PAINEWEBBER RMA MONEY FUND INC, 485BPOS, 1996-08-30

PAINEWEBBER RMA MONEY FUND INC
485BPOS, 1996-08-30

Previous: SPECIALTY CHEMICAL RESOURCES INC, S-3/A, 1996-08-30

Next: SUN LIFE OF CANADA U S VARIABLE ACCOUNT C, N-30D, 1996-08-30

As filed with the Securities and Exchange Commission on August 29, 1996

1933 Act Registration No. 2-78309
1940 Act Registration No. 811-3503

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
-----

Pre-Effective Amendment No. [ ]
----- -----

Post-Effective Amendment No. 28 [ X ]
---- -----

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
-----

Amendment No. 29
----

PAINEWEBBER RMA MONEY FUND, INC.
(Exact name of registrant as specified in charter)

1285 Avenue of the Americas
New York, New York 10019
(Address of principal executive offices)

(Registrant's telephone number, including area code): (212) 713-2000

DIANNE E. O'DONNELL, Esq.
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
(Name and address of agent for service)

Copies to:

ROBERT A. WITTIE, Esq.
BENJAMIN J. HASKIN, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036-1800
Telephone: (202) 778-9000

It is proposed that this filing will become effective:
[ ] Immediately upon filing pursuant to Rule 485(b)
[ x ] On August 30, 1996 pursuant to Rule 485(b)
----------------
[ ] 60 days after filing pursuant to Rule 485(a)(i)
[ ] On pursuant to Rule 485(a)(i)
----------------
[ ] 75 days after filing pursuant to Rule 485(a)(ii)
[ ] On pursuant to Rule 485(a)(ii)
----------------

Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and filed the notice required by such Rule for
its most recent fiscal year on August 26, 1996.

<PAGE>

PaineWebber RMA Money Fund, Inc.
Contents of Registration Statement

This registration statement consists of the following papers and documents:

Cover Sheet

Contents of Registration Statement

Cross Reference Sheets

Money Market Portfolio and
U.S. Government Portfolio
- --------------------------

Part A - Prospectus

Part B - Statement of Additional Information

PaineWebber Retirement Money Fund
- ---------------------------------

Part A - Prospectus

Part B - Statement of Additional Information

Part C - Other Information

Signature Page

Exhibits

<PAGE>

PaineWebber RMA Money Fund, Inc.
(Money Market Portfolio and U.S. Government Portfolio)
Form N-1A Cross Reference Sheet

Part A Item No.
and Caption Prospectus Caption
--------------- ------------------

1. Cover Page......... Cover Page

2. Synopsis........... Highlights

3. Condensed Financial
Information........ Financial Highlights;
Performance Information

4. General Description
of Registrant...... Highlights; Investment
Objectives and Policies;
General Information;
Other Investment Policies
and Risk Factors

5. Management of the
Fund............... Management; General Information

6. Capital Stock and
Other Securities... Cover Page; Dividends and
Taxes; General Information

7. Purchase of Securities
Being Offered...... Purchases; Valuation of
Shares; Management

8. Redemption or
Repurchase......... Redemptions

9. Pending Legal
Proceedings........ Not Applicable

Part B Item No. Statement of Additional
and Caption Information Caption
--------------- --------------------

10. Cover Page......... Cover Page

11. Table of Contents.. Table of Contents

12. General Information
and History........ Not Applicable

13. Investment Objective
and Policies....... Investment Policies and
Restrictions

<PAGE>

Part B Item No. Statement of Additional
and Caption Information Caption
--------------- ------------------------

14. Management of the
Fund................ Directors/Trustees and Officers

15. Control Persons and
Principal Holders of
Securities.......... Directors/Trustees and Officers

16. Investment Advisory
and Other Services.. Investment Advisory,
Administration and Distribution
Arrangements; Other Information

17. Brokerage Allocation
and other Practices. Portfolio Transactions

18. Capital Stock and
Other Securities.... Not Applicable

19. Purchase, Redemption
and Pricing of
Securities Being
Offered............. Additional Information
Regarding Redemptions;
Valuation of Shares

20. Tax Status.......... Taxes

21. Underwriters........ Investment Advisory,
Administration and Distribution
Arrangements

22. Calculation of
Performance Data.... Calculation of Yield

23. Financial
Statements.......... Financial Statements

Part C
------

Information required to be included in Part C is set forth
under the appropriate item, so numbered, in Part C of this
Registration Statement.

<PAGE>

PaineWebber RMA Money Fund, Inc.
(PaineWebber Retirement Money Fund)
Form N-1A Cross Reference Sheet

Part A Item No.
and Caption Prospectus Caption
--------------- ------------------

1. Cover Page......... Cover Page

2. Synopsis........... Highlights

3. Condensed Financial
Information........ Financial Highlights;
Performance Information

4. General Description
of Registrant...... Highlights; Investment
Objective and Policies;
General Information

5. Management of the
Fund............. Management; General Information

6. Capital Stock and
Other Securities... Cover Page; Dividends and
Taxes; General Information

7. Purchase of Securities
Being Offered...... Purchases; Valuation of
Shares; Management

8. Redemption or
Repurchase......... Redemptions; Retirement
Plan Distributions

9. Pending Legal
Proceedings........ Not Applicable

Part B Item No. Statement of Additional
Caption Information Caption
------- -------------------

10. Cover Page......... Cover Page

11. Table of Contents.. Table of Contents

12. General Information
and History........ Not Applicable

13. Investment Objective
and Policies....... Investment Policies and
Restrictions

<PAGE>

Part B Item No. Statement of Additional
and Caption Information Caption
----------- -------------------

14. Management of the
Fund................ Directors and Officers

15. Control Persons and
Principal Holders of
Securities.......... Directors and Officers

16. Investment Advisory
and Other Services.. Investment Advisory,
Administration and Distribution
Arrangements; Other Information

17. Brokerage Allocation
and Other Practices. Portfolio Transactions

18. Capital Stock and
Other Securities.... Not Applicable

19. Purchase, Redemption
and Pricing of
Securities Being
Offered............. Additional Information
Regarding Redemptions;
Valuation of Shares

20. Tax Status.......... Taxes

21. Underwriters........ Investment Advisory,
Administration and Distribution
Arrangements

22. Calculation of
Performance Data.... Calculation of Yield

23. Financial
Statements.......... Financial Statements

Part C
------

Information required to be included in Part C is set forth
under the appropriate item, so numbered, in Part C of this
Registration Statement.

<PAGE>
This Prospectus concisely sets forth PAINEWEBBER RMA
information about the Funds a
prospective investor should know before MONEY MARKET PORTFOLIO
investing. Please retain this Prospectus
for future reference. A Statement of U.S. GOVERNMENT PORTFOLIO
Additional Information dated August 29,
1996 (which is incorporated by reference TAX-FREE FUND
herein) has been filed with the
Securities and Exchange Commission CALIFORNIA MUNICIPAL
("SEC"). The Statement of Additional
Information can be obtained without MONEY FUND
charge, and further inquiries can be
made, by contacting the Funds, your CONNECTICUT MUNICIPAL
PaineWebber Investment Executive or
PaineWebber's correspondent firms, or by MONEY FUND
calling toll-free 1-800-762-1000.
NEW JERSEY MUNICIPAL

MONEY FUND

NEW YORK MUNICIPAL

MONEY FUND

1285 AVENUE OF THE AMERICAS

NEW YORK, NEW YORK 10019
- ---------------------------------------- --------------------------------------

MONEY MARKET PORTFOLIO AND U.S.
GOVERNMENT PORTFOLIO ARE SERIES OF PROFESSIONALLY MANAGED MONEY MARKET
PAINEWEBBER RMA MONEY FUND, INC.
PAINEWEBBER RMA MONEY FUND, INC. AND FUNDS SEEKING:
PAINEWEBBER RMA TAX-FREE FUND, INC. ARE
MARYLAND CORPORATIONS (EACH A /X/ MAXIMUM CURRENT INCOME
"CORPORATION"). CALIFORNIA MUNICIPAL
MONEY FUND AND NEW YORK MUNICIPAL MONEY /X/ HIGH LIQUIDITY
FUND ARE SERIES OF PAINEWEBBER MANAGED
MUNICIPAL TRUST, A MASSACHUSETTS /X/ CONSERVATION OF CAPITAL
BUSINESS TRUST, AND CONNECTICUT
MUNICIPAL MONEY FUND AND NEW JERSEY /X/ INCOME FREE FROM FEDERAL INCOME
MUNICIPAL MONEY FUND ARE SERIES OF TAX FOR TAX-FREE FUND
PAINEWEBBER MUNICIPAL MONEY MARKET
SERIES, ALSO A MASSACHUSETTS BUSINESS /X/ CALIFORNIA DOUBLE TAX-FREE INCOME
TRUST (EACH A "TRUST"). FOR CALIFORNIA MUNICIPAL MONEY
FUND
AN INVESTMENT IN A FUND IS NEITHER
INSURED NOR GUARANTEED BY THE U.S. /X/ CONNECTICUT DOUBLE TAX-FREE INCOME
GOVERNMENT. WHILE EACH FUND SEEKS TO FOR CONNECTICUT MUNICIPAL MONEY
MAINTAIN A STABLE NET ASSET VALUE OF FUND
$1.00 PER SHARE, THERE CAN BE NO
ASSURANCE THAT IT WILL BE ABLE TO DO SO. /X/ NEW JERSEY DOUBLE TAX-FREE INCOME
FOR NEW JERSEY MUNICIPAL MONEY
CALIFORNIA MUNICIPAL MONEY FUND, FUND
CONNECTICUT MUNICIPAL MONEY FUND, NEW
JERSEY MUNICIPAL MONEY FUND AND NEW YORK /X/ NEW YORK STATE DOUBLE TAX-FREE
MUNICIPAL MONEY FUND EACH MAY INVEST A INCOME OR NEW YORK CITY TRIPLE
SIGNIFICANT PERCENTAGE OF ITS ASSETS IN TAX-FREE INCOME FOR NEW YORK
THE SECURITIES OF A SINGLE ISSUER. MUNICIPAL MONEY FUND
THEREFORE, AN INVESTMENT IN THESE FUNDS
MAY BE RISKIER THAN AN INVESTMENT IN
OTHER TYPES OF MONEY MARKET FUNDS.

- ---------------------------------------- --------------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS ANY SUCH
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. PROSPECTUS DATED AUGUST 29, 1996

<PAGE>

HIGHLIGHTS

See elsewhere in the Prospectus for more information on the topics discussed
in these highlights.

<TABLE>
<S> <C>
The Funds: Professionally managed money market funds (each a "Fund") offered
primarily to participants in the PaineWebber Resource Management
Account ("RMA")(R) program. The Funds also are offered to
participants in the PaineWebber Business Services Account
("BSA")(R) program.
Investment Objectives PaineWebber RMA Money Market Portfolio ("Money Market
and Policies: Portfolio")--A diversified money market fund seeking maximum
current income consistent with liquidity and conservation of
capital; invests in high quality money market instruments.
PaineWebber RMA U.S. Government Portfolio ("U.S. Government
Portfolio")--A diversified money market fund seeking maximum
current income consistent with liquidity and conservation of
capital; invests in short-term U.S. government securities.
PaineWebber RMA Tax-Free Fund, Inc. ("Tax-Free Fund")--A
diversified money market fund seeking maximum current income
exempt from federal income tax consistent with liquidity and
conservation of capital; invests in high quality municipal money
market instruments.
PaineWebber RMA California Municipal Money Fund ("California
Municipal Money Fund")--A non-diversified money market fund
seeking maximum current income exempt from federal income tax and
California personal income tax, consistent with liquidity and
conservation of capital; invests in high quality California
Municipal Securities (as defined below).
PaineWebber RMA Connecticut Municipal Money Fund ("Connecticut
Municipal Money Fund")--A non-diversified money market fund
seeking the maximization of current income exempt from federal
income tax and Connecticut personal income tax to the extent
consistent with the preservation of capital and the maintenance of
liquidity; invests in high quality Connecticut Municipal
Securities (as defined below).
PaineWebber RMA New Jersey Municipal Money Fund ("New Jersey
Municipal Money Fund")--A non-diversified money market fund
seeking the maximization of current income exempt from federal
income tax and New Jersey personal income tax to the extent
consistent with the preservation of capital and the maintenance of
</TABLE>

2
<PAGE>

<TABLE>
<S> <C>
liquidity; invests in high quality New Jersey Municipal Securities
(as defined below).
PaineWebber RMA New York Municipal Money Fund ("New York Municipal
Money Fund")--A non-diversified money market fund seeking maximum
current income exempt from federal income tax and New York State
and New York City personal income taxes, consistent with liquidity
and conservation of capital; invests in high quality New York
Municipal Securities (as defined below).
Net Assets at Money Market Portfolio--$7.6 billion.
July 31, 1996: U.S. Government Portfolio--$1.1 billion.
Tax-Free Fund--$2.1 billion.
California Municipal Money Fund--$497.0 million.
Connecticut Municipal Money Fund--$18.3 million.
New Jersey Municipal Money Fund--$43.3 million.
New York Municipal Money Fund--$288.6 million.
Distributor and PaineWebber Incorporated ("PaineWebber"). See "Management."
Investment Adviser:
Sub-Adviser: Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins").
Purchases: Shares are available exclusively through PaineWebber and its
correspondent firms. See "Purchases."
Redemptions: Shares may be redeemed through PaineWebber or its correspondent
firms. See "Redemptions."
Yield: Based on current money market rates; quoted in the financial
section of most newspapers.
Dividends: Declared daily and paid monthly. See "Dividends and Taxes."
Reinvestment: All dividends are automatically paid in Fund shares.
Minimum Purchase: No minimum.
Public Offering Price: Net asset value, which each Fund seeks to maintain at $1.00 per
share.
</TABLE>

WHO SHOULD INVEST. Each Fund has its own suitability considerations and risk
factors, as summarized below and described in detail under "Investment
Objectives and Policies." The Funds are designed for investors seeking liquidity
and current income. The Funds provide a convenient means for investors to enjoy
current income at money market rates with minimal risk of fluctuation of
principal.

Shares of the Funds are offered primarily to clients of PaineWebber and its
correspondent firms who are participants in the RMA and BSA programs. Shares of
the Funds may be offered to PaineWebber clients with other types of accounts
under certain limited circumstances.

Tax-Free Fund, California Municipal Money Fund, Connecticut Municipal Money
Fund, New Jersey Municipal Money Fund and New York Municipal Money Fund
(referred to collectively in this Prospectus as the "Municipal Funds") are not
suitable for tax-exempt institutions or qualified

3
<PAGE>
retirement plans, because those investors cannot take advantage of the
tax-exempt character of these Funds' dividends.

MONEY MARKET PORTFOLIO AND U.S. GOVERNMENT PORTFOLIO are designed for
investors seeking liquidity and current income. They provide a convenient means
for investors to enjoy current income at money market rates with minimal risk of
fluctuation of principal.

TAX-FREE FUND is designed for investors seeking liquidity and current income
that is exempt from federal income tax. It provides a convenient means for
investors to enjoy current tax-free income at money market rates with minimal
risk of fluctuation of principal.

CALIFORNIA MUNICIPAL MONEY FUND is designed for investors seeking liquidity
and current income that is exempt from federal income tax and California
personal income tax. The Fund provides a convenient means for California
investors to enjoy current tax-free income at money market rates with minimal
risk of fluctuation of principal.

CONNECTICUT MUNICIPAL MONEY FUND is designed for investors seeking liquidity
and current income that is exempt from federal income tax and Connecticut
personal income tax. The Fund provides a convenient means for Connecticut
investors to enjoy current tax-free income at money market rates with minimal
risk of fluctuation of principal.

NEW JERSEY MUNICIPAL MONEY FUND is designed for investors seeking liquidity
and current income that is exempt from federal income tax and New Jersey
personal income tax. The Fund provides a convenient means for New Jersey
investors to enjoy current tax-free income at money market rates with minimal
risk of fluctuation of principal.

NEW YORK MUNICIPAL MONEY FUND is designed for investors seeking liquidity
and current income that is exempt from federal income tax and New York State and
New York City personal income taxes. The Fund provides a convenient means for
New York investors to enjoy current tax-free income at money market rates with
minimal risk of fluctuation of principal.

RISK FACTORS. There can be no assurance that any Fund will achieve its
investment objective. In periods of declining interest rates, a Fund's yield
will tend to be somewhat higher than prevailing market rates, and in periods of
rising interest rates, a Fund's yield generally will be somewhat lower. See
"Investment Objectives and Policies" for more information about this risk factor
and those described below.

THE CONCENTRATION OF THE INVESTMENTS OF CALIFORNIA MUNICIPAL MONEY FUND,
CONNECTICUT MUNICIPAL MONEY FUND, NEW JERSEY MUNICIPAL MONEY FUND AND NEW YORK
MUNICIPAL MONEY FUND IN SECURITIES ISSUED BY A SINGLE STATE OR ENTITIES WITHIN
THAT STATE MAY SUBJECT THOSE FUNDS TO GREATER RISKS THAN A MONEY MARKET FUND
THAT HAS A BROADER RANGE OF INVESTMENTS. Investors should be aware that each of
the states of California, Connecticut, New Jersey and New York (the "States")
experienced economic recessions during the late 1980's and/or early 1990's and
the credit ratings assigned to the general obligation bonds of each State was
reduced by at least one rating agency since 1990. In particular, the State of
New York and many of its agencies and local governments have been experiencing,
and continue to experience, significant financial difficulties. There can be no
assurance that one or more of

4
<PAGE>

the States will not experience financial difficulties in the future, which may
lead to reductions in the credit standings of such States and possibly of
certain local governments (including New York City).

The ability of each Municipal Fund to invest more than 25% of its total
assets in securities the interest on which is paid from similar types of
projects may further increase the risk of an investment in those Funds.

EXPENSES OF INVESTING IN THE FUNDS. The following tables are intended to
assist investors in understanding the expenses associated with investing in each
Fund.

SHAREHOLDER TRANSACTION EXPENSES
FOR ALL FUNDS

<TABLE>
<S> <C>
Sales charge on purchases of shares.................................... None
Sales charge on reinvested dividends................................... None
Redemption fee or deferred sales charge................................ None
</TABLE>

ANNUAL FUND OPERATING EXPENSES**
(AS A PERCENTAGE OF AVERAGE NET ASSETS)

<TABLE>
<CAPTION>
NEW
CALIFORNIA CONNECTICUT JERSEY NEW YORK
MONEY U.S. MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL
MARKET GOVERNMENT TAX- MONEY MONEY MONEY MONEY
PORTFOLIO PORTFOLIO FREE FUND FUND FUND FUND FUND
--------- ---------- --------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Management fees.......... 0.50% 0.44% 0.45% 0.48% 0.50% 0.50% 0.50%
12b-1 fees............... None 0.08 0.08 0.08 0.12 0.12 0.08
Other expenses........... 0.09 0.11 0.08 0.11 0.49 0.33 0.12
--- --- --- --- --- --- ---
Total Operating
Expenses................. 0.59%(1) 0.63%(2) 0.61%(3) 0.67%(4) 1.11%* 0.95%* 0.70%(5)
--- --- --- --- --- --- ---
--- --- --- --- --- --- ---
</TABLE>

- ---------

* Annualized

** See "Management" for additional information. The fees and expenses shown are
those actually incurred for each Fund's most recent fiscal year, except for
Connecticut Municipal Money Fund and New Jersey Municipal Money Fund, for
which the fees and expenses shown are for the eight months ended June 30,
1996 and, except for New York Municipal Money Fund, for which "Management
fees" and "Total Operating Expenses" are those which would have been incurred
by that Fund had PaineWebber not waived a portion of its fees during the
fiscal year. PaineWebber currently charges an annual $85 account charge for
the RMA program including the Gold MasterCard(R) without the Bank One Line of
Credit. The fee for clients who choose the Line of Credit for their Gold
MasterCard is $125. The annual account charge for the BSA program, including
the MasterCard BusinessCard(R), is $125 ($165 with a MasterCard Line of
Credit). The account charges are not included in the table because certain
non-RMA and non-BSA participants are permitted to purchase shares of the
Funds.

(Footnotes continue on following page)

5
<PAGE>
(Footnotes continued from preceding page)

(1) These ratios do not include non-recurring acquisition expenses of 0.01%. If
these expenses had been included, Other Expenses would have been 0.10%.

(2) These ratios do not include non-recurring acquisition expenses of 0.02%. If
these expenses had been included, Other Expenses would have been 0.13%.

(3) These ratios do not include non-recurring acquisition expenses of 0.01%. If
these expenses had been included, Other Expenses would have been 0.09%.

(4) These ratios do not include non-recurring acquisition expenses of 0.03%. If
these expenses had been included, Other Expenses would have been 0.14%.

(5) These ratios do not include non-recurring acquisition expenses of 0.04%. If
these expenses had been included, Other Expenses would have been 0.16%.

EXAMPLE OF EFFECT OF FUND EXPENSES

An investor would pay directly or indirectly the following expenses on a
$1,000 investment in each Fund, assuming a 5% annual return:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Portfolio..................................... $ 6 $19 $33 $ 74
U.S. Government Portfolio.................................. $ 6 $20 $35 $ 79
Tax-Free Fund.............................................. $ 6 $20 $33 $ 75
California Municipal Money Fund............................ $ 7 $21 $37 $ 83
Connecticut Municipal Money Fund........................... $ 11 $35 $61 $135
New Jersey Municipal Money Fund............................ $ 10 $30 $53 $117
New York Municipal Money Fund.............................. $ 7 $22 $39 $ 87
</TABLE>

This Example assumes that all dividends are reinvested and that the
percentage amounts listed under Annual Fund Operating Expenses remain the same
in the years shown. The above tables and the assumption in the Example of a 5%
annual return are required by regulations of the SEC applicable to all mutual
funds; the assumed 5% annual return is not a prediction of, and does not
represent, any Fund's projected or actual performance.

THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND EACH FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN. The actual expenses of each Fund will depend upon, among other things,
the level of average net assets and the extent to which each Fund incurs
variable expenses, such as transfer agency costs.

6
<PAGE>
FINANCIAL HIGHLIGHTS

The tables below provide selected per share data and ratios for one share of
each Fund for each of the periods shown. This information is supplemented by the
financial statements and accompanying notes appearing in each Fund's Annual
Report to Shareholders for the fiscal year or eight months ended June 30, 1996,
which are incorporated by reference into the Statement of Additional Information
and which may be obtained without charge by calling 1-800-647-1568. The
financial statements and notes, as well as the information in the tables
appearing below insofar as it relates to each of the five fiscal years in the
period ended June 30, 1996 (in the case of Tax-Free Fund, Money Market Portfolio
and U.S. Government Portfolio), the six fiscal periods ended June 30, 1996 (in
the case of California Municipal Money Fund and New York Municipal Money Fund)
and the eight months ended June 30, 1996 and the fiscal year ended October 31,
1995 (in the case of Connecticut Municipal Money Fund and New Jersey Municipal
Money Fund), have been audited by Ernst & Young LLP, independent auditors, whose
unqualified reports thereon are incorporated by reference into the Funds'
Statement of Additional Information. The information appearing below for the
periods ended prior to these dates also has been audited by Ernst & Young LLP
or, in the case of Connecticut Municipal Money Fund and New Jersey Municipal
Money Fund, by other auditors whose reports thereon also were unqualified.

<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
----------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED JUNE 30,
----------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net investment
income............. 0.051 0.049 0.030 0.029 0.046 0.069 0.081 0.084 0.064
Dividends from net
investment
income............. (0.051) (0.049) (0.030) (0.029) (0.046) (0.069) (0.081) (0.084) (0.064)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period..... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total investment
return (1)......... 5.25% 5.00% 2.95% 2.98% 4.56% 6.88% 8.10% 8.40% 6.40%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's).... $7,522,612 $5,398,146 $4,337,009 $4,031,398 $4,054,344 $4,208,467 $3,765,953 $2,637,820 $2,509,372
Expenses to average
net assets........ 0.60% (2) 0.59% 0.59% 0.59% 0.59% 0.61% 0.58% 0.59% 0.76%
Net investment
income to average
net assets......... 5.14% (2) 4.91% 2.98% 2.95% 4.57% 6.89% 8.07% 8.48% 6.37%

1987
----------
<S> <C>
Net asset value,
beginning of
period............. $1.00
----------
Net investment
income............. 0.055
Dividends from net
investment
income............. (0.055)
----------
Net asset value,
end of period..... $1.00
----------
----------
Total investment
return (1)......... 5.50%
----------
----------
RATIOS/SUPPLEMENTAL
Net assets, end of
period (000's).... $2,163,807
Expenses to average
net assets........ 0.79%
Net investment
income to average
net assets......... 5.54%
</TABLE>

- ---------

(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and other
distributions at net asset value on the payable date, and a sale at net
asset value on the last day of each period reported.

(2) These ratios include non-recurring acquisition expenses of 0.01%.

7
<PAGE>

<TABLE>
<CAPTION>
U.S. GOVERNMENT PORTFOLIO
----------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED JUNE 30,
----------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net investment
income............. 0.049 0.046 0.027 0.028 0.044 0.066 0.077 0.078 0.059
Dividends from net
investment
income............. (0.049) (0.046) (0.027) (0.028) (0.044) (0.066) (0.077) (0.078) (0.059)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period..... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total investment
return (1)......... 5.04% 4.67% 2.74% 2.83% 4.36% 6.59% 7.70% 7.80% 5.90%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's).... $1,137,510 $815,781 $854,928 $880,834 $838,023 $937,943 $488,577 $327,437 $316,349
Expenses to average
net assets........ 0.65% (2) 0.63% 0.62% 0.61% 0.62% 0.64% 0.68% 0.60% 0.74%
Net investment
income to average
net assets......... 4.91% (2) 4.55% 2.75% 2.80% 4.37% 6.46% 7.67% 7.77% 5.92%

1987
----------
<S> <C>
Net asset value,
beginning of
period............. $1.00
----------
Net investment
income............. 0.053
Dividends from net
investment
income............. (0.053)
----------
Net asset value,
end of period..... $1.00
----------
----------
Total investment
return (1)......... 5.30%
----------
----------
RATIOS/SUPPLEMENTAL
Net assets, end of
period (000's).... $241,148
Expenses to average
net assets........ 0.75%
Net investment
income to average
net assets......... 5.31%
</TABLE>

- ---------

(2) These ratios include non-recurring acquisition expenses of 0.02%.

<TABLE>
<CAPTION>
TAX-FREE FUND
------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED JUNE 30,
------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- --------
Net investment
income................ 0.030 0.030 0.019 0.021 0.033 0.047 0.053 0.056 0.042
Dividends from net
investment income.... (0.030) (0.030) (0.019) (0.021) (0.033) (0.047) (0.053) (0.056) (0.042)
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- --------
Net asset value, end
of period............. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- --------
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- --------
Total investment
return (1)............ 3.09% 3.03% 1.88% 2.07% 3.30% 4.74% 5.30% 5.60% 4.20%
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- --------
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- --------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's)........ $2,013,448 $1,562,040 $1,427,724 $1,248,702 $1,183,719 $1,190,073 $1,097,787 $912,865 $941,169
Expenses to average
net assets............ 0.61% (2) 0.63% 0.64% 0.65% 0.62% 0.67% 0.67% 0.60% 0.61%
Net investment income
to average net
assets................ 3.02% (2) 3.00% 1.90% 2.06% 3.30% 4.66% 5.33% 5.49% 4.20%

1987
--------
<S> <C>
Net asset value,
beginning of
period............... $1.00
--------
Net investment
income................ 0.037
Dividends from net
investment income.... (0.037)
--------
Net asset value, end
of period............. $1.00
--------
--------
Total investment
return (1)............ 3.70%
--------
--------
RATIOS/SUPPLEMENTAL DA
Net assets, end of
period (000's)........ $942,668
Expenses to average
net assets............ 0.62%
Net investment income
to average net
assets................ 3.70%
</TABLE>

- ---------

(2) These ratios include non-recurring acquisition expenses of 0.01%.

8
<PAGE>

<TABLE>
<CAPTION>
CALIFORNIA MUNICIPAL MONEY FUND
----------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED FOR THE SEVEN FOR THE YEARS ENDED FOR THE PERIOD
JUNE 30, MONTHS NOVEMBER 30, NOVEMBER 7, 1988+
------------------------------------------ ENDED ---------------------------- TO
1996 1995 1994 1993 JUNE 30, 1992 1991 1990 1989 NOVEMBER 30, 1988
-------- -------- -------- -------- ------------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- ------ -------- -------- -------- ------
Net investment
income............... 0.029 0.029 0.018 0.019 0.016 0.038 0.050 0.056 0.004
Dividends from net
investment income... (0.029) (0.029) (0.018) (0.019) (0.016) (0.038) (0.050) (0.056) (0.004)
-------- -------- -------- -------- ------ -------- -------- -------- ------
Net asset value, end
of period............ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- ------ -------- -------- -------- ------
-------- -------- -------- -------- ------ -------- -------- -------- ------
Total investment
return (1)........... 2.89% 2.91% 1.78% 1.88% 1.61% 3.81% 4.95% 5.56% 0.35%
-------- -------- -------- -------- ------ -------- -------- -------- ------
-------- -------- -------- -------- ------ -------- -------- -------- ------

RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)...... $473,726 $330,937 $295,183 $290,367 $259,183 $261,902 $300,516 $234,605 $53,745
Expenses to average
net assets**........ 0.70% (2) 0.69% 0.69% 0.72% 0.69%* 0.75% 0.70% 0.67% 0.67%*
Net investment income
to average net
assets**............. 2.82% (2) 2.87% 1.79% 1.86% 2.75%* 3.83% 4.96% 5.52% 5.24%*
</TABLE>

- ---------
* Annualized

+ Commencement of operations

(2) These ratios include non-recurring acquisition expenses of 0.03%.

** For the year ended November 30, 1989, PaineWebber waived fees and/or
reimbursed the Fund for a portion of its operating expenses. If such fee
waivers and/or expense reimbursements had not been made, the annualized
ratio of expenses to average net assets and the annualized ratio of net
investment income to average net assets would have been 0.73% and 5.46%,
respectively.

<TABLE>
<CAPTION>
CONNECTICUT MUNICIPAL MONEY FUND
------------------------------------------------------------------------------------------
FOR THE YEARS FOR THE PERIOD
FOR THE EIGHT MONTHS ENDED OCTOBER 31, NOVEMBER 6, 1990+
ENDED ------------------------------------------- TO
JUNE 30, 1996 1995(2) 1994 1993 1992 OCTOBER 31, 1991
-------------------- ------- ------- ------- ------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------- ------- ------- ------- ------
Net investment income.......... 0.016 0.026 0.017 0.015 0.022 0.040
Dividends from net investment
income......................... (0.016) (0.026) (0.017) (0.015) (0.022) (0.040)
------ ------- ------- ------- ------- ------
Net asset value, end of
period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------- ------- ------- ------- ------
Total investment return (1).... 1.64% 2.62% 1.74% 1.49% 2.25% 4.04%
------ ------- ------- ------- ------- ------
------ ------- ------- ------- ------- ------

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's)........................ $ 18,988 $22,209 $25,763 $27,937 $28,063 $40,078
Expenses to average net
assets**....................... 1.11%* 1.01% 0.90% 0.97% 0.86% 0.36%*
Net investment income to
average net assets**.......... 2.47%* 2.63% 1.71% 1.47% 2.28% 3.96%*
</TABLE>

- ------------

* Annualized

+ Commencement of operations

(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and other
distributions at net asset value on the payable dates, and a sale at net
asset value on the last day of each period reported. Total investment
returns for periods of less than one year have not been annualized.

(2) Investment advisory functions for the Fund were transferred from Kidder
Peabody Asset Management, Inc. to PaineWebber on January 30, 1995.

** For the period November 6, 1990 to October 31, 1991, the predecessor adviser
waived and/or reimbursed the Fund for a portion of its operating expenses.
If such fee waivers and/or expense reimbursements had not been made, the
annualized ratio of expenses to average net assets and the annualized ratio
of net investment income to average net assets would have been 0.82% and
3.50%, respectively.

9
<PAGE>

<TABLE>
<CAPTION>
NEW JERSEY MUNICIPAL MONEY FUND
----------------------------------------------------------------------------------------------
FOR THE YEARS FOR THE PERIOD
FOR THE EIGHT MONTHS ENDED OCTOBER 31, FEBRUARY 1, 1991+
ENDED ------------------------------------------- TO
JUNE 30, 1996 1995(2) 1994 1993 1992 OCTOBER 31, 1991
-------------------- ------- ------- ------- ------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------- ------- ------- ------- ------

Net investment income.......... 0.017 0.027 0.018 0.016 0.025 0.032
Dividends from net investment
income......................... (0.017) (0.027) (0.018) (0.016) (0.025) (0.032)
------ ------- ------- ------- ------- ------
Net asset value, end of
period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------- ------- ------- ------- ------
------ ------- ------- ------- ------- ------
Total investment return (1).... 1.71% 2.75% 1.76% 1.65% 2.49% 3.19%
------ ------- ------- ------- ------- ------
------ ------- ------- ------- ------- ------

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's)........................ $ 42,233 $36,206 $31,981 $36,473 $27,625 $ 41,504
Expenses to average net
assets**....................... 0.95%* 0.93% 0.85% 0.93% 0.86% 0.27%*
Net investment income to
average net assets**.......... 2.56%* 2.73% 1.74% 1.63% 2.51% 4.20%*
</TABLE>

- ------------

* Annualized

+ Commencement of operations

(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and other
distributions at net asset value on the payable dates, and a sale at net
asset value on the last day of each period reported. Total investment
returns for periods of less than one year have not been annualized.

(2) Investment advisory functions for the Fund were transferred from Kidder
Peabody Asset Management, Inc. to PaineWebber on January 30, 1995.

** For the period February 1, 1991 to October 31, 1991, the predecessor adviser
waived and/or reimbursed the Fund for a portion of its operating expenses.
If such fee waivers and/or expense reimbursements had not been made, the
annualized ratio of expenses to average net assets and the annualized ratio
of net investment income to average net assets would have been 0.83% and
3.64%, respectively.

<TABLE>
<CAPTION>
NEW YORK MUNICIPAL MONEY FUND
-----------------------------------------------------------------------------------------------------------
FOR THE
FOR THE YEARS ENDED SEVEN FOR THE YEARS ENDED FOR THE PERIOD
JUNE 30, MONTHS ENDED NOVEMBER 30, NOVEMBER 10, 1988+
-------------------------------------------- JUNE 30, --------------------------- TO
1996 1995 1994 1993 1992 1991 1990 1989 NOVEMBER 30, 1988
--------- -------- -------- -------- ------------ -------- -------- ------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period.............. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
--------- -------- -------- -------- ------ -------- -------- ------- ------
Net investment
income.............. 0.029 0.028 0.017 0.018 0.016 0.037 0.049 0.055 0.003
Dividends from net
investment income... (0.029) (0.028) (0.017) (0.018) (0.016) (0.037) (0.049) (0.055) (0.003)
--------- -------- -------- -------- ------ -------- -------- ------- ------
Net asset value, end
of period.......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
--------- -------- -------- -------- ------ -------- -------- ------- ------
--------- -------- -------- -------- ------ -------- -------- ------- ------
Total investment
return (1).......... 2.91% 2.81% 1.70% 1.82% 1.62% 3.74% 4.92% 5.51% 0.29%
--------- -------- -------- -------- ------ -------- -------- ------- ------
--------- -------- -------- -------- ------ -------- -------- ------- ------

RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's)..... $255,177 $192,799 $165,111 $116,604 $129,687 $121,347 $113,885 $78,497 $24,237
Expenses to average
net assets:
Before waiver
from adviser.... 0.74% (2) 0.71% 0.75% 0.79% 0.73%* 0.89% 0.85% 0.89% 1.09%*
After waiver from
adviser............. 0.72% (2) 0.68% 0.68% 0.68% 0.68%* 0.68% 0.64% 0.37% 0.27%*
Net investment
income to average
net assets:
Before waiver
from adviser.... 2.79% (2) 2.78% 1.67% 1.70% 2.54%* 3.52% 4.67% 5.04% 4.07%*
After waiver from
adviser............. 2.81% (2) 2.81% 1.74% 1.81% 2.59%* 3.73% 4.88% 5.56% 4.89%*
</TABLE>

- ---------

* Annualized

+ Commencement of operations

(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and other
distributions at net asset value on the payable dates, and a sale at net
asset value on the last day of each period reported. Total investment
returns for periods of less than one year have not been annualized.

(2) These ratios include non-recurring acquisition expenses of 0.04%.

10
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES

The investment objective of both Money Market Portfolio and U.S. Government
Portfolio is to provide maximum current income consistent with liquidity and
conservation of capital. Each Fund seeks to meet this objective by following
different investment policies. Tax-Free Fund's investment objective is to
provide maximum current income exempt from federal income tax consistent with
liquidity and conservation of capital. California Municipal Money Fund's
investment objective is to provide maximum current income exempt from federal
income tax and California personal income tax consistent with liquidity and
conservation of capital. New York Municipal Money Fund's investment objective is
to provide maximum current income exempt from federal income tax and New York
State and New York City personal income taxes consistent with liquidity and
conservation of capital. Connecticut Municipal Money Fund's objective is the
maximization of current income exempt from federal income tax and Connecticut
personal income tax for residents of the State of Connecticut, consistent with
the preservation of capital and the maintenance of liquidity. New Jersey
Municipal Money Fund's objective is the maximization of current income exempt
from federal income tax and New Jersey personal income tax for residents of the
State of New Jersey, consistent with the preservation of capital and the
maintenance of liquidity.

Each Fund maintains a dollar-weighted average portfolio maturity of 90 days
or less. In managing each Fund's portfolio, Mitchell Hutchins may employ a
number of professional money management techniques, including varying the
composition and the average weighted maturity of each Fund's portfolio based
upon its assessment of the relative values of various money market instruments
and future interest rate patterns, in order to respond to changing economic and
money market conditions and to shifts in fiscal and monetary policy. Mitchell
Hutchins may also seek to improve a Fund's yield by purchasing or selling
securities to take advantage of yield disparities among similar or dissimilar
money market instruments that regularly occur in the money market.

There can be no assurance that the Funds will achieve their investment
objectives. In periods of declining interest rates, the Funds' yields will tend
to be somewhat higher than prevailing market rates, and in periods of rising
interest rates the opposite will be true. Also, when interest rates are falling,
net cash inflows from the continuous sale of a Fund's shares are likely to be
invested in portfolio instruments producing lower yields than the balance of
that Fund's portfolio, thereby reducing its yield. In periods of rising interest
rates, the opposite can be true.

MONEY MARKET PORTFOLIO

Money Market Portfolio invests in high quality money market instruments
having or deemed to have remaining maturities of 13 months or less. These
instruments include U.S. government securities, obligations of U.S. banks,
commercial paper and other short-term corporate obligations, corporate bonds and
notes, variable and floating rate securities and participation interests or
repurchase agreements involving any of the foregoing securities. Participation
interests are pro rata interests in securities held by others.

The U.S. government securities in which the Money Market Portfolio may
invest include direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and obligations issued or guaranteed by U.S. government
agencies and instrumentalities, including securities that are supported by the
full faith and credit of the United States (such as Government

11
<PAGE>
National Mortgage Association certificates ("GNMAs")), securities supported
primarily or solely by the creditworthiness of the issuer (such as securities of
the Resolution Funding Corporation and the Tennessee Valley Authority) and
securities that are supported primarily or solely by specific pools of assets
and the creditworthiness of a U.S. government-related issuer (such as
mortgage-backed securities issued by the Federal National Mortgage Association).

Money Market Portfolio may invest in obligations (including certificates of
deposit, bankers' acceptances and similar obligations) of U.S. banks, including
foreign branches of domestic banks and domestic branches of foreign banks,
having total assets in excess of $1.5 billion at the time of purchase. The Fund
may invest in non-negotiable time deposits of U.S. banks, savings associations
and similar deposi- tory institutions having total assets in excess of $1.5
billion at the time of purchase only if the time deposits have maturities of
seven days or less. The Fund may also invest in interest-bearing savings
deposits in U.S. banks and savings associations having total assets of $1.5
billion or less, provided that the principal amounts at each such bank are fully
insured by the Federal Deposit Insurance Corporation and the aggregate amount of
such deposits (plus accrued interest) does not exceed 5% of the Fund's assets.

The commercial paper and other short-term corporate obligations purchased by
Money Market Portfolio consist only of obligations that Mitchell Hutchins
determines, pursuant to procedures adopted by the Corporation's board of
directors, present minimal credit risks and are either (1) rated in the highest
short-term rating category by at least two nationally recognized statistical
rating organizations ("NRSROs"), (2) rated in the highest short-term rating
category by a single NRSRO if only that NRSRO has assigned the obligations a
short-term rating or (3) unrated, but determined by Mitchell Hutchins to be of
comparable quality ("First Tier Securities"). Money Market Portfolio generally
may invest no more than 5% of its total assets in the securities of a single
issuer (other than securities issued by the U.S. government, its agencies or
instrumentalities).

U.S. GOVERNMENT PORTFOLIO

U.S. Government Portfolio invests in U.S. government securities having or
deemed to have remaining maturities of 13 months or less and repurchase
agreements secured by U.S. government securities. Under investment guidelines
adopted by the Corporation's board of directors, U.S. Government Portfolio
currently invests only in securities, such as U.S. Treasury bills, Treasury
notes and GNMAs, that are backed by the full faith and credit of the United
States and repurchase agreements secured by such securities. These guidelines
may be modified by the directors without shareholder approval. U.S. government
securities in which the Fund would otherwise be authorized to invest include
obligations supported primarily or solely by the creditworthiness of the issuer.

TAX-FREE FUND

Tax-Free Fund invests substantially all of its assets in high quality money
market instruments having or deemed to have remaining maturities of 13 months or
less issued by states, municipalities and public authorities, the interest from
which is exempt from federal income tax ("Municipal Securities"). The Fund
purchases only those Municipal Securities that are First Tier Securities. These
Municipal Securities include municipal notes, municipal commercial paper,
municipal bonds, floating and variable rate municipal obligations and
participation interests in municipal bonds and floating and variable rate
obligations. Municipal

12
<PAGE>

bonds include industrial development bonds ("IDBs"), private activity bonds
("PABs"), moral obligation bonds, municipal lease obligations and certificates
of participation therein and put bonds. The interest on most PABs is an item of
tax preference for purposes of the federal alternative minimum tax ("AMT").
Under normal market conditions, the Fund intends to invest in Municipal
Securities that pay interest that is not an item of tax preference for purposes
of the AMT ("AMT exempt interest"), but may invest up to 20% of its total assets
in such securities if, in Mitchell Hutchins' judgment, market conditions
warrant. The principal Municipal Securities in which the Fund invests are
described in the Appendix to this Prospectus.

CALIFORNIA MUNICIPAL MONEY FUND

Except for temporary purposes, California Municipal Money Fund invests at
least 80% and seeks to invest 100% of its net assets in Municipal Securities
issued by the State of California, its municipalities and public authorities and
other issuers if such obligations pay interest that is exempt from federal
income tax as well as California personal income tax ("California Municipal
Securities").

California Municipal Money Fund invests in high quality California Municipal
Securities having or deemed to have remaining maturities of 13 months or less.
These instruments include the types of Municipal Securities identified above for
the Tax-Free Fund and further described in the Appendix to this Prospectus.
Under normal market conditions, the Fund intends to invest in California
Municipal Securities that pay AMT exempt interest, but may invest without limit
in securities that pay interest that is subject to the AMT if, in Mitchell
Hutchins' judgment, market conditions warrant. The California Municipal
Securities purchased by the Fund consist only of First Tier Securities.

CONNECTICUT MUNICIPAL MONEY FUND

Except for temporary purposes, Connecticut Municipal Money Fund invests at
least 65% of its total assets and seeks to invest 100% of its net assets in
Municipal Securities issued by the State of Connecticut, its political
subdivisions, authorities and corporations, the interest from which is exempt
from federal income tax as well as Connecticut personal income tax ("Connecticut
Municipal Securities"). Except for temporary purposes, the Fund invests at least
80% of its net assets in Municipal Securities.

Connecticut Municipal Money Fund invests in high quality Connecticut
Municipal Securities having or deemed to have remaining maturities of 13 months
or less. These instruments include the types of Municipal Securities identified
above for Tax-Free Fund and further described in the Appendix to this
Prospectus. Under normal market conditions, the Fund may invest in securities
that pay interest that is subject to the AMT. The Connecticut Municipal
Securities purchased by the Fund consist only of First Tier Securities.

NEW JERSEY MUNICIPAL MONEY FUND

Except for temporary defensive purposes, New Jersey Municipal Money Fund
invests at least 65% of its total assets and seeks to invest 100% of its net
assets in Municipal Securities issued by the State of New Jersey, its political
subdivisions, authorities and corporations, the interest from which is exempt
from federal income tax as well as New Jersey personal income tax ("New Jersey
Municipal Securities"). Except for temporary purposes, the Fund invests at least
80% of its net assets in Municipal Securities.

New Jersey Municipal Money Fund invests in high quality New Jersey Municipal
Securities having or deemed to have remaining maturities

13
<PAGE>
of 13 months or less. These instruments include the types of Municipal
Securities identified above for Tax-Free Fund and further described in the
Appendix to this Prospectus. Under normal market conditions, the Fund may invest
in securities that pay interest that is subject to the AMT. The New Jersey
Municipal Securities purchased by the Fund consist only of First Tier
Securities.

NEW YORK MUNICIPAL MONEY FUND

Except for temporary purposes, New York Municipal Money Fund invests at
least 80% and seeks to invest 100% of its net assets in Municipal Securities
issued by the State of New York, its municipalities and public authorities and
other issuers if such obligations pay interest that is exempt from federal
income tax as well as New York State and New York City personal income taxes
("New York Municipal Securities").

New York Municipal Money Fund invests in high quality New York Municipal
Securities having or deemed to have remaining maturities of 13 months or less.
These instruments include the types of Municipal Securities identified above for
the Tax-Free Fund and further described in the Appendix to this Prospectus.
Under normal market conditions, the Fund intends to invest in New York Municipal
Securi-ties that pay AMT exempt interest, but may invest without limit in
securities that pay inter-est that is subject to the AMT if, in Mitchell
Hutchins' judgment, market conditions warrant. The New York Municipal Securities
purchased by the Fund consist only of First Tier Securities.

OTHER INVESTMENT POLICIES AND RISK FACTORS

U.S. GOVERNMENT SECURITIES. Money Market and U.S. Government Portfolios may
also acquire custodial receipts that evidence ownership of future interest
payments, principal payments or both that have been "stripped" from certain U.S.
Treasury notes or bonds. These custodial receipts are known by various names,
including "Treasury Investment Growth Receipts" ("TIGRs") and "Certificates of
Accrual on Treasury Securities" ("CATS"). The Funds may also invest in
separately traded principal and interest components of securities issued or
guaranteed by the U.S. Treasury. The principal and interest components of
selected securities are traded independently under the Separate Trading of
Registered Interest and Principal of Securities ("STRIPS") program. Under the
STRIPS program, the principal and interest components are individually numbered
and separately issued by the U.S. Treasury. The staff of the SEC currently takes
the position that interests in "stripped" U.S. government securities that are
not part of the STRIPS program are not U.S. government securities.

VARIABLE AND FLOATING RATE SECURITIES. The Funds may purchase variable and
floating rate securities with remaining maturities in excess of 13 months issued
by U.S. government agencies or instrumentalities or guaranteed by the U.S.
government (Money Market and U.S. Government Portfolios), or, if subject to a
demand feature exercisable within 13 months or less, issued by U.S. companies
(Money Market Portfolio) or municipal issuers (Municipal Funds). The yield on
these securities is adjusted in relation to changes in specific rates, such as
the prime rate, and different securities may have different adjustment rates.
The Funds' investments in these securities must comply with conditions
established by the SEC under which they may be considered to have remaining
maturities of 13 months or less. Certain of these obligations carry a demand
feature that gives a Fund the right to tender them back to the issuer or a

14
<PAGE>

remarketing agent and receive the principal amount of the security prior to
maturity. The demand feature may be backed by letters of credit or other
liquidity support arrangements provided by banks or other financial
institutions, whose credit standing affects the credit quality of the
obligation. Changes in the credit quality of these institutions could cause
losses to a Fund and affect its share price.

Securities purchased by Money Market Portfolio may include variable amount
master demand notes, which are unsecured redeemable obligations that permit
investment of varying amounts at fluctuating interest rates under a direct
agreement between the Fund and the issuer. The principal amount of these notes
may be increased from time to time by the parties (subject to specified
maximums) or decreased by the Fund or the issuer. These notes are pay-
able on demand and are typically unrated.

REPURCHASE AGREEMENTS. Money Market Portfolio and U.S. Government Portfolio
each may enter into repurchase agreements with U.S. banks and dealers with
respect to any security in which that Fund is authorized to invest. Each
Municipal Fund may enter into repurchase agreements with such institutions with
respect to U.S. government securities, commercial paper, bank certificates of
deposit and bankers' acceptances. Repurchase agreements are transactions in
which a Fund purchases securities from a bank or recognized securities dealer
and simultaneously commits to resell the securities to that bank or dealer at an
agreed-upon date or upon demand and at a price reflecting a market rate of
interest unrelated to the coupon rate or maturity of the purchased securities.
Although repurchase agreements carry certain risks not associated with direct
investments in securities, including possible decline in the market value of the
underlying securities and delays and costs to the Fund if the other party to the
repurchase agreement becomes insolvent, the Funds intend to enter into
repurchase agreements only with banks and dealers in transactions believed by
Mitchell Hutchins to present minimal credit risks in accordance with guidelines
established by the applicable Corporation's board of directors or Trust's board
of trustees (each a "board"). The Municipal Funds do not intend to enter into
repurchase agreements except as a temporary measure and under unusual
circumstances.

LENDING OF PORTFOLIO SECURITIES. Each Fund is authorized to lend up to 33
1/3% of the total value of its portfolio securities to broker-
dealers or institutional investors that Mitchell Hutchins deems qualified.
Lending securities enables a Fund to earn additional income, but could result in
a loss or delay in recovering securities. Because the income earned through
securities lending is taxable, the Municipal Funds do not expect to engage in
securities lend-
ing except under unusual circumstances.

SPECIAL RISK CONSIDERATIONS--
CALIFORNIA MUNICIPAL MONEY FUND, CONNECTICUT MUNICIPAL MONEY FUND, NEW JERSEY
MUNICIPAL MONEY FUND AND NEW YORK
MUNICIPAL MONEY FUND

Each of these Funds may each invest more than 5% of its total assets in the
securities of a single issuer, although generally only with respect to up to 25%
of its total assets, and each Fund concentrates its investments in securities
issued by a single state or entities within that state. In addition, each of
these Funds may invest more than 25% of the value of its total assets in
Municipal Securities that are related in such a way that an economic, business
or political development or change affecting one such security would also affect
the other securities, such as securities the interest on which is paid

15
<PAGE>
from revenues of similar types of projects. These Funds may be subject to
greater risk than other money market funds that do not follow these practices.

RISKS OF CALIFORNIA MUNICIPAL SECURITIES. California Municipal Money Fund's
investment concentration in California Municipal Securities involves greater
risks than if it selected its investments from a broader geographic region. The
Fund's yield and ability to maintain a constant net asset value per share can be
affected by political and economic developments within the State of California
and by the financial condition of California, its public authorities and
political subdivisions. California suffered a severe economic recession between
1990-1993, which resulted in broad-based revenue shortfalls for the State and
many local governments. California's fiscal condition has improved as its
economy has been in a sustained recovery since 1994. During the recession, the
State substantially reduced local assistance, and further reductions could
adversely affect the financial conditions of cities, counties, and other
government agencies facing constraints in their own revenue collections.
California's long-term credit rating was reduced in the early 1990's, but was
raised in 1996 by Fitch Investors Service, L.P. ("Fitch") and Standard & Poor's,
a division of The McGraw-Hill Companies, Inc. ("S&P" or "Standard & Poor's").
California's general obligation bonds are currently rated A+ by Standard &
Poor's, A1 by Moody's Investors Service, Inc. ("Moody's") and A+ by Fitch.

In the past, California voters have passed amendments to the California
Constitution and other measures that limit the taxing and spending authority of
California governmental entities and future voter initiatives could result in
adverse consequences affecting California Municipal Securities. These factors,
among others (including the outcome of related pending litigation), could reduce
the credit standing of certain issuers of California Municipal Securities. A
more detailed discussion of the risks of investing in California Municipal
Securities is included in the Statement of Additional Information.

RISKS OF CONNECTICUT MUNICIPAL MONEY FUND. Connecticut Municipal Money
Fund's investment concentration in Connecticut Municipal Securities involves
greater risks than if it selected its investments from a broader geographic
region. The Fund's yield and ability to maintain a constant net asset value per
share can be affected by political and economic developments within the State of
Connecticut and by the financial condition of Connecticut, its public
authorities and subdivisions. Connecticut's economy relies in part on activities
that may be adversely affected by cyclical change, and recent declines in
defense spending have had an impact on unemployment levels. Connecticut reported
deficits from its General Fund operations for the fiscal years 1988 through
1991. Together with the deficit carried forward from the State's 1990 fiscal
year, the total General Fund deficit for the 1991 fiscal year was $965.7
million. The total deficit was funded by the issuance of General Obligation
Economic Recovery Notes. The State Comptroller's annual reports for the fiscal
years ended June 30, 1992, 1993, 1994 and 1995 reflected General Fund operating
surpluses of $110.2 million, $113.5 million, $19.7 million and $80.5 million,
respectively. As of the date hereof, the Comptroller is projecting a General
Fund surplus of $224.7 million for the fiscal year ended June 30, 1996. As a
result of recurring budgetary problems in the early 1990s, Standard & Poor's
downgraded the State's general obligation bonds from AA+ to AA in April 1990
and, in September 1991, to AA-. Moody's and Fitch rate Connecticut's bonds Aa
and AA, respectively. A more detailed discussion of the risks of investing

16
<PAGE>

in Connecticut Municipal Securities is included in the Statement of Additional
Information.

RISKS OF NEW JERSEY MUNICIPAL MONEY FUND. New Jersey Municipal Money Fund's
investment concentration in New Jersey Municipal Securities involves greater
risks than if it selected its investments from a broader geographic region. The
Fund's yield and ability to maintain a constant net asset value per share can be
affected by political and economic developments within the State of New Jersey
and by the financial condition of New Jersey, its public authorities and
political subdivisions. Although New Jersey enjoyed a period of economic growth
with unemployment levels below the national average during the mid-1980s, New
Jersey's economy slowed down well before the onset of the national recession,
which, according to the National Bureau of Economic Research, began in July
1990. Reflecting the economic downturn, New Jersey's unemployment rate rose from
a low of 3.6% in the first quarter of 1989 to a recessionary peak of 8.4% during
1992. Since then, the State's unemployment rate fell to 6.4% during the first
ten months of 1995. As a result of New Jersey's fiscal weakness, in July 1991
S&P lowered its rating of the State's AAA general obligation debt to AA+.

Moody's and Fitch each currently rate New Jersey general obligation bonds
Aa(1) and AA+, respectively. A more detailed discussion of the risks of
investing in New Jersey Munici-
pal Securities is included in the Statement of Additional Information.

RISKS OF NEW YORK MUNICIPAL SECURITIES. New York Municipal Money Fund's
investment concentration in New York Municipal Securities involves greater risks
than if it selected its investments from a broader geographic region. The Fund's
yield and ability to maintain a constant net asset value per share can be
affected by political and economic developments within the State of New York and
by the financial condition of the State, its public authorities and political
subdivisions, particularly the City of New York (the "City"). The State reduced
its accumulated General Fund deficits and experienced operating surpluses in
fiscal year ("FY") 1991-92 through 1993-94, an operating deficit of $1.426
billion for FY 1994-95 and a modest General Fund surplus for FY 1995-96. The
State continues to experience substantial financial difficulties related to the
recent recession, resulting in, among other things, reductions in General Fund
receipts. Although the FY 1996-97 budget projects a cash balance in the General
Fund, it anticipates closing an approximate $3.9 billion budget gap to arrive at
such balance. Approximately $2 billion of such savings are expected to derive
from federal policy changes. The likelihood that a balanced budget for FY
1996-97 will be achieved depends in part on the implementation of such federal
policy changes as well as numerous and substantial corrective measures assumed
in the FY 1996-97 budget. In addition, recent changes to federal entitlement
programs and uncertainties stemming from such changes may materially adversely
impact the State's ability to achieve a balanced budget in FY 1996-97 or in
future fiscal years. The City (which is constrained in its fiscal flexibility by
an already heavy local tax burden, urgent social needs and its extensive and
deteriorating infrastructure) and most suburban county governments have
experienced serious fiscal problems related to the recessionary performance of
the regional economy, which has caused substantial, broad-based and recurring
revenue shortfalls. Both the State of New York's credit rating and the City's
credit rating have been, and could be further, reduced; and their ability to
provide assistance to public authorities and political subdivisions has been,
and could be further, impaired. Currently, New York's general obligation bonds
are rated A by Moody's, A- by S&P and A+ by Fitch. A more detailed discussion of
the risks of investing in New York

17
<PAGE>
Municipal Securities is included in the Statement of Additional Information.

OTHER INVESTMENT POLICIES

When Mitchell Hutchins believes that there is an insufficient supply of the
type of Municipal Securities in which a Municipal Fund primarily invests, or
during other unusual market conditions, that Municipal Fund tempo-
rarily may invest all or any portion of its net assets in other types of
Municipal Securities. In addition, when Mitchell Hutchins believes that there is
an insufficient supply of any type of Municipal Securities or that other circum-
stances warrant a defensive posture, each Municipal Fund may hold cash and may
invest all or any portion of its net assets in taxable money market instruments,
including repur-
chase agreements. To the extent that a Fund
holds cash, such cash would not earn income and would reduce the Fund's yield.

Each Fund may borrow money for temporary purposes, but not in excess of 10%
of its total assets (15% of net assets in the case of Connecticut Municipal
Money Fund and New Jersey Municipal Money Fund). Borrowings by Money Market
Portfolio and U.S. Government Portfolio may include reverse repurchase
agreements involving up to 5% of each Fund's net assets. The Municipal Funds may
purchase Municipal Securities on a "when-issued" basis, that is, for delivery
beyond the normal settlement date at a stated price and yield. A Fund generally
would not pay for such securities or start earning interest on them until they
are received. However, when a Fund purchases Municipal Securities on a
when-issued basis, it immediately assumes the risks of ownership, including the
risk of price fluctuation. Failure by the issuer to deliver a security purchased
on a when-issued basis may result in a loss or missed opportunity to make an
alternative investment. Each Fund expects that commitments to purchase
when-issued securities normally will not exceed 25% of its assets (20% in the
case of Connecticut Municipal Money Fund and New Jersey Municipal Money Fund).

No Fund will invest more than 10% of its net assets in illiquid securities,
including repurchase agreements with maturities in excess of seven days. In
order to facilitate portfolio liquidity in unusual market conditions, a
Municipal Fund may acquire standby commitments from municipal bond dealers who
would agree to purchase the Municipal Securities that are the subject of the
commitments.

Future federal, state and local laws may adversely affect the tax-exempt
status of interest on Municipal Securities held by one of the Municipal Funds or
of the exempt-interest dividends paid by the Municipal Funds, extend the time
for payment of principal or interest or otherwise constrain enforcement of such
obligations. Opinions relating to the validity of Municipal Securities and the
tax-exempt status of interest thereon are rendered by the issuer's bond counsel
at the time of issuance; Mitchell Hutchins will rely on such opinions without
independent verification.

A Fund's investment objective may not be changed without the approval of its
shareholders. California Municipal Money Fund's investment policy of investing
at least 80% of its net assets in California Municipal Securities and the
similar investment policy of New York Municipal Money Fund, Connecticut
Municipal Money Fund and New Jersey Municipal Money Fund relating to investments
in New York Municipal Securities, Connecticut Municipal Securities and New
Jersey Municipal Securities, respectively, may not be changed without approval
of the appropriate Fund's shareholders. Certain other investment limitations, as
described in the Statement of Additional Information, also may not be changed
without shareholder approval. All other investment policies may be changed by
the applicable board without shareholder approval.

18
<PAGE>
PURCHASES

THE RMA AND BSA PROGRAMS. Shares of each Fund are available primarily
through the RMA and BSA programs. RMA and BSA participants are asked to select
one of the Funds as their designated portfolio ("Primary Sweep Money Fund").
Investors will have all free credit cash balances of over $1 (including proceeds
from securities sold) in the account invested in the Primary Sweep Money Fund.
Each Fund and PaineWebber reserve the right to reject any purchase order and to
suspend the offering of Fund shares for a period of time.

Investors who choose one Fund as their Primary Sweep Money Fund may also
purchase shares of another Fund by contacting their PaineWebber Investment
Executive or correspondent firms. Minimum purchase and maintenance requirements,
however, may apply to purchases of shares of a Fund other than the investor's
Primary Sweep Money Fund.

Certain features available to RMA and BSA participants are summarized in the
Appendices to the Statement of Additional Information. The RMA program is more
fully described in the brochure, "Facts about Your Resource Management Account
(RMA)" and the BSA program is more fully described in the brochure, "Facts about
Your Business Services Account (BSA)." The availability of Fund shares to
customers of PaineWebber's correspondent firms varies depending on the
arrangements between PaineWebber and such firms.

An order to purchase shares of a Fund will be executed on the Business Day
on which federal funds become available to the Fund, at the Fund's
next-determined net asset value per share. "Federal funds" are funds deposited
by a
commercial bank in an account at a Federal
Reserve Bank that can be transferred to a simi-
lar account of another bank in one day and thus
may be made immediately available to the Fund
through its custodian. A "Business Day" is any
day on which the Boston offices of the Fund's custodian, State Street Bank and
Trust Company ("Custodian"), and the New York City offices of PaineWebber and
PaineWebber's bank are all open for business.

RMA and BSA participants may change their Primary Sweep Money Fund at any
time by notifying their PaineWebber Investment Executives or correspondent
firms. However, RMA and BSA participants may not have more than one Primary
Sweep Money Fund at a time.

On any Business Day, a Fund will accept purchase orders and credit shares to
investors' accounts as follows.

PURCHASES WITH FUNDS HELD AT PAINEWEBBER. All deposits to RMA and BSA
participants' brokerage accounts and any free credit cash balances that may
arise in such brokerage accounts will be automatically invested in shares of
their Primary Sweep Money Fund, as described above under "The RMA and BSA
Programs," provided that federal funds are available for the investment. Federal
funds normally are available for cash balances arising from the sale of
securities held in a brokerage account on the Business Day following settlement,
but in some cases can take longer.

PURCHASES BY CHECK OR ELECTRONIC FUNDS
TRANSFER CREDIT. RMA and BSA participants may purchase Fund shares by depositing
into their account checks drawn on a U.S. bank. The RMA or BSA participant's
brokerage account number should be included on the check.

As noted above, shares of the participant's Primary Sweep Money Fund will be
purchased when federal funds are available. RMA or BSA participants wishing to
invest amounts deposited in their accounts by check in one of the other

19
<PAGE>

Funds should so instruct their PaineWebber Investment Executives or
correspondent firms. Federal funds are deemed available to a Fund two Business
Days after deposit of a personal check and/or an Electronic Funds Transfer
credit initiated by PaineWebber and one Business Day after deposit of a
cashier's or certified check. PaineWebber may benefit from the temporary use of
the proceeds of personal checks and Electronic Funds Transfer credits to the
extent those funds are converted to federal funds in fewer than two Business
Days.

PURCHASES BY WIRE. RMA and BSA participants may also purchase shares of
their Primary Sweep Money Fund or another Fund by instructing their banks to
transfer federal funds by wire to their RMA or BSA account. Wire transfers
should be directed to: The Bank of New York, ABA 021000018, PaineWebber Inc.,
A/C 890-0114-088, OBI=FBO [Account Name]/[Brokerage Account Number]. The wire
must include the investor's name and RMA or BSA brokerage account number. RMA or
BSA participants wishing to transfer federal funds into their accounts should
contact their PaineWebber Investment Executives or correspondent firms to
determine the appropriate wire instructions.

To the extent that the amounts transferred by wire create a cash balance in
an investor's account, that cash balance will be automatically invested in the
investor's Primary Sweep Money Fund, as described above under "Purchases with
Funds Held at PaineWebber." RMA or BSA participants wishing to invest amounts
transferred by wire in one of the other Funds should so instruct their
PaineWebber Investment Executives or correspondent firms.

If PaineWebber receives a notice from an investor's bank of a wire transfer
of federal funds by 12:00 noon, Eastern time, on a Business Day, the automatic
investment will be executed on that Business Day. Otherwise, the automatic
investment will be executed at 12:00 noon, Eastern time, on the next Business
Day.
PaineWebber and/or an investor's bank may impose a service charge for wire
transfers.

REDEMPTIONS

Shareholders may redeem any number of shares from their Fund accounts by
wire, by telephone or by mail. Shares will be redeemed at the net asset value
per share next determined after receipt by the Funds' transfer agent ("Transfer
Agent") of instructions from PaineWebber to redeem. PaineWebber delivers such
instructions to the Transfer Agent prior to the determination of net asset value
at 12:00 noon, Eastern time, on any Business Day.

AUTOMATIC REDEMPTIONS. Under the RMA and BSA programs, PaineWebber will
redeem Fund shares automatically to satisfy outstanding "Debits" and "Charges."
"Debits" are amounts due PaineWebber on settlement date for securities purchases
and other debits in the investor's RMA or BSA brokerage account, including
margin loans, any federal funds wires arranged by PaineWebber and fees for such
wires and PaineWebber checks and fees for such checks. "Charges" are RMA or BSA
checks, MasterCard purchases, cash advances, Bill Payment Service checks and
Automated Clearing House transfers, including Electronic Funds Transfer Debits.
Shares are redeemed to cover Debits on the day the Debit is generated. Shares
are redeemed to cover RMA or BSA checks and MasterCard cash advances on the day
they are paid. Shares are redeemed to cover MasterCard purchases at the end of
the MasterCard monthly billing period. Shares are also redeemed to cover
interest due on and credit extended and outstanding under the Bank One

20
<PAGE>
Line of Credit at the end of the MasterCard monthly billing cycle. Securities
purchases are automatically paid for on settlement date. Fund shares will not be
purchased until all Debits and Charges in a shareholder's RMA or BSA brokerage
account are satisfied.

ORDER OF REDEMPTION. If a shareholder owns shares of more than one Fund,
shares of the Primary Sweep Money Fund are always redeemed first; thereafter,
shares held in the other Funds will be redeemed, if necessary, in the following
order: first, Money Market Portfolio; second, U.S. Government Portfolio; third,
Tax-Free Fund; and fourth, New York Municipal Money Fund, California Municipal
Money Fund, Connecticut Municipal Money Fund or New Jersey Municipal Money Fund.

ADDITIONAL INFORMATION ON REDEMPTIONS. Shareholders with questions about
redemption requirements should consult their PaineWebber Investment Executives
or correspondent firms. Shareholders who redeem all their shares will receive
cash credits to their RMA or BSA brokerage accounts for dividends earned on
those shares to (but not including) the day of redemption. The redemption price
may be more or less than the purchase price, depending on the market value of
the Fund's portfolio; however, each Fund anticipates that its net asset value
per share will normally be $1.00 per share. See "Valuation of Shares."

Because each Fund incurs certain fixed costs in maintaining shareholder
accounts, each Fund reserves the right to establish minimum initial purchase
requirements and to redeem Fund shares in any shareholder account of less than
$500 net asset value. If a Fund elects to do so, it will notify the shareholder
and provide the shareholder with an opportunity to increase the amount invested
to $500 or more within 60 days of the notice. This notice may appear on the
shareholder's account statement. If a shareholder requests redemption of shares
that were purchased recently, a Fund may delay payment until it is assured that
it has received good payment for the purchase of the shares. In the case of
purchases by check, this can take up to 15 days.

PaineWebber has the right to terminate an RMA or BSA brokerage account for
any reason. In such event, all Fund shares held in the shareholder's RMA or BSA
brokerage account will be redeemed and the proceeds sent to the shareholder
within three Business Days.

VALUATION OF SHARES

Each Fund uses its best efforts to maintain its net asset value at $1.00 per
share. Each Fund's net asset value per share is determined by dividing the value
of its investments and other assets minus its liabilities by the number of Fund
shares outstanding. Each Fund's net asset value is determined once each Business
Day at 12:00 noon, Eastern time.

Each Fund values its portfolio securities using the amortized cost method of
valuation, under which market value is approximated by amortizing the difference
between the acquisition cost and value at maturity of an instrument on a
straight-line basis over its remaining life. All cash, receivables and current
payables are carried at their face value. Other assets are valued at fair value
as determined in good faith by or under the direction of the board of the
applicable Corporation or Trust.

DIVIDENDS AND TAXES

DIVIDENDS. Each Business Day, each Fund declares as dividends all of its net
investment income. Shares begin earning dividends on the day of purchase;
dividends are accrued to shareholder accounts daily and are automatically

21
<PAGE>

paid in additional Fund shares monthly. Shares do not earn dividends on the day
of redemption. Net investment income includes accrued interest and earned
discount (including original issue and, generally, market discounts), less
amortization of market premium and accrued expenses. Any amounts from accretion
of mar-ket discounts on Municipal Securities, which are taxable to each Fund's
shareholders, are included in the daily dividends.

Each Fund distributes its net short-term capital gain, if any, annually but
may make more frequent distributions of such gain if necessary to maintain its
net asset value per share at $1.00 or to avoid income or excise taxes. The Funds
do not expect to realize net long-term capital gain and thus do not anticipate
payment of any long-term capital gain distributions.

FEDERAL TAX. Each Fund intends to continue to qualify for treatment as a
regulated investment company ("RIC") under the Internal Revenue Code so that it
will be relieved of federal income tax on that part of its investment company
taxable income (consisting generally of taxable net investment income and net
short-term capital gain, if any) that is distributed to its shareholders.

Dividends paid by Money Market Portfolio and U.S. Government Portfolio
generally are taxable to their shareholders as ordinary income, notwithstanding
that such dividends are paid in additional Fund shares. Shareholders not subject
to tax on their income, however, generally are not required to pay tax on
amounts distributed to them. Distributions by a Municipal Fund that it
designates as "exempt-interest dividends" generally may be excluded from gross
income by a shareholder. Interest on indebtedness incurred by a shareholder to
purchase or carry shares of a Municipal Fund is not deductible.

Each Fund notifies its shareholders following the end of each calendar year
of the tax status of all distributions paid (or deemed paid) during that year.
The notice sent by each Municipal Fund specifies the amount of exempt-interest
dividends (and the portion thereof, if any, that is not AMT exempt interest) and
the amount of any taxable dividends.

Each Fund is required to withhold 31% of all taxable dividends payable to
any individuals and certain other non-corporate shareholders who (1) do not
provide the Fund with a correct taxpayer identification number or (2) otherwise
are subject to backup withholding.

CALIFORNIA TAXES. If California Municipal Money Fund qualifies as a RIC
under the Internal Revenue Code and at least 50% of the value of its total
assets consists of California Municipal Securities, exempt-interest dividends
derived from interest on qualifying California Municipal Securities will be
exempt from California personal income tax ("California exempt-interest
dividends"), but not California franchise tax. Dividends derived from interest
on other Municipal Securities, taxable income and net capital gain are taxable
under California law at ordinary income rates. Interest on indebtedness incurred
by a shareholder to purchase or carry shares of the Fund is not deductible for
purposes of California personal income tax. California exempt-interest dividends
may affect the calculation of certain adjustments to alternative minimum taxable
income for shareholders that are corporations. Shareholders receive notification
annually stating the portion of the Fund's exempt-interest dividends
attributable to issuers in California and other states. The Fund itself will not
be subject to California franchise or corporate income tax on interest income
distributed to its shareholders.

NEW YORK STATE AND NEW YORK CITY TAXES. If New York Municipal Money Fund

22
<PAGE>
qualifies as a RIC under the Internal Revenue Code and at the end of each
quarter of the Fund's taxable year at least 50% of its assets are invested in
New York Municipal Securities, exempt-interest dividends paid by the Fund that
are derived from interest on qualifying New York Municipal Securities will be
exempt from New York State and New York City personal income taxes, but not
corporate franchise taxes. Dividends derived from interest on other Municipal
Securities, taxable income and net capital gain are not exempt from New York
State and New York City taxes. Interest on indebtedness incurred by a
shareholder to purchase or carry shares of the Fund is not deductible for
purposes of New York State or New York City personal income tax. Shareholders
receive notification annually stating the portion of the Fund's exempt-interest
dividends attributable to issuers in New York State, New York City and other
states.

CONNECTICUT TAXES. Dividends paid by Connecticut Municipal Money Fund that
qual-
ify as exempt-interest dividends for federal income tax purposes are not subject
to the Con-
necticut income tax imposed on individuals, trusts and estates, to the extent
that such divi-
dends are derived from income received by the Fund as interest from Connecticut
Municipal Securities, or as interest from obligations with respect to which
Connecticut is prohibited by federal law from taxing. Dividends derived from
other sources are subject to Connecticut income tax, except that dividends
qualifying as capital gains dividends for federal income tax purposes are not
subject to Connecticut income tax to the extent derived from Connecticut
Municipal Securities. In the case of a shareholder subject to the Connecticut
income tax and required to pay AMT, the portion of exempt-interest dividends
paid by the Fund that is derived from income received by the Fund as interest
from Connecticut Municipal Securities or obligations the interest with respect
to which Connecticut is prohibited by federal law from taxing is not subject to
the net Connecticut minimum tax, even though treated as a preference item for
purposes of the AMT.

Dividends qualifying as exempt-interest dividends for federal income tax
purposes that are distributed by the Fund to entities taxed as corporations
under the Connecticut corporation business tax are not exempt from the tax.

Connecticut Municipal Money Fund's shares are not subject to property
taxation by the State of Connecticut or its political subdivisions.

NEW JERSEY TAXES. New Jersey Municipal Money Fund anticipates that
substantially all dividends paid by the Fund will not be subject to New Jersey
gross income tax. In accordance with the provisions of New Jersey law as
currently in effect, distributions paid by a "qualified investment fund" will
not be subject to the New Jersey gross income tax to the extent the
distributions are attributable to income received as interest or gain from New
Jersey Municipal Securities, direct U.S. government obligations or certain other
specified obligations. To be classified as a qualified investment fund, at least
80% of the Fund's investments must consist of such obligations. Distributions by
a qualified investment fund that are attributable to most other sources will be
subject to the New Jersey gross income tax. If the Fund continues to qualify as
a qualified investment fund, any gain on the redemption of its shares will not
be subject to the New Jersey gross income tax. To the extent a shareholder of
the Fund is obligated to pay state or local taxes outside of New Jersey,
dividends earned by such shareholder may represent taxable income.

23
<PAGE>

New Jersey Municipal Money Fund Shares are not subject to property taxation
by New Jersey or its political subdivisions.

ADDITIONAL INFORMATION. The foregoing is only a summary of some of the
important federal, state and local income tax considerations generally affecting
the Funds and their shareholders; see the Statement of Additional Information
for a further discussion. There may be other federal, state and local tax
considerations applicable to a particular investor. Prospective shareholders are
urged to consult their tax advisers.

MANAGEMENT

Each board, as part of its overall management responsibility, oversees
various organizations responsible for its Fund's day-to-day management.
PaineWebber, the Funds' investment adviser and administrator, provides a
continuous investment program for each Fund and supervises all aspects of its
operations. As sub-adviser to the Funds, Mitchell Hutchins makes and implements
investment decisions and, as sub-administrator, is responsible for the
day-to-day administration of the Funds.

PaineWebber receives a monthly fee for these services. For the fiscal year
ended June 30, 1996, the effective advisory and administration fees paid to
PaineWebber by Money Market Portfolio, U.S. Government Portfolio, Tax-Free Fund,
California Municipal Money Fund and New York Municipal Money Fund were equal to
0.50%, 0.44%, 0.44%, 0.48%, and 0.50%, respectively, of the Fund's average daily
net assets. For the eight months ended June 30, 1996, the effective advisory and
administration fees paid to PaineWebber by Connecticut Municipal Money Fund and
New Jersey Municipal Money Fund were equal to 0.50% of the Fund's average daily
net assets. PaineWebber (not the Funds) pays Mitchell Hutchins a fee for its
sub-advisory and sub-administration services at an annual rate of 20% of the fee
received by PaineWebber from each Fund for advisory and administrative services.

Each Fund, except Connecticut Municipal Money Fund and New Jersey Municipal
Money Fund, pays PaineWebber an annual fee of $4.00 per active Fund account,
plus certain out-of-pocket expenses, for certain services not performed by the
Transfer Agent. Each Fund also incurs other expenses. For the fiscal year ended
June 30, 1996, the ratio of expenses as a percentage of average net assets of
Money Market Portfolio, U.S. Government Portfolio, Tax-Free Fund, California
Municipal Money Fund and New York Municipal Money Fund were 0.60%, 0.65%, 0.61%,
0.70% and 0.72%, respectively. PaineWebber waived a portion of its advisory and
administration fees for New York Municipal Money Fund. If such waiver had not
been made, the Fund's ratio of expenses stated as a percentage of average net
assets would have been 0.74%. For the eight months ended June 30, 1996, the
annualized ratios of expenses as a percentage of average net assets of
Connecticut Municipal Money Fund and New Jersey Municipal Money Fund were 1.11%
and 0.95%, respectively.

PaineWebber and Mitchell Hutchins are located at 1285 Avenue of the
Americas, New York, New York 10019. Mitchell Hutchins is a wholly owned
subsidiary of PaineWebber, which is in turn wholly owned by Paine Webber Group
Inc., a publicly owned financial services holding company. At July 31, 1996,
PaineWebber or Mitchell Hutchins was investment adviser or sub-adviser to 31
registered investment companies with 64 separate portfolios and aggregate assets
in excess of $30 billion.

Mitchell Hutchins personnel may engage in securities transactions for their
own accounts pursuant to a code of ethics that establishes

24
<PAGE>
procedures for personal investing and restricts certain transactions.

DISTRIBUTION ARRANGEMENTS. PaineWebber is the distributor of each Fund's
shares and each Fund (other than Money Market Portfolio) has a separate plan of
distribution ("Plan"). Under their Plans, U.S. Government Portfolio, Tax-Free
Fund, California Municipal Money Fund and New York Municipal Money Fund each is
authorized to pay PaineWebber a 12b-1 service fee at the annual rate of up to
0.15% of the Fund's average daily net assets. Each of these Funds currently pays
PaineWebber a 12b-1 service fee at the annual rate of 0.08% of its average daily
net assets. Any increase in this annual rate would require prior approval by the
board of the applicable Corporation or Trust.

Under each Plan, PaineWebber uses the 12b-1 service fee to pay PaineWebber
Investment Executives and correspondent firms for shareholder servicing,
currently at the annual rate of 0.06% of the Fund's average daily net assets
held in accounts serviced by such investment executives and correspondent firms.
The fee is also used to offset PaineWebber's other expenses in servicing and
maintaining shareholder accounts. These expenses may include the costs of the
PaineWebber branch office in which the Investment Executive is based, such as
rent, communications equipment, employee salaries and other overhead costs.

During the period they are in effect, each Plan and a related distribution
contract ("Distribution Contract") obligate the affected Fund to pay the 12b-1
service fee to PaineWebber as compensation for its service activities and not as
reimbursement for specific expenses incurred. Thus, even if PaineWebber's
expenses exceed the 12b-1 fee, the Fund will not be obliged to pay more than the
fee and, if PaineWebber's expenses are less than the fee, it will retain its
full fee and realize a profit. Each Fund will pay the 12b-1 fee to PaineWebber
until either the Plan or the Distribution Contract is terminated or not renewed
for that Fund. In that event, PaineWebber's service expenses in excess of fees
received or accrued through the termination date will be PaineWebber's sole
responsibility and not obligations of the Fund.

Under a separate Plan, Connecticut Municipal Money Fund and New Jersey
Municipal Money Fund are authorized to reimburse PaineWebber its expenses for
distribution of each Fund's shares at the annual rate of up to 0.12% of each
Fund's average daily net assets. The expenses which may be reimbursed include
compensation to Investment Executives and other employees of PaineWebber,
printing of prospectuses and reports for other than existing shareholders, and
the preparation, printing and distribution of sales literature and advertising
materials. It is not anticipated that items reimbursable under this Plan will
generally include any profit to PaineWebber. The Fund is not authorized to
reimburse PaineWebber for expenses incurred more than 12 months prior to the
date of such reimbursement. PaineWebber anticipates that there will be no
carryover of expenses from one year to the next. The expenses to be reimbursed
are for activities primarily intended to result in the sale of each Fund's
shares and the maintenance of Fund accounts and account balances, and there will
be no reimbursement for the expenses relative to PaineWebber's overhead.
PaineWebber currently intends that approximately 0.10% per annum of each Fund's
daily net assets will be paid to its Investment Executives proportionately in
respect of Fund share balances maintained by their respective clients and the
balance on other activities.

25
<PAGE>
PERFORMANCE INFORMATION

From time to time each Fund may advertise its "yield" and "effective yield."
Both yield figures are based on historical earnings and are not intended to
indicate future performance. The "yield" of a Fund is the income on an
investment in that Fund over a specified seven-day period. This income is then
"annualized" (that is, assumed to be earned each week over a 52-week period) and
shown as a percentage of the investment. The "effective yield" is calculated
similarly, but when annualized the income earned is assumed to be reinvested.
The "effective yield" will be higher than the "yield" because of the compounding
effect of this assumed reinvestment.

The Municipal Funds may also advertise "tax-equivalent yield" and
"tax-equivalent effective yield." "Tax-equivalent yield" shows the taxable yield
that would produce the same income after a stated rate of taxes as the
respective Fund's tax-exempt yield (yield excluding taxable income).
"Tax-equivalent effective yield" shows the taxable effective yield that would
produce the same income after a stated rate of taxes as the respective Fund's
tax-exempt effective yield (effective yield excluding taxable income).

Each Fund may also advertise other performance data, which may consist of
the annual or cumulative return (including realized net short-term capital gain,
if any) earned on a hypothetical investment in the Fund since it began
operations or for shorter periods. This return data may or may not assume
reinvestment of dividends (compounding).

The performance of shareholder accounts with small balances will differ from
the quoted performance because daily income for each shareholder account is
rounded to the nearest whole penny. Accordingly, very small shareholder accounts
(at current interest rates, approximately $36 or less in the case of the Money
Market Portfolio and U.S. Government Portfolio, and approximately $64 or less in
the case of Municipal Funds) that generate less than 1/2 per day of income will
earn no dividends.

GENERAL INFORMATION

Money Market and U.S. Government Portfolios are diversified series of
PaineWebber RMA Money Fund, Inc. ("Money Fund Corporation"). Both Tax-Free Fund
and Money Fund Corporation were incorporated in Maryland on July 2, 1982, and
each is registered with the SEC as an open-end, management investment company.
Money Fund Corporation has an authorized capitalization of 30 billion shares of
$0.001 par value common stock, 15 billion and 5 billion of which are designated
as shares of Money Market Portfolio and U.S. Government Portfolio, respectively.
The remaining shares are classified as shares of Money Fund Corporation's third
series. Tax-Free Fund, a diversified investment company, has an authorized
capitalization of 20 billion shares of $0.001 par value common stock.

California Municipal Money Fund and New York Municipal Money Fund are
non-diversified series of PaineWebber Managed Municipal Trust. The Trust is
registered as an open-end management investment company and was organized as a
business trust under the laws of the Commonwealth of Massachusetts by
Declaration of Trust dated November 21, 1986. The Trust's board has authority to
issue an unlimited number of shares of beneficial interest of separate series,
par value $0.001 per share.

Connecticut Municipal Money Fund and New Jersey Municipal Money Fund are
non-diversified series of PaineWebber Municipal

26
<PAGE>
Money Market Series. The Trust is registered as an open-end management
investment company and was organized as a Massachusetts business trust on
September 14, 1990. The Trust's board has authority to issue an unlimited number
of full and fractional shares of beneficial interest, $.001 par value per share.

Although each Fund is offering only its own shares, it is possible that a
Fund might become liable for a misstatement in the Prospectus about another
Fund. Each board has considered this factor in approving the use of a single,
combined Prospectus.

The Corporations and the Trusts do not hold annual shareholder meetings.
There normally will be no meetings of shareholders to elect board members unless
fewer than a majority of the board members holding office have been elected by
shareholders.

The directors are required to call a meeting of shareholders of a
Corporation when requested in writing to do so by the shareholders of record
holding at least 25% of the Corporation's outstanding shares.

Shareholders of record of no less than two-thirds of the outstanding shares
of the applica-
ble Trust may remove a trustee by vote cast in person or by proxy at a meeting
called for that purpose. The trustees are required to call a meeting of
shareholders of the applicable Trust for the purposes of voting upon the
question of removal of any trustee when requested in writing to do so by the
shareholders of record of not less than 10% of the applicable Trust's
outstanding shares.

Each share of a Fund has equal voting, dividend and liquidation rights. The
shares of each series of Money Fund Corporation and the Trusts will be voted
separately except when an aggregate vote of all series is required by the
Investment Company Act of 1940.

CERTIFICATES. To avoid additional operating expense and for investor
convenience, stock certificates are not issued. Ownership of shares of each Fund
is recorded on a stock register by the Transfer Agent, and shareholders have the
same rights of ownership with respect to such shares as if certificates had been
issued.

REPORTS. Shareholders of each Fund receive its audited annual and unaudited
semi-annual financial statements. All purchases and redemptions of Fund shares
are confirmed to shareholders at least quarterly. To avoid sending duplicate
copies of materials to households, a Fund may mail only one copy of each annual
and semi-annual report to shareholders having the same last name and address on
the Fund's records. However, shareholders may call 1-800-762-1000 to ask that
copies of those materials be sent personally to that shareholder.

CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, One
Heritage Drive, North Quincy, Massachusetts 02171, is custodian of each Fund's
assets. PFPC Inc., a subsidiary of PNC Bank, National Association, whose
principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809,
is each Fund's transfer and dividend disbursing agent.

27
<PAGE>
APPENDIX
MUNICIPAL SECURITIES

The following description of the principal Municipal Securities in which,
where applicable, Tax-Free Fund, California Municipal Money Fund, Connecticut
Municipal Money Fund, New Jersey Municipal Money Fund and New York Municipal
Money Fund may invest supplements that provided elsewhere in the prospectus.

MUNICIPAL BONDS. Municipal bonds are debt obligations issued to obtain funds
for various public purposes, the interest on which is exempt from federal income
tax in the opinion of bond counsel. The two principal classifications of
municipal bonds are "general obligation" and "revenue" bonds. General obligation
bonds are secured by the issuer's pledge of its full faith, credit and taxing
power for the payment of principal and interest. Revenue bonds are payable only
from the revenue derived from a particular facility or class of facilities or,
in some cases, from the proceeds of a special excise tax or other specific
revenue source such as from the user of the facility being financed. The term
"municipal bonds" also includes "moral obligation" issues, which are normally
issued by special purpose authorities. In the case of such issues, an express or
implied "moral obligation" of a related governmental unit is pledged to the
payment of the debt service, but is usually subject to annual budget
appropriations. The term "municipal bonds" also includes municipal lease
obligations, such as leases, installment purchase contracts and conditional
sales contracts, and certificates of participation therein. Municipal lease
obligations are issued by local and state governments and authorities to
purchase land or various types of equipment or facilities and may be subject to
annual budget appropriations. The Funds generally invest in municipal lease
obligations through certificates of participation. The term "municipal bonds"
also includes custodial receipts that represent an ownership interest in one or
more municipal bonds.

INDUSTRIAL DEVELOPMENT BONDS AND PRIVATE ACTIVITY BONDS. IDBs and PABs are
issued by or on behalf of public authorities to finance various privately
operated facilities, such as airport or pollution control facilities. PABs
generally are such bonds issued after August 15, 1986. These obligations are
included within the term "municipal bonds" if the interest paid thereon is
exempt from federal income tax in the opinion of the bond issuer's counsel. IDBs
and PABs are in most cases revenue bonds and thus are not payable from the
unrestricted revenues of the issuer. The credit quality of IDBs and PABs is
usually directly related to the credit standing of the user of the facilities
being financed. Each Fund is authorized to invest more than 25% of its assets in
IDBs and PABs.

PARTICIPATION INTERESTS. Participation interests are interests in municipal
bonds, including IDBs and PABs, and floating and variable rate obligations that
are owned by banks. These interests carry a demand feature permitting the holder
to tender them back to the bank, which demand feature generally is backed by an
irrevocable letter of credit or guarantee of the bank. The credit standing of
such bank affects the credit quality of the participation interest.

PUT BONDS. A put bond is a municipal bond that gives the holder the
unconditional right to sell the bond back to the issuer or a third party at a
specified price and exercise date, which is typically well in advance of the
bond's maturity date.

TAX-EXEMPT COMMERCIAL PAPER AND SHORT-TERM MUNICIPAL NOTES. Tax-exempt
commercial paper and short-term municipal notes include tax anticipation notes,
bond anticipation notes, revenue anticipation notes and other forms of
short-term loans. Such notes are issued with a short-term maturity in
anticipation of the receipt of tax funds, the proceeds of bond placements or
other revenues.

A-1
<PAGE>
TABLE OF CONTENTS

Highlights......................... 2 [LOGO]
Financial Highlights............... 7 PROSPECTUS
Investment Objectives and
Policies......................... 11 -------------------------------
Purchases.......................... 19
Redemptions........................ 20 RMA MONEY MARKET PORTFOLIO
Valuation of Shares................ 21
Dividends and Taxes................ 21 RMA U. S. GOVERNMENT
Management......................... 24 PORTFOLIO
Performance Information............ 26
General Information................ 26 RMA TAX-FREE FUND
Appendix........................... A-1

MONEY FUND
FOR INFORMATION ON THE RMA PROGRAM OR
THE RMA FUNDS, CALL PAINEWEBBER RMA CONNECTICUT MUNICIPAL
TOLL-FREE AT 1-800-RMA-1000. MONEY FUND

FOR INFORMATION ON THE BSA PROGRAM, RMA NEW JERSEY MUNICIPAL
CALL PAINEWEBBER TOLL-FREE AT MONEY FUND
1-800-762-1000.
RMA NEW YORK MUNICIPAL
-------------------------------------- MONEY FUND
NO PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, AUGUST 29, 1996
IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE
FUNDS OR THEIR DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN
OFFERING BY THE FUNDS OR BY THE
DISTRIBUTOR IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.

[LOGO]
-C- 1996 PaineWebber Incorporated

<PAGE>
PAINEWEBBER RMA
MONEY MARKET PORTFOLIO
U.S. GOVERNMENT PORTFOLIO
TAX-FREE FUND
CALIFORNIA MUNICIPAL MONEY FUND
CONNECTICUT MUNICIPAL MONEY FUND
NEW JERSEY MUNICIPAL MONEY FUND
NEW YORK MUNICIPAL MONEY FUND
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
1-800-762-1000

STATEMENT OF ADDITIONAL INFORMATION

The seven funds named above (each a "Fund") are professionally managed money
market funds, each with its own investment objective and policies as described
in the Funds' Prospectus. PaineWebber RMA Money Market Portfolio ("Money Market
Portfolio") and PaineWebber RMA U.S. Government Portfolio ("U.S. Government
Portfolio") are series of PaineWebber RMA Money Fund, Inc. ("Money Fund"). Money
Fund and PaineWebber RMA Tax-Free Fund, Inc. ("Tax-Free Fund") are Maryland
corporations (each a "Corporation"). PaineWebber RMA California Municipal Money
Fund ("California Municipal Money Fund") and PaineWebber RMA New York Municipal
Money Fund ("New York Municipal Money Fund") are series of PaineWebber Managed
Municipal Trust ("Managed Municipal Trust"). PaineWebber RMA Connecticut
Municipal Money Fund ("Connecticut Municipal Money Fund") and PaineWebber RMA
New Jersey Municipal Money Fund ("New Jersey Municipal Money Fund") are series
of PaineWebber Municipal Money Market Series ("Municipal Money Market Series").
Managed Municipal Trust and Municipal Money Market Series are Massachusetts
business trusts (each a "Trust"). The Tax-Free Fund, California Municipal Money
Fund, Connecticut Municipal Money Fund, New Jersey Municipal Money Fund and New
York Municipal Money Fund may be referred to collectively as the "Municipal
Funds." The investment adviser, administrator and distributor of each Fund is
PaineWebber Incorporated ("PaineWebber"); the sub-adviser and sub-administrator
of each Fund is Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a
wholly owned subsidiary of PaineWebber. This Statement of Additional Information
is not a prospectus and should be read only in conjunction with the Funds'
current Prospectus, dated August 29, 1996. A copy of the Prospectus may be
obtained by contacting any PaineWebber Investment Executive or correspondent
firm or by calling 1-800-762-1000. This Statement of Additional Information is
dated August 29, 1996.

1
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS

The following supplements the information contained in the Prospectus
concerning the Funds' investment policies and limitations.

YIELDS AND RATINGS OF MONEY MARKET INVESTMENTS. The yields on the money
market instruments in which the Funds invest (such as commercial paper, bank
obligations and municipal securities) are dependent on a variety of factors,
including general money market conditions, conditions in the particular market
for the obligation, the financial condition of the issuer, the size of the
offering, the maturity of the obligation and the ratings of the issue. The
ratings of nationally recognized statistical rating organizations ("NRSROs")
represent their opinions as to the quality of the obligations they undertake to
rate. Ratings, however, are general and are not absolute standards of quality.
Consequently, obligations with the same rating, maturity and interest rate may
have different market prices. Subsequent to its purchase by a Fund, an issue may
cease to be rated or its rating may be reduced. In the event that a security in
a Fund's portfolio ceases to be a "First Tier Security," as defined in the
Prospectus, or Mitchell Hutchins becomes aware that a security has received a
rating below the second highest rating by any NRSRO, Mitchell Hutchins, or the
applicable Corporation's board of directors or the applicable Trust's board of
trustees (each a "board") will consider whether the Fund should continue to hold
the obligation. A First Tier Security rated in the highest short-term rating
category by a single NRSRO at the time of purchase that subsequently receives a
rating below the highest rating category from a different NRSRO will continue to
be considered a First Tier Security.

Opinions relating to the validity of municipal securities and to the
exemption of interest thereon from federal income tax, California personal
income tax, Connecticut personal income tax, New Jersey personal income tax, and
New York State and New York City personal income taxes (and also, when
available, from the federal alternative minimum tax) are rendered by bond
counsel to the respective issuing authorities at the time of issuance. Neither
the Municipal Funds nor Mitchell Hutchins will review the proceedings relating
to the issuance of municipal securities or the basis for such opinions. An
issuer's obligations under its municipal securities are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors (such as the federal bankruptcy laws) and federal, state
and local laws that may be enacted that adversely affect the tax-exempt status
of interest on the municipal securities held by a Fund or of the exempt-interest
dividends received by a Fund's shareholders, extend the time for payment of
principal or interest, or both, or impose other constraints upon enforcement of
such obligations. There is also the possibility that, as a result of litigation
or other conditions, the power or ability of issuers to meet their obligations
for the payment of principal of and interest on their municipal securities may
be materially and adversely affected.

REPURCHASE AGREEMENTS. As stated in the Prospectus, Money Market and U.S.
Government Portfolios may each enter into repurchase agreements with respect to
any security in which that Fund is authorized to invest, except that securities
subject to repurchase agreements may have maturities in excess of 13 months.
Securities subject to repurchase agreements may have maturities in excess of 13
months. Municipal Fund may enter into repurchase agreements with U.S. banks and
dealers with

2
<PAGE>

respect to any obligation issued or guaranteed by the U.S. government, its
agencies or instrumentalities and also with respect to commercial paper, bank
certificates of deposit and bankers' acceptances. However, the Municipal Funds
do not intend to do so except as a temporary measure and under unusual
circumstances, because repurchase agreements are transactions that generate
taxable income. Each Fund maintains custody of the underlying securities prior
to their repurchase; thus, the obligation of the bank or securities dealer to
pay the repurchase price on the date agreed to is, in effect, secured by such
securities. If the value of these securities is less than the repurchase price,
plus any agreed-upon additional amount, the other party to the agreement must
provide additional collateral so that at all times the collateral is at least
equal to the repurchase price plus any agreed-upon additional amount. The
difference between the total amount to be received upon repurchase of the
securities and the price that was paid by the Fund upon acquisition is accrued
as interest and included in the Fund's net investment income.

Repurchase agreements carry certain risks not associated with direct
investments in securities. Each Fund intends to enter into repurchase agreements
only with banks and dealers in transactions believed by Mitchell Hutchins to
present minimal credit risks in accordance with guidelines established by the
applicable board. Mitchell Hutchins will review and monitor the creditworthiness
of those institutions under the board's general supervision.

REVERSE REPURCHASE AGREEMENTS. Money Market and U.S. Government Portfolios
may each enter into reverse repurchase agreements with banks and securities
dealers up to an aggregate value of not more than 5% of its net assets. Such
agreements involve the sale of securities held by a Fund subject to its
agreement to repurchase the securities at an agreed-upon date and price
reflecting a market rate of interest. Such agreements are considered to be
borrowings and may be entered into only for temporary or emergency purposes.
While a reverse repurchase agreement is outstanding, the Fund's custodian
segregates assets to cover the Fund's obligations under the reverse repurchase
agreement. See "Investment Policies and Restrictions--Segregated Accounts."

ILLIQUID SECURITIES. No Fund may invest more than 10% of its net assets in
illiquid securities. The term "illiquid securities" for this purpose means
securities that cannot be disposed of within seven days in the ordinary course
of business at approximately the amount at which the Fund has valued the
securities and includes, among other things, repurchase agreements maturing in
more than seven days, restricted securities and municipal lease obligations
(including certificates of participation) other than those Mitchell Hutchins has
determined to be liquid pursuant to guidelines established by the applicable
board.

Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933 ("1933 Act"), including private
placements, repurchase agreements, commercial paper, foreign securities and
corporate bonds and notes. These instruments are often restricted securities
because the securities are sold in transactions not requiring registration.
Institutional investors generally will not seek to sell these instruments to the
general public, but instead will often depend either on an efficient
institutional market in which such unregistered securities can be readily resold
or on an issuer's ability to honor a demand for repayment. Therefore, the fact
that there are contractual or legal restrictions on resale to the general public
or certain institutions is not dispositive of the liquidity of such investments.

3
<PAGE>

Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for restricted securities
have developed as a result of Rule 144A, providing both readily ascertainable
values for restricted securities and the ability to liquidate an investment in
order to satisfy share redemption orders. Such markets include automated systems
for the trading, clearance and settlement of unregistered securities, such as
the PORTAL System sponsored by the National Association of Securities Dealers,
Inc. An insufficient number of qualified institutional buyers interested in
purchasing certain restricted securities held by Money Market Portfolio,
however, could affect adversely the marketability of such portfolio securities,
and the Fund might be unable to dispose of such securities promptly or at
favorable prices.

The boards have delegated the function of making day-to-day determinations
of liquidity to Mitchell Hutchins, pursuant to guidelines approved by each
board. Mitchell Hutchins takes into account a number of factors in reaching
liquidity decisions, including (1) the frequency of trades for the security, (2)
the number of dealers that make quotes for the security, (3) the number of
dealers that have undertaken to make a market in the security, (4) the number of
other potential purchasers and (5) the nature of the security and how trading is
effected (e.g., the time needed to sell the security, how offers are solicited
and the mechanics of transfer). Mitchell Hutchins monitors the liquidity of
restricted securities held by the Funds and reports periodically on such
decisions to the applicable board.

In making liquidity determinations with respect to municipal lease
obligations, Mitchell Hutchins takes into account a number of additional factors
relating specifically to the credit quality of the obligations, including, where
appropriate, (1) whether the underlying lease can be cancelled, (2) what
assurance there is that the assets underlying the lease can be sold, (3) the
strength of the lessee's general credit (e.g., its administrative, economic and
financial characteristics), (4) the likelihood that the municipality will
discontinue appropriating funding for the property because the property is no
longer deemed essential to the operations of the municipality (e.g., the
potential for an "event of nonappropriation") and (5) the legal recourse in the
event of a failure to appropriate. In making liquidity determinations, Mitchell
Hutchins will distinguish between direct investments in municipal lease
obligations (or participations therein) and investments in securities that may
be supported by municipal lease obligations or certificates of participation
therein. Because these municipal lease obligation-backed securities are based on
a well-established means of securitization, Mitchell Hutchins does not believe
that investing in such securities presents the same liquidity issues as direct
investments in municipal lease obligations.

OBLIGATIONS OF FOREIGN BANKS AND FOREIGN BRANCHES OF U.S. BANKS. Money
Market Portfolio may invest in U.S. dollar-denominated obligations of domestic
branches of foreign banks and foreign branches of domestic banks. Such
investments may involve risks that are different from investments in obligations
of domestic branches of domestic banks. These risks may include unfavorable
political and economic developments, withholding taxes, seizure of foreign
deposits, currency controls, interest limitations or other governmental
restrictions that might affect the payment of principal or interest on the
securities held by the Fund. Additionally, there may be less publicly available
information about

4
<PAGE>
foreign banks and their branches, as these institutions may not be subject to
the same regulatory requirements as domestic banks.

FLOATING RATE AND VARIABLE RATE DEMAND INSTRUMENTS. As noted in the
Prospectus, each Fund may invest in floating rate and variable rate securities
with demand features. A demand feature gives a Fund the right to sell the
securities back to a specified party, usually a remarketing agent, on a
specified date, at a price equal to their amortized cost value plus accrued
interest. A demand feature is often backed by a letter of credit, guarantee or
other liquidity support arrangement from a bank or other financial institution
that may be drawn upon demand, after specified notice, for all or any part of
the exercise price of the demand feature. Generally, a Fund intends to exercise
demand features (1) upon a default under the terms of the underlying security,
(2) to maintain the Fund's portfolio in accordance with its investment objective
and policies or applicable legal or regulatory requirements, or (3) as needed to
provide liquidity to the Fund in order to meet redemption requests. The ability
of a bank or other financial institution to fulfill its obligations under a
letter of credit, guarantee or other liquidity arrangement might be affected by
possible financial difficulties of its borrowers, adverse interest rate or
economic conditions, regulatory limitations or other factors. The interest rate
on floating rate or variable rate securities ordinarily is readjusted on the
basis of the prime rate of the bank that originated the financing or some other
index or published rate, such as the 90-day U.S. Treasury bill rate, or is
otherwise reset to reflect market rates of interest. Generally, these interest
rate adjustments cause the market value of floating rate and variable rate
securities to fluctuate less than the market value of fixed rate obligations.

LENDING OF PORTFOLIO SECURITIES. As indicated in the Prospectus, each Fund
is authorized to lend up to 33 1/3% of its portfolio securities to
broker-dealers or institutional investors that Mitchell Hutchins deems
qualified, but only when the borrower maintains acceptable collateral with the
Fund's custodian, marked to market daily, in an amount at least equal to the
market value of the securities loaned, plus accrued interest and dividends.
Acceptable collateral is limited to cash, U.S. government securities and
irrevocable letters of credit that meet certain guidelines established by
Mitchell Hutchins. In determining whether to lend securities to a particular
broker-dealer or institutional investor, Mitchell Hutchins will consider, and
during the period of the loan will monitor, all relevant facts and
circumstances, including the creditworthiness of the borrower. Each Fund will
retain authority to terminate any loan at any time. A Fund may pay reasonable
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash or money market
instruments held as collateral to the borrower or placing broker. A Fund will
receive reasonable interest on the loan or a flat fee from the borrower and
amounts equivalent to any dividends, interest or other distributions on the
securities loaned. A Fund will regain record ownership of loaned securities to
exercise beneficial rights, such as voting and subscription rights and rights to
dividends, interest or other distributions, when regaining such rights is
considered to be in the Fund's interest.

CERTAIN POLICIES OF THE MUNICIPAL FUNDS

MUNICIPAL SECURITIES. The types of municipal securities identified in the
Prospectus may include obligations of issuers whose revenues are primarily
derived from mortgage loans on housing projects for moderate to-low-income
families. The Municipal Funds also may purchase mortgage subsidy

5
<PAGE>

bonds with a remaining maturity of less than 13 months that are issued to
subsidize mortgages on single family homes and "moral obligation" bonds with a
remaining maturity of less than 13 months that are normally issued by special
purpose public authorities. In some cases the repayment of such bonds depends
upon annual legislative appropriations; in other cases repayment is a legal
obligation of the issuer, and if the issuer is unable to meet its obligations,
repayment becomes a moral commitment of a related government unit (subject,
however, to such appropriations).

PUT BONDS. The Municipal Funds may each invest in put bonds that have a
fixed rate of interest and a final maturity beyond the date on which the put may
be exercised. If the put is a "one time only" put, the Fund ordinarily will
either sell the bond or put the bond, depending upon the more favorable price.
If the bond has a series of puts after the first put, the bond will be held as
long as, in the judgment of Mitchell Hutchins, it is in the best interest of the
Fund to do so. There is no assurance that an issuer of a put bond acquired by
the Fund will be able to repurchase the bond on the exercise date, if the Fund
chooses to exercise its right to put the bond back to the issuer.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. As stated in the Prospectus,
the Municipal Funds may purchase municipal securities on a "when-issued" or
"delayed delivery" basis. A security purchased on a when-issued or delayed
delivery basis is recorded as an asset on the commitment date and is subject to
changes in market value, generally based upon changes in the level of interest
rates. Thus, fluctuation in the value of the security from the time of the
commitment date will affect the Fund's net asset value. When a Fund commits to
purchase securities on a when-issued or delayed delivery basis, its custodian
segregates assets to cover the amount of the commitment. See "Investment
Policies and Restrictions--Segregated Accounts."

STAND-BY COMMITMENTS. As stated in the Prospectus, a Municipal Fund may
acquire stand-by commitments under unusual market conditions to facilitate
portfolio liquidity. Pursuant to a stand-by commitment, a municipal bond dealer
agrees to purchase the securities that are the subject of the commitment at an
amount equal to (1) the acquisition cost (excluding any accrued interest paid on
acquisition), less any amortized market premium and plus any accrued market or
original issue discount, plus (2) all interest accrued on the securities since
the last interest payment date or the date the securities were purchased,
whichever is later.

A Fund will enter into stand-by commitments only with those banks or other
dealers that, in the opinion of Mitchell Hutchins, present minimal credit risk.
A Fund's right to exercise stand-by commitments will be unconditional and
unqualified. Stand-by commitments will not be transferable by a Fund, although
the Fund may sell the underlying securities to a third party at any time. A Fund
may pay for stand-by commitments either separately in cash or by paying a higher
price for the securities that are acquired subject to such a commitment (thus
reducing the yield to maturity otherwise available for the same securities). The
acquisition of a stand-by commitment will not ordinarily affect the valuation or
maturity of the underlying municipal securities. Stand-by commitments acquired
by a Fund will be valued at zero in determining net asset value. Whether a Fund
paid directly or indirectly for a stand-by commitment, its cost will be treated
as unrealized depreciation and will be amortized over the period the commitment
is held by the Fund.

6
<PAGE>

PARTICIPATION INTERESTS. The Municipal Funds may invest in participation
interests in municipal bonds, including industrial development bonds ("IDBs"),
private activity bonds ("PABs") and floating and variable rate securities. A
participation interest gives a Fund an undivided interest in a municipal bond
owned by a bank. A Fund has the right to sell the instrument back to the bank.
As discussed above under "Floating Rate and Variable Rate Demand Instruments,"
to the extent that payment of an obligation is backed by a letter of credit,
guarantee or liquidity support arrangement from a bank or other financial
institution, such payment may be subject to the financial institution's ability
to satisfy that commitment. Mitchell Hutchins will monitor the pricing, quality
and liquidity of the participation interests held by each Municipal Fund, and
the credit standing of financial institutions issuing letters of credit,
guarantees or liquidity support arrangements supporting such participation
interests on the basis of published financial information, reports of rating
services and bank analytical services. Under normal market conditions, neither
Connecticut Municipal Money Fund nor New Jersey Municipal Money Fund will invest
more than 25% of its total assets in participation interests or other securities
issued by or purchased from banks.

SEGREGATED ACCOUNTS. When a Fund enters into certain transactions that
involve obligations to make future payments to third parties, including the
purchase of securities on a when-issued or delayed delivery basis or reverse
repurchase agreements, the Fund will maintain with an approved custodian in a
segregated account cash or liquid securities, marked to market daily, in an
amount at least equal to the Fund's obligation or commitment under such
transactions.

SPECIAL CONSIDERATIONS RELATING TO CALIFORNIA MUNICIPAL SECURITIES

The financial conditions of the State of California, its public authorities
and local governments could affect the market values and marketability of, and
therefore the net asset value per share and the interest income of, California
Municipal Money Fund, or result in the default of existing obligations,
including obligations which may be held by the Fund. The following section
provides only a brief summary of the complex factors affecting the financial
condition of California, and is based on information obtained from the State of
California, as publicly available on the date of this Statement of Additional
Information. The information contained in such publicly available documents has
not been independently verified. It should be noted that the creditworthiness of
obligations issued by local issuers may be unrelated to the creditworthiness of
California, and that there is no obligation on the part of California to make
payment on such local obligations in the event of default in the absence of a
specific guarantee or pledge provided by the State of California.

The State of California has experienced significant financial difficulties
because of the 1990-93 recession, which reduced its credit standing. However,
since the start of 1994, California's economy has rebounded strongly, with
corresponding improvements in tax revenues. The ratings of certain related debt
of other issuers for which California has an outstanding lease purchase,
guarantee or other contractual obligation (such as for State-insured hospital
bonds) are generally linked directly to California's rating. Should the
financial condition of California deteriorate again, the marketability of all
outstanding notes and bonds issued by California, its public authorities or
local governments could be adversely affected.

ECONOMIC FACTORS. California's economy is the largest among the 50 states
and one of the largest in the world. The State's population of over 32 million
represents over 12% of the total United States

7
<PAGE>

population. While the State's substantial population growth during the 1980s
stimulated local economic growth and diversification, it also increased demands
on State services. Total personal income in the State, at an estimated $748
billion in 1995, accounts for almost 13% of all personal income in the nation.

From mid-1990 to late 1993, the State suffered a recession with the worst
economic, fiscal and budget conditions since the 1930s. Construction,
manufacturing (especially aerospace), and financial services, among others, were
all severely affected, particularly in Southern California. Job losses were the
worst of any post-war recession. Employment levels stabilized by late 1993 and
steady growth has occurred since the start of 1994. Pre-recession job levels are
expected to be reached in 1996. Unemployment, while remaining higher than the
national average, came down about 3% from its peak of over 10% in 1994. Economic
indicators show a steady recovery underway in California since the start of
1994. However, any delay or reversal of the recovery will exacerbate shortfalls
in State revenue.

STATE DEBT. Under the California Constitution, debt service on outstanding
general obligation bonds is the second charge to the General Fund after support
of the public school system and public institutions of higher education. Total
outstanding general obligation bonds and lease purchase debt of the State
increased from $9.4 billion at June 30, 1988 to $24.1 billion at June 30, 1996.
State agencies and authorities had approximately $20.9 billion of revenue bonds
and notes outstanding at June 30, 1996, for which the State General Fund has no
liability.

The ratings on California's long-term general obligation bonds were reduced
in the early 1990's from AAA levels which had existed prior to the recession. In
1996, Fitch Investors Service, L.P. ("Fitch") and Standard & Poor's, a division
of The McGraw-Hill Companies, Inc. ("Standard & Poor's") raised their ratings of
California's general obligation bonds, which, as of August 1996, were assigned
ratings of A+ from Standard & Poor's, A1 from Moody's Investors Service, Inc.
("Moody's") and A+ from Fitch.

STATE FINANCES. Throughout the 1980's, State spending increased rapidly as
the State population and economy also grew rapidly, including increased spending
for many assistance programs to local governments, which were constrained by
Article XIIIA of the California Constitution (commonly known as "Proposition
13") and other laws. The largest State program is assistance to local public
school districts. In 1988, an initiative (commonly known as "Proposition 98")
was enacted which (subject to suspension by a two-thirds vote of the Legislature
and the Governor) guarantees local school districts and community college
districts a minimum share of State General Fund revenues (currently about 35%).

Since the start of fiscal year ("FY") 1990-91 until FY1995-96, the State
faced adverse economic fiscal and budget conditions. The economic recession
seriously affected State tax revenues. It also caused increased expenditures for
health and welfare programs. The State is also facing a structural imbalance in
its budget with the largest programs supported by the General Fund (education,
health, welfare and corrections) growing at rates significantly higher than the
growth rates for the principal revenue sources of the General Fund. These
structural concerns will continue in future years with the expected need to
increase capital and operating costs of the correctional system in response to a
"Three Strikes" law enacted in 1994 which mandates life imprisonment for certain
felony offenders.

8
<PAGE>

Recent Budgets. As a result of these factors, among others, from the late
1980's until 1992-93, the State had a period of budget imbalance, with
expenditures exceeding revenues in four out of six years, and the State
accumulated and sustained a budget deficit in the budget reserve, the Special
Fund for Economic Uncertainties ("SFEU"), approaching $2.8 billion at its peak
at June 30, 1993. Starting in FY1990-91 and for each year thereafter, each
budget required multibillion dollar actions to bring projected revenues and
expenditures into balance and to close large "budget gaps" which were
identified. The Legislature and Governor eventually agreed on a number of
different steps to produce Budget Acts in the years 1991-92 to 1995-96,
including:

. significant cuts in health and welfare program expenditures;

. transfers of program responsibilities and funding from the State to local
governments, coupled with some reduction in mandates on local government;

. transfer of about $3.6 billion in annual local property tax revenues from
cities, counties, redevelopment agencies and some other districts to local
school districts, thereby reducing State funding for schools;

. reduction in growth of support for higher education programs, coupled with
increases in student fees;

. revenue increases (particularly in the budget for FY1991-92) most of which
were for a short duration;

. increased reliance on aid from the federal government to offset the costs
of incarcerating, educating and providing health and welfare services to
undocumented aliens (although these efforts have produced much less federal aid
than the State Administration has requested); and

. various one-time adjustments and accounting changes.

Despite these budget actions, the effects of the recession led to large,
unanticipated deficits in the SFEU, as compared to projected positive balances.
By the start of FY1993-94, the accumulated deficit was so large (almost $2.8
billion) that it was impractical to budget to retire it in one year, so a two-
year program was implemented, using the issuance of revenue anticipation
warrants to carry a portion of the deficit over the end of the fiscal year. When
the economy failed to recover sufficiently in 1993-94, a second two-year plan
was implemented in 1994-95, to carry the final retirement of the deficit into
1995-96.

The combination of stringent budget actions cutting State expenditures, and
the turnaround of the economy starting in late 1993, finally led to the
restoration of positive financial results. While General Fund revenues and
expenditures were essentially equal in FY1992-93 (following two years of excess
expenditures over revenues), the General Fund had positive operating results in
FY1993-94, FY1994-95 and FY1995-96, which reduced the accumulated budget deficit
to less than $100 million as of June 30, 1996.

A consequence of the accumulated budget deficits in the early 1990's,
together with other factors such as disbursement of funds to local school
districts "borrowed" from future fiscal years and hence not shown in the annual
budget, was to significantly reduce the State's cash resources available to pay
its ongoing obligations. When the Legislature and the Governor failed to adopt a
budget for FY1992-93 by July 1, 1992, which would have allowed the State to
carry out its normal annual cash flow

9
<PAGE>
borrowing to replenish its cash reserves, the State Controller was forced to
issue registered warrants ("IOUs") to pay a variety of obligations representing
prior years or continuing appropriations, and mandates from court orders.

The State's cash condition became so serious that from late spring 1992
until 1995, the State had to rely on issuance of short term notes which matured
in a subsequent fiscal year to finance its ongoing deficit, and pay current
obligations. With the repayment of the last of these deficit notes in April
1996, the State does not plan to rely further on external borrowing across
fiscal years, but will continue its normal cash flow borrowings during a fiscal
year.

The State Department of Finance estimated that the General Fund received
revenues of about $46.1 billion in FY 1995-96, about $2 billion higher than was
originally expected, as a result of the strengthening economy. Expenditures
totaled about $45.4 billion, also about $2 billion higher than budgeted, in part
because of the constitutional requirement to disburse revenues to local school
districts, and in part because federal actions to reduce welfare costs and to
pay for costs of illegal immigrants were not forthcoming.

CURRENT BUDGET. The 1996-97 Budget Act was signed by the Governor on July
15, 1996, along with various implementing bills. The Legislature rejected the
Governor's proposed 15% cut in personal income taxes (to be phased over three
years), but did approve a 5% cut in bank and corporation taxes, to be effective
for income years starting on January 1, 1997. As a result, revenues for the
Fiscal Year are estimated to total $47.643 billion, a 3.3 percent increase over
the final estimated FY 1995-96 revenues. The Budget Act contains General Fund
appropriations totaling $47.251 billion, a 4.0 percent increase over the final
estimated FY 1995-96 expenditures.

The following are principal features of the 1996-97 Budget Act:

1. Funding for schools and community college districts increased by $1.65
billion in total above revised FY 1995-96 levels. Almost half of this money was
budgeted to fund class-size reductions in kindergarten and grades 1-3. Also, for
the second year in a row, the full cost of living allowance (3.2 percent) was
funded. The funding increases have brought K-12 expenditures to almost $4,800
per pupil, an almost 15% increase over the level prevailing during the recession
years.

2. Proposed cuts in health and welfare totaling $660 million. All of these
cuts require federal law changes (including welfare reform, which was enacted),
federal waivers, or federal budget appropriations in order to be achieved. The
Budget Act was based on continuation of previously approved assistance levels
for Aid to Families with Dependent Children and other health and welfare
programs, which had been reduced in prior years, including suspension of State
authorized cost of living increases. Part of the federal actions referred to
above is approval to maintain reduced assistance levels in FY 1996-97.

3. A 4.9% increase in funding for the University of California and the
California State University system, with no increases in student fees for the
second consecutive year.

4. The Budget Act assumed the federal government will provide approximately
$700 million in new aid for incarceration and health care costs of illegal
immigrants. These funds reduce appropriations in these categories that would
otherwise have to be paid from the General Fund.

With signing of the Budget Act, the State implemented its regular cash flow
borrowing program with the issuance of $3.0 billion of Revenue Anticipation
Notes to mature on June 30, 1997. The

10
<PAGE>

Budget Act appropriates a modest budget reserve in the SFEU of $305 million, as
of June 30, 1997. The General Fund fund balance, however, still reflects $1.6
billion of "loans" which the General Fund made to local schools in the recession
years, representing cash outlays above the mandatory minimum funding level.
Settlement of litigation over these transactions in July 1996 calls for
repayment of these loans over the period ending in 2001-02, about equally split
between outlays from the General Fund and from schools' entitlements. The
1996-97 Budget Act contained a $150 million appropriation from the General Fund
toward this settlement.

The Department of Finance projects that, on June 30, 1997, the State's
available internal borrowable (cash) resources will be $2.9 billion, after
payment of all obligations due by that date, so that no external cross-fiscal
year borrowing will be needed. The State will continue to rely on internal
borrowing and intra-year external note borrowing to meet its cash flow
requirements.

There can be no assurance that the State will not face budget gaps in future
years. Certain major budgetary considerations affecting the State are outlined
below.

REVENUE BASE. The recession seriously affected State tax revenues which
basically mirror general economic conditions. These revenues have rebounded
strongly as the economy has improved since 1994. The principal sources of
General Fund revenues are economically sensitive, and include the California
personal income tax (43% of total FY1994-95 revenues), the sales tax (34%), bank
and corporation taxes (13%), and the gross premium tax on insurance (3%).
Personal income tax receipts are generated disproportionately by relatively few
taxpayers (the top 4% of taxpayers paid 49% of the total tax in 1990), and
capital gains are a significant component of such collections. Auto sales and
building materials are significant components of retail sales tax collections.
Tax rates are relatively high, and may impose political and economic constraints
on the ability of the State to further increase its taxes. In November 1993, the
voters approved a constitutional amendment to permanently extend 0.5 percent of
the sales tax for local law enforcement and thus not available as General Fund
revenues.

BUDGETARY FLEXIBILITY. Article XIIIB of the California Constitution, adopted
by voter initiative, established an "Appropriations Limit" for the State and
local governments; excess State revenues are to be divided equally between
transfers to K-14 districts and refunds to taxpayers. A taxpayer refund has not
been required since FY1986-87. Because of liberal annual increase provisions,
the Article XIIIB spending limit has not had a practical impact on the State or
any local governments since the late 1980's.

Proposition 98 established a minimum expenditure base for State aid to K-14
districts, currently requiring allocation of over 34% of General Fund revenues
to such districts.

For many years starting in the early 1980s, the State maintained the SFEU as
a budget reserve in case of unexpected changes in revenues or expenditures
during a fiscal year. Since the start of the recession in 1990, the SFEU has
been in a negative balance, as the State accumulated sizable budget deficits.
The Department of Finance projects that the accumulated budget deficit will be
completely eliminated by June 30, 1997, at which time the SFEU is budgeted to
have a positive balance of about $300 million.

LABOR COSTS. The State government workforce is mostly unionized, subject to
the law which authorizes collective bargaining and prohibits strikes and work
slowdowns. All of the State's collective bargaining agreements expired on June
30, 1995 and most are still being renegotiated. The State has a

11
<PAGE>
substantial unfunded liability for future pension benefits, and has utilized
changes in its pension fund policies to reduce current contribution
requirements. If the investment assumptions used in determining required State
contributions are not sustained by actual results, additional State
contributions would be required in future years.

PUBLIC ASSISTANCE. California has the largest number of persons receiving
public assistance (Aid to Families with Dependent Children ("AFDC") and General
Relief) of any state. AFDC costs are shared among the federal government, the
State and its counties by statutory formula. Caseloads tend to rise
significantly during economic downturns, but are also significantly affected by
changing demographic and social trends which may impede the reduction of
caseloads during an economic recovery. The recent federal welfare reform bill
will result in a significant decline in federal aid in upcoming years. Costs to
counties may increase if large numbers of persons no longer eligible for AFDC
and similar programs apply for General Assistance. It is too soon to tell how
welfare reform ultimately will affect the State's finances or those of its local
governments.

MEDI-CAL. California participates in the federal Medicaid program under a
state plan approved by the Health Care Financing Administration. The federal
government provides certain of the eligible program costs, with the remainder
shared by the State and its counties. Basic program eligibility and benefits are
determined by federal guidelines, but the State currently provides a number of
optional benefits and expanded eligibility. Program costs have increased
substantially in recent years, and account for a large share of the State
budget. Federal law requires the State adopt reimbursement rates for hospitals
and nursing homes that are reasonable and adequate to meet the costs that must
be incurred by efficiently and economically operated facilities in providing
patient care.

LITIGATION. The State is involved in certain legal proceedings (described in
the State's recent financial statements) that, if decided against the State, may
require the State to make significant future expenditures or may substantially
impair revenues.

STATE ASSISTANCE TO LOCALITIES. Property tax revenues received by local
governments declined more than 50% following voter approval of Proposition 13 in
1978. Subsequently, the California Legislature enacted measures to provide for
the redistribution of the State's then-existing General Fund surplus to local
agencies to make up some of the loss of property tax moneys, including taking
over the principal responsibility for funding local K-12 schools and community
colleges. Under the pressure of the recent recession, the Legislature has
eliminated the remnants of this post-Proposition 13 aid and has transferred over
$3.5 billion of annual local property tax receipts from cities and counties to
school districts, although the State has also provided additional funding
sources to cities and counties (such as sales taxes) and reduced mandates for
local services. Nonetheless, many counties, in particular, continue to be under
severe fiscal stress. While such stress has in recent years most often been
experienced by smaller, rural counties, larger urban counties have also been
affected.

Los Angeles County, the largest in the State, has reported severe fiscal
problems. To balance its FY 1995-96 budget, the county has imposed severe cuts
in services, particularly for health care. Both Moody's and S&P have reduced Los
Angeles County's debt ratings in August 1995 (to "A" and "A-"), respectively.
Orange County, which recently emerged from federal bankruptcy, has substantially
reduced services and personnel in order to live within much reduced means.

12
<PAGE>

LOCAL GOVERNMENTS. The fiscal condition of local governments in California
(58 counties, 480 cities and thousands of education, utility and other special
districts) has been constrained since the enactment of "Proposition 13" in 1978,
which reduced and limited the future growth of property taxes, and limited the
ability of local governments to impose other taxes. Counties, in particular,
have had fewer options to raise revenues than many other local government
entities, and have been required to maintain many basic public services. A 1986
initiative statute, called "Proposition 62," imposed additional limits on local
governments, essentially requiring either majority or 2/3 voter approval for any
tax increase (other than property taxes). Later court decisions had struck down
most of Proposition 62, and many local governments, particularly cities, had
enacted or raised local taxes without voter approval. In September 1995, the
California Supreme Court overruled the prior cases, and upheld the
constitutionality of Proposition 62. Many aspects of this decision remain
unclear (such as its impact on charter cities, and whether it will have
retroactive effect), but its future effect will be to further limit the fiscal
flexibility of many local governments.

CONSTITUTIONAL, LEGISLATIVE AND OTHER FACTORS. Certain California
constitutional amendments, legislative measures, executive orders,
administrative regulations and voter initiatives are introduced and/or
implemented from time to time which may result in adverse fiscal or economic
effects.

As referred to above, Article XIIIA of the Constitution ("Proposition 13")
limits local property tax rates and reassessment practices; Proposition 13 and
Proposition 62 require local voter approval for imposition of new taxes. A new
initiative Constitutional Amendment called the "Right to Vote on Local Taxes
Act" has been placed on the November 1996 ballot. If enacted, it would place new
vote requirements on certain local taxes, and purports to permit local voter
initiatives to reduce previously imposed taxes, fees, charges and assessments.
It is not yet clear how such powers would be interpreted by the courts if they
interfered with rights of existing debt-holders. Another part of this initiative
would impose new limitations on special assessments and other property-related
fees and charges.

SPECIAL CONSIDERATIONS RELATING TO CONNECTICUT MUNICIPAL SECURITIES

The financial conditions of the State of Connecticut, its public authorities
and local governments could affect the market values and marketability of, and
therefore the net asset value per share and the interest income of, Connecticut
Municipal Money Fund, or result in the default of existing obligations,
including obligations which may be held by the Fund. The following section
provides only a brief summary of the complex factors affecting the financial
condition of Connecticut, and is based on information obtained from the State of
Connecticut, as publicly available on the date of this Statement of Additional
Information. The information contained in such publicly available documents has
not been independently verified. It should be noted that the creditworthiness of
obligations issued by local issuers may be unrelated to the creditworthiness of
Connecticut, and that there is no obligation on the part of Connecticut to make
payment on such local obligations in the event of default in the absence of a
specific guarantee or pledge provided by the State of Connecticut.

ECONOMIC FACTORS. Connecticut's economy is diverse, with manufacturing,
services and trade accounting for approximately 70% of total non-agricultural
employment. The State's manufacturing industry is diversified, but from 1970 to
1994 manufacturing employment declined to 18.5%, while non-manufacturing-related
employment increased to 81.5%. The non-manufacturing sector is comprised of
service industries. The four major industries in terms of employment are:
wholesale and

13
<PAGE>

retail trade; finance, insurance and real estate; professional business and
personal services; and government, which collectively comprise about 90% of
employment in the non-manufacturing sector.

Connecticut has a high level of personal income. According to Bureau of
Economic Analysis figures, personal income of State residents for calendar year
1995 was $99.2 billion, a 4.3% increase over the previous year. As of January
1996, the rate of unemployment in the State was 5.3%. According to projections
made by the U.S. Department of Commerce through the year 2005, Connecticut is
expected to continue to rank first in the nation in state per capita income
throughout the projected period.

NOTE DEBT. While the State's General Fund ended fiscal years 1985 through
1987 with operating surpluses, the State recorded operating deficits of $115.6
million, $28 million, $259.5 million and $808.5 million for fiscal 1988, 1989,
1990 and 1991, respectively. Together with the deficit carried forward from
fiscal 1989-90, the total deficit for the fiscal year 1990-91 was $965.7
million. The total deficit amount was funded by the issuance of General
Obligation Economic Recovery Notes. The Comptroller's annual report for the
fiscal year ended June 30, 1992 reflected a General Fund operating surplus of
$110.2 million, which surplus was used to retire $110.1 million of the State's
Economic Recovery Notes. The Comptroller's annual reports for fiscal years ended
June 30, 1993, 1994 and 1995 reflected General Fund operating surpluses of
$113.5 million, $19.7 million and $80.5 million, respectively. The Comptroller's
August 1, 1996 letter projects a General Fund surplus of $224.7 million for
fiscal year ended June 30, 1996, which primarily results from higher than
anticipated reserve collections, principally from the personal income tax. These
improved revenue results are offset somewhat by Medicaid expenditures which are
anticipated to be higher than appropriations and the costs of negotiated
settlements and additional expenditures resulting from several major lawsuits.
Up to $89.5 million of the anticipated surplus has been appropriated to the
Economic Recovery Fund to meet the fiscal 1996-97 debt service payments on the
Economic Recovery Notes. Any excess surplus is currently designated to be
deposited into the Budget Reserve Fund pursuant to the provisions of State law.
There can be no assurance that subsequent events or projections will not
indicate changes in the anticipated 1995-96 General Fund result as indicated in
the Comptroller's August 1, 1996 letter.

Since 1988, the Comptroller's annual report has reported results on the
basis of both the modified cash basis required by State law and the modified
accrual basis used for GAAP financial reporting. The Comptroller's monthly
report for the period ended September 30, 1995 stated that on a GAAP basis the
cumulative deficit was $576.9 million for fiscal 1995. The modified cash basis
of accounting used for statutory financial reporting and the modified accrual
basis used for GAAP financial reporting are different and, as a result, often
produce varying financial results, primarily because of differences in the
recognition of revenues and expenditures.

STATE FINANCES. By law, the State budgetary process is on a biennium basis.
The Governor is required to transmit a budget document in February of each
odd-numbered year containing, among other things, a separate budget for each of
the two fiscal years. In each even-numbered year, the Governor is required to
prepare a report on the status of the budget enacted in the previous year with
recommendations, if any, for adjustments and revisions to such budget, and a
report, with revisions, if any, which sets forth estimated revenues and
expenditures for the three fiscal years after the biennium in progress. As
originally adopted on June 1, 1995, the budget for fiscal year 1995-96
anticipated

14
<PAGE>

General Fund revenues of $8.8370 billion and projected General Fund expenditures
of $8.8368 billion, resulting in a projected surplus of $0.2 million. As
discussed above, the Comptroller's August 1, 1996 letter indicates a projected
General Fund surplus of $224.7 million for fiscal year ended June 30, 1996,
primarily due to higher than anticipated revenue collections of $252.5 million
above the original budget projections for such fiscal year. The adopted budget
for fiscal year 1996-97 originally anticipated General Fund revenues of $9.1580
billion and General Fund expenditures of $9.1578 billion resulting in a
projected surplus of $0.2 million. On February 7, 1996, the Governor submitted a
status report and proposed midterm budget adjustments for the 1996-97 fiscal
year budget, which was considered and revised by the legislature and adopted
into law on May 31, 1996 (the "Midterm Budget Adjustments"). The Midterm Budget
Adjustments anticipate General Fund revenues of $9.0497 billion and General Fund
expenditures of $9.0944 billion, resulting in a projected surplus of $0.3
million for fiscal year 1996-97. The Midterm Budget Adjustments reflect General
Fund expenditures of $108.4 million below the originally adopted fiscal year
1996-97 budget.

The budget for the 1996-97 fiscal year, both as adopted and modified by the
Midterm Budget Adjustments, reflects implementation of significant tax changes
aimed at increasing overall disposable income and encouraging economic expansion
in the State. A phase down in the personal income tax rate was enacted. To
improve the business climate in the State and stimulate long-term job growth,
legislation was also enacted which will reduce Connecticut's corporate tax rate
from its current rate of 11.25% to 7.5% by January 1, 2000. The budget for the
1996-97 fiscal year also reflects significant reductions in expenditures from
current service levels including restructuring social service programs, reducing
benefits in the AFDC and General Assistance Programs, consolidating of State
mental health hospitals, merging of the State's mental health and substance
abuse services and reducing Medicaid payments. There can be no assurance that
the State's economy will experience the results predicted in the Midterm Budget
Adjustments, nor that its projections of receipts and disbursements will prove
to be accurate. Recent changes at the federal level and uncertainties stemming
from such changes could reduce or eliminate federal funding of some local
programs and accordingly might impose substantial increased expenditure
requirements on affected localities and on the State itself.

As part of the adopted budget for fiscal year 1995-96, approximately $241
million of the original $965.7 million in Economic Recovery Notes issued to fund
the cumulative deficit of fiscal 1990-91 will be retired in fiscal years 1996-97
through 1998-99, rather than in fiscal 1995-96. As discussed above, the entire
fiscal 1996-97 Economic Recovery Note payment will be met by the appropriation
of up to $89.5 million of the fiscal year 1995-96 surplus. Of the original
$965.7 million issued, $725 million will be retired on schedule, and it is
expected that the Economic Recovery Notes will be paid in full by the expiration
of the current Governor's term.

The State finances its operations primarily through the General Fund. All
tax and most non-tax revenues of the State, except for motor fuels taxes and
other transportation-related taxes, fees and revenues, are paid into, and
substantially all expenditures pursuant to legislative appropriations are made
out of, the General Fund. The State expects to derive approximately 75% of its
General Fund revenues from taxes during each of the 1995-96 and 1996-97 fiscal
years. Miscellaneous fees, receipts, transfers and Federal grants account for
most of the other State revenue. The sales and use taxes, the corporation
business tax and the recently enacted broad based personal income tax are the
major revenue raising taxes.

15
<PAGE>
On November 3, 1992, Connecticut voters approved a constitutional amendment
which requires a balanced budget for each year and imposes a cap on the growth
of expenditures. The General Assembly is required by the constitutional
amendment to adopt by three-fifths vote certain spending cap definitions. The
statutory spending cap limits the growth of expenditures to either (1) the
rolling five-year average annual growth in personal income or (2) the increase
in the consumer price index for urban consumers during the preceding 12-month
period, whichever is greater. Expenditures for the payment of bonds, notes and
other evidences of indebtedness are excluded from the constitutional and
statutory definitions of general budget expenditures.

The State has no constitutional limit on its power to issue obligations or
incur indebtedness other than that it may only borrow for public purposes. There
are no reported court decisions relating to State bonded indebtedness other than
two cases validating the legislative determination of the public purpose for
improving employment opportunities and related activities. The State
Constitution has never contained provisions requiring submission of the
questions of incurring indebtedness to a public referendum. Therefore, the
authorization and issuance of State debt, including the purpose, amount and
nature thereof, the method and manner of the incurrence of such debt, the
maturity and terms of repayment thereof, and other related matters are
statutory.

The State has established a program of temporary note issuance to cover
periodic cash flow requirements. The maximum volume of cash flow borrowing is
determined based upon the State's actual cash needs on a daily basis. In
September 1995, the State established a commercial paper program which replaces
all previous programs. Under this program, the State may issue and have
outstanding at any time up to $400 million of general obligation temporary notes
during a two-year period concluding in September 1997.

The General Assembly has empowered, pursuant to bond acts in effect, the
State Bond Commission to authorize general obligation bonds in the amount of
$9.069 billion. As of August 9, 1996, the State Bond Commission had authorized
$8.5295 billion in such bonds and the balance of $1.5136 billion was available
for authorization.

LOCAL GOVERNMENT. General obligation bonds issued by Connecticut
municipalities are payable primarily from ad valorem taxes on property subject
to taxation by the municipality. Certain Connecticut municipalities have
experienced severe fiscal difficulties and have reported operating and
accumulated deficits in recent years. The most notable of these was the City of
Bridgeport.

NEW JERSEY MUNICIPAL SECURITIES

The financial condition of the State of New Jersey, its public authorities
(the "Authorities") and its local governments, could affect the market values
and marketability of, and therefore the net asset value per share and the
interest income of New Jersey Municipal Money Fund, or result in the default of
existing obligations, including obligations which may be held by the Fund. The
following section provides only a brief summary of the complex factors affecting
the financial situation in New Jersey and is based on information obtained from
New Jersey, certain of its Authorities and certain other localities, as publicly
available on the date of this Statement of Additional Information. The
information contained in such publicly available documents has not been
independently verified. It should be noted that the creditworthiness of
obligations issued by local issuers may be unrelated to the creditworthiness of
New Jersey, and that there is no obligation on the part of New Jersey to make

16
<PAGE>

payment on such local obligations in the event of default in the absence of a
specific guarantee or pledge provided by New Jersey.

ECONOMIC FACTORS. New Jersey's economic base is diversified, consisting of a
variety of manufacturing, construction and service industries, supplemented by
rural areas with selective commercial agriculture. New Jersey's principal
manufacturing industries produce chemicals, pharmaceuticals, electrical
equipment and instruments, machinery, food products, and printing. Other
economic activities include services, wholesale and retail trade, insurance,
tourism, petroleum refining and truck farming. In 1976, voters approved casino
gambling for Atlantic City, which has become an important State tourist
attraction.

While New Jersey's economy continued to expand during the late 1980s, the
level of growth has slowed considerably after 1987. By the beginning of the
national recession in July 1990 (according to the National Bureau of Economic
Research), construction activity had already been declining in New Jersey for
nearly two years, growth had tapered off markedly in the service sectors and the
long-term downward trend of factory employment had accelerated, partly because
of a leveling off of industrial demand nationally. The onset of recession caused
an acceleration of New Jersey's job losses in construction and manufacturing, as
well as an employment downturn in such previously growing sectors as wholesale
trade, retail trade, finance, utilities and trucking and warehousing. The net
effect was a decline in the State's total nonfarm wage and salary employment
from a peak of 3,689,800 in 1989 to a low of 3,445,000 in 1992. This loss has
been followed by an employment gain of 176,400 from May 1992 to October 1995, a
recovery of 67% of the jobs lost during the recession. In July 1991, S&P lowered
the State's general obligation bond rating from AAA to AA+.

Reflecting the downturn, the rate of unemployment in the State rose from a
low of 3.6% during the first quarter of 1989 to a recessionary peak of 8.4%
during 1992. Since then, the unemployment rate fell to 6.4% during the first ten
months of 1995. Despite an increase reported in December 1995, the annualized
unemployment rate remained 6.4% for the fourth quarter of 1995.

STATE FINANCES. The State is projecting an approximate $890 million budget
surplus for the 1996 Fiscal Year, which is expected to provide New Jersey with a
cushion to cover unexpected spending or revenue shortfalls which may have
occurred during the fiscal year. The State budget for fiscal year 1997, which
was adopted on June 28, 1996 (the "Fiscal Year 1997 Budget"), closely resembles
the budget proposed by the Governor in the Governor's Fiscal Year 1997 Budget
Message. The $15.97 billion Fiscal Year 1997 Budget lowers state taxes for the
third consecutive year, reduces government programs in almost every State agency
and anticipates a $550 million surplus. The Fiscal Year 1997 Budget has been
subjected to criticism questioning, among other things, the extent of the
reductions in governmental programs, continued tax cuts and reliance on
temporary reallocations of excess funds in special purpose accounts. There can
be no assurance that the State's economic activity will experience the results
predicted in the Fiscal Year 1997 Budget nor that its projections of receipts
and disbursements will prove to be accurate. Recent changes at the federal level
and uncertainties stemming from such changes could reduce or eliminate federal
funding of some local programs and accordingly might impose substantial
increased expenditure requirements on affected localities and on the State
itself.

The General Fund is the fund into which all State revenues not otherwise
restricted by statute are deposited and from which appropriations are made. The
largest part of the total financial operations of

17
<PAGE>

the State is accounted for in the General Fund. Revenues received from taxes and
unrestricted by statute, most federal revenue and certain miscellaneous items
are recorded in the General Fund. Sales and use taxes and corporation business
taxes are the two largest components of the General Fund.

The revised estimate as shown in the Governor's Fiscal Year 1997 Budget
Message forecasts sales and use tax collections for Fiscal Year 1996 as $4.310
billion, a 4.3% increase from Fiscal Year 1995 revenue. The Fiscal Year 1997
estimate of $4.403 billion is a 2.2% increase from the Fiscal Year 1996
estimate.

The revised estimate as shown in the Governor's Fiscal Year 1997 Budget
Message forecasts corporation business tax collection for fiscal year 1996 as
$1.198 million, a 10.4% increase from Fiscal Year 1995 revenue. Included in the
corporation business tax forecast is a reduction in the corporation business tax
rate from 9.375% to 9.0% of net New Jersey income. The Fiscal Year 1997 forecast
as shown in the Governor's Fiscal Year 1997 Budget Message of $1.210 billion
represents a 1.0% increase from the Fiscal Year 1996 estimate.

The revised estimate as shown in the Governor's Fiscal Year 1997 Budget
Message forecasts other miscellaneous taxes, fees and revenues collections for
Fiscal Year 1996 as $1.514 billion, a decrease from Fiscal Year 1995 revenue.

Special revenue funds are used to account for resources legally restricted
to expenditure for specified purposes: these include the Casino Control Fund,
the Casino Revenue Fund, the Gubernatorial Elections Fund and the Property Tax
Relief Fund (collectively the "Special Revenue Funds"). The Property Tax Relief
Fund, the largest of the Special Revenue Funds, is used to account for revenues
from the gross income tax collection. All receipts of the income tax must be
appropriated exclusively for the purpose of reducing or offsetting property
taxes.

The revised estimate as shown in the Governor's Fiscal Year 1997 Budget
Message forecasts gross income tax collections for Fiscal Year as $4.547
billion, a 0.2% increase from Fiscal Year 1995 revenue. Included in the Fiscal
Year 1995 revenue is a 5% reduction of personal income tax rates effective
January 1, 1994 and a further 10% reduction of personal income tax rates
effective January 1, 1995 (on joint income under $80,000). The estimate for
Fiscal Year 1997 as shown in the Governor's Fiscal Year 1997 Budget Message of
$4.610 billion is a 1.4% increase from the Fiscal Year 1996 estimate. Included
in the Fiscal Year 1996 forecast is the 10% reduction of personal income tax
rates mentioned in the preceding sentence and a further 15% reduction of
personal income tax rates effective January 1, 1996 (on joint income under
$80,000).

The Fiscal Year 1996 revised estimates include an estimate for a tax amnesty
program which has been enacted. It is esimated that a 90-day amnesty will yield
$70 million.

Should revenues be less than the amount anticipated in the budget for a
fiscal year, the Governor may, pursuant to statutory authority, prevent any
expenditure under any appropriation. There are additional means by which the
Governor may ensure that the State is operated efficiently and does not incur a
deficit. No supplemental appropriation may be enacted after adoption of an
appropriations act except where there are sufficient revenues on hand or
anticipated, as certified by the Governor, to meet such appropriation. In the
past when actual revenues have been less than the amount anticipated in the
budget, the Governor has exercised her plenary powers leading to, among other
actions, implementation of a hiring freeze for all State departments and the
discontinuation of programs for which appropriations were budgeted but not yet
spent.

18
<PAGE>

The State appropriated approximately $15.439 billion and $16.109 billion for
fiscal 1995 and 1996, respectively. Of the $16.109 billion appropriated in
Fiscal Year 1996 from the General Fund and the Special Revenue Funds, $6.447
billion (40.0%) is appropriated for State aid to local governments, $3.746
billion (23.3%) is appropriated for grants-in-aid (payments to individuals or
public or private agencies for benefits to which a receipient is entitled by law
or for the provison of services on behalf of the State), $5.253 billion (32.5%)
for Direct State Services, $466.3 million (2.9%) for debt service on State
general obligation bonds and $217.1 million (1.3%) for capital construction.

Should tax revenues be less than the amount anticipated in the Budget for a
fiscal year, the Governor may, pursuant to statutory authority, prevent any
expenditure under any appropriation. The appropriations for Fiscal Year 1996 and
for Fiscal Year 1997 reflect the amounts contained in the Governor's Fiscal Year
1997 Budget Message.

The State has made appropriations for principal and interest payments for
general obligation bonds for fiscal years 1993 through 1996 in the amounts of
$444.3 million, $119.9 million, $103.6 million and $466.3 million, respectively.
The Governor's Fiscal Year 1997 Budget Message for Fiscal Year 1997 includes an
appropriation in the amount of $463.1 million for principal and interest
payments for general obligation bonds. Currently the State has $3.6 billion in
outstanding debt.

SPECIAL CONSIDERATIONS RELATING TO NEW YORK MUNICIPAL SECURITIES

The financial condition of the State of New York ("New York State" or the
"State"), its public authorities and public benefit corporations (the
"Authorities") and its local governments, particularly The City of New York (the
"City"), could affect the market values and marketability of, and therefore the
net asset value per share and the interest income of New York Municipal Money
Fund, or result in the default of existing obligations, including obligations
which may be held by the Fund. The following section provides only a brief
summary of the complex factors affecting the financial situation in New York and
is based on information obtained from New York State, certain of its
Authorities, the City and certain other localities, as publicly available on the
date of this Statement of Additional Information. The information contained in
such publicly available documents has not been independently verified. It should
be noted that the creditworthiness of obligations issued by local issuers may be
unrelated to the creditworthiness of New York State, and that there is no
obligation on the part of New York State to make payment on such local
obligations in the event of default in the absence of a specific guarantee or
pledge provided by New York State.

New York State and the City are each experiencing serious financial
difficulties and have each experienced recent declines in their credit
standings. S&P and Moody's have each assigned ratings for New York State's
general obligation bonds that are among the three lowest of those states with
rated general obligation bonds. The ratings of certain related debt of other
issuers for which New York State has an outstanding moral obligation, lease
purchase, guarantee or other contractual obligation are generally linked
directly to the State's rating. S&P and Moody's have each assigned ratings for
the City's obligations that are among the four lowest of those cities with rated
general obligation bonds. Should the financial condition of New York State, its
Authorities or its local governments deteriorate, their respective credit
ratings could be further reduced, and the market value and marketability of

19
<PAGE>
their outstanding notes and bonds could be adversely affected, and their
respective access to the public credit markets jeopardized.

ECONOMIC FACTORS. New York State is the third most populous state, and has a
relatively high level of personal wealth; however, the State economy has grown
more slowly than that of the nation as a whole, resulting in the gradual erosion
of its relative economic affluence (due to such factors such as relative costs
for taxes, labor and energy). The State's economy is diverse, with a
comparatively large share of the nation's finance, insurance, transportation,
communications and services employment, and a very small share of the nation's
farming and mining activity. Travel and tourism constitute an important part of
the State's economy. New York has a declining proportion of its workforce
engaged in manufacturing and an increasing proportion engaged in service
industries. The State, therefore, is likely to be less affected than the nation
as a whole during an economic recession concentrated in construction and
manufacturing sectors of the economy, but likely to be more affected during a
recession concentrated in the service-producing sector. The State's
manufacturing and maritime base have been seriously eroded, as illustrated by
the decline of the steel industry in the Buffalo area and of the apparel and
textile industries in the City. In addition, the City experienced substantial
socio-economic changes, as a large segment of its population and a significant
share of corporate headquarters and other businesses relocated (many
out-of-state).

Both the State and the City experienced substantial revenue increases in the
mid-1980s attributable directly (corporate income and financial corporations
taxes) and indirectly (personal income and a variety of other taxes) to growth
in new jobs, rising profits and capital appreciation derived from the finance
sector of the City's economy. From 1977 to its 1988 peak, the finance, insurance
and real estate sectors rose 55%, to account in 1988 for 23% of total earnings
in the City and 14% statewide (compared to 7% nationwide). The finance sector's
growth was a catalyst for the New York metropolitan region's related business
and professional services, retail trade and residential and commercial real
estate markets. The then-rising real estate market contributed to City revenues,
as higher property values and new construction added to collections from
property taxes, mortgage recording and transfer taxes and sales taxes on
building materials. The boom on Wall Street more than compensated for the
continued erosion of the State's (and the City's) manufacturing and maritime
base, since average wages in the finance, insurance and real estate sector and
related business and professional services were substantially higher (thereby
providing a net increase of higher incomes, taxed at even higher marginal
rates).

During the calendar years 1984 through 1991, the State's rate of economic
expansion was somewhat slower than that of the nation as a whole. In the
1990-1991 national recession, the economy of the Northeast region in general and
the State in particular was more heavily damaged than that of the rest of the
nation and has been slower to recover. Although the national economy began to
expand in 1991, the State economy remained in recession until 1993, when
employment growth resumed. Employment growth has been hindered during recent
years by significant cutbacks in the computer and instrument manufacturing,
utility and defense industries. Personal income increased substantially in 1992
and 1993. The State's economy entered into the third year of a slow recovery in
1995. Most of the growth occurred in the trade, construction and service
industries, with business, social services recreation and health sectors
accounting for most of the service industry growth. According to assumptions
contained in the State financial plan for FY1996-97 issued on July 25, 1996 (the
"1996-

20
<PAGE>

97 State Financial Plan"), employment is currently projected to continue to grow
modestly during 1996 and 1997, and although the rate of increase is expected to
be slightly above the rate experienced in 1995, it is expected to be below the
rate experienced in 1994, due to cutbacks in governmental spending and
employment at all levels, as well as continued corporate downsizing.

Notwithstanding the State budget for FY1996-97 which enacts significant tax
and program reductions, the State can expect to confront structural deficits in
future years. The 1996-97 State Financial Plan includes actions that will have
an effect on the budget outlook for FY1996-97 and beyond. In part, the 1996-97
State financial plan reflects actions which provide nonrecurring measures
(sometimes referred to as "one-shots") estimated to provide $1.3 billion of
savings in FY1996-97. Additionally, the three-year plan to reduce State personal
income taxes, as discussed below briefly, will decrease State tax receipts by an
estimated $1.8 billion in FY1996-97. Similarly, other actions taken to reduce
disbursements in the State's FY1995-96, such as reductions in the State
workforce and Medicaid and welfare expenditures, are expected to provide greater
reductions in future fiscal years. The net impact of these and other factors is
expected to produce a potential imbalance in receipts and disbursements for
State's FY1996-97 and future fiscal years. Additionally, uncertainties with
regard to both the economy and potential decisions to be made at the federal
level add further pressure on the balanced budget outlook for FY1996-97 and
fiscal years beyond. For example, various proposals relating to federal tax and
spending policies may have a significant impact on the State's financial
condition in FY1996-97 and subsequent fiscal years.

Further, there can be no assurance that the State's economy will not
experience worse-than-predicted results in FY1996-97 with corresponding material
and adverse effects on the State's projections of receipts and disbursements.
The 1996-97 State Financial Plan is based upon forecasts of national and State
economic activity. As all State financial plans are based upon forecasts of
national and State economic activity, it should be noted that many uncertainties
exist in such forecasts, including federal financial and monetary policies, the
availability of credit and the condition of the world economy. In addition, the
economic and financial condition of the State may be affected by various
financial, social, economic and political factors. These factors can be complex,
may vary from year to year and are frequently the results of actions taken not
only by the State and its agencies and instrumentalities, but also by other
entities, such as the federal government, that are not under the control of the
State.

The fiscal health of the State may also be impacted by the fiscal health of
the City. Although the City has had a balanced budget since 1981, estimates of
the City's future revenues and expenditures are subject to various
uncertainties. For example, the effects of the October 1987 stock market crash
and the 1990-92 national recession have had a disproportionately adverse impact
on the New York City metropolitan region, as private sector job losses since
1989 have offset all the prior employment gains of the 1980s. Declines in both
employment and earnings in the finance sector contributed to declines in retail
sales and real estate values. In addition, a number of widely publicized
bankruptcies among highly leveraged retailing and brokerage companies occurred.
The effects of the recession have extended to banking, insurance, business
services (such as law, accounting and advertising), publishing and
communications. Factors which may inhibit the City's economic recovery include
(i) credit restraints imposed by the weak financial condition of several major
money center banks located in the City; (ii) increases in combined State and
local tax burdens, if uncompetitive tax rates are imposed;

21
<PAGE>

(iii) perceived declines in the quality of life attributable to service
reductions and the deterioration of the City's infrastructure; (iv) additional
employment losses in the City's banking sector or corporate headquarters complex
due to further corporate relocations or restructurings; or (v) increased
expenditures for public assistance and health care. The City's future economic
condition will also likely be affected by its competitive position as a world
financial center (compared to London, Tokyo, Frankfurt and competing regional
U.S. centers). Investors should note that the budget for the City for FY1996-97
contains provisions to address a projected $2.6 billion budget gap. Most of the
budget-gap closing initiatives may be implemented only with the cooperation of
the City's municipal unions, or the State or federal governments. No assurance
can be given that such initiatives will be successfully undertaken.

While the State's economy is broader-based than that of the City, particular
industries are concentrated in and have a disproportionate impact on certain
areas, such as heavy industry in Buffalo, photographic and optical equipment in
Rochester, machinery and transportation equipment in Syracuse and Utica-Rome,
computers in Binghamton and in the Mid-Hudson Valley and electrical equipment in
the Albany-Troy-Schenectedy area. Constraints on economic growth, taxpayer
resistance to proposed substantial increases in local tax rates, and reductions
in State aid in regions apart from the City have contributed to financial
difficulties for several county and other local governments.

THE STATE. As noted above, the financial condition of the State is affected
by several factors, including the strength of the State and its regional
economies, actions of the federal government, and State actions affecting the
level of receipts and disbursements. Owing to these and other factors, the State
may, in future years, face substantial potential budget gaps resulting from a
significant disparity between tax revenues projected from a lower recurring
receipts base and the future costs of maintaining State programs at current
levels.

The State has been experiencing and continues to experience substantial
financial difficulties with General Fund (the principal operating account)
deficits incurred during FY1989-90 through FY1991-92. The State's accumulated
General Fund deficit (on a GAAP basis) grew 91% from FY1986-87 to FY1990-91, and
reached a then-record $6.265 billion (audited) by March 31, 1991. An accumulated
General Fund deficit at March 31, 1992 was restated (on a GAAP basis) to be
$4.616 billion and at March 31, 1993 was restated to be $2.551 billion. The
State ended its FY1993-94 with a negative General Fund balance of $1.637
billion. This represented an improvement over prior fiscal years, primarily due
to an improving national and State economy resulting in higher-than-expected
receipts from personal income tax and various business taxes and the relative
success of the New York Local Government Assistance Corporation ("LGAC"). The
General Fund showed an operating surplus of $914 million (on a GAAP basis). The
State's FY1994-95 budget was adopted on June 8, 1994, more than two months after
the beginning of the State's fiscal year. The State ended its FY1994-95
reporting a General Fund operating deficit of $1.426 billion, primarily due to
change in accounting methodologies used by the State Comptroller and the use of
$1.026 billion of the FY1993-94 cash surplus to fund operating expenses in
FY1994-95. These factors were offset by net proceeds of $315 million of bonds
issued by LGAC. Actual receipts reported fell short of original projections,
primarily in the category of business taxes. These shortfalls were offset by
better than expected

22
<PAGE>

performance in the remaining taxes, principally the user taxes and fees. Total
expenditures for FY1994-95 increased $2.083 billion, or 6.7% over the prior
fiscal year.

On June 7, 1995, the New York State legislature passed the final legislation
regarding the State's FY1995-96 budget, again adopting such budget more than two
months after the beginning of the State's fiscal year. Both the enacted budget
bills and the State financial plan for FY1995-96 included reductions in the
actual level of spending from that which occurred in FY1994-95 and projected
reductions in Medicaid and State Authority operating costs. The FY1995-96 budget
also projected an approximate increase of 3% in all governmental funds over the
amounts received in FY1994-95 and included the phase-in of a three-year
reduction in the State's personal income tax. The State ended its 1995-96 fiscal
year with a General Fund surplus, showing a balance of $287 million which was an
increase of $129 million from the prior fiscal year. Revenues exceeded
projections by $270 million and spending for social service and all other
programs was $175 million lower than forecast. General Fund receipts reflected a
decrease of 1.1% from levels of the prior fiscal year.

The State's budget for FY1996-97 was enacted by the Legislature on July 13,
1996, more than three months after the start of such fiscal year. The State's
FY1996-97 budget projects a cash balance in the General Fund and includes
increased General Fund spending by approximately $843 million over the proposed
budget as revised in March 1996, primarily due to increases for education
programs, community projects and increased assistance to fiscally distressed
cities. The State's FY1996-97 budget anticipates closing an approximate $3.9
billion budget gap, primarily by relying on certain resources which include,
among other things, increased revenues of approximately $650 million based on
higher than projected tax collections and receipts from a new State tax amnesty
program as well as certain non-recurring resources, projected to be
approximately $1.3 billion.

There can be no assurance that the State will not face budget gaps in future
years, resulting from a disparity between tax revenues projected from a lower
recurring-receipts base and the spending required to maintain State programs at
current levels. Furthermore, the State is a party to numerous lawsuits in which
an adverse decision could require extraordinary expenditures. The State's budget
for FY1996-97 may be materially adversely impacted by future changes to federal
entitlement programs either not foreseen or inaccurately forecast at the time
such budget was enacted. Recent changes at the federal level and uncertainties
stemming from such changes continue to represent significant risk to the
efficacy of the State's FY1996-97 budget, since federal expenditure reductions
could reduce, or in some cases eliminate, federal funding of some local programs
and accordingly might impose substantial increased expenditure requirements on
affected localities. Certain major budgetary considerations affecting the State
are outlined below.

REVENUE BASE. The State's principal revenue sources are economically
sensitive, and include the personal income tax (52% of FY1995-96 General Fund
tax receipts and approximately 53% of estimated FY1996-97 General Fund tax
receipts), user taxes and fees (20% of both FY1995-96 and estimated FY1996-97
General Fund tax receipts) and business taxes (15% and 14%, respectively, of
FY1995-96 and estimated FY1996-97 General Fund tax receipts). Uncertainties in
taxpayer behavior as a result of actual and proposed changes in federal tax law
also may have an adverse impact on State tax receipts. One-fourth of the 4%
State sales tax has been dedicated to pay debt service of LGAC, and has
correspondingly reduced General Fund receipts. To the extent those moneys are
not necessary for

23
<PAGE>

payment to LGAC, they are transferred from the LGAC Tax Fund to the General Fund
and reported as a transfer from other funds rather than as sales and use tax
receipts. During fiscal years 1991-92, 1992-93, 1993-94 and 1994-95, moneys were
so transferred. Capital gains are a significant component of income tax
collections. Auto sales and building materials are significant components of
retail sales tax collections. Tax rates are relatively high and may impose
political and economic constraints on the ability of the State to further
increase its taxes. In 1995, the State enacted a tax-reduction program designed
to reduce, by 20 percent over three years, receipts from the personal income
tax. The tax had remained unchanged since 1989 as a result of annual deferrals
of tax reductions originally enacted in 1987. The tax-reduction program is
estimated to reduce receipts by $2.3 billion in FY1996-97 and produce further
significant reductions in FY1997-98. In addition to such reductions in overall
tax rates, the tax-reduction program also includes other modifications to the
tax laws which will have the effect of lowering the amount of tax revenues to be
received by the State. In the absence of countervailing economic growth or
expenditure cuts, the tax cuts could make the achievement of a balanced State
budget more difficult in future years. A significant risk to the 1996-97 State
Financial Plan arises from proposed tax legislation in the U.S. Congress.
Changes to the federal tax treatment of capital gains, if made, are likely to
flow automatically to the State personal income tax. Such changes, depending
upon their precise character and timing, as well as taxpayer response, could
produce revenue loss during FY1996-97.

STATE DEBT. New York has the heaviest debt burden of any state (with nearly
$5.05 billion of general obligation, $5.28 billion of LGAC debt and $20.34
billion of lease-purchase or other contractual debt outstanding as of March 31,
1996), and debt service costs absorb a large share of the State's budget. As of
March 31, 1996, the State is also obligated with respect to $6.46 billion for
statutory moral obligations for eight of its Authorities and for guarantees of
$315 million of other Authority debt. Historically, the State has had one of the
largest seasonal financing requirements of any municipal issuer, and was
required each spring to borrow substantial sums from public credit markets to
finance its accumulated General Fund deficit and its scheduled payments of aid
to local governments and school districts. In an effort to reduce such seasonal
financing needs, the State created LGAC as a financing vehicle to finance the
State's local assistance payments by issuing long-term debt, payable over 30
years from a portion of the State sales tax, as discussed above. As of June
1995, LGAC had issued bonds and notes to provide net proceeds of $4.7 billion,
thus completing the LGAC program. The impact of LGAC's borrowing is that the
State was able to meet its cash flow needs in the first quarter of FY1995-96
without relying on short-term seasonal borrowings. Spring borrowing has not been
included in a State Financial Plan since the 1994-95 State Financial Plan. The
1994-95 fiscal year was the first year in 35 years that there was no short-term
borrowing. Investors should note that the enabling legislation for LGAC contains
a covenant restricting the amount of any future State spring borrowing, which
may reduce the State's fiscal flexibility in future years.

BUDGETARY FLEXIBILITY. A significant portion of the State's General Fund
budget is accounted for by contractually required expenses (such as pension and
debt service costs) and by federally mandated programs (such as AFDC and
Medicaid). In addition, State aid for school districts comprises a major share
of the budget, and total appropriations and distribution of such aid is
especially contentious politically. Furthermore, the State's ability to respond
to unanticipated developments in the future may have been impaired since the
State has utilized a substantial range of actions of a non-recurring

24
<PAGE>

nature in recent years to finance its General Fund operations, including tapping
excess monies in special funds, refinancing outstanding debt to reduce reserve
fund requirements and current (but not long-term) debt service costs,
recalculating pension fund contributions, selling state assets, reimbursing past
General Fund expenditures by the issuance of Authority debt and deferring
payment for expenditures to future fiscal years. The 1996-97 State Financial
Plan contains actions of a non-recurring nature including the use of certain
surplus funds available from the Medical Malpractice Insurance Association
("MMIA") (approximately $481 million), savings from refinancings of certain
pension and bond obligations (approximately $222 million) and non-recurring
resources carried forward from the State's prior fiscal year and various other
actions (approximately $314 million). It has been reported that certain health
care providers are considering a challenge to the State's rights to the MMIA
surplus revenues, totalling approximately $1.3 billion.

LABOR COSTS. The State government workforce is mostly unionized, subject to
the Taylor Law which authorizes collective bargaining and prohibits (but has
not, historically, prevented) strikes and work slowdowns. Costs for employee
health benefits have increased substantially, and can be expected to further
increase. The State has a substantial unfunded liability for future pension
benefits, and has utilized changes in its pension fund investment return
assumptions to reduce current contribution requirements. If such investment
earnings assumptions are not sustained by actual results, additional State
contributions will be required in future years to meet the State's contractual
obligations. The State's change in actuarial method from the aggregate cost
method to a modified projected unit credit in FY1990-91 created a substantial
surplus that was amortized and applied to offset the State's contribution
through FY1993-94. This change in actuarial method was ruled unconstitutional by
the State's highest court and the State returned to the aggregate cost method in
FY1994-95 using a four-year phase-in. Employer contributions, including the
State's, are expected to increase over the next five to ten years.

PUBLIC ASSISTANCE. New York has the second largest number of persons
receiving public assistance (AFDC and Home Relief) of any state. Currently, AFDC
costs are shared among the federal government, the State and its counties
(including the City) by statutory formula. Caseloads tend to rise significantly
during economic downturns, but have fallen only in the later stages of past
economic recoveries. The budget adopted for FY1996-97 includes reduction in
disbursements for public assistance.

MEDICAID. New York participates in the federal Medicaid program under a
state plan approved by the Health Care Financing Administration. Currently, the
federal government provides a substantial portion of eligible program costs,
with the remainder shared by the State and its counties (including the City).
Basic program eligibility and benefits are determined by federal guidelines, but
the State provides a number of optional benefits and expanded eligibility.
Program costs have increased substantially in recent years, and account for a
rising share of the State budget. Federal law requires the State to adopt
reimbursement rates for hospitals and nursing homes that are reasonable and
adequate to meet the costs that must be incurred by efficiently and economically
operated facilities in providing patient care, a standard that has led to past
litigation by hospitals and nursing homes seeking higher reimbursement from the
State. The budget adopted for FY1996-97 includes continued planned reductions in
spending for Medicaid. Cutbacks in State spending for Medicaid may

25
<PAGE>
adversely affect the financial condition of hospitals and health care
institutions that are the obligors of bonds that may be held by the Fund.

THE STATE AUTHORITIES. The State's Authorities are not subject to the
constitutional restrictions on the incurrence of debt which apply to the State
itself, and may issue bonds and notes within the amounts of, and as otherwise
restricted by, their legislative authorization. The New York State Public
Authorities Control Board approves the issuance of debt and major contracts by
10 of the Authorities. As of September 30, 1995 (the date of the latest data
available), there were 17 Authorities that had outstanding debt of $100 million
or more, the aggregate debt of which (including refunding bonds and moral
obligation, lease-purchase, contractual obligation or State-guaranteed debt)
then totaled approximately $73.45 billion. As of March 31, 1996, aggregate
public authority debt outstanding as State-supported debt was $30.67 billion and
total State-related debt was $38.26 billion. In recent years, the State has
provided financial assistance through appropriations, in some cases of a
recurring nature, to certain Authorities for operating and other expenses and,
(from 1976 to 1987) in fulfillment of its commitments on moral obligation
indebtedness or otherwise, for debt service. The State has budgeted operating
assistance of approximately $1.09 billion for the Metropolitan Transportation
Authority ("MTA") during FY1996-97. This assistance is expected to continue to
be required (and may increase) in future years. Failure by the State to
appropriate necessary amounts or to take other action to permit the Authorities
to meet their obligations could adversely affect the ability of the State and
the Authorities to obtain financing in the public credit markets and the market
price of the State's outstanding bonds and notes.

The MTA oversees the operation of the City's subway and bus lines by its
affiliates, the New York City Transit Authority and the Manhattan and Bronx
Surface Transit Operating Authority (collectively, the "TA"). MTA subsidiaries
operate certain commuter rail and bus lines in the New York metropolitan area.
An affiliated agency, the Triborough Bridge and Tunnel Authority ("TBTA"),
operates certain intrastate toll bridges and tunnels. To maintain its facilities
and equipment, which deteriorated significantly in the late 1970s due to
deferred maintenance, the MTA prepares a five year capital program subject to
approval by the MTA Capital Program Review Board. State legislation accompanying
the State's budget for FY1996-97 authorized the MTA, TBTA and TA to issue an
aggregate of $6.5 billion in bonds to finance a portion of a new $11.98 billion
MTA capital plan for the 1995 through 1999 calendar years (the "1995-1999
Capital Program"). This 1995-1999 Capital Program assumes the issuance of an
estimated $5.1 billion in bonds under this $6.5 billion aggregate bonding
authority. If the 1995-1999 Capital Program is delayed or reduced, ridership and
fare revenues may decline, which could impair the MTA's ability to meet its
operating expenses without additional State assistance. In addition, because
fares are not sufficient to finance its mass transit operations, the MTA has
depended and will continue to depend for operating support upon a system of
State, local government and TBTA support, and, to the extent available, federal
assistance (including loans, grants and operating subsidies). If current revenue
projections are not realized and/or operating expenses exceed current
projections, the TA or commuter railroads may seek additional State assistance,
raise fares or take other actions. No assurance can be given that any such
assistance will continue at any particular level or in any fixed relationship to
the operating costs and capital needs of the MTA.

26
<PAGE>

THE CITY. The City has required, and continues to require, significant
financial assistance from the State. The City depends on the State to enable the
City to balance its budget and meet its cash requirements. In the early 1970s,
the City incurred substantial operating deficits, and its financial controls,
accounting practices and disclosure policies were widely criticized. In 1975,
the City encountered severe financial difficulties and lost access to the public
credit markets. The State Legislature responded in 1975 by creating the
Municipal Assistance Corporation For The City of New York ("MAC") to provide
financing assistance for the City and the Financial Control Board to exercise
certain oversight and review functions with respect to the City's finances. The
Financial Control Board's powers over the City were suspended in June 1986, but
would be reinstated (under current law) if the City experiences certain adverse
financial circumstances. At the time of the fiscal crisis the State provided
substantial financial assistance to the City, the federal government provided
the City with direct seasonal loans and guarantees on the City's long-term debt
and the City's labor unions accepted deferrals of wage increases and approved
purchases of City bonds by the pension funds. No assurance can be given that
similar assistance would again be made available if needed, particularly given
the current budgetary constraints faced by both the federal and State
governments.

The City provides services usually undertaken by counties, school districts
or special districts in other large urban areas, including the provision of
social services such as day care, foster care, health care, family planning,
services for the elderly and special employment services for needy individuals
and families who qualify for such assistance. State law requires the City to
allocate a large portion of its total budget to Board of Education operations,
and mandates the City to assume the local share of public assistance and
Medicaid costs. For each of the 1981 through 1995 fiscal years, the City
achieved balanced operating results as reported in accordance with applicable
generally accepted accounting principles ("GAAP"). While the City had GAAP
operating surpluses during the 1980's, the City has experienced growing
financial difficulties, primarily related to the impact of the 1989-1992
recession on the local economy (reducing revenues from most major taxes and
increasing public assistance and Medicaid caseloads), rising health care costs
for City employees and for Medicaid and rising inflation and interest rates. To
address substantial budget gaps occurring as a result of these difficulties, the
City has implemented gap-closing programs, which relied primarily on actions of
a non-recurring nature, but also included substantial property tax rate
increases and a personal income tax surcharge imposed and significant service
reductions. Aid to nonprofit cultural institutions in the City was significantly
reduced (as was State aid to such institutions), including certain institutions
that are obligors of bonds that may be held by the Fund. For FY1995, the City
adopted a budget which halted the trend in recent years of substantial increases
in City-funded spending from one year to the next and the City's budget for
FY1996 reduced City-funded spending for the second consecutive year. The City
budget adopted for FY1997 (sometimes referred to herein as the "1997 City
Budget") continues the trend of reduced City-funded spending for the third
consecutive year.

Pursuant to State law, the City prepares a four-year annual financial plan,
which is reviewed and revised on a quarterly basis and includes the City's
capital, revenue and expense projections and outlines proposed budget
gap-closing programs for those years with projected budget gaps. The mayor is
responsible for preparing the City's four-year financial plan, including the
City's current financial plan for the 1997 through 2000 fiscal years (the
"1997-2000 Financial Plan"). The 1997-2000 Financial Plan projects substantial
budget gaps (approximately $1.7 billion, $2.7 billion and $3.4

27
<PAGE>

billion) for each of the 1998 through 2000 fiscal years, respectively, and
assumes additional programs to reduce expenditures and to increase revenues
sufficient to close such projected gaps. The City's projections set forth in the
1997-2000 Financial Plan are based on various assumptions and contingencies
which are uncertain and which may not materialize. Changes in major assumptions
could significantly affect the City's ability to balance its budget and to meet
its annual cash flow and financing requirements. Such assumptions and
contingencies include the timing and pace of a regional and local economic
recovery, increases in employment growth, the ability to implement proposed
reductions in City personnel and other cost reduction initiatives which may
require in certain cases the cooperation of the City's municipal unions, the
ability to complete revenue generating transactions, provision of State and
federal aid and mandate relief, and the impact on City revenues of proposals for
federal and State welfare reform. No assurance can be given that the assumptions
used by the City in the 1997-2000 Financial Plan will be realized. Further,
cost-containment assumptions contained in both the 1997-2000 Financial Plan and
the 1997 City Budget may be significantly adversely affected by the changes
which may result from the adoption of the State's FY1996-97 budget as well as
from recent changes occurring at the federal level with respect to various
social spending programs. Additionally, actions taken in recent fiscal years to
avert deficits may have reduced the City's flexibility in responding to future
budgetary imbalances, and have deferred certain expenditures to later fiscal
years.

The City's original budget for FY1996 reflected proposed actions to close a
substantial projected budget gap (approximately $3.1 billion) resulting from
lower than projected tax receipts and other revenues and greater than projected
expenditures. Such proposed actions included a reduction of approximately $400
million primarily affecting public assistance and Medicaid payments by the City,
expenditure reductions in agencies totalling approximately $1.2 billion and
transitional labor savings of approximately $600 million. The 1997 City Budget
identifies a $2.6 billion budget gap which it attempts to close by implementing
a variety of actions, including an approximate $1.2 billion reduction in City
spending for a variety of services and programs, a renewal of the 12.5% personal
income tax surcharge, and the use of non-recurring measures estimated to provide
approximately $1.4 billion in one-time savings. The City's budget for FY1997 has
been the subject of substantial criticism questioning, among other things, the
capacity of the City to generate future revenues sufficient to meet expected
expenditure increases and to provide necessary municipal services. Such
criticism has also noted the City's reliance on non-recurring resources to close
budget gaps and has charged that the City has made no progress in achieving
structural balance.

The City's budget for FY1997, like all City budgets, is subject to the
ability of the City to implement the reductions in expenditures, personal
services and personnel, which are substantial and may be difficult to implement.
For example, one of the key items contained in the City's Budget for FY1996 was
the sale of the City's water system for approximately $2.3 billion. This plan
has been hotly contested since it was announced, has been the focus of several
lawsuits and has been ruled illegal both by the lower court and the appeals
court. It is unclear whether a final appeal will be sought. Further, the 1997
City Budget and the 1997-2000 Financial Plan reflect the costs of tentative
settlements with a coalition of municipal unions which together represent
approximately 2/3 of its workforce. There can be no assurance that such proposed
settlement will be ratified. In addition, certain proposals may be offset by
various State and federal legislation which could mandate levels of

28
<PAGE>

City funding inconsistent with either the City's budget for FY1997 or the
1997-2000 Financial Plan. In addition, the 1997-2000 Financial Plan anticipates
the receipt of substantial amounts of federal aid. Certain proposed State and
federal actions are subject to legislative, the governor's and the president's
approvals as applicable. Both federal and State actions are uncertain; certain
legislative proposals and recently enacted legislation contemplate significant
reductions in federal spending, including federal welfare reform which could
result in caps on, or block grants of, federal programs. Further, no assurance
can be given that either such actions will in fact be taken or that the
projected savings will result even if such actions are taken.

The City derives its revenues from a variety of local taxes, user charges,
miscellaneous revenues and federal and State unrestricted and categorical
grants. The City projects that local revenues will provide approximately 68.2%
of total revenues in FY1997 while federal aid, including categorical grants,
will provide 11.5% in FY1997 and State aid, including unrestricted aid and
categorical grants, will provide 20.3% in FY1997. As a proportion of total
revenues, State aid has remained relatively constant over the period from 1980
to 1990, while federal aid was sharply reduced (having provided nearly 20% of
total fiscal year 1980 revenues). The largest source of the City's revenues is
the real estate tax (approximately 22% of total revenues projected for FY1997),
at rates levied by the City council (subject to certain State constitutional
limits). The City derives the remainder of its tax revenues from a variety of
other economically sensitive local taxes (subject to authorization by the
legislature), including: the 4% local sales and compensating use tax (primarily
dedicated to MAC debt service) imposed in addition to the State's retail sales
tax; the personal income tax on City residents and the earnings tax on
non-residents; a general corporation tax; and a financial corporation tax. High
tax burdens in the City impose political and economic constraints on the ability
of the City to increase local tax rates. The City's four-year financial plans
have been the subject of extensive public comment and criticism, principally
questioning the reasonableness of assumptions that the City will have the
capacity to generate sufficient revenues in the future to provide the level of
services contained in such City financial plans. On July 10, 1995, S&P lowered
the City's credit rating from A- to BBB+, among the lowest ratings of any major
city in the country. The rating agency cited specifically the City budget's
reliance on "one-shot" measures to balance the budget for FY1996 without
rectifying the underlying structural problems, its continued optimistic
projections of State and federal aid, and continued high debt levels. On
February 28, 1996, Fitch Investors Service, L.P. placed the City's general
obligation bonds on Fitch Alert with negative implications.

The City is the largest municipal debt issuer in the nation, and has more
than doubled its debt load since the end of FY1988, in large measure to
rehabilitate its extensive, aging physical plant. The City's seasonal borrowing
needs increased significantly during FY1990 and FY1991, largely due to delayed
State aid payments, and totalled $1.40 billion in FY1993, $1.75 billion in
FY1994, $2.2 billion in FY1995 and $2.4 billion in FY1996. Current projections
do not forecast a need for seasonal financing for FY1997. The City's current
capital financing program reflects major reductions (approximately $2.13
billion) in the size of the capital program to be implemented cumulatively
through FY1999 which is intended to reduce future debt service requirements.
Further reductions may be required to keep the City's projected debt issuance
within the general debt limitations imposed on the City by the State
Constitution. Such reductions may adversely affect the condition of the City's
aging and deteriorating infrastructure and physical assets, such as sewers,
streets, bridges and tunnels,

29
<PAGE>

and mass transit facilities. In addition, the City's capital financing program
currently contemplates receipt of proceeds of approximately $1 billion resulting
from the sale of the City's water and sewer system to the Water Board, and
proposes to utilize a substantial portion of such proceeds for capital project
improvements. It is unlikely that such proceeds will become available for
capital improvements, because, as discussed above, the legality of the sale of
the water system has been successfully challenged in the lower court as well as
the intermediate appeals court. In the event such proceeds are not available,
the City will be required to find alternative sources of funding or reduce the
capital program by a corresponding amount.

In November 1993, the voters approved a proposed charter whereby Staten
Island would secede from the City. Staten Island is one of five
counties/boroughs, comprising 4% of the City's population and 19% of its land
area. State law provides a complex mechanism for such secession.

OTHER LOCALITIES. Certain localities in addition to the City could have
financial problems which, if significant, could lead to requests for additional
State assistance during the State's FY1996-97 and thereafter. Fiscal
difficulties experienced by the City of Yonkers, for example, could result in
State actions to allocate State resources in amounts that cannot yet be
determined. In the recent past, the State provided substantial financial
assistance to its political subdivisions, totalling approximately 68% of the
State's General Fund disbursements for FY1992-93, 69% for FY1993-94, 70% for
FY1994-95, 69% for FY1995-96 and estimated to account for 70% of General Fund
disbursements in the State's FY1996-97, primarily for aid to elementary,
secondary and higher education and Medicaid and income maintenance and local
transportation programs. The Legislature enacted substantial reductions from
previously budgeted levels of State aid since December 1990. To the extent the
State is constrained by its financial condition, State assistance to localities
may be further reduced, compounding the serious fiscal constraints already
experienced by many local governments. Localities also face anticipated and
potential problems resulting from pending litigation (including challenges to
local property tax assessments), judicial decisions and socio-economic trends.

The total indebtedness of all localities in the State, other than the City,
was approximately $17.7 billion as of the localities' fiscal years ending during
1994 (the date of the latest available data). A small portion (approximately
$82.9 million) of this indebtedness represented borrowing to finance budgetary
deficits issued pursuant to enabling State legislation (requiring budgetary
review by the State Comptroller). Subsequently, certain counties and other local
governments have encountered significant financial difficulties, including the
counties of Nassau, Suffolk, Monroe and Westchester and the City of Buffalo. The
State has imposed financial control on the City from 1977 to 1986 and on the
City of Yonkers since 1984 under an appointed control board in response to
fiscal crises encountered by such municipalities. The Legislature imposed
certain limited fiscal restraints on Nassau and Suffolk counties, and authorized
their issuance of deficit bonds to finance over several years their respective
1992 operating deficits. Beginning in 1990, the City of Troy experienced a
series of budgetary deficits that resulted in the establishment of a Supervisory
Board for the City of Troy in 1994. The Supervisory Board's powers were
increased in 1995, when Troy MAC was created to help the City of Troy avoid
default on certain obligations. The legislation creating Troy MAC prohibits the
City of Troy from seeking federal bankruptcy protection while Troy MAC bonds are
outstanding.

30
<PAGE>
INVESTMENT LIMITATIONS

FUNDAMENTAL LIMITATIONS. The following investment limitations cannot be
changed with respect to a Fund without the affirmative vote of the lesser of (1)
more than 50% of the outstanding shares of the Fund or (2) 67% or more of the
shares present at a shareholders' meeting if more than 50% of the outstanding
shares are represented at the meeting in person or by proxy. If a percentage
restriction is adhered to at the time of an investment or transaction, a later
increase or decrease in percentage resulting from changing values of portfolio
securities or amount of total assets will not be considered a violation of any
of the following limitations.

Each Fund will not:

(1) purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers
having their principal business activities in the same industry,
except that this limitation does not apply to securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities
or to municipal securities or to certificates of deposit and bankers'
acceptances of domestic branches of U.S. banks;

The following interpretation applies to, but is not a part of, this fundamental
restriction (1): With respect to this limitation, domestic and foreign banking
will be considered to be different industries.

(2) issue senior securities or borrow money, except as permitted under
the Investment Company Act of 1940 ("1940 Act") and then not in
excess of 33 1/3% of the Fund's total assets (including the amount of
the senior securities issued but reduced by any liabilities not
constituting senior securities) at the time of the issuance or
borrowing, except that the Fund may borrow up to an additional 5% of
its total assets (not including the amount borrowed) for temporary or
emergency purposes;

(3) make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this
restriction, the acquisition of bonds, debentures, other debt
securities or instruments or participations or other interests
therein and investments in government obligations, commercial paper,
certificates of deposit, bankers' acceptances or similar instruments
will not be considered the making of a loan;

(4) engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter
under the federal securities laws in connection with its disposition
of portfolio securities;

(5) purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other
instruments supported by interests in real estate are not subject to
this limitation, and except that the Fund may exercise rights under
agreements relating to such securities, including the right to
enforce security interests and to hold real estate

31
<PAGE>
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner; and

(6) purchase or sell physical commodities unless acquired as a result of
owning securities or other instruments, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts
or derivative instruments.

Money Market Portfolio, U.S. Government Portfolio and Tax-Free Fund will
not:

(7) purchase securities of any one issuer if, as a result, more than 5%
of the Fund's total assets would be invested in securities of that
issuer or the Fund would own or hold more than 10% of the outstanding
voting securities of that issuer, except that up to 25% of the Fund's
total assets may be invested without regard to this limitation, and
except that this limitation does not apply to securities issued or
guaranteed by the U.S. government, its agencies and instrumentalities
or to securities issued by other investment companies.

With respect to Money Market Portfolio and U.S. Government Portfolio, the
following interpretation applies to, but is not a part of, fundamental
restriction (7), Mortgage and asset-backed securities will not be considered to
have been issued by the same issuer by reason of the securities having the same
sponsor, and mortgage- and asset-backed securities issued by a finance or other
special purpose subsidiary that are not guaranteed by the parent company will be
considered to be issued by a separate issuer from the parent company.

With respect to Tax-Free Fund, the following interpretation applies to, but
is not a part of, fundamental restriction (7): Each state, territory and
possession of the United States (including the District of Columbia and Puerto
Rico), each political subdivision, agency, instrumentality and authority
thereof, and each multi-state agency of which a state is a member is a separate
"issuer." When the assets and revenues of an agency, authority, instrumentality
or other political subdivision are separate from the government creating the
subdivision and the security is backed only by the assets and revenues of the
subdivision, such subdivision would be deemed to be the sole issuer. Similarly,
in the case of an IDB or PAB, if that bond is backed only by the assets and
revenues of the non-governmental user, then that non-governmental user would be
deemed to be the sole issuer. However, if the creating government or another
entity guarantees a security, then to the extent that the value of all
securities issued or guaranteed by that government or entity and owned by the
Fund exceeds 10% of the Fund's total assets, the guarantee would be considered a
separate security and would be treated as issued by that government or entity.

NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The following investment
restrictions may be changed by each board without shareholder approval.

Each Fund will not:

(1) mortgage, pledge or hypothecate any assets except in connection with
permitted borrowings or the issuance of senior securities;

32
<PAGE>
(2) purchase securities on margin, except for short-term credit necessary
for clearance of portfolio transactions and except that the Fund may
make margin deposits in connection with its use of financial options
and futures, forward and spot currency contracts, swap transactions
and other financial contracts or derivative instruments;

(3) engage in short sales of securities or maintain a short position,
except that the Fund may (a) sell short "against the box" and (b)
maintain short positions in connection with its use of financial
options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative instruments;

(4) invest in oil, gas or mineral exploration or development programs or
leases, except that investments in securities of issuers that invest
in such programs or leases and investments in asset-backed securities
supported by receivables generated from such programs or leases are
not subject to this prohibition;

(5) purchase securities of other investment companies, except to the
extent permitted by the 1940 Act and except that this limitation does
not apply to securities received or acquired as dividends, through
offers of exchange, or as a result of reorganization, consolidation,
or merger;

(6) invest in real estate limited partnerships;

(7) purchase portfolio securities while borrowings in excess of 5% of its
total assets are outstanding;

(8) invest more than 10% of its net assets in illiquid securities;

(9) purchase or retain the securities of any issuer if the officers and
directors or trustees of the applicable Corporation or Trust and the
officers and directors of PaineWebber and Mitchell Hutchins (each
owning beneficially more than 0.5% of the outstanding securities of
the issuer) own in the aggregate more than 5% of the securities of
the issuer; or

(10) purchase any security if as a result the Fund would have more than
5% of its total assets invested in securities of companies that
together with any predecessors have been in continuous operation for
less than three years.

Connecticut Municipal Money Fund and New Jersey Municipal Money Fund will
not:

(11) invest in companies for the purpose of exercising control or
management.

33
<PAGE>
DIRECTORS/TRUSTEES AND OFFICERS

The directors and trustees (each also referred to as "board members") and
executive officers of the Corporations and the Trusts, their ages, business
addresses and principal occupations during the past five years are:

<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE CORPORATIONS/TRUSTS OTHER DIRECTORSHIPS
- ------------------------------ -------------------- ---------------------------------------
<S> <C> <C>
Margo N. Alexander**; 49...... Director/Trustee and Mrs. Alexander is president, chief
President executive officer and a director of
Mitchell Hutchins (since January
1995) and also an executive vice
president and a director of
PaineWebber. Mrs. Alexander is
president and a director or trustee
of 30 investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
Richard Q. Armstrong; 61...... Director/Trustee Mr. Armstrong is chairman and principal
78 West Brother Drive of RQA Enterprises (management
Greenwich, CT 06830 consulting firm) (since April 1991
and principal occupation since March
1995). Mr. Armstrong is also a
director of Hi Lo Automotive, Inc. He
was chairman of the board, chief
executive officer and co-owner of
Adirondack Beverages (producer and
distributor of soft drinks and
sparkling/still waters) (October
1993-March 1995). Mr. Armstrong was a
partner of the New England Consulting
Group (management consulting firm)
(December 1992-September 1993). He
was managing director of LVMH U.S.
Corporation (U.S. subsidiary of the
French luxury goods conglomerate,
Louis Vuitton Moet Hennessey
Corporation) (1987-1991) and chairman
of its wine and spirits subsidiary,
Schieffelin & Somerset Company
(1987-1991). Mr. Armstrong is a
director or trustee of 29 investment
companies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.
</TABLE>

34
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE CORPORATIONS/TRUSTS OTHER DIRECTORSHIPS
- ------------------------------ -------------------- ---------------------------------------
<S> <C> <C>
E. Garrett Bewkes, Jr.**; 69 Director/Trustee and Mr. Bewkes is a director of Paine
Chairman of the Webber Group Inc. ("PW Group")
Boards of (holding company of PaineWebber and
Directors/Trustees Mitchell Hutchins). Prior to December
1995, he was a consultant to PW
Group. Prior to 1988, he was chairman
of the board, president and chief
executive officer of American
Bakeries Company. Mr. Bewkes is a
director of Interstate Bakeries
Corporation and NaPro Bio-
Therapeutics, Inc. Mr. Bewkes is a
director or trustee of 30 investment
companies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.
Richard R. Burt; 49........... Director/Trustee Mr. Burt is chairman of International
1101 Connecticut Avenue, N.W. Equity Partners (international
Washington, D.C. 20036 investments and consulting firm)
(since March 1994) and a partner of
McKinsey & Company (management
consulting firm) (since 1991). He is
also a director of American
Publishing Company. He was the chief
negotiator in the Strategic Arms
Reduction Talks with the former
Soviet Union (1989-1991) and the U.S.
Ambassador to the Federal Republic of
Germany (1985-1989). Mr. Burt is a
director or trustee of 29 investment
companies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.
</TABLE>

35
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE CORPORATIONS/TRUSTS OTHER DIRECTORSHIPS
- ------------------------------ -------------------- ---------------------------------------
<S> <C> <C>
Mary C. Farrell**; 46......... Director/Trustee Ms. Farrell is a managing director,
senior investment strategist, and
member of the Investment Policy
Committee of PaineWebber. Ms. Farrell
joined PaineWebber in 1982. She is a
member of the Financial Women's
Association and Women's Economic
Roundtable, and is employed as a
regular panelist on Wall $treet Week
with Louis Rukeyser. She also serves
on the Board of Overseers of New York
University's Stern School of
Business. Ms. Farrell is a director
or trustee of 29 investment companies
for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
Meyer Feldberg; 54............ Director/Trustee Mr. Feldberg is Dean and Professor of
Columbia University Management of the Graduate School of
101 Uris Hall Business, Columbia University. Prior
New York, New York to 1989, he was president of the
10027 Illinois Institute of Technology.
Dean Feldberg is also a director of
AMSCO International Inc. (medical
instruments and supplies), Federated
Department Stores Inc., Inco Homes
Corporation and New World
Communications Group Incorporated.
Dean Feldberg is a director or
trustee of 29 investment companies
for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
George W. Gowen; 66........... Director/Trustee Mr. Gowen is a partner in the law firm
666 Third Avenue of Dunnington, Bartholow & Miller.
New York, New York Prior to May 1994, he was a partner
10017 in the law firm of Fryer, Ross &
Gowen. Mr. Gowen is a director of
Columbia Real Estate Investments,
Inc. Mr. Gowen is a director or
trustee of 29 investment companies
for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
</TABLE>

36
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE CORPORATIONS/TRUSTS OTHER DIRECTORSHIPS
- ------------------------------ -------------------- ---------------------------------------
<S> <C> <C>
Frederic V. Malek; 59......... Director/Trustee Mr. Malek is Chairman of Thayer Capital
901 15th Street, N.W. Partners (investment bank) and a co-
Suite 300 chairman and director of CB
Washington, D.C. 20005 Commercial Group Inc. (real estate).
From January 1992 to November 1992,
he was campaign manager of Bush-
Quayle '92. From 1990 to 1992, he was
vice chairman and, from 1989 to 1990,
he was president of Northwest
Airlines Inc., NWA Inc. (holding
company of Northwest Airlines Inc.)
and Wings Holdings Inc. (holding
company of NWA Inc.). Prior to 1989,
he was employed by the Marriott
Corporation (hotels, restaurants,
airline catering and contract
feeding), where he most recently was
an executive vice president and
president of Marriott Hotels and
Resorts. Mr. Malek is also a director
of American Management Systems, Inc.
(management consulting and computer-
related services), Automatic Data
Processing, Inc., Avis, Inc.
(passenger car rental), FPL Group,
Inc. (electric services), National
Education Corporation and Northwest
Airlines Inc. Mr. Malek is a director
or trustee of 29 investment companies
for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
</TABLE>

37
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE CORPORATIONS/TRUSTS OTHER DIRECTORSHIPS
- ------------------------------ -------------------- ---------------------------------------
<S> <C> <C>
Carl W. Schafer; 60........... Director/Trustee Mr. Schafer is president of the
P.O. Box 1164 Atlantic Foundation (charitable
Princeton, NJ 08542 foundation supporting mainly
oceanographic exploration and
research). He also is a director of
Roadway Express, Inc. (trucking), The
Guardian Group of Mutual Funds, Evans
Systems, Inc. (major fuels,
convenience store and diversified
company), Hidden Lake Gold Mines
Ltd., Electronic Clearing House, Inc.
(financial transactions processing),
Wainoco Oil Corporation and
Nutraceutix, Inc. (biotechnology
company). Prior to January 1993, he
was chairman of the Investment
Advisory Committee of the Howard
Hughes Medical Institute. Mr. Schafer
is a director or trustee of 29
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
John R. Torell III; 57........ Director/Trustee Mr. Torell is chairman of Torell
767 Fifth Avenue Management, Inc. (financial advisory
Suite 4605 firm), chairman of Telesphere
New York, NY 10153 Corporation (electronic provider of
financial information) and a partner
of Zilkha & Company (merchant banking
and private investment company). He
is the former chairman and chief
executive officer of Fortune Bancorp
(1990-1991 and 1990-1994,
respectively), the former chairman,
president and chief executive officer
of CalFed, Inc. (savings association)
(1988 to 1989) and former president
of Manufacturers Hanover Corp. (bank)
(prior to 1988). Mr. Torell is a
director of American Home Products
Corp., New Colt Inc. (armament
manufacturer) and Volt Information
Services Inc. and a director or
trustee of 29 investment companies
for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
</TABLE>

38
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE CORPORATIONS/TRUSTS OTHER DIRECTORSHIPS
- ------------------------------ -------------------- ---------------------------------------
<S> <C> <C>
Cynthia Bow; 37............... Vice President Ms. Bow is a vice president and a
(Managed Municipal manager of Mitchell Hutchins. Ms. Bow
Trust) has been with Mitchell Hutchins since
1982. Ms. Bow is a vice president of
two investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
Teresa M. Boyle; 37........... Vice President Ms. Boyle is a first vice president and
manager--advisory administration of
Mitchell Hutchins. Prior to November
1993, she was compliance manager of
Hyperion Capital Management, Inc., an
investment advisory firm. Prior to
April 1993, Ms. Boyle was a vice
president and manager--legal
administration of Mitchell Hutchins.
Ms. Boyle is a vice president of 30
other investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
Kimberly Brown; 28............ Vice President Ms. Brown is an assistant vice
(Money Fund) president and a portfolio manager of
Mitchell Hutchins. She has been a
portfolio manager since March 1995
and has been with Mitchell Hutchins
since December 1992. Prior to joining
Mitchell Hutchins Ms. Brown was with
Visual Impact Advertising.
C. William Maher; 35.......... Vice President and Mr. Maher is a first vice president and
Assistant Treasurer senior manager of the mutual fund
finance division of Mitchell
Hutchins. Mr. Maher is a vice
president and assistant treasurer of
30 investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
Dennis McCauley; 49........... Vice President Mr. McCauley is a managing director and
chief investment officer--fixed
income of Mitchell Hutchins. Prior to
December 1994, he was director of
fixed income investments of IBM
Corporation. Mr. McCauley is a vice
president of 19 investment companies
for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
</TABLE>

39
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE CORPORATIONS/TRUSTS OTHER DIRECTORSHIPS
- ------------------------------ -------------------- ---------------------------------------
<S> <C> <C>
Susan P. Messina; 36.......... Vice President Ms. Messina is a senior vice president
(Money Fund) of Mitchell Hutchins. Ms. Messina has
been with Mitchell Hutchins since
1982. Ms. Messina is a vice president
of five investment companies for
which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
Ann E. Moran; 39.............. Vice President and Ms. Moran is a vice president of
Assistant Treasurer Mitchell Hutchins. Ms. Moran is a vice
president and assistant treasurer of
30 investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
Dianne E. O'Donnell; 44....... Vice President and Ms. O'Donnell is a senior vice
Secretary president and deputy general counsel of
Mitchell Hutchins. Ms. O'Donnell is a
vice president and secretary of 29
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
Victoria E. Schonfeld; 45..... Vice President Ms. Schonfeld is a managing director
and general counsel of Mitchell
Hutchins. Prior to May 1994, she was
a partner in the law firm of Arnold &
Porter. Ms. Schonfeld is a vice
president of 30 investment companies
for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
Paul H. Schubert; 33.......... Vice President and Mr. Schubert is a first vice president
Assistant Treasurer and a senior manager of the mutual fund
finance division of Mitchell
Hutchins. From August 1992 to August
1994, he was a vice president of
BlackRock Financial Management, Inc.
Prior to August 1992, he was an audit
manager with Ernst & Young LLP. Mr.
Schubert is a vice president and
assistant treasurer of 30 investment
companies for which Mitchell Hutchins
or PaineWebber serves as investment
adviser.
</TABLE>

40
<PAGE>

- ------------

* Unless otherwise indicated, the business address of each listed person is
1285 Avenue of the Americas, New York, New York 10019.

** Mrs. Alexander, Mr. Bewkes and Ms. Farrell are "interested persons" of each
Fund as defined in the 1940 Act by virtue of their positions with Mitchell
Hutchins, PaineWebber and/or PW Group.

Each Corporation or Trust pays board members who are not "interested
persons" of the Corporation or Trust $1,000 annually for each series and $150
per meeting of the board and each meeting of a board committee (other than
committee meetings held on the same day as a board meeting). Money Fund,
Tax-Free Fund, Managed Municipal Trust and Municipal Money Market Series
presently pay such directors and trustees $3,000, $1,000, $2,000 and $2000
annually, respectively, plus any additional amounts due for board or committee
meetings. Messrs. Feldberg and Torrell serve as chairmen of the audit and
contract review committees of individual funds within the PaineWebber fund
complex and receive additional annual compensation, aggregating $15,000 each,
from the relevant funds. Board members are reimbursed for any expenses incurred
in attending meetings. Board members and officers of the Corporations/Trusts own
in the aggregate less than 1% of the shares of each Fund. Since PaineWebber and
Mitchell Hutchins perform substantially all of the services necessary for the
operation of the Corporations/Trusts and the Funds, the Corporations and Trusts
require no employees. No officer, director or employee of Mitchell Hutchins or
PaineWebber

41
<PAGE>

presently receives any compensation from the Corporations and Trusts for acting
as a board member or officer.

The table below includes certain information relating to the compensation of
the current board members of the Corporations/Trusts who held office with one of
the Funds or with other PaineWebber funds during the fiscal year or period ended
June 30, 1996.

<TABLE>
<CAPTION>
TOTAL
COMPENSATION
AGGREGATE COMPENSATION FROM FROM THE
------------------------------------------ MUNICIPAL CORPORATIONS/TRUST
MONEY TAX-FREE MANAGED MONEY MARKET AND THE
NAME OF PERSONS, POSITION FUND* FUND* MUNICIPAL TRUST* SERIES* FUND COMPLEX**
- ---------------------------------- ---------- ---------- ---------------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Richard Q. Armstrong
Director/Trustee................. -- -- -- -- $ 9,000
Richard Burt
Director/Trustee................. -- -- -- -- 7,750
Meyer Feldberg,
Director/Trustee................. $7,250 $8,500 $7,250 -- 106,375
George W. Gowen,
Director/Trustee................. 7,250 8,500 7,250 -- 99,750
Frederic V. Malek,
Director/Trustee................. 7,250 8,500 7,250 -- 99,750
Carl W. Schafer
Director/Trustee................. -- -- -- $1,875 118,175
John R. Torell III
Director/Trustee................. -- -- -- -- 28,125
</TABLE>

- ---------

Only independent board members are compensated by the Corporations or Trusts
and identified above; board members who are "interested persons" as defined by
the 1940 Act do not receive compensation.

* Represents fees paid to each board member during the fiscal years ended June
30, 1996 (for the eight months ended June 30, 1996 for Municipal Money
Market Series).

** Represents total compensation paid to each board member during the calendar
year ended December 31, 1995; no fund within the fund complex has a bonus,
pension, profit sharing, or retirement plan.

42
<PAGE>
INVESTMENT ADVISORY, ADMINISTRATION AND DISTRIBUTION ARRANGEMENTS

INVESTMENT ADVISORY AND ADMINISTRATION ARRANGEMENTS. PaineWebber acts as the
Funds' investment adviser and administrator pursuant to separate contracts dated
March 23, 1989 with Money Fund, March 1, 1989 with Tax-Free Fund, September 10,
1990 with Managed Municipal Trust and April 13, 1995 with Municipal Money Market
Series ("PaineWebber Contracts"). Under the PaineWebber Contracts, each Fund
pays PaineWebber an annual fee, computed daily and paid monthly, according to
the following schedule:

<TABLE>
<CAPTION>
ANNUAL
AVERAGE DAILY NET ASSETS RATE
- --------------------------------------------------------------- ------
<S> <C>
MONEY MARKET PORTFOLIO:
All.......................................................... 0.50%
U.S. GOVERNMENT PORTFOLIO:
Up to $300 million........................................... 0.50%
In excess of $300 million up to $750 million................. 0.44%
Over $750 million............................................ 0.36%
TAX-FREE FUND:
Up to $1 billion............................................. 0.50%
In excess of $1 billion up to $1.5 billion................... 0.44%
Over $1.5 billion............................................ 0.36%
CALIFORNIA MUNICIPAL MONEY FUND AND NEW YORK MUNICIPAL MONEY FUND:
Up to $300 million........................................... 0.50%
In excess of $300 million up to $750 million................. 0.44%
Over $750 million............................................ 0.36%
CONNECTICUT MUNICIPAL MONEY FUND AND NEW JERSEY MUNICIPAL MONEY FUND:
All.......................................................... 0.50%
</TABLE>

For the periods indicated, the Funds paid (or accrued) to PaineWebber the
following fees.

<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED JUNE 30,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Money Market Portfolio........ $32,952,818 $23,493,781 $21,677,334
U.S. Government Portfolio..... 4,457,510 3,746,439 4,027,163
Tax-Free Fund................. 9,012,871 7,340,127 6,818,920
California Municipal Money
Fund.......................... 2,050,593 1,587,620 1,518,394
New York Municipal Money
Fund.......................... 1,263,305 923,010 752,803
($ 46,118) ($ 50,014) ($ 100,644)
waived waived waived
</TABLE>

43
<PAGE>
For the periods indicated, Connecticut Municipal Money Fund and New Jersey
Municipal Money Fund paid (or accrued) to PaineWebber and/or Kidder Peabody
Asset Management, Inc., the Funds' predecessor manager and investment adviser,
the following fees:

<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
OCTOBER 31,
FOR THE EIGHT MONTHS --------------------------------
ENDED JUNE 30, 1996 1995 1994 1993
-------------------- -------- -------- --------
<S> <C> <C> <C> <C>
Connecticut Municipal Money Fund........ $ 76,173 $120,651 $151,858 $312,881
New Jersey Municipal Money Fund......... $138,224 $167,865 $207,338 $349,798
</TABLE>

Under service agreements pursuant to which PaineWebber provides certain
services to each Fund (other than Connecticut Municipal Money Fund and New
Jersey Municipal Money Fund) not otherwise provided by the transfer agent, which
agreements are reviewed by each Corporation's or Trust's board annually, the
Funds paid (or accrued) to PaineWebber the following fees.

<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED JUNE 30,
--------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Money Market Portfolio................................ $1,391,745 $1,168,942 $1,106,377
U.S. Government Portfolio............................. 144,758 122,640 124,114
Tax-Free Fund......................................... 242,449 217,437 199,135
California Municipal Money Fund....................... 50,117 43,682 41,733
New York Municipal Money Fund......................... 36,019 30,749 27,333
</TABLE>

Under separate contracts with PaineWebber dated March 23, 1989 with respect
to Money Fund, March 1, 1989 with respect to Tax-Free Fund, September 10, 1990
with respect to Managed Municipal Trust and April 13, 1995 with respect to
Municipal Money Market Series ("Mitchell Hutchins Contracts"). Mitchell Hutchins
serves as each Fund's sub-adviser and sub-administrator. Under the Mitchell
Hutchins Contracts, PaineWebber (not the Funds) pays Mitchell Hutchins fees,
computed daily and paid monthly, at an annual rate of 20% of the fee paid by
each Fund to PaineWebber under the PaineWebber Contracts.

For the periods indicated, PaineWebber paid (or accrued) to Mitchell
Hutchins the following fees.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30,
------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Money Market Portfolio................................... $6,590,564 $4,698,756 $4,335,467
U.S. Government Portfolio................................ 891,502 749,288 805,433
Tax-Free Fund............................................ 1,802,574 1,468,025 1,363,784
California Municipal Money Fund.......................... 410,119 317,524 303,679
New York Municipal Money Fund............................ 252,661 184,602 150,561
</TABLE>

44
<PAGE>

<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
FOR THE FISCAL OCTOBER 31,
EIGHT MONTHS --------------------------------
JUNE 30, 1996 1995 1994 1993
-------------- -------- -------- --------
<S> <C> <C> <C> <C>
Connecticut Municipal Money Fund.............. $ 15,235 $ 13,354 $ -- $ --
New Jersey Municipal Money Fund............... $ 27,645 $ 18,580 $ -- $ --
</TABLE>

Under the terms of the PaineWebber Contracts, each Fund bears all expenses
incurred in its operation that are not specifically assumed by PaineWebber.
General expenses of a Corporation or Trust not readily identifiable as belonging
to a specific Fund or to any other series of the Corporation or Trust are
allocated among series by or under the direction of the Corporation's or Trust's
board in such manner as the board deems fair and equitable. Expenses borne by
the Funds include the following (or each Fund's share of the following): (1) the
cost (including brokerage commissions and other transaction costs, if any) of
securities purchased or sold by the Funds and any losses incurred in connection
therewith, (2) fees payable to and expenses incurred on behalf of the Funds by
PaineWebber, (3) organizational expenses, (4) filing fees and expenses relating
to the registration and qualification of the shares of the Funds under federal
and state securities laws and maintaining such registrations and qualifications,
(5) fees and salaries payable to the directors, trustees and officers who are
not interested persons of a Corporation or a Trust, or of PaineWebber, (6) all
expenses incurred in connection with the board members' services, including
travel expenses, (7) taxes (including any income or franchise taxes) and
governmental fees, (8) costs of any liability, uncollectable items of deposit
and other insurance or fidelity bonds, (9) any costs, expenses or losses arising
out of a liability of or claim for damages or other relief asserted against a
Corporation or Trust, or a Fund for violation of any law, (10) legal, accounting
and auditing expenses, including legal fees of special counsel for those board
members who are not interested persons of a Corporation or Trust, (11) charges
of custodians, transfer agents and other agents, (12) expenses of setting in
type and printing prospectuses and supplements thereto, reports and statements
to shareholders and proxy material for existing shareholders, (13) costs of
mailing prospectuses and supplements thereto, statements of additional
information and supplements thereto, reports and proxy materials to existing
shareholders, (14) any extraordinary expenses (including fees and disbursements
of counsel, costs of actions, suits or proceedings to which a Corporation or
Trust is a party and the expenses a Corporation or Trust may incur as a result
of its legal obligation to provide indemnification to its officers, board
members, agents and shareholders) incurred by a Fund, (15) fees, voluntary
assessments and other expenses incurred in connection with membership in
investment company organizations, (16) costs of mailing and tabulating proxies
and costs of meetings of shareholders, the board and any committees thereof,
(17) the cost of investment company literature and other publications provided
to the board members and officers, and (18) costs of mailing, stationery and
communications equipment.

As required by state regulation, PaineWebber will reimburse a Fund if and to
the extent that the aggregate operating expenses of the Fund exceed applicable
limits for the fiscal year. Currently, the most restrictive such limit
applicable to each Fund is 2.5% of the first $30 million of the Fund's average
daily net assets, 2.0% of the next $70 million of its average daily net assets
and 1.5% of its average daily net assets in excess of $100 million. Certain
expenses, such as brokerage commissions, distribution fees, taxes, interest and
extraordinary items, are excluded from this limitation. No

45
<PAGE>
reimbursement pursuant to such limitation was required for the last three fiscal
years for any of the Funds.

Under the PaineWebber and Mitchell Hutchins Contracts (collectively,
"Contracts"), PaineWebber or Mitchell Hutchins will not be liable for any error
of judgment or mistake of law or for any loss suffered by a Fund in connection
with the performance of the Contracts, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of PaineWebber or
Mitchell Hutchins in the performance of its duties or from reckless disregard of
its duties and obligations thereunder.

The Contracts are terminable with respect to each Fund at any time without
penalty by vote of the applicable Corporation's or Trust's board of
directors/trustees or by vote of the holders of a majority of the outstanding
voting securities of that Fund on 60 days' written notice to PaineWebber or
Mitchell Hutchins, as the case may be. The PaineWebber Contracts are also
terminable without penalty by PaineWebber on 60 days' written notice to the
appropriate Corporation or Trust, and the Mitchell Hutchins Contracts are
terminable without penalty by PaineWebber or Mitchell Hutchins on 60 days'
written notice to the other party. The Contracts terminate automatically upon
their assignment, and each Mitchell Hutchins Contract also terminates
automatically upon the assignment of the applicable PaineWebber Contract.

The following table shows the approximate net assets as of July 31, 1996,
sorted by category of investment objective, of the investment companies as to
which Mitchell Hutchins serves as adviser or sub-adviser. An investment company
may fall into more than one of the categories below.

<TABLE>
<CAPTION>
INVESTMENT CATEGORY NET ASSETS
- ---------------------------------------------------------- ----------
($ MIL)
<S> <C>
Domestic (excluding Money Market)......................... $ 5,413.8
Global.................................................... 2,766.8
Equity/Balanced........................................... 2,927.3
Fixed Income (excluding Money Market)..................... 5,253.3
Taxable Fixed Income.................................... 3,620.8
Tax-Free Fixed Income................................... 1,632.5
Money Market Funds........................................ 21,914.2
</TABLE>

Mitchell Hutchins personnel may invest in securities for their own accounts
pursuant to a code of ethics that describes the fiduciary duty owed to
shareholders of the PaineWebber mutual funds and other Mitchell Hutchins'
advisory accounts by all Mitchell Hutchins' directors, officers and employees,
establishes procedures for personal investing and restricts certain
transactions. For example, employee accounts generally must be maintained at
PaineWebber, personal trades in most securities require pre-clearance and
short-term trading and participation in initial public offerings generally are
prohibited. In addition, the code of ethics puts restrictions on the timing of
personal investing in relation to trades by the PaineWebber mutual funds and
other Mitchell Hutchins advisory clients.

DISTRIBUTION ARRANGEMENTS. PaineWebber acts as distributor of shares of the
Funds under separate distribution contracts with each Corporation or Trust
("Distribution Contracts") which

46
<PAGE>
require PaineWebber to use its best efforts, consistent with its other business,
to sell shares of the Funds. Shares of the Funds are offered continuously.
Payments by the U.S. Government Portfolio, Tax-Free Fund, California Municipal
Money Fund, Connecticut Municipal Money Fund, New Jersey Municipal Money Fund
and New York Municipal Money Fund to compensate or reimburse PaineWebber for
certain expenses incurred in connection with its activities in providing certain
shareholder and account maintenance services are authorized under the
Distribution Contracts and made in accordance with related plans of distribution
("Plans") adopted by each Corporation or Trust with respect to those Funds in
the manner prescribed by Rule 12b-1 under the 1940 Act. No such payments have
been authorized for the Money Market Portfolio.

Among other things, each Plan provides that (1) PaineWebber will submit to
the board at least quarterly, and the directors/trustees will review, reports
regarding all amounts expended under the Plan and the purposes for which such
expenditures were made, (2) the Plan will continue in effect only so long as it
is approved at least annually, and any material amendment thereto is approved,
by the board, including those directors/trustees who are not "interested
persons" of the Corporation or Trust and who have no direct or indirect
financial interest in the operation of the Plan or any agreement related to the
Plan, acting in person at a meeting called for that purpose, (3) payments by a
Fund under the Plan shall not be materially increased without the affirmative
vote of the holders of a majority of the affected Fund's outstanding shares and
(4) while the Plan remains in effect, the selection and nomination of
directors/trustees who are not "interested persons" of the Corporation or Trust
shall be committed to the discretion of the directors/trustees who are not
"interested persons" of the Corporation or Trust.

Under the applicable Plan, U.S. Government Portfolio, Tax-Free Fund,
California Municipal Money Fund and New York Municipal Money Fund each is
authorized to pay PaineWebber a service fee, computed daily and paid monthly, at
the annual rate of up to 0.15% of its average daily net assets. Each of these
Funds currently pays service fees to PaineWebber at the annual rate of 0.08% of
average daily net assets. Any increase from the current annual rate would
require prior approval of the board. Under the applicable Plan, Connecticut
Municipal Money Fund and New Jersey Municipal Money Fund each reimburses
PaineWebber for certain service expenses at an annual rate of up to 0.12% of its
average daily net assets.

During the fiscal year ended June 30, 1996, U.S. Government Portfolio,
Tax-Free Fund, California Municipal Money Fund and New York Municipal Money Fund
paid or accrued to PaineWebber service fees of $817,222, $1,602,861, $339,545
and $202,130, respectively. For the same period, PaineWebber estimates that it
incurred expenses of $925,566, $1,666,047, $479,254 and $336,828, respectively,
in distributing shares of these Funds and servicing Fund shareholders.
PaineWebber estimates that these expenses were incurred for each of these Funds,
respectively, as follows: (a) advertising, promotion and allocated
costs--$311,000, $461,000, $224,000 and $185,000; (b) printing--$1,649, $2,901,
$595 and $419; and (c) service fees to investment executives-- $612,917,
$1,202,146, $254,659 and $151,409.

During the eight months ended June 30, 1996 and the fiscal year ended
October 31, 1995, Connecticut Municipal Money Fund paid or accrued to
PaineWebber or Kidder, Peabody & Co. Incorporated, the Fund's predecessor
distributor, service fees of $18,280 and $28,957, respectively.

47
<PAGE>

PaineWebber estimates that these expenses were incurred for Connecticut
Municipal Money Fund during the eight months ended June 30, 1996, and the fiscal
year ended October 31, 1995, respectively, as follows: (a) advertising,
promotion and allocated costs--$80,775 and $23,686; (b) printing--$8,558 and
$927; and (c) service fees to investment executives--$15,236 and $14,478. During
the eight months ended June 30, 1996, and the fiscal year ended October 31,
1995, New Jersey Municipal Money Fund paid or accrued to PaineWebber or Kidder,
Peabody & Co. Incorporated, the Fund's predecessor distributor, service fees of
$33,172 and $40,287, respectively. PaineWebber estimates that these expenses
were incurred for New Jersey Municipal Money Fund during the eight months ended
June 30, 1996 and the fiscal year ended October 31, 1995, respectively, as
follows: (a) advertising, promotion and allocated costs--$44,613 and $32,852;
(b) printing--$14,054 and $1,392; and (c) service fees to investment
executives--$27,646 and $20,145.

"Allocated costs" include various internal costs allocated by PaineWebber to
its efforts at providing certain shareholder and account maintenance services.
These internal costs encompass office rent, salaries and other overhead expenses
of various PaineWebber departments and areas of operations.

In approving the continuance of the Plan for the Funds, the directors of
each Corporation and the trustees of each Trust considered all features of the
distribution system for the applicable Fund, including (a) PaineWebber's view
that the payment of service fees at the annual rate of 0.06% of the average
daily net assets of the Fund held in shareholder accounts serviced by investment
executives and correspondent firms was attractive to such investment executives
and correspondent firms and would result in greater growth of the Fund than
might otherwise be the case, (b) the extent to which Fund shareholders might
benefit from economies of scale resulting from growth in the Fund's assets and
shareholder account size and the potential for continued growth, (c) the
services provided to the Fund and its shareholders by PaineWebber pursuant to
the applicable Distribution Contract, (d) PaineWebber's expenses and costs under
the Plan as described above and (e) the fact that the expense to the Fund of the
Plan could be offset if the Plan is successful by the lower advisory fee rates
that may be triggered as assets reach higher levels.

With respect to each Plan, the applicable board considered the benefits that
would accrue to PaineWebber under the Plan in that PaineWebber would receive
service and advisory fees that are calculated based upon a percentage of the
average net assets of the Fund, which fees would increase if the Plan is
successful and the Fund attains and maintains increased asset levels.

PORTFOLIO TRANSACTIONS

The Mitchell Hutchins Contracts authorize Mitchell Hutchins (with the
approval of each Corporation's or Trust's board) to select brokers and dealers
to execute purchases and sales of the Funds' portfolio securities. The Contracts
direct Mitchell Hutchins to use its best efforts to obtain the best available
price and most favorable execution with respect to all transactions for the
Funds. To the extent that the execution and price offered by more than one
dealer are comparable, Mitchell Hutchins may, in its discretion, effect
transactions in portfolio securities with dealers who provide the Funds with
research, analysis, advice and similar services. Although Mitchell Hutchins may
receive

48
<PAGE>

certain research or execution services in connection with these transactions,
Mitchell Hutchins will not purchase securities at a higher price or sell
securities at a lower price than would otherwise be paid had no services been
provided by the executing dealer. Moreover, Mitchell Hutchins will not enter
into any explicit soft dollar arrangements relating to principal transactions
and will not receive in principal transactions the types of services which could
be purchased for hard dollars. Research services furnished by the dealers with
which a Fund effects securities transactions may be used by Mitchell Hutchins in
advising other funds or accounts it advises and, conversely, research services
furnished to Mitchell Hutchins in connection with other funds or accounts that
Mitchell Hutchins advises may be used in advising the Fund. Information and
research received from dealers will be in addition to, and not in lieu of, the
services required to be performed by Mitchell Hutchins under the Mitchell
Hutchins Contracts. During its past three fiscal years, none of the Funds has
paid any brokerage commissions, nor has any Fund allocated any transactions to
dealers for research, analysis, advice and similar services.

Mitchell Hutchins may engage in agency transactions in over-the-counter
equity and debt securities in return for research and execution services. These
transactions are entered into only in compliance with procedures ensuring that
the transaction (including commissions) is at least as favorable as it would
have been if effected directly with a market-maker that did not provide research
or execution services. These procedures include Mitchell Hutchins receiving
multiple quotes from dealers before executing the transactions on an agency
basis.

The Funds purchase portfolio securities from dealers and underwriters as
well as from issuers. Securities are usually traded on a net basis with dealers
acting as principal for their own accounts without a stated commission. Prices
paid to dealers in principal transactions generally include a "spread," which is
the difference between the prices at which the dealer is willing to purchase and
sell a specific security at the time. When securities are purchased directly
from an issuer, no commissions or discounts are paid. When securities are
purchased in underwritten offerings, they include a fixed amount of compensation
to the underwriter.

Investment decisions for each Fund and for other investment accounts managed
by Mitchell Hutchins are made independently of each other in light of differing
considerations for the various accounts. However, the same investment decision
may occasionally be made for a Fund and one or more of such accounts. In such
cases, simultaneous transactions are inevitable. Purchases or sales are then
averaged as to price and allocated between the Fund and such other account(s) as
to amount according to a formula deemed equitable to the Fund and such
account(s). While in some cases this practice could have a detrimental effect
upon the price or value of the security as far as the Fund is concerned, or upon
its ability to complete its entire order, in other cases it is believed that
coordination and the ability to participate in volume transactions will be
beneficial to the Fund.

MONEY MARKET PORTFOLIO

As of June 30, 1996, Money Market Portfolio owned commercial paper and
short-term corporate obligations issued by the following persons who are regular
broker-dealers for the Fund: Bear Stearns Companies, Inc. ($348,987,683); Dean
Witter, Discover & Company ($15,010,897); Merrill Lynch & Co., Inc.
($131,700,316); Morgan Stanley Group, Inc. ($333,443,313); and Nomura Holding
America Inc. ($49,645,000).

49
<PAGE>
ADDITIONAL INFORMATION REGARDING REDEMPTIONS

Each Fund may suspend redemption privileges or postpone the date of payment
during any period (1) when the New York Stock Exchange, Inc. ("NYSE") is closed
or trading on the NYSE is restricted as determined by the SEC, (2) when an
emergency exists, as defined by the SEC, which makes it not reasonably
practicable for a Fund to dispose of securities owned by it or to determine
fairly the market value of its assets or (3) as the SEC may otherwise permit.
The redemption price may be more or less than the shareholder's cost, depending
on the market value of the Fund's portfolio at the time, although each Fund
seeks to maintain a constant net asset value of $1.00 per share.

If conditions exist that make cash payments undesirable, California
Municipal Money Fund, Connecticut Municipal Money Fund, New Jersey Municipal
Money Fund, and New York Municipal Money Fund each reserve the right to honor
any request for redemption by making payment in whole or in part in securities
chosen by the Fund and valued in the same way as they would be valued for
purposes of computing the Fund's net asset value. If payment is made in
securities, a shareholder may incur brokerage expenses in converting these
securities into cash. Managed Municipal Trust has elected, however, to be
governed by Rule 18f-1 under the 1940 Act, under which it is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net asset value
of either Fund during any 90-day period for one shareholder. This election is
irrevocable unless the SEC permits its withdrawal.

VALUATION OF SHARES

Each Fund's net asset value per share is determined by State Street Bank and
Trust Company ("State Street") as of 12:00 noon, Eastern time, on each Business
Day. As defined in the Prospectus, "Business Day" means any day on which State
Street's Boston offices, PaineWebber's New York City offices and the New York
City offices of PaineWebber's bank, The Bank of New York, are all open for
business. One or more of these institutions will be closed on the observance of
the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Patriot's Day, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.

Each Fund values its portfolio securities in accordance with the amortized
cost method of valuation under Rule 2a-7 ("Rule") under the 1940 Act. To use
amortized cost to value its portfolio securities, a Fund must adhere to certain
conditions under that Rule relating to the Fund's investments, some of which are
discussed in the Prospectus. Amortized cost is an approximation of market value
of an instrument, whereby the difference between its acquisition cost and value
at maturity is amortized on a straight-line basis over the remaining life of the
instrument. The effect of changes in the market value of a security as a result
of fluctuating interest rates is not taken into account, and thus the amortized
cost method of valuation may result in the value of a security being higher or
lower than its actual market value. In the event that a large number of
redemptions take place at a time when interest rates have increased, a Fund
might have to sell portfolio securities prior to maturity and at a price that
might not be desirable.

50
<PAGE>

The board of each Corporation and Trust has established procedures
("Procedures") for the purpose of maintaining a constant net asset value of
$1.00 per share, which include a review of the extent of any deviation of net
asset value per share, based on available market quotations, from the $1.00
amortized cost per share. Should that deviation exceed 1/2 of 1% for any Fund,
the board of directors/trustees will promptly consider whether any action should
be initiated to eliminate or reduce material dilution or other unfair results to
shareholders. Such action may include redeeming shares in kind, selling
portfolio securities prior to maturity, reducing or withholding dividends and
utilizing a net asset value per share as determined by using available market
quotations. Each Fund will maintain a dollar-weighted average portfolio maturity
of 90 days or less and except as otherwise indicated herein will not purchase
any instrument with a remaining maturity greater than 13 months, will limit
portfolio investments, including repurchase agreements, to those U.S.
dollar-denominated instruments that are of high quality under the Rule and that
Mitchell Hutchins, acting pursuant to the Procedures, determines present minimal
credit risks, and will comply with certain reporting and recordkeeping
procedures. There is no assurance that constant net asset value per share will
be maintained. In the event amortized cost ceases to represent fair value per
share, the board will take appropriate action.

In determining the approximate market value of portfolio investments, each
Fund may employ outside organizations, which may use a matrix or formula method
that takes into consideration market indices, matrices, yield curves and other
specific adjustments. This may result in the securities being valued at a price
different from the price that would have been determined had the matrix or
formula method not been used.

TAXES

FEDERAL TAXES. In order to continue to qualify for treatment as a regulated
investment company ("RIC") under the Internal Revenue Code, each Fund must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of taxable net
investment income and net short-term capital gain, if any) plus, in the case of
each Municipal Fund, its net interest income excludable from gross income under
section 103(a) of the Internal Revenue Code, and must meet several additional
requirements. With respect to each Fund, these requirements include the
following: (1) the Fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of securities and certain other
income; (2) the Fund must derive less than 30% of its gross income each taxable
year from the sale or other disposition of securities held for less than three
months; (3) at the close of each quarter of the Fund's taxable year, at least
50% of the value of its total assets must be represented by cash and cash items,
U.S. government securities and other securities, with these other securities
limited, in respect of any one issuer, to an amount that does not exceed 5% of
the value of the Fund's total assets; and (4) at the close of each quarter of
the Fund's taxable year, not more than 25% of the value of its total assets may
be invested in securities (other than U.S. government securities) of any one
issuer.

Dividends paid by a Municipal Fund will qualify as "exempt-interest
dividends," and thus will be excludable from gross income by its shareholders,
if that Fund satisfies the additional requirement that, at the close of each
quarter of its taxable year, at least 50% of the value of its total assets
consists

51
<PAGE>
of securities the interest on which is excludable from gross income under
section 103(a). Each Municipal Fund intends to continue to satisfy this
requirement. The aggregate amount annually designated by a Municipal Fund as
exempt-interest dividends may not exceed the Fund's interest for the year that
is excludable under section 103(a) over certain amounts disallowed as
deductions. The shareholders' treatment of dividends from the Municipal Funds
under local and state income tax laws may differ from the treatment thereof
under the Internal Revenue Code.

Tax-exempt interest attributable to certain PABs (including, in the case of
a Municipal Fund receiving interest on such bonds, a proportionate part of the
exempt-interest dividends paid by that Fund) is subject to the alternative
minimum tax. Exempt-interest dividends received by a corporate shareholder also
may be indirectly subject to that tax without regard to whether a Municipal
Fund's tax-exempt interest was attributable to such bonds. PABs are issued by or
on behalf of public authorities to finance various privately operated facilities
and are described in the Prospectus.

Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by IDBs or PABs should consult their
tax advisers before purchasing shares of a Municipal Fund because, for users of
certain of these facilities, the interest on such bonds is not exempt from
federal income tax. For these purposes, the term "substantial user" is defined
generally to include a "non-exempt person" who regularly uses in trade or
business a part of a facility financed from the proceeds of IDBs or PABs.

Up to 85% of social security and railroad retirement benefits may be
included in taxable income for recipients whose adjusted gross income (including
income from tax-exempt sources such as a Municipal Fund) plus 50% of their
benefits exceeds certain base amounts. Exempt-interest dividends from the
Municipal Funds still are tax-exempt to the extent described above and in the
Prospectus; they are only included in the calculation of whether a recipient's
income exceeds the established amounts.

If a Municipal Fund invests in any instruments that generate taxable income,
under the circumstances described in the Prospectus and in the discussion of
municipal market discount bonds below, the portion of any Fund dividend
attributable to the interest earned thereon will be taxable to that Fund's
shareholders as ordinary income to the extent of that Fund's earnings and
profits and only the remaining portion will qualify as an exempt-interest
dividend. The respective portions will be determined by the "actual earned"
method, under which the portion of any dividend that qualifies as an
exempt-interest dividend may vary, depending on the relative proportions of
tax-exempt and taxable interest earned during the dividend period. Moreover, if
a Municipal Fund realizes capital gain as a result of market transactions, any
distribution of that gain will be taxable to its shareholders.

Each Municipal Fund may invest in municipal bonds that are purchased,
generally not on their original issue, with market discount (that is, at a price
less than the principal amount of the bond or, in the case of a bond that was
issued with original issue discount, a price less than the amount of the issue
price plus accrued original issue discount) ("municipal market discount bonds").
If a bond's market discount is less than the product of (1) 0.25% of the
redemption price at maturity times (2) the number of complete years to maturity
after the taxpayer acquired the bond, then no market discount is considered to
exist. Gain on the disposition of a municipal market discount bond purchased by
a

52
<PAGE>
Municipal Fund after April 30, 1993 (other than a bond with a fixed maturity
date within one year from its issuance) generally is treated as ordinary
(taxable) income, rather than capital gain, to the extent of the bond's accrued
market discount at the time of disposition. Market discount on such a bond
generally is accrued ratably, on a daily basis, over the period from the
acquisition date to the date of maturity. In lieu of treating the disposition
gain as above, a Municipal Fund may elect to include market discount in its
gross income currently, for each taxable year to which it is attributable.

Dividends from investment company taxable income paid to a shareholder who,
as to the United States, is a nonresident alien individual, nonresident alien
fiduciary of a trust or estate, foreign corporation or foreign partnership
("foreign shareholder") generally are subject to a 30% withholding tax, unless
the applicable tax rate is reduced by a treaty between the United States and the
shareholder's country of residence. Withholding does not apply to a dividend
paid to a foreign shareholder that is "effectively connected with the
[shareholder's] conduct of a trade or business within the United States," in
which case the withholding requirements applicable to domestic taxpayers apply.
Exempt-interest dividends paid by the Municipal Funds are not subject to
withholding.

Each Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year substantially all its
ordinary income for that year and any capital gain net income for the one-year
period ending October 31 of that year, plus certain other amounts.

CALIFORNIA TAXES. In any year in which California Municipal Money Fund
qualifies as a RIC under the Internal Revenue Code and 50% or more of the assets
of the Fund at the close of each quarter of its taxable year are invested in
obligations the interest on which is exempt from personal income taxation by the
State of California under the laws or the Constitution of California or the
United States, the Fund will be qualified under California law to pay
"exempt-interest" dividends which will be exempt from the California personal
income tax.

Individual shareholders of California Municipal Money Fund who reside in
California will not be subject to California personal income tax on
distributions received from the Fund to the extent such distributions are
attributable to interest on tax-exempt obligations issued by the State of
California or a California local government (or interest earned on tax-exempt
obligations of U.S. possessions or territories), provided that the Fund
satisfies the requirement of California law that at least 50% of its assets at
the close of each quarter of its taxable year be invested in obligations the
interest on which is exempt from personal income taxation by the State of
California. Income distributions from the Fund which are attributable to sources
other than those described in the preceding sentence will generally be taxable
to such shareholders as ordinary income. However, distributions from the Fund,
if any, that are derived from interest on obligations of the U.S. government may
also be designated by the Fund and treated by its shareholders as exempt from
California personal income tax, provided that the foregoing 50% requirement is
satisfied. In addition, distributions to such shareholders other than
exempt-interest dividends are includable in income subject to the California
alternative minimum tax.

Shareholders of California Municipal Money Fund who are subject to the
California corporate franchise tax will be required to include distributions of
investment income and capital gains in their

53
<PAGE>
taxable income for purposes of that tax. In addition, such distributions may be
includable in income subject to the alternative minimum tax.

Shares of California Municipal Money Fund will not be subject to the
California property tax.

The foregoing is a general, abbreviated summary of certain of the provisions
of the tax laws of the State of California presently in effect as they directly
govern the taxation of shareholders of California Municipal Money Fund. These
provisions are subject to change by legislative or administrative action, and
any such change may be retroactive with respect to Fund transactions.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning California tax matters.

NEW YORK TAXES. Individual shareholders of New York Municipal Money Fund
will not be required to include in their gross income for New York State and
City purposes any portion of distributions received from the Fund that are
directly attributable (i) to interest earned on tax-exempt obligations issued by
New York State or any political subdivisions thereof (including the City) or
(ii) interest earned on obligations of U.S. possessions or territories that is
exempt from state taxation pursuant to federal law, provided that the Fund
qualifies as a RIC and satisfies the requirements that at least 50% of its
assets at the close of each quarter of the taxable year constitute obligations
which are tax-exempt for federal income tax purposes. Distributions from the
Fund which are attributable to sources other than those described in the
preceding sentence (including interest on obligations of other states and their
political subdivisions) will generally be taxable to individual shareholders as
ordinary income. However, distributions by the Fund, if any, that are derived
from interest earned on obligations of the U.S. government may also be
designated by the Fund and treated by its shareholders as exempt from personal
income taxation for New York State and City purposes, provided that at least 50%
of the value of its total assets at the close of each quarter of its taxable
year is invested in such obligations.

Shareholders of New York Municipal Money Fund that are subject to the New
York State corporation franchise tax or the City general corporation tax will be
required to include exempt-interest dividends paid by the Fund in their "entire
net income" for purposes of such taxes and will be required to include their
shares of the Fund in their investment capital for purposes of such taxes.

Shareholders of New York Municipal Money Fund will not be subject to the
unincorporated business tax imposed by the City solely by reason of their
ownership of shares in the Fund. If a shareholder is subject to unincorporated
business taxation by the City, income and gains distributed by the Fund will be
subject to such taxation except to the extent such distributions are directly
attributable to interest earned on tax-exempt obligations issued by New York
State or any political subdivision thereof (including the City).

Shares of New York Municipal Money Fund will not be subject to property
taxes imposed by New York State or the City.

Interest on indebtedness incurred by shareholders to purchase or carry
shares of the Fund generally will not be deductible for New York State personal
income tax purposes.

54
<PAGE>
Interest income of the Fund which is distributed to the shareholders will
generally not be taxable to the Fund for purposes of the New York State
corporation franchise tax or the City general corporation tax.

The foregoing is a general, abbreviated summary of certain of the provisions
of the tax laws of New York State and the City presently in effect as they
directly govern the taxation of shareholders of New York Municipal Money Fund.
These provisions are subject to change by legislative or administrative action,
and any such change may be retroactive with respect to Fund transactions.
Shareholders are advised to consult with their own tax advisers for more
detailed information concerning New York State and City tax matters.

CONNECTICUT TAXES. Dividends paid by the Connecticut Municipal Money Fund
that qualify as exempt-interest dividends for federal income tax purposes are
not subject to the Connecticut income tax imposed on individuals, trusts and
estates, to the extent that such dividends are derived from income received by
the Fund as interest from Connecticut Municipal Securities, or as interest from
obligations with respect to which Connecticut is prohibited by federal law from
taxing. Dividends derived from other sources are subject to Connecticut income
tax, except that dividends qualifying as capital gains dividends for federal
income tax purposes are not subject to Connecticut income tax to the extent
derived from Connecticut Municipal Securities. In the case of a shareholder
subject to the Connecticut income tax and required to pay AMT, the portion of
exempt-interest dividends paid by the Fund that is derived from income received
by the Fund as interest from Connecticut Municipal Securities or obligations the
interest with respect to which Connecticut is prohibited by federal law from
taxing is not subject to the net Connecticut minimum tax, even though treated as
a preference item for purposes of the AMT.

Connecticut Municipal Money Fund's shares are not subject to property
taxation by the State of Connecticut or its political subdivisions.

The foregoing is a general, abbreviated summary of certain of the provisions
of the tax laws of the State of Connecticut presently in effect as they directly
govern the taxation of shareholders of the Connecticut Municipal Money Fund.
These provisions are subject to change by judicial, legislative or
administrative action, and any such change may be either prospective or
retroactive with respect to Fund transactions.

Shareholders are advised to consult with their own tax advisers for more
detailed information concerning Connecticut State tax matters.

NEW JERSEY TAXES. New Jersey Municipal Money Fund anticipates that
substantially all dividends paid by the New Jersey Municipal Money Fund will not
be subject to the New Jersey gross income tax. In accordance with the provisions
of New Jersey law as currently in effect, distributions paid by a "qualified
investment fund" will not be subject to the New Jersey gross income tax to the
extent the distributions are attributable to income received as interest or gain
from New Jersey

55
<PAGE>

Municipal Securities or direct U.S. government obligations or certain other
specified obligations. To be classified as qualified investment fund, at least
80% of the Fund's investments must consist of such obligations. Distributions by
a qualified investment fund that are attributable to most other sources will be
subject to the New Jersey gross income tax. If the New Jersey Municipal Money
Fund continues to qualify as a qualified investment fund, any gain on the
redemption of its shares will not be subject to the New Jersey gross income tax.
To the extent a shareholder of the New Jersey Municipal Money Fund is obligated
to pay state or local taxes outside of New Jersey, dividends earned by such
shareholder may represent taxable income.

The shares of New Jersey Municipal Money Fund are not subject to property
taxation by New Jersey or its political subdivisions.

The foregoing is a general, abbreviated summary of certain of the applicable
provisions of New Jersey tax law presently in effect. These provisions are
subject to change by legislative, judicial or administrative action and any such
change may be either prospective or retroactive with respect to Fund
transactions.

Shareholders are urged to consult with their own tax advisers for more
detailed information concerning New Jersey State tax matters.

TAX-FREE INCOME VS. TAXABLE INCOME--TAX-FREE FUND. Table I below illustrates
approximate equivalent taxable and tax-free yields at the 1995 federal
individual income tax rates in effect on the date of this Statement of
Additional Information. For example, a couple with taxable income of $90,000 in
1996, or a single individual with taxable income of $55,000 in 1996, whose
investments earn a 4% tax-free yield, would have to earn approximately a 5.6%
taxable yield to receive the same benefit.

TABLE I. 1995 FEDERAL TAXABLE VS. TAX-FREE YIELDS*

TAXABLE INCOME (000'S) A TAX-FREE YIELD OF
- ------------------------------ -----------------------------------------------
SINGLE JOINT FEDERAL TAX 4.00% 5.00% 6.00% 7.00% 8.00%
RETURN RETURN BRACKET ----- ----- ----- ------ ------
IS EQUAL TO A TAXABLE YIELD OF APPROXIMATELY:
- ------------ ------------- ----------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 0-- 23.4 $ 0-- 39.0 15.00% 4.71% 5.88% 7.06% 8.24% 9.41%
23.4-- 56.6 39.0-- 94.3 28.00 5.56 6.94 8.33 9.72 11.11
56.6--118.0 94.3--143.6 31.00 5.80 7.25 8.70 10.14 11.59
118.0--257.0 143.61--257.0 36.00 6.25 7.81 9.38 10.94 12.50
Over 257.0 Over 257.0 39.60 6.62 8.28 9.93 11.59 13.25
</TABLE>

- ---------

* See note following Table V.

TAX-FREE INCOME VS. TAXABLE INCOME--CALIFORNIA MUNICIPAL MONEY FUND. Table
II below illustrates approximate equivalent taxable and tax-free yields at the
1995 federal individual and 1996 California personal gross income tax rates
currently in effect on the date of this Statement of Additional Information. For
example, a California couple with taxable income of $90,000, or a single
California individual with taxable income of $55,000, whose investments earn a
6% tax-free yield, would have to earn approximately a 9.2% taxable yield to
receive the same benefit.

56
<PAGE>

TABLE II. 1995 FEDERAL AND 1996 CALIFORNIA TAXABLE VS. TAX-FREE YIELDS*

(See notes 1-4 below)

EFFECTIVE
TAXABLE INCOME (000'S) CALIFORNIA A TAX-FREE YIELD OF
- ----------------------------- AND --------------------------------------
SINGLE JOINT FEDERAL TAX 2.00% 4.00% 5.00% 6.00%
RETURN RETURN BRACKET ----- ----- ----- ------
IS EQUAL TO A TAXABLE YIELD OF
APPROXIMATELY:
- ------------ ------------ ----------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$18.1-- 23.4 $36.1-- 39.0 20.10% 2.50% 5.01% 6.26% 7.51%
23.4-- 25.1 39.0-- 50.2 32.32 2.96 5.91 7.39 8.87
25.1-- 31.7 50.2-- 63.4 33.76 3.02 6.04 7.55 9.06
31.7-- 56.6 63.4-- 94.3 34.70 3.06 6.13 7.66 9.19
56.6--118.0 94.3--143.6 37.42 3.20 6.39 7.99 9.59
118.0--256.5 143.6--256.5 41.95 3.45 6.89 8.61 10.34
Over 256.5 Over 256.5 45.22 3.65 7.30 9.13 10.95
</TABLE>

- ------------

* See note following Table V.

1. Net amount subject to federal income tax after deductions and exemptions.
Assumes that all income is ordinary income.

2. The income ranges shown for 1996 reflect federal and California income
brackets for 1995. Inflation adjusted income brackets for 1996 are not yet
available.

3. The rates shown reflect federal rates for 1995 and California rates for 1996
in effect as of the date hereof. The California rates are still subject to
change with retroactive effect for 1996.

4. Excludes the impact of the phase out of personal exemptions, limitations on
itemized deductions and other credits, exclusions and adjustments which may
increase a taxypayer's marginal tax rate as well as the effect of certain
levels of income (including tax exempt income) on the taxability of social
security payments.

TAX-FREE INCOME VS. TAXABLE INCOME-NEW YORK MUNICIPAL MONEY FUND. Table III
below illustrates approximate equivalent taxable and tax-free yields at the 1995
federal individual, and New York State and New York City personal, income tax
rates in effect on the date of this Statement of Additional Information. For
example, a New York City couple with taxable income of $90,000 in 1995, whose
investments earn a 4% tax-free yield, would have to earn approximately a 6.3%
taxable yield to receive the same benefit. A couple who lives in New York State
outside of New York City with taxable income of $90,000 in 1995 would have to
earn approximately a 6.0% taxable yield to realize a benefit equal to a 4%
tax-free yield.

Single taxpayers may also take advantage of high tax-free income. For
example, a single individual with taxable income of $55,000 in 1995 who lives in
New York City and whose investments earn a 4% tax-free yield, would have to earn
approximately a 6.3% taxable yield to receive the same benefit. A single
individual who lives in New York State outside of New York City with taxable
income of $55,000 in 1995, would have to earn approximately a 6.0% taxable yield
to realize a benefit equal to a 4% tax-free yield.

57
<PAGE>

TABLE III. 1995 FEDERAL AND NEW YORK TAXABLE VS. TAX-FREE YIELDS*

TAXABLE INCOME (000'S) COMBINED A TAX-FREE YIELD OF
- --------------------------- FEDERAL/ ------------------------------------
SINGLE JOINT NYS/NYC 2.00% 4.00% 5.00% 6.00%
RETURN RETURN TAX BRACKET ----- ----- ----- ------
IS EQUAL TO A TAXABLE YIELD OF
APPROXIMATELY:
- ----------- ----------- ----------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 0-- 23.4 $ 0-- 39.0 25.19% 2.67% 5.35% 6.68% 8.02%
23.4-- 56.6 39.0-- 94.3 36.64 3.16 6.31 7.89 9.47
56.6--118.0 94.3--143.6 39.32 3.30 6.59 8.24 9.89
118.0--257.0 143.6--257.0 43.71 3.55 7.11 8.88 10.66
Over 257.0 Over 257.0 46.88 3.76 7.53 9.41 11.29

TAXABLE INCOME (000'S) COMBINED A TAX-FREE YIELD OF
- --------------------------- FEDERAL/ ------------------------------------
SINGLE JOINT NYS/ 2.00% 4.00% 5.00% 6.00%
RETURN RETURN TAX BRACKET ----- ----- ----- ------
IS EQUAL TO A TAXABLE YIELD OF
APPROXIMATELY:
- ----------- ----------- ----------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 0-- 23.4 $ 0-- 39.0 21.45% 2.55% 5.09% 6.37% 7.64%
23.4-- 56.6 39.0-- 94.3 33.47 3.01 6.01 7.52 9.02
56.6--118.0 94.3--143.6 36.24 3.14 6.27 7.84 9.41
118.0--257.0 143.6--257.0 40.86 3.38 6.76 8.45 10.15
Over 257.0 Over 257.0 44.19 3.58 7.17 8.96 10.75
</TABLE>

- ------------

* See note following Table V.

TAX-FREE INCOME VS. TAXABLE INCOME--NEW JERSEY MUNICIPAL MONEY FUND. Table
IV below illustrates approximate equivalent taxable and tax-free yields at the
1995 federal individual and New Jersey gross income tax rates currently in
effect on the date of this Statement of Additional Information. For example, a
New Jersey couple with taxable income of $90,000, or a single New Jersey
individual with taxable income of $55,000, whose investments earn a 6% tax-free
yield, would have to earn approximately a 9.2% taxable yield to receive the same
benefit.

TABLE IV. 199[5] FEDERAL AND NEW JERSEY TAXABLE VS. TAX-FREE YIELDS*

<TABLE>
<CAPTION>
EFFECTIVE
TAXABLE INCOME (000'S) NEW JERSEY
- --------------------------- AND
SINGLE JOINT FEDERAL TAX
RETURN RETURN BRACKET 2.00% 4.00% 5.00% 6.00%
- ----------- ----------- ----------- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C>
$ 0-- 23.4 $ 0-- 39.0 16.81% 2.40% 4.81% 6.01% 7.21%
23.4-- 35.0 39.0-- 50.0 29.53 2.84 5.68 7.10% 8.57
50.0-- 70.0 30.14 2.86 5.73 7.16% 8.59
35.0-- 40.0 70.0-- 80.0 31.06 2.90 5.80 7.25% 8.70
40.0-- 56.6 80.0-- 94.3 32.33 2.96 5.91 7.39% 8.87
56.6-- 75.0 94.3--143.6 35.15 3.08 6.17 7.71% 9.25
75.0--118.0 35.54 3.10 6.21 7.76% 9.31
143.6--150.0 39.85 3.32 6.65 8.31% 9.97
118.0--257.0 150.0--257.0 40.21 3.35 6.69 8.36% 10.04
Over 257.0 Over 257.0 43.57 3.54 7.09 8.86% 10.63
</TABLE>

58
<PAGE>

TAX-FREE INCOME VS. TAXABLE INCOME--CONNECTICUT MUNICIPAL MONEY FUND. Table
V below illustrates approximate equivalent taxable and tax-free yields at the
1996 federal individual and Connecticut personal income tax rates currently in
effect on the date of this Statement of Additional Information. For example, a
Connecticut couple with taxable income of $90,000, or a single Connecticut
individual with taxable income of $55,000, whose investments earn a 6% tax-free
yield, would have to earn approximately a 9.4% taxable yield to receive the same
benefit.

TABLE V. 1995 FEDERAL AND CONNECTICUT TAXABLE VS. TAX-FREE YIELDS*

<TABLE>
<CAPTION>
EFFECTIVE
TAXABLE INCOME ($000) CONNECTICUT
- ---------------------------- AND
SINGLE JOINT FEDERAL TAX
RETURN RETURN BRACKET 2.00% 4.00% 5.00% 6.00%
- ------------ ------------ ----------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
$ 0-- 23.4 $ 0-- 39.0 18.83% 2.46 % 4.93 % 6.16 % 7.39%
23.4-- 56.6 39.0-- 94.3 31.24 2.91 5.82 7.27 % 8.73
56.6--118.0 94.3--143.6 34.11 3.04 6.07 7.59 % 9.11
118.0--257.0 143.6--257.0 38.88 3.27 6.54 8.18 % 9.82
Over 257.0 Over 257.0 42.32 3.47 6.93 8.67 % 10.40
</TABLE>

- ------------

* Single rate assumes no dependents; joint rate assumes two dependents. The
yields listed are for illustration only and are not necessarily representative
of a Fund's yield. Each Fund invests primarily in obligations the interest on
which is exempt from federal income tax and (1) in the case of California
Municipal Money Fund, from California personal income tax; (2) in the case of
Connecticut Municipal Money Fund, from Connecticut personal income tax; (3) in
the case of New Jersey Municipal Money Fund, from New Jersey gross income tax;
and (4) in the case of New York Municipal Money Fund, from New York State and
New York City personal income taxes; however, some of a Fund's investments may
generate taxable income. Effective tax rates shown are those in effect on the
date of this Statement of Additional Information; such rates might change
after that date. The effective rates reflect the highest tax bracket within
each range of income listed. However, a California, Connecticut, New Jersey or
New York taxpayer within the lowest income ranges shown may fall within a
lower effective tax bracket. The figures set forth above do not reflect the
federal alternative minimum tax, limitations on federal or state itemized
deductions and personal exemptions or any state or local taxes payable on Fund
distributions (other than California, Connecticut, New Jersey, New York State
and New York City, personal income taxes in the case of Tables II through V,
respectively).

59
<PAGE>
CALCULATION OF YIELD

Each Fund computes its yield and effective yield quotations using
standardized methods required by the Securities and Exchange Commission ("SEC").
The Fund from time to time advertises (1) its current yield based on a recently
ended seven-day period, computed by determining the net change, exclusive of
capital changes, in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from that shareholder account, dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and then multiplying the base period return by
(365/7), with the resulting yield figure carried to at least the nearest
hundredth of one percent, and (2) its effective yield based on the same
seven-day period by compounding the base period return by adding 1, raising the
sum to a power equal to (365/7), and subtracting 1 from the result, according to
the following formula:

EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)365/7] - 1

Each of the Municipal Funds from time to time also advertises its
tax-equivalent yield and tax-equivalent effective yield, also based on a
recently ended seven-day period. These quotations are calculated by dividing
that portion of the Fund's yield (or effective yield, as the case may be) that
is tax-exempt by 1 minus a stated income tax rate and adding the product to that
portion, if any, of the Fund's yield that is not tax-exempt, according to the
following formula:

E
TAX-EQUIVALENT YIELD = ( 1 - p ) + t

E = Tax exempt yield
p = stated income tax rate
t = taxable yield

Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yield of each Fund fluctuates, it cannot be compared
with yields on savings accounts or other investment alternatives that provide an
agreed-to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one money market fund to
another, consideration should be given to each fund's investment policies,
including the types of investments made, the average maturity of the portfolio
securities and whether there are any special account charges that may reduce the
yield.

60
<PAGE>
The following yields are for the seven-day period ended June 30, 1996:

<TABLE>
<CAPTION>
EFFECTIVE
YIELD YIELD
----- ---------
<S> <C> <C>
Money Market Portfolio............................... 4.85% 4.97%
U.S. Government Portfolio............................ 4.66% 4.77%
Tax-Free Fund........................................ 2.84% 2.88%
California Municipal Money Fund...................... 2.75% 2.79%
Connecticut Municipal Money Fund..................... 2.29% 2.31%
New Jersey Municipal Money Fund...................... 2.55% 2.59%
New York Municipal Money Fund........................ 2.68% 2.71%
</TABLE>

The following tax equivalent yields are based, in each case, on the maximum
individual tax rates:

<TABLE>
<CAPTION>
TAX-EQUIVALENT TAX-EQUIVALENT
YIELD EFFECTIVE YIELD
-------------- ---------------
<S> <C> <C>
Tax-Free Fund (assuming a federal tax rate of 39.6%)............ 4.70% 4.77%
California Municipal Money Fund (assuming a combined federal and
California State tax rate of 45.2%)............................. 5.02% 5.09%
Connecticut Municipal Money Fund (assuming a combined federal
and Connecticut State tax rate of 42.3%)........................ 3.97% 4.00%
New Jersey Municipal Money Fund (assuming a combined federal and
New Jersey State tax rate of 43.6%)............................. 4.52% 4.59%
New York Municipal Money Fund (assuming a combined federal, New
York State and New York City tax rate of 46.9%)................. 5.05% 5.10%
New York Municipal Money Fund (assuming an effective combined
federal and New York State tax rate of 44.2%)................... 4.80% 4.86%
</TABLE>

OTHER INFORMATION. The Fund's performance data quoted in advertising and
other promotional materials ("Performance Advertisements") represent past
performance and are not intended to predict or indicate future results. The
return on an investment in each Fund will fluctuate. In Performance
Advertisements, the Funds may compare their taxable or tax-free yield with data
published by Lipper Analytical Services, Inc. for money funds ("Lipper"), CDA
Investment Technologies, Inc. ("CDA"), IBC/Donoghue's Money Market Fund Report
("Donoghue"), Wiesenberger Investment Companies Service ("Wiesenberger") or
Investment Company Data Inc. ("ICD"), or with the performance of recognized
stock and other indexes, including (but not limited to) the Standard & Poor's
500 Composite Stock Price Index, the Dow Jones Industrial Average, the Merrill
Lynch Municipal Bond Indices, the Morgan Stanley Capital International World
Index, the Lehman Brothers Treasury Bond Index, the Lehman Brothers
Government/Corporate Bond Index, the Salomon Brothers Government Bond Index and
changes in the Consumer Price Index as published by the U.S. Department of
Commerce. The Funds also may refer in such materials to mutual fund performance
rankings and other data, such as comparative asset, expense and fee levels,
published by Lipper, CDA, Donoghue, Wiesenberger or ICD. Performance
Advertisements also may refer to discussions of the Funds and comparative mutual
fund data and ratings reported in independent periodicals, including (but not
limited to) THE WALL STREET JOURNAL, MONEY Magazine,

61
<PAGE>
FORBES, BUSINESS WEEK, FINANCIAL WORLD, BARRON'S, FORTUNE, THE NEW YORK TIMES,
THE CHICAGO TRIBUNE, THE WASHINGTON POST and THE KIPLINGER LETTERS. Comparisons
in Performance Advertisements may be in graphic form.

Each Fund may include discussions or illustrations of the effects of
compounding in Performance Advertisements. "Compounding" refers to the fact
that, if dividends on a Fund investment are reinvested by being paid in
additional Fund shares, any future income of the Fund would increase the value,
not only of the original Fund investment, but also of the additional Fund shares
received through reinvestment. As a result, the value of a Fund investment would
increase more quickly than if dividends had been paid in cash.

Each Fund may also compare its performance with the performances of bank
certificates of deposit ("CDs") as measured by the CDA. Certificate of Deposit
Index and the Bank Rate Monitor National Index and the averages of yields of CDs
of major banks published by Banxquotes(R) Money Markets. In comparing a Fund's
performance to CD performance, investors should keep in mind that bank CDs are
insured in whole or in part by an agency of the U.S. government and offer fixed
principal and fixed or variable rates of interest, and that bank CD yields may
vary depending on the financial institution offering the CD and prevailing
interest rates. Advertisements and other promotional materials for the Funds or
for the PaineWebber Resource Management Account ("RMA")(R) and Business Services
Account ("BSA")SM programs may compare features of the RMA and BSA programs to
those offered by bank checking accounts and other bank accounts. Bank accounts
are insured in whole or in part by an agency of the U.S. government and may
offer a fixed rate of return. Fund shares are not insured or guaranteed by the
U.S. government and returns thereon will fluctuate. While each Fund seeks to
maintain a stable net asset value of $1.00 per share, there can be no assurance
that it will be able to do so.

OTHER INFORMATION

Each Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, each Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each note, bond, contract, instrument, certificate or undertaking made or issued
by the trustees or by any officers or officer by or on behalf of that Trust, a
Fund, the trustees or any of them in connection with the Trust. The Declaration
of Trust provides for indemnification from a Fund's property for all losses and
expenses of any shareholder held personally liable for the obligations of the
Fund. Thus, the risk of a shareholder's incurring financial loss on account of
shareholder liability is limited to circumstances in which a Fund itself would
be unable to meet its obligations, a possibility which PaineWebber believes is
remote and not material. Upon payment of any liability incurred by a
shareholder, the shareholder paying such liability will be entitled to
reimbursement from the general assets of the Fund. The trustees intend to
conduct the operations of each Fund in such a way as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of the Fund.

62
<PAGE>

Prior to February 28, 1996, PaineWebber Municipal Money Market Series was
known as PaineWebber/Kidder, Peabody Municipal Money Market Series. Prior to
January [25], 1995 PaineWebber/Kidder, Peabody Municipal Money Market Series was
known as Kidder, Peabody Municipal Money Market Series. Prior to December 15,
1995 PaineWebber RMA Connecticut Municipal Money Series was known as Connecticut
Series. Prior to December 15, 1995 PaineWebber RMA New Jersey Municipal Money
Market Series was known as New Jersey Series.

COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036, serves as counsel to the Funds.
Kirkpatrick & Lockhart LLP also acts as counsel to PaineWebber and Mitchell
Hutchins in connection with other matters. The law firm of Orrick, Herrington &
Sutcliffe, 400 Sansome Street, San Francisco, CA 94111, serves as counsel to
California Municipal Money Fund with respect to California law. The law firm of
Orrick, Herrington & Sutcliffe, 599 Lexington Avenue, New York, New York 10022,
serves as counsel to New York Municipal Money Fund with respect to New York law,
Connecticut Municipal Money Fund with respect to Connecticut law and New Jersey
Municipal Money Fund with respect to New Jersey law..

AUDITORS. Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
serves as independent auditors for the Funds.

PRINCIPAL SHAREHOLDERS. With respect to New Jersey Municipal Money Fund, to
the knowledge of the Trust, G. Rogers & R. Rogers, c/o Mitchell Hutchins Asset
Management Inc., New York, New York 10019, owned 8.6% of the Fund's outstanding
shares of beneficial interest as of August 1, 1996.

The Trust is not aware as to whether or to what extent shares owned of
record also are owned benefically.

FINANCIAL STATEMENTS

The Annual Reports to Shareholders for the fiscal years ended June 30, 1996
for Money Market Portfolio, U.S. Government Portfolio, Tax-Free Fund, California
Municipal Money Fund, and New York Municipal Money Fund and the Annual Report to
Shareholders for the eight months ended June 30, 1996 for Connecticut Municipal
Money Fund and New Jersey Municipal Money Fund are separate documents supplied
with this Statement of Additional Information and the financial statements,
accompanying notes and reports of independent auditors appearing therein are
incorporated herein by this reference.

63
<PAGE>
APPENDIX A
SERVICES AVAILABLE THROUGH THE RMA PROGRAM TO RMA ACCOUNTHOLDERS

Shares of the Funds are available primarily to investors who are
Participants in the Resource Management Account (RMA) program offered by
PaineWebber and its correspondent firms. The following is a summary of some of
the services available to RMA Participants. For more complete information,
investors should refer to their RMA account agreement and the brochure entitled
"Facts About Your Resource Management Account (RMA)."

THE PAINEWEBBER RMA PREMIER STATEMENT. RMA Participants receive a monthly
Premier account statement, which provides consolidated information to assist
with portfolio management decisions and personal financial planning. The Premier
account statement summarizes securities transactions, charges, cash advances and
checks (if applicable) and provides cost basis information and calculations of
unrealized and realized gains and losses on most investments. A "Summary of
Accounts" statement and a menu of customized statement options are now available
to make the monthly reporting even more comprehensive.

PRELIMINARY AND YEAR-END SUMMARY STATEMENT. RMA Participants receive
preliminary (nine month) summary information and year-end summary account
statements that provide a comprehensive overview of tax-related activity in the
account during the year to help investors with tax planning.

CHOICE OF MONEY MARKET FUNDS AND AUTOMATIC SWEEP OF UNINVESTED CASH. As
described more fully in the prospectus under the heading "Purchases--The RMA and
BSA Programs," RMA Participants select a money market fund as a primary fund
into which uninvested cash is automatically swept on a daily basis from a
variety of taxable and tax-free money funds. By automatically investing cash
balances into a money market fund, this sweep feature minimizes the extent to
which an investor's assets remain idle while held in the account pending
investment.

CHECK WRITING. RMA Participants have ready access to the assets held in
their RMA account through the check writing feature. There are no minimum check
amounts or per check charges. The RMA checks also include an expense coding
system that enables the investor to track types of expenses for tax and
financial planning.

DIRECT DEPOSIT. Regular payments from an employer, pension, social security
or other sources may be eligible for electronic deposit into RMA Participants'
accounts.

ELECTRONIC FUNDS TRANSFER/BILL PAYMENT SERVICE. RMA Participants can
electronically transfer money between their RMA and other financial
institutions, transfer funds to and from other PaineWebber accounts and pay
bills. Unlimited transfers from other financial accounts and ten free transfers
to other financial accounts are permitted monthly, with a nominal charge per
transaction thereafter. A Bill Payment Service is available for an additional
charge.

GOLD MASTERCARD(R). RMA Participants are provided with a Gold MasterCard
that makes account assets easily accessible. The Gold MasterCard is accepted by
businesses, stores and services both in the U.S. and abroad, and can be used to
obtain cash advances at thousands of automated teller

A-1
<PAGE>
machines in the U.S. For an additional annual fee, investors can also obtain a
line of credit from Bank One that can be accessed through their Gold MasterCard.
Through MasterCard's enhanced MasterAssist(R) and MasterPurchase(R) programs,
investors can obtain other benefits, including rental car insurance, emergency
medical and travel assistance, legal services and purchase protection.

EXTENDED ACCOUNT PROTECTION. Assets of RMA Participants that are held in an
RMA Account by PaineWebber or one of its correspondent firms are protected for
up to $50 million through private insurance in the event of the liquidation or
failure of the firm. This protection is in addition to the $500,000 in
protection provided to accountholders by the Securities Investor Protection
Corporation ("SIPC"). Neither the SIPC protection nor the additional account
protection insurance applies to shares of the Funds because such shares are
registered directly in the name of the shareholder, and not in the name of
PaineWebber or one of its correspondent firms.

THE PAINEWEBBER PROTECTOR. The PaineWebber Protector is a popular
convalescent care insurance program. Participants can elect to own $50,000 to
$200,000 of convalescent care benefits. This feature is not available to
PaineWebber's correspondent firms.

RMA RESOURCE ACCUMULATION PLANSM. The RMA Resource Accumulation Plan is an
automatic mutual fund investment program that provides RMA participants the
ability to purchase shares of mutual funds on a regular, periodic basis. The
minimum purchase in the program is $100 per investment, however, initial minimum
purchase requirements of the designated mutual fund(s) must be met before an
investor can participate in this program. The participant must receive a
prospectus, which contains more complete information (including charges and
expenses), for each fund before the application form to participate in the
Resource Accumulation Plan is submitted.

RMA AUTHORIZATION LIMIT. RMA Participants' Authorization Limit is the
combined amount of any uninvested cash balances in the account, money fund
balances and, if applicable, the Securities Credit Line (margin). The
Authorization Limit is reduced each time a debit is generated in their
securities account, a security is purchased, an RMA check is paid, cash advances
are obtained from MasterCard or when an electronic transfer/payment is made. The
Authorization Limit is increased when funds are deposited into their securities
account.

FINANCIAL SERVICES CENTER AND RESOURCELINE(R). RMA Participants have day and
night access to information concerning their RMA account. This service is
available by calling (800) RMA-1000. RMA representatives are available at the
Financial Services Center from 8:30 a.m. to 8:00 p.m. (ET) to answer inquiries
from Participants regarding their accounts, and ResourceLine, an automated voice
response system, provides 24 hour account information.

SECURITIES CREDIT LINE. RMA Participants may choose to have a Securities
Credit Line (margin) as part of their RMA account.

A-2
<PAGE>
APPENDIX B
SERVICES AVAILABLE THROUGH THE BSA PROGRAM FOR BSA ACCOUNTHOLDERS

Shares of the Funds are available to investors who are Participants in the
Business Services Account ("BSA")(R) program. The following is a summary of some
of the services that are available to BSA Participants. For more complete
information, investors should refer to their BSA Account Agreement and the
brochure entitled "Facts About Your Business Services Account (BSA)."

PREMIER BUSINESS SERVICES ACCOUNT STATEMENT--BSA Participants receive the
monthly Premier Business Services Account statement, which provides consolidated
information to assist with portfolio management decisions and business finances.
The Premier Business Services Account statement summarizes securities
transactions, charges, cash advances and checks in chronological order with
running cash and money fund balances. When applicable, the expiration and
beneficiary of outstanding letters of credit are printed. The "Portfolio
Management" feature provides cost basis information where available as well as
calculated gains and losses on most investments. A menu of customized statement
options are now available to make the monthly reporting more comprehensive.

PRELIMINARY AND YEAR-END SUMMARY STATEMENT--BSA Participants receive
preliminary (nine month) summary information and year-end summary account
statements that provide a comprehensive overview of tax-related activity in the
account during the year to help investors plan.

CHOICE OF MONEY MARKET FUNDS AND AUTOMATIC SWEEP OF UNINVESTED CASH--As
described more fully in the prospectus under the heading "Purchases--The RMA and
BSA Programs," BSA Participants select a money market fund as a primary fund
into which uninvested cash is automatically swept on a daily basis from a
variety of taxable and tax-free money funds. By automatically investing cash
balances into a money market fund, this sweep feature minimizes the extent to
which an investor's assets remain idle while held in the account pending
investment.

CHECK WRITING--BSA Participants have ready access to the assets held in
their BSA account through the check writing feature. There are no minimum check
amounts. BSA Participants may clear up to 100 checks each month without
incurring per check charges. Participants can order from a number of business
check styles to suit their check writing needs. The BSA checks also include an
expense code system that enables the investors to track business expense types
for tax and financial planning.

MASTERCARD BUSINESSCARD(R)--BSA Participants can elect to receive a
MasterCard BusinessCard for easy access to account assets. The MasterCard
BusinessCard is accepted by businesses, stores and services worldwide, and can
be used to obtain cash at thousands of automated teller machines in the U.S.
Through MasterCard's enhanced MasterAssist(R) and MasterPurchase(R) programs,
investors can obtain other benefits including full value primary rental car
insurance, emergency medical and travel assistance, legal services and purchase
protection.

SECURITIES CREDIT LINE.--BSA Participants may choose to have a Securities
Credit Line (margin) as part of their BSA account.

EXTENDED ACCOUNT PROTECTION--Assets of BSA Participants that are held in a
BSA Account by PaineWebber or one of its correspondent firms are protected for
up to $50 million through private

B-1
<PAGE>
insurance in the event of the liquidation or failure of the firm. This
protection is in addition to the $500,000 in protection provided to
accountholders by the Securities Investor Protection Corporation ("SIPC").
Neither the SIPC protection nor the additional account protection insurance
applies to shares of the Funds because such shares are registered directly in
the name of the shareholder, and not in the name of PaineWebber or one of its
correspondent firms.

BSA AUTHORIZATION LIMIT--BSA Participants' Authorization Limit is the
combined amount of any uninvested cash balances in the account, money fund
balances and, if applicable, the Securities Credit Line (margin). The
Authorization Limit is reduced each time a debit is generated in their
securities account, a security is purchased, a BSA check is paid, cash advances
are obtained from MasterCard or when an electronic transfer/payment is made. The
Authorization Limit is increased when funds are deposited into their securities
account.

FINANCIAL SERVICES CENTER AND RESOURCELINE(R)--BSA Participants can call the
Financial Services Center at (800) 762-1000 from 8:30 A.M. to 8:00 P.M. ET and
speak to a PaineWebber representative to make any inquiries about their
accounts. The automated ResourceLine provides basic account information through
a touchtone phone and is available night and day by calling (800) 762-1000.

ELECTRONIC FUNDS TRANSFER/PAYMENT SERVICE--BSA Participants have the option
to initiate transfers of funds to and from their accounts, pay bills and process
their payroll through an electronic fund transfer service. Unlimited transfers
to the BSA from other financial institutions and twenty free transfers/payments
out of the BSA are permitted monthly with nominal fees thereafter. Participants
can set up payees to receive regular or variable payments simply by calling an
800 number.

DIRECT DEPOSIT--Regular payments from customers, receivables and other
sources may be eligible for electronic deposit into BSA Participants' accounts.
This feature permits the investor's money to be invested sooner and eliminates
excess paperwork.

LETTERS OF CREDIT--BSA Participants can have Standby Letters of Credit
issued on their behalf through PaineWebber at competitive rates and backed by
securities in their account.

B-2
<PAGE>

No person has been authorized to give
any information or to make any PAINEWEBBER RMA
representations not contained in the
Prospectus or in this Statement of MONEY MARKET PORTFOLIO
Additional Information in connection
with the offering made by the Prospectus U.S. GOVERNMENT PORTFOLIO
and, if given or made, such information
or representations must not be relied TAX-FREE FUND
upon as having been authorized by the
Funds or their distributor. The CALIFORNIA MUNICIPAL
Prospectus and this Statement of
Additional Information do not constitute MONEY FUND
an offering by the Funds or by the
distributor in any jurisdiction in which CONNECTICUT MUNICIPAL
such offering may not lawfully be made.
MONEY FUND

NEW JERSEY MUNICIPAL

MONEY FUND

NEW YORK MUNICIPAL
-------------------
TABLE OF CONTENTS MONEY FUND
PAGE
----

Investment Policies and Restrictions. 2 -------------------------------------
Directors/Trustees and Officers...... 34 Statement of Additional Information
Investment Advisory, Administration August 29, 1996
and Distribution Arrangements..... 43
Portfolio Transactions.............. 48
Additional Information Regarding
Redemptions....................... 50
Valuation of Shares................. 50
Taxes............................... 51
Calculation of Yield................ 60
Other Information................... 62
Financial Statements................ 63
Appendix A.......................... A-1
Appendix B.......................... B-1 -------------------------------------

<PAGE>

THE FUND IS A SERIES OF PAINEWEBBER RMA PAINEWEBBER
MONEY FUND, INC. THIS PROSPECTUS
CONCISELY SETS FORTH INFORMATION ABOUT RETIREMENT MONEY FUND
THE FUND A PROSPECTIVE INVESTOR SHOULD
KNOW BEFORE INVESTING. PLEASE RETAIN 1285 AVENUE OF THE AMERICAS
THIS PROSPECTUS FOR FUTURE REFERENCE. A NEW YORK, NEW YORK 10019
STATEMENT OF ADDITIONAL INFORMATION
DATED AUGUST 29, 1996 (WHICH IS
INCORPORATED BY REFERENCE HEREIN) HAS
BEEN FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ("SEC"). THE
STATEMENT OF ADDITIONAL INFORMATION CAN
BE OBTAINED WITHOUT CHARGE, AND FURTHER
INQUIRIES CAN BE MADE, BY CONTACTING THE
FUND, YOUR PAINEWEBBER INVESTMENT
EXECUTIVE OR PAINEWEBBER'S CORRESPONDENT
FIRMS OR BY CALLING TOLL-FREE
1-800-647-1568.

- --------------------------------------- ---------------------------------------

AN INVESTMENT IN THE FUND IS NEITHER A PROFESSIONALLY MANAGED MONEY MARKET
INSURED NOR GUARANTEED BY THE U.S. FUND OFFERED TO INDIVIDUAL RETIREMENT
GOVERNMENT. WHILE THE FUND SEEKS TO ACCOUNTS AND OTHER QUALIFIED RETIREMENT
MAINTAIN A STABLE NET ASSET VALUE OF PLANS SEEKING:
$1.00 PER SHARE, THERE CAN BE NO
ASSURANCE THAT IT WILL BE ABLE TO DO /X/ CURRENT INCOME
SO.
/X/ HIGH LIQUIDITY

/X/ CONSERVATION OF CAPITAL

- -------------------------------------- ----------------------------------------

THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION NOR
HAS ANY SUCH COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

AUGUST 29, 1996

- --------------------------------------------------------------------------------
<PAGE>
PAINEWEBBER RETIREMENT MONEY FUND
HIGHLIGHTS

See elsewhere in the Prospectus for more information on the topics discussed
in these highlights.

<TABLE>
<S> <C>
The Fund: PaineWebber Retirement Money Fund ("Fund") is a professionally
managed, diversified money market fund offered exclusively to
individual retirement accounts and other qualified retirement plans.
The Fund is a series of a Maryland corporation ("Corporation").
Investment Objective
and Policies: Current income consistent with liquidity and conservation of
capital; invests primarily in high quality money market instruments.
Net Assets: Over $3.5 billion at July 31, 1996.
Distributor and
Investment Adviser: PaineWebber Incorporated ("PaineWebber"). See "Management."
Sub-Adviser: Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins").
Purchases: Shares of common stock are available exclusively through PaineWebber
and its correspondent firms. See "Purchases."
Redemptions: Shares may be redeemed through PaineWebber or its correspondent
firms. See "Redemptions."
Yield: Based on current money market rates; quoted in the financial section
of most newspapers.
Dividends: Declared daily and paid monthly. See "Dividends and Taxes."
Reinvestment: All dividends are automatically paid in Fund shares.
Minimum Purchase: $25 minimum for first purchase; no minimum for subsequent purchases.
Check Writing: Available to plan owners eligible for distributions; $250 minimum
per check.
Public Offering Price: Net asset value, which the Fund seeks to maintain at $1.00 per
share.
</TABLE>

WHO SHOULD INVEST. The Fund is designed for investors seeking safety,
liquidity and current income. Shares of the Fund are offered to qualified
retirement plans, including pension and profit-sharing plans, whether
established by corporations, partnerships or self-employed individuals and
individual retirement accounts ("Retirement Plans"). The Fund provides a
convenient means for Retirement Plans to enjoy current income at money market
rates with minimal risk of fluctuation of principal.

RISK FACTORS. There can be no assurance that the Fund will achieve its
investment objective. In periods of declining interest rates, the Fund's yield
will tend to be somewhat higher than prevailing

2
<PAGE>
market rates, and in periods of rising interest rates, the Fund's yield
generally will be somewhat lower. See "Investment Objective and Policies."

EXPENSES OF INVESTING IN THE FUND. The following tables are intended to
assist investors in understanding the expenses associated with investing in the
Fund.

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<CAPTION>
Sales charge on purchases of shares................................. None
<S> <C>
Sales charge on reinvested dividends................................ None
Redemption fee or deferred sales charge............................. None
</TABLE>

ANNUAL FUND OPERATING EXPENSES*
(AS A PERCENTAGE OF AVERAGE NET ASSETS)

<TABLE>
<CAPTION>
Management fees............................................... 0.41%
<S> <C> <C>
12b-1 fees.................................................... 0.08%
Other expenses................................................ 0.21%
----
Total operating expenses...................................... 0.70%
----
----
</TABLE>

- ------------

* See "Management" for additional information. The fees and expenses shown are
those actually incurred for the fiscal year ended June 30, 1996.

EXAMPLE OF EFFECT OF FUND EXPENSES

An investor would pay directly or indirectly the following expenses on a
$1,000 investment in the Fund, assuming a 5% annual return:

<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
- -------- ----------- ---------- ---------
<S> <C> <C> <C>
$7 $22 $ 39 $87
</TABLE>

THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND THE FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
THE ACTUAL EXPENSES OF THE FUND WILL DEPEND UPON, AMONG OTHER THINGS, THE LEVEL
OF AVERAGE NET ASSETS AND THE EXTENT TO WHICH THE FUND INCURS VARIABLE EXPENSES,
SUCH AS TRANSFER AGENCY COSTS.

3
<PAGE>
FINANCIAL HIGHLIGHTS

The table below provides selected per share data and ratios for one share of
the Fund for the periods shown. This information is supplemented by the
financial statements and accompanying notes appearing in the Fund's Annual
Report to Shareholders for the fiscal year ended June 30, 1996, and the report
of Ernst & Young LLP, independent auditors, appearing therein. Both are
incorporated by reference into the Statement of Additional Information, and the
Annual Report to Shareholders may be obtained without charge by calling
1-800-647-1568. The financial statements and notes, as well as the information
in the table below insofar as it relates to each of the five fiscal years in the
period ended June 30, 1996, have been audited by Ernst & Young LLP whose
unqualified report appears in the Annual Report to Share-holders. The
information appearing below for the fiscal periods ended prior to June 30, 1992
also has been audited by Ernst & Young LLP, whose report thereon was
unqualified.

<TABLE>
<CAPTION>
FOR THE
PERIOD
JULY 2, 1988
(COMMENCEMENT
OF
FOR THE YEARS ENDED JUNE 30, OPERATIONS)
----------------------------------------------------------------------------------------- TO JUNE 30,
1996 1995 1994 1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------------
Net investment
income............ 0.050 0.047 0.028 0.027 0.044 0.068 0.079 0.081
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------------
Dividends from net
investment
income............ (0.050) (0.047) (0.028) (0.027) (0.044) (0.068) (0.079) (0.081)
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------------
Net asset value,
end of period.... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------------
---------- ---------- ---------- ---------- ---------- ---------- ---------- -------------
Total investment
return(1)......... 5.13% 4.83% 2.75% 2.78% 4.40% 6.80% 7.90% 8.10%

Ratios/Supplemental Data:
Net assets, end of
period (000's).... $3,500,508 $2,966,199 $2,450,235 $2,280,840 $2,163,935 $2,122,973 $1,812,092 $1,340,550
Expenses to
average net
assets............ 0.70% 0.78% 0.77% 0.79% 0.79% 0.79% 0.85% 0.91%*
Net investment
income to average
net assets........ 5.01% 4.75% 2.77% 2.76% 4.39% 6.69% 7.84% 8.13%*
</TABLE>

- ------------

* Annualized

(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and other
distributions at net asset value on the payable dates, and a sale at net
asset value on the last day of each period reported. Total investment
returns for periods of less than one year have not been annualized.

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to provide current income consistent with
liquidity and conservation of capital. The Fund invests in high quality money
market instruments having
or deemed to have remaining maturities of 13 months or less. These instruments
include U.S. government securities, obligations of U.S. and foreign banks,
commercial paper and other short-term corporate obligations, corporate bonds and
notes, variable and floating rate

4
<PAGE>
securities and participation interests or repurchase agreements involving any of
the foregoing securities. Participation interests are pro rata interests in
securities held by others. The Fund maintains a dollar-weighted average
portfolio maturity of 90 days or less.

U.S. GOVERNMENT SECURITIES. The U.S. government securities in which the Fund
may invest include direct obligations of the U.S. Treasury (such as Treasury
bills, notes and bonds) and obligations issued by U.S. government agencies and
instrumentalities. The Fund may invest in U.S. government securities that are
supported by the full faith and credit of the U.S. government (such as
Government National Mortgage Association certificates), securities supported
primarily or solely by the creditworthiness of the issuer (such as securities of
the Resolution Funding Corporation and the Tennessee Valley Authority) and
securities that are supported primarily or solely by specific pools of assets
and the creditworthiness of a U.S. government-related issuer (such as
mortgage-backed securities issued by the Federal National Mortgage Association).

The Fund may also acquire custodial receipts that evidence ownership of
future interest payments, principal payments or both that have been "stripped"
from certain U.S. Treasury notes or bonds. Such notes and bonds are held in
custody by a bank on behalf of the owners of such notes or bonds. These
custodial receipts are known by various names, including "Treasury Investment
Growth Receipts" ("TIGRs") and "Certificates of Accrual on Treasury Securities"
("CATS"). The Fund also may invest in separately traded principal and interest
components of securities issued or guaranteed by the U.S. Treasury. The
principal and interest components of selected securities are traded
independently under the Separate Trading of Registered Interest and Principal of
Securities ("STRIPS") program. Under the STRIPS program, the principal and
interest components are individually numbered and separately issued by the U.S.
Treasury at the request of depository financial institutions, which then trade
the component parts independently. The staff of the SEC currently takes the
position that interests in "stripped" U.S. government securities that are not
part of the STRIPS program are not U.S. government securities.

OTHER INVESTMENTS. The Fund may invest in obligations (including
certificates of deposit, bankers' acceptances, and similar obligations) of
banks, including foreign branches of domestic banks and foreign and domestic
branches of foreign banks, having total assets in excess of $1.5 billion at the
time of purchase. The Fund may invest in non-negotiable time deposits of U.S.
banks, savings associations and similar depository institutions having total
assets in excess of $1.5 billion at the time of purchase only if the time
deposits have maturities of seven days or less. The Fund may also invest in
interest-bearing savings deposits in U.S. banks and savings associations having
total assets of $1.5 billion or less, provided that the principal amounts at
each such bank are fully insured by the Federal Deposit Insurance Corporation
and the aggregate amount of such deposits (plus accrued interest) does not
exceed 5% of the Fund's assets.

The commercial paper and other short-term corporate obligations purchased by
the Fund consist only of obligations that Mitchell Hutchins determines, pursuant
to procedures adopted by the Corporation's board of directors, present minimal
credit risks and are either (1) rated in the highest short-term rating category
by at least two nationally recognized statistical rating organizations
("NRSROs"), (2) rated in the highest short-term rating category by a single
NRSRO if only that NRSRO

5
<PAGE>
has assigned the obligations a short-term rating or (3) unrated, but determined
by Mitchell Hutchins to be of comparable quality ("First Tier Securities"). The
Fund generally may invest no more than 5% of its total assets in the securities
of a single issuer (other than securities issued by the U.S. government, its
agencies or instrumentalities).

INVESTMENT CONSIDERATIONS. In managing the Fund's portfolio, Mitchell
Hutchins may employ a number of professional money management techniques,
including varying the composition and the average weighted maturity of the
Fund's portfolio based upon its assessment of the relative values of various
money market instruments and future interest rate patterns, in order to respond
to changing economic and money market conditions and to shifts in fiscal and
monetary policy. Mitchell Hutchins also may seek to improve the Fund's yield by
purchasing or selling securities to take advantage of yield disparities among
similar or dissimilar money market instruments that regularly occur in the money
market.

In periods of declining interest rates, the Fund's yield will tend to be
somewhat higher than prevailing market rates, and in periods of rising interest
rates the opposite will be true. Also, when interest rates are falling, net cash
inflows from the continuous sale of Fund shares are likely to be invested in
portfolio instruments producing lower yields than the balance of the Fund's
portfolio, thereby reducing the Fund's yield. In periods of rising interest
rates, the opposite can be true. There can be no assurance that the Fund will
achieve its investment objective.

VARIABLE AND FLOATING RATE SECURITIES. The Fund may purchase variable and
floating rate securities with remaining maturities in excess of 13 months issued
by U.S. government agencies or instrumentalities or guaranteed by the U.S.
government, or (if subject to a demand feature exercisable within 13 months or
less) issued by U.S. companies. The yield of these securities is adjusted in
relation to changes in specific rates, such as the prime rate, and different
securities may have different adjustment rates. The Fund's investment in these
securities must comply with conditions established by the SEC under which they
may be considered to have remaining maturities of 13 months or less. Certain of
these obligations carry a demand feature that gives the Fund the right to tender
them back to the issuer or a remarketing agent and receive the principal amount
of the security prior to maturity. The demand feature may be backed by a letter
of credit or other liquidity support arrangement provided by a bank or other
financial institution, whose credit standing affects the credit quality of the
obligation. Changes in the credit quality of those institu-
tions could cause losses to the Fund and affect its share price.

Variable rate securities include variable amount master demand notes, which
are unsecured redeemable obligations that permit investment of varying amounts
at fluctuating interest rates under a direct agreement between the issuer and
the Fund. The principal amount of these notes may be increased from time to time
by the parties (subject to specified maximums) or decreased by the Fund or the
issuer. These notes are payable on demand and are typically unrated.

REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which the
Fund purchases securities from a bank or recognized securities dealer and
simultaneously commits to resell the securities to that bank or dealer at an
agreed-upon date or upon demand and at a price reflecting a market rate of
interest unrelated to the coupon rate or maturity of the purchased securities.
Because repurchase agreements carry certain risks not associated with direct
invest-

6
<PAGE>
ments in securities, including possible decline in the market value of the
underlying securities and delays and costs to the Fund if the other party to the
repurchase agreement becomes insolvent, the Fund intends to enter into
repurchase agreements only with banks and dealers in transactions believed by
Mitchell Hutchins to present minimal credit risks in accordance with guidelines
established by the Corporation's board of directors.

LENDING OF PORTFOLIO SECURITIES. The Fund
is authorized to lend up to 33 1/3% of the total
value of its portfolio securities to broker-dealers
or institutional investors that Mitchell Hutchins
deems qualified. Lending securities enables the
Fund to earn additional income, but could result
in a loss or delay in recovering securities.

FOREIGN BANK OBLIGATIONS. The Fund may invest in U.S. dollar-denominated
obligations of domestic and foreign branches of foreign banks and foreign
branches of domestic banks. These investments may involve special risks, arising
both from political and economic developments abroad and differences between
foreign and U.S. regulatory systems. These risks include possible withholding
taxes, seizure of foreign deposits, currency controls, interest limitations or
other government restrictions that might affect payment of principal or interest
on securities held by the Fund. Additionally, there may be less public
information available about foreign banks and their branches, and legal remedies
for defaults or disputes may have to be pursued in foreign courts, whose
procedures may differ substantially from those of U.S. courts.

OTHER INFORMATION. The Fund may borrow money for temporary purposes from
banks, or, with respect to up to 5% of its net assets, through reverse
repurchase agreements, but aggregate borrowings may not exceed 10% of its total
assets.

The Fund may not invest more than 10% of its net assets in illiquid
securities, including repurchase agreements with maturities in excess of seven
days.

The Fund's investment objective may not be changed without the approval of
the Fund's shareholders. Certain investment limitations, as described in the
Statement of Additional Information, also may not be changed without shareholder
approval. All other investment policies may be changed by the Corporation's
board of directors without shareholder approval.

PURCHASES

GENERAL. Fund shares are offered to Retirement Plans through brokerage
accounts established as Retirement Plan Sweep Accounts for such Retirement Plans
at PaineWebber or its correspondent firms. The minimum initial investment is
$25. Cash balances of $1 or more in a Retirement Plan Sweep Account (including
proceeds from securities sold) are invested daily, provided that the Fund
account value after any such subsequent purchase is at least $25. The Fund and
PaineWebber reserve the right to reject any purchase order and to suspend the
offering of Fund shares for a period of time.

An order to purchase Fund shares will be executed on the Business Day on
which federal funds become available to the Fund, at the Fund's next-determined
net asset value per share. A "Business Day" is any day on which the Boston
offices of the Fund's custodian, State Street Bank and Trust Company
("Custodian"), and the New York City offices of PaineWebber and PaineWebber's
bank are all open for business. "Federal funds" are funds deposited by a
commercial bank in an account at a Federal Reserve Bank that can be transferred
to a similar account of another bank in one day and thus may be made immediately
available to the Fund through its Custodian.

7
<PAGE>

To the extent that amounts transferred by check or wire or from funds held
at PaineWeb-ber into a Retirement Plan Sweep Account cre-ate a free credit cash
balance, that cash balance will be automatically invested in Fund shares, as
described above, when federal funds are availa-ble for the investment, unless
the account holder specifically instructs its PaineWebber Invest-ment Executive
or correspondent firm not to purchase Fund shares with such amounts.

On any Business Day, the Fund will accept purchase orders and credit shares
to investors' accounts as follows.

PURCHASES WITH FUNDS HELD AT PAINEWEBBER. Investors may invest in Fund
shares with funds held in their Retirement Plan Sweep Account, including funds
from the sale of secur-ities, as described above under "General." Federal funds
normally are available for cash balances arising from the sale of securities
held in a Retirement Plan brokerage account on the Business Day following
settlement, but in some cases can take longer.

PURCHASES BY CHECK. Investors may purchase Fund shares by depositing into
their Retirement Plan checks drawn on a U.S. bank. The Retirement Plan's
brokerage account number should be included on the check.

As noted above, Fund shares will be purchased when federal funds are
available. Federal funds are deemed available to the Fund two Business Days
after deposit of a personal check and one Business Day after deposit of a
cashier's or certified check. PaineWebber may benefit from the temporary use of
the proceeds of personal checks to the extent those checks are converted to
federal funds in fewer than two Business Days.

PURCHASES BY WIRE. Investors may also purchase Fund shares by instructing
their banks to transfer federal funds by wire to their Retirement Plans. Wire
transfers should be directed to: The Bank of New York, ABA 021000018,
PaineWebber Inc., A/C 890-0114-088, OBI=FBO [Account Name]/[Brokerage Account
Number]. The wire must include the investor's name and the Retirement Plan
brokerage account number. Investors wishing to transfer federal funds into their
accounts should contact their PaineWebber Investment Executives or correspondent
firms to determine the appropriate wire instructions.

If PaineWebber receives a notice from an investor's bank of a wire transfer
of federal funds for a purchase of Fund shares by 12:00 noon, Eastern time, on a
Business Day, the purchase will be executed on that Business Day. All other wire
purchase orders will be executed at 12:00 noon, Eastern time, on the next
Business Day. PaineWebber and/or an investor's bank may impose a service charge
for wire purchases.

ELIGIBLE PLANS. PaineWebber offers a variety of Retirement Plans, including
Individual Retirement Accounts (standard and rollover), Simplified Employee
Pension Plans, Cash or Deferred Arrangement/Simplified Employee Pension Plans,
Profit Sharing Plans, 401(k) Plans, Money Purchase Plans, Defined Benefit Plans
and Target Benefit Plans. Other Retirement Plans also may be held in custody at
PaineWebber or its correspondent firms. For further information regarding any of
these Retirement Plans, investors should contact their PaineWebber Investment
Executives or correspondent firms.

Although the amount that may be contributed to a Retirement Plan in any one
year is subject to certain limitations, assets already held by a Retirement Plan
may be invested in the Fund without regard to such limitations.

Shares of the Fund may not be purchased by any Retirement Plan for which
either PaineWebber, Mitchell Hutchins or PW Trust

8
<PAGE>
Company is a fiduciary (within the meaning of the Employee Retirement Income
Security Act or the Internal Revenue Code) in any capacity other than solely by
reason of the sponsorship of a master or prototype plan adopted by such Plan or
the provision of nondiscretionary trust services to such Plan. Thus, if
PaineWebber, Mitchell Hutchins or PW Trust Company serves as investment manager
or renders investment advice to a Retirement Plan, that Plan
may not purchase Fund shares.

REDEMPTIONS

Shareholders may redeem any number of shares by submitting a redemption
request to PaineWebber. Shareholders should contact their PaineWebber Investment
Executives or correspondent firms to effect such redemptions. Fund shares will
be redeemed at the net asset value per share next determined after receipt by
the Fund's transfer agent ("Transfer Agent") of instructions from PaineWebber to
redeem. PaineWebber delivers such instructions to the Transfer Agent prior to
the determination of net asset value at 12:00 noon, Eastern time, on any
Business Day. In addition, unless shareholders otherwise notify their
PaineWebber Investment Executives or correspondent firms, any securities
purchase or other debit in their Retirement Plan brokerage accounts will be paid
for automatically on the settlement date by redeeming Fund shares held in such
accounts.

No adverse tax consequences result from a redemption of Fund shares if the
redemption proceeds remain in the Retirement Plan brokerage account.

Shareholders with questions about redemption requirements should consult
their PaineWebber Investment Executives or correspondent firms. Shareholders who
redeem all their shares will receive cash credits to their Retirement Plan
brokerage accounts for dividends earned on those shares to the day of
redemption. The redemption price may be more or less than the purchase price,
depending on the market value of the Fund's portfolio; however, the Fund
anticipates that its net asset value per share will normally be $1.00 per share.
See "Valuation of Shares."

Because the Fund incurs certain fixed costs in maintaining shareholder
accounts, the Fund reserves the right to redeem all Fund shares in any
shareholder account of less than $25 net asset value. If the Fund elects to do
so, it will notify the shareholder and provide the shareholder with an
opportunity to increase the amount invested to $25 or more within 60 days of the
notice. This notice may appear on the shareholder's account statement. If a
shareholder requests redemption of shares that were purchased recently, the Fund
may delay the payment of redemption proceeds until it is assured that it has
received good payment for the purchase of the shares. In the case of purchases
by check, this can take up to 15 days.

RETIREMENT PLAN DISTRIBUTIONS

Distributions from a Retirement Plan, except those representing returns of
non-deductible contributions thereto, generally are taxable income to the
participant. Distributions from a Retirement Plan to a participant prior to the
time the participant reaches age 59 1/2 or becomes permanently disabled may
subject the participant to an additional 10% penalty tax. Shareholders should
consult their tax advisers concerning the timing and consequences of
distributions from a Retirement Plan.

CHECK REDEMPTIONS. Shareholders eligible for distributions from their
Retirement Plan may redeem Fund shares by drawing a check, a supply of which may
be obtained through PaineWebber, for $250 or more against their Fund accounts.
With respect to Retirement

9
<PAGE>
Plans that permit participants to direct the investment of their Plan account
balances, only those Plan participants who are either 59 1/2 years of age or
older, permanently disabled or otherwise eligible for distributions are eligible
for the check redemption service; with respect to other Retirement Plans, the
Plan fiduciary having investment responsibility is eligible for the service.
When a check is presented to the Transfer Agent for payment, the Transfer Agent
will cause the Fund to redeem sufficient shares to cover the amount of the
check. The shareholder will continue to receive dividends on those shares until
the check is presented to the Transfer Agent for payment. The date on which the
Transfer Agent processes the check, not the date written on the check,
determines the year in which the distribution is reported to the Internal
Revenue Service. Shareholders who must take annual distributions by December 31
should allow sufficient time for processing.

Checks can be made payable to the order of any person in any amount not less
than $250; however, these checks may not be used to purchase securities in
transactions with PaineWebber. Shareholders will receive copies of their
cancelled checks. If a shareholder has insufficient shares to cover a check, the
check will be returned to the payee marked "nonsufficient funds." Checks written
in amounts less than $250 also will be returned. Shareholders should not
attempt, by writing checks, to redeem all assets held in their Retirement Plan
brokerage accounts, transfer such accounts, correct excess contributions to a
Retirement Plan or withdraw amounts classified as voluntary contributions to a
Retirement Plan. All check redemptions will be reported to the Internal Revenue
Service as taxable distributions; therefore, any of these actions could have
adverse tax consequences. Charges may be imposed for specially imprinted checks,
copies of cancelled checks, stop payment orders, checks returned "nonsufficient
funds" and checks returned because they are written for less than $250. Charges
not paid by the shareholder may be paid by the automatic redemption of an
appropriate number of Fund shares. PaineWebber reserves the right to modify or
terminate the check redemption service at any time or to impose a service charge
in connection with it.

Shareholders who are interested in the check redemption service should
contact their PaineWebber Investment Executives or correspondent firms.

SYSTEMATIC WITHDRAWAL PLAN. Shareholders eligible for distributions from
their Retirement Plan may have PaineWebber redeem a portion of their Fund shares
monthly, quarterly or semi-annually under the Fund's systematic withdrawal plan
("SWP"). Minimum monthly, quarterly and semi-annual withdrawal amounts are $100,
$300 and $600, respectively. The SWP is not available to shareholders who have
elected to have income taxes withheld from their Retirement Plan distributions.
The proceeds of redemptions under the SWP will be mailed directly to the
shareholder or deposited into a non-Retirement Plan account held at PaineWebber.
A shareholder's participation in the SWP will be suspended if the shareholder's
Fund balance is below the minimum withdrawal amount designated by the
shareholder (for example, monthly withdrawals will be suspended for a
shareholder whose Fund balance is below $100). With respect to Retirement Plans
that permit participants to direct the investment of their Retirement Plan
account balances, only those participants who are either 59 1/2 years of age or
older, permanently disabled or otherwise eligible for distributions are eligible
to participate in the SWP; with respect to other Retirement Plans, the
Retirement Plan fiduciary having investment responsibility is eligible for the
SWP. Shareholders who are interested in the SWP should contact their PaineWebber
Invest-

10
<PAGE>

ment Executives or correspondent firms for more information and an application.
PaineWebber reserves the right to modify or terminate the SWP at any time or to
impose a service charge in connection with it.

VALUATION OF SHARES

The Fund uses its best efforts to maintain its net asset value at $1.00 per
share. Net asset value per share is determined by dividing the Fund's net assets
by the number of Fund shares outstanding. The Fund's net assets are equal to the
value of its investments and other assets minus its liabilities. The Fund's net
asset value is determined once each Business Day at 12:00 noon, Eastern time.

The Fund values its portfolio securities using the amortized cost method of
valuation, under which market value is approximated by amortizing the difference
between the acquisition cost and value at maturity of an instrument on a
straight-line basis over its remaining life. All cash, receivables and current
payables are carried at their face value. Other assets are valued at fair value
as determined in good faith by or under the direction of the Corporation's board
of directors.

DIVIDENDS AND TAXES

DIVIDENDS. Each Business Day, the Fund declares as dividends all of its net
investment income. Shares begin earning dividends on the day of purchase;
dividends are accrued to shareholder accounts daily and are automatically paid
in additional Fund shares monthly. Shares do not earn dividends on the day of
redemption. Net investment income includes accrued interest and earned discount
(including both original issue and market discounts), less amortization of
market premium and accrued expenses.

The Fund distributes its net short-term capital gain, if any, annually but
may make more frequent distributions of such gain if necessary to maintain its
net asset value per share at $1.00 or to avoid income or excise taxes. The Fund
does not expect to realize any net long-term capital gain and thus does not
anticipate payment of any long-term capital gain distributions.

TAXES. The Fund intends to continue to qualify for treatment as a regulated
investment company under the Internal Revenue Code so that it will be relieved
of federal income tax on that part of its investment company taxable income
(consisting generally of net investment income and net short-term capital gain,
if any) that is distributed to its shareholders.

Dividends received by a Retirement Plan ordinarily will not be subject to
taxation until a participant withdraws the proceeds from the Retirement Plan
account. Generally, with-drawals from the Retirement Plan will be taxable as
ordinary income and, if made prior to the time the participant reaches age 59
1/2 or becomes permanently disabled, will be subject to an additional tax equal
to 10% of the amount distributed. If the distributions from a Retirement Plan
(other than a governmental or church plan) for any taxable year following the
year in which the participant reaches age 70 1/2 are less than the "minimum
required distribution" for that taxable year, an excise tax equal to 50% of the
deficiency may be imposed. Moreover, certain contributions to a Retirement Plan
in excess of the amounts permitted by law may be subject to an excise tax.

The Fund notifies its shareholders following the end of each calendar year
of the amount of all dividends paid that year.

The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders; see the
Statement of Additional Information for a further discussion. There may be other
federal,

11
<PAGE>
state or local tax considerations applicable to a particular investor.
Prospective shareholders are urged to consult their tax advisers.

MANAGEMENT

The Corporation's board of directors, as part of its overall management
responsibility, oversees various organizations responsible for the Fund's
day-to-day management. PaineWebber, the Fund's investment adviser and
administrator, provides a continuous investment program for the Fund and
supervises all aspects of its operations. As sub-adviser to the Fund, Mitchell
Hutchins makes and implements investment decisions and, as sub-administrator, is
responsible for the day-to-day administration of the Fund.

PaineWebber receives a monthly fee for these services and, for the fiscal
year ended June 30, 1996, the Fund's effective advisory and administration fee
paid to PaineWebber was equal to 0.41% of the Fund's average daily net assets.
PaineWebber (not the Fund) pays Mitchell Hutchins a fee for its sub-advisory and
sub-administration services, at an annual rate of 20% of the fee received by
PaineWebber from the Fund for advisory and administrative services.

The Fund pays PaineWebber an annual fee of $4.00 per active Fund account,
plus certain out-of-pocket expenses, for certain services not performed by the
Transfer Agent. The Fund also incurs other expenses. For the fiscal year ended
June 30, 1996, the Fund's ratio of expenses as a percentage of average net
assets was 0.70%. The Fund's expense ratio may be higher than those of other
PaineWebber money market funds due to the relatively small size of the accounts
in the Fund.

PaineWebber and Mitchell Hutchins are located at 1285 Avenue of the
Americas, New York, New York 10019. Mitchell Hutchins is a wholly owned
subsidiary of PaineWebber, which is in turn wholly owned by Paine Webber Group
Inc., a publicly owned financial services holding company. At July 31, 1996,
PaineWebber or Mitchell Hutchins was investment adviser of 31 registered
investment companies with 64 separate portfolios and aggregate assets in excess
of $30 billion.

Mitchell Hutchins personnel may engage in securities transactions for their
own accounts pursuant to a code of ethics that establishes procedures for
personal investing and restricts certain transactions.

DISTRIBUTION ARRANGEMENTS. PaineWebber is the distributor of Fund shares.
Under a plan of distribution ("Plan"), the Fund is authorized to pay PaineWebber
a 12b-1 service fee at the annual rate of up to 0.15% of the Fund's average
daily net assets. The Fund currently pays PaineWebber a 12b-1 service fee at the
annual rate of 0.08% of the Fund's average daily net assets, and any increase in
this annual rate would require prior approval by the Corporation's board of
directors.

Under the Plan, PaineWebber uses the 12b-1 service fee to pay PaineWebber
Investment Executives and correspondent firms for shareholder servicing,
currently at the annual rate of 0.06% of the Fund's average daily net assets
held in accounts serviced by such Investment Executives and correspondent firms.
The fee is also used to offset PaineWebber's other expenses in servicing and
maintaining shareholder accounts. These expenses may include the costs of the
PaineWebber branch office in which the Investment Executive is based, such as
rent, communications equipment, employee salaries and other overhead costs.

During the period they are in effect, the Plan and a related distribution
contract ("Distribution Contract") obligate the Fund to pay the 12b-1 service
fee to PaineWebber as
com-

12
<PAGE>
pensation for its service activities and not as reimbursement for specific
expenses incurred. Thus, even if PaineWebber's expenses exceed its 12b-1 service
fee, the Fund will not be obliged to pay more than the fee and, if PaineWebber's
expenses are less than the fee, it will retain its full fee and realize a
profit. The Fund will pay the 12b-1 service fee to PaineWebber until either the
Plan or the Distribution Contract is terminated or not renewed. In that event,
PaineWebber's 12b-1 service expenses in excess of 12b-1 service fees received or
accrued through the termination date will be PaineWebber's sole responsibility
and not obligations of the Fund.

PERFORMANCE INFORMATION

From time to time the Fund may advertise its "yield" and "effective yield."
Both yield figures are based on historical earnings and are not intended to
indicate future performance. The "yield" of the Fund is the income on an
investment in the Fund over a specified seven-day period. This income is then
"annualized" (that is, assumed to be earned each week over a 52-week period) and
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned is assumed to be reinvested.
The "effective yield" will be higher than the "yield" because of the compounding
effect of this assumed reinvestment.

The Fund may also advertise other performance data, which may consist of the
annual or cumulative return (including realized net short-term capital gain, if
any) earned on a hypothetical investment in the Fund since it began operations
on July 2, 1988, or for shorter periods. This return data may or may not assume
reinvestment of dividends (compounding).

The performance of shareholder accounts with small balances will differ from
the quoted performance because daily income for each shareholder account is
rounded to the nearest whole penny. Accordingly, very small shareholder accounts
(approximately $33 or less at current interest rates) that generate less than
1/2 cent per day of income will earn no dividends.

GENERAL INFORMATION

The Corporation's name is "PaineWebber RMA Money Fund, Inc." The Corporation
was incorporated in Maryland on July 2, 1982 and is registered with the SEC as
an open-end management investment company. The Corporation has an authorized
capitalization of 30 billion shares of $0.001 par value common stock; 10 billion
of these shares are designated as shares of the Fund and the remaining shares
are classified as shares of the two other series of the Corporation.

The Corporation does not hold annual shareholder meetings. There normally
will be no meetings of shareholders to elect directors unless fewer than a
majority of the directors holding office have been elected by shareholders. The
directors are required to call a meeting of shareholders when requested in
writing to do so by the shareholders of record holding at least 25% of the
Corporation's outstanding shares. Each share of the Fund has equal voting,
dividend and liquidation rights. The shares of each series of the Corporation
will be voted separately except when an aggregate vote of all series is required
by the Investment Company Act of 1940 or under Maryland law.

CERTIFICATES. To avoid additional operating expenses and for investor
convenience, share certificates are not issued. Ownership of Fund shares is
recorded on a stock register by the Transfer Agent, and shareholders have the
same rights of ownership with respect to such shares as if certificates had been
issued.

13
<PAGE>

REPORTS. Shareholders receive audited annual and unaudited semi-annual
financial statements of the Fund. All purchases and redemptions of Fund shares
are confirmed to shareholders at least quarterly. To avoid sending duplicate
copies of materials to households, the Fund may mail only one copy of each
annual and semi-annual report to shareholders having the same last name and
address on the Fund's records. However, each shareholder may call 201-902-8312
to ask that copies of those materi-als be sent personally to that shareholder.

CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, One
Heritage Drive, North Quincy, Massachusetts 02171, is custodian of the Fund's
assets. PFPC Inc., a subsidiary of PNC Bank, National Association, whose
principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809,
is the Fund's transfer and dividend disbursing agent.

14
<PAGE>

TABLE OF CONTENTS

Highlights ............................2

Financial Highlights ..................4 PAINEWEBBER

Investment Objective and Policies .....4 PROSPECTUS

Purchases .............................7

Redemptions ...........................9

Retirement Plan Distributions .........9

Valuation of Shares ..................11

Dividends and Taxes ..................11

Management ...........................12
---------------------
Performance Information ..............13

General Information ..................13

R E T I R E M E N T

M O N E Y

F U N D

- ----------------------------------------

No person has been authorized to give
any information or to make any
representations not contained in this
Prospectus in connection with the
offering made by this Prospectus and, If
given or made, such information or
representations must not be relied upon
as having been authorized by the Fund or
its distributor. This Prospectus does not
constitute an offering by the Fund or by
the distributor in any jurisdiction in
which offering may not lawfully be made.

[PAINEWEBBER LOGO]
A U G U S T 2 9, 1 9 9 6

<PAGE>

PAINEWEBBER RETIREMENT MONEY FUND
1285 Avenue of the Americas
New York, New York 10019
STATEMENT OF ADDITIONAL INFORMATION

PaineWebber Retirement Money Fund ("Fund") is a diversified series of
PaineWebber RMA Money Fund, Inc. ("Corporation"), a professionally managed money
market fund. The Fund seeks to provide investors with current income consistent
with liquidity and conservation of capital. The Fund's investment adviser,
administrator and distributor is PaineWebber Incorporated ("PaineWebber"); its
sub-adviser and sub-administrator is Mitchell Hutchins Asset Management Inc.
("Mitchell Hutchins"), a wholly owned subsidiary of PaineWebber. This Statement
of Additional Information is not a prospectus and should be read only in
conjunction with the Fund's current Prospectus, dated August 29, 1996. A copy of
the Prospectus may be obtained by contacting any PaineWebber Investment
Executive or correspondent firm. This Statement of Additional Information is
dated August 29, 1996.

INVESTMENT POLICIES AND RESTRICTIONS

The following supplements the information contained in the Prospectus
concerning the Fund's investment policies and limitations.

YIELDS AND RATINGS OF MONEY MARKET INVESTMENTS. The yields on the money
market instruments in which the Fund invests (such as commercial paper and bank
obligations) are dependent on a variety of factors, including general money
market conditions, conditions in the particular market for the obligation, the
financial condition of the issuer, the size of the offering, the maturity of the
obligation and the ratings of the issue. The ratings of nationally recognized
statistical rating organizations ("NRSROs") represent their opinions as to the
quality of the obligations they undertake to rate. Ratings, however, are general
and are not absolute standards of quality. Consequently, obligations with the
same rating, maturity and interest rate may have different market prices.
Subsequent to its purchase by the Fund, an issue may cease to be rated or its
rating may be reduced. In the event that a security in the Fund's portfolio
ceases to be a "First Tier Security," as defined in the Prospectus, or Mitchell
Hutchins becomes aware that a security has received a rating below the second
highest rating by any NRSRO, Mitchell Hutchins or the Corporation's board of
directors will consider whether the Fund should continue to hold the obligation.
A First Tier Security rated in the highest short-term rating category by a
single NRSRO at the time of purchase that subsequently receives a rating below
the highest rating category from a different NRSRO will continue to be
considered a First Tier Security.

REPURCHASE AGREEMENTS. As stated in the Prospectus, the Fund may enter into
repurchase agreements with respect to any security in which it is authorized to
invest, except that securities subject to repurchase agreements may have
maturities in excess of 13 months. The Fund maintains custody of the underlying
securities prior to their repurchase; thus, the obligation of the bank or
securities dealer to pay the repurchase price on the date agreed to is, in
effect, secured by such securities. If the value of these securities is less
than the repurchase price, plus any agreed-upon additional amount, the other
party to the agreement must provide additional collateral so that at all times
the collateral is at least equal to the repurchase price, plus any agreed-upon
additional amount. The difference between the total amount to be received upon
repurchase of the securities and the price

<PAGE>

that was paid by the Fund upon acquisition is accrued as interest and included
in the Fund's net investment income. Repurchase agreements carry certain risks
not associated with direct investments in securities. The Fund intends to enter
into repurchase agreements only with banks and dealers believed by Mitchell
Hutchins to present minimum credit risks in accordance with guidelines
established by the Corporation's board of directors. Mitchell Hutchins will
review and monitor the creditworthiness of those institutions under the board's
general supervision.

REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements with banks and securities dealers up to an aggregate value of not
more than 5% of its net assets. Such agreements involve the sale of securities
held by the Fund subject to its agreement to repurchase the securities at an
agreed-upon date and price reflecting a market rate of interest. Such agreements
are considered to be borrowings and may be entered into only for temporary or
emergency purposes. While a reverse repurchase agreement is outstanding, the
Fund will maintain with its custodian in a segregated account cash or liquid
securities, marked to market daily, in an amount at least equal to the Fund's
obligations under the reverse repurchase agreement.

ILLIQUID SECURITIES. The Fund may not invest more than 10% of its net assets
in illiquid securities. The term "illiquid securities" for this purpose means
securities that cannot be disposed of within seven days in the ordinary course
of business at approximately the amount at which the Fund has valued the
securities and includes, among other things, restricted securities other than
those Mitchell Hutchins has determined to be liquid pursuant to guidelines
established by the Corporation's board of directors and repurchase agreements
maturing in more than seven days.

Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for restricted securities
have developed as a result of Rule 144A, providing both readily ascertainable
values for restricted securities and the ability to liquidate an investment to
satisfy share redemption orders. Such markets include automated systems for
trading, clearance and settlement of unregistered securities, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc. An
insufficient number of qualified institutional buyers interested in purchasing
certain restricted securities held by the Fund, however, could affect adversely
the marketability of such portfolio securities, and the Fund might be unable to
dispose of such securities promptly or at favorable prices.

The board of directors has delegated the function of making day-to-day
determinations of liquidity to Mitchell Hutchins, pursuant to guidelines
approved by the board. Mitchell Hutchins takes into account a number of factors
in reaching liquidity decisions, including (1) the frequency of trades for the
security, (2) the number of dealers that make quotes for the security, (3) the
number of dealers

2
<PAGE>
that have undertaken to make a market in the security, (4) the number of other
potential purchasers and (5) the nature of the security and how trading is
effected (e.g., the time needed to sell the security, how offers are solicited
and the mechanics of transfer). Mitchell Hutchins monitors the liquidity of
restricted securities in the Fund's portfolio and reports periodically on such
decisions to the board.

FLOATING RATE AND VARIABLE RATE DEMAND INSTRUMENTS. As noted in the
Prospectus, the Fund may invest in floating rate and variable rate securities
with demand features. A demand feature gives the Fund the right to sell a
security back to a specified party, usually a remarketing agent, on a specified
date, at a price equal to the amortized cost of the security plus accrued
interest. A demand feature is often backed by a letter of credit, guarantee or
other liquidity support arrangement from a bank or other financial institution
that may be drawn upon on demand, after specified notice, for all or any part
of the exercise price of the demand feature. Generally, the Fund intends to
exercise demand features only (1) upon a default under the terms of the
underlying security, (2) to maintain the Fund's portfolio in accordance with
its investment objective and policies or applicable legal or regulatory
requirements or (3) as needed to provide liquidity to the Fund in order to meet
redemption requests. The ability of a bank or other financial institution to
fulfill its obligations under a letter of credit, guarantee or other liquidity
arrangement might be affected by possible financial difficulties of its
borrowers, adverse interest rate or economic conditions, regulatory limitations
or other factors. The interest rate on floating rate or variable rate
obligations ordinarily is readjusted on the basis of the prime rate of the bank
that originated the financing or some other index or published rate, such as the
90-day U.S. Treasury Bill rate, or is otherwise reset to reflect market rates of
interest. Generally, these interest rate adjustments cause the market value of
floating rate and variable rate securities to fluctuate less than the market
value of fixed rate obligations.

LENDING OF PORTFOLIO SECURITIES. As indicated in the Prospectus, the Fund is
authorized to lend up to 33 1/3% of its portfolio securities to broker-dealers
or institutional investors that Mitchell Hutchins deems qualified, but only when
the borrower maintains acceptable collateral with the Fund's custodian, marked
to market daily, in an amount at least equal to the market value of the
securities loaned, plus accrued interest and dividends. Acceptable collateral is
limited to cash, U.S. government securities and irrevocable letters of credit
that meet certain guidelines established by Mitchell Hutchins. In determining
whether to lend securities to a particular broker-dealer or institutional
investor, Mitchell Hutchins will consider, and during the period of the loan
will monitor, all relevant facts and circumstances, including the
creditworthiness of the borrower. The Fund will retain authority to terminate
any loan at any time. The Fund may pay reasonable administrative and custodial
fees in connection with a loan and may pay a negotiated portion of the interest
earned on the cash or money market instruments held as collateral to the
borrower or placing broker. The Fund will receive reasonable interest on the
loan or a flat fee from the borrower and amounts equivalent to any dividends,
interest or other distributions on the securities loaned. The Fund will regain
record ownership of loaned securities to exercise beneficial rights, such as
voting and subscription rights and rights to dividends, interest or other
distributions, when regaining such rights is considered to be in the Fund's
interest.

INVESTMENT LIMITATIONS.

FUNDAMENTAL LIMITATIONS. The following fundamental investment
limitations cannot be changed without the affirmative vote of the lesser of (a)
more than 50% of the outstanding shares of the Fund or (b) 67% or more of the
shares present at a shareholders' meeting if more than 50% of the

3
<PAGE>

outstanding shares are represented at the meeting in person or by proxy. If a
percentage restriction is adhered to at the time of an investment or
transaction, a later increase or decrease in percentage resulting from changing
values of portfolio securities or amount of total assets will not be considered
a violation of any of the following limitations.

The Fund will not:

(1) purchase securities of any one issuer if, as a result, more than 5%
of the Fund's total assets would be invested in securities of that
issuer or the Fund would own or hold more than 10% of the outstanding
voting securities of that issuer, except that up to 25% of the Fund's
total assets may be invested without regard to this limitation, and
except that this limitation does not apply to securities issued or
guaranteed by the U.S. government, its agencies and instrumentalities
or to securities issued by other investment companies.

The following interpretation applies to, but is not a part of, this fundamental
restriction: Mortgage- and asset-backed securities will not be considered to
have been issued by the same issuer by reason of the securities
having the same sponsor, and mortgage- and asset-backed securities
issued by a finance or other special purpose subsidiary that are not
guaranteed by the parent company will be considered to be issued by a
separate issuer from the parent company.

(2) purchase any security if, as a result of that purchase, 25% or more
of the Fund's total assets would be invested in securities of issuers
having their principal business activities in the same industry,
except that this limitation does not apply to securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities
or to municipal securities or to certificates of deposit and bankers'
acceptances of domestic branches of U.S. banks.

The following interpretation applies to, but is not a part of, this fundamental
restriction: With respect to this limitation, domestic and foreign banking will
be considered to be different industries.

(3) issue senior securities or borrow money, except as permitted under
the Investment Company Act of 1940 ("1940 Act") and then not in
excess of 33 1/3% of the Fund's total assets (including the amount of
the senior securities issued but reduced by any liabilities not
constituting senior securities) at the time of the issuance or
borrowing, except that the Fund may borrow up to an additional 5% of
its total assets (not including the amount borrowed) for temporary or
emergency purposes.

(4) make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this
restriction, the acquisition of bonds, debentures, other debt
securities or instruments, or participations or other interests
therein and investments in government obligations, commercial paper,
certificates of deposit, bankers' acceptances or similar instruments
will not be considered the making of a loan.

(5) engage in the business of underwriting securities of other issuers,
except to the extent that the Fund might be considered an underwriter
under the federal securities laws in connection with its disposition
of portfolio securities.

4
<PAGE>

(6) purchase or sell real estate, except that investments in securities
of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other
instruments supported by interests in real estate are not subject to
this limitation, and except that the Fund may exercise rights under
agreements relating to such securities, including the right to
enforce security interests and to hold real estate acquired by reason
of such enforcement until that real estate can be liquidated in an
orderly manner.

(7) purchase or sell physical commodities unless acquired as a result of
owning securities or other instruments, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts
or derivative instruments.

NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The following non-fundamental
investment restrictions may be changed by vote of the Fund's board of directors
without shareholder approval.

The Fund will not:

(1) mortgage, pledge or hypothecate any assets except in connection with
permitted borrowings or the issuance of senior securities.

(2) purchase securities on margin, except for short-term credit necessary
for clearance of portfolio transactions and except that the Fund may
make margin deposits in connection with its use of financial options
and futures, forward and spot currency contracts, swap transactions
and other financial contracts or derivative instruments.

(6) invest in real estate limited partnerships.

(7) purchase portfolio securities while borrowings in excess of 5% of
its total assets are outstanding.

(8) make investments in warrants if such investments, valued at the
lower of cost or market, exceed 5% of the value of its net assets,
which amount may include warrants that are not listed on the New
York Stock Exchange, Inc. ("NYSE") or the American Stock Exchange,
Inc., provided that such unlisted warrants, valued at the lower of
cost or market, do not exceed 2% of the Fund's net assets.

5
<PAGE>
DIRECTORS AND OFFICERS

The directors and executive officers of the Corporation, their ages,
business addresses and principal occupations during the past five years are:

<TABLE>
<CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE CORPORATION OTHER DIRECTORSHIPS
- ---------------------------- ---------------------- ------------------------------------
<S> <C> <C>
Margo N. Alexander**; 49.... Director and President Mrs. Alexander is president, chief
executive officer and a director of
Mitchell Hutchins (since January
1995) and an executive vice
president and director of
PaineWebber. Mrs. Alexander is
president and a director or trustee
of 30 investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
Richard Q. Armstrong; 61.... Director Mr. Armstrong is chairman and
78 West Brother Drive principal of RQA Enterprises
Greenwich, CT 06830 (management consulting firm) (since
April 1991 and principal occupation
since March 1995). Mr. Armstrong is
also a director of Hi Lo Automotive,
Inc. He was chairman of the board,
chief executive officer and co-owner
of Adirondack Beverages (producer
and distributor of soft drinks and
sparkling/still waters) (October
1993-March 1995). Mr. Armstrong was
a partner of The New England
Consulting Group (management
consulting firm) (December 1992-
September 1993). He was managing
director of LVMH U.S. Corporation
(U.S. subsidiary of the French
luxury goods conglomerate, Louis
Vuitton Moet Hennessey Corporation)
(1987-1991) and chairman of its wine
and spirits subsidiary, Schieffelin
& Somerset Company (1987-1991). Mr.
Armstrong is a director or trustee
of 29 investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
E. Garrett Bewkes, Jr.**; Director and Chairman Mr. Bewkes is a director of Paine
69.......................... of the Board of Webber Group Inc. ("PW Group")
Directors (holding company of PaineWebber and
Mitchell Hutchins). Prior to
December 1995, he was a consultant
to PW Group. Prior to 1988, he was
chairman
</TABLE>

6
<PAGE>

<TABLE>
<CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE CORPORATION OTHER DIRECTORSHIPS
- ---------------------------- ---------------------- ------------------------------------
<S> <C> <C>
of the board, president and chief
executive officer of American
Bakeries Company. Mr. Bewkes is also
a director of Interstate Bakeries
Corporation and NaPro
Biotherapeutics, Inc. Mr. Bewkes is
a director or trustee of 30
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
Richard R. Burt; 49......... Director Mr. Burt is chairman of
1101 Connecticut Avenue, International Equity Partners
N.W. (international investments and
Washington, D.C. 20036 consulting firm) (since March 1994)
and a partner of McKinsey & Company
(management consulting firm) (since
1991). He is also a director of
American Publishing Company. He was
the chief negotiator in the
Strategic Arms Reduction Talks with
the former Soviet Union (1989-1991)
and the U.S. Ambassador to the
Federal Republic of Germany (1985-
1989). Mr. Burt is a director or
trustee of 29 investment companies
for which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
Mary C. Farrell**; 46....... Director Ms. Farrell is a managing director,
senior investment strategist, and
member of the Investment Policy
Committee of PaineWebber. Ms.
Farrell joined PaineWebber in 1982.
She is a member of the Financial
Women's Association and Women's
Economic Roundtable and is employed
as a regular panelist on Wall $treet
Week with Louis Rukeyser. She also
serves on the Board of Overseers of
New York University's Stern School
of Business. Ms. Farrell is a
director or trustee of 29 investment
companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Meyer Feldberg; 54.......... Director Mr. Feldberg is Dean and Professor
Columbia University of Management of the Graduate School
101 Uris Hall of Business, Columbia University.
New York, New York 10027 Prior to 1989, he was president of
the Illinois Institute of
Technology. Dean
</TABLE>

7
<PAGE>

<TABLE>
<CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE CORPORATION OTHER DIRECTORSHIPS
- ---------------------------- ---------------------- ------------------------------------
<S> <C> <C>
Feldberg is also a director of AMSCO
International Inc. (medical
instruments and supplies), Federated
Department Stores, Inc. and New
World Communications Group
Incorporated. Dean Feldberg is a
director or trustee of 29 investment
companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
George W. Gowen; 66......... Director Mr. Gowen is a partner in the law
666 Third Avenue firm of Dunnington, Bartholow &
New York, New York 10017 Miller. Prior to May 1994, he was a
partner in the law firm of Freyer,
Ross & Gowen. Mr. Gowen is also a
director of Columbia Real Estate
Investments, Inc. Mr. Gowen is a
director or trustee of 29 investment
companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Frederic V. Malek; 59....... Director Mr. Malek is chairman of Thayer
901 15th Street, N.W. Capital Partners (investment bank)
Suite 300 and a co-chairman and director of CB
Washington, D.C. 20005 Commercial Group Inc. (real estate).
From January 1992 to November 1992,
he was campaign manager of
Bush-Quayle '92. From 1990 to 1992,
he was vice chairman and, from 1989
to 1990, he was president of
Northwest Airlines Inc., NWA Inc.
(holding company of Northwest
Airlines Inc.) and Wings Holdings
Inc. (holding company of NWA Inc.).
Prior to 1989, he was employed by
the Marriott Corporation (hotels,
restaurants, airline catering and
contract feeding), where he most
recently was an executive vice
president and president of Marriott
Hotels and Resorts. Mr. Malek is
also a director of American
Management Systems, Inc. (management
consulting and computer related
services), Automatic Data
Processing, Inc., Avis, Inc.
(passenger car rental), FPL Group,
Inc. (electric services), National
Education Corporation and Northwest
Airlines Inc. Mr. Malek is a
director or trustee of 29 investment
</TABLE>

8
<PAGE>

<TABLE>
<CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE CORPORATION OTHER DIRECTORSHIPS
- ---------------------------- ---------------------- ------------------------------------
<S> <C> <C>
companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Carl W. Schafer, 60......... Director Mr. Schafer is president of the
P.O. Box 1164 Atlantic Foundation (charitable
Princeton, NJ 08542 foundation supporting mainly
oceanographic exploration and
research). He is a director of
Roadway Express, Inc. (trucking),
The Guardian Group of Mutual Funds,
Evans Systems, Inc. (motor fuels,
convenience store and diversified
company), Hidden Lake Gold Mines
Ltd., Electronic Clearing House,
Inc. (financial transactions
processing), Wainoco Oil Corporation
and Nutraceutix, Inc. (biotechnology
company). Prior to January 1993, he
was chairman of the Investment
Advisory Committee of the Howard
Hughes Medical Institute. Mr.
Schafer is a director or trustee of
29 investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
John R. Torell III; 57...... Director Mr. Torell is chairman of Torell
767 Fifth Avenue Management, Inc. (financial advisory
Suite 4605 firm), chairman of Telesphere
New York, NY 10153 Corporation (electronic provider of
financial information) and a partner
of Zilkha & Company (merchant
banking and private investment
company). He is the former chairman
and chief executive officer of
Fortune Bancorp (1990-1991 and
1990-1994, respectively), the former
chairman, president and chief
executive officer of CalFed, Inc.
(savings association) (1988 to 1989)
and former president of
Manufacturers Hanover Corp. (bank)
(prior to 1988). Mr. Torell is a
director of American Home Products
Corp., New Colt Inc. (armament
manufacturer) and Volt Information
Sciences Inc. Mr. Torell is a
director or trustee of 29 investment
companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
</TABLE>

9
<PAGE>

<TABLE>
<CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE CORPORATION OTHER DIRECTORSHIPS
- ------------------------------- ---------------------- ----------------------------------
<S> <C> <C>
Teresa M. Boyle; 37............ Vice President Ms. Boyle is a first vice
president and manager-advisory
administration of Mitchell
Hutchins. Prior to November 1993,
she was compliance manager of
Hyperion Capital Management, Inc.,
an investment advisory firm. Prior
to April 1993, Ms. Boyle was a
vice president and manager-legal
administration of Mitchell
Hutchins. Ms. Boyle is a vice
president of 30 investment
companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Kimberly Brown; 28............. Vice President Ms. Brown is an assistant vice
president and a portfolio manager
of Mitchell Hutchins. She has been
a portfolio manager since March
1995 and has been with Mitchell
Hutchins since December 1992.
Prior to joining Mitchell Hutchins
Ms. Brown was with Visual Impact
Advertising.
C. William Maher; 35........... Vice President and Mr. Maher is a first vice
Assistant Treasurer president and the senior manager
of the mutual funds finance
division of Mitchell Hutchins. Mr.
Maher is a vice president and
assistant treasurer of 30
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
Dennis McCauley; 49............ Vice President Mr. McCauley is a managing
director and chief investment
officer--fixed income of Mitchell
Hutchins. Prior to December 1994,
he was director of fixed income
investments of IBM Corporation.
Mr. McCauley is a vice president
of 19 investment companies for
which Mitchell Hutchins or
PaineWebber serves as investment
adviser.
</TABLE>

10
<PAGE>

<TABLE>
<CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE CORPORATION OTHER DIRECTORSHIPS
- ------------------------------- ---------------------- ----------------------------------
<S> <C> <C>
Susan Messina; 36.............. Vice President Ms. Messina is a senior vice
president of Mitchell Hutchins.
Ms. Messina has been with Mitchell
Hutchins since 1982. Ms. Messina
is a vice president of five
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
Ann E. Moran; 39............... Vice President and Ms. Moran is a vice president of
Assistant Treasurer Mitchell Hutchins. Ms. Moran is a
vice president and assistant
treasurer of 30 investment
companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Dianne E. O'Donnell; 44........ Vice President and Ms. O'Donnell is a senior vice
Secretary president and deputy general
counsel of Mitchell Hutchins. Ms.
O'Donnell is a vice president and
secretary of 29 investment
companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Victoria E. Schonfeld; 45...... Vice President Ms. Schonfeld is a managing
director and general counsel of
Mitchell Hutchins. Prior to May
1994, she was a partner in the law
firm of Arnold & Porter. Ms.
Schonfeld is a vice president of
30 investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
Paul H. Schubert; 33........... Vice President and Mr. Schubert is a first vice
Assistant Treasurer president and a senior manager of
the mutual fund finance division
of Mitchell Hutchins. From August
1992 to August 1994, he was a vice
president of BlackRock Financial
Management, Inc. Prior to August
1992, he was an audit manager with
Ernst & Young LLP. Mr. Schubert is
a vice president and assistant
treasurer of 30 investment
companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
</TABLE>

11
<PAGE>

<TABLE>
<CAPTION>
POSITION BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE WITH THE CORPORATION OTHER DIRECTORSHIPS
- ------------------------------- ---------------------- ----------------------------------
<S> <C> <C>
Julian F. Sluyters; 36......... Vice President and Mr. Sluyters is a senior vice
Treasurer president and the director of the
mutual fund finance division of
Mitchell Hutchins. Prior to 1991,
he was an audit senior manager
with Ernst & Young LLP. Mr.
Sluyters is a vice president and
treasurer of 30 investment
companies for which Mitchell
Hutchins or PaineWebber serves as
investment adviser.
Keith A. Weller; 35 Vice President and Mr. Weller is a first vice
Assistant Secretary president and associate general
counsel of Mitchell Hutchins.
Prior to May 1995, he was an
attorney in private practice. Mr.
Weller is a vice president and
assistant secretary of 29
investment companies for which
Mitchell Hutchins or PaineWebber
serves as investment adviser.
</TABLE>

- ------------

* Unless otherwise indicated, the business address of each listed person is
1285 Avenue of the Americas, New York, New York 10019.

** Mrs. Alexander, Mr. Bewkes and Ms. Farrell are "interested persons" of the
Corporation as defined in the 1940 Act by virtue of their positions with
Mitchell Hutchins, PaineWebber and/or PW Group.

The Corporation pays directors who are not "interested persons" of the
Corporation $1,000 annually for each series of the Corporation and $150 per
meeting of the board and each meeting of a board committee (other than committee
meetings held on the same dates as a board meeting). The Corporation presently
has three series and thus pays each such director $3,000 annually, plus any
additional amounts due for board or committee meetings. Messrs. Feldberg and
Torell serve as chairmen of the audit and contract review committees of
individual funds within the PaineWebber fund complex and receives additional
annual compensation, aggregating $15,000 each, from the relevant funds.
Directors are reimbursed for any expenses incurred in attending meetings.
Directors and officers of the Corporation own in the aggregate less than 1% of
the shares of the Fund. Since PaineWebber and Mitchell Hutchins perform
substantially all of the services necessary for the operation of the Corporation
and the Fund, the Corporation requires no employees. No officer, director or
employee of PaineWebber or Mitchell Hutchins presently receives any compensation
from the Corporation for acting as a director or officer.

12
<PAGE>

The table below includes certain information relating to the compensation of
the Corporation's current directors who held office with the Corporation or with
other PaineWebber funds during the Corporation's last fiscal year.

<TABLE>
<CAPTION>
TOTAL
AGGREGATE COMPENSATION
COMPENSATION FROM THE
FROM THE CORPORATION AND THE
NAME OF PERSONS, POSITION CORPORATION* FUND COMPLEX**
- ------------------------------------------------------------- ------------ -------------------
<S> <C> <C>
Richard Q. Armstrong,
Director................................................... $-- $ 9,000
Richard R. Burt
Director................................................... -- 7,750
Meyer Feldberg,
Director................................................... 7,250 106,375
George W. Gowen,
Director................................................... 7,250 99,750
Frederic V. Malek,
Director................................................... 7,250 99,750
Carl W. Schafer,
Director................................................... -- 118,175
John R. Torell III,
Director................................................... -- 28,125
</TABLE>

- ------------

Only independent members of the board of directors are compensated by the Fund
and identified above; directors who are "interested persons," as defined in the
1940 Act, do not receive compensation.

* Represents fees paid to each director during the fiscal year ended June 30,
1996.

** Represents total compensation paid to each director during the calendar year
ended December 31, 1995; no fund within the complex has a bonus, pension,
profit sharing or retirement plan.

INVESTMENT ADVISORY, ADMINISTRATION AND DISTRIBUTION ARRANGEMENTS

INVESTMENT ADVISORY AND ADMINISTRATION ARRANGEMENTS. PaineWebber acts as the
Fund's investment adviser and administrator pursuant to a contract with the
Corporation dated March 23, 1989 ("Advisory Contract"). Under the Advisory
Contract, the Fund pays PaineWebber an annual fee, computed daily and paid
monthly, according to the following schedule:

<TABLE>
<CAPTION>
ANNUAL
AVERAGE DAILY NET ASSETS RATE
- ------------------------------------------------------------------ ------
<S> <C>
Up to $1 billion.................................................. 0.50%
In excess of $1 billion up to $1.5 billion........................ 0.44%
Over $1.5 billion................................................. 0.36%
</TABLE>

For the fiscal years ended June 30, 1996, June 30, 1995 and June 30, 1994,
the Fund paid (or accrued) to PaineWebber fees totalling $14,023,396,
$10,973,704 and $10,458,600, respectively, under the Advisory Contract.

13
<PAGE>

Under a service agreement pursuant to which PaineWebber provides certain
services to the Fund not otherwise provided by the Fund's transfer agent, which
agreement is reviewed by the Corporation's board of directors annually, during
the fiscal years ended June 30, 1996, June 30, 1995 and June 30, 1994, the Fund
paid (or accrued) to PaineWebber $2,559,302, $2,388,513 and $2,023,867,
respectively, in fees and reimbursements of expenses.

Under a contract with PaineWebber dated March 23, 1989 ("Mitchell Hutchins
Contract"), Mitchell Hutchins serves as the Fund's sub-adviser and
sub-administrator. Under the Mitchell Hutchins Contract, PaineWebber (not the
Fund) pays Mitchell Hutchins a fee, computed daily and paid monthly, at an
annual rate of 20% of the fee paid by the Fund to PaineWebber under the Advisory
Contract. For the fiscal years ended June 30, 1996, June 30, 1995 and June 30,
1994, PaineWebber paid (or accrued) to Mitchell Hutchins fees of $2,804,679,
$2,194,741 and $2,091,720, respectively.

Under the terms of the Advisory Contract, the Fund bears all expenses
incurred in its operation that are not specifically assumed by PaineWebber.
General expenses of the Corporation not readily identifiable as belonging to the
Fund or to the Corporation's other series are allocated among series by or under
the direction of the board of directors in such manner as the board deems fair
and equitable. Expenses borne by the Fund include the following (or the Fund's
share of the following): (1) the cost (including brokerage commissions and other
transaction costs, if any) of securities purchased or sold by the Fund and any
losses incurred in connection therewith; (2) fees payable to and expenses
incurred on behalf of the Fund by PaineWebber; (3) organizational expenses; (4)
filing fees and expenses relating to the registration and qualification of Fund
shares under federal and state securities laws and maintaining such
registrations and qualifications; (5) fees and salaries payable to the directors
and officers who are not interested persons of the Corporation or PaineWebber;
(6) all expenses incurred in connection with the directors' services, including
travel expenses; (7) taxes (including any income or franchise taxes) and
governmental fees; (8) costs of any liability, uncollectible items of deposit
and other insurance or fidelity bonds; (9) any costs, expenses or losses arising
out of a liability of or claim for damages or other relief asserted against the
Corporation or the Fund for violation of any law; (10) legal, accounting and
auditing expenses, including legal fees of special counsel for those directors
who are not interested persons of the Corporation; (11) charges of custodians,
transfer agents and other agents; (12) expenses of setting in type and printing
prospectuses and statements of additional information and supplements thereto,
reports and statements to shareholders and proxy material for existing
shareholders and costs of mailing such materials to existing shareholders; (13)
any extraordinary expenses (including fees and disbursements of counsel)
incurred by the Fund; (14) fees, voluntary assessments and other expenses
incurred in connection with membership in investment company organizations; (15)
50% of the cost of printing and mailing PaineWebber monthly statements; (16)
costs of mailing and tabulating proxies and costs of meetings of shareholders,
the board and any committees thereof; (17) the cost of investment company
literature and other publications provided to the directors and officers; and
(18) costs of mailing, stationery and communications equipment.

As required by state regulation, PaineWebber will reimburse the Fund if and
to the extent that the aggregate operating expenses of the Fund exceed
applicable limits for the fiscal year. Currently, the most restrictive such
limit applicable to the Fund is 2.5% of the first $30 million of the Fund's
average daily net assets, 2.0% of the next $70 million of its average daily net
assets and 1.5% of its average daily net assets in excess of $100 million.
Certain expenses, such as brokerage commissions, distribution fees, taxes,
interest

14
<PAGE>

and extraordinary items, are excluded from this limitation. For the fiscal years
ended June 30, 1996, June 30, 1995 and June 30, 1994, no reimbursement pursuant
to such limitations was required.

Under the Advisory and Mitchell Hutchins Contracts (collectively,
"Contracts"), PaineWebber and Mitchell Hutchins will not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with the performance of the Contracts, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of PaineWebber or
Mitchell Hutchins in the performance of its duties or from reckless disregard of
its duties and obligations thereunder.

The Contracts are terminable with respect to the Fund at any time without
penalty by vote of the Corporation's board of directors or by vote of the
holders of a majority of the Fund's outstanding voting securities on 60 days'
written notice to PaineWebber or Mitchell Hutchins, as the case may be. The
Advisory Contract is also terminable without penalty by PaineWebber on 60 days'
written notice to the Corporation, and the Mitchell Hutchins Contract is
terminable without penalty by PaineWebber or Mitchell Hutchins on 60 days'
written notice to the other party. The Contracts terminate automatically upon
their assignment, and the Mitchell Hutchins Contract also automatically
terminates upon the assignment of the Advisory Contract.

<TABLE>
<CAPTION>
INVESTMENT CATEGORY NET ASSETS
- --------------------------------------------------------------- ----------
<S> <C>
($ MIL)
Domestic (excluding Money Market).............................. $ 5,413.8
Global......................................................... 2,766.8
Equity/Balanced................................................ 2,927.3
Fixed Income (excluding Money Market).......................... 5,253.3
Taxable Fixed Income....................................... 3,620.8
Tax-Free Fixed Income...................................... 1,632.5
Money Market Funds............................................. 21,914.2
</TABLE>

Mitchell Hutchins personnel may invest in securities for their own accounts
pursuant to a code of ethics that describes the fiduciary duty owed to
shareholders of the PaineWebber mutual funds and other Mitchell Hutchins'
advisory accounts by all Mitchell Hutchins' directors, officers and employees,
establishes procedures for personal investing and restricts certain
transactions. For example, employee accounts generally must be maintained at
PaineWebber, personal trades in most securities require pre-clearance, and
short-term trading and participation in initial public offerings generally are
prohibited. In addition, the code of ethics puts restrictions on the timing of
personal investing in relation to trades by PaineWebber mutual funds and other
Mitchell Hutchins advisory clients.

15
<PAGE>

DISTRIBUTION ARRANGEMENTS. PaineWebber acts as the distributor of Fund
shares under a distribution contract with the Corporation dated July 7, 1993
("Distribution Contract"), which requires PaineWebber to use its best efforts,
consistent with its other business, to sell shares of the Fund. Shares of the
Fund are offered continuously. Payments by the Fund to compensate PaineWebber
for certain expenses incurred in connection with its activities in providing
certain shareholder and account maintenance services are authorized under the
Distribution Contract and made in accordance with a plan of distribution adopted
by the Corporation in the manner prescribed by Rule 12b-1 under the 1940 Act
("Plan").

Among other things, the Plan provides that (1) PaineWebber will submit to
the Corporation's board of directors at least quarterly, and the directors will
review, reports regarding all amounts expended under the Plan and the purposes
for which such expenditures were made, (2) the Plan will continue in effect only
so long as it is approved at least annually, and any material amendment thereto
is approved, by the board of directors, including those directors who are not
"interested persons" of the Corporation and who have no direct or indirect
financial interest in the operation of the Plan or any agreement related to the
Plan, acting in person at a meeting called for that purpose, (3) payments by the
Fund under the Plan shall not be materially increased without the affirmative
vote of the holders of a majority of the Fund's outstanding shares and (4) while
the Plan remains in effect, the selection and nomination of directors who are
not "interested persons" of the Corporation shall be committed to the discretion
of the directors who are not "interested persons" of the Corporation.

The Plan authorizes the Fund to pay PaineWebber a service fee, computed
daily and paid monthly, at an annual rate of up to 0.15% of its average daily
net assets. The Fund currently pays service fees to PaineWebber at the annual
rate of 0.08% of average net assets, and any increase from the 0.08% annual rate
would require prior approval of the board of directors.

During the fiscal year ended June 30, 1996, the Fund paid or accrued to
PaineWebber service fees of $2,716,309. For the same period, PaineWebber
estimates that it incurred expenses of $2,780,232, in distributing shares of the
Fund and servicing Fund shareholders. PaineWebber estimates that these expenses
were incurred as follows: (a) advertising, promotion and allocated
costs--$738,490; (b) printing--$4,510; and (c) service fees to investment
executives--$2,037,232.

In approving the continuance of the Plan, the directors of the Corporation
considered all features of the distribution system for the Fund, including (a)
PaineWebber's view that the payment of service fees at the annual rate of 0.06%
of the average daily net assets of the Fund held in shareholder accounts
serviced by Investment Executives and correspondent firms was attractive to such
Investment Executives and correspondent firms and would result in greater growth
of the Fund than might otherwise be the case, (b) the extent to which Fund
shareholders might benefit from economies of scale resulting from growth in the
Fund's assets and shareholder account size and the potential for continued
growth, (c) the services provided to the Fund and its shareholders by
PaineWebber pursuant to the Distribution Contract, (d) PaineWebber's expenses
and costs under the Plan as described above

16
<PAGE>
and (e) the fact that the expense to the Fund of the Plan could be offset if the
Plan is successful by the lower advisory fee rates that are triggered as assets
reach higher levels.

The Corporation's directors also considered the benefits that would accrue
to PaineWebber under the Plan in that PaineWebber would receive service and
advisory fees that are calculated based upon a percentage of the average net
assets of the Fund, which fees would increase if the Plan is successful and the
Fund attains and maintains increased asset levels.

PORTFOLIO TRANSACTIONS

The Fund purchases only securities that have remaining maturities of 13
months or less, except for securities subject to repurchase agreements and
except for variable rate and floating rate securities with remaining maturities
of more than 13 months that comply with conditions established by the Securities
and Exchange Commission ("SEC") under which they may be considered to have
remaining maturities of 13 months or less.

The Fund purchases portfolio securities from dealers and underwriters as
well as from issuers. Securities are usually traded on a net basis with dealers
acting as principal for their own accounts without a stated commission. Prices
paid to dealers in principal transactions generally include a "spread," which is
the difference between the prices at which the dealer is willing to purchase and
sell a specific security at the time. When securities are purchased directly
from an issuer, no commissions or discounts are paid. When securities are
purchased in underwritten offerings, they include a fixed amount of compensation
to the underwriter.

The Mitchell Hutchins Contract authorizes Mitchell Hutchins (with the
approval of the Corporation's board) to select brokers and dealers to execute
purchases and sales of the Fund's portfolio securities. The Contract directs
Mitchell Hutchins to use its best efforts to obtain the best available price and
most favorable execution with respect to all transactions for the Fund. To the
extent that the execution and price offered by more than one dealer are
comparable, Mitchell Hutchins may, in its discretion, effect transactions in
portfolio securities with dealers who provide the Fund with research, analysis,
advice and similar services. Although Mitchell Hutchins may receive certain
research or execution services in connection with these transactions, Mitchell
Hutchins will not purchase securities at a higher price or sell securities at a
lower price than would otherwise be paid had no services been provided by the
executing dealer. Moreover, Mitchell Hutchins will not enter into any explicit
soft dollar arrangements relating to principal transactions and will not receive
in principal transactions the types of services that could be purchased for hard
dollars. Research services furnished by the dealers with which the Fund effects
securities transactions may be used by Mitchell Hutchins in advising other funds
or accounts it advises and, conversely, research services furnished to Mitchell
Hutchins in connection with other funds or accounts that Mitchell Hutchins
advises may be used in advising the Fund. Information and research services
received from dealers will be in addition to, and not in lieu of, the services
required to be performed by Mitchell Hutchins under the Mitchell Hutchins
Contract. During its past three fiscal years, the Fund has not paid any
brokerage commissions, nor has it allocated any transactions to dealers for
research, analysis, advice and similar services.

17
<PAGE>

Investment decisions for the Fund and for other investment accounts managed
by Mitchell Hutchins are made independently of each other in light of differing
considerations for the various accounts. However, the same investment decision
may occasionally be made for the Fund and one or more of such accounts. In such
cases, simultaneous transactions are inevitable. Purchases or sales are then
averaged as to price and allocated between the Fund and such other account(s) as
to amount according to a formula deemed equitable to the Fund and such
account(s). While in some cases this practice could have a detrimental effect
upon the price or value of the security as far as the Fund is concerned, or upon
its ability to complete its entire order, in other cases it is believed that
coordination and the ability to participate in volume transactions will be
beneficial to the Fund.

As of June 30, 1996, the Fund owned commercial paper and short-term
corporate obligations issued by the following persons who are regular
broker-dealers for the Fund: Bear Stearns Companies Incorporated--$160,894,928;
Goldman Sachs Group LP--$9,999,711; Merrill Lynch & Company
Incorporated--$94,590,938; Morgan Stanley Group Incorporated--$137,631,235 and
Nomura Holding America Incorporated--$32,300,000.

ADDITIONAL INFORMATION REGARDING REDEMPTIONS

The Fund may suspend redemption privileges or postpone the date of payment
during any period (1) when the New York Stock Exchange ("NYSE") is closed or
trading on the NYSE is restricted as determined by the SEC, (2) when an
emergency exists, as defined by the SEC, which makes it not reasonably
practicable for the Fund to dispose of securities owned by it or to determine
fairly the market value of its assets or (3) as the SEC may otherwise permit.
The redemption price may be more or less than the shareholder's cost, depending
on the market value of the Fund's portfolio at the time, although the Fund seeks
to maintain a constant net asset value of $1.00 per share.

VALUATION OF SHARES

The Fund's net asset value per share is determined by State Street Bank and
Trust Company ("State Street") as of 12:00 noon, Eastern time, on each Business
Day. As defined in the Prospectus, "Business Day" means any day on which State
Street's Boston offices, PaineWebber's New York City offices and the New York
offices of PaineWebber's bank, The Bank of New York, are all open for business.
One or more of these institutions will be closed on the observance of the
following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Patriots' Day, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.

18
<PAGE>
The Fund values its portfolio securities in accordance with the amortized
cost method of valuation under Rule 2a-7 under the 1940 Act. To use amortized
cost to value its portfolio securities, the Fund must adhere to certain
conditions under that Rule relating to the Fund's investments, some of which are
discussed in the Prospectus. Amortized cost is an approximation of market value,
whereby the difference between acquisition cost and value at maturity is
amortized on a straight-line basis over the remaining life of the instrument.
The effect of changes in the market value of a security as a result of
fluctuating interest rates is not taken into account and thus the amortized cost
method of valuation may result in the value of a security being higher or lower
than its actual market value. In the event that a large number of redemptions
take place at a time when interest rates have increased, the Fund might have to
sell portfolio securities prior to maturity and at a price that might not be
desirable.

The Corporation's board of directors has established procedures for the
purpose of maintaining a constant net asset value of $1.00 per share, which
include a review of the extent of any deviation of net asset value per share,
based on available market quotations, from the $1.00 amortized cost per share.
Should that deviation exceed 1/2 of 1% for the Fund, the directors will promptly
consider whether any action should be initiated to eliminate or reduce material
dilution or other unfair results to shareholders. Such action may include
redeeming shares in kind, selling portfolio securities prior to maturity,
reducing or withholding dividends and utilizing a net asset value per share as
determined by using available market quotations. The Fund will maintain a
dollar-weighted average portfolio maturity of 90 days or less except as
otherwise indicated herein and will not purchase any instrument with a remaining
maturity greater than 13 months, will limit portfolio investments, including
repurchase agreements, to those U.S. dollar-denominated instruments that are of
high quality and that the directors determine present minimal credit risks as
advised by Mitchell Hutchins, and will comply with certain reporting and
recordkeeping procedures. There is no assurance that constant net asset per
share value will be maintained. In the event amortized cost ceases to represent
fair value, the board will take appropriate action.

In determining the approximate market value of portfolio investments, the
Fund may employ outside organizations, which may use a matrix or formula method
that takes into consideration market indices, matrices, yield curves and other
specific adjustments. This may result in the securities being valued at a price
different from the price that would have been determined had the matrix or
formula method not been used.

TAXES

In order to continue to qualify for treatment as a regulated investment
company under the Internal Revenue Code, the Fund must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income and net short-term
capital gain, if any) and must meet several additional requirements. Among these
requirements are the following: (1) the Fund must derive at least 90% of its
gross income each taxable year from dividends, interest, payments with respect
to securities loans, gains from the sale or other disposition of securities and
certain other income; (2) the Fund must derive less than 30% of its gross income
each taxable year from the sale or other disposition of securities held for less
than three months; (3) at the close of each quarter of the Fund's taxable year,
at least 50% of the value of its total

19
<PAGE>
assets must be represented by cash and cash items, U.S. government securities
and other securities, with these other securities limited, in respect of any one
issuer, to an amount that does not exceed 5% of the value of the Fund's total
assets; and (4) at the close of each quarter of the Fund's taxable year, not
more than 25% of the value of its total assets may be invested in securities
(other than U.S. government securities) of any one issuer.

CALCULATION OF YIELD

The Fund computes its yield and effective yield quotations using
standardized methods required by the SEC. The Fund from time to time advertises
(1) its current yield based on a recently ended seven-day period, computed by
determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of the period, subtracting a hypothetical charge reflecting deductions from that
shareholder account, dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
multiplying the base period return by (365/7), with the resulting yield figure
carried to at least the nearest hundredth of one percent, and (2) its effective
yield based on the same seven-day period by compounding the base period return
by adding 1, raising the sum to a power equal to (365/7), and subtracting 1 from
the result, according to the following formula:

EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)365/7] - 1

Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yield of the Fund fluctuates, it cannot be compared
with yields on savings accounts or other investment alternatives that provide an
agreed-to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one money market fund to
another, consideration should be given to each fund's investment policies,
including the types of investments made, the average maturity of the portfolio
securities and whether there are any special account charges that may reduce the
yield.

The Fund's yield and effective yield for the seven-day period ended June 30,
1996, were 4.68% and 4.79%, respectively.

20
<PAGE>
Government Bond Index and changes in the Consumer Price Index as published by
the U.S. Department of Commerce. The Fund also may refer in such materials to
mutual fund performance rankings and other data, such as comparative asset,
expense and fee levels, published by Lipper, CDA, Donoghue, Wiesenberger or ICD.
Performance Advertisements also may refer to discussions of the Fund and
comparative mutual fund data and ratings reported in independent periodicals,
including (but not limited to) THE WALL STREET JOURNAL, MONEY Magazine, FORBES,
BUSINESS WEEK, FINANCIAL WORLD, BARRON'S, FORTUNE, THE NEW YORK TIMES, THE
CHICAGO TRIBUNE, THE WASHINGTON POST and THE KIPLINGER LETTERS. Comparisons in
Performance Advertisements may be in graphic form.

The Fund may include discussions or illustrations of the effects of
compounding in Performance Advertisements. "Compounding" refers to the fact
that, if dividends on a Fund investment are reinvested by being paid in
additional Fund shares, any future income of the Fund would increase the value,
not only of the original Fund investment, but also of the additional Fund shares
received through reinvestment. As a result, the value of the Fund investment
would increase more quickly than if dividends had been paid in cash.

The Fund may also compare its performance with the performance of bank
certificates of deposit ("CDs") as measured by the CDA Certificate of Deposit
Index and the Bank Rate Monitor National Index and the averages of yields of CDs
of major banks published by Banxquotes(R) Money Markets. In comparing the Fund's
performance to CD performance, investors should keep in mind that bank CDs are
insured in whole or in part by an agency of the U.S. government and offer fixed
principal and fixed or variable rates of interest, and that bank CD yields may
vary depending on the financial institution offering the CD and prevailing
interest rates. Fund shares are not insured or guaranteed by the U.S. government
and returns thereon will fluctuate. While the Fund seeks to maintain a stable
net asset value of $1.00 per share, there can be no assurance that it will be
able to do so.

OTHER INFORMATION

COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036, serves as counsel to the Fund. Kirkpatrick
& Lockhart LLP also acts as counsel to PaineWebber and Mitchell Hutchins in
connection with other matters.

AUDITORS. Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
serves as the Fund's independent auditors.

FINANCIAL STATEMENTS

The Fund's Annual Report to Shareholders for the fiscal year ended June 30,
1996 is a separate document supplied with this Statement of Additional
Information, and the financial statements, accompanying notes and the report of
independent auditors appearing therein are incorporated herein by this
reference.

21
<PAGE>

NO PERSON HAS BEEN AUTHORIZED TO GIVE PAINEWEBBER
ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THE RETIREMENT MONEY FUND
PROSPECTUS OR IN THIS STATEMENT OF
ADDITIONAL INFORMATION IN CONNECTION
WITH THE OFFERING MADE BY THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE
FUND OR THE DISTRIBUTOR. THE PROSPECTUS
AND THIS STATEMENT OF ADDITIONAL
INFORMATION DO NOT CONSTITUTE AN
OFFERING BY THE FUND OR BY THE
DISTRIBUTOR IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE.

-------------------

TABLE OF CONTENTS

Page
----
Investment Policies and Restrictions. 1 -----------------------------------
Directors and Officers............... 6 Statement of Additional Information
Investment Advisory, Administration
and Distribution Arrangements........13 August 29, 1996
Portfolio Transactions...............17
Additional Information Regarding
Redemptions..........................18
Valuation of Shares..................18
Taxes................................19
Calculation of Yield.................20
Other Information....................21
Financial Statements.................21

-----------------------------------

Recycled
Paper

<PAGE>

PART C. OTHER INFORMATION
-------------------------

Item 24. Financial Statements and Exhibits
---------------------------------

(a) Financial Statements

PaineWebber Retirement Money Fund
---------------------------------

Included in Part A of this Registration Statement:

Financial Highlights of the Fund for each of the seven
years in the period ended June 30, 1996 and for the
period July 2, 1988 (commencement of operations) to
June 30, 1989

Included in Part B of this Registration Statement through
incorporation by reference from the Annual Report to Shareholders
filed with the Securities and Exchange Commission through EDGAR
on August 29, 1996, Accession No. 0000950130-96-003410:

Statement of Net Assets at June 30, 1996

Statement of Operations for the year ended June 30, 1996

Statement of Changes in Net Assets for each of the two years
in the period ended June 30, 1996

Notes to Financial Statements

Financial Highlights of the Fund for each of the five years
in the period ended June 30, 1996

Report of Ernst & Young LLP, Independent Auditors, dated
August 12, 1996

Money Market Portfolio and U.S. Government Portfolio
-----------------------------------------------------

Included in Part A of this Registration Statement:

Financial Highlights of each Portfolio for each of the ten
years in the period ended June 30, 1996

Statement of Net Assets at June 30, 1996

Statement of Operations for the year ended June 30, 1996

Statement of Changes in Net Assets for each of the two years
in the period ended June 30, 1996

Notes to Financial Statements

C-1

<PAGE>

Financial Highlights of the Fund for each of the five years
in the period ended June 30, 1996

Report of Ernst & Young LLP, Independent Auditors, dated
August 12, 1996

(b) Exhibits:
(1) Restatement of Articles of Incorporation (filed herewith)
(2) (a) By-Laws1/
-
(b) Amendment dated September 28, 1994 to By-Laws2/
-
(3) Voting trust agreement - none
(4) Instruments defining the rights of holders of the Registrant's
shares of common stock3/
-
(5) (a) Investment Advisory and Administration Contract4/
-
(b) Sub-Advisory and Sub-Administration Contract4/
-
(6) Distribution Contract5
/
-
(7) Bonus, profit sharing or pension plans - none
(8) (a) Custodian Contract with respect to Money Market Portfolio
and U.S. Government Portfolio6/
-
(b) Custodian Contract with respect to PaineWebber Retirement
Money Fund7/
-
(9) (a) Transfer Agency Agreement9/
-
(b) Service Contract4/
-
(10) (a) Opinion and consent of counsel regarding Money Market
Portfolio and U.S. Government Portfolio9/
-
(b) Opinion and consent of counsel regarding PaineWebber
Retirement Money Fund10/
--
(11) Other opinions, appraisals, rulings and consents:
(a) Auditor's Consent (filed herewith)
(12) Financial statements omitted from Part B - none
(13) Letter of investment intent6/
-
(14) Prototype Retirement Plan - none
(15) Plan pursuant to Rule 12b-15/
-
(16) Schedule for computation of each performance quotation
provided in the Registration Statement8/
-
(17) and (27) Financial Data Schedule (filed herewith)
(18) Plan pursuant to Rule 18f-3 (not applicable)

--------------------

1/ Incorporated by reference from Post-Effective Amendment No. 18
-
to registration statement, SEC File No. 2-78309, filed August
29, 1990.

2/ Incorporated by reference from Post Effective Amendment No.26
-
to registration statement, SEC File No. 2-78309, filed August
29, 1995

3/ Incorporated by reference from Articles Fifth, Sixth, Seventh,
-
Ninth, Tenth and Twelfth of the Registrant's Restated Articles
of Incorporation and from Articles II, III, VIII, X, XI, XII
and XIII of the Registrant's By-Laws, as amended September 28,
1994.

C-2

<PAGE>

4/ Incorporated by reference from Post-Effective Amendment No. 15
-
to registration statement, SEC File No. 2-78309, filed
June 5, 1989.

5/ Incorporated by reference from Post Effective Amendment No.28
-
to registration statement, SEC File No. 2-89016, filed August
29, 1994.

6/ Incorporated by reference from Post-Effective Amendment No. 1
-
to registration statement, SEC File No. 2-78309, filed
February 8, 1983.

7/ Incorporated by reference from Post-Effective Amendment No. 13
-
to registration statement, SEC File No. 2-78309, filed
August 29, 1988.

8/ Incorporated by reference from Post-Effective Amendment No. 19
-
to registration statement, SEC File No. 2-78309, filed August
29, 1991.

9/ Incorporated by reference from Pre-Effective Amendment No. 1
-
to registration statement, SEC File No. 2-78309, filed
September 20, 1982.

10/ Incorporated by reference from Post-Effective Amendment No. 12
--
to registration statement, SEC File No. 2-78309, filed
February 12, 1988.

C-3

<PAGE>

Item 25. Persons Controlled by or under Common Control with
--------------------------------------------------
Registrant
----------

None.

Item 26. Number of Holders of Securities
-------------------------------

Number of Record Holders
Title of Class as of June 5, 1996
-------------- ------------------

Shares of Capital Stock,
($.001 par value)

PaineWebber Retirement
Money Fund 431,357

Money Market Portfolio 266,000

U.S. Government Portfolio 22,604

Item 27. Indemnification
---------------

Article Fourteenth of the Articles of Incorporation provides
that the directors and officers of the Registrant shall not be
liable to the Registrant or to any of its stockholders for monetary
damages. Article Fourteenth also provides that no amendment,
alteration or repeal of the contents contained in the preceding
sentence or the adoption, alteration or amendment of any other
provision of the Articles or By-Laws inconsistent with Article
Fourteenth shall adversely affect any limitation of liability of
any director or officer of the Registrant with respect to any act
or failure to act which occurred prior to such amendment,
alteration, repeal or adoption.

Section 10.01 of Article X of the Bylaws provides that the
Registrant shall indemnify its present and past directors,
officers, employees and agents, and any persons who are serving or
have served at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust, or enterprise, to the fullest extent
permitted by law.

Section 10.02 of Article X of the Bylaws further provides that
the Registrant may purchase and maintain insurance on behalf of any
person who is or was a director, officer or employee of the
Registrant, or is or was serving at the request of the Registrant
as a director, officer or employee of a corporation, partnership,
joint venture, trust or other enterprise against any liability
asserted against him or out of his or her status as such whether or
not the Registrant would have the power to indemnify him or her
against such liability.

C-4

<PAGE>

Section 9 of the Investment Advisory and Administration
Contract provides that PaineWebber shall not be liable for any
error of judgment or mistake of law or for any loss suffered by
Registrant in connection with the matters to which the Contract
relates except for a loss resulting from willful misfeasance, bad
faith or gross negligence of PaineWebber in the performance of its
duties or from its reckless disregard of its obligations and duties
under the Contract. Section 9 further provides that any person,
even though also an officer, partner, employee or agent of
PaineWebber, who may be or become an officer, director, employee or
agent of Registrant shall be deemed, when rendering services to the
Registrant or acting with respect to any business of the
Registrant, to be rendering such service to or acting solely for
the Registrant and not as an officer, partner, employee, or agent
or one under the control or direction of PaineWebber even though
paid by it.

Section 8 of the Sub-Advisory and Sub-Administration Contract
provides that Mitchell Hutchins will not be liable for any error of
judgment or mistake of law or for any loss suffered by PaineWebber
or the Registrant or its shareholders in connection with the
performance of those Contracts, except a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of
its obligations or duties under the Contracts.

Section 9 of the Distribution Contract provides that the
Registrant will indemnify PaineWebber and its officers, directors
or controlling persons against all liabilities arising from any
alleged untrue statement of material fact in the Registration
Statement or from alleged omission to state in the Registration
Statement a material fact required to be stated in it or necessary
to make the statements in it, in light of the circumstances under
which they were made, not misleading, except insofar as liability
arises from untrue statements or omissions made in reliance upon
and in conformity with information furnished by PaineWebber to the
Registrant for use in the Registration Statement; and provided that
this indemnity agreement shall not protect any such persons against
liabilities arising by reason of their bad faith, gross negligence
or willful misfeasance; and shall not inure to the benefit of any
such persons unless a court of competent jurisdiction or
controlling precedent determines that such result is not against
public policy as expressed in the Securities Act of 1933. Section
9 of the Distribution Contract also provides that PaineWebber
agrees to indemnify, defend and hold the Registrant, its officers
and directors free and harmless of any claims arising out of any
alleged untrue statement or any alleged omission of material fact
contained in information furnished by PaineWebber for use in the
Registration Statement or arising out of an agreement between
PaineWebber and any retail dealer, or arising out of supplementary
literature or advertising used by PaineWebber in connection with
the Contract.

C-5

<PAGE>
Section 7 of the Service Contract provides that PaineWebber
shall be indemnified and held harmless by the Registrant against
all liabilities, except those arising out of bad faith, gross
negligence, willful misfeasance or reckless disregard of its duties
under the Contract.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act"), as amended, may be provided to
directors, officers and controlling persons of the Registrant,
pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant
in connection with the successful defense of any action, suit or
proceeding or payment pursuant to any insurance policy) is asserted
against the Registrant by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.

Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------

I. PaineWebber Incorporated ("PaineWebber"), a Delaware
corporation, is a registered investment adviser and is wholly owned
by Paine Webber Group Inc. PaineWebber is primarily engaged in the
financial services business. Information as to the officers and
directors of PaineWebber is included in its Form ADV filed with the
Securities and Exchange Commission (registration number 801-7163)
and is incorporated herein by reference.

II. Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins"), a Delaware corporation, is a registered investment
adviser and is wholly owned by PaineWebber. Mitchell Hutchins is
primarily engaged in the investment advisory business. Information
as to the officers and directors of Mitchell Hutchins is included
in its Form ADV filed with the Securities and Exchange Commission
(registration number 801-13219) and is incorporated herein by
reference.

Item 29. Principal Underwriters
----------------------

(a) PaineWebber serves as principal underwriter and/or
investment adviser for the following other investment companies:

LIQUID INSTITUTIONAL RESERVES
PAINEWEBBER CASHFUND, INC.
PAINEWEBBER MANAGED MUNICIPAL TRUST
PAINEWEBBER MUNICIPAL MONEY MARKET SERIES
PAINEWEBBER RMA TAX-FREE FUND, INC.

(b) PaineWebber is the principal underwriter of the
Registrant. The directors and officers of PaineWebber, their

C-6

<PAGE>

principal business addresses, and their positions and offices with
PaineWebber are identified in its Form ADV filed with the
Securities and Exchange Commission (registration number 801-7163),
and such information is hereby incorporated herein by reference.
The information set forth below is furnished for those directors
and officers of PaineWebber who also serve as directors or
officers of the Registrant:
Name and Principal Position with Position and Offices
Business Address Registrant with Underwriter
------------------ -------------- ------------------

Margo N. Alexander Director, President Executive Vice
1285 Avenue of the and Chief Executive President and
Americas Officer Director
New York, NY 10019

Mary C. Farrell Director Managing Director,
1285 Avenue of the Senior Investment
Americas Strategist and
New York, NY 10019 Member of the
Investment Policy
Committee
(c) None.

Item 30. Location of Accounts and Records
--------------------------------

The books and other documents required by paragraphs (b)(4),
(c) and (d) of Rule 31a-1 under the Investment Company Act of 1940
are maintained in the physical possession of Registrant's Port-
folio Manager, Mitchell Hutchins Asset Management Inc., 1285
Avenue of the Americas, New York, New York 10019. All other
accounts, books and documents required by Rule 31a-1 are
maintained for each Portfolio in the physical possession of such
Portfolio's transfer agent and custodian.

Item 31. Management Services
-------------------

Not applicable.

Item 32. Undertakings
------------

Not applicable.

C-7

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant hereby certifies that it
meets all the requirements for effectiveness of this Post-Effective
Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective Amendment to
be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of New York and State of New York, on the 26th day of August,
1996.

PAINEWEBBER RMA MONEY FUND, INC.

By: /s/ Dianne E. O'Donnell
---------------------------------
Dianne E. O'Donnell
Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment has been signed below by the following persons in the
capacities and on the dates indicated:

Signature Title Date
--------- ----- ----

/s/ Margo N. Alexander President and August 26, 1996
----------------------------
Margo N. Alexander * Director
(Chief Executive
Officer)

/s/ E. Garrett Bewkes, Jr. Director and August 26, 1996
----------------------------
E. Garrett Bewkes, Jr. * Chairman
of the Board of
Directors
/s/ Richard Q. Armstrong Director August 26, 1996
----------------------------
Richard Q. Armstrong *

/s/ Richard R. Burt Director August 26, 1996
----------------------------
Richard R. Burt *
/s/ Mary C. Farrell Director August 26, 1996
----------------------------
Mary C. Farrell *

/s/ Meyer Feldberg Director August 26, 1996
----------------------------
Meyer Feldberg *

/s/ George W. Gowen Director August 26, 1996
----------------------------
George W. Gowen *
/s/ Frederic V. Malek Director August 26, 1996
----------------------------
Frederic V. Malek *

/s/ Carl W. Schafer Director August 26, 1996
----------------------------
Carl W. Schafer *
/s/ John R. Torell III Director August 26, 1996
----------------------------
John R. Torell III *

/s/ Julian F. Sluyters Vice President and August 26, 1996
----------------------------
Julian F. Sluyters Treasurer (Chief
Financial and
Accounting Officer)

<PAGE>

SIGNATURES (CONTINUED)

* Signature affixed by Elinor W. Gammon pursuant to power of attorney
dated May 21, 1996 and incorporated by reference from Post-Effective
Amendment No. 25 of PaineWebber RMA Tax-Free Fund, Inc., SEC File No.
2-78319, filed June 27, 1996.

<PAGE>

PAINEWEBBER RMA MONEY FUND, INC.
EXHIBIT INDEX
-------------

Exhibits
- --------

(1) Restatement of Articles of Incorporation (filed herewith)
(2) (a) By-Laws1/
-
(b) Amendment dated September 28, 1994 to By-Laws2/
-
(3) Voting trust agreement - none
(4) Instruments defining the rights of holders of the Registrant's shares of
common stock3/
-
(5) (a) Investment Advisory and Administration Contract4/
-
(b) Sub-Advisory and Sub-Administration Contract4/
-
(6) Distribution Contract5/
-
(7) Bonus, profit sharing or pension plans - none
(8) (a) Custodian Contract with respect to Money Market Portfolio and U.s.
Government Portfolio6/
-
(b) Custodian Contract with respect o PaineWebber Retirement Money
Fund7/
-
(9) (a) Transfer Agency Agreement9/
-
(b) Service Contract4/
-
(10) (a) Opinion and consent of counsel regarding Money Market Portfolio and
U.S. Government Portfolio9/
-
(b) Opinion and consent of counsel regarding PaineWebber Retirement Money
Fund10/
--
(11) Other opinions, appraisals, rulings and consents:
(a) Auditor's Consent (filed herewith)
(12) Financial statements omitted from Part B - none
(13) Letter of investment intent6/
-
(14) Prototype Retirement Plan - none
(15) Plan pursuant to Rule 12b-15/
-
(16) Schedule for computation of each performance quotation provided in the
Registration Statement8/
-
(17) and (27) Financial Data Schedule (filed herewith)
(18) Plan pursuant to Rule 18f-3 (not applicable)

- --------------------

1/ Incorporated by reference from Post-Effective Amendment No. 18 to
-
registration statement, SEC File No. 2-78309, filed August 29, 1990.

2/ Incorporated by reference from Post Effective Amendment No. 26 to
-
registration statement, SEC File No. 2-78309, filed August 29, 1995.

3/ Incorporated by reference from Articles Fifth, Sixth, Seventh, Ninth,
-
Tenth and Twelfth of the Registrant's Restated Articles of
Incorporation and from Articles II, III, VIII, X, XI, XII and XIII of
the Registrant's By-Laws, as amended September 28, 1994.

4/ Incorporated by reference from Post-Effective Amendment No. 15 to
-
registration statement, SEC File No. 2-78309, filed June 5, 1989.

5/ Incorporated by reference from Post-Effective Amendment No. 28 to
-
registration statement, SEC File No. 2-89016 filed August
<PAGE>

29, 1994.

6/ Incorporated by reference from Post-Effective Amendment No. 1
-
to registration statement, SEC File No. 2-78309, filed
February 8, 1983.

7/ Incorporated by reference from Post-Effective Amendment No. 13
-
to registration statement, SEC File No. 2-78309, filed
August 29, 1988.

8/ Incorporated by reference from Post-Effective Amendment No. 19
-
to registration statement, SEC File No. 2-78309, filed
August 29, 1991.

9/ Incorporated by reference from Pre-Effective Amendment No. 1
-
to registration statement, SEC File No. 2-78309, filed
September 20, 1982.

10/ Incorporated by reference from Post-Effective Amendment No. 12
--
to registration statement, SEC File No. 2-78309, filed
February 12, 1988.

EXHIBIT 1

RESTATEMENT OF ARTICLES OF INCORPORATION

PAINEWEBBER RMA MONEY FUND, INC.

PaineWebber RMA Money Fund, Inc. desires to restate its existing Articles
of Incorporation by adopting the following Restatement of Articles of
Incorporation, as approved by a majority of the Board of Directors as of July
24, 1996. The provisions set forth in this Restatement of Articles of
Incorporation, which do not amend the existing Articles of Incorporation,
restate all of the provisions of the charter currently in effect and otherwise
permitted by Maryland General Corporate Law:

FIRST:
- -----

I, Clifford J. Alexander, whose post office address is 1900 M Street, N.W.,
Washington, D.C. 20036, being at least twenty-one years of age, do, under and by
virtue of the General Laws of the State of Maryland authorizing the formation of
corporations, associate myself as incorporator with intention of forming a
corporation (hereinafter called the "Corporation").

SECOND: Name.
- ------------

The name of the Corporation is PaineWebber RMA Money Fund, Inc.

THIRD: Corporate Purposes.
- -------------------------

(a) The purposes for which the Corporation is formed are to act as an
open-end, diversified management investment company under the Investment Company
Act of 1940, as amended, and to exercise and enjoy all of the powers, rights and
privileges granted to, or conferred upon, corporations of a similar character by
the General Laws of the State of Maryland now or hereafter in force.

(1) To invest, hold for investment, or reinvest in securities,
including bonds, debentures, bills, time notes and all other evidence of
indebtedness; negotiable or non-negotiable instruments; government
securities; and money market instruments including bank certificates of
deposit, finance paper, commercial paper, bankers' acceptances and all
kinds of repurchase and reverse repurchase agreements, of any corporation,
company, trust, association, firm or other business organization however
established, and of any country, state, municipality or other political
subdivision, or any other governmental or quasi-governmental agency or
instrumentality.

(2) To acquire (by purchase, subscription or otherwise), to trade in
and deal in, to sell or otherwise dispose of, to lend and to pledge any
such securities.

(3) To exercise all rights, powers and privileges of ownership or
interest in all securities held by the Corporation, including the right to
vote thereon and otherwise act with respect thereto and to do all acts for
the preservation, protection, improvement and enhancement in value of all
such securities.

(4) To acquire (by purchase, lease or otherwise) and to hold, use,
maintain, develop and dispose of (by sale or otherwise) any property, real
or personal and any interest therein.

<PAGE>
(5) To borrow money and, in this connection, issue notes or other
evidence of indebtedness.

(6) To aid by further investment any issuer, any obligation of or
interest in which is held by the Corporation or in the affairs of which the
Corporation has any direct or indirect interest; to do all acts and things
designed to protect, preserve, improve or enhance the value of such
obligation or interest; to guarantee or become surety on any or all of the
contracts, stocks, bonds, notes, debentures and other obligations of any
corporation, company, trust association or firm.

(7) In general to carry on any other business in connection with or
incidental to any of the foregoing objects and purposes; to have and
exercise all the powers conferred upon corporations by the laws of the
State of Maryland as in force from time to time; to do everything
necessary, suitable or proper for the accomplishment of any purpose or the
attainment of any object or the furtherance of any power hereinbefore set
forth, either alone or in association with others; and to do every other
act or thing incidental or appurtenant to or growing out of or connected
with the aforesaid business or purposes, objects or powers.

(b) The Corporation shall have the power to conduct and carry on its
business, or any part thereof, and to have one or more offices, and to exercise
any or all of its corporate powers and rights, in the State of Maryland, in any
other states, territories, districts, colonies and dependencies of the United
States, and in any or all foreign countries.

(c) The foregoing clauses shall be construed both as objects and powers,
and the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Corporation.

FOURTH: Address and Resident Agent.
- ----------------------------------

The post office address of the principal office of the Corporation in this
State is c/o The Corporation Trust Incorporated, 32 South Street, Baltimore,
Maryland 21202. The name of the resident agent of the Corporation in this State
is The Corporation Trust Incorporated, a corporation of this State, and the post
office address of the resident agent is 32 South Street, Baltimore, Maryland
21202.

FIFTH: Capital Stock.
- --------------------

(a) The total number of shares of stock which the Corporation shall have
authority to issue is thirty billion (30,000,000,000) shares of Common Stock, of
the par value of 1/10th of one cent ($.001) per share and of the aggregate par
value of $30,000,000. The board of directors of the Corporation is authorized,
from time to time, to classify or to reclassify, as the case may be, any
unissued shares of stock of the Corporation. Without limiting the authority of
the Board of Directors set forth herein to classify and reclassify any unissued
shares of stock, there are hereby established and classified three series of
stock: one series comprised of fifteen billion (15,000,000,000) shares to be
known as the Money Market Portfolio series; one series comprised of five billion
(5,000,000,000) shares to be known as the U.S. Government Portfolio series; and
one series comprised of ten billion (10,000,000,000) shares to be known as the
PaineWebber Retirement Money Fund series.

(b) The shares of each said series of stock shall have the following
relative preferences, rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption:

(1) Assets Belonging to Series. All consideration received by the
--------------------------
Corporation for the issue or sale of shares of a particular series,
together with all assets in which such consideration is invested or
reinvested, all income, earnings, profits, and proceeds thereof, including
any proceeds derived from the sale, exchange or liquidation of such assets,
and any funds or payments derived from any reinvestment of

- 2 -

<PAGE>
such proceeds in whatever form the same may be, shall irrevocably belong to
that series for all purposes, subject only to the rights of creditors, and
shall be so recorded upon the books and accounts of the Corporation. Such
consideration, assets, income, earnings, profits, and proceeds thereof,
including any proceeds derived from any reinvestment of such proceeds, in
whatever form the same may be, together with any General Items allocated to
that series as provided in the following sentence, are herein referred to
as "assets belonging to" that series. In the event that there are any
assets, income, earnings, profits, and proceeds thereof, funds, or payments
which are not readily identifiable as belonging to any particular series
(collectively "General Items"), such General Items shall be allocated by or
under the supervision of the Board of Directors to and among any one or
more of the series established and designated from time to time in such
manner and on such basis as the Board of Directors, in its sole discretion,
deems fair and equitable, and any General Items so allocated to a
particular series shall belong to that series. Each such allocation by the
Board of Directors shall be conclusive and binding for all purposes.

(2) Liabilities Belonging to Series. The assets belonging to each
-------------------------------
particular series shall be charged with the liabilities of the Corporation
in respect of that series and all expenses, costs, charges and reserves
attributable to that series, and any general liabilities, expenses, costs,
charges or reserves of the Corporation which are not readily identifiable
as belonging to any particular series shall be allocated and charged by or
under the supervision of the Board of Directors to and among any one or
more of the series established and designated from time to time in such
manner and on such basis as the Board of Directors, in its sole discretion,
deems fair and equitable. The liabilities, expenses, costs, charges and
reserves allocated and so charged to a series are herein referred to as
"liabilities belonging to" that series. Each allocation of liabilities,
expenses, costs, charges and reserves by the Board of Directors shall be
conclusive and binding for all purposes.

(3) Income Belonging to Series. The Board of Directors shall have
--------------------------
full discretion, to the extent not inconsistent with the Maryland General
Corporation Law and the Investment Company Act of 1940, to determine which
items shall be treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding. "Income
belonging to" a series includes all income, earnings and profits derived
from assets belonging to that series, less any expenses, costs, charges or
reserves belonging to that series, for the relevant time period.

(4) Dividends. Dividends and distributions on shares of a particular
---------
series may be declared and paid with such frequency, in such form and in
such amount as the Board of Directors may from time to time determine.
Dividends may be declared daily or otherwise pursuant to a standing
resolution or resolutions adopted only once or with such frequency as the
Board of Directors may determine, after providing for actual and accrued
liabilities belonging to that series.

All dividends on shares of a particular series shall be paid only out
of the income belonging to that series and capital gains distributions on
shares of a particular series shall be paid only out of the capital gains
belonging to that series. All dividends and distributions on shares of a
particular series shall be distributed pro rata to the holders of that
series in proportion to the number of shares of that series held by such
holders at the date and time of record established for the payment of such
dividends or distributions, except that in connection with any dividend or
distribution program or procedure the Board of Directors may determine that
no dividend or distribution shall be payable on shares as to which the
shareholder's purchase order and/or payment have not been received by the
time or times established by the Board of Directors under such program or
procedure.

The Board of Directors shall have the power, in its sole discretion,
to distribute in any fiscal year as dividends, including dividends
designated in whole or in part as capital gains distributions, amounts
sufficient, in the opinion of the Board of Directors, to enable the
Corporation to qualify as a regulated

- 3 -

<PAGE>
investment company under the Internal Revenue Code of 1954, as amended, or
any successor or comparable statute thereto, and regulations promulgated
thereunder, and to avoid liability of the Corporation for Federal income
tax in respect of that year. However, nothing in the foregoing shall limit
the authority of the Board of Directors to make distributions greater than
or less than the amount necessary to qualify as a regulated investment
company and to avoid liability of the Corporation for such tax.

Dividends and distributions may be paid in cash, property or shares,
or a combination thereof, as determined by the Board of Directors or
pursuant to any program that the Board of Directors may have in effect at
the time. Any such dividend or distribution paid in shares will be paid at
the current per share net asset value thereof as defined in Article
SEVENTH, Section III.

(5) Liquidation. In the event of the liquidation of the Corporation
-----------
or of a particular series, the shareholders of each series that has been
established and designated and is being liquidated shall be entitled to
receive, as a series, when and as declared by the Board of Directors, the
excess of the assets belonging to that series. The holders of shares of
any series shall not be entitled thereby to any distribution upon
liquidation of any other series. The assets so distributable to the
shareholders of any particular series shall be distributed among such
shareholders in proportion to the number of shares of that series held by
them and recorded on the books of the Corporation. The liquidation of any
particular series in which there are shares then outstanding may be
authorized by vote of a majority of the Board of Directors then in office,
subject to the approval of a majority of the outstanding securities of that
series, as defined in the 1940 Act.

(6) Voting. On each matter submitted to a vote of the shareholders,
------
each holder of a share shall be entitled to one vote for each share
outstanding in his name on the books of the Corporation, irrespective of
the series thereof, and all shares of all series shall vote as a single
series ("Single Series Voting"); provided, however, that (i) as to any
matter with respect to which a separate vote of any series is required by
the 1940 Act or by the Maryland General Corporation Law, such requirement
as to a separate vote by that series shall apply in lieu of Single Series
Voting as described above; (ii) in the event that the separate vote
requirements referred to in (i) above apply with respect to one or more
series, then, subject to (iii) below, the shares of all other series shall
vote as a single series; and (iii) as to any matter which affects the
interest of only particular series, only the holders of shares of the one
or more affected series shall be entitled to vote.

(7) Redemption by Shareholder. Each holder of shares of a particular
-------------------------
series shall have the right to require the Corporation to redeem all or any
part of his shares of that series at such times and on such terms as set
forth in Article SEVENTH, Section II.

(8) Equality. All shares of each particular series shall represent
--------
an equal proportionate interest in the assets belonging to that series
(subject to the liabilities belonging to that series), and each share of
any particular series shall be equal to each other share of that series.
The Board of Directors may from time to time divide or combine the shares
of any particular series into a greater or lesser number of shares of that
series without thereby changing the proportionate beneficial interest in
the assets belonging to that series or in any way affecting the rights of
shares of any other series.

(9) Conversion or Exchange Rights. Subject to compliance with the
-----------------------------
requirements of the Investment Company Act of 1940, the Board of Directors
shall have the authority to provide that holders of shares of any series
shall have the right to convert or exchange said shares into shares of one
or more other series of shares in accordance with such requirements and
procedures as may be established by the Board of Directors.

- 4 -

<PAGE>
(10) Redemption by the Corporation. The Board of Directors may cause
-----------------------------
the Corporation to redeem at current net asset value the shares of any
series from a shareholder whose shares have an aggregate current net asset
value of less than five hundred dollars ($500). No such redemption shall
be effected unless the Corporation has given the shareholder at least sixty
(60) days' notice of its intention to redeem the shares and an opportunity
to purchase a sufficient number of additional shares to bring the aggregate
current net asset value of his shares to five hundred dollars ($500). Upon
redemption of shares pursuant to this Section, the Corporation shall
promptly cause payment of the full redemption price to be made to the
holder of shares so redeemed.

SIXTH: Preemptive Rights.
- ------------------------

No holder of any of the shares of the Corporation shall be entitled as of
right to subscribe for, purchase, or otherwise acquire any shares of the
Corporation which the Corporation proposes to issue; and any or all of such
shares of the Corporation, whether now or hereafter authorized or created, may
be issued, or may be reissued or transferred if the same have been reacquired
and have treasury status to such persons, firms, corporations and associations,
and for such lawful consideration, and on such terms as the board of directors
in its discretion may determine, without first offering the same, or any
thereof, to any said holder.

SEVENTH: Issue, Redemption and Repurchase of Capital Stock.
- ----------------------------------------------------------

SECTION I
ISSUE OF THE CORPORATION'S SHARES

1.01 General. The board of directors may from time to time issue, reissue,
-------
sell or cause to be issued and sold any of the Corporation's authorized shares
of Capital Stock, including any additional shares hereafter authorized and any
shares redeemed or repurchased by the Corporation, except that only shares
previously contracted to be sold may be issued during any period when the
determination of net asset value is suspended pursuant to the provisions of
Section III hereof. All shares of such authorized Capital Stock, when issued in
accordance with the terms of this Section I, shall be fully paid and
nonassessable.

1.02 Price. No shares of Capital Stock shall be issued or sold by the
-----
Corporation, except as a stock dividend distributed to shareholders, for less
than an amount which would result in proceeds to the Corporation, before taxes
payable by the Corporation in connection with such transaction, of at least the
net asset value per share determined as set forth in Section III hereof as of
such time as the board of directors shall have by resolution prescribed. In the
absence of a resolution of the board of directors applicable to the transaction,
such net asset value shall be that next determined after receipt of an
unconditional order for shares. For this purpose, the time of receipt of such
an unconditional order shall be the time of its receipt by the distributor or by
the custodian or depositary of the Corporation's assets or by another agent of
the Corporation designated for the purpose.

1.03 Merger or Consolidation. In connection with the acquisition of all or
-----------------------
substantially all the assets or stock of another investment company or
investment trust, the board of directors may issue or cause to be issued shares
of Capital Stock of the Corporation and accept in payment therefore, in lieu of
cash, such assets at their market value, or such stock at the market value of
the assets held by such investment company or investment trust, either with or
without adjustment for contingent costs or liabilities, provided such assets are
of the character in which the board of directors is permitted to invest the
funds of the Corporation.

1.04 Fractional Shares. The Corporation may issue and sell or cause to be
-----------------
issued and sold fractions of shares having pro rata all the rights of full
shares, including, without limitation, the right to vote and to receive
dividends.

- 5 -

<PAGE>

SECTION II
REDEMPTION AND REPURCHASE OF
THE CORPORATION'S SHARES

2.01 Redemption of Shares. All shares of the Capital Stock of the
--------------------
Corporation now or hereafter authorized shall be "subject to redemption" and
"redeemable" in the sense used in the General Laws of the State of Maryland
authorizing the formation of corporations, at the redemption or purchase price
for any such shares, determined in the manner set out in these Articles of
Incorporation or in any amendment thereto; provided, however, that the
Corporation shall have the right, at its option, to refuse to redeem the shares
of stock at less than the par value thereof. Redeemed shares may be resold by
the Corporation.

The Corporation shall redeem shares of its Capital Stock, subject to the
conditions, and at the price determined as hereinafter set forth, upon the
appropriately verified written application of the record holder thereof (or upon
such other form of request as the board of directors may determine) at such
office or agency as may be designated from time to time for that purpose by the
board of directors. Any such application must be accompanied by any certificate
or certificates which may have been issued for such shares, duly endorsed or
accompanied by a proper instrument of transfer.

2.02 Price. Such shares shall be redeemed at their net asset value
-----
determined as set forth in Section III hereof as of such time as the board of
directors shall have prescribed by resolution. In the absence of such
resolution, the redemption price of shares shall be the net asset value of such
shares next determined as set forth in Section III hereof after receipt of such
application (including any certificate or certificates which may have been
issued therefore, if any, duly endorsed or accompanied by a proper instrument of
transfer).

2.03 Payment. Payment for such shares shall be made in cash to the
-------
shareholder of record within 7 days after the date upon which the application
(including any certificate or certificates which may have been issued therefore,
duly endorsed or accompanied by a proper instrument of transfer) is received,
subject to the provision of Section 2.04 hereof.

2.04 Effect of Suspension of Determination of Net Asset Value. If,
--------------------------------------------------------
pursuant to Section 3.03 hereof, the board of directors shall declare a
suspension of the determination of net asset value, the rights of stockholders
(including those who shall have applied for redemption pursuant to Section 2.01
hereof but who shall not yet have received payment) to have shares redeemed and
paid for by the Corporation shall be suspended until the termination is declared
of the suspension of the determination of net asset value. Any stockholder who
shall have his redemption right so suspended may during the period of such
suspension, by appropriate written notice of revocation at the office or agency
where application was made, revoke any application for redemption not honored
and withdraw any certificates on deposit. The redemption price of shares for
which redemption applications have not been revoked shall be the net asset value
of such shares next determined as set forth in Section III after the termination
of such suspension, and payment shall be made within 7 days after the date upon
which the application was made plus the period after such application during
which the determination of net asset value was suspended.

2.05 Repurchase by Agreement. The Corporation may repurchase shares of the
-----------------------
Corporation directly, or through its distributor or another agent designated for
the purpose, by agreement with the owner thereof at a price not exceeding the
net asset value per share determined pursuant to Section III hereof.

2.06 Redemption of Stockholders' Interest. If, in the opinion of the board
------------------------------------
of directors, concentration in the ownership of the Corporation's shares might
cause the Corporation to be deemed a personal holding company within the meaning
of the Internal Revenue Code, the Corporation may compel the redemption of,
reject any order for or refuse to give effect on the Corporation's books to
transfer of, its shares in an effort to prevent personal holding company status.
The Corporation shall be required only to give general notice to all
shareholders of its

- 6 -

<PAGE>
intention to avail itself of either such right, either by publication in the
Corporation's prospectus, if any, or by such other means as the board of
directors may determine.

SECTION III
NET ASSET VALUE OF SHARES

3.01 By Whom Determined. The board of directors shall have the power and
------------------
duty to determine from time to time the net asset value per share of the
outstanding shares of each series of Capital Stock of the Corporation. It may
delegate such power and duty to any one or more of the directors and officers of
the Corporation, to the investment adviser, custodian or depositary of the
Corporation's assets, or to another agent of the Corporation appointed for such
purpose. Any determination made pursuant to this Section by the board of
directors or its delegate shall be binding on all parties concerned.

3.02 When Determined. The net asset value shall be determined at such
---------------
times as the board of directors shall prescribe by resolution, provided that
such net asset value shall be determined at least once each week. In the
absence of a resolution of the board of directors, the net asset value shall be
determined on each business day as of 12:00 noon New York City time and as of
the close of trading on the New York Stock Exchange.

3.03 Suspension of Determination of Net Asset Value. The board of
----------------------------------------------
directors may declare a suspension of the determination of net asset value for
the whole or any part of any period (a) during which the New York Stock Exchange
is closed other than customary week-end and holiday closings, (b) during which
trading on the New York Stock Exchange is restricted, (c) during which an
emergency exists as a result of which disposal by the Corporation of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Corporation fairly to determine the value of its net assets or (d)
during which a governmental body having jurisdiction over the Corporation may by
order permit for the protection of the security holders of the Corporation.
Such suspension shall take effect at such time as the board of directors shall
specify and thereafter there shall be no determination of net asset value until
the board of directors shall declare the suspension at an end, except that the
suspension shall terminate in any event on the first day on which (1) the
condition giving rise to the suspension shall have ceased to exist and (2) no
other condition exists under which suspension is authorized under this Section
3.03. Each declaration by the board of directors pursuant to this Section 3.03
shall be consistent with such official rules and regulations, if any, relating
to the subject matter thereof as shall have been promulgated by the Securities
and Exchange Commission or any other governmental body having jurisdiction over
the Corporation and as shall be in effect at the time. To the extent not
inconsistent with such official rules and regulations, the determination of the
board of directors shall be conclusive.

3.04 Computation of Per Share Net Asset Value. The net asset value of each
----------------------------------------
share of any series as of any particular time shall be the quotient obtained by
dividing the value of the net assets of that series (being the value of the
assets belonging to that series less the liabilities belonging to that series)
by the total number of shares of that series outstanding.

3.05 Interim Determinations. Any determination of net asset value other
----------------------
than at the time or times established pursuant to Section 3.02 of this Article
SEVENTH may be made either by appraisal or by calculation or estimate. Any such
calculation or estimate shall be based on changes in the market value of
representative or selected securities or on changes in recognized market
averages since the last closing appraisal and made in a manner which, in the
opinion of the board of directors or its delegate, will fairly reflect the
changes in the net asset value.

3.06 Miscellaneous. For the purposes of this Section III:
-------------

- 7 -

<PAGE>
(a) Shares of the Corporation sold shall be deemed to be outstanding as of
the time at or after which an unconditional order therefor has been received by
the Corporation (directly or through one of its agents), the sale price in
currency has been determined and federal funds are credited to an account of a
series of stock of the Corporation or to an account of its custodian established
for said series of stock of the Corporation. The net sale price of shares sold
to the Corporation (less commission, if any, and less any stamp or other tax
payable by the Corporation in connection with the issue and sale thereof) shall
be thereupon deemed to be an asset belonging to that series of the Corporation.

(b) Shares of a series of stock of the Corporation for which an
application for redemption has been made or which are subject to repurchase by
the Corporation shall be deemed to be outstanding up to and including the time
as of which the redemption or repurchase price is determined. After such time,
they shall be deemed to be no longer outstanding and the price until paid shall
be deemed to be a liability belonging to said series of the Corporation.

(c) Funds on deposit and contractual obligations payable to a series of
stock of the Corporation in foreign currency and liabilities and contractual
obligations payable by a series of stock of the Corporation in foreign currency
shall be taken at the current cable rate of exchange as nearly as practicable at
the time as of which the net asset value is computed.

SECTION IV
COMPLIANCE WITH INVESTMENT
COMPANY ACT OF 1940

Notwithstanding any of the foregoing provisions of this Article SEVENTH,
the board of directors may prescribe, in its absolute discretion, such other
bases and times for determining the per share net asset value of the
Corporation's Capital Stock as it shall deem necessary or desirable to enable
the Corporation to comply with any provision of the Investment Company Act of
1940, or any rule or regulation thereunder, including any rule or regulation
adopted pursuant to Section 22 of said Act by the Securities and Exchange
Commission or any securities association registered under the Securities
Exchange Act of 1934, all as in effect now or as hereafter amended or added.

EIGHTH: Board of Directors.
- --------------------------

The number of directors of the Corporation shall be such number as may from
time to time be fixed in the manner provided in the By-Laws of the Corporation,
provided that after stock is issued to more than one stockholder the number of
directors shall not be less than three. Except as provided in the By-Laws, the
election of directors may be conducted in any way approved at the meeting
(whether of stockholders or directors) at which the election is held, provided
that such election shall be by ballot whenever requested by any person entitled
to vote. As of the effective date of this Restatement of Articles of
Incorporation, the Board of Directors is comprised of ten members and the
following persons have been duly elected or appointed to serve as Directors:
Margo N. Alexander, Richard Q. Armstrong, E. Garrett Bewkes, Jr., Richard Burt,
Mary C. Farrell, Meyer Feldberg, George W. Gowen, Frederic V. Malek, Carl W.
Schafer, and John R. Torell III.

NINTH: Stockholder Liability.
- ----------------------------

Neither the stockholders personally nor their property shall be liable to
any extent for the payment of the corporate debts.

TENTH: Management of the Affairs of the Corporation.
- ---------------------------------------------------

- 8 -

<PAGE>
(1) Powers of the Corporation. All corporate powers and authority of the
-------------------------
Corporation (except as at the time otherwise provided by statute, by these
Articles of Incorporation or by the By-Laws) shall be vested in and exercised by
the board of directors.

(2) By-Laws. The board of directors shall have the power to make, alter
-------
or repeal the By-Laws of the Corporation except to the extent that the By-Laws
otherwise provide. The By-Laws may provide that meetings of the stockholders
may be held at any place in the United States provided in, or fixed by the board
of directors pursuant to, the By-Laws. The By-Laws may also provide for the
conduct of meetings of the board of directors or committees thereof by means of
a telephone conference circuit.

(3) Compensation of Directors. The board of directors shall have power
-------------------------
from time to time to authorize payment of compensation to the directors for
services to the Corporation, including fees for attendance at meetings of the
board of directors and of committees.

(4) Inspection of Corporation's Books. The board of directors shall have
---------------------------------
power from time to time to determine whether and to what extent, and at what
times and places and under what conditions and regulations, the accounts and
books of the Corporation (other than the stock ledger) or any of them shall be
open to the inspection of stockholders; and no stockholder shall have any right
of inspecting any account, book or document of the Corporation except as at the
time conferred by statute, unless authorized by a resolution of the stockholders
or the board of directors.

(5) Meetings, Offices, etc. Both stockholders and directors shall have
----------------------
power, if the By-Laws so provide, to hold their meetings and to have one or more
offices within or without the State of Maryland and to keep the books of the
Corporation (except as at the time otherwise required by statute) outside the
State of Maryland, at such places as from time to time may be designated by the
By-Laws or the board of directors.

(6) Majority of Votes. Notwithstanding any provision of the General
-----------------
Corporation Laws of the State of Maryland requiring a greater proportion than a
majority of the votes entitled to be cast in order to take or authorize any
action, any such action may be taken or authorized upon the concurrence of at
least a majority of the aggregate number of votes entitled to be cast thereon.

(7) Determination of Net Profits, etc; Dividends. The board of directors
--------------------------------------------
is expressly authorized to determine in accordance with generally accepted
accounting principles and practices what constitutes net profits, earnings,
surplus or net assets in excess of capital, and to determine what accounting
periods shall be used by the Corporation for any purpose, whether annual or any
other period, including daily; to set apart out of any funds of the Corporation
such reserves for such purposes as it shall determine and to abolish the same;
to declare and pay dividends and distributions in cash, securities or other
property from surplus or any funds legally available therefor, at such intervals
(which may be as frequently as daily) or on such other periodic basis, as it
shall determine; to declare such dividends or distributions including daily
dividends, by means of a formula or other method of determination at meetings
held less frequently than the frequency of the effectiveness of such
declarations; to establish payment dates for dividends or any other
distributions on any basis including dates occurring less frequently than the
effectiveness of the declarations thereof; and to provide for the payment of
declared dividends on a date other than the specified payment date in the case
of stockholders of the Corporation redeeming their entire ownership of shares of
the Corporation.

ELEVENTH: Name.
- --------------

The Corporation acknowledges that it is adopting its corporate name through
permission of Paine, Webber, Jackson & Curtis Incorporated, and agrees that
Paine, Webber, Jackson & Curtis Incorporated reserves to itself and any
successor to its business the right to grant the non-exclusive right to use the
name "PaineWebber RMA Money

- 9 -

<PAGE>
Fund, Inc." or "Paine, Webber, Jackson & Curtis Fund" or "Paine Webber Fund" or
"Paine Webber" or any similar name to any other corporation or entity, including
but not limited to any investment company of which Paine, Webber, Jackson &
Curtis Incorporated or any subsidiary or affiliate thereof or any successor to
the business thereof shall be the investment adviser, administrator or
distributor.

TWELFTH: Reservation of Right to Amend.
- --------------------------------------

The Corporation reserves the right to amend or repeal any provision
contained in these Articles of Incorporation from time to time and at any time
in the manner now or hereafter prescribed by the law of the State of Maryland
and all rights herein conferred upon stockholders are granted subject to such
reservation.

THIRTEENTH: Contracts.
- ---------------------

(a) The board of directors may in its discretion from time to time enter
into an exclusive or non-exclusive distribution contract or contracts providing
for the sale of the shares of Capital Stock of the Corporation to net the
Corporation not less than the amount provided for in Section 1.02 of Article
SEVENTH hereof, whereby the Corporation may either agree to sell the shares to
the other party to the contract or appoint such other party its sales agent for
such shares (such other party being herein sometimes called the "underwriter"),
and in either case on such terms and conditions as may be prescribed in the
By-Laws, if any, and such further terms and conditions as the board of directors
may in its discretion determine not inconsistent with the provisions of this
Article THIRTEENTH or Article SEVENTH hereof or of the By-Laws; and such
contract may also provide for the repurchase of shares of the Corporation by
such other party as agent of the Corporation.

(b) The board of directors may in its discretion from time to time enter
into an investment advisory or management contract or contracts whereby the
other party to such contract shall undertake to furnish to the board of
directors such management, investment advisory, statistical and research facili-
ties and services and such other facilities and services, if any, and all upon
such terms and conditions as the board of directors may in its discretion
determine.

(c) Any contract of the character described in paragraphs (a) or (b) or
for services as administrator, custodian, transfer agent or disbursing agent or
related services may be entered into with any corporation, firm, trust or
association, although any one or more of the directors or officers of the
Corporation may be an officer, director, trustee, shareholder or member of such
other party to the contract, and no such contract shall be invalidated or
rendered voidable by reason of the existence of any such relationship, nor shall
any person holding such relationship be liable merely by reason of such
relationship for any loss or expense to the Corporation under or by reason of
said contract or accountable for any profit realized directly or indirectly
therefrom, provided that the contract when entered into was reasonable and fair
and not inconsistent with the provisions of this Article THIRTEENTH. The same
person (including a firm, corporation, trust, or association, may be the other
party to contracts entered into pursuant to paragraphs (a) and (b) above, and
any individual may be financially interested or otherwise affiliated with
persons who are parties to any or all of the contracts mentioned in this
paragraph (c).

(d) Any contract entered into pursuant to paragraph (a) or (b) above shall
be consistent with and subject to the requirements of Section 15 of the
Investment Company Act of 1940 (including any amendment thereof or other
applicable Act of Congress hereafter enacted) applicable thereto with respect to
its continuance in effect, its termination and the method of authorization and
approval of such contract or renewal thereof.

FOURTEENTH: Liability of Directors and Officers.
- -----------------------------------------------

- 10 -

<PAGE>
(a) To the maximum extent permitted by applicable law (including Maryland
law and the Investment Company Act of 1940) as currently in effect or as may
hereafter be amended, no director or officer of the Corporation shall be liable
to the Corporation or its stockholders for monetary damages.

(b) No amendment, alteration or repeal of this Article or the adoption,
alteration or amendment of any other provision of the Articles of Incorporation
or By-Laws inconsistent with this Article, shall adversely affect any limitation
of liability of any officer or director under this Article with respect to any
act or failure to act which occurred prior to such amendment, alteration, repeal
or adoption.

FIFTEENTH: Duration.
- -------------------

The duration of the Corporation shall be perpetual.

IN WITNESS WHEREOF, PAINEWEBBER RMA MONEY FUND, INC. has caused these
presents to be signed in its name and on its behalf by its Vice President and
attested by the Corporation's Assistant Secretary on this 26th day of July,
1996, who swear under penalty of perjury to the best of their knowledge,
information, and belief, the matters and facts set forth in these articles are
true in all material respects.

PAINEWEBBER RMA MONEY FUND, INC.

By: /s/ Dianne E. O'Donnell
----------------------------------------
Dianne E. O'Donnell
Vice President

Attest: /s/ Keith A. Weller
-------------------------------------------
Keith A. Weller
Assistant Secretary

- 11 -

EXHIBIT 11(a)

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Financial
Highlights" in the Prospectuses and "Auditors" in the Statements of Additional
Information and to the incorporation by reference of our reports dated
August 12, 1996, in this Registration Statement (Form N-1A No. 2-78309) of
PaineWebber RMA Money Fund, Inc. (compromising the PaineWebber Retirement Money
Fund, PaineWebber RMA U.S. Government Portfolio and PaineWebber RMA Money Market
Portfolio).

/s/ ERNST & YOUNG LLP
------------------------
ERNST & YOUNG LLP

New York, New York
August 27, 1996

<ARTICLE> 6
<CIK> 0000703876
<NAME> PW RMA MONEY FUND
<SERIES>
<NUMBER> 2
<NAME> PW RMA U.S. GOVERNMENT
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 1,131,290
<INVESTMENTS-AT-VALUE> 1,131,290
<RECEIVABLES> 8,632
<ASSETS-OTHER> 9
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,139,931
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,421
<TOTAL-LIABILITIES> 2,421
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,137,612
<SHARES-COMMON-PRIOR> 815,865
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (102)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,137,510
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 56,703
<OTHER-INCOME> 0
<EXPENSES-NET> (6,590)
<NET-INVESTMENT-INCOME> 50,113
<REALIZED-GAINS-CURRENT> (16)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 50,097
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (50,289)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,766,140
<NUMBER-OF-SHARES-REDEEMED> (5,492,802)
<SHARES-REINVESTED> 48,736
<NET-CHANGE-IN-ASSETS> 321,730
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (85)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,458
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,590
<AVERAGE-NET-ASSETS> 1,021,530
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.049
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.049)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000703876
<NAME> PW RMA MONEY FUND
<SERIES>
<NUMBER> 1
<NAME> PW RMA MONEY MARKET PORTFOLIO
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 7,609,644,457
<INVESTMENTS-AT-VALUE> 7,609,644,457
<RECEIVABLES> 38,120
<ASSETS-OTHER> 620
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,648,384
<PAYABLE-FOR-SECURITIES> 110,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15,772
<TOTAL-LIABILITIES> 125,772
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 7,526,776
<SHARES-COMMON-PRIOR> 5,884,604
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (701)
<ACCUMULATED-NET-GAINS> (3,915)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 7,522,612
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 376,195
<OTHER-INCOME> 0
<EXPENSES-NET> 39,202
<NET-INVESTMENT-INCOME> 336,993
<REALIZED-GAINS-CURRENT> 338
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 337,331
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (337,694)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 38,391,873
<NUMBER-OF-SHARES-REDEEMED> (36,593,662)
<SHARES-REINVESTED> 326,876
<NET-CHANGE-IN-ASSETS> 2,125,087
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 32,953
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 261
<AVERAGE-NET-ASSETS> 41,638
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .017
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.017)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000703876
<NAME> PW RMA MONEY FUND
<SERIES>
<NUMBER> 3
<NAME> PW RMA RETIREMENT FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 3,539,594
<INVESTMENTS-AT-VALUE> 3,539,594
<RECEIVABLES> 17,811
<ASSETS-OTHER> 414
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,557,818
<PAYABLE-FOR-SECURITIES> 50,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,309
<TOTAL-LIABILITIES> 57,310
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,502,361
<SHARES-COMMON-STOCK> 3,502,349
<SHARES-COMMON-PRIOR> 2,968,330
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (11)
<ACCUMULATED-NET-GAINS> (1,841)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,500,508
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 193,779
<OTHER-INCOME> 0
<EXPENSES-NET> 23,739
<NET-INVESTMENT-INCOME> 170,039
<REALIZED-GAINS-CURRENT> 289
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 170,329
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (170,039)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12,749,232
<NUMBER-OF-SHARES-REDEEMED> (12,381,363)
<SHARES-REINVESTED> 166,151
<NET-CHANGE-IN-ASSETS> 534,309
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (12)
<OVERDIST-NET-GAINS-PRIOR> (2,131)
<GROSS-ADVISORY-FEES> 14,023
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 23,739
<AVERAGE-NET-ASSETS> 3,395,388
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>