<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND ANNUAL REPORT
PERFORMANCE AT A GLANCE
- - --------------------------------------------------------------------------------
COMPARISON OF THE CHANGE OF A $10,000 INVESTMENT IN PAINEWEBBER EMERGING MARKETS
EQUITY FUND AND THE IFC GLOBAL COMPOSITE INDEX
[Line Graph]
THE GRAPH DEPICTS THE PERFORMANCE OF PAINEWEBBER EMERGING MARKETS EQUITY FUND
VERSUS THE IFC GLOBAL COMPOSITE INDEX. IT IS IMPORTANT TO NOTE THAT PAINEWEBBER
EMERGING MARKETS EQUITY FUND IS A PROFESSIONALLY MANAGED MUTUAL FUND WHILE THE
INDEX IS NOT AVAILABLE FOR INVESTMENT AND IS UNMANAGED. THE COMPARISON IS SHOWN
FOR ILLUSTRATIVE PURPOSES ONLY.
AVERAGE ANNUAL TOTAL RETURN
COMMENCEMENT OF
TWELVE MONTHS OPERATIONS
ENDED 10/31/96 THROUGH 10/31/96+
% Return Without Deducting CLASS A* (1.25)% (7.99)%
Maximum Sales Charge CLASS B** N/A N/A
CLASS C*** (1.89)% (8.67)%
% Return After Deducting CLASS A* (5.68)% (9.52)%
Maximum Sales Charge CLASS B** N/A N/A
CLASS C*** (2.89)% (8.67)%
* Maximum sales charge for Class A shares is 4.5% of the public offering
price. Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B shares is 5.0% and is
reduced to 0% after 6 years. Class B shares bear ongoing 12b-1 distribution
and service fees.
*** Maximum contingent deferred sales charge for Class C shares is 1% and is
reduced to 0% after 1 year. Class C shares bear ongoing 12b-1 distribution
and service fees.
+ Commencement of operations dates are January 19, 1994, December 5, 1995 and
January 19, 1994 for Class A, Class B and Class C, respectively.
Note: The Fund offers Class Y (formerly Class C) shares to certain eligible
investors, including the trustees of the PaineWebber Savings Investment Plan and
INSIGHT Investment Advisory Program participants. For the twelve months ended
October 31, 1996, and since inception, January 19, 1994 through October 31,
1996, Class Y shares have an average annual total return of (1.04)% and (7.76)%,
respectively. Class Y shares do not have initial or contingent deferred sales
charges or ongoing distribution and service fees.
The principal value of an investment in the Fund will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
1
<PAGE>
FUND PROFILE
- - - GOAL:
Long-term capital appreciation
- - - PORTFOLIO MANAGER:
Antoine van Agtmael,
Emerging Markets Management
- - - TOTAL NET ASSETS:
$35.1 million (as of October 31, 1996)
- - - DIVIDEND PAYMENT:
Annually
December 16, 1996
Dear Shareholder,
We are pleased to present you with the annual report for PaineWebber Emerging
Markets Equity Fund (the "Fund") for the year ended October 31, 1996. This is
the first letter written since the Fund's fiscal year end was changed from June
30 to October 31.
GENERAL MARKET OVERVIEW
- - --------------------------------------------------------------------------------
The recovery in emerging markets has been modest year-to-date. The "mean
reversion" of several major Latin American Markets (after their steep fall in
early 1995) seems to have run its course--highlighting their vulnerability to a
correction in the U.S. Market. However, fundamentals remain good and valuations
attractive. After a period in which capital flows--rather than fundamentals--
largely determined returns (as markets were in the grips of euphoria and
disillusion), value-oriented strategies, such as that employed in the management
of this fund, may once again come into favor.
With world economic growth better than expected and strong fundamentals in
many emerging markets, we believe that, after some volatility that may arise in
the event of a major U.S. correction, the outlook for emerging markets is
positive. As such, we expect emerging markets to outperform the u.S. And
european markets over the next 18 months.
PORTFOLIO REVIEW
- - --------------------------------------------------------------------------------
The fund's total return (the net asset value change) for the 12 months
ended October 31, 1996, without deducting sales charges, was (1.25%) For Class a
shares, (1.89%) For Class C (formerly Class B) shares and (1.04%) For Class Y
(formerly Class C) shares. For shareowners who purchased or redeemed fund shares
during the period, the fund's total return for the period may be lower; for
example, after deducting the maximum applicable sales charges, the fund's total
return for the period was (5.68%) For Class A shares, (2.89%) For Class C shares
and (1.04%) For Class Y shares. As you may recall, Class B shares were not
offered until December 5, 1995; therefore, no performance figures are available.
Since inception of the fund and year-to-date, the fund's performance has
lagged some competitors and the IFC Global composite benchmark (up 7.2% Year-to-
date as of october 31, 1996), in part due to its overweighting in Korea (11.38%
of net assets as of October 31, 1996) and underweighting in Malaysia (3.14%).
The Korean market dropped 5.96% In October and 35% year-to-date, while
Malaysia's market was up 1.88% In October and 24.9% Year-to-date. In addition,
throughout the fiscal period, overexposure to semiconductor stocks in Asia and
underexposure to Taiwanese banks also
2
<PAGE>
hampered performance, as did the high rate of redemptions in falling markets and
higher-than-average costs related to transacting for a smaller fund size.
Conversely, the fund benefited from its positions in South Africa (3.43% as
of October 31, 1996), Thailand (3.61%) and Eastern Europe (15.30%), as well as
from its one private equity, Global Telesystems (4.10%), now the fund's largest
holding.
Our concern about the overvaluation of the U.S. market and the impact of a
major correction has steadily increased year-to-date. Thus, we have positioned
the portfolio (relative to market weightings) to minimize this impact. We have
overweighted countries that possess a historically lower correlation of return
with the U.S. market, such as Korea, China (8.14% Of net assets as of October
31, 1996) and the new markets in Eastern Europe, and underweighted countries
with a higher correlation of return, including Malaysia, Thailand, Indonesia
(3.47%) and Argentina (1.44%). The successful outcome of the Russian elections
is a positive for our exposure in Eastern Europe, while the rise of the dollar
versus the yen and the weakness in semiconductors had an earlier impact on the
Korean market than we anticipated.
OUTLOOK
- - --------------------------------------------------------------------------------
The crisis and disillusion with emerging markets appears to be over, but
the recovery is slower than we hoped. A focus on value in country selection,
combined with fundamental analysis of individual companies rather than market
sentiment and liquidity flows, has generally worked well in emerging markets.
That this focus has not added value over the past two years is sometimes
frustrating. However, we have learned from past experience that adhering to a
management style--rather than opportunistically following the latest trend--
offers the best results over the long term.
One final note: the cyclical nature of the world markets underscores the
importance of maintaining a well-diversified portfolio. An element of
international diversification may better position your portfolio to withstand
market fluctuations that may ultimately prevent you from achieving your long-
term investment objectives. Therefore, an investment in the fund may be a
prudent investment strategy.
Our ultimate objective in managing your investments is to help you
successfully meet your financial goals. We thank you for your continued support,
and welcome any comments or questions you may have.
Sincerely,
/s/ Margo N. Alexander /s/ Antoine W. van Agtmael
MARGO N. ALEXANDER ANTOINE W. VAN AGTMAEL
PRESIDENT, PORTFOLIO MANAGER,
MITCHELL HUTCHINS ASSET MANAGEMENT INC. PAINEWEBBER EMERGING MARKETS
EQUITY FUND
3
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
PERFORMANCE RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
TOTAL RETURN(1)
NET ASSET VALUE --------------------------
------------------------------------------ 4 MONTHS
12 MONTHS ENDED
10/31/96 06/30/96 10/31/95 ENDED 10/31/96 10/31/96
<S> <C> <C> <C> <C> <C>
- - --------------------------------------------------------------------------------------------
Class A Shares $ 9.46 $ 10.06 $ 9.58 (1.25)% (5.96)%
- - --------------------------------------------------------------------------------------------
Class B Shares 9.32 9.94 N/A N/A (6.24)%
- - --------------------------------------------------------------------------------------------
Class C Shares 9.32 9.94 9.50 (1.89)% (6.24)%
- - --------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS A SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN(1)
<S> <C> <C> <C> <C> <C>
- - --------------------------------------------------------------------------------------
01/19/94 - 12/31/94 $12.00 $10.49 -- -- (12.58)%
- - --------------------------------------------------------------------------------------
1995 10.49 9.26 -- $0.0517 (11.20)
- - --------------------------------------------------------------------------------------
01/01/96 - 10/31/96 9.26 9.46 -- -- 2.16
- - --------------------------------------------------------------------------------------
Total: $0.0000 $0.0517
- - --------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 10/31/96: (20.70)%
- - --------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS B SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------ CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN(1)
<S> <C> <C> <C> <C> <C>
- - --------------------------------------------------------------------------------------
12/05/95 - 12/31/95 $9.13 $9.18 -- -- 0.55%
- - --------------------------------------------------------------------------------------
01/01/96 - 10/31/96 9.18 9.32 -- -- 1.53
- - --------------------------------------------------------------------------------------
Total: $0.0000 $0.0000
- - --------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 10/31/96: 2.08%
- - --------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE SUMMARY CLASS C SHARES
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------- CAPITAL GAINS TOTAL
PERIOD COVERED BEGINNING ENDING DISTRIBUTED DIVIDENDS PAID RETURN(1)
<S> <C> <C> <C> <C> <C>
- - --------------------------------------------------------------------------------------
01/19/94 - 12/31/94 $12.00 $10.42 -- -- (13.17)%
- - --------------------------------------------------------------------------------------
1995 10.42 9.18 -- $0.0034 (11.87)
- - --------------------------------------------------------------------------------------
01/01/96 - 10/31/96 9.18 9.32 -- -- 1.53
- - --------------------------------------------------------------------------------------
Total: $0.0000 $0.0034
- - --------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN AS OF 10/31/96: (22.30)%
- - --------------------------------------------------------------------------------------
</TABLE>
(1) FIGURES ASSUME REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS AT NET ASSET
VALUE ON THE PAYABLE DATES AND DO NOT INCLUDE SALES CHARGES; RESULTS FOR
EACH CLASS WOULD BE LOWER IF SALES CHARGES WERE INCLUDED.
NOTE: THE FUND OFFERS CLASS Y SHARES TO A LIMITED GROUP OF ELIGIBLE INVESTORS,
INCLUDING THE TRUSTEE OF THE PAINEWEBBER SAVINGS INVESTMENT PLAN AND INSIGHT
INVESTMENT ADVISORY PROGRAM PARTICIPANTS. FOR THE YEAR ENDED OCTOBER 31, 1996,
AND SINCE INCEPTION, JANUARY 19, 1994 THROUGH OCTOBER 31, 1996, CLASS Y SHARES
HAVE A TOTAL RETURN OF (1.04)% AND (22.39)%, RESPECTIVELY. CLASS Y SHARES DO NOT
HAVE INITIAL OR CONTINGENT DEFERRED SALES CHARGES OR ONGOING DISTRIBUTION AND
SERVICE FEES.
4
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1996
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - ----------- ------------
<C> <S> <C>
COMMON STOCKS - 87.22%
ARGENTINA - 1.44%
Construction - 0.43%
8,680 Dycasa S.A.......................................... $ 31,772
19,094 Perez Companc S.A. (cia Naviera) Class B............ 121,259
------------
153,031
------------
Electric, Gas & Sanitary Services - 0.19%
9,310 Capex S.A.*......................................... 67,504
------------
Metals & Mining - 0.08%
10,450 Siderar S.A.+....................................... 28,218
------------
Oil & Gas - 0.53%
42,440 Astra CIA Argentina de Petro Class B................ 76,400
4,767 YPF Sociedad Anonima Series D ADR................... 108,449
------------
184,849
------------
Real Estate - 0.21%
24,032 IRSA Inversiones y Representaciones Class B......... 73,545
------------
Total Argentina Common Stocks..................................... 507,147
------------
AUSTRIA - 1.63%
Chemicals & Allied Products - 0.04%
405 Graboplast.......................................... 12,407
------------
Retail - 1.59%
18480 Julius Meinl International AG....................... 560,237
------------
Total Austria Common Stocks....................................... 572,644
------------
BANGLADESH - 0.26%
Chemicals - 0.26%
10,500 Beximco Pharmaceuticals............................. 93,251
------------
BRAZIL - 3.09%
Communications - 1.59%
1,800 Companhia de Telecomucicacione ADR.................. 177,525
6,200,000 Telebras............................................ 377,769
9,514 Telesp.............................................. 1,621
------------
556,915
------------
Electric, Gas & Sanitary Services - 0.25%
2,200,000 CESP CIA Energy SP*................................. 87,794
------------
Food, Beverage & Tobacco - 0.21%
33,548,410 Avipal S.A.......................................... 72,165
------------
</TABLE>
5
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - ----------- ------------
<C> <S> <C>
COMMON STOCKS - (CONTINUED)
BRAZIL - (CONCLUDED)
Investment Companies - 0.70%
661 Eternity Fund ADR*.................................. $ 247,395
------------
Retail - 0.18%
6,700 Makro S.A. GDR *+................................... 62,310
------------
Utilities - Electric - 0.16%
1,801 CEMIG ADR........................................... 57,407
------------
Total Brazil Common Stocks........................................ 1,083,986
------------
CHILE - 2.79%
Beverages - 0.51%
9,000 Vina Concha Y Toro ADR.............................. 180,000
------------
Chemicals - 0.20%
1,200 Sociedad Quimica y Minera de Chile S.A. Series B
ADR............................................... 69,000
------------
Financial - Other Services - 0.37%
5,600 Administradora De Fondas ADR........................ 130,200
------------
Food Stores - 0.18%
2,300 Santa Isabel S.A. ADR............................... 64,688
------------
Utilities - Electric - 1.53%
4,100 Chilectra S.A. ADR.................................. 223,450
10,700 Enersis S.A. ADR.................................... 314,313
------------
537,763
------------
Total Chile Common Stocks......................................... 981,651
------------
CHINA - 7.70%
Agriculture - 1.19%
1,256,000 CP Pokphand Company................................. 418,277
------------
Chemicals - 0.15%
266,000 Kingboard Chemical.................................. 52,290
------------
Communications - 0.67%
1,778,101 Champion Technology Holdings........................ 234,560
------------
Conglomerates - 0.54%
262,016 Guangdong Investments Limited....................... 188,069
------------
Electric Products - 0.51%
82,000 Johnson Electric Holdings........................... 179,225
------------
Electronics - 0.81%
156,000 Varitronix International............................ 284,473
------------
Furniture & Fixtures - 0.26%
262,000 Lamex Holdings Limited.............................. 92,335
------------
</TABLE>
6
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - ----------- ------------
<C> <S> <C>
COMMON STOCKS - (CONTINUED)
CHINA - (CONCLUDED)
Leather Products - 0.00%
802 KTP Holdings Limited*............................... $ 37
------------
Metal Products - 0.58%
426,000 Sinocan Holdings Limited............................ 202,471
------------
Miscellaneous Manufacturing - 0.16%
240,000 Lung Kee............................................ 57,733
------------
Railroad Transportation - 0.59%
11,200 Guangshen RY Limited ADR*........................... 208,600
------------
Real Estate - 0.12%
19,000 Henderson China Holdings*........................... 43,001
500 Tian An China Investments........................... 60
------------
43,061
------------
Retail - Wholesale Companies - 0.58%
250,000 Goldlion Holdings................................... 203,694
------------
Textile Products - 0.41%
142,000 Giordano International*............................. 143,245
------------
Transportation - 1.13%
84,000 New World Infrastructure Limited *(1)+.............. 209,125
444,000 Qingling Motors Company Class H..................... 186,622
------------
395,747
------------
Total China Common Stocks......................................... 2,703,817
------------
COLOMBIA - 1.37%
Banks - 0.38%
7,200 Banco Industrial Colombiano ADR..................... 133,200
------------
Holding & Other Investment Offices - 0.20%
3,867 Suramericana........................................ 71,540
------------
Retail - 0.02%
1,442 Carulla & Cia Series B ADR.......................... 8,650
------------
Stone, Clay & Glass Products - 0.45%
10,100 Cementos Argos...................................... 54,540
2,700 Cementos Paz del Rio S.A. GDS*...................... 33,750
5,500 Cementos Paz del Rio S.A. ADR *..................... 68,750
------------
157,040
------------
Tire & Rubber - 0.18%
32,000 Pavco............................................... 64,000
------------
</TABLE>
7
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - ----------- ------------
<C> <S> <C>
COMMON STOCKS - (CONTINUED)
COLOMBIA - (CONCLUDED)
Tobacco Products - 0.14%
15,874 Coltabaco........................................... $ 48,416
------------
Total Colombia Common Stocks...................................... 482,846
------------
CZECH REPUBLIC - 1.84%
Chemicals - 0.34%
1,466 Deza Valasske Meririci.............................. 118,682
------------
Communications - 0.59%
1,920 SPT Telecom A.S.*................................... 205,276
------------
Electronics - 0.09%
1,144 Kablo Kladno*....................................... 32,415
------------
Holding & Other Investment Offices - 0.41%
4,566 IF Zivnobanka....................................... 83,425
4,880 Zivnobanca Podil.................................... 61,435
------------
144,860
------------
Machinery - Industrial - 0.03%
188 Zavody Presneho Stro................................ 11,869
------------
Utilities - Electric - 0.38%
2,478 Cez*................................................ 88,342
1,240 Cez GDR*............................................ 44,020
------------
132,362
------------
Total Czech Republic Common Stocks................................ 645,464
------------
GHANA - 0.55%
Metals & Mining - 0.55%
11,700 Ashanti Goldfield Company Limited GDR (1)........... 191,588
------------
GREECE - 2.47%
Banks - 0.65%
3,580 Alpha Credit Bank................................... 228,677
------------
Communications - 0.22%
4,440 Greek Telecom....................................... 78,459
------------
Construction - 0.72%
1,930 General Construction S.A............................ 21,899
4,380 Helliniki Technodom................................. 64,423
18,710 Michaniki S.A....................................... 166,295
------------
252,617
------------
</TABLE>
8
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - ----------- ------------
<C> <S> <C>
COMMON STOCKS - (CONTINUED)
GREECE - (CONCLUDED)
Food, Beverage & Tobacco - 0.59%
5,710 AB Vassilopoulos.................................... $ 79,785
4,000 Hellenic Bottling Company........................... 128,761
------------
208,546
------------
Water Transportation - 0.29%
14,550 Attica Enterprises.................................. 100,583
------------
Total Greece Common Stocks........................................ 868,882
------------
HUNGARY - 1.13%
Chemicals & Allied Products - 0.29%
5,000 Borsodchem RT GDR+.................................. 101,250
------------
Depository Institutions - 0.08%
118 Inter Europa Bank (Rights).......................... 29,237
------------
Oil & Gas - 0.46%
2,700 Mol Magyar Olaj Es Gazipari......................... 27,541
7,400 Mol Magyar Olaj Es Gazipari GDR*.................... 74,740
5,900 Mol Magyar Olaj Es Gazipari GDS..................... 59,590
------------
161,871
------------
Plastics - 0.30%
3,243 Pannonplast Muanya.................................. 106,023
------------
Total Hungary Common Stocks....................................... 398,381
------------
INDIA - 6.81%
Construction - 0.71%
6,600 Larsen & Toubro Limited GDR+........................ 99,000
10,100 Larsen & Toubro Limited GDS......................... 151,500
------------
250,500
------------
Electric, Gas & Sanitary Services - 0.94%
10,700 BSES Limited GDR*+.................................. 203,300
6,600 BSES Limited GDR*................................... 125,400
------------
328,700
------------
Holding & Other Investment Offices - 0.46%
40,000 India Fund (Class A)................................ 162,109
------------
Hotels - 0.51%
3,110 East India Hotels GDR............................... 55,980
14,000 Industrial Credit and Investment India GDR*+........ 122,500
------------
178,480
------------
</TABLE>
9
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - ----------- ------------
<C> <S> <C>
COMMON STOCKS - (CONTINUED)
INDIA - (CONCLUDED)
Investment Companies - 0.00%
3,364 Himalayan Fund Warrants*............................ $ 303
------------
Metals & Mining - 0.98%
10,500 Hindalco Industries Limited GDR..................... 192,990
13,600 Steel Authority India GDR*+......................... 108,800
5,300 Steel Authority India GDR*+......................... 42,400
------------
344,190
------------
Stone, Clay & Glass Products - 0.79%
31,700 Gujarat Ambuja Cement GDR*.......................... 261,525
6,300 India Cement Limited GDR............................ 16,569
------------
278,094
------------
Textiles - 0.60%
15,100 Arvind Mills GDS*................................... 56,624
10,900 Grasim Industries Limited GDS*...................... 152,600
------------
209,224
------------
Transportation Equipment - 1.50%
26,080 Tata Engineering & Locomotive Company Limited GDR... 322,740
16,392 Tata Engineering & Locomotive Company Limited GDR... 202,851
------------
525,591
------------
Utilities - Electric - 0.32%
350 Tata Electric Companies GDR......................... 113,750
------------
Total India Common Stocks......................................... 2,390,941
------------
INDONESIA - 3.40%
Agriculture - 0.15%
47,000 Chareon Pokphand Indonesia*......................... 52,462
------------
Banks - 0.39%
85,617 P.T. Bank International Indonesia................... 137,837
------------
Conglomerates - 0.26%
61,500 P.T. Bakrie & Brothers.............................. 91,090
------------
Electronics - 0.20%
91,500 P.T. Astra Graphia.................................. 69,726
------------
Financial Services - 0.34%
140,500 P.T. Dharmala Sakti Sejahtera....................... 120,637
------------
Local & Interurban Passenger Transit - 0.37%
132,033 Steady Safe+........................................ 128,955
------------
Real Estate - 0.26%
271,500 P.T. Pakuwon Jati................................... 93,247
------------
</TABLE>
10
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - ----------- ------------
<C> <S> <C>
COMMON STOCKS - (CONTINUED)
INDONESIA - (CONCLUDED)
Stone, Clay & Glass Products - 0.23%
86,070 Mulia Industrindo................................... $ 81,292
------------
Telecommunications - 0.59%
139,000 Telekomunikasi*..................................... 207,369
------------
Textile Products - 0.35%
42,500 Indorama Synthetic.................................. 121,335
------------
Transportation - 0.26%
43,500 P.T. Astra International............................ 90,573
------------
Total Indonesia Common Stocks..................................... 1,194,523
------------
KOREA - 11.34%
Banks - 2.26%
1,420 Housing and Commercial Bank*........................ 28,013
15,100 Housing and Commercial Bank * (New)................. 290,578
7,700 Kook Min Bank GDR*+................................. 160,738
9,490 Korea Exchange Bank*................................ 93,148
13,770 Shinhan Bank........................................ 221,653
------------
794,130
------------
Communications - 0.49%
130 Korea Mobile Telecom................................ 68,442
8,400 Korea Mobile Telecom GDR............................ 105,000
------------
173,442
------------
Construction - 0.69%
8,312 Hyundai Engineering & Construction Company.......... 241,438
------------
Electronics - 1.76%
2,006 Samsung Display Devices............................. 126,248
145 Samsung Display Devices (New)....................... 8,389
2,476 Samsung Electronics Company......................... 174,107
562 Samsung Electronics Company (New)................... 38,430
4,143 Samsung Electronics Company GDR*.................... 89,075
753 Samsung Electronics Company GDR*.................... 34,638
226 Samsung Electronics Company GDR*.................... 10,227
6,317 Samsung Electronics Company GDS*.................... 135,816
------------
616,930
------------
Insurance - 0.45%
340 Samsung Fire & Marine Insurance..................... 158,427
------------
Investment Companies - 0.66%
13,840 Korea Fund (1)...................................... 233,550
------------
</TABLE>
11
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - ----------- ------------
<C> <S> <C>
COMMON STOCKS - (CONTINUED)
KOREA - (CONCLUDED)
Metals & Mining - 1.73%
20,500 Pohang Iron & Steel Limited ADR (1)................. $ 425,375
5,904 Seah Steel Corporation.............................. 164,347
700 Seah Steel Corporation (New)........................ 17,283
------------
607,005
------------
Miscellaneous - 0.40%
2,150 Namhae Chemical*.................................... 139,213
------------
Steel - 0.37%
9,380 Hanwha*............................................. 131,689
------------
Telecommunications - 0.13%
220 Sungmi Telecom*..................................... 44,732
------------
Transportation Equipment - 0.60%
6,020 Hyundai Motor Company*.............................. 187,248
1,900 Hyundai Motor GDR+.................................. 21,375
100 Hyundai Motor GDR................................... 1,125
------------
209,748
------------
Utilities - Electric - 1.80%
21,480 Korea Electric Power Corporation.................... 631,726
------------
Total Korea Common Stocks......................................... 3,982,030
------------
MALAYSIA - 3.14%
Agriculture - 0.30%
36,250 Perlis Plantations*................................. 104,022
------------
Brewery - 0.21%
29,000 Guinness Anchor Berhad.............................. 74,609
------------
Construction - 0.78%
79,000 IJM Corporation..................................... 171,977
13,000 United Engineers Berhad*............................ 102,909
------------
274,886
------------
Depository Institutions - 0.33%
18,000 Commerce Asset Holdings............................. 117,554
------------
Electric, Gas & Sanitary Services - 0.24%
19,000 Malakoff Berhad*.................................... 85,731
------------
Holding & Other Investment Offices - 0.32%
22,000 Road Builder*....................................... 113,200
------------
Hotels - 0.36%
22,000 Resorts World Berhad*............................... 126,262
------------
</TABLE>
12
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - ----------- ------------
<C> <S> <C>
COMMON STOCKS - (CONTINUED)
MALAYSIA - (CONCLUDED)
Packaging & Containers - 0.38%
34,000 Malaysian Pacific Industries Berhad................. $ 131,882
------------
Publishing - 0.22%
21,000 Star Publications*.................................. 77,716
------------
Total Malaysia Common Stocks...................................... 1,105,862
------------
MEXICO - 7.97%
Automotive - 0.62%
75,000 Grupo Industrial Saltillo, S.A. de C.V.............. 217,418
------------
Banks - 0.64%
222,200 Grupo Financiero Banorte, S.A. Series B*............ 223,375
------------
Communications - 0.57%
6,547 Telefonos de Mexico, S.A. de C.V. Series L ADR...... 199,684
------------
Computers - 0.39%
8,000 Acer Computers Latino Americano, S.A. de C.V.
ADR*+............................................. 137,360
------------
Construction - 0.84%
18,600 Empresa Ica Sociedad Contro ADR *(1)................ 241,800
4,000 Empresa Ica Sociedad Contro*........................ 52,703
------------
294,503
------------
Food, Beverage & Tobacco - 0.64%
61,000 Fomento Economico Mexicano, S.A. de C.V. Series B... 185,182
45,000 Sistema Argos, S.A. de C.V. Series B*............... 39,863
------------
225,045
------------
Holding Companies - 0.47%
33,000 Desc- Sociedad de Fomento Industrial, S.A. de C.V.
Series B *........................................ 161,767
750 Desc- Sociedad de Fomento Industrial, S.A. de C.V.
Series C *........................................ 3,639
------------
165,406
------------
Hotels - 0.45%
285,357 Grupo Posada, S.A. de C.V. Series A*................ 129,587
3,400 Grupo Posada, S.A. de C.V. GDR*..................... 27,625
------------
157,212
------------
Metals & Mining - 0.77%
36,000 Alfa, S.A. de C.V. Series A*........................ 150,047
45,000 Grupo Mexico, S.A. de C.V. Series B*................ 121,493
------------
271,540
------------
Miscellaneous Retail - 0.31%
58,000 Farmacia Benavides, S.A. de C.V. Series B........... 108,387
------------
</TABLE>
13
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - ----------- ------------
<C> <S> <C>
COMMON STOCKS - (CONTINUED)
MEXICO - (CONCLUDED)
Paper Products - 0.38%
318,000 Empaques Ponderosa, S.A. de C.V. Series B*.......... $ 134,519
------------
Retail - 0.51%
141,000 Cifra, S.A. de C.V. Series C*....................... 180,691
------------
Stone, Clay & Glass Products - 1.01%
99,200 Cementos Mexicanos, S.A. de C.V..................... 336,323
4,875 Cementos Mexicanos, S.A. de C.V. Series B........... 17,529
------------
353,852
------------
Transportation - 0.37%
4,000 Grupo Condumex, S.A. Series A....................... 13,437
420,000 Industrias Automotriz Class A*...................... 20,902
16,000 Transportacion Maritima Mexicana, S.A. de C.V.
Series A.......................................... 94,954
------------
129,293
------------
Total Mexico Common Stocks........................................ 2,798,285
------------
MOROCCO - 0.46%
Holding Companies - 0.46%
2,800 Omnium Nord Africain................................ 161,262
------------
PAKISTAN - 0.65%
Banks - 0.02%
13,530 Bank of Punjab *.................................... 5,182
------------
Chemicals - 0.14%
14,432 Engro Chemicals..................................... 49,331
------------
Oil & Gas - 0.17%
7,092 Pakistan State Oil.................................. 61,224
------------
Telecommunications - 0.13%
280 Pakistan Telecommunications Company GDR*............ 21,000
310 Pakistan Telecommunications Company GDR*............ 23,250
------------
44,250
------------
Utilities - Electric - 0.19%
3,300 Hub Power Company Limited GDR*...................... 66,825
------------
Total Pakistan Common Stocks...................................... 226,812
------------
PERU - 1.45%
Communications - 0.48%
50,203 Telefonica del Peru Class B......................... 106,223
3,000 Telefonica del Peru Class B ADR..................... 61,875
------------
168,098
------------
</TABLE>
14
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - ----------- ------------
<C> <S> <C>
COMMON STOCKS - (CONTINUED)
PERU - (CONCLUDED)
Food, Beverage & Tobacco - 0.12%
74,735 Compania Nacional de Cerveza Class Trabajo*......... $ 44,021
------------
Holding & Other Investment Offices - 0.43%
8,698 Credicorp Limited ADR............................... 152,215
------------
Metals & Mining - 0.36%
15,947 Minas Buenaventura S.A.............................. 123,782
186 Minas Buenaventura S.A.............................. 1,449
------------
125,231
------------
Stone, Clay, & Glass Products - 0.06%
13,702 Cem Norte Pacasmay*................................. 19,965
------------
Total Peru Common Stocks.......................................... 509,530
------------
PHILIPPINES - 1.34%
Banks - 0.18%
2,789 Metropolitan Bank & Trust Company................... 61,553
------------
Conglomerates - 0.14%
6,800 Benpress Holdings Corporation GDR*.................. 47,600
------------
Holding Companies - 0.11%
18,204 First Philippine Holdings Corporation Class B....... 36,713
------------
Metals & Mining - 0.28%
791,800 Philex Mining Corporation Class B*.................. 99,427
------------
Real Estate - 0.42%
90,030 Ayala Land Incorporated Class B..................... 95,922
56,000 Fil Estate Land Inc.*............................... 52,207
------------
148,129
------------
Telecommunications - 0.10%
600 Philippine Long Distance ADR........................ 35,925
------------
Utilities - Electric - 0.11%
5,460 Manila Electric Company Class B..................... 40,098
------------
Total Philippines Common Stocks................................... 469,445
------------
POLAND - 1.77%
Chemicals & Allied Products - 0.05%
1,107 Jelfa*.............................................. 15,748
------------
Construction - 0.51%
21,921 Exbud S.A.*......................................... 180,875
------------
Depository Institutions - 0.68%
183,425 Bank Inicjatyw Gospodarczy*......................... 238,113
------------
Industrial Machinery & Equipment - 0.31%
17,598 Rafako*............................................. 107,652
------------
</TABLE>
15
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - ----------- ------------
<C> <S> <C>
COMMON STOCKS - (CONTINUED)
POLAND - (CONCLUDED)
Metals & Mining - 0.22%
1,009 Kety S.A.*.......................................... $ 78,949
------------
Total Poland Common Stocks........................................ 621,337
------------
PORTUGAL - 2.06%
Banks - 0.74%
11,474 Banco Comercial Portugues........................... 142,441
6,680 Banco Espirito Santo Comercial de Lisboa............ 117,407
------------
259,848
------------
Communications - 0.29%
3,900 Portugal Telecom.................................... 101,418
------------
Construction - 0.29%
6,972 Engil Sociedade de Constrcao Civil S.A.............. 71,064
2,150 Sempa Soc Invest.................................... 32,169
------------
103,233
------------
Food Stores - 0.13%
500 Jeronimo Martins SGPS............................... 45,606
------------
Lumber & Wood Products - 0.38%
5,894 Corticiera Amorim S.A............................... 61,039
2,460 Sonae Investimento.................................. 72,104
------------
133,143
------------
Printing & Publishing - 0.04%
400 Investec Consult*................................... 12,545
------------
Real Estate - 0.19%
4,400 Lusotur Sociedade*.................................. 67,560
------------
Total Portugal Common Stocks...................................... 723,353
------------
RUSSIA - 4.91%
Telecommunications - 4.10%
80,000 Global Telesystems ADR.............................. 1,440,000
------------
Utilities - Electric 0.81%
1,100 AO Mosenergo ADR.................................... 31,075
13,500 Rao Gazprom ADR*+ (1)............................... 253,125
------------
284,200
------------
Total Russia Common Stocks........................................ 1,724,200
------------
SINGAPORE - 1.98%
Business Services - 0.27%
80,000 Datacraft Asia ADR*................................. 94,400
------------
</TABLE>
16
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - ----------- ------------
<C> <S> <C>
COMMON STOCKS - (CONTINUED)
SINGAPORE - (CONCLUDED)
Construction - 0.19%
28,000 IPCO International ADR*............................. $ 66,640
------------
Electronics - 1.22%
41,000 GP Batteries International Limited ADR*............. 118,900
177,608 San Teh Limited..................................... 114,749
47,184 San Teh Limited Warrants............................ 16,415
97,500 Venture Manufacturing Limited....................... 177,210
------------
427,274
------------
Furniture & Fixtures - 0.30%
157,000 Roly International ADR.............................. 105,975
------------
Total Singapore Common Stocks..................................... 694,289
------------
SLOVAKIA - 0.73%
Metals & Mining - 0.34%
6,221 VSZ A.S............................................. 119,727
------------
Miscellaneous - 0.05%
419 Plastika Nitra*..................................... 16,088
------------
Transportation Equipment - 0.04%
486 Slovenske Lodenice*................................. 14,396
------------
Utilities - Electric 0.30%
1,695 Nafta............................................... 105,843
------------
Total Slovakia Common Stocks...................................... 256,054
------------
SOUTH AFRICA - 3.43%
Chemicals - 0.64%
18,615 Sasol............................................... 227,109
------------
Food, Beverage & Tobacco - 0.29%
3,900 South African Brewery............................... 101,396
------------
Industrial Machinery & Equipment - 0.30%
12,200 Barlow Limited...................................... 106,336
------------
Metals & Mining - 2.20%
2,200 Anglo American Corporation S.A...................... 132,327
10,300 De Beers............................................ 304,006
11,100 Driefontein......................................... 147,251
36,800 Gencor Limited...................................... 127,830
17,300 Gencor Limited ADR.................................. 57,955
2,800 Iscor............................................... 1,999
------------
771,368
------------
Total South Africa Common Stocks.................................. 1,206,209
------------
</TABLE>
17
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - ----------- ------------
<C> <S> <C>
COMMON STOCKS - (CONTINUED)
SRI LANKA - 0.05%
Hotels - 0.05%
7,470 Aitken Spence....................................... $ 17,022
------------
TAIWAN - 5.33%
Building Materials - 0.48%
17,035 Hocheng Corporation GDR............................. 136,791
4,051 Hocheng Corporation GDR............................. 32,533
------------
169,324
------------
Electronics - 0.97%
3,008 GVC Corporation GDR*................................ 20,695
28,860 Siliconware Precision GDR*+......................... 235,209
10,080 Siliconware Precision GDR*+......................... 82,152
------------
338,056
------------
Metals & Mining - 1.75%
31,700 China Steel Corporation GDS*........................ 614,584
------------
Miscellaneous - 2.13%
19,300 Evergreen Marine Corporation GDR*+.................. 335,338
42,400 R.O.C. Taiwan Fund (1).............................. 413,400
------------
748,738
------------
Total Taiwan Common Stocks........................................ 1,870,702
------------
THAILAND - 3.20%
Banks - 1.15%
3,500 Bangkok Bank Company Limited........................ 37,341
77,900 Bank of Asia........................................ 131,387
40,250 Bank of Ayudhya Limited............................. 115,248
106,150 Siam City Bank plc.................................. 121,784
------------
405,760
------------
Construction - 0.18%
55,600 Siam Syntech Construction Company Limited........... 63,243
------------
Electronics - 0.46%
32,300 Hana Microelectronic................................ 160,898
------------
Stone, Clay & Glass Products - 0.77%
6,700 Siam Cement Company................................. 229,159
39,500 Thai-German Ceramic Industry Company Limited........ 42,606
------------
271,765
------------
Telecommunications - 0.41%
74,300 Telecom Asia Corporation*........................... 142,801
------------
Transportation - 0.23%
</TABLE>
18
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - ----------- ------------
<C> <S> <C>
COMMON STOCKS - (CONCLUDED)
THAILAND - (CONCLUDED)
37,600 Precious Shipping Limited........................... $ 79,638
------------
Total Thailand Common Stocks...................................... 1,124,105
------------
TURKEY - 0.72%
Banks - 0.26%
756,200 Akbank.............................................. 92,210
------------
Construction - 0.09%
101,000 Enka Holdings*...................................... 29,872
------------
Holding Companies - 0.29%
583,480 Alarko Holding*..................................... 102,939
------------
Insurance - 0.08%
870,000 Aksigorta*.......................................... 27,989
------------
Total Turkey Common Stocks........................................ 253,010
------------
UNITED KINGDOM - 0.39%
Holding & Other Investment Offices - 0.39%
56,300 Lonrho.............................................. 137,451
------------
VENEZUELA - 1.46%
Metals & Mining - 0.09%
1,872 Venprecar ADR*...................................... 9,734
4,200 Venprecar GDS*...................................... 21,840
------------
31,574
------------
Stone, Clay & Glass Products - 0.69%
64,600 Ceramica Carabobo Class B ADR....................... 70,091
63,249 Venezolana de Cementos Class I...................... 173,095
------------
243,186
------------
Utilities - Electric - 0.68%
218,392 Electricidad de Caracas............................. 239,490
------------
Total Venezuela Common Stocks..................................... 514,250
------------
ZIMBABWE - 0.36%
Holding Companies - 0.36%
53,300 Trans Zambezi Industries Limited ADR................ 127,920
------------
Total Common Stocks (cost - $31,824,155).......................... 30,638,249
------------
</TABLE>
19
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - ----------- ------------
<C> <S> <C>
PREFERRED STOCKS - 7.74%
BRAZIL - 7.45%
Banks - 0.37%
15,121,727 Banco Bradesco S.A.................................. $ 128,934
------------
Building Products - Cement - 0.47%
630,000 CIM Port Itau (CIA)*................................ 165,631
------------
Chemicals - 0.01%
752,000 IAP S.A.*........................................... 4,611
------------
Communications - 0.73%
3,443,880 Telebras............................................ 255,760
------------
Depository Institutions - 0.44%
5,590,000 Unibanco............................................ 155,066
------------
Electric, Gas & Sanitary Services - 0.12%
1,200,000 CESP CIA Energy SP.................................. 40,296
------------
Food, Beverage & Tobacco - 0.82%
199,610 Brahma.............................................. 123,372
245,000 Sadia Concordia..................................... 164,542
------------
287,914
------------
Machinery - Industrial - 0.34%
157,162 Dixie Toga S.A...................................... 117,787
------------
Metals & Mining - 0.59%
10,000 Vale Rio Doce....................................... 207,319
------------
Miscellaneous Manufacturing - 0.19%
306,000 Nakata.............................................. 66,120
------------
Petroleum & Coal Products - 0.90%
2,450,000 Petrobras Brasileiros............................... 317,160
------------
Textile Mill Products - 0.27%
280,000 Coteminas........................................... 94,024
------------
Tire & Rubber - 0.36%
649,900 Marcopolo S.A. Class B.............................. 126,514
------------
Utilities - Electric - 1.84%
7,148,000 CEMIG............................................... 227,506
836,000 Iven S.A.*.......................................... 419,058
------------
646,564
------------
Total Brazil Preferred Stocks..................................... 2,613,700
------------
GREECE - 0.02%
Plastics - 0.02%
2,819 A.G. Petzetakis S.A.*............................... 7,925
------------
</TABLE>
20
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - ----------- ------------
<C> <S> <C>
PREFERRED STOCKS - (CONCLUDED)
KOREA - 0.04%
Construction - 0.04%
483 Hyundai Engineering & Construction Company (New)*... $ 13,620
------------
PHILIPPINES - 0.23%
Telecommunications - 0.23%
2,500 Philippine Long Distance GDS........................ 82,500
------------
Total Preferred Stocks (cost - $2,362,767)........................ 2,717,745
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000)** DATES RATES
- - ------------ -------- --------
<C> <S> <C> <C> <C>
CONVERTIBLE BONDS - 5.02%
CHINA - 0.44%
Real Estate - 0.27%
110 Henderson Capital
International*................. 03/28/97 1.000% 94,050
-----------
Transportation - 0.17%
56 New World Infrastructure
Limited*+...................... 07/15/01 5.000 60,200
-----------
Total China Convertible Bonds.................. 154,250
-----------
INDONESIA - 0.07%
Real Estate - 0.07%
IDR 172,800 P.T. Modernland*................. 01/04/03 6.000 24,574
-----------
PHILIPPINES - 0.13%
Banks - 0.09%
25 Metropolitan Bank & Trust
Company........................ 09/10/00 2.750 30,375
-----------
Real Estate - 0.04%
12 Ayala Land Incorporated.......... 06/08/00 3.000 15,600
-----------
Total Philippines Convertible Bonds............ 45,975
-----------
SWITZERLAND - 0.41%
General Contracting - 0.41%
150 Pacific Construction*............ 10/01/98 2.125 144,185
-----------
TAIWAN - 3.53%
Electronics - 0.42%
122 United Microelectronics
Corporation*................... 06/08/04 1.250 148,230
-----------
Machinery - 1.00%
360 Teco*............................ 04/15/04 2.750 263,700
120 Teco*............................ 01/01/04 2.750 87,900
-----------
</TABLE>
21
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000)** DATES RATES VALUE
- - ------------ -------- -------- -----------
<C> <S> <C> <C> <C>
CONVERTIBLE BONDS - (CONCLUDED)
TAIWAN - (CONCLUDED)
$ 351,600
-----------
Petroleum & Coal Products - 1.52%
495 Nan Ya Plastics*................. 07/19/01 1.750 532,125
-----------
Transportation - 0.59%
237 U-Ming Marine*................... 02/07/01 1.500 207,375
-----------
Total Taiwan Convertible Bonds................. 1,239,330
-----------
THAILAND - 0.44%
Banks - 0.44%
154 Bangkok Bank Company Limited..... 03/03/04 3.250 155,540
-----------
Total Convertible Bonds (cost - $1,861,554).... 1,763,854
-----------
</TABLE>
<TABLE>
<C> <S> <C>
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED - 4.62%
<CAPTION>
NUMBER OF
SHARES
- - -----------
<C> <S> <C>
MONEY MARKET FUNDS - 4.62%
223,000 AIM Institutional Trust............................. 223,600
1,400,100 Provident Institutional Investment Fund............. 1,400,100
------------
Total Money Market Funds (cost $1,623,700)........................ 1,623,700
------------
Total Investments (cost - $37,672,176) - 104.60%.................. 36,743,548
Liabilities in excess of other assets - (4.60%)................... (1,616,295)
------------
Net Assets - 100.00%.............................................. $ 35,127,253
------------
------------
</TABLE>
- - ----------
Note: The Portfolio of Investments is listed by the security issuer's country of
origin.
* Non-income producing security
** In local currency unless otherwise indicated
(1) Security, or portion thereof, was loaned at October 31, 1996.
+ 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
GDR Global Depositary Receipts
GDS Global Depositary Shares
IDR International Depositary Receipts
See accompanying notes to financial statements
22
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1996
<TABLE>
<S> <C>
Assets
Investments, at value (cost - $37,672,176)........................ $ 36,743,548
Cash denominated in foreign currencies, at value (cost -
$230,271)....................................................... 225,277
Receivable for investments sold................................... 345,211
Dividends and interest receivable................................. 52,733
Receivable from sub-adviser....................................... 185,805
Deferred organizational expenses.................................. 122,515
Other assets...................................................... 29,353
------------
Total assets...................................................... 37,704,442
------------
Liabilities
Payable for shares of beneficial interest repurchased............. 600,138
Payable for investments purchased................................. 74,989
Collateral for securities loaned.................................. 1,623,700
Payable to affiliate.............................................. 31,663
Accrued expenses and other liabilities............................ 246,699
------------
Total liabilities................................................. 2,577,189
------------
Net Assets
Beneficial interest shares of $0.001 par value outstanding
(unlimited amount authorized)................................... 52,185,718
Accumulated net investment loss................................... (41,602)
Accumulated net realized losses from investments.................. (16,074,749)
Net unrealized (depreciation) of investments and other assets and
liabilities denominated in foreign currencies................... (942,114)
------------
Net assets........................................................ $ 35,127,253
------------
------------
Class A:
Net assets........................................................ $ 14,991,849
------------
Shares outstanding................................................ 1,584,814
------------
Net asset and redemption value per share.......................... $9.46
------------
------------
Maximum offering price per share (net asset value plus sales
charge of 4.50% of offering price).............................. $9.91
------------
------------
Class B:
Net assets........................................................ $ 878,972
------------
Shares outstanding................................................ 94,285
------------
Net asset value and offering price per share...................... $9.32
------------
------------
Class C:
Net assets........................................................ $ 7,881,678
------------
Shares outstanding................................................ 846,062
------------
Net asset value and offering price per share...................... $9.32
------------
------------
Class Y:
Net assets........................................................ $ 11,374,754
------------
Shares outstanding................................................ 1,195,864
------------
Net asset value, offering price and redemption value per share.... $9.51
------------
------------
</TABLE>
See accompanying notes to financial statements
23
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE FOUR FOR THE YEAR
MONTHS ENDED ENDED
OCTOBER 31, 1996 JUNE 30, 1996
---------------- -------------
<S> <C> <C>
Investment Income:
Dividends (net of foreign withholding taxes of
$20,740 and $77,615, respectively)........... $ 125,987 $ 850,111
Interest....................................... 14,147 193,054
---------------- -------------
140,134 1,043,165
---------------- -------------
Expenses:
Investment advisory and administration fees.... 220,071 867,093
Service fees - Class A......................... 14,960 65,762
Service and distribution fees - Class B........ 3,097 2,704
Service and distribution fees - Class C........ 32,379 144,997
Reports and notices to shareholders............ 60,500 110,313
Custody and accounting......................... 47,453 417,705
Legal and audit................................ 37,571 84,877
Transfer agency fees and expenses.............. 19,672 73,454
State registration fees........................ 19,255 63,912
Amortization of organizational expenses........ 19,214 57,173
Trustees' fees and expenses.................... 3,375 10,129
Other expenses................................. 11,976 25,901
---------------- -------------
489,523 1,924,020
Less: Fee waivers.............................. (142,160) (538,618)
---------------- -------------
Net expenses................................... 347,363 1,385,402
---------------- -------------
Net investment loss............................ (207,229) (342,237)
---------------- -------------
Realized and unrealized gains (losses) from
investment transactions:
Net realized losses from:
Investment transactions...................... (745,976) (6,654,434)
Foreign currency transactions................ (37,271) (191,127)
Net change in unrealized
appreciation/depreciation of:
Investments.................................. (1,584,591) 8,571,981
Other assets and liabilities denominated in
foreign currencies.......................... 29,067 (50,722)
---------------- -------------
Net realized and unrealized gains (losses) from
investment transactions....................... (2,338,771) 1,675,698
---------------- -------------
Net increase (decrease) in net assets resulting
from operations............................... $(2,546,000) $ 1,333,461
---------------- -------------
---------------- -------------
</TABLE>
See accompanying notes to financial statements
24
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOUR
MONTHS ENDED FOR THE YEARS ENDED JUNE 30,
OCTOBER 31, ----------------------------
1996 1996 1995
--------------- ------------- -------------
<S> <C> <C> <C>
From operations:
Net investment loss............................................... $ (207,229) $ (342,237) $ (722,359)
Net realized losses from investment transactions.................. (745,976) (6,654,434) (7,704,890)
Net realized losses from foreign currency transactions............ (37,271) (191,127) (185,851)
Net change in unrealized appreciation/depreciation of:
Investments..................................................... (1,584,591) 8,571,981 1,768,294
Other assets and liabilities denominated in foreign
currencies..................................................... 29,067 (50,722) 19,491
--------------- ------------- -------------
Net increase (decrease) in net assets resulting from operations... (2,546,000) 1,333,461 (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)
--------------- ------------- -------------
-- -- (278,564)
--------------- ------------- -------------
From beneficial interest transactions:
Net proceeds from the sale of shares.............................. 1,986,965 13,661,073 18,199,542
Proceeds from dividends reinvested................................ -- -- 272,835
Cost of shares repurchased........................................ (10,470,673) (32,764,223) (36,356,442)
--------------- ------------- -------------
Net decrease in net assets from beneficial interest
transactions.................................................... (8,483,708) (19,103,150) (17,884,065)
--------------- ------------- -------------
Net decrease in net assets........................................ (11,029,708) (17,769,689) (24,987,944)
Net Assets:
Beginning of period............................................... 46,156,961 63,926,650 88,914,594
--------------- ------------- -------------
End of period..................................................... $ 35,127,253 $ 46,156,961 $ 63,926,650
--------------- ------------- -------------
--------------- ------------- -------------
</TABLE>
See accompanying notes to financial statements
25
<PAGE>
PAINEWEBBER NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PaineWebber Emerging Markets Equity Fund (the "Fund") is a
diversified series of PaineWebber Investment Trust II (the
"Trust"), which is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
Organizational costs have been deferred and are being amortized
using the straight-line method over a period of benefit not to
exceed 60 months from the date the Fund commenced operations.
Currently, the Fund offers Class A, Class B, Class C and Class
Y shares. Each class represents interests in the same assets of
the Fund, and the classes are identical except for differences
in their sales charge structures, ongoing service and
distribution charges and certain transfer agency expenses. In
addition, Class B shares and all corresponding dividend
reinvested shares automatically convert to Class A shares
approximately six years after initial issuance. All classes of
shares have equal voting privileges, except that Class A, Class
B and Class C shares have exclusive voting rights with respect
to their service and/or distribution plan.
At a meeting held on December 13, 1995, the Trust's board of
trustees elected to change the Trust's fiscal year end from
June 30th to October 31st, effective October 31, 1996.
The preparation of financial statements in accordance with
generally accepted accounting principles requires the Trust's
management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates. generally
accepted accounting principles requires the Trust's management
to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
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 Emerging Markets Management ("EMM"), the sub-adviser
to the Fund, as the primary market. Securities traded in the
over-the-counter ("OTC") market and listed on The Nasdaq Stock
Market, Inc. ("Nasdaq") are valued at the last trade price on
Nasdaq prior to the time of valuation; other OTC securities are
valued at the last bid price available prior to the time of
valuation (other than certain short term debt instruments). The
amortized cost
26
<PAGE>
PAINEWEBBER
method of valuation, which approximates market value, generally
is used to value short-term debt instruments with 60 days or
less remaining to maturity unless the Trust's board of trustees
determines that this does not represent fair value. Securities
and assets for which market quotations are not readily
available (including restricted securities subject to
limitations as to their sale) are valued at fair value as
determined in good faith by or under the direction of the
Trust'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 valuation is determined by
the Fund's custodian. Foreign currency exchange rates are
generally determined prior to the close of regular trading on
the New York Stock Exchange ("NYSE"). Occasionally, events
affecting the value of foreign investments and such exchange
rates occur between the time at which they are determined and
the close of regular trading on the NYSE, which 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 occur during such time period, the
investments are valued at their fair value as determined in
good faith by or under the direction of the Trust's board of
trustees.
REPURCHASE AGREEMENTS--The Fund's custodian takes possession of
the collateral pledged for investments in repurchase
agreements. The underlying collateral is valued daily on a
mark-to-market basis to ensure that the value, including
accrued interest, is at least equal to the repurchase price. In
the event of default of the obligation to repurchase, the Fund
has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. Under certain
circumstances, in the event of default or bankruptcy by the
other party to the agreement, realization and/or retention of
the collateral may be subject to legal proceedings. The Fund
occasionally participates in joint repurchase agreement
transactions with other funds managed by Mitchell Hutchins.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Investment
transactions are recorded on the trade date. Realized gains and
losses from investment and foreign exchange transactions are
calculated using the identified cost method. 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, using reasonable diligence,
becomes aware of such dividends). Interest income is recorded
on an accrual basis. Discounts are accreted and premiums are
amortized as adjustments to interest income and the identified
cost of investments.
Income, expenses (excluding class-specific expenses) and
realized/unrealized gains/losses are allocated proportionately
to each class of shares based upon the
27
<PAGE>
PAINEWEBBER
relative net asset value of outstanding shares 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: 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 asset value per share and market values of the
Fund's securities are presented at the foreign exchange rates
at the end of the period, the Fund does not generally isolate
the effect of fluctuations in foreign exchange rates from the
effect of the unrealized 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. Realized currency
gain/loss on investment transactions includes realized foreign
exchange gains/losses from the sale of portfolio securities,
sales of foreign currencies, currency gains/losses realized
between the trade and settlement dates on securities
transactions, the difference between the amounts of dividends,
interest and foreign withholding taxes recorded on the Fund's
books and the U.S. dollar equivalent of the amounts received or
paid. Gains/losses from translating foreign currency
denominated assets and liabilities at year-end exchange rates
are included in the change in unrealized
appreciation/depreciation of other assets and liabilities
denominated in foreign currencies.
DIVIDENDS AND DISTRIBUTIONS--Dividends and distributions to
shareholders are recorded on the ex-dividend date. The amount
of dividends and distributions are determined in accordance
with federal income tax regulations, which may differ from
generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in
nature, such amounts are reclassified within the capital
accounts based on their federal tax-basis treatment; temporary
differences do not require reclassifications.
28
<PAGE>
PAINEWEBBER
CONCENTRATION OF RISK
Investing in securities of foreign issuers and currency
transactions may involve certain considerations and risks not
typically associated with investments in the United States.
These risks include revaluation of currencies, adverse
fluctuations in foreign currency values and possible adverse
political, social and economic developments, including those
particular to a specific industry, country or region, which
could cause the securities and their markets to be less liquid
and prices more volatile than those of comparable U.S.
companies. These risks are greater with respect to securities
of issuers located in emerging market countries in which the
Fund is authorized to invest. The ability of the issuers of
debt securities held by the Fund to meet their obligations may
be affected by economic and political developments in a
specific industry, country or region.
INVESTMENT ADVISER AND ADMINISTRATOR
The Trust's board of trustees has approved an investment
advisory and administration contract ("Advisory Contract") with
Mitchell Hutchins, under which Mitchell Hutchins serves as
investment adviser and administrator of the Fund. In accordance
with the Advisory Contract, Mitchell Hutchins receives
compensation from the Fund, computed daily and paid monthly, at
an annual rate of 1.62% of the Fund's average daily net assets
up to $100 million and 1.50% thereafter. At October 31, 1996
the Fund owed Mitchell Hutchins $20,270 in investment advisory
and administration fees. Mitchell Hutchins is voluntarily
waiving part of its management fee. Mitchell Hutchins may
discontinue these voluntary waivers at any time.
Under a separate contract with Mitchell Hutchins ("Sub-Advisory
Contract"), EMM serves as the Fund's sub-adviser. Under the
Sub-Advisory Contract, Mitchell Hutchins (not the Fund) pays
EMM a fee, computed 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.
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 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.
Mitchell Hutchins also receives the proceeds of the initial
sales charges paid upon the purchase of Class A shares and the
contingent deferred sales charges paid
29
<PAGE>
PAINEWEBBER
upon certain redemptions of Class A, Class B and Class C
shares. Mitchell Hutchins has informed the Fund that for the
four months ended October 31, 1996 and for the year ended June
30, 1996 it had earned approximately $4,000 and $27,000 in
sales charges, respectively.
SECURITY LENDING
The Fund may lend up to 33 1/3% of its total assets to
qualified institutions. The loans are secured at all times by
cash or U.S. government securities in an amount at least equal
to the market value of the securities loaned, plus accrued
interest and dividends, determined on a daily basis and
adjusted accordingly. The Fund will regain record ownership of
loaned securities to exercise certain beneficial rights,
however, the Fund may bear the risk of delay in recovery of, or
even loss of rights in, the securities loaned should the
borrower fail financially. The Fund receives compensation for
lending its securities from interest earned on the cash or U.S.
government securities held as collateral, net of fee rebates
paid to the borrower plus reasonable administrative and custody
fees. The Fund's lending agent is PaineWebber Global Security
Lending, a wholly owned subsidiary of PaineWebber, who received
no compensation from the Fund.
As of October 31, 1996, the Fund's custodian held cash and cash
equivalents having an aggregate value of $1,623,700 as
collateral for portfolio securities loaned having a market
value of $1,549,640.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned
at October 31, 1996 was substantially the same as the cost of
securities for financial statement purposes.
At October 31, 1996, the components of the net unrealized
depreciation of investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an
excess of value over cost)............. $ 4,095,796
Gross depreciation (investments having an
excess of cost over value)............. (5,024,424)
-----------
Net unrealized depreciation of
investments............................ $ (928,628)
-----------
-----------
</TABLE>
For the four months ended October 31, 1996, aggregate purchases
and sales of portfolio securities, excluding short-term
securities, were $8,302,808 and $12,153,875, respectively.
30
<PAGE>
PAINEWEBBER
FEDERAL INCOME TAX STATUS
The Fund intends to distribute substantially all of its taxable
income and to comply with the other requirements of the
Internal Revenue Code applicable to regulated investment
companies. Accordingly, no provision for federal income taxes
is required. In addition, by distributing during each calendar
year, substantially all of its net investment income, capital
gains and certain other amounts, if any, the Fund intends not
to be subject to a federal excise tax.
At October 31, 1996, the Fund had a net capital loss
carryforward of $15,753,361. In subsequent years, this
carryforward loss is available as a reduction, to the extent
provided in the regulations, of future net realized capital
gains and will expire between October 31, 2002 and October 31,
2004.
To the extent that such losses are used to offset future
capital gains, it is probable that the gains so offset will not
be distributed to shareholders.
To reflect reclassifications arising from permanent "book/tax"
differences for the four months ended October 31, 1996, the
Fund's accumulated net realized loss was decreased by $24,235;
accumulated net investment loss was reduced by $291,741 and
beneficial interest was decreased by $315,976.
SHARES OF BENEFICIAL INTEREST
At October 31, 1996, 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>
FOUR MONTHS ENDED OCTOBER 31,
1996:
Shares sold................... 15,395 $ 148,762 16,082 $ 153,631 164,114 $ 1,567,621 11,872 $ 116,951
Shares repurchased............ (485,631) (4,703,565) (15,952) (151,768) (481,729) (4,627,446) (99,846) (987,894)
---------- ------------ ------- --------- ---------- ------------ -------- -----------
Net increase (decrease)....... (470,236) $ (4,554,803) 130 $ 1,863 (317,615) $ (3,059,825) (87,974) $ (870,943)
---------- ------------ ------- --------- ---------- ------------ -------- -----------
---------- ------------ ------- --------- ---------- ------------ -------- -----------
YEAR ENDED JUNE 30, 1996:
Shares sold................... 310,914 $ 3,098,378 100,302 $ 985,160 631,864 $ 6,160,591 349,064 $ 3,416,944
Shares repurchased............ (1,653,023) (15,971,690) (6,147) (60,876) (1,385,687) (13,506,039) (330,645) (3,225,618)
---------- ------------ ------- --------- ---------- ------------ -------- -----------
Net increase (decrease)....... (1,342,109) $(12,873,312) 94,155 $ 924,284 (753,823) $ (7,345,448) 18,419 $ 191,326
---------- ------------ ------- --------- ---------- ------------ -------- -----------
---------- ------------ ------- --------- ---------- ------------ -------- -----------
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>
31
<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 FOR THE YEARS FOR THE
FOUR MONTHS ENDED FOR THE FOUR MONTHS FOR THE
ENDED JUNE 30, PERIOD ENDED ENDED PERIOD ENDED
OCTOBER 31, ------------------ JUNE 30, OCTOBER 31, JUNE 30,
1996 1996 1995 1994+ 1996 1996++
----------- ------- ------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $ 10.06 $ 9.73 $ 10.79 $ 12.00 $ 9.94 $ 9.13
----------- ------- ------- ------- ----------- ------
Net investment income (loss)............... (0.13) (0.14) (0.04) 0.04 (0.07) (0.01)
Net realized and unrealized gains (losses)
from investment and foreign currency
transactions............................. (0.47) 0.47 (0.97) (1.25) (0.55) 0.82
----------- ------- ------- ------- ----------- ------
Net increase (decrease) from investment
operations............................... (0.60) 0.33 (1.01) (1.21) (0.62) 0.81
----------- ------- ------- ------- ----------- ------
Dividends from net investment income....... -- -- (0.05) -- -- --
----------- ------- ------- ------- ----------- ------
Net asset value, end of period............. $ 9.46 $ 10.06 $ 9.73 $ 10.79 $ 9.32 $ 9.94
----------- ------- ------- ------- ----------- ------
----------- ------- ------- ------- ----------- ------
Total investment return (1)................ (5.96)% 3.39% (9.29)% (10.08)% (6.24)% 8.87%
----------- ------- ------- ------- ----------- ------
----------- ------- ------- ------- ----------- ------
Ratios/Supplemental Data:
Net assets, end of period (000's).......... $ 14,992 $20,680 $33,043 $46,758 $ 879 $ 936
Expenses, net of fee waivers, to average
net assets............................... 2.44%* 2.44% 2.44% 2.47%* 3.19%* 3.19%*
Expenses, before fee waivers, to average
net assets............................... 3.48%* 3.42% 2.54% 2.47%* 4.23%* 4.97%*
Net investment income (loss), net of fee
waivers, to average net assets........... (1.42)%* (0.52)% (0.76)% 0.72%* (2.12)%* (0.21)%*
Net investment income (loss), before fee
waivers, to average net assets........... (2.46)%* (1.50)% (0.86)% 0.72%* (3.16)%* (1.99)%*
Portfolio turnover......................... 22% 69% 76% 8% 22% 69%
Average commission rate paid per share
of common stock investments
purchased/sold (2)..................... $ 0.0024 -- -- -- $0.0024 --
</TABLE>
- - ------------
+ FOR THE PERIOD JANUARY 19, 1994 (COMMENCEMENT OF OPERATIONS) TO JUNE 30,
1994.
++ FOR THE PERIOD DECEMBER 5, 1995 (COMMENCEMENT OF OFFERING OF SHARES) TO JUNE
30, 1996.
* ANNUALIZED
(1) TOTAL INVESTMENT RETURN IS CALCULATED ASSUMING A $1,000 INVESTMENT ON THE
FIRST DAY OF EACH PERIOD REPORTED, REINVESTMENT OF ALL DIVIDENDS AT NET
ASSET VALUE ON THE PAYABLE DATES AND A SALE AT NET ASSET VALUE ON THE LAST
DAY OF EACH PERIOD REPORTED. THE FIGURES DO NOT INCLUDE SALES CHARGES;
RESULTS FOR EACH CLASS (EXCEPT CLASS Y) WOULD BE LOWER IF SALES CHARGES
WERE INCLUDED. TOTAL INVESTMENT RETURN FOR PERIODS OF LESS THAN ONE YEAR
HAVE NOT BEEN ANNUALIZED.
(2) DISCLOSURE EFFECTIVE FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1,
1995.
32
<PAGE>
<TABLE>
<CAPTION>
CLASS C CLASS Y
--------------------------------------------------- -------------------------------------------------
FOR THE FOR THE
FOUR MONTHS FOR THE YEARS ENDED FOR THE FOUR MONTHS FOR THE YEARS ENDED FOR THE
ENDED JUNE 30, PERIOD ENDED ENDED JUNE 30, PERIOD ENDED
OCTOBER 31, ------------------- JUNE 30, OCTOBER 31, ------------------- JUNE 30,
1996 1996 1995 1994+ 1996 1996 1995 1994+
----------- -------- -------- -------------- ----------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period...... $ 9.94 $ 9.67 $ 10.75 $ 12.00 $ 10.11 $ 9.75 $ 10.80 $ 12.00
----------- -------- -------- ------- ----------- -------- -------- ------------
Net investment income
(loss)................... (0.22) (0.24) (0.17) -- (0.05) (0.01) 0.01 0.05
Net realized and
unrealized gains (losses)
from investment and
foreign currency
transactions........... (0.40) 0.51 (0.90) (1.25) (0.55) 0.37 (0.99) (1.25)
----------- -------- -------- ------- ----------- -------- -------- ------------
Net increase (decrease)
from investment
operations............. (0.62) 0.27 (1.07) (1.25) (0.60) 0.36 (0.98) (1.20)
----------- -------- -------- ------- ----------- -------- -------- ------------
Dividends from net
investment income........ -- -- (0.01) -- -- -- (0.07) --
----------- -------- -------- ------- ----------- -------- -------- ------------
Net asset value, end of
period................... $ 9.32 $ 9.94 $ 9.67 $ 10.75 $ 9.51 $ 10.11 $ 9.75 $ 10.80
----------- -------- -------- ------- ----------- -------- -------- ------------
----------- -------- -------- ------- ----------- -------- -------- ------------
Total investment return
(1)...................... (6.24)% 2.79% (10.01)% (10.42)% (5.93)% 3.69% (9.03)% (10.00)%
----------- -------- -------- ------- ----------- -------- -------- ------------
----------- -------- -------- ------- ----------- -------- -------- ------------
Ratios/Supplemental Data:
Net assets, end of period
(000's).................. $ 7,882 $ 11,561 $ 18,551 $26,721 $11,375 $ 12,979 $ 12,332 $15,435
Expenses, net of fee
waivers, to average net
assets................... 3.19%* 3.19% 3.19% 3.22%* 2.19%* 2.19% 2.19% 2.22%*
Expenses, before fee
waivers, to average net
assets................... 4.23%* 4.17% 3.29% 3.22%* 3.23%* 3.29% 2.29% 2.22%*
Net investment income
(loss), net of fee
waivers, to average net
assets................... (2.16)%* (1.28)% (1.50)% (0.03)%* (1.13)%* (0.15)% (0.51)% 0.97%*
Net investment income
(loss), before fee
waivers, to average net
assets................... (3.20)%* (2.26)% (1.60)% (0.03)%* (2.17)%* (1.25)% (0.61)% 0.97%*
Portfolio turnover....... 22% 69% 76% 8% 22% 69% 76% 8%
Average commission rate
paid per share
of common stock
investments
purchased/sold (2)... $0.0024 -- -- -- $0.0024 -- -- --
</TABLE>
33
<PAGE>
PAINEWEBBER
EMERGING MARKETS EQUITY FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders,
PaineWebber Emerging Markets Equity Fund:
We have audited the accompanying statement of assets and
liabilities of PaineWebber Emerging Markets Equity Fund,
including the portfolio of investments, as of October 31, 1996,
and the related statements of operations, changes in net
assets, and the financial highlights for the four months then
ended and for the year ended June 30, 1996. These financial
statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights
based on our audits. The statement of changes in net assets for
the year ended June 30, 1995 and the financial highlights for
each of the periods then ended were audited by other auditors
whose report dated August 25, 1995 expressed an unqualified
opinion on that statement and financial highlights.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
securities owned as of October 31, 1996, by correspondence with
the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of PaineWebber Emerging
Markets Equity Fund at October 31, 1996, the results of its
operations, changes in its net assets, and the financial
highlights for the four months then ended and for the year
ended June 30, 1996, in conformity with generally accepted
accounting principles.
[SIGNATURE]
New York, New York
December 9, 1996
34
<PAGE>
PAINEWEBBER EMERGING MARKETS EQUITY FUND
TAX INFORMATION
We are required by subchapter M of the Internal Revenue Code of
1986, as amended, to advise you within 60 days of the Fund's
fiscal year end (October 31, 1996) as to the federal tax status
of distributions received by shareholders during such fiscal
year. Accordingly, we are advising you that no distributions
were paid by the Fund during the period.
Because the Fund's fiscal year is not the calendar year,
another notification will be sent in respect of calendar 1996.
The second notification, which will reflect the amount to be
used by calendar year taxpayers on their federal income tax
returns, will be made in conjunction with Form 1099 DIV and
will be mailed in January 1997. Shareholders are advised to
consult their own tax advisers with respect to the tax
consequences of their investment in the Fund.
35
<PAGE>
BOARD OF TRUSTEES
Margo N. Alexander
Richard Q. Armstrong
E. Garrett Bewkes, Jr.
Richard R. Burt
Mary C. Farrell
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
John R. Torell III
PRINCIPAL OFFICERS
Margo N. Alexander
PRESIDENT
Victoria E. Schonfeld
VICE PRESIDENT
Dianne E. O'Donnell
VICE PRESIDENT AND SECRETARY
Julian F. Sluyters
VICE PRESIDENT AND TREASURER
INVESTMENT ADVISER, ADMINISTRATOR AND DISTRIBUTOR
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
INVESTMENT SUB-ADVISER
Emerging Markets Management
1001 Nineteenth Street North
Arlington, Virginia 22209-1722
A PROSPECTUS CONTAINING MORE COMPLETE INFORMATION FOR ANY OF THE FUNDS LISTED ON
THE BACK COVER CAN BE OBTAINED FROM A PAINEWEBBER INVESTMENT EXECUTIVE OR
CORRESPONDENT FIRM.
READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
THIS REPORT IS NOT TO BE USED IN CONNECTION WITH THE OFFERING OF SHARES OF THE
FUND UNLESS ACCOMPANIED OR PRECEDED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
PaineWebber offers a family of 21 funds which encompass a diversified range of
investment goals.
BOND FUNDS
- - - High Income Fund
- - - Investment Grade Income Fund
- - - Low Duration U.S. Government Income Fund
- - - Strategic Income Fund
- - - U.S. Government Income Fund
TAX-FREE BOND FUNDS
- - - California Tax-Free Income Fund
- - - Municipal High Income Fund
- - - National Tax-Free Income Fund
- - - New York Tax-Free Income Fund
STOCK FUNDS
- - - Capital Appreciation Fund
- - - Financial Services Growth Fund
- - - Growth Fund
- - - Growth and Income Fund
- - - Small Cap Fund
- - - Utility Income Fund
ASSET ALLOCATION FUNDS
- - - Balanced Fund
- - - Tactical Allocation Fund
GLOBAL FUNDS
- - - Emerging Markets Equity Fund
- - - Global Equity Fund
- - - Global Income Fund
PAINEWEBBER MONEY MARKET FUND
PAINEWEBBER
-C-1996 PaineWebber Incorporated
Member SIPC
[GRAPHIC]
ANNUAL REPORT
EMERGING MARKETS EQUITY FUND
OCTOBER 31, 1996
