Somec*............................................................... 3,474
-----------
35,807
-----------
</TABLE>
17
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Number of
Shares Value
- ---------- -----------
<C> <S> <C>
PORTUGAL--(CONCLUDED)
FURNITURE & FIXTURES--0.15%
5,968 Cinca................................................................ $ 65,392
-----------
MACHINERY-CONSTRUCTION--0.10%
6,300 Empresa Fabril de Maquinas Electricas, S.A........................... 42,512
-----------
MISCELLANEOUS MANUFACTURING--0.20%
7,694 Corticiera Amorim S.A................................................ 88,673
-----------
PACKAGING & CONTAINERS--0.05%
722 Barbosa E Almeida S.A................................................ 21,466
-----------
PAPER PRODUCTS--0.15%
3,060 Sonae Investimentos.................................................. 65,401
-----------
REAL ESTATE--0.24%
2,700 Lusotur Sociedade*................................................... 55,921
2,000 Mundicenter Sociedade Imobiliaria, S.A............................... 52,768
-----------
108,689
-----------
STONE, CLAY & GLASS PRODUCTS--0.05%
1,400 Cimentos de Portugal S.A............................................. 23,188
-----------
Total Portugal Common Stocks...................................................... 692,372
-----------
RUSSIA--2.77%
COMMUNICATIONS--2.44%
80,000 Global Telesystems Group Incorporated*............................... 1,080,000
-----------
METALS & MINING--0.31%
89,300 Nelson Gold Corporation*............................................. 138,642
-----------
UTILITIES-ELECTRIC--0.02%
1,100 AO Mosenergo ADR+*................................................... 8,938
-----------
Total Russia Common Stocks........................................................ 1,227,580
-----------
SINGAPORE--1.63%
CONSTRUCTION--0.27%
37,000 IPCO International................................................... 119,880
-----------
ELECTRONICS--0.37%
55,000 GP Batteries International Limited................................... 132,550
25,750 GP Batteries International Limited Warrants.......................... 18,025
10,000 Tri-M Technologies Limited........................................... 14,000
-----------
164,575
-----------
</TABLE>
18
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Number of
Shares Value
- ---------- -----------
<C> <S> <C>
SINGAPORE--(CONCLUDED)
MISCELLANEOUS MANUFACTURING--0.56%
163,840 San Teh Limited...................................................... $ 137,836
39,320 San Teh Limited Warrants............................................. 19,180
27,000 Venture Manufacturing Limited........................................ 90,477
-----------
247,493
-----------
TRANSPORTATION--0.43%
109,000 Chuan Hup Holdings Limited........................................... 98,636
106,000 Pacific Carriers Limited............................................. 91,425
-----------
190,061
-----------
Total Singapore Common Stocks..................................................... 722,009
-----------
SLOVAKIA--1.28%
CONSTRUCTION--0.05%
510 Vahostav AS.......................................................... 24,099
-----------
INSTRUMENTS--0.22%
4,140 Chirana Prama........................................................ 97,813
-----------
MACHINERY-INDUSTRIAL--0.14%
7,732 Povazske Strojarne*.................................................. 60,023
-----------
METALS & MINING--0.26%
8,048 VSZ A.S.............................................................. 114,087
-----------
TRANSPORTATION EQUIPMENT--0.08%
715 Slovenske Lodenice*.................................................. 36,199
-----------
UTILITIES-ELECTRIC--0.53%
3,212 Nafta................................................................ 233,084
-----------
Total Slovakia Common Stocks...................................................... 565,305
-----------
SOUTH AFRICA--1.60%
CHEMICALS--0.18%
9,900 Sasol................................................................ 81,063
-----------
CONGLOMERATES--0.11%
1,200 Anglovaal............................................................ 48,718
-----------
CONSTRUCTION--0.05%
3,300 Murray & Roberts..................................................... 23,310
-----------
</TABLE>
19
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Number of
Shares Value
- ---------- -----------
<C> <S> <C>
SOUTH AFRICA--(CONCLUDED)
FOOD, BEVERAGE & TOBACCO--0.38%
18,100 Malbak............................................................... $ 125,367
5,500 Smith (C. G.)........................................................ 42,244
-----------
167,611
-----------
METALS & MINING--0.69%
1,600 De Beers Centenary................................................... 48,498
7,200 Driefontein.......................................................... 91,345
181,200 Iscor................................................................ 163,033
-----------
302,876
-----------
RETAIL--0.19%
15,100 Wooltru.............................................................. 83,877
-----------
Total South Africa Common Stocks.................................................. 707,455
-----------
SRI LANKA--0.40%
BANKS--0.14%
15,100 National Development Bank............................................ 61,462
-----------
FINANCIAL SERVICES--0.20%
14,907 Development Finance Corporation of Ceylon............................ 82,738
24,300 Vanik Incorporated................................................... 9,441
-----------
92,179
-----------
HOTELS--0.06%
7,470 Aitken Spence........................................................ 25,844
-----------
Total Sri Lanka Common Stocks..................................................... 179,485
-----------
TAIWAN--1.96%
BUILDING MATERIALS--0.42%
19,100 Hocheng Corporation GDR*............................................. 187,180
-----------
ELECTRONICS--0.55%
3,400 ACER Incorporated GDR+*.............................................. 44,200
11,342 GVC Corporation GDR*................................................. 93,572
6,300 Siliconware Precision Industries..................................... 103,950
-----------
241,722
-----------
METALS & MINING--0.99%
25,300 China Steel Corporation GDR.......................................... 439,588
-----------
Total Taiwan Common Stocks........................................................ 868,490
-----------
</TABLE>
20
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Number of
Shares Value
- ---------- -----------
<C> <S> <C>
THAILAND--3.91%
BANKS--1.00%
3,500 Bangkok Bank Company, Limited........................................ $ 42,517
51,200 Bank of Asia......................................................... 117,888
18,600 Bank of Ayudhya Limited ............................................. 104,113
153,000 Siam City Bank plc................................................... 176,141
-----------
440,659
-----------
CONSTRUCTION--0.20%
55,600 Siam Syntech Construction Company, Limited........................... 90,496
-----------
ELECTRONICS--0.34%
36,200 Hana Microelectronic................................................. 149,456
-----------
HEALTH SERVICES--0.11%
31,800 Ramkamhaeng Hospital Company, Limited................................ 50,496
-----------
HOTELS--0.28%
257,000 First Pacific Land, Limited.......................................... 122,430
-----------
METALS & MINING--0.21%
17,000 Alucon Manufacturing Company, Limited................................ 93,132
-----------
REAL ESTATE--0.62%
112,200 M. D. X. Company, Limited............................................ 170,371
57,500 Raimon Land.......................................................... 103,861
-----------
274,232
-----------
STONE, CLAY & GLASS PRODUCTS--0.52%
2,000 Siam Cement Company.................................................. 110,838
39,500 Thai-German Ceramic Industry Company, Limited ....................... 117,606
-----------
228,444
-----------
TELECOMMUNICATIONS--0.22%
32,500 Telecom Asia Corporation*............................................ 99,345
-----------
TEXTILES--0.19%
76,200 Saha-Union Corporation............................................... 86,213
-----------
TRANSPORTATION--0.22%
16,800 Precious Shipping Limited............................................ 95,371
-----------
Total Thailand Common Stocks...................................................... 1,730,274
-----------
TURKEY--0.62%
BANKS--0.21%
494,100... Akbank .............................................................. 93,303
-----------
</TABLE>
21
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS--(CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Number of
Shares Value
- ---------- -----------
<C> <S> <C>
TURKEY--(CONCLUDED)
HOLDING COMPANIES--0.28%
311,740 Alarko Holding....................................................... $ 125,413
-----------
NON-DEPOSITORY INSTITUTIONS--0.03%
370,020 Aktif Finans Factori................................................. 12,607
-----------
RETAIL--0.10%
57,600 Migros Turks......................................................... 43,980
-----------
Total Turkey Common Stocks........................................................ 275,303
-----------
VENEZUELA--1.13%
METALS & MINING--0.12%
140,400 Sivensa.............................................................. 45,071
1,872 Venprecar............................................................ 8,143
-----------
53,214
-----------
STONE, CLAY & GLASS PRODUCTS--0.22%
79,249 Venezolana de Cementos Class I....................................... 97,328
-----------
UTILITIES-ELECTRIC--0.79%
509,006 Electricidad de Caracas Class D*..................................... 347,792
-----------
Total Venezuela Common Stocks..................................................... 498,334
-----------
ZIMBABWE--0.17%
AEROSPACE & DEFENSE--0.17%
53,300 Trans Zambezi Industries Limited..................................... 77,285
-----------
Total Common Stocks (cost--$37,933,102)........................................... 33,539,559
-----------
- --------------------------------------------------------------------------------
PREFERRED STOCKS--7.32%
- --------------------------------------------------------------------------------
BRAZIL--6.38%
BANKS--0.78%
429,874 Antarctica de Paraiba................................................ 57,493
33,347,818 Banco Bradesco S.A. ................................................. 288,191
-----------
345,684
-----------
CHEMICALS--0.19%
5,331,394 Bombril S.A.......................................................... 80,081
752,000 IAP S.A.............................................................. 4,410
-----------
84,491
-----------
</TABLE>
22
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PREFERRED STOCKS--(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Number of
Shares Value
- ---------- -----------
<C> <S> <C>
BRAZIL--(CONTINUED)
COMMUNICATIONS--0.07%
222,000 Telesp............................................................... $ 32,775
-----------
DEPOSITORY INSTITUTIONS--0.34%
3,870,000 Unibanco............................................................. 151,296
-----------
ELECTRONICS--0.11%
67,000 Multibras S.A. ...................................................... 49,630
-----------
FOOD, BEVERAGE & TOBACCO--0.90%
529,610 Brahma............................................................... 217,952
244,000 Sadia Concordia...................................................... 180,741
-----------
398,693
-----------
MACHINERY-INDUSTRIAL--0.31%
157,162 Dixie Toga S.A....................................................... 137,436
-----------
METALS & MINING--0.21%
553,000 Vale Do Rio Doce S.A................................................. 91,029
-----------
MISCELLANEOUS MANUFACTURING--0.54%
13,627,731 Cosigua.............................................................. 92,534
16,688,000 Mangels Industrial S.A............................................... 37,771
306,000 Nakata............................................................... 110,185
-----------
240,490
-----------
PAPER PRODUCTS--0.29%
604,000 Melpaper S.A......................................................... 29,827
4,719,591 Votorantim Cellulose e Papel......................................... 97,111
-----------
126,938
-----------
RETAIL--0.02%
636,950 Mesbla S.A........................................................... 7,864
TELEPHONE--0.90% -----------
8,243,880 Telebras............................................................. 396,928
TIRE & RUBBER--0.34% -----------
1,019,900 Marcopolo S.A. Class B............................................... 151,096
-----------
TRANSPORTATION EQUIPMENT--0.05%
201,000 Iochpe Maxion S.A.................................................... 21,920
-----------
</TABLE>
23
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
PREFERRED STOCKS--(CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Number of
Shares Value
- ---------- -----------
<C> <S> <C>
BRAZIL--(CONCLUDED)
UTILITIES-ELECTRIC--1.33%
8,748,000 Cemig................................................................ $ 191,700
906,000 Iven S.A............................................................. 400,802
-----------
592,502
-----------
Total Brazil Preferred Stocks..................................................... 2,828,772
-----------
GREECE--0.59%
CONSTRUCTION--0.21%
9,140 Michaniki S.A........................................................ 91,173
-----------
FOOD, BEVERAGE & TOBACCO--0.30%
9,040 Delta Dairy S.A...................................................... 133,451
-----------
PLASTICS--0.08%
9,219 A.G. Petzetakis S.A.................................................. 35,734
-----------
260,358
Total Greece Preferred Stocks.....................................................
-----------
KOREA--0.10%
FINANCIAL SERVICES--0.10%
2,600 Daewoo Securities.................................................... 43,236
-----------
PHILIPPINES--0.25%
COMMUNICATIONS--0.25%
600 Philippine Long Distance ADR......................................... 32,475
2,500 Philippine Long Distance GDS......................................... 79,375
-----------
111,850
-----------
Total Preferred Stocks (cost--$3,770,793)......................................... 3,244,216
-----------
</TABLE>
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS--8.08%
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Principal
Amount Maturity Interest
(000) Date Rate
- --------- -------- --------
<C> <S> <C> <C> <C>
CHINA--0.45%
REAL ESTATE--0.45%
$ 163 Guangdong Investment Limited.......................... 10/07/98 4.500% 199,267
-----------
</TABLE>
24
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS--(CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------- -------- -----------
<C> <S> <C> <C> <C>
INDIA--0.98%
STONE, CLAY & GLASS PRODUCTS--0.98%
$ 325 Gujarat Ambuja Cement................................. 06/30/99 3.500% $ 433,875
-----------
INDONESIA--0.10%
REAL ESTATE--0.10%
72 P. T. Modernland Realty Limited....................... 01/04/03 6.000 45,344
-----------
TAIWAN--6.40%
ELECTRONICS--3.30%
180 ACER Incorporated..................................... 06/10/01 4.000 531,000
737 United Microelectronics Corporation................... 06/08/01 1.250 930,463
-----------
1,461,463
-----------
MACHINERY--0.82%
460 Teco.................................................. 04/15/04 2.750 363,400
-----------
PETROLEUM & COAL PRODUCTS--1.13%
505 Nan Ya Plastics....................................... 07/19/01 1.750 499,950
-----------
TRANSPORTATION--1.15%
536 U-Ming Marine......................................... 02/07/01 1.500 507,860
-----------
Total Taiwan Convertible Bonds.................................... 2,832,673
-----------
THAILAND--0.15%
BANKS--0.15%
38 Bangkok Bank Company, Limited ........................ 03/03/04 3.250 40,470
29 Bank of Asia.......................................... 02/09/04 3.750 28,130
-----------
68,600
-----------
Total Convertible Bonds (cost--$3,843,745)........................ 3,579,759
-----------
TOTAL INVESTMENTS (cost--$45,547,640)--91.13%..................... 40,363,534
Other assets in excess of liabilities--8.87%...................... 3,928,411
-----------
Net Assets--100.00%............................................... $44,291,945
-----------
-----------
</TABLE>
- ------------
<TABLE>
<S> <C>
(1) Includes 72,400 non-detachable warrants
* 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
</TABLE>
See accompanying notes to financial statements
25
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
December 31, 1995 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost--$45,547,640).................................... $40,363,534
Cash......................................................................... 685,006
Cash denominated in foreign currencies, at value (cost--$1,532,274).......... 1,514,499
Receivable for investments sold.............................................. 2,149,962
Dividends and interest receivable............................................ 242,516
Deferred organizational expenses............................................. 170,160
Receivable for shares of beneficial interest sold............................ 43,982
Other assets................................................................. 97,464
-----------
Total assets.............................................................. 45,267,123
-----------
LIABILITIES
Payable for shares of beneficial interest repurchased........................ 422,704
Payable for investments purchased............................................ 237,483
Payable to affiliates........................................................ 233,382
Accrued expenses and other liabilities....................................... 81,609
-----------
Total liabilities......................................................... 975,178
-----------
NET ASSETS
Beneficial interest shares of $0.001 par value outstanding (unlimited amount
authorized)..................................................................... 62,973,657
Accumulated net investment loss and distributions in excess of net investment
income.......................................................................... (414,621)
Accumulated net realized losses from investment transactions................. (13,050,547)
Net unrealized depreciation of investments and other assets and liabilities
denominated in foreign currencies.......................................... (5,216,544)
-----------
Net assets................................................................ $44,291,945
-----------
-----------
CLASS A:
Net assets................................................................... $21,077,170
-----------
Shares outstanding........................................................... 2,275,158
-----------
Net asset value and redemption value per share............................... $9.26
Maximum offering price per share (net asset value plus sales charge of 4.50%
of offering price).............................................................. $9.70
CLASS B:
Net assets................................................................... $ 27,597
-----------
Shares outstanding........................................................... 3,005
-----------
Net asset value and offering price per share................................. $9.18
CLASS C:
Net assets................................................................... $12,796,699
-----------
Shares outstanding........................................................... 1,393,913
-----------
Net asset value and offering price per share................................. $9.18
CLASS Y:
Net assets................................................................... $10,390,479
-----------
Shares outstanding........................................................... 1,117,770
-----------
Net asset value, offering price and redemption value per share............... $9.30
</TABLE>
See accompanying notes to financial statements
26
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
Statement of Operations
For the Six Months Ended December 31, 1995 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes).................................. $ 350,162
Interest (net of foreign withholding taxes)................................... 62,813
-----------
412,975
-----------
EXPENSES:
Investment advisory and administration fees................................... 474,742
Service fees--Class A......................................................... 37,611
Service and distribution fees--Class B........................................ 35
Service and distribution fees--Class C........................................ 82,471
Custody and accounting........................................................ 176,886
Transfer agency............................................................... 31,361
Amortization of organizational expenses....................................... 28,742
Reports and notices to shareholders........................................... 21,173
Legal and audit............................................................... 21,036
Federal and state registration fees........................................... 15,675
Trustees' fees and expenses................................................... 5,041
Other expenses................................................................ 7,647
-----------
902,420
Less: Fee waivers............................................................. (136,451)
-----------
Net expenses............................................................... 765,969
-----------
Net investment loss.............................................................. (352,994)
-----------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT TRANSACTIONS:
Net realized losses from:
Investment transactions.................................................... (2,480,111)
Foreign currency transactions.............................................. (2,378,417)
Net change in unrealized appreciation/depreciation of:
Investments................................................................ 2,719,417
Assets and liabilities denominated in foreign currencies................... (28,112)
-----------
Net realized and unrealized losses from investment transactions.................. (2,167,223)
-----------
Net decrease in net assets resulting from operations............................. $(2,520,217)
-----------
-----------
</TABLE>
See accompanying notes to financial statements
27
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
DECEMBER 31, 1995 YEAR ENDED
(UNAUDITED) JUNE 30, 1995
----------------- -------------
<S> <C> <C>
FROM OPERATIONS:
Net investment loss..................................... $ (352,994) $ (722,359 )
Net realized losses from investment transactions........ (2,480,111) (7,704,890 )
Net realized losses from foreign currency
transactions............................................... (2,378,417) (185,851 )
Net change in unrealized appreciation/depreciation of:
Investments........................................... 2,719,417 1,768,294
Assets and liabilities denominated in foreign
currencies................................................. (28,112) 19,491
----------------- -------------
Net decrease in net assets resulting from operations.... (2,520,217) (6,825,315 )
----------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income--Class A.......................... -- (184,109 )
Net investment income--Class B.......................... -- --
Net investment income--Class C.......................... -- (6,584 )
Net investment income--Class Y.......................... -- (87,871 )
----------------- -------------
Total dividends to shareholders......................... -- (278,564 )
----------------- -------------
FROM BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from the sale of shares.................... 4,462,632 18,199,542
Proceeds from dividends reinvested...................... -- 272,835
Cost of shares repurchased.............................. (21,577,120) (36,356,442 )
----------------- -------------
Net decrease in net assets from beneficial interest
transactions............................................... (17,114,488) (17,884,065 )
----------------- -------------
Total decrease in net assets............................ (19,634,705) (24,987,944 )
NET ASSETS:
Beginning of period..................................... 63,926,650 88,914,594
----------------- -------------
End of period........................................... $ 44,291,945 $ 63,926,650
----------------- -------------
----------------- -------------
</TABLE>
See accompanying notes to financial statements
28
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Emerging Markets Equity Fund (formerly Mitchell Hutchins/Kidder,
Peabody Emerging Markets Equity Fund) (the "Fund") is registered with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The Fund's
board of trustees have the authority to issue an unlimited number of shares of
beneficial interest, par value $0.001.
Organizational Matters--The Fund commenced investment operations on January
19, 1994. The costs incurred by the Fund in connection with its organization and
registration of shares of the Fund have been deferred and are being amortized
using the straight-line method over the period of benefit, not to exceed five
years, beginning with the commencement of operations of the Fund. The Fund
offers Class A, Class B, Class C (formerly Class B) and Class Y (formerly Class
C) shares. Effective November 10, 1995, the Fund began using industry
standardized nomenclatures and Class B and Class C shares were renamed Class C
and Class Y shares, respectively. In addition, a new Class B was created. 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 each
class has exclusive voting rights with respect to its distribution plan.
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 subsidiary of PaineWebber
Incorporated ("PaineWebber") and investment adviser and administrator of the
Fund or by the sub-adviser of the Fund, as the primary market. Securities traded
in the over-the-counter ("OTC") market and listed on Nasdaq are valued at the
last trade price on Nasdaq prior to the time of valuation; other OTC securities
are valued at the last bid price available in the OTC market prior to the time
of valuation. The amortized cost method of valuation generally is used to value
short-term debt instruments with sixty days or less remaining to maturity unless
the Fund's board of trustees determines that this does not represent fair value.
Securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Fund's board of trustees.
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 valuations are determined by the Fund's custodian. Foreign currency
exchange rates are generally determined prior to the close of the New York Stock
Exchange ("NYSE"). Occasionally, events affecting the value of foreign
investments and such exchange rates occur between the time at which they are
determined and the close of the NYSE, which
29
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
will not be reflected in a computation of the Fund's net asset value. If events
materially affecting the value of such investments or currency exchange rates
occurs during such time period, the securities are valued at their fair value as
determined in good faith by or under the direction of the Fund's board of
trustees.
Investment Transactions and Investment Income--Investment transactions are
recorded on the trade date. Realized gains and losses from sales of investments
and foreign exchange transactions are calculated using the identified cost
method. Interest income is recorded on an accrual basis. Dividend income is
recorded on the ex-dividend date (except in the case of certain foreign
dividends which are recorded as soon after the ex-dividend date as the Fund
becomes aware of such dividend).
Income and expenses (excluding class-specific expenses) and
realized/unrealized gains/losses are allocated proportionately to each class of
shares based upon the relative net asset value of outstanding shares (or the
value of dividend-eligible shares, as appropriate) of each class at the
beginning of the day (after adjusting for current capital share activity of the
respective classes). Class-specific expenses are charged directly to the
applicable class of shares.
Foreign Currency Translation--The books and records of the Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:
(1) market value of investment securities, other assets and
liabilities--at the exchange rates prevailing at the end of the period.
(2) purchases and sales of investment securities, income and
expenses--at the exchange rates prevailing on the respective dates of such
transactions.
Although the net assets and the market value of the Fund are presented at
the foreign exchange rates at the end of the period, the Fund does not generally
isolate the effect of fluctuations in foreign exchange rates from the effect of
the changes in market prices of securities. However, the Fund does isolate the
effect of fluctuations in foreign exchange rates when determining the realized
gain or loss upon the sale or maturity of foreign currency denominated debt
obligations. Pursuant to federal income tax regulations, certain foreign
exchange gains/losses included in realized and unrealized gain/loss are included
in or are a reduction of ordinary income for federal income tax purposes.
Repurchase Agreements--The Fund's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligations. 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.
30
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dividends and Distributions--Dividends and distributions to shareholders are
recorded on the ex-dividend date. Dividends from net investment income and
distributions from realized capital gains 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
reclassifications. Dividends and distributions which exceed net investment
income and net realized capital gains for financial reporting purposes, but not
for tax purposes, are reported as dividends in excess of net investment income
or distributions in excess of net realized capital gains. To the extent they
exceed net investment income and net realized capital gains for tax purposes,
they are reported as distributions of paid-in-capital.
CONCENTRATION OF RISK
Investing in securities of foreign issuers and currency transactions may
involve certain considerations and risks not typically associated with
investments in the United States. These risks include revaluation of currencies,
adverse fluctuations in foreign currency values and possible adverse political,
social and economic developments, including those particular to a specific
industry, country or region, which could cause the securities and their markets
to be less liquid and prices more volatile than those of comparable U.S.
companies and U.S. government securities. These risks are greater with respect
to securities of issuers located in emerging market countries in which this Fund
is authorized to invest.
INVESTMENT ADVISER AND ADMINISTRATOR
Mitchell Hutchins receives compensation from the Fund accrued 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% thereafter.
In compliance with applicable state securities laws, Mitchell Hutchins will
reimburse the Fund if and to the extent that the aggregate operating expenses in
any fiscal year, exclusive of taxes, interest, brokerage fees, distribution fees
and extraordinary expenses, exceed limitations imposed by various state
regulations. Currently, the most restrictive limitation applicable to the Fund
is 2.5% of the first $30 million of average daily net assets, 2.0% of the next
$70 million and 1.5% of any excess over $100 million. For the six months ended
December 31, 1995, Mitchell Hutchins waived a portion of its investment advisory
fee. At December 31, 1995 the Fund owed Mitchell Hutchins $182,613 in investment
advisory and administration fees.
Under a separate contract with Mitchell Hutchins ("Sub-Advisory Contract"),
Emerging Markets Management serves as the Fund's sub-adviser. Under the
Sub-Advisory Contract, Mitchell Hutchins (not the Fund) will pay the Sub-Adviser
a fee, accrued daily and paid monthly, at the annual rate of 1.12% of the Fund's
average daily net assets up to $100 million and 0.90% thereafter.
31
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DISTRIBUTION PLAN
Mitchell Hutchins is the distributor of the Fund's shares and has appointed
PaineWebber as the exclusive dealer for the sale of those shares. Under separate
plans of distribution pertaining to Class A, Class B and Class C (formerly Class
B) shares, the Fund pays Mitchell Hutchins monthly service fees at the annual
rate of 0.25% of the average daily net assets of Class A, Class B and Class C
shares and monthly distribution fees at the annual rate of 0.75% of the average
daily net assets of Class B and Class C shares. At December 31, 1995, the Fund
owed Mitchell Hutchins $50,769 in service and distribution fees.
Mitchell Hutchins also receives the proceeds of the initial sales charges
paid by the 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 Fund that for the
period ended December 31, 1995, it earned $19,902 in sales charges.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at December
31, 1995 was substantially the same as the cost of securities for financial
statement purposes.
At December 31, 1995, the components of the net unrealized depreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross depreciation (investments having an excess of cost over
value)......................................................... $ (9,185,038)
Gross appreciation (investments having an excess of value over
cost).......................................................... 4,000,932
------------
Net unrealized depreciation of investments..................... $ (5,184,106)
------------
------------
</TABLE>
32
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For the six months ended December 31, 1995, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $12,286,908 and
$32,031,752, respectively.
BENEFICIAL INTEREST
At December 31, 1995, there was an unlimited amount of $0.001 par value
shares of beneficial interest authorized. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
------------------------ ------------------------ ------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Six months ended
December 31, 1995:
Shares sold.......... 50,630 $ 505,149 3,005 $27,642 365,984 $ 3,559,234 38,017 $ 370,607
Dividends
reinvested............ -- -- -- -- -- -- -- --
Shares repurchased... (1,172,631) (11,160,920) -- -- (889,571) (8,629,590) (185,666) (1,786,610)
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)............ (1,122,001) $(10,655,771) 3,005 $27,642 (523,587) $ (5,070,356) (147,649) $ (1,416,003)
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Year ended June 30,
1995:
Shares sold.......... 1,014,098 $ 11,084,369 -- -- 432,605 $ 4,522,619 242,720 $ 2,592,554
Dividends
reinvested............ 20,613 180,155 -- -- 749 6,520 9,847 86,160
Shares repurchased... (1,971,947) (21,159,863) -- -- (1,001,168) (10,754,854) (416,367) (4,441,725)
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Net decrease.......... (937,236) $ (9,895,339) -- -- (567,814) $ (6,225,715) (163,800) $ (1,763,011)
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
</TABLE>
FEDERAL TAX STATUS
The Fund intends to distribute substantially all of its taxable income and
to comply with the other requirements of the Internal Revenue Code applicable to
regulated investment companies. Accordingly, no provision for federal income
taxes is required. In addition, by distributing during each calendar year
substantially all of its net investment income, capital gains and certain other
amounts, if any, the Fund intends not to be subject to a federal excise tax.
At June 30, 1995, the Fund had a net capital loss carryforward of
approximately $350,000. This loss carryforward is available as a reduction, to
the extent provided in the regulations, of future net realized capital gains and
will expire by June 30, 2003.
In accordance with U.S. Treasury regulations, the Fund has elected to defer
realized losses arising after October 31, 1994. Such losses have been treated
for tax purposes as arising on July 1, 1995.
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.
33
<PAGE>
PaineWebber Emerging Markets Equity Fund
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------------------------ -------------------------
FOR THE SIX FOR THE FOR THE FOR THE
MONTHS ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED
DECEMBER 31, 1995 JUNE 30, JUNE 30, DECEMBER 31, 1995++
(UNAUDITED) 1995 1994+ (UNAUDITED)
------------------ ---------- ------------ -------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ 9.73 $ 10.79 $ 12.00 $9.13
------- ---------- ------------ -----
Net investment income (loss)..... (0.12) (0.04) 0.04 0.01
Net realized and unrealized gains
(losses) from investment
transactions..................... (0.35) (0.97) (1.25) 0.04
------- ---------- ------------ -----
Total income (loss) from
investment operations........... (0.47) (1.01) (1.21) 0.05
------- ---------- ------------ -----
Dividends from net investment
income........................... -- (0.05) -- --
------- ---------- ------------ -----
Net asset value, end of period... $ 9.26 $ 9.73 $ 10.79 $9.18
------- ---------- ------------ -----
------- ---------- ------------ -----
Total investment return(1)....... (4.83)% (9.29)% (10.08)% 0.55%
------- ---------- ------------ -----
------- ---------- ------------ -----
Ratios/Supplemental Data:
Net assets, end of period
(000's).......................... $ 21,077 $ 33,043 $ 46,758 $28
Ratio of expenses, net of fee
waivers and expense
reimbursements, to average net
assets........................... 2.44%* 2.44% 2.47%* 3.19%*
Ratio of expenses, before fee
waivers and expense
reimbursements, to average net
assets........................... 2.92%* 2.54% 2.47%* 4.22%*
Ratio of net investment income,
net of fee waivers and expense
reimbursements, to average net
assets........................... (1.04)%* (0.76)% 0.72%* (1.93)%*
Ratio of net investment income,
before fee waivers and expense
reimbursements, to average net
assets.......................... (1.50)%* (0.86)% 0.72%* (2.95)%*
Portfolio turnover............... 22% 76% 8% 22%
</TABLE>
- ------------
<TABLE>
<C> <S>
+ 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 December 31,
1995.
* Annualized
** Formerly Class B shares
*** Formerly Class C shares
(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 returns for periods of less than
one year have not been annualized.
</TABLE>
34
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE><CAPTION>
CLASS C** CLASS Y***
- ------------------------------------------------- ---------------------------------------------------
FOR THE SIX FOR THE FOR THE FOR THE SIX FOR THE FOR THE
MONTHS ENDED YEAR ENDED PERIOD ENDED MONTHS ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, 1995 JUNE 30, JUNE 30, DECEMBER 31, 1995 JUNE 30, JUNE 30,
(UNAUDITED) 1995 1994+ (UNAUDITED) 1995 1994+
- ----------------- ---------- ------------ ----------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 9.67 $ 10.75 $ 12.00 $ 9.75 $ 10.80 $ 12.00
------- ---------- ------------ ------- ------------ ------------
(0.18) (0.17) -- (0.05) 0.01 0.05
(0.31) (0.90) (1.25) (0.40) (0.99) (1.25)
------- ---------- ------------ ------- ------------ ------------
(0.49) (1.07) (1.25) (0.45) (0.98) (1.20)
------- ---------- ------------ ------- ------------ ------------
-- (0.01) -- -- (0.07) --
------- ---------- ------------ ------- ------------ ------------
$ 9.18 $ 9.67 $ 10.75 $ 9.30 $ 9.75 $ 10.80
------- ---------- ------------ ------- ------------ ------------
------- ---------- ------------ ------- ------------ ------------
(5.07)% (10.01)% (10.42)% (4.62)% (9.03)% (10.00)%
------- ---------- ------------ ------- ------------ ------------
------- ---------- ------------ ------- ------------ ------------
$12,797 $ 18,551 $ 26,721 $10,390 $ 12,332 $ 15,435
3.19%* 3.19% 3.22%* 2.19%* 2.19% 2.22%*
3.68%* 3.29% 3.22%* 2.69%* 2.29% 2.22%*
(1.79)%* (1.50)% (0.03)%* (0.82)%* (0.51)% 0.97%*
(2.26)%* (1.60)% (0.03)%* (1.29)%* (0.61)% 0.97%*
22% 76% 8% 22% 76% 8%
</TABLE>
35
