PAINEWEBBER RMA MONEY FUND INC, 485APOS, 1999-06-30

PAINEWEBBER RMA MONEY FUND INC
485APOS, 1999-06-30

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As filed with the Securities and Exchange Commission on June 30, 1999

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. 31 [ X ]

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

Amendment No. 32

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:

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

Approximate Date of Proposed Public Offering: Effective Date of this
Post-Effective Amendment.

It is proposed that this filing will become effective:
[ ] Immediately upon filing pursuant to Rule 485(b)
[ ] On pursuant to Rule 485(b)
[ ] 60 days after filing pursuant to Rule 485(a)(1)

[ X ] On AUGUST 29, 1999 pursuant to Rule 485(a)(1)

[ ] 75 days after filing pursuant to Rule 485(a)(2)
[ ] On __________________ pursuant to Rule 485(a)(2)

Title of Securities Being Registered: Shares of Common Stock.

<PAGE>

PAINEWEBBER RMA

MONEY MARKET PORTFOLIO
U.S. GOVERNMENT PORTFOLIO
TAX-FREE FUND
CALIFORNIA MUNICIPAL MONEY FUND
NEW JERSEY MUNICIPAL MONEY FUND
NEW YORK MUNICIPAL MONEY FUND

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

PROSPECTUS

AUGUST 29, 1999

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

This prospectus offers shares of these money market funds primarily to
participants in the PaineWebber Resource Management Account(R) (RMA) Program.
Shares of the funds also are available to participants in the PaineWebber
Business Services Accountsm (BSA) Program.

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the funds' shares or determined whether this prospectus
is complete or accurate. To state otherwise is a crime.

<PAGE>

PaineWebber RMA

- ----------------------------------------------
CONTENTS

THE FUNDS

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

What every investor 3 Money Market Portfolio
should know about 6 U.S. Government Portfolio
the funds 9 Tax-Free Fund
12 California Municipal Money Fund
15 New Jersey Municipal Money Fund
18 New York Municipal Money Fund
21 More About Risks and Investment Strategies

YOUR INVESTMENT

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

Information for 23 Managing Your Fund Account
managing your fund 23 Buying Shares
account 24 Selling Shares
24 Pricing and Valuation

ADDITIONAL INFORMATION

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

Additional important 25 Management
information about 26 Dividends and Taxes
the funds 27 Financial Highlights

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

Where to learn more Back Cover
about the funds

-------------------------------
The funds are not complete or
balanced investment programs.
-------------------------------

2
<PAGE>

PaineWebber RMA Money Market Portfolio
- -------------------------------------------

MONEY MARKET PORTFOLIO

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- ------------------------------------------

FUND OBJECTIVE

Maximum current income consistent with liquidity and conservation of capital

PRINCIPAL INVESTMENT STRATEGIES

The fund is a money market fund and seeks to maintain a stable price of $1.00
per share. The fund invests in a diversified portfolio of high quality money
market instruments of governmental and private issuers.

Money market instruments are short-term debt obligations and similar securities.
They also include longer term bonds that have variable interest rate or other
special features that give them the financial characteristics of short-term
debt.

The fund may invest in any of these money market instruments. It invests in
foreign money market instruments only if they are denominated in U.S. dollars.

PaineWebber Incorporated, the fund's investment adviser, has appointed Mitchell
Hutchins Asset Management Inc. to serve as the fund's sub-adviser. Mitchell
Hutchins selects money market instruments for the fund based on its assessment
of relative values and changes in market and economic conditions.

PRINCIPAL RISKS

An investment in the fund is not a bank deposit and is neither insured nor
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. While the fund seeks to maintain the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund.

Money market instruments generally have a low risk of loss, but they are not
risk-free. The fund is subject to credit risk, which is that issuers may fail,
or become less able, to make payments when due. The fund also is subject to
interest rate risk. When short-term interest rates rise, the value of the fund's
investments generally will fall, and its yield will tend to lag behind
prevailing rates.

More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:

o Credit Risk

o Interest Rate Risk

o Foreign Securities Risk

INFORMATION ON THE FUND'S RECENT HOLDINGS CAN BE FOUND IN ITS CURRENT
ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON ORDERING THOSE
REPORTS).

3
<PAGE>

PaineWebber RMA Money Market Portfolio
- -------------------------------------------

PERFORMANCE
- -----------

RISK/RETURN BAR CHART AND TABLE

The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.

The bar chart shows how the fund's performance has varied from year to year.

The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares.

The fund's past performance does not necessarily indicate how the fund will
perform in the future.

MONEY MARKET PORTFOLIO -- TOTAL RETURN

[INSERT BAR CHART]

Calendar year total return as of June 30, 1999 - %
Best quarter during years shown: quarter, 19 - %
Worst quarter during years shown: quarter, 19 - %

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998

One Year
Five Years
Ten Years
Life of Fund (10/4/82)

4
<PAGE>

PaineWebber RMA Money Market Portfolio
- -------------------------------------------

EXPENSES AND FEE TABLES
- -----------------------

FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

Maximum Sales Charge (Load) Imposed on Purchases
(as a % of offering price)....................... None
Maximum Contingent Deferred Sales Charge (Load)
(as a % of offering price)....................... None
Maximum Account Fee*
PaineWebber RMA Program.......................... $125
PaineWebber BSA Program.......................... 165

* If you participate in the PaineWebber RMA Program but do not choose the
available Bank One Line of Credit for the Gold MasterCard, the maximum annual
account fee is $85. If you participate in the PaineWebber BSA program but do not
choose the MasterCard Line of Credit, the maximum annual account fee is $125.
Additional fees may apply for optional RMA/BSA services.

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)

Management Fees..................................... 0.50%

Distribution and/or Service (12b-1) Fees............ None

Other Expenses...................................... ___%

Total Annual Fund Operating Expenses ===%

EXAMPLE

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.

This example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

1 YEAR 3 YEARS 5 YEARS 10 YEARS

5
<PAGE>

PaineWebber RMA U.S. Government Portfolio
- --------------------------------------------

U.S. GOVERNMENT PORTFOLIO

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- ------------------------------------------

FUND OBJECTIVE

Maximum current income consistent with liquidity and conservation of capital.

PRINCIPAL INVESTMENT STRATEGIES

The fund is a money market fund and seeks to maintain a stable price of $1.00
per share. The fund invests in a diversified portfolio of high quality, U.S.
government money market instruments.

The fund invests in money market instruments that are backed by the full faith
and credit of the United States and in repurchase agreements relating to those
U.S. government obligations.

PRINCIPAL RISKS

More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:

o Credit Risk

o Interest Rate Risk

INFORMATION ON THE FUND'S RECENT HOLDINGS CAN BE FOUND IN ITS CURRENT
ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON ORDERING THOSE
REPORTS).

6
<PAGE>

PaineWebber RMA U.S. Government Portfolio
- -------------------------------------------

PERFORMANCE
- -----------

RISK/RETURN BAR CHART AND TABLE

The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.

The bar chart shows how the fund's performance has varied from year to year.

The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares.

The fund's past performance does not necessarily indicate how the fund will
perform in the future.

U.S. GOVERNMENT PORTFOLIO -- TOTAL RETURN

[INSERT BAR CHART]

Calendar year total return as of June 30, 1999 - %
Best quarter during years shown: quarter, 19 - %
Worst quarter during years shown: quarter, 19 - %

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998

One Year
Five Years
Ten Years
Life of Fund (10/4/82)

7
<PAGE>

PaineWebber RMA U.S. Government Portfolio
- -------------------------------------------

EXPENSES AND FEE TABLES
- -----------------------

FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)

Management Fees..................................... ____

Distribution and/or Service (12b-1) Fees............ 0.13%*

Other Expenses...................................... ____%

Total Annual Fund Operating Expenses................ ====%

* The contract rate is 0.125% but has been rounded to 0.13% for purposes
of the table.

EXAMPLE

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.

1 YEAR 3 YEARS 5 YEARS 10 YEARS

8
<PAGE>

PaineWebber RMA Tax-Free Fund
- -------------------------------------

TAX-FREE FUND

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- ------------------------------------------

FUND OBJECTIVE

Maximum current income exempt from federal income tax consistent with liquidity
and conservation of capital.

PRINCIPAL INVESTMENT STRATEGIES

The fund is a money market fund and seeks to maintain a stable price of $1.00
per share. The fund invests in a diversified portfolio of high quality,
municipal money market instruments.

The fund invests in money market instruments that are exempt from federal income
tax. The fund may invest up to 20% of its total assets in securities that are
subject to the federal alternative minimum tax.

PRINCIPAL RISKS

More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:

o Credit Risk

o Interest Rate Risk

INFORMATION ON THE FUND'S RECENT HOLDINGS CAN BE FOUND IN ITS CURRENT
ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON ORDERING THOSE
REPORTS).

9
<PAGE>

PaineWebber RMA Tax-Free Fund
- -------------------------------------

PERFORMANCE
- -----------

RISK/RETURN BAR CHART AND TABLE

The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.

The bar chart shows how the fund's performance has varied from year to year.

The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares.

The fund's past performance does not necessarily indicate how the fund will
perform in the future.

TAX-FREE FUND -- TOTAL RETURN

[INSERT BAR CHART]

Calendar year total return as of June 30, 1999 - %
Best quarter during years shown: quarter, 19 - %
Worst quarter during years shown: quarter, 19 - %

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998

One Year
Five Years
Ten Years
Life of Fund
(10/4/82)

10
<PAGE>

PaineWebber RMA Tax-Free Fund
- -------------------------------------

EXPENSES AND FEE TABLES
- -----------------------

FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)

Management Fees..................................... ____

Distribution and/or Service (12b-1) Fees............ 0.13%*

Other Expenses...................................... ____%

Total Annual Fund Operating Expenses................ ====%

* The contract rate is 0.125% but has been rounded to 0.13% for purposes
of the table.

EXAMPLE

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.

1 YEAR 3 YEARS 5 YEARS 10 YEARS

11
<PAGE>

PaineWebber RMA California Municipal Money Fund
- -----------------------------------------------

CALIFORNIA MUNICIPAL MONEY FUND

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- ------------------------------------------

FUND OBJECTIVE

Maximum current income exempt from federal income tax and California personal
income tax consistent with liquidity and conservation of capital.

PRINCIPAL INVESTMENT STRATEGIES

The fund is a money market fund and seeks to maintain a stable price of $1.00
per share. The fund invests in a diversified portfolio of high quality
California municipal money market instruments.

The fund invests in money market instruments that are exempt from both federal
income tax and California personal income tax. While the fund normally does not
do so, it may invest without limit in instruments that are subject to the
federal alternative minimum tax.

PRINCIPAL RISKS

More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:

o Credit Risk

o Interest Rate Risk

o Single State Concentration Risk

o Related Securities Concentration Risk

INFORMATION ON THE FUND'S RECENT HOLDINGS CAN BE FOUND IN ITS CURRENT
ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON ORDERING THOSE
REPORTS).

12
<PAGE>

PaineWebber RMA California Municipal Money Fund
- -----------------------------------------------

PERFORMANCE
- -----------

RISK/RETURN BAR CHART AND TABLE

The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.

The bar chart shows how the fund's performance has varied from year to year.

The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares.

The fund's past performance does not necessarily indicate how the fund will
perform in the future.

CALIFORNIA MUNICIPAL MONEY FUND -- TOTAL RETURN

[INSERT BAR CHART]

Calendar year total return as of June 30, 1999 - %
Best quarter during years shown: quarter, 19 - %
Worst quarter during years shown: quarter, 19 - %

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998

One Year
Five Years
Ten Years
Life of Fund (11/7/88)

13
<PAGE>

PaineWebber RMA California Municipal Money Fund
- -----------------------------------------------

EXPENSES AND FEE TABLES
- -----------------------

FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)

Management Fees..................................... ____

Distribution and/or Service (12b-1) Fees............ 0.13%*

Other Expenses...................................... %

Total Annual Fund Operating Expenses................ %

* The contract rate is 0.125% but has been rounded to 0.13% for purposes
of the table.

EXAMPLE

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.

1 YEAR 3 YEARS 5 YEARS 10 YEARS

14
<PAGE>

PaineWebber RMA New Jersey Municipal Money Fund
- -----------------------------------------------
- -------------------------------------------------------------------------

NEW JERSEY MUNICIPAL MONEY FUND

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- ------------------------------------------

FUND OBJECTIVE

Maximum current income exempt from federal income tax and New Jersey personal
tax consistent with liquidity and conservation of capital.

PRINCIPAL INVESTMENT STRATEGIES

The fund is a money market fund and seeks to maintain a stable price of $1.00
per share. The fund invests in a diversified portfolio of high quality New
Jersey municipal money market instruments.

The fund invests in money market instruments that are exempt from both federal
income tax and New Jersey personal income tax. The fund may invest without limit
in instruments that are subject to the federal alternative minimum tax.

PRINCIPAL RISKS

More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:

o Credit Risk

o Interest Rate Risk

o Single State Concentration Risk

o Related Securities Concentration Risk

INFORMATION ON THE FUND'S RECENT HOLDINGS CAN BE FOUND IN ITS CURRENT
ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON ORDERING THOSE
REPORTS).

15
<PAGE>

PaineWebber RMA New Jersey Municipal Money Fund
- -----------------------------------------------

PERFORMANCE
- -----------

RISK/RETURN BAR CHART AND TABLE

The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.

The bar chart shows how the fund's performance has varied from year to year.

The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares.

The fund's past performance does not necessarily indicate how the fund will
perform in the future.

NEW JERSEY MUNICIPAL MONEY FUND -- TOTAL RETURN

[INSERT BAR CHART]

Calendar year total return as of June 30, 1999 - %
Best quarter during years shown: quarter, 19 - %
Worst quarter during years shown: quarter, 19 - %

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998

One Year
Five Years
Life of Fund (2/10/91)

16
<PAGE>

PaineWebber RMA New Jersey Municipal Money Fund
- -----------------------------------------------

EXPENSES AND FEE TABLES
- -----------------------

FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)

Management Fees..................................... 0.50%

Distribution and/or Service (12b-1) Fees............ 0.12%

Other Expenses...................................... ____%

Total Annual Fund Operating Expenses................ ====%

EXAMPLE

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.

1 YEAR 3 YEARS 5 YEARS 10 YEARS

17
<PAGE>

PaineWebber RMA New York Municipal Money Fund
- ---------------------------------------------

NEW YORK MUNICIPAL MONEY FUND

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- ------------------------------------------

FUND OBJECTIVE

Maximum current income exempt from federal income tax and New York State and New
York City personal income tax consistent with liquidity and conservation of
capital.

PRINCIPAL INVESTMENT STRATEGIES

The fund is a money market fund and seeks to maintain a stable price of $1.00
per share. The fund invests in a diversified portfolio of high quality New York
municipal money market instruments.

The fund invests in money market instruments that are exempt from federal income
tax and from both New York State and New York City personal income taxes. While
the fund normally does not do so, it may invest without limit in instruments
that are subject to the federal alternative minimum tax.

PRINCIPAL RISKS

More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:

o Credit Risk

o Interest Rate Risk

o Single State Concentration Risk

o Related Securities Concentration Risk

INFORMATION ON THE FUND'S RECENT HOLDINGS CAN BE FOUND IN ITS CURRENT
ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON ORDERING THOSE
REPORTS).

18
<PAGE>

PaineWebber RMA New York Municipal Money Fund
- ---------------------------------------------

PERFORMANCE
- -----------

RISK/RETURN BAR CHART AND TABLE

The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.

The bar chart shows how the fund's performance has varied from year to year.

The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares.

The fund's past performance does not necessarily indicate how the fund will
perform in the future.

CALIFORNIA MUNICIPAL MONEY FUND -- TOTAL RETURN

[INSERT BAR CHART]

Calendar year total return as of June 30, 1999 - %
Best quarter during years shown: quarter, 19 - %
Worst quarter during years shown: quarter, 19 - %

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998

One Year
Five Years
Ten Years
Life of Fund (11/10/88)

19
<PAGE>

PaineWebber RMA New York Municipal Money Fund
- ---------------------------------------------

EXPENSES AND FEE TABLES
- -----------------------

FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)

Management Fees..................................... ____

Distribution and/or Service (12b-1) Fees............ 0.13%*

Other Expenses...................................... ____%

Total Annual Fund Operating Expenses................ ====%

* The contract rate is 0.125% but has been rounded to 0.13% for purposes
of the table.

EXAMPLE

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.

1 YEAR 3 YEARS 5 YEARS 10 YEARS

20
<PAGE>
PaineWebber RMA Funds

MORE ABOUT RISKS AND INVESTMENT STRATEGIES
- ------------------------------------------

PRINCIPAL RISKS

The main risks of investing in one or more of the funds are described below. Not
all of these risks apply to each fund. You can find a list of the main risks
that apply to a particular fund by looking under the "Investment Objective,
Strategies and Risks" heading for that fund.

Other risks of investing in a fund, along with further detail about some of the
risks described below, are discussed in the funds' Statement of Additional
Information ("SAI"). Information on how you can obtain the SAI is on the back
cover of this prospectus.

CREDIT RISK. Credit risk is the risk that the issuer of a money market
instrument will not make principal or interest payments when they are due. Even
if an issuer does not default on a payment, a money market instrument's value
may decline if the market believes that the issuer has become less able, or less
willing, to make payments on time. Even the highest quality money market
instruments are subject to some credit risk.

FOREIGN SECURITIES RISK. Foreign securities involve risks that normally are
not associated with securities of U.S. issuers. These include risks relating
to political, social and economic developments abroad and differences between
U.S. and foreign regulatory requirements and market practices.

INTEREST RATE RISK. The value of money market instruments generally can be
expected to fall when short-term interest rates rise and to rise when short-term
interest rates fall. Interest rate risk is the risk that interest rates will
rise, so that the value of a fund's investments will fall. Also, a fund's yield
will tend to lag behind changes in prevailing short-term interest rates. This
means that a fund's income will tend to rise more slowly than increases in
short-term interest rates. Similarly, when short-term interest rates are
falling, a fund's income will tend to fall more slowly. The value of a fund's
municipal money market instruments also could fall due to adverse political or
regulatory developments concerning tax exemptions for municipal securities.

RELATED SECURITIES CONCENTRATION RISK. Each of the municipal money market funds
may invest more than 25% of its total assets in municipal money market
instruments that are issued to finance similar projects, such as those relating
to education , health care, transportation or utilities. Economic, business or
political developments or changes that affect one municipal security may affect
municipal securities in the same sector. As a result, these funds are subject to
greater risk than funds that do not follow this practice.

SINGLE STATE CONCENTRATION RISK. The performance of a fund that invests
primarily in the municipal money market instruments of a single state will be
more severely affected by unfavorable political or economic conditions within
that state than a more geographically diversified fund. As a result, an
investment in the fund could be more volatile and involve greater risk than an
investment in a more geographically diversified fund. The particular risks of
investments in California, New York and New Jersey municipal money market
instruments are discussed in the SAI.

In addition, a single state municipal money market fund is permitted to invest
more than 5% of its total assets in the securities of a single issuer with
respect to 25% of its total assets. When a fund holds a large position in the
securities of a single issuer, changes in the financial condition or in the
market's assessment of that issuer can cause larger changes in the value of the
funds' total investments and its income that if the fund held only a smaller
position.

ADDITIONAL RISKS

YEAR 2000 RISK. The fund could be adversely affected by problems relating to the
inability of computer systems used by Mitchell Hutchins and the fund's other
service providers to recognize the year 2000. While year 2000-related computer
problems could have a negative effect on the fund, Mitchell Hutchins is working
to avoid these problems with respect to its own computer systems and to obtain
assurances from other service providers that they are taking similar steps.

Similarly, the issuers whose money market instruments are bought by the fund and
the trading systems used by the fund could be adversely affected by this issue.
The ability of an issuer or trading system to respond successfully to the issue
requires both technological sophistication and diligence, and there can be no
assurance that any steps taken will be sufficient to avoid an adverse impact on
the fund.

ADDITIONAL INVESTMENT STRATEGIES

Like all money market funds, the funds are subject to maturity, quality and
diversification requirements designed to help then maintain a stable price of

21
<PAGE>

PaineWebber RMA Funds
- ---------------------------------------------

$1.00 per share. The funds' investment strategies are designed to comply with
these requirements. RMA California, RMA New Jersey and RMA New York Municipal
Money Market Funds are organized as "non-diversified" funds. Normally, this
would mean that they would not be subject to certain limitations on investments
of more than 5% of total assets in the securities of a single issuer. However,
because these funds are single state money market funds, they are subject to
special regulations that impose substantially the same limitations as normally
apply to "diversified" mutual funds. The other funds are subject to even more
stringent diversification requirements, which apply to money market funds that
are not single state funds.

22
<PAGE>

PaineWebber RMA Funds
- ---------------------------------------------

YOUR INVESTMENT

MANAGING YOUR FUND ACCOUNT
- --------------------------

BUYING SHARES
- -------------

You must be a PaineWebber client or a client of a PaineWebber correspondent firm
to purchase fund shares. Shares of the funds are available primarily through the
PaineWebber Resource Management Account (RMA(R)) Program. Shares of the funds
also are available to participants in the PaineWebber Business Services Account
(BSA(R)) Program

Certain features available to RMA and BSA participants are summarized in the
Appendices to the SAI. The RMA and BSA programs are more fully described in
separate materials your Financial Advisor can provide you. Not all correspondent
firms have arrangements with PaineWebber to make fund shares available to their
customers.

PaineWebber asks participants in these programs to select one of the funds as
their primary sweep money fund. You may have only one primary sweep money fund
at any time, but you may change your primary sweep money fund or purchase shares
of another fund by contacting your Financial Advisor.

Your order to purchase a fund's shares will be effective on the business day on
which federal funds become available to the fund. 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 can be
made immediately available to the fund. A business day is any day that the
Boston offices of the fund's custodian and the New York City offices of
PaineWebber and its bank, The Bank of New York, are open for business.

Each fund (other than Money Market Portfolio) has adopted a plan under rule
12b-1 under which the fund pays fees for services provided to its shareholders
at the annual rate of 0.125% of its average net assets (0.12% for New Jersey
Municipal Money Fund).

The funds and PaineWebber reserve the right to reject a purchase order or
suspend the offering of fund shares.

BUYING SHARES AUTOMATICALLY

All free cash credit balances (that is, immediately available funds) of $1 or
more in your PaineWebber RMA or BSA brokerage account (including proceeds from
securities you have sold) are automatically invested in your primary sweep money
fund on a daily basis for settlement the next business day, when federal funds
normally are available. For cash balances arising from the sale of securities in
your brokerage account, federal funds availability can sometimes take longer.

Fund shares will be purchased only after all debits and charges to your RMA or
BSA brokerage account are satisfied. See "Selling Shares Automatically" below.

BUYING SHARES BY CHECK OR ELECTRONIC FUNDS TRANSFER CREDIT

RMA and BSA participants may purchase shares of their primary sweep money fund
or another fund by placing an order with their PaineWebber Financial Advisor and
providing a check from a U.S. bank. You should include your PaineWebber account
number on the check.

Federal funds are deemed available to a fund two business days after the deposit
of a personal check 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 if they are converted to
federal funds in less than two business days.

BUYING SHARES BY WIRE

You may purchase fund shares by placing an order through your Financial Advisor
and instructing your bank to transfer federal funds by wire to:

The Bank of New York
ABA 021-000018
A/C 890-0114-061, OBI=FBO)
[Account Name]/[Brokerage Account Number.]

The wire must include your name and RMA or BSA brokerage account number.

23
<PAGE>

PaineWebber RMA Funds
- ---------------------------------------------

order on the next business day. PaineWebber and/or your bank may impose a
service charge for wire transfers.

MINIMUM INVESTMENTS

The funds have no minimum for initial investments or to add to an account, but
reserve the right to establish minimum investment requirements at any time.

SELLING SHARES
- --------------

You can sell your fund shares at any time. You may sell your shares by
contacting your Financial Advisor in person or by telephone or mail. You may
also sell your shares by wire. Your fund shares will also be redeemed
automatically to settle any outstanding securities purchases or debits to your
PaineWebber brokerage account, unless you instruct your Financial Advisor
otherwise.

If you own shares of more than one fund, shares of your primary sweep money fund
are always sold first for automatic sales or if you do not specify which fund's
shares are to be sold. Shares in the other funds will be sold, if necessary, in
the following order: first, Money Market Portfolio; second, U.S. Government
Portfolio; third, Tax-Free Fund; and fourth, California Municipal Money Fund,
New Jersey Municipal Money Fund or New York Municipal Money Fund.

If you sell all your shares in a fund, you will receive cash credits to your RMA
or BSA brokerage account for dividends earned on those shares prior to the sale
date.

SELLING SHARES AUTOMATICALLY

Under the RMA and BSA programs, PaineWebber sells fund shares automatically to
satisfy outstanding debits and charges in your brokerage account.

O Debits are amounts due PaineWebber on settlement date for securities
purchases, margin loans, PaineWebber checks, federal funds wires arranged by
PaineWebber and related fees.

O Charges are RMA and BSA checks, MasterCard purchases, cash advances, Bill
Payment Service checks and Automated Clearing House transfers, including
Electronic Funds Transfer Debits.

Shares are sold automatically to cover MasterCard purchases at the end of the
MasterCard monthly billing period. Shares also are sold to cover interest due on
and credit extended and outstanding under the Bank One Line of Credit at the end
of the MasterCard monthly billing period. Shares are sold to pay for securities
purchases on settlement date.

If you send an order to sell your shares by mail to PaineWebber or its
correspondent firms, your request must include:

o Your name and address;

o The fund's name;

o Your account number;

o The dollar amount or number of shares you want to sell; and

o A guarantee of each registered owner's signature. A signature guarantee
may be obtained from a financial institution, broker, dealer or clearing
agency that is a participant in one of the medallion programs recognized
by the Securities Transfer Agents Association. These are: Securities
Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion
Program (SEMP) and the New York Stock Exchange Medallion Signature Program
(MSP). The funds and their transfer agent will not accept signature
guarantees that are not a part of these programs.

Sales by mail may also need to include additional supporting documents for sales
by estates, trusts, guardianships, custodianships, partnerships and
corporations.

ADDITIONAL INFORMATION

It costs the fund money to maintain shareholder accounts. Therefore, each fund
reserves the right to repurchase all shares in any account that has a net asset
value of less than $500. If a fund elects to do this with your account, it will
notify you that you can increase the amount invested to $500 or more within 60
days. This notice may appear on your account statement.

If you want to sell shares that you purchased recently, a fund may delay payment
until it verifies that it has received good payment. If you purchased shares by
check, this can take up to 15 days.

24
<PAGE>

PaineWebber has the right to terminate your RMA or BSA brokerage account for any
reason. In that case, PaineWebber will sell all of the fund shares held in the
RMA or BSA brokerage account and will send you the proceeds within three
business days.

PRICING AND VALUATION
- ---------------------

The price of fund shares is based on net asset value. The net asset value is the
total value of a fund divided by the total number of shares outstanding. In

24A
<PAGE>

PaineWebber RMA Funds
- ---------------------------------------------

determining net asset value, each fund values its securities at their amortized
cost. This method uses a constant amortization to maturity of the difference
between the cost of the instrument to the fund and the amount due at maturity.
Each fund's net asset value per share is expected to be $1.00 per share,
although this value is not guaranteed.

Each fund calculates net asset value once each business day at 12:00 noon,
Eastern time. Your price for buying or selling shares will be the net asset
value that is next calculated after the fund accepts your order. Your Financial
Advisor is responsible for making sure that your order is promptly sent to the
fund.

MANAGEMENT
- ----------

INVESTMENT ADVISER AND SUB-ADVISER

PaineWebber is the investment adviser and administrator of each fund. Mitchell
Hutchins Asset Management Inc. is each fund's sub-adviser and sub-administrator.
PaineWebber and Mitchell Hutchins are located at 1285 Avenue of the Americas,
New York, New York, 10019. Mitchell Hutchins is a wholly owned asset management
subsidiary of PaineWebber, which is wholly owned by Paine Webber Group Inc., a
publicly owned financial services holding company. On July 31, 1999, PaineWebber
or Mitchell Hutchins was the adviser or sub-adviser of __ investment companies
with __ separate portfolios and aggregate assets of approximately $__._ billion.

ADVISORY FEES

The funds paid advisory and administration fees to PaineWebber for the most
recent fiscal year ended June 30, 1999 at the following annual rates based on
average daily net assets:

Money Market Portfolio................0.50%
U.S. Government Portfolio.............
Tax-Free Fund.........................
California Municipal Money Fund.......
New Jersey Municipal Money Fund.......
New York Municipal Money Fund.........

25
<PAGE>

DIVIDENDS AND TAXES
- -------------------

DIVIDENDS

The funds declare dividends daily and pay them monthly. The funds distribute any
net short-term capital gain annually, but may make more frequent distributions
if necessary to maintain their share prices at $1.00 per share.

You will receive dividends in additional shares of a fund unless you elect to
receive them in cash. Contact your Financial Advisor at PaineWebber or one of
its correspondent firms if you prefer to receive dividends in cash.

TAXES

The dividends that you receive from the Money Market Portfolio and U.S.
Government Portfolio generally are subject to federal income tax regardless of
whether you receive them in additional fund shares or in cash. The funds expect
that their dividends will be taxed primarily as ordinary income. If you hold
fund shares through a tax-exempt account or plan, such as an IRA or 401(k) plan,
dividends on your shares generally will not be subject to tax.

The dividends that you receive from Tax-Free Fund, California Municipal Money
Fund, New York Municipal Money Fund and New Jersey Municipal Money Fund
generally are not subject to federal income tax.

In addition, California Municipal Money Fund seeks to pay dividends that are
exempt from California personal income tax, New Jersey Municipal Money Fund
seeks to pay dividends that are exempt from New Jersey personal income tax and
New York Municipal Money Fund seeks to pay dividends that are exempt from New
York State and New York City personal income tax.

Each fund will tell you how you should treat its dividends for tax purposes. You
will not recognize any gain on the sale of your shares in a fund so long as the
fund maintains a share price of $1.00.

26
<PAGE>

PaineWebber RMA Funds
- ---------------------------------------------

FINANCIAL HIGHLIGHTS
- --------------------

The following financial highlights tables are intended to help you understand
the funds' financial performance for the past 5 years. Certain information
reflects financial results for a single fund share. In the tables, "total
investment return" represents the rate that an investor would have earned on an
investment in a fund (assuming reinvestment of all dividends).

The information in the financial highlights has been audited by Ernst & Young,
LLP, independent auditors, whose report, along with the fund's financial
statements, are included in the fund's annual report to shareholders. You may
obtain the funds' annual report without charge by calling 1-800-762-1000.

MONEY MARKET PORTFOLIO

U.S. GOVERNMENT PORTFOLIO

TAX-FREE FUND

CALIFORNIA MUNICIPAL MONEY FUND

NEW YORK MUNICIPAL MONEY FUND

NEW JERSEY MUNICIPAL MONEY FUND

[FINANCIAL HIGHLIGHTS TO BE PROVIDED]

27
<PAGE>

TICKER SYMBOL: PaineWebber RMA Money Market Portfolio:
U.S. Government
Portfolio:
Tax-Free Fund
California Municipal Money Fund
New York Municipal Money Fund
New Jersey Municipal Money Fund

If you want more information about a fund, the following documents are available
free upon request:

ANNUAL/SEMI-ANNUAL REPORTS

Additional information about the funds' investments is available in the funds'
annual and semi-annual reports to shareholders.

STATEMENT OF ADDITIONAL INFORMATION (SAI)

The SAI provides more detailed information about the funds and is incorporated
by reference into this prospectus.

You may discuss your questions about a fund by contacting your PaineWebber
Financial Advisor. You may obtain free copies of annual and semi-annual reports
and the SAI by contacting the fund directly at 1-800-762-1000.

You may review and copy information about a fund, including shareholder reports
and the SAI, at the Public Reference Room of the Securities and Exchange
Commission. You can get text-only copies of reports and other information about
a fund:

o For a fee, by writing to or calling the SEC's Public Reference Room,
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330
o Free, from the SEC's Internet website at: http://www.sec.gov

PaineWebber RMA Money Fund, Inc. PaineWebber Managed Municipal Trust
- - Money Market Portfolio - RMA California Municipal Money Fund
- - U.S. Government Portfolio - RMA New York Municipal Money Fund
Investment Company Act File No.811-3503 Investment Company Act File No.811-3946
PaineWebber RMA Tax-Free Fund, Inc. PaineWebber Municipal Money Market
Investment Company Act File No. 811-3504 Series
- RMA New Jersey Municipal Money Fund
Investment Company Act File No.811-6173

(COPYRIGHT)1999 PaineWebber Incorporated

<PAGE>

PAINEWEBBER RMA
MONEY MARKET PORTFOLIO
U.S. GOVERNMENT PORTFOLIO
TAX-FREE FUND
CALIFORNIA MUNICIPAL MONEY FUND
NEW YORK MUNICIPAL MONEY FUND
NEW JERSEY MUNICIPAL MONEY FUND

1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019

STATEMENT OF ADDITIONAL INFORMATION

The six funds named above are professionally managed money market funds.
PaineWebber RMA Money Market Portfolio and PaineWebber RMA U.S. Government
Portfolio are diversified series of PaineWebber RMA Money Fund, Inc., and
PaineWebber RMA Tax-Free Fund, Inc. also is a diversified fund. PaineWebber RMA
California Municipal Money Fund and PaineWebber RMA New York Municipal Money
Fund are non-diversified series of PaineWebber Managed Municipal Trust;
PaineWebber RMA New Jersey Municipal Money Fund is a non-diversified series of
PaineWebber Municipal Money Market Series.

The funds' investment adviser, administrator and distributor is
PaineWebber Incorporated ("PaineWebber"); their sub-adviser and
sub-administrator is Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins"), a wholly owned asset management subsidiary of PaineWebber.

Portions of the funds' Annual Report to Shareholders are incorporated by
reference into this Statement of Additional Information ("SAI"). The Annual
Report accompanies this SAI. You may obtain an additional copy of the
funds'Annual Report by calling toll-free 1-800-647-1568.

This SAI is not a prospectus and should be read only in conjunction with
the Funds' current Prospectus, dated August 29, 1999. A copy of the Prospectus
may be obtained by contacting any PaineWebber Financial Advisor or correspondent
firm or by calling 1-800-762-1000. This SAI is dated August 29, 1999.

TABLE OF CONTENTS
PAGE

The Funds and Their Investment Policies................2
The Funds' Investments, Related Risks and
Limitations............................................4
Organization of the Fund, Directors/Trustees and
Officers and Principal Holders of
Securities.........................................13
Investment Advisory, Administration and
Distribution Arrangements ............................22
Portfolio Transactions................................26
Additional Information Regarding
Redemptions........................................27
Valuation of Shares...................................27
Performance Information...............................28
Taxes.................................................31
Other Information.....................................37
Financial Statements..................................39
Appendix A...........................................A-1
Appendix B...........................................B-1

<PAGE>

THE FUNDS AND THEIR INVESTMENT POLICIES

Each fund's investment objective may not be changed without shareholder
approval. Except where noted, the other investment policies of a fund may be
changed by its board without shareholder approval. As with other mutual funds,
there is no assurance that a fund will achieve its investment objective. Each
fund is a money market fund that invests in high quality money market
instruments that have, or are deemed to have, remaining maturities of 13 months
or less and maintains a dollar-weighted average portfolio maturity of 90 days or
less. Money market instruments are short-term debt-obligations and similar
securities. They also include longer term bonds that have variable interest rate
or other special features that give them the financial characteristics of
short-term debt. Each fund may purchase only those obligations that Mitchell
Hutchins determines, pursuant to procedures adopted by the board, present
minimal credit risks and are "First Tier Securities" as defined in Rule 2a-7
under the Investment Company Act of 1940, as amended ("Investment Company Act").

MONEY MARKET PORTFOLIO

Money Market Portfolio's investment objective is to provide maximum
current income consistent with liquidity and conservation of capital. The fund's
investments include (1) U.S. and foreign government securities, (2) obligations
of U.S. and foreign banks, (3) commercial paper and other short-term obligations
of U.S. and foreign corporations, partnerships, trusts and similar entities, (4)
repurchase agreements regarding any of the foregoing and (5) investment company
securities.

The fund may invest in obligations (including certificates of deposit,
bankers' acceptances, time deposits and similar obligations) of U.S. and foreign
banks only if the institution has total assets at the time of purchase in excess
of $1.5 billion. The fund may invest in non-negotiable time deposits of U.S.
banks, savings associations and similar depository institutions only if the
institution has total assets at the time of purchase in excess of $1.5 billion
and the time deposits have a maturity of seven days or less.

The fund generally may invest no more than 5% of its total assets in the
securities of a single issuer (other than U.S. government securities). The fund
may purchase only U.S. dollar-denominated obligations of foreign issuers.

The fund may invest up to 10% of its net assets in illiquid securities.
The fund may purchase securities on a when-issued or delayed delivery basis. The
fund may lend its portfolio securities to qualified broker-dealers or
institutional investors in an amount up to 33-1/3% of its total assets. The fund
may borrow up to 10% of its total assets for temporary purposes, including
reverse repurchase agreements. It may invest in the securities of other
investment companies.

U.S. GOVERNMENT PORTFOLIO

U.S. Government Portfolio's investment objective is to provide maximum
current income consistent with liquidity and the conservation of capital. The
fund invests in U.S. government securities. Under investment guidelines adopted
by its board, the fund currently invests only in securities, such as U.S.
Treasury bills and notes and Government National Mortgage Association
certificates, that are backed by the full faith and credit of the United States,
in repurchase agreements secured by such securities and in the securities of
other investment companies that invest only in these instruments.

The fund may invest up to 10% of its net assets in illiquid securities.
The fund may purchase securities on a when-issued or delayed delivery basis. The
fund may lend its portfolio securities to qualified broker-dealers or
institutional investors in an amount up to 33-1/3% of its total assets. The fund
may borrow up to 10% of its total assets for temporary purposes, including
reverse repurchase agreements. The fund may invest in the securities of other
investment companies.

2
<PAGE>

TAX-FREE FUND

Tax Free Fund's investment objective is to provide maximum current income
exempt from federal income tax consistent with liquidity and conservation of
capital. The fund invests substantially all of its assets in money market
instruments issued by states, municipalities, public authorities and other
issuers, the interest from which is exempt from federal income tax ("municipal
securities"). The fund also may purchase participation interests in municipal
securities. Participation interests are pro rata interests in securities held by
others.

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 federal alternative minimum tax ("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 fund generally may invest no more than 5% of its total assets in the
securities of a single issuer [(other than U.S. government securities)]. The
fund may invest up to 10% of its net assets in illiquid securities. The fund may
purchase securities on a when-issued or delayed delivery basis. The fund may
lend its portfolio securities to qualified broker-dealers or institutional
investors in an amount up to 33-1/3% of its total assets. The fund may borrow up
to 10% of its total assets for temporary purposes, including reverse repurchase
agreements.

CALIFORNIA MUNICIPAL MONEY FUND

California Municipal Money Fund's investment objective is to provide
maximum current income exempt from federal income tax and California's personal
income tax consistent with liquidity and conservation of capital. The 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"). The fund also may purchase participation interests in
California municipal securities. Participation interests are pro rata interests
in securities held by others.

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.

As a single state money market fund, the fund may invest more than 5% of
its total assets in the securities of a single issuer with respect to 25% of its
total assets. The fund may invest up to 10% of its net assets in illiquid
securities. The fund may purchase securities on a when-issued or delayed
delivery basis. The fund may lend its portfolio securities to qualified
broker-dealers or institutional investors in an amount up to 33-1/3% of its
total assets. The fund may borrow up to 10% of its total assets for temporary
purposes, including reverse repurchase agreements. The fund may invest in the
securities of other investment companies.

NEW JERSEY MUNICIPAL MONEY FUND

New Jersey Municipal Money Fund's investment objective is the maximization
of current income exempt from federal income tax and New Jersey personal income
tax consistent with the preservation of capital and the maintenance of
liquidity. The fund invests at least 65% and seeks to invest 100% of its net
assets in municipal securities issued by the State of New Jersey, its
municipalities and public authorities and other issuers if such obligations pay
interest that is exempt from federal income tax as well as New Jersey personal
income tax ("New Jersey municipal securities"). The fund also may purchase
participation interests in New Jersey municipal securities. Participation
interests are pro rata interests in securities held by others. Under normal
market conditions, the fund will not invest more than 25% of its total assets in
participation interests or other securities issued by or purchased from banks or
other financial institutions.

The fund may invest without limit in New Jersey securities that pay
interest that is subject to the AMT.

3
<PAGE>

As a single state money market fund, the fund may invest more than 5% of
its total assets in the securities of a single issuer with respect to 25% of its
total assets. The fund may invest up to 10% of its net assets in illiquid
securities. The fund may purchase securities on a when-issued or delayed
delivery basis. The fund may lend its portfolio securities to qualified
broker-dealers or institutional investors in an amount up to 33-1/3% of its
total assets. The fund may borrow up to 15% of its total assets for temporary
purposes, including reverse repurchase agreements. The fund may invest in the
securities of other investment companies.

NEW YORK MUNICIPAL MONEY FUND

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. The 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"). The fund
also may purchase participation interests in New York municipal securities.
Participation interests are pro rata interests in securities held by others.

Under normal market conditions, the fund intends to invest in New York
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 FUNDS' INVESTMENTS, RELATED RISKS AND LIMITATIONS

The following supplements the information contained in the Prospectus and
above concerning each fund's investments, related risks and limitations. Except
as otherwise indicated in the Prospectus or the Statement of Additional
Information, each fund has established no policy limitations on its ability to
use the investments or techniques discussed in these documents. New forms of
money market instruments continue to be developed. The funds may invest in these
instruments to the extent consistent with their investment objectives.

YIELDS AND CREDIT RATINGS OF MONEY MARKET INSTRUMENTS; FIRST TIER
SECURITIES. The yields on the money market instruments in which each fund
invests (such as U.S. government securities, 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 assigned by
nationally recognized statistical rating organizations ("rating agencies")
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. If a security in a fund's portfolio ceases to be a
First Tier Security or Mitchell Hutchins becomes aware that a security has
received a rating below the second highest rating by any rating agency, Mitchell
Hutchins and, in certain cases, a fund's board, will consider whether a fund
should continue to hold the obligation. A First Tier Security is either (1)
rated in the highest short-term rating category by at least two rating agencies,
(2) rated in the highest short-term rating category by a single rating agency if
only that rating agency has assigned the obligation a short-term rating, (3)
issued by an issuer that has received such a short-term rating with respect to a
security that is comparable in priority and security, (4) subject to a guarantee
rated in the highest short-term rating category or issued by a guarantor that

4
<PAGE>

has received the highest short-term rating for a comparable debt obligation or
(5) unrated, but determined by Mitchell Hutchins to be of comparable quality. A
First Tier Security rated in the highest short-term category at the time of
purchase that subsequently receives a rating below the highest rating category
from a different rating agency may continue to be considered a First Tier
Security.

U.S. GOVERNMENT SECURITIES include direct obligations of the U.S. Treasury
(such as Treasury bills, notes or bonds) and obligations issued or guaranteed as
to principal and interest (but not as to market value) by the U.S. government,
its agencies or its instrumentalities. U.S. government securities include
mortgage-backed securities issued or guaranteed by government agencies or
government-sponsored enterprises. Other U.S. government securities may be backed
by the full faith and credit of the U.S. government or supported primarily or
solely by the creditworthiness of the government-related issuer or, in the case
of mortgage-backed securities, by pools of assets.

Money Market Portfolio and U.S. Government Portfolio may invest in
separately traded principal and interest components of securities issued or
guaranteed by the U.S. Treasury, which are traded independently under the
Separate Trading of Registered Interest and Principal of Securities ("STRIPS")
program. Under the STRIPS programs, the principal and interest components are
individually numbered and separately issued by the U.S. Treasury.

COMMERCIAL PAPER AND OTHER SHORT-TERM OBLIGATIONS. Money Market Portfolio
may purchase commercial paper, which includes short-term obligations issued by
corporations, partnerships, trusts or other entities to finance short-term
credit needs. The fund also may purchase non-convertible debt obligations
subject to maturity constraints imposed by Rule 2a-7 under the Investment
Company Act.

ASSET-BACKED SECURITIES. [Money Market Portfolio] may invest in securities
that are comprised of financial assets. Such assets may include a motor vehicle
and other types of installment sales contracts, home equity loans, leases of
various types of real and personal property and receivables from revolving
credit (credit card) agreements or other types of financial assets. Such assets
are securitized through the use of trusts or special purpose corporations or
other entities. Payments or distributions of principal and interest may be
guaranteed up to a certain amount and for a certain time period by a letter of
credit or pool insurance policy issued by a financial institution unaffiliated
with the issuer, or other credit enhancements may be present. See "The Funds'
Investments, Related Risks and Limitations -- Credit and Liquidity
Enhancements."

VARIABLE AND FLOATING RATE SECURITIES AND DEMAND INSTRUMENTS. Money Market
Portfolio and U.S. Government Portfolio 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.
In addition, Money Market Portfolio may purchase variable and floating rate
securities of other issuers and the municipal funds may purchase such securities
of municipal issuers including tender option bonds. The funds will only purchase
these other types of variable and floating rate securities with remaining
maturities in excess of 13 months if the securities are subject to a demand
feature exercisable within 13 months or less. The yields on these securities are
adjusted in relation to changes in specific rates, such as the prime rate, and
different securities may have different adjustment rates. Each fund's investment
in these securities must 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. Certain of these obligations carry a
demand feature that gives a fund the right to tender them back to a specified
party, usually the issuer or a remarketing agent, prior to maturity. See "The
Funds' Investments, Related Risks and Limitations -- Credit and Liquidity
Enhancements."

Generally, each fund may exercise demand features (1) upon a default under
the terms of the underlying security, (2) to maintain its portfolio in
accordance with its investment objective and policies or applicable legal or
regulatory requirements or (3) as needed to provide liquidity to a 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

5
<PAGE>

value of floating rate and variable rate securities to fluctuate less than the
market value of fixed rate securities.

VARIABLE AMOUNT MASTER DEMAND NOTES. Money Market Portfolio may invest in
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 an 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 payable on
demand and may or may not be rated.

INVESTING IN FOREIGN SECURITIES. Money Market Portfolio's investments in
U.S. dollar-denominated securities of foreign issuers may involve risks that are
different from investments in U.S. issuers. These risks may include future
unfavorable political and economic developments, possible 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 fund's investments. Additionally, there may be less publicly available
information about foreign issuers because they may not be subject to the same
regulatory requirements as domestic issuers.

CREDIT AND LIQUIDITY ENHANCEMENTS. The fund may invest in securities that
have credit or liquidity enhancements or the fund may purchase these types of
enhancements in the secondary market. Such enhancements may be structured as
demand features that permit the fund to sell the instrument at designated times
and prices. These credit and liquidity enhancements may be backed by letters of
credit or other instruments provided by banks or other financial institutions
whose credit standing affects the credit quality of the underlying obligation.
Changes in the credit quality of these financial institutions could cause losses
to the fund and affect its share price. The credit and liquidity enhancements
may have conditions that limit the ability of the fund to use them when the fund
wished to do so.

TENDER OPTION BONDS. The Municipal Funds may invest in "tender option
bonds." Tender option bonds are long-term municipal securities sold by a bank or
other financial institution subject to a demand feature that gives the purchaser
the right to sell them to the bank or other financial institution at par plus
accrued interest at designated times (the "tender option"). The Municipal Funds
may invest in bonds with tender option that may be exercisable at intervals
ranging from daily to 397 days, and the interest rate on the bonds is typically
reset at the end of the applicable interval in an attempt to cause the bonds to
have a market value that approximates their par value. The tender option may not
be exercisable in the event of a default on, or significant downgrading of, the
underlying municipal securities, and may be subject to other conditions.
Therefore, a Fund's ability to exercise the tender option will be affected by
the credit standing of both the bank or other financial institution involved and
the issuer of the underlying securities.

ILLIQUID SECURITIES. The term "illiquid securities" for purposes of the
Prospectus and SAI means securities that cannot be disposed of within seven days
in the ordinary course of business at approximately the amount at which a 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 are liquid pursuant to guidelines established
by each fund's board. To the extent the funds invest in illiquid securities,
they may not be able readily to liquidate such investments and may have to sell
other investments if necessary to raise cash to meet its obligations.

Restricted securities are not registered under the Securities Act of 1933,
as amended ("Securities Act") and may be sold only in privately negotiated or
other exempted transactions or after a registration statement under the
Securities Act has become effective. Where registration is required, a fund may
be obligated to pay all or part of the registration expenses and a considerable
period may elapse between the time of the decision to sell and the time a fund
may be permitted to sell a security under an effective registration statement.
If, during such a period, adverse market conditions were to develop, a fund
might obtain a less favorable price than prevailed when it decided to sell.

However, not all restricted securities are illiquid. A large institutional
market has developed for many U.S. and foreign securities that are not
registered under the Securities Act. 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

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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.

Institutional markets for restricted securities also have developed as a
result of Rule 144A, which establishes a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. Such markets include automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by the National Association
of Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
a 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.

Each board 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, which may include (1) the frequency of trades for the security, (2)
the number of dealers that make quotes, or are expected to make quotes, for the
security, (3) the nature of the security and how trading is effected (e.g., the
time needed to sell the security, how bids are solicited and the mechanics of
transfer) and (4) the existence of demand features or similar liquidity
enhancements. Mitchell Hutchins monitors the liquidity of restricted securities
in each fund's portfolio and reports periodically on such decisions to the
applicable board.

REPURCHASE AGREEMENTS. Money Market Portfolio and U.S. Government
Portfolio each 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. Each municipal
fund may enter into repurchase agreements 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 or other obligations from a bank or securities dealer (or its
affiliate) and simultaneously commits to resell them to the counterparty 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 obligations.
Securities or other obligations subject to repurchase agreements may have
maturities in excess of 13 months. A fund maintains custody of the underlying
obligations prior to their repurchase, either through its regular custodian or
through a special "tri-party" custodian or sub-custodian that maintains separate
accounts for both the fund and its counterparty. Thus, the obligation of the
counterparty to pay the repurchase price on the date agreed to or upon demand
is, in effect, secured by such obligations. Repurchase agreements carry certain
risks not associated with direct investments in securities, including a possible
decline in the market value of the underlying obligations. If their value
becomes less than the repurchase price, plus any agreed-upon additional amount,
the counterparty 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 obligations and the price that was paid by a fund upon
acquisition is accrued as interest and included in its net investment income.
Repurchase agreements involving obligations other than U.S. government
securities (such as commercial paper and corporate bonds) may be subject to
special risks and may not have the benefit of certain protections in the event
of the counterparty's insolvency. If the seller or guarantor becomes insolvent,
a fund may suffer delays, costs and possible losses in connection with the
disposition of collateral. Each fund intends to enter into repurchase agreements
only with counterparties in transactions believed by Mitchell Hutchins to
present minimum credit risks.

REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements involve the
sale of securities held by a fund subject to its agreement to repurchase the
securities at an agreed-upon date or upon demand and at a price reflecting a
market rate of interest. Reverse repurchase agreements are subject to a fund's
limitation on borrowings and may be entered into only with banks and securities
dealers. While a reverse repurchase agreement is outstanding, a fund will
maintain, in a segregated account with its custodian, cash or liquid securities,
marked to market daily, in an amount at least equal to its obligations under the
reverse repurchase agreement. See "The Funds' Investments and Related Risks--
Segregated Accounts."

Reverse repurchase agreements involve the risk that the buyer of the
securities sold by a fund might be unable to deliver them when the fund seeks to
repurchase. If the buyer of securities under a reverse repurchase agreement

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files for bankruptcy or becomes insolvent, such buyer or trustee or receiver may
receive an extension of time to determine whether to enforce that fund's
obligation to repurchase the securities, and a fund's use of the proceeds of the
reverse repurchase agreement may effectively be restricted pending such
decision.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each fund may purchase
securities on a "when-issued" basis or may purchase or sell securities for
delayed delivery, I.E., for issuance or delivery to or by the fund later than
the normal settlement date for such securities 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 undertakes a when-issued or
delayed delivery obligation, it immediately assumes the risks of ownership,
including the risks of price fluctuation. Failure of the issuer to deliver a
security purchased by a fund on a when-issued or delayed delivery basis may
result in a fund's incurring a loss or missing an opportunity to make an
alternative investment.

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 a 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 "The Funds' Investments and Related
Risks--Segregated Accounts." Each fund may sell the right to acquire the
security prior to delivery if Mitchell Hutchins deems it advantageous to do so,
which may result in a gain or loss to the fund. Each Municipal Fund expects that
commitments to purchase when-issued or delayed delivery securities will not
exceed 25% of its assets (20% in the case of New Jersey Municipal Money Fund).

INVESTMENTS IN OTHER INVESTMENT COMPANIES. Each fund may invest in
securities of other money market funds, subject to Investment Company Act
limitations, which at present restrict these investments in the aggregate to no
more than 10% of the fund's total assets. The shares of other money market funds
are subject to the management fees and other expenses of those funds. At the
same time, a fund would continue to pay its own management fees and expenses
with respect to all its investments, including shares of other money market
funds. Each fund may invest in the securities of other money market funds when
Mitchell Hutchins believes that (1) the amounts to be invested are too small or
are available too late in the day to be effectively invested in other money
market instruments, (2) shares of other money market funds otherwise would
provide a better return than direct investment in other money market instruments
or (3) such investments would enhance the fund's liquidity.

LENDING OF PORTFOLIO SECURITIES. Each fund is authorized to lend 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 these securities. The
borrower of a fund's portfolio securities must maintain acceptable collateral
with the fund's custodian in an amount, marked to market daily, 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. Each fund may reinvest any cash collateral in money market
investments or other short-term liquid investments. 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 of its loans at any
time. Each fund may pay reasonable fees in connection with a loan and may pay
the borrower or placing broker a negotiated portion of the interest earned on
the reinvestment of cash held as collateral. Each fund will receive amounts
equivalent to any interest, dividends or other distributions on the securities
loaned. Each fund will regain record ownership of loaned securities to exercise
beneficial rights, such as voting and subscription rights, when regaining such
rights is considered to be in a fund's interest.

Pursuant to procedures adopted by the board of each fund governing a
fund's securities lending program, PaineWebber has been retained to serve as
lending agent for a fund. The board of each fund also has authorized the payment
of fees (including fees calculated as a percentage of invested cash collateral)
to PaineWebber for these services. The board periodically reviews all portfolio
securities loan transactions for which PaineWebber acted as lending agent.
PaineWebber also has been approved as a borrower under the fund's securities
lending program.

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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, it 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 a fund's obligation or commitment under such
transactions

CERTAIN POLICIES OF THE MUNICIPAL FUNDS

Tax-Free Fund, California Municipal Money Fund, New Jersey Municipal Money
Fund and New York Municipal Money Fund may be referred to collectively as the
"municipal funds."

NON-DIVERSIFIED STATUS OF SINGLE STATE MUNICIPAL FUNDS. California
Municipal Money Fund, New Jersey Municipal Money Fund and New York Municipal
Money Fund are "non-diversified funds," as that term is defined in the
Investment Company Act. In general, a non-diversified fund is not subject to
certain limitations on its ability to invest more than 5% of its total assets in
securities of a single issuer with respect to 50% of its assets. Rule 2a-7 under
the Investment Company Act, however, imposes more stringent diversification
requirements on money market funds. For single state municipal money market
funds, Rule 2a-7 generally requires that the securities of a single issuer may
not exceed 5% of the fund's total assets with respect to at least 75% of its
assets. Nonetheless, a single state municipal money fund may be subject to
greater risk than a money market fund that is more "diversified" because changes
in the financial condition of a single issuer may cause greater fluctuations in
its yield or on its ability to maintain a constant net asset value per share.

TYPES OF MUNICIPAL SECURITIES. Each municipal fund may invest in a variety
of municipal securities, as described below:

MUNICIPAL BONDS. Municipal bonds are debt obligations that are issued by
states, municipalities, public authorities or other issuers and that pay
interest that is exempt from federal income tax in the opinion of issuer's
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 revenues 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 government unit is pledged to the payment of the debt
service, but is usually subject to annual budget appropriations. Custodial
receipts that represent an ownership interest in one or more municipal bonds
also are considered to be municipal bonds. Various types of municipal bonds are
described in the following sections.

MUNICIPAL LEASE OBLIGATIONS. Municipal bonds include municipal lease
obligations, such as leases, installment purchase contracts and conditional
sales contracts, and certificates of participation therein. Municipal lease
obligations are issued by state and local 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.

Although municipal lease obligations do not constitute general obligations
of the municipality for which the municipality's taxing power is pledged, they
ordinarily are backed by the municipality's covenant to budget for, appropriate
and make the payments due under the lease obligation. The leases underlying
certain municipal lease obligations, however, provide that lease payments are
subject to partial or full abatement if, because of material damage or
destruction of the leased property, there is substantial interference with the
lessee's use or occupancy of such property. This "abatement risk" may be reduced
by the existence of insurance covering the leased property, the maintenance by
the lessee of reserve funds or the provision of credit enhancements such as
letters of credit.

Certain municipal lease obligations contain "non-appropriation" clauses
which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for

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such purpose on a yearly basis. Some municipal lease obligations of this type
are insured as to timely payment of principal and interest, even in the event of
a failure by the municipality to appropriate sufficient funds to make payments
under the lease. However, in the case of an uninsured municipal lease
obligation, a fund's ability to recover under the lease in the event of a
non-appropriation or default will be limited solely to the repossession of
leased property without recourse to the general credit of the lessee, and
disposition of the property in the event of foreclosure might prove difficult.

INDUSTRIAL DEVELOPMENT BONDS ("IDBS") AND PRIVATE ACTIVITY BONDS ("PABS").
IDBs and PABs are are issued by or on behalf of public authorities to finance
various privately operated facilities, such as airport or pollution control
facilities. These obligations are considered 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. IDBs issued after August 15, 1986 generally are
considered PABs, and to the extent a fund invests in such PABs, shareholders
generally will be required to include a portion of their exempt-interest
dividends from that fund in calculating their liability for the AMT. See "Taxes"
below. Each municipal fund may invest more than 25% of its net assets in IDBs
and PABs.

PARTICIPATION INTERESTS. Participation interests are interests in
municipal bonds, including IDBs, 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
interests.

A participation interest gives a fund an undivided interest in a municipal
bond owned by a bank. The fund has the right to sell the instruments back to the
bank. As discussed above under "The Funds' Investments, Related Risks and
Limitations -- Credit and Liquidity Enhancements," 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 a fund, and the credit standing of banks issuing
letters of credit or guarantees supporting such participation interests on the
basis of published financial information reports of rating services and bank
analytical services.

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 remarketing agent
at a specified price and exercise date, which is typically well in advance of
the bond's maturity date. The obligation to purchase the bond on the exercise
date may be supported by a letter of credit or other credit support arrangement
from a bank, insurance company or other financial institution, the credit
standing of which affects the credit quality of the obligation.

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 the issuer of a put bond acquired by a fund will
be able to repurchase the bond upon the exercise date, if the fund chooses to
exercise its right to put the bond back to the issuer.

TAX-EXEMPT COMMERCIAL PAPER AND SHORT-TERM MUNICIPAL NOTES. Municipal
bonds include tax-exempt commercial paper and short-term municipal notes, such
as 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 and other revenues.

MORTGAGE SUBSIDY BONDS. The funds also may purchase mortgage subsidy 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

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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).

STAND-BY COMMITMENTS. 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 a
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.

SPECIAL CONSIDERATIONS RELATING TO CALIFORNIA MUNICIPAL SECURITIES

[TO BE UPDATED]

SPECIAL CONSIDERATIONS RELATING TO NEW JERSEY MUNICIPAL SECURITIES

[TO BE UPDATED]

SPECIAL CONSIDERATIONS RELATING TO NEW YORK MUNICIPAL SECURITIES

[TO BE UPDATED]

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 interpretations apply to, but are not a part of, this
fundamental limitation (a): With respect to this limitation, domestic and
foreign banking will be considered to be different industries: and (b)

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asset-backed securities will be grouped in industries based upon their
underlying assets and not treated as constituting a single, separate industry.

(2) issue senior securities or borrow money, except as permitted under the
Investment Company 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.

The following interpretation applies to, but is not a part of, this
fundamental restriction: The fund's investments in master notes and similar
instruments will not be considered to be 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 acquired by reason
of such enforcement until that real estate can be liquidated in an orderly
manner.

(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
limitation (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 limitation (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

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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 LIMITATIONS. The following investment restrictions are not
fundamental and may be changed by each board without shareholder approval.

Each fund will not:

(1) 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.

(2) 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.

(3) purchase securities of other investment companies, except to the
extent permitted by the Investment Company 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.

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

(5) invest more than 10% of its net assets in illiquid securities.

ORGANIZATION OF THE FUNDS; DIRECTORS/TRUSTEES AND OFFICERS
AND PRINCIPAL HOLDERS OF SECURITIES

PaineWebber RMA Money Fund, Inc. and PaineWebber RMA Tax-Free Fund, Inc.
(each may be referred to as the "Corporation") were organized on July 2, 1982 as
Maryland corporations. Money Fund has three operating series and has authority
to issue 60 billion shares of common stock, par value $0.001 per share (30
billion shares are designated as shares of Money Market Portfolio and $10
billion are designated as shares of U.S. Government Portfolio). Tax-Free Fund
has authority to issue 20 billion shares of common stock, par value $0.001 per
share. PaineWebber Managed Municipal Trust and PaineWebber Municipal Money
Market Series (each may be referred to as the "Trust") were formed on November
21, 1986 and September 14, 1990, respectively, as business trusts under the laws
of the Commonwealth of Massachusetts. Managed Municipal Trust has two operating
series and Municipal Money Market Series has one. Each Trust is authorized to
issue an unlimited number of shares of beneficial interest, par value $0.001 per
share, of existing or future series.

13
<PAGE>

Each Corporation or Trust is governed by a board of directors or trustees
(sometimes referred to as "board members"), which oversees the business
operations of the applicable fund. Each board is authorized to establish
additional series. The board members and executive officers of the Corporations
and the Trusts, their ages, business addresses and principal occupations during
the past five years are:

POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE CORPORATIONS/TRUSTS OTHER DIRECTORSHIPS
---------------------- ------------------- -------------------

Margo N. Alexander**; 52 Director/Trustee Mrs. Alexander is chairman
and President (since March 1999), chief
executive officer and a
director of Mitchell Hutchins
(since January 1995), and an
executive vice president and
a director of PaineWebber
(since March 1984). Mrs.
Alexander is president and a
director or trustee of 32
investment companies for
which Mitchell Hutchins,
PaineWebber or one of their
affiliates serves as
investment adviser.

Richard Q. Armstrong; 64 Director/Trustee Mr. Armstrong is chairman and
R.Q.A. Enterprises principal of RQA Enterprises
One Old Church Road-Unit #6 (management consulting firm)
Greenwich, CT 06830 (since April 1991 and
principal occupation since
March 1995). Mr. Armstrong 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). He
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 31 investment
companies for which Mitchell
Hutchins, PaineWebber or one
of their affiliates serves as
investment adviser.

14
<PAGE>

POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE CORPORATIONS/TRUSTS OTHER DIRECTORSHIPS
---------------------- ------------------- -------------------

E. Garrett Bewkes, Jr.**; 72 Director/Trustee Mr. Bewkes is a director of
and Chairman of Paine Webber Group Inc. ("PW
the Board of Group") (holding company of
Directors/Trustees PaineWebber and 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. Mr.
Bewkes is a director or
trustee of 35 investment
companies for which Mitchell
Hutchins, PaineWebber or one
of their affiliates serves as
investment adviser.

Richard R. Burt; 52 Director/Trustee Mr. Burt is chairman of IEP
1275 Pennsylvania Avenue, Advisors, Inc. (international
N.W. investments and consulting
Washington, D.C. 20004 firm) (since March 1994) and a
partner of McKinsey & Company
(management consulting firm)
(since 1991). He is also a
director of
Archer-Daniels-Midland Co.
(agricultural commodities)
Hollinger International Co.
(publishing), Homestake Mining
Corp., Powerhouse Technologies
Inc. and Wierton Steel Corp.
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 31
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.

Mary C. Farrell**; 49 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 appears as a
regular panelist on Wall
Street 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 31
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.

15
<PAGE>

POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE CORPORATIONS/TRUSTS OTHER DIRECTORSHIPS
---------------------- ------------------- -------------------

Meyer Feldberg; 57 Director/Trustee Mr. Feldberg is Dean and
Columbia University Professor of Management of the
101 Uris Hall Graduate School of Business,
New York, New York 10027 Columbia University. Prior to
1989, he was president of the
Illinois Institute of
Technology. Dean Feldberg is
also a director of Primedia,
Inc., Federated Department
Stores Inc. and Revlon, Inc.
Dean Feldberg is a director or
trustee of 34 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.

George W. Gowen; 69 Director/Trustee Mr. Gowen is a partner in the
666 Third Avenue law firm of Dunnington,
New York, New York 10017 Bartholow & Miller. Prior to
May 1994, he was a partner in
the law firm of Fryer, Ross &
Gowen. Mr. Gowen is a director
or trustee of 34 investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.

Frederic V. Malek; 62 Director/Trustee Mr. Malek is chairman of
1455 Pennsylvania Ave., N.W. Thayer Capital Partners
Suite 350 (merchant bank). From January
Washington, D.C. 20004 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., CB Commercial Group,
Inc. (real estate services),
Choice Hotels International
(hotel and hotel franchising),
FPL Group, Inc. (electric
services), Manor Care, Inc.
(health care) and Northwest
Airlines Inc. Mr. Malek is a
director or trustee of 31
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.

16
<PAGE>

POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE CORPORATIONS/TRUSTS OTHER DIRECTORSHIPS
---------------------- ------------------- -------------------

Carl W. Schafer; 63 Director/Trustee Mr. Schafer is president of
66 Witherspoon Street #1100 the Atlantic Foundation
Princeton, NJ 08542 (charitable foundation
supporting mainly
oceanographic exploration and
research). He is a director of
Base Ten Systems, Inc.
(software), Roadway Express,
Inc. (trucking), The Guardian
Group of Mutual Funds, the
Harding, Loevner Funds, Evans
Systems, Inc. (motor fuels,
convenience store and
diversified company),
Electronic Clearing House,
Inc. (financial transactions
processing), Frontier 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 31
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.

Brian M. Storms;** 44 Director/Trustee Mr. Storms is president and
chief operating officer of
Mitchell Hutchins (since March
1999). Prior to March 1999,
he was president of Prudential
Investments (1996-1999).
Prior to joining Prudential,
he was a managing director at
Fidelity Investments. Mr.
Storms is a director or
trustee of 31 investment
companies for which Mitchell
Hutchins, PaineWebber or one
of their affiliates serves as
investment adviser.

John J. Lee; 31 Vice President and Mr. Lee is a vice president
Assistant Treasurer and a manager of the mutual
fund finance department of
Mitchell Hutchins. Prior to
September 1997 he was an audit
manager in the financial
services practice of Ernst &
Young LLP. Mr. Lee is a vice
president and assistant
treasurer of 32 investment
companies for which Mitchell
Hutchins, PaineWebber or one
of their affiliates serves as
investment adviser.

17
<PAGE>

POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE CORPORATIONS/TRUSTS OTHER DIRECTORSHIPS
---------------------- ------------------- -------------------

Kevin J. Mahoney; 33 Vice President and Mr. Mahoney is a first vice
Assistant Treasurer president and a senior manager
of the mutual fund finance
department of Mitchell
Hutchins. From August 1996
through March 1999, he was the
manager of the mutual fund
internal control group of
Salomon Smith Barney. Prior
to August 1996, he was an
associate and assistant
treasurer of BlackRock
Financial Management L.P. Mr.
Mahoney is a vice president
and assistant treasurer of 32
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.

Dennis McCauley; 52 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 22
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.

Kevin P. McIntyre; 32 Vice President Mr. McIntyre is a vice
(Municipal Money president and a portfolio
Market Series) manager of Mitchell Hutchins.
Mr. McIntyre is a vice
president of one investment
company for which Mitchell
Hutchins, PaineWebber or one
of their affiliates serves as
investment adviser.

Ann E. Moran; 42 Vice President and Ms. Moran is a vice president
Assistant Treasurer and a manager of the mutual
fund finance department of
Mitchell Hutchins. Ms. Moran
is a vice president and
assistant treasurer of 32
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.

Dianne E. O'Donnell; 47 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 31
investment companies and vice
president and assistant
secretary of one investment
company for which Mitchell
Hutchins, PaineWebber or one
of their affiliates serves as
investment adviser.

18
<PAGE>

POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE CORPORATIONS/TRUSTS OTHER DIRECTORSHIPS
---------------------- ------------------- -------------------

Emil Polito; 38 Vice President Mr. Polito is a senior vice
president and director of
operations and control for
Mitchell Hutchins. Mr. Polito
is vice president of 32
investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.

Susan P. Ryan; 39 Vice President Ms. Ryan is a senior vice
(Money Fund) president and a manager of
Mitchell Hutchins and has been
with Mitchell Hutchins since
1982. Ms. Ryan is a vice
president of five investment
companies for which Mitchell
Hutchins, PaineWebber or one of
their affiliates serves as
investment adviser.

Victoria E. Schonfeld; 48 Vice President Ms. Schonfeld is a managing
director and general counsel
of Mitchell Hutchins (since
May 1994) and a senior vice
president of PaineWebber
(since July 1995). Ms.
Schonfeld is a vice president
of 31 investment companies and
a vice president and secretary
of one investment company for
which Mitchell Hutchins,
PaineWebber or one of their
affiliates serves as
investment adviser.

Paul H. Schubert; 36 Vice President and Mr. Schubert is a senior vice
Treasurer president and director of the
mutual fund finance department
of Mitchell Hutchins. Mr.
Schubert is a vice president
and treasurer of 32 investment
companies for which Mitchell
Hutchins, PaineWebber or one
of their affiliates serves as
investment adviser.

Barney A. Taglialatela; 38 Vice President and Mr. Taglialatela is a vice
Assistant Treasurer president and a manager of the
mutual fund finance department
of Mitchell Hutchins. Prior to
February 1995, he was a
manager of the mutual fund
finance division of Kidder
Peabody Asset Management, Inc.
Mr. Taglialatela is a vice
president and assistant
treasurer of 32 investment
companies for which Mitchell
Hutchins, PaineWebber or one
of their affiliates serves as
investment adviser.

19
<PAGE>

POSITION WITH BUSINESS EXPERIENCE;
NAME AND ADDRESS*; AGE CORPORATIONS/TRUSTS OTHER DIRECTORSHIPS
---------------------- ------------------- -------------------

Debbie Vermann; 40 Vice President Ms. Vermann is a vice
(Tax-Free Fund, president and a portfolio
Managed Municipal manager of Mitchell Hutchins.
Trust, Municipal Ms. Vermann is a vice Managed
Money Market Municipal president of three
Series) investment companies for which
Mitchell Hutchins, PaineWebber
or one of their affiliates
serves as investment adviser.
Keith A. Weller; 38 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 31 investment
companies for which Mitchell
Hutchins, PaineWebber or one
of their affiliates serves as
investment adviser.

* 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, Ms. Farrell and Mr. Storms are "interested
persons" of each fund as defined in the Investment Company 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 an
additional up to $150 per series for each board meeting and each separate. 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 $1,000
annually, respectively, plus any additional amounts due for board or committee
meetings. Each chairman of the audit and contract review committees of
individual funds within the PaineWebber fund complex receives additional
compensation aggregating $15,000 annually 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. Because PaineWebber and Mitchell Hutchins perform
substantially all of the services necessary for the operation of the
Corporations/Trusts and the funds, the Corporations/Trusts require no employees.
No officer, director or employee of Mitchell Hutchins or PaineWebber presently
receives any compensation from the Corporations/Trusts for acting as a board
member or officer.

20
<PAGE>

The table below includes certain information relating to the compensation
of the current board members of the Corporations/Trusts who held office with
them or with other PaineWebber funds during the fiscal year ended June 30, 1999.

<TABLE>
<CAPTION>
COMPENSATION TABLE+

AGGREGATE COMPENSATION FROM

--------------------------------------------------------- TOTAL COMPENSATION
MUNICIPAL FROM THE CORPORATIONS/TRUSTS
MANAGED MONEY MARKET AND THE
MONEY TAX-FREE MUNICIPAL SERIES* FUND COMPLEX**
NAME OF PERSONS, POSITION FUND* FUND* TRUST*
<S> <C> <C> <C> <C> <C>

Richard Q. Armstrong
Director/Trustee............. $ 101,372
Richard R. Burt
Director/Trustee............. 101,372
Meyer Feldberg,
Director/Trustee............. 116,222
George W. Gowen,
Director/Trustee............. 108,272
Frederic V. Malek,
Director/Trustee............. 101,372
Carl W. Schafer
Director/Trustee............. 101,372
</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, 1999.

** Represents total compensation paid to each board member during the calendar
year ended December 31, 1998; no fund within the fund complex has a bonus,
pension, profit sharing, or retirement plan.

PRINCIPAL HOLDERS OF SECURITIES

As of July 31, 1999, the funds' records showed no shareholders owning 5%
or more of a fund's shares.

21
<PAGE>

INVESTMENT ADVISORY, ADMINISTRATION
AND DISTRIBUTION 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:

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%
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 YEARS ENDED JUNE 30,
----------------------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Money Market $...50,859,070 $...40,972,909
Portfolio..................................
U.S. Government 5,010,616 4,931,890
Portfolio..................................
Tax-Free 10,111,111 9,479,630
Fund.......................................
California Municipal Money Fund............ 2,667,404 2,493,144
New Jersey Municipal Money Fund............ 294,352 239,816
New York Municipal Money Fund.............. 1,673,724 1,446,166
($5113 waived) ($292,698 waived)
</TABLE>

22
<PAGE>

[During its fiscal year ended June 30, 1999, no fund paid fees to
PaineWebber for its services as lending agent because no Fund engaged in any
securities lending activities during that period.] Prior to August 1, 1997,
PaineWebber provided certain services to each fund not otherwise provided by its
transfer agent. Pursuant to agreements between PaineWebber and the funds (other
than New Jersey Municipal Money Fund) relating to these services, the funds paid
(or accrued) to PaineWebber the following fees:

FOR THE FISCAL YEARS ENDED JUNE 30,
----------------------------------------
1998 1997
---- ----
Money Market Portfolio............... $156,077 $1,736,778
U.S. Government Portfolio............ 12,249 148,113
Tax-Free Fund........................ 20,345 247,472
California Municipal Money Fund....... 4,546 54,029
New York Municipal Money Fund......... 3,402 39,481

Subsequent to July 31, 1997, PaineWebber provides transfer agency related
services to each fund pursuant to a delegation of authority from PFPC Inc. and
is compensated for these services by PFPC Inc., not the funds.

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 FISCAL YEARS ENDED JUNE 30,
-------------------------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C>
Money Market Portfolio..................... $ 10,171,814 $ 8,194,582
U.S. Government Portfolio.................. 1,002,123 986,378
Tax-Free Fund.............................. 2,022,222 1,895,926
California Municipal Money Fund............ 533,481 498,629
New Jersey Municipal Money Fund............ 58,870 47,963
New York Municipal Money Fund.............. 333,722 347,773
</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 board members 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

23
<PAGE>

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 shareholders meetings, 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.

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 board 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, 1999,
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.

NET ASSETS
INVESTMENT CATEGORY ($ MIL)
------------------- -------
Domestic (excluding Money Market)................
Global...........................................
Equity/Balanced..................................
Fixed Income (excluding Money Market)............
Taxable Fixed Income....................
Tax-Free Fixed Income...................
Money Market Funds...............................

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.

24
<PAGE>

DISTRIBUTION ARRANGEMENTS. PaineWebber acts as distributor of shares of
the funds under separate distribution contracts with each Corporation or Trust
("Distribution Contracts") which 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 each fund (other than Money Market
Portfolio) 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 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 Money Market Portfolio.

Under plans of distribution adopted for each of these funds in the manner
prescribed by Rule 12b-1 under the Investment Company Act ("Plan"), the fund
pays PaineWebber a service fee, accrued daily and payable monthly, for providing
certain shareholder and account maintenance services. Each fund's Plan (other
than the Plan for New Jersey Municipal Money Fund) authorizes it 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. Each of these funds currently pays
service fees to PaineWebber at the annual rate of 0.125% of average net assets.
Any increase from 0.125% annual rate would require prior approval of the board.
Under its Plan, New Jersey Municipal Money Fund pays service fees to PaineWebber
at the annual rate of 0.12% of average net assets.

PaineWebber uses the 12b-1 service fees to pay PaineWebber Financial
Advisors and correspondent firms for shareholder servicing. 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 Financial Advisor is based, such as rent, communications equipment,
employee salaries and other overhead costs.

Among other things, each Plan provides that (1) PaineWebber will submit to
the board at least quarterly, and the board members 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 board members 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 board members who
are not "interested persons" of the Corporation or Trust shall be committed to
the discretion of the board members 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 0.125% of
average daily net assets. Any increase from the current annual rate would
require prior approval of the board. Under the applicable Plan, New Jersey
Municipal Money fund pays service fees to PaineWebber at an annual rate of 0.12%
of its average daily net assets.

The funds paid (or accrued) the following service fees to PaineWebber
under the Plans during the fiscal year ended June 30, 1999:

U.S. Government Portfolio
Tax-Free Fund
California Municipal Money Fund
New Jersey Municipal Money Fund
New York Municipal Money Fund

PaineWebber estimates that it incurred the following shareholder
service-related expenses with respect to each fund during the fiscal year ended
June 30 1999:

SERVICE FEES PAID TO
PAINEWEBBER
FINANCIAL ADVISORS ALLOCATED COSTS
U.S. Government Portfolio
Tax-Free Fund
California Municipal Money Fund
New Jersey Municipal Money Fund
New York Municipal Money Fund

"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.

25
<PAGE>

In approving the continuance of the Plan for a fund, the applicable board
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 0.02%
of the average daily net assets of the fund held in shareholder accounts
serviced by PaineWebber Financial advisors and correspondent firms was
attractive to such Financial Advisors 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 of the Plan to funds with breakpoints in their advisory and
administration fees could be offset if the Plan is successful by the lower 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 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.

The Mitchell Hutchins Contracts authorize Mitchell Hutchins (with the
approval of the applicable board) to select brokers and dealers to execute
purchases and sales of each fund's portfolio securities. The Mitchell Hutchins
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 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 if no weight
was attributed to the services 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 through which or with which a fund
effects securities transactions may be used by Mitchell Hutchins in advising
other funds or accounts 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, no fund has paid any brokerage commissions; therefore,
none has allocated any brokerage transactions 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.]

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

26
<PAGE>

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.

HOLDINGS OF REGULAR BROKER-DEALERS

As of June 30, 1999, Money Market Portfolio owned commercial paper and
other short-term obligations issued by the following persons who are regular
broker-dealers for the fund:

[information to be supplied]

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 ("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, that 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
attempts to maintain a constant net asset value of $1.00 per share.

If conditions exist that make cash payments undesirable, California
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 a fund during any 90-day period for one shareholder. This election is
irrevocable unless the SEC permits its withdrawal.

Under normal circumstances, a fund will redeem shares when so requested by
a shareholder's broker-dealer other than PaineWebber by telegram or telephone to
PaineWebber. Such a redemption order will be executed at the net asset value
next determined after the order is received by PaineWebber. Redemptions of fund
shares effected through a broker-dealer other than PaineWebber may be subject to
a service charge by that broker-dealer.

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 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 and the New York City offices of PaineWebber
and 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 1940 Act. To use
amortized cost to value its portfolio securities, a fund must adhere to certain

27
<PAGE>

conditions under the Rule relating to the fund's investments, some of which are
discussed in the Prospectus and this SAI. Amortized cost is an approximation of
market value, whereby the difference between acquisition cost and value at
maturity of the instrument 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. If 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.

Each board 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. If that deviation exceeds
1/2 of 1% for any fund, its board 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 having, or deemed to have, a remaining maturity
of more than 397 days, will limit portfolio investments, including repurchase
agreements, to those U.S. dollar-denominated instruments that are of high
quality 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. If amortized cost ceases to represent fair
value, the relevant 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. Other assets, if any, are valued at fair value as
determined in good faith by or under the direction of the applicable board.

PERFORMANCE INFORMATION

The funds' performance data quoted in advertising and other promotional
materials ("Performance Advertisements") represent past performance and are not
intended to indicate future performance. The investment return will fluctuate.

TOTAL RETURN CALCULATIONS. Average annual total return quotes
("Standardized Return") used in each fund's Performance Advertisements are
calculated according to the following formula:

P(1 + T)n = ERV
where: P = a hypothetical initial payment of $1,000 to purchase shares
T = average annual total return of shares
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment at
the beginning of that period.

Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the last
day of the most recent quarter prior to submission of the advertisement for
publication. Total return, or "T" in the formula above, is computed by finding
the average annual change in the value of an initial $1,000 investment over the
period. All dividends are assumed to have been reinvested at net asset value.

The funds also may refer in Performance Advertisements to total return
performance data that are not calculated according to the formula set forth
above ("Non-Standardized Return"). The funds calculate Non-Standardized Return
for specified periods of time by assuming an investment of $1,000 in fund shares

28
<PAGE>

and assuming the reinvestment of all dividends. The rate of return is determined
by subtracting the initial value of the investment from the ending value and by
dividing the remainder by the initial value.

The following tables show performance information for the funds' shares
outstanding for the periods indicated. All returns for periods of more than one
year are expressed as an average annual return.

<TABLE>
<CAPTION>
U.S. CALIFORNIA NEW JERSEY NEW YORK
MONEY GOVERN- MUNICIPAL MUNICIPAL MUNICIPAL
MARKET MENT TAX-FREE MONEY MONEY MONEY
PORTFOLIO PORTFOLIO FUND FUND FUND FUND
--------- --------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Year ended June 30, 1999:
Standardized
Return...............
Non-Standardized
Return...............
Five Years
ended June 30, 1999:
Standardized
Return...............
Non-Standardized
Return...............
Ten Years
ended June 30, 1999:
Standardized
Return...............
Non-Standardized
Return...............
Inception* to June 30,
1999:
Standardized
Return...............
Non-Standardized
Return...............
</TABLE>

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

* The inception dates for the funds are as follows:

Money Market Portfolio 10/04/82
U.S. Government Portfolio 10/04/82
Tax-Free Fund 10/04/82
California Municipal Money Market Fund 11/07/88
New Jersey Municipal Money Market Fund 02/10/91
New York Municipal Money Market Fund 11/10/88

YIELD. Each fund computes its yield and effective yield quotations using
standardized methods required by the SEC. Each 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

29
<PAGE>

Each municipal fund 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 ) + 1
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.

The following yields are for the seven-day period ended June 30, 1999:

EFFECTIVE
YIELD YIELD
----- -----
Money Market Portfolio
U.S. Government Portfolio
Tax-Free Fund
California Municipal Money Fund
New Jersey Municipal Money Fund
New York Municipal Money Fund

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%)
California Municipal Money Fund (assuming a combined
federal and California State tax rate of 45.22%)
New Jersey Municipal Money Fund (assuming a combined
federal and New Jersey State tax rate of 43.45%)
New York Municipal Money Fund (assuming a combined
federal, New York State and New York City tax rate
of 46.43%
New York Municipal Money Fund (assuming an effective
combined federal and New York State tax rate of 43.74%
</TABLE>

OTHER INFORMATION. The funds' 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 standardized or non-standardized
return and taxable or tax-free yields with data published by Lipper Analytical

30
<PAGE>

Services, Inc. for money funds ("Lipper"), CDA Investment Technologies, Inc.
("CDA"), IBC/ Donoghue's Money Market Fund Report ("Donoghue"), Wiesenberger
Investment Companies Service ("Wiesenberger"), Investment Company Data Inc.
("ICD") or Morningstar Mutual Funds ("Morningstar"), or with the performance of
recognized stock and other indexes, including the Standard & Poor's 500
Composite Stock Price Index, the Dow Jones Industrial Average, the Merrill Lynch
Municipal Bond Indices, the Morgan Stanley Capital World Index, the Lehman
Brothers Treasury Bond Index, the Lehman Brothers Government-Corporate Bond
Index, the Salomon Brothers Government Bond Index and 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, ICD or Morningstar. Performance Advertisements also may refer to
discussions of the Funds and comparative mutual fund data and ratings reported
in independent periodicals, including 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.

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-Registered Trademark- 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(R) ("RMA") and
Business Services Accountsm ("BSA") 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.

TAXES

BACKUP WITHHOLDING. Each fund is required to withhold 31% of all
taxable dividends payable to individuals and certain other non-corporate
shareholders who (1) do not provide the fund or PaineWebber with a correct
taxpayer identification number on Form W-9 (for U.S. citizens and resident
aliens) or a properly completed claim for exemption on form W-8 (for nonresident
aliens and other foreigners) or (2) otherwise are subject to backup withholding.

QUALIFICATION AS A REGULATED INVESTMENT COMPANY. 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) 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 (3) 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.

31
<PAGE>

Dividends paid by a municipal fund will qualify as "exempt-interest
dividends," and thus will be excludable from gross income by its shareholders,
if it 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 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 its 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 state and local 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 federal
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 those 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 those 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 its 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 (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

32
<PAGE>

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 (I.E., taxable) 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 its assets
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, 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 that 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 will be 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 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 JERSEY TAXES. New Jersey Municipal Money Fund anticipates that
substantially all dividends aid by it 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 Municipal Securities or 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.

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

33
<PAGE>

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.

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 New York Municipal
Money Fund to the extent such distributions are directly attributable to
interest earned on tax-exempt obligations issued by New York State or any
political subdivisions thereof (including New York City) or interest earned on
obligations of U.S. possessions or territories to the extent interest on such
obligations is exempt from state taxation pursuant to federal law, provided that
New York Municipal Money Fund qualifies as a RIC under the Internal Revenue Code
and satisfies certain requirements, among others, that at least 50% of its
assets at the close of each quarter of its taxable year constitute obligations
which are tax-exempt for federal income tax purposes. Distributions from New
York Municipal Money 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 such
individual shareholders as ordinary income. Distributions to individual
shareholders by New York Municipal Money Fund which represents long-term capital
gains for federal income tax purposes will be treated as long-term capital gains
for New York State and City personal income tax purposes. (Certain undistributed
capital gains of New York Municipal Money Fund that are treated as (taxable)
long-term capital gains in the hands of shareholders will be treated as
long-term capital gains for New York State and City personal income taxes
purposes.)

Shareholders of New York Municipal Money Fund that are subject to the New
York State corporate franchise tax or the New York City general corporation tax
will be required to include exempt-interest dividends paid by New York Municipal
Money Fund in their "entire net income" for purposes of such taxes and will be
required to include their shares of New York Municipal Money 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 taxation imposed by New York City solely by reason of
their ownership of shares in New York Municipal Money Fund. If a shareholder is
subject to the unincorporated business tax, income and gains distributed by New
York Municipal Money Fund will be subject to such tax except, in general, 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 New York City).

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

Interest on indebtedness incurred by shareholders to purchase or carry
shares of New York Municipal Money Fund (and certain other expenses relating
thereto) generally will not be deductible for New York State or City personal
income tax purposes.

Interest income of New York Municipal Money Fund which is distributed to
shareholders will generally not be taxable to New York Municipal Money Fund for
purposes of the New York State corporate franchise tax or City general
corporation tax.

New York Municipal Money Fund is subject to the corporate franchise
(income) tax measured by the entire net income base, the minimum taxable income
base or the fixed dollar minimum, whichever is greater. "Entire net income" of
New York Municipal Money Fund is federal "investment company taxable income"
with certain modifications. In addition, New York Municipal Money Fund is
permitted to deduct dividends paid to its shareholders in determining its
federal taxable income.

The foregoing is a general summary of certain provisions of federal, New
York State and City tax laws currently in effect as they directly govern the
taxation of shareholders of New York Municipal Money Fund. Further, these

34
<PAGE>

provisions are subject to change by legislative or administrative action, and
any such change may be retroactive with respect to New York Municipal Money
Fund's transactions. Shareholders are advised to consult with their own tax
advisers for more detailed information concerning tax matters.

TAX-FREE INCOME VS. TAXABLE INCOME--TAX-FREE FUND. Table I below
illustrates approximate equivalent taxable and tax-free yields at the 1999
federal individual income tax rates in effect on the date of this SAI. For
example, a couple with taxable income of $90,000 in 1999, or a single individual
with taxable income of $55,000 in 1999, whose investments earn a 3% tax-free
yield, would have to earn a 4.17% taxable yield to receive the same benefit.

<TABLE>
<CAPTION>
TABLE I. 1999 FEDERAL TAXABLE VS. TAX-FREE YIELDS*

TAXABLE INCOME (000'S) A TAX-FREE YIELD OF
- ----------------------------------- -------------------------------------------------------------------
SINGLE JOINT FEDERAL TAX 3.00% 4.00% 5.00% 6.00% 7.00%
RETURN RETURN BRACKET IS EQUAL TO A TAXABLE YIELD OF APPROXIMATELY
- ------------------ ---------------- -------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 0 -- 25.4 0-- 15.00% 3.53% 4.71% 5.88% 7.06% 8.24%
42.4
25.4 -- 61.4 42.4--102.3 28.00 4.17 5.56 6.94 8.33 9.72
61.4 -- 128.1 102.3--156.0 31.00 4.35 5.80 7.25 8.70 10.14
128.1 -- 278.5 156.0--278.5 36.00 4.69 6.25 7.81 9.38 10.94
Over 278.5 Over 278.5 39.60 4.97 6.62 8.28 9.93 11.59
</TABLE>

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

* The yields listed are for illustration only and are not necessarily
representative of the fund's yield. The fund invests primarily in
obligations the interest on which is exempt from federal income tax;
however, some of the fund's investments may generate taxable income.
Effective tax rates shown are those in effect on the date of this SAI;
such rates might change after that date. Certain simplifying assumptions
have been made. Any particular taxpayer's rate may differ. The effective
rates reflect the highest tax bracket within each range of income listed.
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.

TAX-FREE INCOME VS. TAXABLE INCOME--CALIFORNIA MUNICIPAL MONEY FUNd. Table
II below illustrates approximate equivalent taxable and tax-free yields at the
1999 federal individual and 1998 California personal gross income tax rates in
effect on the date of this Statement of Additional Information. For example, a
California couple with taxable income of $90,000 in 1999, or a single California
individual with taxable income of $55,000 in 1999, whose investments earn a 3%
tax-free yield, would have to earn a 4.59% taxable yield to receive the same
benefit.

<TABLE>
<CAPTION>
TABLE II. 1999 FEDERAL AND 1998 CALIFORNIA TAXABLE VS. TAX-FREE YIELDS*

TAXABLE INCOME (000'S) EFFECTIVE A TAX-FREE YIELD OF
- --------------------------------------- CALIFORNIA --------------------------------------------------
AND 3.00% 4.00% 5.00%
SINGLE JOINT FEDERAL TAX 6.00%
RETURN RETURN BRACKET IS EQUAL TO A TAXABLE YIELD OF APPROXIMATELY
- -------------------- ------------------ ------------- --------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 18.8-- 25.4 $ 37.5-- 42.4 20% 3.75% 5.01% 6.26% 7.51 %
25.4-- 26.1 42.4-- 52.1 32.32 4.43 5.91 7.39 8.87
26.1-- 32.9 52.1-- 65.8 33.76 4.53 6.04 7.55 9.06
32.9-- 61.4 65.8--102.3 34.70 4.59 6.13 7.66 9.19
61.4--128.1 102.3--156.0 37.42 4.79 6.39 7.99 9.59
128.1--278.5 156.0--278.5 41.95 5.17 6.89 8.61 10.34
Over 278.5 Over 278.5 45.22 5.48 7.30 9.13 10.95
</TABLE>

35
<PAGE>

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

* The yields listed are for illustration only and are not necessarily
representative of the fund's yield. The fund invests primarily in
obligations the interest on which is exempt from federal income tax and
California personal income tax; however, some of the fund's investments
may generate taxable income. Effective tax rates shown are those in effect
on the date of this SAI; such rates might change after that date. Certain
simplifying assumptions have been made. Any particular taxpayer's rate may
differ. The effective rates reflect the highest tax bracket within each
range of income listed. However, a California, 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 personal income taxes).

The rates shown reflect federal rates for 1999 and California rates for
1998 in effect as of the date hereof. Inflation adjusted income brackets for
1999 for California are not yet available, and the California rates thus are
still subject to change with retroactive effect for 1999.

TAX-FREE INCOME VS. TAXABLE INCOME--NEW JERSEY MUNICIPAL MONEY FUND. Table
IV below illustrates approximate equivalent taxable and tax-free yields at the
federal individual and New Jersey gross income tax rates in effect on the date
of this SAI. For example, a New Jersey couple with taxable income of $90,000 in
1999, or a single New Jersey individual with taxable income of $55,000 in 1999,
whose investments earn a 3% tax-free yield, would have to earn a 4.41% taxable
yield to receive the same benefit.

<TABLE>
<CAPTION>
TABLE III. 1999 FEDERAL AND NEW JERSEY TAXABLE VS. TAX-FREE YIELDS*

TAXABLE INCOME (000'S) EFFECTIVE A TAX-FREE YIELD OF
- ------------------------------------ NEW JERSEY ----------------------------------------------------
AND
SINGLE JOINT FEDERAL TAX 3.00% 4.00% 5.00% 6.00%
RETURN RETURN BRACKET IS EQUAL TO A TAXABLE YIELD OF APPROXIMATELY
- ------------------- ---------------- -------------- ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 0 -- 25.4 0-- 42.4 16.49% 3.59% 4.79% 5.99% 7.18%
25.4-- 35.0 42.4--50.0 29.26 4.24 5.65 7.07 8.48
50.0 --70.0 29.76 4.27 5.70 7.12 8.54
35.0--40.0 70.0--80.0 30.52 4.32 5.76 7.20 8.64
40.0--61.4 80.0--102.3 31.98 4.41 5.88 7.35 8.82
61.4--75.0 102.3--150.0 34.81 4.60 6.14 7.67 9.20
75.0--128.1 150.0--156.0 35.40 4.64 6.19 7.74. 9.29
128.1--278.5 156.0--278.5 40.08 5.01 6.68 8.34 10.01
Over 278.5 Over 278.5 43.45 5.31 7.07 8.84 10.61
</TABLE>

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

o The yields listed are for illustration only and are not necessarily
representative of the fund's yield. The fund invests primarily in
obligations the interest on which is exempt from federal income tax and
New Jersey gross income tax; however, some of the fund's investments may
generate taxable income. Effective tax rates shown are those in effect on
the date of this SAI; such rates might change after that date. Certain
simplifying assumptions have been made. Any particular taxpayer's rate may
differ. The effective rates reflect the highest tax bracket within each
range of income listed. However, a New Jersey 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 New Jersey personal income taxes).

36
<PAGE>

TAX-FREE INCOME VS. TAXABLE INCOME--NEW YORK MUNICIPAL MONEY FUNd. Table
III below illustrates approximate equivalent taxable and tax-free yields at the
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 1999, or a
single individual with taxable income of $55,000 in 1999 who lives in New York
City, whose investments earn a 3% tax-free yield, would have to earn a 4.67%
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 1999, or a single
individual who lives in New York State outside of New York City with taxable
income of $55,000 in 1999, would have to earn a 4.47% taxable yield to realize a
benefit equal to a 3% tax-free yield.

<TABLE>
<CAPTION>
TABLE III. 1999 FEDERAL AND NEW YORK TAXABLE VS. TAX-FREE YIELDS*

TAXABLE INCOME (000'S) COMBINED A TAX-FREE YIELD OF
- ------------------------------------- FEDERAL/ ---------------------------------------------------
NYS/NYC
SINGLE JOINT TAX 3.00% 4.00% 5.00% 6.00%
RETURN RETURN BRACKET IS EQUAL TO A TAXABLE YIELD OF APPROXIMATELY
- ------------------- ----------------- -------------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 0-- 25.4 $ 0-- 42.4 24.10% 3.95% 5.27% 6.59% 7.91%
25.4-- 61.4 42.4--102.3 35.75 4.67 6.23 7.78 9.34
61.4--128.1 102.3--156.0 38.42 4.87 6.50 8.12 9.74
128.1--278.5 156.0--278.5 42.89 5.25 7.00 8.75 10.50
Over 278.5 Over 278.5 46.10 5.57 7.42 9.28 11.13

</TABLE>

TAXABLE INCOME (000'S) COMBINED A TAX-FREE YIELD OF
- ------------------------------------- FEDERAL/ ---------------------------------------------------
NYS
SINGLE JOINT TAX 3.00% 4.00% 5.00% 6.00%
RETURN RETURN BRACKET IS EQUAL TO A TAXABLE YIELD OF APPROXIMATELY
- ------------------- ----------------- -------------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 0-- 25.4 $ 0-- 42.4 20.82% 3.79% 5.05% 6.31% 7.58%
25.4-- 61.4 42.4--102.3 32.93 4.47 5.96 7.46 8.95
61.4--128.1 102.3--156.0 35.73 4.67 6.22 7.78 9.34
128.1--278.5 156.0--278.5 40.38 5.03 6.71 8.39 10.06
Over 278.5 Over 278.5 43.74 5.33 7.11 8.89 10.66
</TABLE>

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

* The yields listed are for illustration only and are not necessarily
representative of the fund's yield. The fund invests primarily in
obligations the interest on which is exempt from federal income tax and
New York State and New York City personal income taxes; however, some of
the fund's investments may generate taxable income. Effective tax rates
shown are those in effect on the date of this SAI; such rates might change
after that date. Certain simplifying assumptions have been made. Any
particular taxpayer's rate may differ. The effective rates reflect the
highest tax bracket within each range of income listed. However, a 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 New York State and New York City
personal income taxes).

OTHER INFORMATION

MASSACHUSETTS BUSINESS TRUSTS. 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 a 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,

37
<PAGE>

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. Each 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.

VOTING RIGHTS. Shareholders of each fund are entitled to one vote for each
full share held and fractional votes for fractional shares held. Voting rights
are not cumulative and, as a result, the holders of more than 50% of all the
shares of the Corporation may elect all its board members. The shares of each
series of the Corporation will be voted separately, except when an aggregate
vote of all the series is required by law.

The Corporations and Trusts do not hold annual 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 of a Corporation 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. Shareholders of record of no
less than two-thirds of the outstanding shares of a Trust may remove a board
member through a declaration in writing or by proxy at a meeting called for that
purpose. A meeting will be called to vote on the removal of a board member at
the written request of 10% of the outstanding shares of a Trust or 25% of the
outstanding shares of a Corporation.

CUSTODIAN AND RECORDKEEPING AGENT; TRANSFER AND DIVIDEND AGENT. State
Street Bank and Trust Company, located at One Heritage Drive, North Quincy,
Massachusetts 02171, serves as custodian and recordkeeping agent for each fund.
PFPC Inc., a subsidiary of PNC Bank, N.A., serves as each fund's transfer and
dividend disbursing agent. It is located at 400 Bellevue Parkway, Wilmington, DE
19809.

PRIOR NAMES. Prior to February 28, 1996, Municipal Money Market Series was
known as PaineWebber/Kidder, Peabody Municipal Money Market Series. Prior to
January 30, 1995, PaineWebber/Kidder, Peabody Municipal Money Market Series was
known as Kidder, Peabody Municipal Money Market Series. Prior to December 15,
1995, New Jersey Municipal Money Fund was known as New Jersey Series.

COMBINED PROSPECTUS. 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. The board of each fund has considered this factor
in approving the use of a single, combined Prospectus.

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 LLP, 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 LLP, 666 Fifth Avenue, New York, New York
10103-0001, serves as counsel to New York Municipal Money Fund with respect to
New York 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.

38
<PAGE>

FINANCIAL STATEMENTS

The funds' Annual Report to Shareholders for their last fiscal year ended
June 30, 1999 is a separate documents supplied with this SAI, and the financial
statements, accompanying notes and reports of independent auditors appearing
therein are incorporated by reference in this SAI.

39
<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 separate materials their Investment Executive can
provide them.

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, card transactions 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 is available to
make the monthly reporting even more comprehensive.

PRELIMINARY AND YEAR-END SUMMARIES. RMA Participants receive preliminary
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
from a variety of taxable and tax-free money funds into which uninvested cash is
automatically swept on a daily basis. 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 through the check writing feature. There are no minimum check amounts
or per check charges. The RMA checks include an expense coding system that
enables the investor to track types of expenses for tax and financial planning.

DIRECT DEPOSIT. Regular payroll, pension, social security or other
payments 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. A Bill Payment Service is available for an additional charge.

GOLD MASTERCARD(R). RMA Participants can elect to receive with a
complementary Gold MasterCard debit card that makes account assets easily
accessible. The Gold MasterCard is accepted by merchants both in the U.S. and
abroad, and can be used to obtain cash advances at thousands of automated teller
machines. Through MasterCard's enhanced MasterAssist-Registered Trademark- and
MasterPurchase-Registered Trademark-programs, investors can obtain other
benefits, including rental car insurance, emergency medical and travel
assistance, legal services and purchase protection.

EXTENDED ACCOUNT PROTECTION. Securities held in an RMA Account by
PaineWebber or one of its correspondent firms are protected for up to the net
equity 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.

40
<PAGE>

RESOURCE ACCUMULATION PLAN-SM-. The Resource Accumulation Plan is an
automatic mutual fund investment program that provides participants the ability
to purchase shares of select 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.

FINANCIAL SERVICES CENTER AND RESOURCELINE-REGISTERED TRADEMARK-. RMA
Participants have around the clock access to information concerning their RMA.
This service is available by calling (800) RMA-1000. RMA representatives are
available at the Financial Services Center from 7:30 a.m. to 8:00 p.m. (Eastern
time) weekdays, and from 8:00 a.m. to 4:00 p.m. (Eastern time) weekends, to
answer inquiries from Participants regarding their accounts, and ResourceLine,
an automated voice response system, provides 24 hour account information.

MARGIN. RMA Participants may choose to have a margin feature as part of
their RMA.

41
<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")-Registered Trademark- 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 separate materials their
Investment Executives can provide them.

PREMIER BUSINESS SERVICES ACCOUNT STATEMENT--BSA Participants receive a
monthly Premier statement, which provides consolidated information to assist
with portfolio management decisions and business finances. The Premier statement
summarizes securities transactions, card transactions, and checks in
chronological order with running cash and money fund balances. The "Portfolio
Management" feature provides cost basis information where available as well as
calculations of gains and losses on most investments. A menu of customized
statement options is now available to make the monthly reporting more
comprehensive.

PRELIMINARY AND YEAR-END SUMMARIES STATEMENT--BSA Participants receive
preliminary and year-end summary information 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
from a variety of taxable and tax-free money funds into which uninvested cash is
automatically swept on a daily basis. 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 through the check writing feature. There are no minimum check amounts.
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 investors to track business expense types for tax and financial
planning. MASTERCARD BUSINESSCARD-REGISTERED TRADEMARK---BSA Participants can
elect to receive a complementary MasterCard BusinessCard debit card for easy
access to account assets. The MasterCard BusinessCard is accepted worldwide, and
can be used to obtain cash at thousands of automated teller machines. Through
MasterCard's enhanced MasterAssist-Registered Trademark- and
MasterPurchase-Registered Trademark- programs, investors can obtain other
benefits including full value primary rental car insurance, emergency medical
and travel assistance, legal services and purchase protection.

MARGIN--BSA Participants may choose to have a margin feature as part of
their BSA.

EXTENDED ACCOUNT PROTECTION--Securities held in a BSA by PaineWebber or
one of its correspondent firms are protected for up to the net equity 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.

FINANCIAL SERVICES CENTER AND RESOURCELINE-REGISTERED TRADEMARK---BSA
Participants can call the Financial Services Center at (800) BSA-0140 from 7:30
a.m. to 8:00 p.m. (Eastern time) weekdays, and from 8:00 a.m. to 4:00 p.m.
(Eastern time) weekends, and speak to a PaineWebber representative to make any
inquiries about their accounts. The automated ResourceLine voice response system
provides basic account information through a touch-tone phone and is available
24 hours a day by calling (800) 762-1000.

42
<PAGE>

ELECTRONIC FUNDS TRANSFER/PAYMENT SERVICE--BSA Participants have the
option to initiate transfers of funds to and from their accounts, pay bills and
vendors through an electronic fund transfer service. Unlimited transfers to the
BSA from other financial institutions and 20 free transfers/payments out of the
BSA are permitted monthly with nominal fees thereafter. Participants send
regular or variable payments simply by calling an 800 number.

CARD RECEIVABLES PROCESSING--BSA account holders that transact business
with their clients using credit cards and debit cards, can have these receipts
automatically deposited into their BSA where their funds will be swept into
their primary sweep Fund thereby continuously earning dividends. Working through
your current merchant processor, or a PaineWebber referral, this service is a
simple way to enhance earnings on your business's cash flow.

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.

43
<PAGE>

No person has been authorized
to give any information or to make
any representations not contained
in the 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 PAINEWEBBER RMA
the Funds or their distributor. The
Prospectus and this Statement of MONEY MARKET PORTFOLIO
Additional Information do not U.S. GOVERNMENT PORTFOLIO
constitute an offering by the Funds TAX-FREE FUND
or by the distributor in any CALIFORNIA MUNICIPAL MONEY FUND
jurisdiction in which such offering NEW YORK MUNICIPAL MONEY FUND
may not lawfully be made. NEW JERSEY MUNICIPAL MONEY FUND

STATEMENT OF ADDITIONAL INFORMATION
AUGUST 29, 1999

44
<PAGE>

PAINEWEBBER RETIREMENT MONEY FUND

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

PROSPECTUS

AUGUST 29, 1999

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This prospectus offers shares of this money market fund only to individual
retirement accounts and qualified retirement plans.

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the fund's shares or determined whether this prospectus
is complete or accurate. To state otherwise is a crime.

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PaineWebber Retirement Money Fund

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CONTENTS

THE FUND

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What every investor 3 Retirement Money Fund
should know about 6 More About Risks and Investment Strategies
the fund

YOUR INVESTMENT

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Information for 7 Managing Your Fund Account
managing your fund 7 Buying Shares
account 7 Selling Shares
7 Retirement Plan Distributions
8 Pricing and Valuation

ADDITIONAL INFORMATION

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Additional important 9 Management
information about 10 Dividends and Taxes
the fund 11 Financial Highlights

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Where to learn more Back Cover
about the fund

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The fund is not a complete or
balanced investment program.
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PaineWebber Retirement Money Fund

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PAINEWEBBER RETIREMENT MONEY FUND

INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
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FUND OBJECTIVE

Current income consistent with liquidity and conservation of capital.

PRINCIPAL INVESTMENT STRATEGIES

The fund may invest in any of these money market instruments. It invests in
foreign money market instruments only if they are denominated in U.S. dollars.

PRINCIPAL RISKS

More information about these and other risks of an investment in the fund is
provided below in "More About Risks and Investment Strategies." In particular,
see the following headings:

o Credit Risk

o Interest Rate Risk

o Foreign Securities Risk

INFORMATION ON THE FUND'S RECENT HOLDINGS CAN BE FOUND IN ITS CURRENT
ANNUAL/SEMI-ANNUAL REPORTS (SEE BACK COVER FOR INFORMATION ON ORDERING THOSE
REPORTS).

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PaineWebber Retirement Money Fund

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PERFORMANCE
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RISK/RETURN BAR CHART AND TABLE

The following bar chart and table provide information about the fund's
performance and thus give some indication of the risks of an investment in the
fund.

The bar chart shows how the fund's performance has varied from year to year.

The table that follows the bar chart shows the average annual returns over
several time periods for the fund's shares.

The fund's past performance does not necessarily indicate how the fund will
perform in the future.

RETIREMENT MONEY FUND -- TOTAL RETURN

[INSERT BAR CHART]

Calendar year total return as of June 30, 1999 - %
Best quarter during years shown: quarter, 19 - %
Worst quarter during years shown: quarter, 19 - %

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998

One Year
Five Years
Ten Years
Life of Fund (7/2/88)

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PaineWebber Retirement Money Fund

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EXPENSES AND FEE TABLES
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FEES AND EXPENSES These tables describe the fees and expenses that you may pay
if you buy and hold shares of the fund.

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investment)

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)

Management Fees.....................................

Distribution and/or Service (12b-1) Fees............ 0.13%*

Other Expenses...................................... ____

Total Annual Fund Operating Expenses................ ====

* The contract rate is 0.125% but has been rounded to 0.13% for purposes
of the table.

EXAMPLE

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.

1 YEAR 3 YEARS 5 YEARS 10 YEARS

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PaineWebber Retirement Money Fund

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MORE ABOUT RISKS AND INVESTMENT STRATEGIES
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PRINCIPAL RISKS

The main risks of investing in the fund are described below. Other risks of
investing in the fund, along with further detail about some of the risks
described below, are discussed in the fund's Statement of Additional Information
("SAI"). Information on how you can obtain the SAI is on the back cover of this
prospectus.

INTEREST RATE RISK. The value of money market instruments generally can be
expected to fall when short-term interest rates rise and to rise when short-term
interest rates fall. Interest rate risk is the risk that interest rates will
rise, so that the value of the fund's investments will fall. Also, the fund's
yield will tend to lag behind changes in prevailing short-term interest rates.
This means that the fund's income will tend to rise more slowly than increases
in short-term interest rates. Similarly, when short-term interest rates are
falling, the fund's income will tend to fall more slowly.

ADDITIONAL RISKS

ADDITIONAL INVESTMENT STRATEGIES

Like all money market funds, the fund is subject to maturity, quality and
diversification requirements designed to help it maintain a stable price of
$1.00 per share. In addition, Mitchell Hutchins may employ a number of
professional money management techniques to respond to changing economic and
money market conditions and to shifts in fiscal and monetary policy. These
techniques include varying the composition and the weighted average maturity of
the portfolio based upon its assessment of the relative values of various money
market instruments and future interest rate patterns. 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 markets.

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PaineWebber Retirement Money Fund

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YOUR INVESTMENT

MANAGING YOUR FUND ACCOUNT
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BUYING SHARES
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Fund shares are offered to retirement plans, including individual retirement
accounts, through brokerage accounts established as retirement plan sweep
accounts at PaineWebber or one of its correspondent firms. The types of
retirement plans that are eligible to buy fund shares are described below. You
can open a retirement plan sweep account by contacting your Financial Advisor.

Your order to buy fund shares will be effective on the business day on which
federal funds become available to the fund. 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 can be made
immediately available to the fund. A business day is any day that the Boston
offices of the fund's custodian and the New York City offices of PaineWebber and
its bank, The Bank of New York, are open for business.

The fund has adopted a plan under rule 12b-1 under which the fund pays fees for
services provided to its shareholders at the annual rate of 0.125% of its
average net assets.

The fund and PaineWebber reserve the right to reject a purchase order or suspend
the offering of fund shares.

BUYING SHARES AUTOMATICALLY

PaineWebber automatically invests immediately available funds of $1 or more in
your PaineWebber retirement plan sweep account in fund shares. These amounts
include proceeds of securities you have sold. This sweep will not take place if
the fund account value after the investment would be less than $25. These
purchases are made daily for settlement the next business day.

BUYING SHARES BY CHECK

You may buy fund shares by depositing a check from a U.S. bank into your
retirement plan sweep account. You should make your check payable to PaineWebber
Retirement Money Fund. You should include your retirement plan sweep account
number on the check.

Federal funds are deemed available to the fund two business days after the
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 if they are converted to federal funds in less than two
business days.

BUYING SHARES BY WIRE

You may buy fund shares by instructing your bank to transfer federal funds by
wire to:

The Bank of New York
ABA 021-000018 PaineWebber Inc.
A/C 890-0114-088, OBI=FBO)
[Account Name]/[Brokerage Account Number.]

The wire must include your name and retirement plan sweep account number.

If PaineWebber receives a notice from your bank of wire transfer of federal
funds for a purchase of fund shares by 12:00 noon, Eastern time, PaineWebber
will execute the purchase on that day. Otherwise, PaineWebber will execute the
order on the next business day. PaineWebber and/or your bank may impose a
service charge for wire purchases.

MINIMUM INVESTMENTS

There is a $25 minimum for the first purchase and no minimum for subsequent
purchases.

The fund may change its minimum investment requirements at any time.

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RETIREMENT PLANS ELIGIBLE TO BUY FUND SHARES

Retirement plans available through PaineWebber that are eligible to buy fund
shares include

o individual retirement accounts (standard and rollover)

o savings investment match plans for employees ("SIMPLE IRA")

o simplified employee pension plans

o cash or deferred arrangement/simplified employee pension plans

o profit sharing plans

o 401(k) plans

o money purchase plans

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o defined benefit plans

o target benefit plans

Other retirement plans also may be held in custody at PaineWebber or its
correspondent firms and may be eligible to buy fund shares. Contact your
Financial Advisor for more information regarding these retirement plans.

Although the amount that you may contribute to a retirement plan in any one year
is subject to certain limitations, you may invest assets already held in a
retirement plan in the fund without regard to these limitations.

If PaineWebber, Mitchell Hutchins or PW Trust Company serves as investment
manager for, provides investment advice to or otherwise is a fiduciary within
the meaning of the Employee Retirement Income Security Act or the Internal
Revenue Code to a retirement plan, the plan may not buy fund shares. This
prohibition does not include retirement plans for which PaineWebber, Mitchell
Hutchins or PW Trust Company is considered a fiduciary solely because it
sponsors a master or prototype plan or because it provides nondiscretionary
trust services to a retirement plan.

SELLING SHARES
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You can sell your fund shares at any time. You may sell your shares by
contacting your Financial Advisor. Your fund shares will also be sold
automatically to settle any outstanding securities purchases or debits to your
retirement plan sweep account, unless you instruct your Financial Advisor
otherwise.

If the proceeds from selling your fund shares remain in the retirement plan
sweep account, the adverse tax consequences described below for certain
retirement plan distributions will not occur.

ADDITIONAL INFORMATION

It costs the fund money to maintain shareholder accounts. Therefore, the fund
reserves the right to repurchase all shares in any account that has a net asset
value of less than $25. If the fund elects to do this with your account, it will
notify you that you can increase the amount invested to $25 or more within 60
days. This notice may appear on your account statement.

If you want to sell shares that you purchased recently, the fund may delay
payment until it verifies that it has received good payment. If you bought
shares by check, this can take up to 15 days.

RETIREMENT PLAN WITHDRAWALS
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A participant's withdrawals from a retirement plan are generally taxable as
ordinary income. Withdrawals prior to the time the participant reaches age 59
1/2 or becomes permanently disabled may be subject to a 10% penalty tax. Sales
of your fund shares through the fund's check writing service or systematic
withdrawal plan, described below, are treated as taxable withdrawals from your
retirement plan. As a result, you may use these services only if

o you are eligible for distributions from your retirement plan,

o your retirement plan permits participants to direct the investment of
their retirement plan balances and

o you are at least 59 1/2 years old.

For retirement plans that do not permit participants to direct the investment of
their plan balances, only the plan fiduciary with investment responsibility may
use the check writing service or participate in the fund's systematic withdrawal
plan.

You may obtain more information about these programs and obtain the forms needed
to participate from your Financial Advisor. PaineWebber may modify or terminate
the check writing service or systematic withdrawal plan at any time or impose
service fees for these programs.

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CHECK WRITING SERVICE. You may sell $250 or more of your fund shares by using a
check drawn on your fund account. When the fund's transfer agent receives the
check for payment, the transfer agent will arrange for the sale of a sufficient
amount of fund shares to cover the amount of the check. You will continue to
receive dividends until the transfer agent receives the check.

You will not receive canceled checks, but you may request photocopies of your
canceled checks. If you have insufficient funds in your account, the check will
be returned to the payee. Checks written in amounts less than $250 will be
returned. You should not attempt to sell all the shares in your fund account by
writing a check because the amount of fund shares is likely to change each day.
You also should not use the checks to transfer money from a retirement sweep
account to another account, correct excess contributions to a retirement plan or
withdraw amount classified as voluntary contributions to a retirement plan. All
sales of fund shares by check will be reported to the Internal Revenue Service
as taxable distributions. As a result, any of these actions could have adverse
tax consequences.
8A

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PaineWebber Retirement Money Fund

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PaineWebber may impose charges for specially imprinted checks, additional copies
of canceled checks, stop payment orders, checks returned for insufficient funds
and checks written for less than $250. You will pay these charges through the
automatic sale of an appropriate number of your fund shares.

SYSTEMATIC WITHDRAWAL PLAN. You may sell a portion of your fund shares under the
fund's systematic withdrawal plan at monthly, quarterly or semi-annual
intervals. The minimum withdrawal amounts under the systematic withdrawal plan
are $100 monthly, $300 quarterly and $600 semi-annually. You may not use the
systematic withdrawal plan if you have elected to have income taxes withheld
from your retirement plan withdrawals.

PRICING AND VALUATION
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The price of fund shares is based on net asset value. The net asset value is the
total value of the fund divided by the total number shares outstanding. In
determining net asset value, the fund values its securities at their amortized
cost. This method uses a constant amortization to maturity of the difference
between the cost of the instrument to the fund and the amount due at maturity.
The fund's net asset value per share is expected to be $1.00 per share, although
this value is not guaranteed.

The fund calculates net asset value once each business day at 12:00 noon,
Eastern time. Your price for buying or selling shares will be the net asset
value that is next calculated after the fund accepts your order. Your Financial
Advisor is responsible for making sure that your order is promptly sent to the
fund.

MANAGEMENT
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INVESTMENT ADVISER AND SUB-ADVISER

PaineWebber is the investment adviser and administrator of the fund. Mitchell
Hutchins is its sub-adviser and sub-administrator. PaineWebber and Mitchell
Hutchins are located at 1285 Avenue of the Americas, New York, New York, 10019.
Mitchell Hutchins is a wholly owned asset management subsidiary of PaineWebber,
which is wholly owned by Paine Webber Group Inc., a publicly owned financial
services holding company. On July 31, 1999, PaineWebber or Mitchell Hutchins was
the adviser or sub-adviser of __ investment companies with __ separate
portfolios and aggregate assets of approximately $__._ billion.

ADVISORY FEES

The fund paid advisory and administration fees to PaineWebber for the fiscal
year ended June 30, 1999 at the annual rate of [0.40]% of its average daily net
assets.

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PaineWebber Retirement Money Fund

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DIVIDENDS AND TAXES
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DIVIDENDS

The fund declares dividends daily and pays them monthly. The fund distributes
any net short-term capital gain annually, but may make more frequent
distributions if necessary to maintain its share price at $1.00 per share.

You will receive dividends in additional shares of the fund. Shares begin to
earn dividends on the day they are purchased but do not earn dividends on the
day they are sold.

TAXES

Retirement plan participants ordinarily do not pay taxes on dividends they
receive on fund shares until they withdraw the proceeds from the retirement
plan. Generally, withdrawals from a retirement plan will be taxable as ordinary
income and withdrawals 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 (unless the withdrawals are used to pay certain
higher education expenses and certain acquisition costs of first time home
buyers). The failure of a retirement plan to distribute sufficient income after
a participant reaches age 70 1/2 may be subject to an excise tax. 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.

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PaineWebber Retirement Money Fund

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FINANCIAL HIGHLIGHTS
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The following financial highlights table is intended to help you understand the
fund's financial performance for the past 5 years. Certain information reflects
financial results for a single fund share. In the tables, "total investment
return" represents the rate that an investor would have earned on an investment
in the fund (assuming reinvestment of all dividends).

The information in the financial highlights has been audited by Ernst & Young,
LLP, independent auditors, whose report, along with the fund's financial
statements, are included in the fund's annual report to shareholders. The annual
report may be obtained without charge by calling 1-800-647-1568.

RETIREMENT MONEY FUND

For the Years Ended June 30,
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1999 1998 1997 1996 1995
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Net asset value, beginning of period.... $1.00 $1.00 $1.00 $1.00
----- ----- ----- -----
Net investment income................... 0.049 0.048 0.050 0.047
Dividends from net investment income.... (0.049) (0.048) (0.050) (0.047)
------- ------- ------- -------
Net asset value, end of period.......... $1.00 $1.00 $1.00 $1.00
===== ===== ===== =====
Total investment return (1)............. 5.03% 4.89% 5.13% 4.83%
===== ===== ===== =====
Ratios/Supplemental Data:
Net assets, end of period (000's)....... $4,191,018 $3,922,753 $3,500,508 $2,966,199
Expenses to average net assets.......... 0.78% 0.75% 0.70% 0.78%
Net investment income to average net assets 4.91% 4.79% 5.01% 4.75%
</TABLE>

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

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[BACK COVER]

TICKER SYMBOL: PaineWebber Retirement Money Fund:

If you want more information about the fund, the following documents are
available free upon request:

ANNUAL/SEMI-ANNUAL REPORTS

Additional information about the fund's investments is available in the fund's
annual and semi-annual reports to shareholders.

STATEMENT OF ADDITIONAL INFORMATION (SAI):

The SAI provides more detailed information about the fund and is incorporated by
reference into this prospectus.

You may discuss your questions about the fund by contacting your PaineWebber
Financial Advisor. You may obtain free copies of annual and semi-annual reports
and the SAI by contacting the fund directly at 1-800-647-1568.

You may review and copy information about the fund, including shareholder
reports and the SAI, at the Public Reference Room of the Securities and Exchange
Commission. You can get text-only copies of reports and other information about
the fund:

o For a fee, by writing to or calling the SEC's Public Reference Room,
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330
o Free, from the SEC's Internet website at: http://www.sec.gov

PaineWebber RMA Money Fund, Inc.
- -PaineWebber Retirement Money Fund
Investment Company Act File No. 811-3503

<PAGE>

PAINEWEBBER RETIREMENT MONEY FUND
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019

STATEMENT OF ADDITIONAL INFORMATION

PaineWebber Retirement Money Fund is a diversified series of PaineWebber
RMA Money Fund, Inc., a professionally managed open-end investment company
("Corporation").

The fund's investment adviser, administrator and distributor is
PaineWebber Incorporated ("PaineWebber"); its sub-adviser is Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins"), a wholly owned asset management
subsidiary of PaineWebber. Mitchell Hutchins also serves as the fund's
sub-administrator.

Portions of the fund's Annual Report to Shareholders are incorporated by
reference into this Statement of Additional Information ("SAI"). The Annual
Report accompanies this SAI. You may obtain an additional copy of the fund's
Annual Report by calling toll-free 1-800-647-1568.

This SAI is not a prospectus and should be read only in conjunction with
the fund's current Prospectus, dated August 29, 1999. A copy of the Prospectus
may be obtained by calling any PaineWebber Financial Advisor or correspondent
firm or by calling toll-free 1-800-647-1568. This SAI is dated August 29, 1999.

TABLE OF CONTENTS
PAGE
----

The Fund and Its Investment Policies........... 2
The Fund's Investments, Related Risks and
Limitations.................................... 2
Organization of the Fund; Directors and
Officers and Principal Holders of
Securities.................................. 8
Investment Advisory and Distribution
Arrangements................................. 15
Portfolio Transactions......................... 18
Additional Purchase and Redemption
Information; Service Organizations.......... 19
Valuation of Shares............................ 19
Performance Information........................ 20
Taxes.......................................... 22
Other Information.............................. 23
Financial Statements........................... 23

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THE FUND AND ITS INVESTMENT POLICIES

The fund's investment objective may not be changed without shareholder
approval. Except where noted, the other investment policies of the fund may be
changed by its board without shareholder approval. As with other mutual funds,
there is no assurance that the fund will achieve its investment objective.

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 that have, or are deemed to have, remaining maturities
of 13 months or less. Money market instruments are short-term debt obligations
and similar securities. These instruments include (1) U.S. and foreign
government securities, (2) obligations of U.S. and foreign banks, (3) commercial
paper and other short-term obligations of U.S. and foreign corporations,
partnerships, trusts and similar entities, (4) repurchase agreements regarding
any of the foregoing and (5) investment company securities. Money market
instruments also include longer term bonds that have variable interest rate or
other special features that give them the financial characteristics of
short-term debt.

The fund may purchase only those obligations that Mitchell Hutchins
determines, pursuant to procedures adopted by the board, present minimal credit
risks and are "First Tier Securities" as defined in Rule 2a-7 under the
Investment Company Act of 1940, as amended ("Investment Company Act"). A First
Tier Security is either (1) rated in the highest short-term rating category by
at least two nationally recognized statistical rating agencies ("rating
agencies"), (2) rated in the highest short-term rating category by a single
rating agency if only that rating agency has assigned the obligation a
short-term rating, (3) issued by an issuer that has received such a short-term
rating with respect to a security that is comparable in priority and security,
(4) subject to a guarantee rated in the highest short-term rating category or
issued by a guarantor that has received the highest short-term rating for a
comparable debt obligation or (5) unrated, but determined by Mitchell Hutchins
to be of comparable quality.

The fund generally may invest no more than 5% of its total assets in
the securities of a single issuer (other than U.S. government securities).
The fund may purchase only U.S. dollar-denominated obligations of foreign
issuers.

THE FUND'S INVESTMENTS, RELATED RISKS AND LIMITATIONS

The following supplements the information contained in the Prospectus and
above concerning the fund's investments, related risks and limitations. Except
as otherwise indicated in the Prospectus or the SAI, the fund has established no
policy limitations on its ability to use the investments or techniques discussed
in these documents.

YIELDS AND CREDIT RATINGS OF MONEY MARKET INSTRUMENTS; FIRST TIER
SECURITIES. The yields on the money market instruments in which the fund invests
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 assigned by rating agencies
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.

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Subsequent to its purchase by the fund, an issue may cease to be rated or
its rating may be reduced. If a security in the fund's portfolio ceases to be a
First Tier Security (as defined above) or Mitchell Hutchins becomes aware that a
security has received a rating below the second highest rating by any rating
agency, Mitchell Hutchins and, in certain cases, the fund's board, will consider
whether the fund should continue to hold the obligation. A First Tier Security
rated in the highest short-term category at the time of purchase that
subsequently receives a rating below the highest rating category from a
different rating agency may continue to be considered a First Tier Security.

U.S. GOVERNMENT SECURITIES include direct obligations of the U.S. Treasury
(such as Treasury bills, notes or bonds) and obligations issued or guaranteed as
to principal and interest (but not as to market value) by the U.S. government,
its agencies or its instrumentalities. These U.S. government securities may
include mortgage-backed securities issued or guaranteed by government agencies
or government-sponsored enterprises. Other U.S. government securities may be
backed by the full faith and credit of the U.S. government or supported
primarily or solely by the creditworthiness of the government-related issuer or,
in the case of mortgage-backed securities, by pools of assets.

U.S. government securities also include separately traded principal and
interest components of securities issued or guaranteed by the U.S. Treasury,
which are traded independently under the Separate Trading of Registered Interest
and Principal of Securities ("STRIPS") program. Under the STRIPS programs, the
principal and interest components are individually numbered and separately
issued by the U.S. Treasury.

COMMERCIAL PAPER AND OTHER SHORT-TERM OBLIGATIONS. The fund may purchase
commercial paper, which includes short-term obligations issued by corporations,
partnerships, trusts or other entities to finance short-term credit needs. The
fund also may purchase non-convertible debt obligations subject to maturity
constraints imposed by Rule 2a-7 under the Investment Company Act. Descriptions
of certain types of short-term obligations are provided below.

ASSET-BACKED SECURITIES. The fund may invest in securities that are
comprised of financial assets. Such assets may include a motor vehicle and other
types of installment sales contracts, home equity loans, leases of various types
of real and personal property and receivables from revolving credit (credit
card) agreements or other types of financial assets. Such assets are securitized
through the use of trusts or special purpose corporations or other entities.
Payments or distributions of principal and interest may be guaranteed up to a
certain amount and for a certain time period by a letter of credit or pool
insurance policy issued by a financial institution unaffiliated with the issuer,
or other credit enhancements may be present. See "The Fund's Investments,
Related Risks and Limitations -- Credit and Liquidity Enhancements."

VARIABLE AND FLOATING RATE SECURITIES AND DEMAND INSTRUMENTS. 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. In addition, the fund may purchase variable
and floating rate securities of other issuers with remaining maturities in
excess of 13 months if the securities are subject to a demand feature
exercisable within 13 months or less. The yields on these securities are
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 Securities
and Exchange Commission ("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 a specified
party, usually the issuer or a remarketing agent, prior to maturity. See "The
Fund's Investments, Related Risks and Limitations -- Credit and Liquidity
Enhancements."

Generally, the fund may exercise demand features (1) upon a default under
the terms of the underlying security, (2) to maintain its 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

3
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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 securities.

VARIABLE AMOUNT MASTER DEMAND NOTES. The fund may invest in 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 an 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 payable on
demand and may or may not be rated.

INVESTING IN FOREIGN SECURITIES. The fund's investments in U.S.
dollar-denominated securities of foreign issuers may involve risks that are
different from investments in U.S. issuers. These risks may include future
unfavorable political and economic developments, possible 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 fund's investments. Additionally, there may be less publicly available
information about foreign issuers because they may not be subject to the same
regulatory requirements as domestic issuers.

ILLIQUID SECURITIES. The term "illiquid securities" for purposes of the
Prospectus and SAI 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 and restricted securities other than
those Mitchell Hutchins has determined are liquid pursuant to guidelines
established by the board. To the extent the fund invests in illiquid securities,
it may not be able readily to liquidate such investments and may have to sell
other investments if necessary to raise cash to meet its obligations.

Restricted securities are not registered under the Securities Act of 1933,
as amended ("Securities Act") and may be sold only in privately negotiated or
other exempted transactions or after a registration statement under the
Securities Act has become effective. Where registration is required, the fund
may be obligated to pay all or part of the registration expenses and a
considerable period may elapse between the time of the decision to sell and the
time the fund may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions were
to develop, the fund might obtain a less favorable price than prevailed when it
decided to sell.

Institutional markets for restricted securities also have developed as a
result of Rule 144A, which establishes a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. Such markets include automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by the National Association
of Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
the fund, however, could affect adversely the marketability of such portfolio

4
<PAGE>

securities, and the fund might be unable to dispose of such securities promptly
or at favorable prices.

The board 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, which may include (1) the frequency of trades for the security, (2)
the number of dealers that make quotes, or are expected to make quotes, for the
security, (3) the nature of the security and how trading is effected (e.g., the
time needed to sell the security, how bids are solicited and the mechanics of
transfer) and (4) the existence of demand features or similar liquidity
enhancements. Mitchell Hutchins monitors the liquidity of restricted securities
in the fund's portfolio and reports periodically on such decisions to the board.

REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which the
fund purchases securities or other obligations from a bank or securities dealer
(or its affiliate) and simultaneously commits to resell them to the counterparty
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 obligations.
Securities or other obligations subject to repurchase agreements may have
maturities in excess of 13 months. The fund maintains custody of the underlying
obligations prior to their repurchase, either through its regular custodian or
through a special "tri-party" custodian or sub-custodian that maintains separate
accounts for both the fund and its counterparty. Thus, the obligation of the
counterparty to pay the repurchase price on the date agreed to or upon demand
is, in effect, secured by such obligations. Repurchase agreements carry certain
risks not associated with direct investments in securities, including a possible
decline in the market value of the underlying obligations. If their value
becomes less than the repurchase price, plus any agreed-upon additional amount,
the counterparty 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 obligations and the price that was paid by the fund upon
acquisition is accrued as interest and included in its net investment income.
Repurchase agreements involving obligations other than U.S. government
securities (such as commercial paper and corporate bonds) may be subject to
special risks and may not have the benefit of certain protections in the event
of the counterparty's insolvency. If the seller or guarantor becomes insolvent,
the fund may suffer delays, costs and possible losses in connection with the
disposition of collateral. The fund intends to enter into repurchase agreements
only with counterparties in transactions believed by Mitchell Hutchins to
present minimum credit risks.

REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements involve the
sale of securities held by the fund subject to its agreement to repurchase the
securities at an agreed-upon date or upon demand and at a price reflecting a
market rate of interest. Reverse repurchase agreements are subject to the fund's
limitation on borrowings and may be entered into only with banks and securities
dealers. While a reverse repurchase agreement is outstanding, the fund will
maintain, in a segregated account with its custodian, cash or liquid securities,
marked to market daily, in an amount at least equal to its obligations under the
reverse repurchase agreement. See "The Fund's Investments, Related Risks and
Limitations -- Segregated Accounts."

Reverse repurchase agreements involve the risk that the buyer of the
securities sold by the fund might be unable to deliver them when the fund seeks
to repurchase. If the buyer of securities under a reverse repurchase agreement
files for bankruptcy or becomes insolvent, such buyer or trustee or receiver may
receive an extension of time to determine whether to enforce that fund's
obligation to repurchase the securities, and the fund's use of the proceeds of
the reverse repurchase agreement may effectively be restricted pending such
decision.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The fund may purchase
securities on a "when-issued" basis or may purchase or sell securities for
delayed delivery, I.E., for issuance or delivery to or by the fund later than
the normal settlement date for such securities at a stated price and yield. The
fund generally would not pay for such securities or start earning interest on
them until they are received. However, when the fund undertakes a when-issued or
delayed delivery obligation, it immediately assumes the risks of ownership,
including the risks of price fluctuation. Failure of the issuer to deliver a
security purchased by the fund on a when-issued or delayed delivery basis may
result in the fund's incurring a loss or missing an opportunity to make an
alternative investment.

5
<PAGE>

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 a fund's net asset value. When the 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 "The Fund's Investments,
Related Risks and Limitations--Segregated Accounts." The fund may sell the right
to acquire the security prior to delivery if Mitchell Hutchins deems it
advantageous to do so, which may result in a gain or loss to the fund.

INVESTMENTS IN OTHER INVESTMENT COMPANIES. The fund may invest in
securities of other money market funds, subject to Investment Company Act
limitations, which at present restrict these investments in the aggregate to no
more than 10% of the fund's total assets. The shares of other money market funds
are subject to the management fees and other expenses of those funds. At the
same time, the fund would continue to pay its own management fees and expenses
with respect to all its investments, including shares of other money market
funds. The fund may invest in the securities of other money market funds when
Mitchell Hutchins believes that (1) the amounts to be invested are too small or
are available too late in the day to be effectively invested in other money
market instruments, (2) shares of other money market funds otherwise would
provide a better return than direct investment in other money market instruments
or (3) such investments would enhance the fund's liquidity.

LENDING OF PORTFOLIO SECURITIES. The fund is authorized to lend 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 these securities. The
borrower of the fund's portfolio securities must maintain acceptable collateral
with the fund's custodian in an amount, marked to market daily, 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. The fund may reinvest any cash collateral in money market
investments or other short-term liquid investments. 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 of its loans at any
time. The fund may pay reasonable fees in connection with a loan and may pay the
borrower or placing broker a negotiated portion of the interest earned on the
reinvestment of cash held as collateral. The fund will receive amounts
equivalent to any interest, dividends 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, when regaining such
rights is considered to be in the fund's interest.

Pursuant to procedures adopted by the board governing the fund's
securities lending program, PaineWebber has been retained to serve as lending
agent for the fund. The board also has authorized the payment of fees (including
fees calculated as a percentage of invested cash collateral) to PaineWebber for
these services. The board periodically reviews all portfolio securities loan
transactions for which PaineWebber acted as lending agent. PaineWebber also has
been approved as a borrower under the fund's securities lending program.

SEGREGATED ACCOUNTS. When the 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, it 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.

INVESTMENT LIMITATIONS OF THE FUND

FUNDAMENTAL LIMITATIONS. The following fundamental investment limitations
cannot be changed for the fund 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 of the fund 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, later changes in percentage resulting from a change in values of
portfolio securities or amount of total assets will not be considered a
violation of any of the following limitations.

6
<PAGE>

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 interpretations apply to, but are not a part of, this
fundamental restriction: (a) domestic and foreign banking will be considered to
be different industries; and (b) asset-backed securities will be grouped in
industries based upon their underlying assets and not treated as constituting a
single, separate industry.

(3) issue senior securities or borrow money, except as permitted under
the Investment Company 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.

The following interpretation applies to, but is not a part of, this
fundamental restriction: the fund's investments in master notes and similar
instruments will not be considered to be 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.

(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 LIMITATIONS. The following investment restrictions are
non-fundamental and may be changed by the vote of the board without
shareholder approval.

7
<PAGE>

The fund will not:

(1) 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.

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

ORGANIZATION OF THE FUND; DIRECTORS AND OFFICERS AND
PRINCIPAL HOLDERS OF SECURITIES

The Corporation was organized on July 2, 1982 as a Maryland corporation
and has three operating series. The Corporation has authority to issue 60
billion shares of common stock of par value $.0001 per share, 20 million of
which are designated as shares of the fund. The remaining shares are designated
as shares of the two other series of the Corporation. The Corporation is
governed by a board of directors, which oversees the fund's operations. The
board also is authorized to establish additional series.

8
<PAGE>

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

NAME AND ADDRESS*; AGE POSITION WITH CORPORATION BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
- ---------------------- ------------------------- ----------------------------------------
<S> <C> <C>

Margo N. Alexander**; 52 Director and President Mrs. Alexander is chairman (since March
1999), chief executive officer and a director
of Mitchell Hutchins (since January 1995), and
an executive vice president and a director of
PaineWebber (since March 1984). Mrs. Alexander
is president and a director or trustee of 32
investment companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.

Richard Q. Armstrong; 64 Director Mr. Armstrong is chairman and principal of
R.Q.A. Enterprises R.Q.A. Enterprises (management consulting
One Old Church Road firm) (since April 1991 and principal
Unit #6 occupation since March 1995). Mr. Armstrong
Greenwich, CT 06830 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). He 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 31 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves
as investment adviser.

E. Garrett Bewkes, Jr.**; 72 Director and Chairman of the Mr. Bewkes is a director of Paine Webber Group
Board of Directors Inc. ("PW Group") (holding company of
PaineWebber and 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.
Mr. Bewkes is a director or trustee of 35
investment companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.

9
<PAGE>

NAME AND ADDRESS*; AGE POSITION WITH CORPORATION BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
- ---------------------- ------------------------- ----------------------------------------

Richard R. Burt; 52 Director Mr. Burt is chairman of IEP Advisors, Inc.
1275 Pennsylvania Ave, N.W. (international investments and consulting
Washington, DC 20004 firm) (since March 1994) and a partner of
McKinsey & Company (management consulting
firm) (since 1991). He is also a director of
Archer-Daniels-Midland Co. (agricultural
commodities), Hollinger International Co.
(publishing), Homestake Mining Corp.,
Powerhouse Technologies Inc. and Wierton Steel
Corp. 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 31 investment companies for which
Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.

Mary C. Farrell**; 49 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 appears 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 31 investment companies for
which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.

Meyer Feldberg; 57 Director Mr. Feldberg is Dean and Professor of
Columbia University Management of the Graduate School of Business,
101 Uris Hall Columbia University. Prior to 1989, he was
New York, NY 10027 president of the Illinois Institute of
Technology. Dean Feldberg is also a director
of Primedia, Inc., Federated Department
Stores, Inc. and Revlon, Inc. Dean Feldberg is
a director or trustee of 34 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves
as investment adviser.

George W. Gowen; 69 Director Mr. Gowen is a partner in the law firm of
666 Third Avenue Dunnington, Bartholow & Miller. Prior to May
New York, NY 10017 1994, he was a partner in the law firm of
Fryer, Ross & Gowen. Mr. Gowen is a director
or trustee of 34 investment companies for
which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.

10
<PAGE>
NAME AND ADDRESS*; AGE POSITION WITH CORPORATION BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
- ---------------------- ------------------------- ----------------------------------------

Frederic V. Malek; 62 Director Mr. Malek is chairman of Thayer Capital
1455 Pennsylvania Ave, N.W. Partners (merchant bank). From January 1992 to
Suite 350 November 1992, he was campaign manager of
Washington, DC 20004 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., CB Commercial
Group, Inc. (real estate services), Choice
Hotels International (hotel and hotel
franchising), FPL Group, Inc. (electric
services), Manor Care, Inc. (health care) and
Northwest Airlines Inc. Mr. Malek is a
director or trustee of 31 investment companies
for which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as investment
adviser.

Carl W. Schafer; 63 Director Mr. Schafer is president of the Atlantic
66 Witherspoon Street, #1100 Foundation (charitable foundation supporting
Princeton, NJ 08542 mainly oceanographic exploration and
research). He is a director of Base Ten
Systems, Inc. (software), Roadway Express,
Inc. (trucking), The Guardian Group of Mutual
Funds, the Harding, Loevner Funds, Evans
Systems, Inc. (motor fuels, convenience store
and diversified company), Electronic Clearing
House, Inc. (financial transactions
processing), Frontier 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 31 investment companies
for which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as investment
adviser.

11
<PAGE>

NAME AND ADDRESS*; AGE POSITION WITH CORPORATION BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
- ---------------------- ------------------------- ----------------------------------------

Brian M. Storms;** 44 Director Mr. Storms is president and chief operating
officer of Mitchell Hutchins (since March
1999). Prior to March 1999, he was president
of Prudential Investments (1996-1999). Prior
to joining Prudential, he was a managing
director at Fidelity Investments. Mr. Storms
is a director or trustee of 31 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves
as investment adviser.

John J. Lee; 31 Vice President and Mr. Lee is a vice president and a manager of
Assistant Treasurer the mutual fund finance department of Mitchell
Hutchins. Prior to September 1997, he was an
audit manager in the financial services
practice of Ernst & Young LLP. Mr. Lee is a
vice president and assistant treasurer of 32
investment companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as an investment adviser.

Kevin J. Mahoney; 33 Vice President and Mr. Mahoney is a first vice president and a
Assistant Treasurer senior manager of the mutual fund finance
department of Mitchell Hutchins. From August
1996 through March 1999, he was the manager of
the mutual fund internal control group of
Salomon Smith Barney. Prior to August 1996, he
was an associate and assistant treasurer of
BlackRock Financial Management L.P. Mr.
Mahoney is a vice president and assistant
treasurer of 32 investment companies for which
Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.

Dennis McCauley; 52 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 22 investment companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.

Ann E. Moran; 42 Vice President and Ms. Moran is a vice president and a manager of
Assistant Treasurer the mutual fund finance department of Mitchell
Hutchins. Ms. Moran is a vice president and
assistant treasurer of 32 investment companies
for which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as investment
adviser.

12
<PAGE>
NAME AND ADDRESS*; AGE POSITION WITH CORPORATION BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
- ---------------------- ------------------------- ----------------------------------------

Dianne E. O'Donnell; 47 Vice President and Secretary Ms. O'Donnell is a senior vice president and
deputy general counsel of Mitchell Hutchins.
Ms. O'Donnell is a vice president and
secretary of 31 investment companies and a
vice president and assistant secretary of one
investment company for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.

Emil Polito; 38 Vice President Mr. Polito is a senior vice president and
director of operations and control for
Mitchell Hutchins. Mr. Polito is a vice
president of 32 investment companies for which
Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.

Susan Ryan; 39 Vice President Ms. Ryan is a senior vice president and
portfolio manager of Mitchell Hutchins and has
been with Mitchell Hutchins since 1982. Ms.
Ryan is a vice president of five investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves
as investment adviser

Victoria E. Schonfeld; 48 Vice President Ms. Schonfeld is a managing director and
general counsel of Mitchell Hutchins (since
May 1994) and a senior vice president of
PaineWebber (since July 1995). Ms. Schonfeld
is a vice president of 31 investment companies
and a vice president and secretary of one
investment company for which Mitchell
Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.

Paul H. Schubert; 36 Vice President and Treasurer Mr. Schubert is a senior vice president and
director of the mutual fund finance department
of Mitchell Hutchins. Mr. Schubert is a vice
president and treasurer of 32 investment
companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves
as investment adviser.

Barney A. Taglialatela; 38 Vice President and Mr. Taglialatela is a vice president and a
Assistant Treasurer manager of the mutual fund finance department
of Mitchell Hutchins. Prior to February 1995,
he was a manager of the mutual fund finance
division of Kidder Peabody Asset Management,
Inc. Mr. Taglialatela is a vice president and
assistant treasurer of 32 investment companies
for which Mitchell Hutchins, PaineWebber or
one of their affiliates serves as investment
adviser.

13
<PAGE>
NAME AND ADDRESS*; AGE POSITION WITH CORPORATION BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
- ---------------------- ------------------------- ----------------------------------------

Keith A. Weller; 38 Vice President and Mr. Weller is a first vice president and
Assistant Secretary 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 31
investment companies for which Mitchell
Hutchins, PaineWebber or one of their
affiliates 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, Ms. Farrell and Mr. Storms are "interested
persons" of the fund as defined in the Investment Company Act by virtue of
their positions with Mitchell Hutchins, PaineWebber, and/or PW Group.

The fund pays each board member who is not an "interested person" of the
fund $1,000 annually and up to $150 for each board meeting and each meeting of a
board committee. Therefore, the Corporation pays each such director $3,000
annually, plus any additional amounts due for board or committee meetings. Each
chairman of the audit and contract review committees of individual funds within
the PaineWebber fund complex receives additional compensation, aggregating
$15,000 annually, from the relevant funds. All board members are reimbursed for
any expenses incurred in attending meetings. Board members and officers own in
the aggregate less than 1% of the outstanding shares of the fund. Because
PaineWebber and Mitchell Hutchins perform substantially all the services
necessary for the operation of the fund, the fund requires no employees. No
officer, director or employee of Mitchell Hutchins or PaineWebber presently
receives any compensation from the fund for acting as a board member or officer.

14
<PAGE>

The table below includes certain information relating to the compensation
of the current board members who held office with the Corporation or with other
PaineWebber funds during the fund's fiscal year ended June 30, 1999.

COMPENSATION TABLE+

AGGREGATE
---------
COMPENSATION TOTAL COMPENSATION FROM
------------ -----------------------
FROM THE THE CORPORATION AND THE
-------- -----------------------
NAME OF PERSON, POSITION CORPORATION* FUND COMPLEX**
------------------------ ------------ --------------
<S> <C> <C>

Richard Q. Armstrong,
Director $ 101,372
Richard R. Burt,
Director 101,372
Meyer Feldberg,
Director 116,222
George W. Gowen,
Director 108,272
Frederic V. Malek,
Director 101,372
Carl W. Schafer,
Director 101,372

</TABLE>

- --------------------
+ Only independent board members are compensated by the fund and identified
above; board members who are "interested persons," as defined by the
Investment Company Act, do not receive compensation.

* Represents fees paid to each board member for the fiscal year ended June 30,
1999.

** Represents total compensation paid during the calendar year ended December
31, 1998, to each board member by 31 investment companies (33 in the case of
Messrs. Feldberg and Gowen) for which Mitchell Hutchins, PaineWebber or one
of their affiliates served as investment adviser. No fund within the
PaineWebber fund complex has a bonus, pension, profit sharing or retirement
plan.

PRINCIPAL HOLDERS OF SECURITIES

As of August 1, 1999, the Corporation's records showed no shareholders as
owning 5% or more of the fund's shares.

INVESTMENT ADVISORY AND DISTRIBUTION ARRANGEMENTS

INVESTMENT ADVISORY ARRANGEMENTS. PaineWebber acts as the fund's
investment adviser and administrator pursuant to a contract with the fund 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:

ANNUAL
AVERAGE DAILY NET ASSETS RATE
------------------------ ----

Up to $1 billion.................................. 0.50%
In excess of $1.0 billion up to $1.5 billion...... 0.44%
Over $1.5 billion................................. 0.36%

Services provided by PaineWebber under the Advisory Contract, some of
which may be delegated to Mitchell Hutchins, as discussed below, include the
provision of a continuous investment program for the fund and supervision of all

15
<PAGE>

matters relating to the operation of the fund. Under the Advisory Contract,
during the fiscal years ended June 30, 1999, 1998 and 1997, the fund paid (or
accrued) to PaineWebber investment advisory and administrative fees in the
amount of $___________, $16,593,019 and $15,211,682, respectively.

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 fees paid by the fund to PaineWebber. Under the
Mitchell Hutchins Contract, for the fiscal years ended June 30, 1999, 1998 and
1997, PaineWebber paid (or accrued) to Mitchell Hutchins fees in the amount of
$________ , $3,318,604 and $3,042,336, respectively.

Prior to August 1, 1997, PaineWebber provided certain services to the fund
not otherwise provided by the fund's transfer agent. Pursuant to an agreement
relating to those services, PaineWebber earned (or accrued) $251,757 for the
period July 1, 1997 to July 31, 1997 and $2,692,218 for the fiscal year ended
June 30, 1997. Subsequent to July 31, 1997, PFPC, the fund's transfer agent,
(not the fund) pays PaineWebber for certain transfer agency related services
that PFPC has delegated to PaineWebber.

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.

The Advisory and Mitchell Hutchins Contracts (collectively, "Contracts")
noted above provide that PaineWebber or Mitchell Hutchins, as the case may be,
shall 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 contract, 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 by vote of the fund's board or by the holders
of a majority of the outstanding voting securities of the fund at any time
without penalty, 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

16
<PAGE>

automatically upon their assignment, and the Mitchell Hutchins Contract also
automatically terminates upon the assignment of the Advisory Contract.

During the fiscal year ended June 30, 1999, the fund [did not] pay fees to
PaineWebber for its services as lending agent because the fund did not engage in
any securities lending activities.

NET ASSETS. The following table shows the approximate net assets as of
July 31, 1999, 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.

NET ASSETS
INVESTMENT CATEGORY ($MIL)
------------------- ------

Domestic (excluding Money Market).......................
Global..................................................
Equity/Balanced.........................................
Fixed Income (excluding Money Market)...................
Taxable Fixed Income..............................
Tax-Free Fixed Income.............................
Money Market Funds......................................

PERSONAL TRADING POLICIES. 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 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 Funds and other Mitchell Hutchins advisory clients.

DISTRIBUTION ARRANGEMENTS. PaineWebber acts as the distributor of fund
shares under a distribution contract with the Corporation ("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.

Under a plan of distribution adopted by the Corporation in the manner
prescribed by Rule 12b-1 under the Investment Company Act ("Plan"), the fund
pays PaineWebber a service fee, accrued daily and payable monthly, for providing
certain shareholder and account maintenance services. 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 0.125% of average net
assets. Any increase from the 0.125% annual rate would require prior approval of
the board.

PaineWebber uses the 12b-1 service fee to pay PaineWebber Financial
Advisors and correspondent firms for shareholder servicing. 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 Financial Advisor is based, such as rent, communications equipment,
employee salaries and other overhead costs.

During the period they are in effect, the Plan and the Distribution
Contract obligate the 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 its 12b-1 service
fee, the fund will not be obligated 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

17
<PAGE>

received or accrued through the termination date will be PaineWebber's sole
responsibility and not obligations of the fund.

Among other things, the Plan provides that (1) PaineWebber will submit to
the board 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,
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.

During the fiscal year ended June 30, 1999, the fund paid or accrued to
PaineWebber service fees of $__________. For the same period, PaineWebber
estimates that it incurred expenses of $___________ in servicing fund
shareholders. PaineWebber estimates that these expenses were incurred as
follows: (a) allocated costs related to shareholder servicing--$______________;
and (b) service fees to Financial Advisors--$___________.

In approving the continuance of the Plan, the board considered all
features of the distribution system for the fund, including (a) PaineWebber's
view that the payment of service fees based on the average daily net assets of
the fund held in shareholder accounts serviced by Financial Advisors and
correspondent firms was attractive to such Financial Advisors 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 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 board 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 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 Sub-Advisory Contract authorizes Mitchell Hutchins (with the approval
of the board) to select brokers and dealers to execute purchases and sales of
the fund's portfolio securities. It 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 or Mitchell Hutchins with research, analysis, advice and
similar services. Although Mitchell Hutchins may receive certain research or
execution services in connection with these transactions, Mitchell Hutchins on

18
<PAGE>

behalf of the fund 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 received from dealers will be in addition to, and not
in lieu of, the services required to be performed by Mitchell Hutchins under the
Sub-Advisory Contract.

During the last three fiscal years, the fund paid no brokerage
commissions.

Mitchell Hutchins may engage in agency transactions in over-the-counter
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 a requirement that Mitchell
Hutchins obtain multiple quotes from dealers before executing the transactions
on an agency basis.

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, 1999, the fund owned securities issued by the following
companies which are regular broker-dealers for the fund:

[information to be supplied]

ADDITIONAL INFORMATION REGARDING REDEMPTIONS

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION. 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, that makes it not reasonably practicable for the fund to dispose of
securities owned by it or fairly to determine the 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 attempts to maintain a constant net asset value of $1.00
per share.

SERVICE ORGANIZATIONS. The fund may authorize service organizations, and
their agents, to accept on its behalf purchase and redemption orders that are in
"good form." The fund will be deemed to have received these purchase and
redemption orders when a service organization or its agent accepts them. Like
all customer orders, these orders will be priced based on the fund's net asset
value next computed after receipt of the order by the service organizations or
their agents. Service organizations may include retirement plan service
providers who aggregate purchase and redemption instructions received from
numerous retirement plans or plan participants.

19
<PAGE>

VALUATION OF SHARES

The fund uses its best efforts to maintain its net asset value at $1.00
per share. 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, and the New York City offices of
PaineWebber and 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, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veteran's Day, Thanksgiving Day and Christmas Day.

The fund values its portfolio securities in accordance with the amortized
cost method of valuation under Rule 2a-7 ("Rule") under the Investment Company
Act. To use amortized cost to value its portfolio securities, the fund must
adhere to certain conditions under the Rule relating to its investments, some of
which are discussed in this SAI. 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. If 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 board 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. If that deviation exceeds
1/2 of 1% for the fund, the board 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 and will not purchase any instrument
having, or deemed to have, a remaining maturity of more than 397 days, 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. If amortized cost ceases to represent fair value per share, 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. Other assets, if any, are valued at fair value as
determined in good faith by or under the direction of the board.

PERFORMANCE INFORMATION

The fund's performance data quoted in advertising and other promotional
materials ("Performance Advertisements") represent past performance and are not
intended to indicate future performance. The investment return will fluctuate.

TOTAL RETURN CALCULATIONS. Average annual total return quotes
("Standardized Return") used in the fund's Performance Advertisements are
calculated according to the following formula:

n
P(1 + T = ERV
where: P = a hypothetical initial payment of $1,000 to purchase shares
of a specified class
T = average annual total return of shares of that class
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment at
the beginning of that period.

20
<PAGE>

The fund also may refer in Performance Advertisements to total return
performance data that are not calculated according to the formula set forth
above ("Non-Standardized Return"). The fund calculates Non-Standardized Return
for specified periods of time by assuming an investment of $1,000 in fund shares
and assuming the reinvestment of all dividends distributions. The rate of return
is determined by subtracting the initial value of the investment from the ending
value and by dividing the remainder by the initial value.

The following tables show performance information for the fund's shares
outstanding for the periods indicated. All returns for periods of more than one
year are expressed as an average annual return.

Year ended June 30, 1999:
Standardized Return.................
Non-Standardized Return.............
Five Years ended June 30, 1999:
Standardized Return.................
Non-Standardized Return.............
Ten Years ended June 30, 1999:
Standardized Return.................
Non-Standardized Return.............
Inception* to June 30, 1999:
Standardized Return.................
Non-Standardized Return.............

- ------------------
* The inception date for the fund is July 2, 1988.

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

The fund may also advertise other performance data, which may consist of
the annual or cumulative return (including 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).

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,

21
<PAGE>

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, 1999 were ________ and ___________, respectively.

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 the fund will fluctuate. In Performance
Advertisements, the fund may compare its yield with data published by Lipper
Analytical Services, Inc. for money funds ("Lipper"), CDA Investment
Technologies, Inc. ("CDA"), IBC Financial Data, Inc. ("IBC"), Wiesenberger
Investment Companies Service ("Wiesenberger") or Investment Company Data Inc.
("ICD"), or with the performance of recognized stock and other indexes,
including the Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Industrial Average, 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 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, IBC, 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 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 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 average 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. 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 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.

The fund may include discussions or illustrations of the effects of
compounding in Performance Advertisements. "Compounding" refers to the fact
that, if dividends on the 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 make available to shareholders a daily accrual factor or "mil rate"
representing dividends accrued to shareholder accounts on a given day or days.
Certain shareholders may find that this information facilitates accounting or
recordkeeping.

TAXES

BACKUP WITHHOLDING. The fund is required to withhold 31% of all dividends
and redemption proceeds payable to individuals and certain other non-corporate
shareholders who do not provide the fund or PaineWebber with a correct taxpayer
identification number. Withholding at that rate also is required from dividends
payable to those shareholders who otherwise are subject to backup withholding.

QUALIFICATION AS A REGULATED INVESTMENT COMPANY. To continue to qualify
for treatment as a RIC 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 gains, 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 and gains from the sale or other disposition of
securities and certain other income; (2) at the close of each quarter of the

22
<PAGE>

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, securities of
other RICs and other securities that are 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 (3) 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 or the securities of other RICs) of any one issuer.
If the fund failed to qualify for treatment as a RIC for any taxable year, (a)
it would be taxed as an ordinary corporation on the full amount of its taxable
income for that year without being able to deduct the distributions it makes to
its shareholders and (b) the shareholders would treat all those distributions as
dividends (that is, ordinary income) to the extent of the fund's earnings and
profits. In addition, the fund could be required to recognize unrealized gains,
pay substantial taxes and interest, and make substantial distributions before
requalifying for RIC treatment.

OTHER INFORMATION

VOTING RIGHTS. Shareholders of the fund are entitled to one vote for each
full share held and fractional votes for fractional shares held. Voting rights
are not cumulative and, as a result, the holders of more than 50% of all the
shares of the Corporation may elect all its board members. The shares of each
series of the Corporation will be voted separately, except when an aggregate
vote of all the series is required by law.

The Corporation does not hold annual 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.

CUSTODIAN AND RECORDKEEPING AGENT; TRANSFER AND DIVIDEND AGENT. State
Street Bank and Trust Company, located at One Heritage Drive, North Quincy,
Massachusetts 02171, serves as custodian and recordkeeping agent for the fund.
PFPC Inc., a subsidiary of PNC Bank, N.A., serves as the fund's transfer and
dividend disbursing agent. It is located at 400 Bellevue Parkway, Wilmington, DE
19809.

COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800, 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 independent auditors for the fund.

FINANCIAL STATEMENTS

The fund's Annual Report to Shareholders for its last fiscal year ended June 30,
1999 is a separate document supplied with this SAI, and the financial
statements, accompanying notes and report of independent auditors appearing
therein are incorporated herein by this reference.

23
<PAGE>

YOU SHOULD RELY ONLY ON THE INFORMATION
CONTAINED OR REFERRED TO IN THE
PROSPECTUS AND THIS STATEMENT OF
ADDITIONAL INFORMATION. THE FUND AND ITS
DISTRIBUTOR HAVE NOT AUTHORIZED ANYONE
TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT. THE PROSPECTUS AND THIS
STATEMENT OF ADDITIONAL INFORMATION IS
NOT AN OFFER TO SELL SHARES OF THE FUND
IN ANY JURISDICTION WHERE THE FUND OR
ITS DISTRIBUTOR MAY NOT LAWFULLY SELL
THOSE SHARES.

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

------------------------------------------
Statement of Additional Information

August 29, 1999
------------------------------------------

PAINEWEBBER

<PAGE>

PART C. OTHER INFORMATION

Item 23. EXHIBITS

(1) (a) Restated Articles of Incorporation 1/

(b) Articles Supplementary filed November 14, 1997 2/

(2) Restated By-Laws 2/

(3) Instruments defining the rights of holders of the Registrant's shares of
common stock 3/

(4) (a) Investment Advisory and Administration Contract 2/

(b) Sub-Advisory and Sub-Administration Contract 2/

(5) Distribution Contract 2/

(6) Bonus, profit sharing or pension plans - none

(7) (a) Custodian Contract with respect to Money Market Portfolio and
U.S. Government Portfolio 2/

(b) Addendum to Custodian Contract with respect to PaineWebber
Retirement Money Fund 2/

(8) Transfer Agency Agreement 2/

(9) Opinion and consent of counsel (to be filed)

(10) Other opinions, appraisals, rulings and consents: Auditor's Consent (to
be filed)

(11) Financial statements omitted from Part B - none

(12) Letter of investment intent (previously filed)

(13) Plan of Distribution pursuant to Rule 12b-1 (to be filed)

(14) and

(27) Financial Data Schedule (not applicable)

(15) Plan pursuant to Rule 18f-3 (not applicable)

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

1/ Incorporated by reference from Post-Effective Amendment No. 29 to the
registration statement, SEC File No. 2-78309, filed August 29, 1996.

2/ Incorporated by reference from Post-Effective Amendment No. 31 to the
registration statement, SEC File No. 2-78309, filed August 28, 1998.

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
Restated By-Laws.

Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

None.

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<PAGE>

Item 25. 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.

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

C-2
<PAGE>

between PaineWebber and any retail dealer, or arising out of supplementary
literature or advertising used by PaineWebber in connection with 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 26. 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 27. PRINCIPAL UNDERWRITERS

(a) PaineWebber serves as principal underwriter and/or investment
adviser for the following other investment companies:

LIQUID INSTITUTIONAL RESERVES
MITCHELL HUTCHINS INSTITUTIONAL SERIES
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 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. Unless
otherwise indicated, the principal business address of each person named is 1285
Avenue of the Americas, New York, New York 10019.

C-3
<PAGE>

Position and Offices
NAME POSITION WITH REGISTRANT with UNDERWRITER

Margo N. Alexander Director and President Executive Vice President
(Chief Executive Officer) and Director

Mary C. Farrell Director Managing Director,
Senior Investment
Strategist and Member of
the Investment Policy
Committee

Brian M. Storms Director President and Chief
Operating Officer of
Mitchell Hutchins

Item 28. 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 29. MANAGEMENT SERVICES

Not applicable.

Item 30. UNDERTAKINGS

Not applicable.

C-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to its Registration Statement 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 28th day of June, 1999.

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 Director June 28, 1999
- -------------------------- (Chief Executive
Margo N. Alexander* Officer)

/s/ E. Garrett Bewkes, Jr. Director and Chairman June 28, 1999
- -------------------------- of the Board of
E. Garrett Bewkes, Jr.* Directors

/s/ Richard Q. Armstrong Director June 28, 1999
- --------------------------
Richard Q. Armstrong*

/s/ Richard R. Burt Director June 28, 1999
- --------------------------
Richard R. Burt*

/s/ Mary C. Farrell Director June 28, 1999
- --------------------------
Mary C. Farrell*

/s/ Meyer Feldberg Director June 28, 1999
- --------------------------
Meyer Feldberg*

/s/ George W. Gowen Director June 28, 1999
- --------------------------
George W. Gowen*

/s/ Frederic V. Malek Director June 28, 1999
- --------------------------
Frederic V. Malek*

/s/ Carl W. Schafer Director June 28, 1999
- --------------------------
Carl W. Schafer*

/s/ Brian M. Storms Director June 28, 1999
- --------------------------
Brian M. Storms**

/s/ Paul H. Schubert Vice President and June 28, 1999
- -------------------------- Treasurer (Chief
Paul H. Schubert Financial and
Accounting Officer)

<PAGE>

SIGNATURES (CONTINUED)

* Signature affixed by Elinor W. Gammon pursuant to powers of attorney dated
May 21, 1996 and incorporated by reference from Post-Effective Amendment
No. 25 to the registration statement of PaineWebber RMA Tax-Free Fund,
Inc., SEC File 2-78310, filed June 27, 1996.

** Signature affixed by Elinor W. Gammon pursuant to power of attorney dated
May 14, 1999 and incorporated by reference from Post-Effective Amendment
No. 38 to the registration statement of PaineWebber Cashfund, Inc., SEC
File 2-60655, filed May 28, 1999.

<PAGE>

PAINEWEBBER RMA MONEY FUND, INC.

EXHIBIT INDEX

Exhibit
NUMBER

(1) (a) Restated Articles of Incorporation 1/

(b) Articles Supplementary filed November 14, 1997 2/

(2) Restated By-Laws 2/

(3) Instruments defining the rights of holders of the Registrant's shares of
common stock 3/

(4) (a) Investment Advisory and Administration Contract 2/

(b) Sub-Advisory and Sub-Administration Contract 2/

(5) Distribution Contract 2/

(6) Bonus, profit sharing or pension plans - none

(7) (a) Custodian Contract with respect to Money Market Portfolio and
U.S. Government Portfolio 2/

(b) Addendum to Custodian Contract with respect to PaineWebber

Retirement Money Fund 2/

(8) Transfer Agency Agreement 2/

(9) Opinion and consent of counsel (to be filed)

(10) Other opinions, appraisals, rulings and consents: Auditor's Consent (to
be filed)

(11) Financial statements omitted from Part B - none

(12) Letter of investment intent (previously filed)

(13) Plan of Distribution pursuant to Rule 12b-1 (to be filed)

(14) and

(27) Financial Data Schedule (not applicable)

(15) Plan pursuant to Rule 18f-3 (not applicable)

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

1/ Incorporated by reference from Post-Effective Amendment No. 29 to the
registration statement, SEC File No. 2-78309, filed August 29, 1996.

2/ Incorporated by reference from Post-Effective Amendment No. 31 to the
registration statement, SEC File No. 2-78309, filed August 28, 1998.