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PaineWebber Short-Term U.S.
Government Income Fund
1285 Avenue of the Americas, New York, New York 10019
Prospectus -- April 1, 1995
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND is a professionally managed
series of a mutual fund seeking the highest level of income consistent with the
preservation of capital and low volatility of net asset value.
The Fund is a series of PaineWebber Managed Investments Trust ("Trust"). This
Prospectus concisely sets forth information about the Fund a prospective
investor should know before investing. Please retain this Prospectus for future
reference.
A Statement of Additional Information dated April 1, 1995 (which is
incorporated by reference herein), has been filed with the Securities and
Exchange Commission. The Statement of Additional Information can be obtained
without charge, and further inquiries can be made, by contacting the Fund, your
PaineWebber investment executive or PaineWebber's correspondent firms or by
calling toll-free 1-800-647-1568.
.Professional Management
.Portfolio Diversification
.Dividend and Capital Gain Reinvestment
.Flexible Pricingsm
.Low Minimum Investment
.Automatic Investment Plan
.Systematic Withdrawal Plan
.Suitable For Retirement Plans
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A PAINEWEBBER MUTUAL FUND
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS ANY SUCH
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Prospectus Page 1
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
Table of Contents
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<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary......................................................... 3
Financial Highlights....................................................... 7
Flexible Pricing System.................................................... 8
Investment Objective and Policies.......................................... 9
Purchases.................................................................. 15
Exchanges.................................................................. 17
Redemptions................................................................ 19
Conversion of Class B Shares............................................... 20
Other Services and Information............................................. 20
Dividends and Taxes........................................................ 21
Valuation of Shares........................................................ 22
Management................................................................. 22
Performance Information.................................................... 24
General Information........................................................ 25
Appendix A................................................................. 26
Appendix B................................................................. 29
</TABLE>
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Prospectus Page 2
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
Prospectus Summary
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See the body of the Prospectus for more information on the topics discussed in
this summary.
The Fund: This Prospectus describes PaineWebber Short-Term U.S.
Government Income Fund ("Fund"), a diversified series
of an open-end, management investment company.
Investment Objective Highest level of income consistent with the preserva-
and Policies: tion of capital and low volatility of net asset value;
invests primarily in U.S. government securities, in-
cluding mortgage-backed securities that are issued or
guaranteed by the U.S. government, its agencies or in-
strumentalities.
Total Net Assets: Approximately $392.8 million at February 28, 1995.
Investment Adviser Mitchell Hutchins Asset Management Inc. ("Mitchell
and Administrator: Hutchins"), an asset management subsidiary of
PaineWebber Incorporated ("PaineWebber" or "PW"), man-
ages over $41.5 billion in assets. See "Management."
Sub-Adviser: Pacific Investment Management Company ("PIMCO") man-
ages approximately $59.8 billion in assets. See "Man-
agement."
Purchases: Shares of beneficial interest are available exclu-
sively through PaineWebber and its correspondent firms
for investors who are clients of PaineWebber or those
firms ("PaineWebber clients") and, for other invest-
ors, through PFPC Inc., the Fund's transfer agent
("Transfer Agent").
Flexible Pricing Investors may select Class A, Class B or Class D
System: shares, each with a public offering price that re-
flects different sales charges and expense levels. See
"Flexible Pricing System," "Purchases," "Redemptions"
and "Conversion of Class B Shares."
Class A Shares Offered at net asset value plus any applicable sales
charge (maximum is 3% of public offering price).
Class B Shares Offered at net asset value (a maximum contingent de-
ferred sales charge of 3% of redemption proceeds is
imposed on certain redemptions made within four years
of date of purchase). Class B shares automatically
convert into Class A shares (which pay lower ongoing
expenses) approximately six years after purchase.
Class D Shares Offered at net asset value without an initial or con-
tingent deferred sales charge. Class D shares pay
higher ongoing expenses than Class A shares and do not
convert into another Class.
Exchanges: Shares may be exchanged for shares of the correspond-
ing Class of most PaineWebber and Mitchell
Hutchins/Kidder, Peabody ("MH/KP") mutual funds.
Redemptions: PaineWebber clients may redeem through PaineWebber;
other shareholders must redeem through the Transfer
Agent.
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Prospectus Page 3
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
Prospectus Summary
(Continued)
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Dividends: Declared daily and paid monthly; net capital gain is
distributed annually. See "Dividends and Taxes."
Reinvestment: All dividends and capital gain distributions are paid
in Fund shares of the same Class at net asset value
unless the shareholder has requested cash.
Minimum Purchase: $100 for initial and subsequent purchases.
Other Features:
Class A Shares Automatic investment plan Quantity discounts on
Systematic withdrawal plan initial sales charge
Rights of accumulation 365-day reinstatement
privilege
Class B Shares Automatic investment plan Systematic withdrawal plan
Class D Shares Automatic investment plan Systematic withdrawal plan
------------------
WHO SHOULD INVEST. The Fund invests primarily in U.S. government securities,
including mortgage-backed securities, and may also invest in privately issued
mortgage- and asset-backed securities that have been rated AAA by Standard &
Poor's Ratings Group ("S&P") or Aaa by Moody's Investors Service ("Moody's"),
have an equivalent rating from another nationally recognized statistical rating
organization ("NRSRO") or, if unrated, have been determined by PIMCO to be of
comparable quality. The Fund maintains a dollar-weighted average portfolio
maturity of three years or less. The Fund is designed to provide investors with
current income and less fluctuation in net asset value than in longer-term U.S.
government bond funds.
RISK FACTORS. There can be no assurance that the Fund will achieve its
investment objective. Although the Fund invests primarily in U.S. government
securities, neither the Fund's yield nor its net asset value is insured or
guaranteed by the U.S. government. The Fund's net asset value per share
generally will vary inversely with movements in interest rates and its yield
will vary depending, in part, on its net asset value per share. Normally, the
Fund concentrates at least 25% of its total assets in mortgage- and asset-
backed securities. Investing in mortgage- and asset-backed securities involves
special risks, such as those relating to the prepayment of principal on the
underlying obligations, in addition to the risks present in the case of other
types of debt securities. During 1994, the value and the liquidity of many
mortgage-backed securities, including securities held by the Fund, declined
sharply due primarily to increases in short-term interest rates. There can be
no assurance that such declines will not recur. The market value of certain
mortgage-backed securities in which the Fund may invest, including interest-
only and principal-only classes of mortgage-backed securities and inverse
floating rate securities, can be extremely volatile, and such securities may
become illiquid. The use of options, futures contracts, interest rate
protection transactions, dollar rolls and reverse repurchase agreements also
entails special risks.
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Prospectus Page 4
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
Prospectus Summary
(Continued)
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EXPENSES OF INVESTING IN THE FUND. The following tables are intended to assist
investors in understanding the expenses associated with investing in the Fund.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
------- ------- -------
<S> <C> <C> <C>
Shareholder Transaction Expenses(1)
Maximum sales charge on purchases of shares (as a
percentage of public offering price)................. 3.00% None None
Sales charge on reinvested dividends.................. None None None
Exchange fee.......................................... $5.00 $5.00 $5.00
Maximum contingent deferred sales charge (as a
percentage of redemption proceeds)................... None 3.00% None
Annual Fund Operating Expenses(2)
(as a percentage of average net assets)
Management fees....................................... 0.50% 0.50% 0.50%
12b-1 fees(3)......................................... 0.25 1.00 0.75
Other expenses........................................ 0.13 0.16 0.14
----- ----- -----
Total operating expenses.............................. 0.88% 1.66% 1.39%
===== ===== =====
</TABLE>
Example of Effect of Fund Expenses (4)
An investor would directly or indirectly pay the following expenses on a $1,000
investment in the Fund, assuming a 5% annual return:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Class A Shares(5).................... $39 $57 $77 $135
Class B Shares:
Assuming a complete redemption at
end of period(6)(7)............... $47 $72 $90 $157
Assuming no redemption(7).......... $17 $52 $90 $157
Class D Shares....................... $14 $44 $76 $167
</TABLE>
This Example assumes that all dividends and other distributions are reinvested
and that the percentage amounts listed under Annual Fund Operating Expenses
remain the same in the years shown. The above tables and the assumption in the
Example of a 5% annual return are required by regulations of the Securities and
Exchange Commission ("SEC") applicable to all mutual funds; the assumed 5%
annual return is not a prediction of, and does not represent, the projected or
actual performance of any Class of the Fund's shares.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND THE FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
The actual expenses attributable to each Class of the Fund's shares will depend
upon, among other things, the level of average net assets and the extent to
which the Fund incurs variable expenses, such as transfer agency costs.
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(1) Sales charge waivers are available for Class A and Class B shares, reduced
sales charge purchase plans are available for Class A shares and exchange
fee waivers are available for all three Classes. The maximum 3% contingent
deferred sales charge on Class B shares applies to redemptions during the
first year after purchase; the charge declines by 1% following each of the
first, third and fourth years after purchase, thereby reaching zero after
four years. See "Purchases."
(2) See "Management" for additional information. During the year ended November
30, 1994, Mitchell Hutchins waived a portion of its advisory and
administration fees. Expenses net of waivers were 0.84% for Class A, 1.62%
for Class B and 1.36% for Class D for this period.
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Prospectus Page 5
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
Prospectus Summary
(Continued)
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(3) 12b-1 fees have two components, as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
------- ------- -------
<S> <C> <C> <C>
12b-1 services fees................................ 0.25% 0.25% 0.25%
12b-1 distribution fees............................ 0.00 0.75 0.50
</TABLE>
12b-1 distribution fees are asset-based sales charges. Long-term Class B
and Class D shareholders may pay more in direct and indirect sales charges
(including distribution fees) than the economic equivalent of the maximum
front-end sales charge permitted by the National Association of Securities
Dealers, Inc.
(4) During the year ended November 30, 1994, Mitchell Hutchins waived a portion
of its advisory and administration fees. This Example is based on expense
ratios which would have occurred had such waivers not been made.
(5) Assumes deduction at the time of purchase of the maximum 3% initial sales
charge.
(6) Assumes deduction at the time of redemption of the maximum applicable
contingent deferred sales charge.
(7) Ten-year figures assume conversion of Class B shares to Class A shares at
end of sixth year.
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Prospectus Page 6
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
Financial Highlights
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The table below provides selected per share data and ratios for one Class A
share, one Class B share and one Class D share for the periods shown. This
information is supplemented by the financial statements and accompanying notes
appearing in the Fund's Annual Report to Shareholders for the fiscal year ended
November 30, 1994, which are incorporated by reference into the Statement of
Additional Information. The financial statements and notes, as well as the
information in the table appearing below, have been audited by Ernst & Young
LLP, independent auditors, whose report thereon is included in the Annual
Report to Shareholders. Further information about the Fund's performance is
also included in the Annual Report to Shareholders, which may be obtained
without charge.
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------------------- --------------------------------------
FOR THE PERIOD FOR THE PERIOD
MAY 3, 1993 MAY 3, 1993
FOR THE YEAR (COMMENCEMENT OF FOR THE YEAR (COMMENCEMENT OF
ENDED OPERATIONS) ENDED OPERATIONS)
NOVEMBER 30, 1994 TO NOVEMBER 30, 1993 NOVEMBER 30, 1994 TO NOVEMBER 30, 1993
----------------- -------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of
period........... $ 2.48 $ 2.50 $ 2.48 $ 2.50
-------- -------- ------- -------
Net
increase(decrease)
from investment
operations:
Net investment
income........... 0.12 0.07 0.10 0.06
Net realized and
unrealized losses
from investment
transactions..... (0.29) (0.02) (0.29) (0.02)
-------- -------- ------- -------
Net increase
(decrease) in net
asset value from
operations....... (0.17) 0.05 (0.19) 0.04
-------- -------- ------- -------
Less
distributions:
Dividends from net
investment
income........... (0.12) (0.07) (0.10) (0.06)
-------- -------- ------- -------
Contribution to
capital from
adviser.......... 0.06 -- 0.06 --
-------- -------- ------- -------
Net asset value,
end of period.... $ 2.25 $ 2.48 $ 2.25 $ 2.48
======== ======== ======= =======
Total investment
return(1)........ (4.50)%** 1.88% (5.24)%** 1.47%
======== ======== ======= =======
Ratios/Supplemental
data:
Net assets, end
of period
(000's
omitted)....... $158,712 $551,243 $13,382 $31,706
Ratio of
expenses to
average net
assets(2)...... 0.84% 0.81%* 1.62% 1.62%*
Ratio of net
investment
income to
average net
assets(2)...... 5.16% 4.85%* 4.40% 4.31%*
Portfolio
turnover rate.. 246.34% 96.60% 246.34% 96.60%
<CAPTION>
CLASS D
--------------------------------------
FOR THE PERIOD
MAY 3, 1993
FOR THE YEAR (COMMENCEMENT OF
ENDED OPERATIONS)
NOVEMBER 30, 1994 TO NOVEMBER 30, 1993
----------------- --------------------
<S> <C> <C>
Net asset value,
beginning of
period........... $ 2.47 $ 2.50
----------------- --------------------
Net
increase(decrease)
from investment
operations:
Net investment
income........... 0.11 0.06
Net realized and
unrealized losses
from investment
transactions..... (0.28) (0.03)
----------------- --------------------
Net increase
(decrease) in net
asset value from
operations....... (0.17) 0.03
----------------- --------------------
Less
distributions:
Dividends from net
investment
income........... (0.11) (0.06)
----------------- --------------------
Contribution to
capital from
adviser.......... 0.06 --
----------------- --------------------
Net asset value,
end of period.... $ 2.25 $ 2.47
================= ====================
Total investment
return(1)........ (4.99)%** 1.20%
================= ====================
Ratios/Supplemental
data:
Net assets, end
of period
(000's
omitted)....... $296,182 $1,186,181
Ratio of
expenses to
average net
assets(2)...... 1.36% 1.35%*
Ratio of net
investment
income to
average net
assets(2)...... 4.65% 4.52%*
Portfolio
turnover rate.. 246.34% 96.60%
</TABLE>
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* Annualized.
** During the year ended November 30, 1994, PaineWebber and Mitchell Hutchins
took actions affecting the Fund and its shareholders. Mitchell Hutchins made
payments aggregating approximately $33 million for the benefit of
shareholders of the Fund who held Fund shares on or after April 28, 1994,
pursuant to a settlement of certain class action lawsuits filed against the
Fund, PaineWebber, Mitchell Hutchins and related parties. The payments
equated to $0.06 per share for each Fund share outstanding on May 6, 1994 or
issued from that date through June 7, 1994, plus certain additional amounts.
If such payments had not been made, the total investment return would have
been (7.02)% for Class A, (7.74)% for Class B and (7.50)% for Class D.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends at net
asset value on the payable dates, and a sale at net asset value on the last
day of each period reported. The figures do not include sales charges;
results for Class A and Class B would be lower if sales charges were
included. Total investment returns for periods less than one year have not
been annualized.
(2) During the year ended November 30, 1994 Mitchell Hutchins waived a portion
of its advisory and administration fees. If such waivers had not been made
the annualized ratios of expenses to average net assets, and net investment
income to average net assets, respectively, would have been 0.88% and 5.12%
for Class A, 1.66% and 4.35% for Class B, and 1.39% and 4.61% for Class D.
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Prospectus Page 7
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
Flexible Pricing System
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DIFFERENCES AMONG THE CLASSES
The primary distinctions among the Classes of the Fund's shares lie in their
initial and contingent deferred sales charge structures and in their ongoing
expenses, including asset-based sales charges in the form of distribution fees.
These differences are summarized in the table below. Each Class has distinct
advantages and disadvantages for different investors, and investors may choose
the Class that best suits their circumstances and objectives.
<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES
(AS A % OF AVERAGE DAILY
SALES CHARGE NET ASSETS) OTHER INFORMATION
------------------------ ------------------------ ----------------------
<C> <S> <C> <C>
Class A Maximum initial sales Service fee of 0.25% Initial sales charge
charge of 3% of the pub- waived or reduced for
lic offering price certain purchases
Class B Maximum contingent de- Service fee of 0.25%; Shares convert to
ferred sales charge of distribution fee of Class A shares
3% of redemption pro- 0.75% approximately six
ceeds; declines to zero years after issuance
after four years
Class D None Service fee of 0.25%; --
distribution fee of
0.50%
</TABLE>
FACTORS TO CONSIDER IN CHOOSING A CLASS OF SHARES
In deciding which Class of shares to purchase, investors should consider the
cost of sales charges together with the cost of the on-going annual expenses
described below, as well as any other relevant facts and circumstances.
SALES CHARGES. Class A shares are sold at net asset value plus an initial sales
charge of up to 3% of the public offering price. Because of this initial sales
charge, not all of a Class A shareholder's purchase price is invested in the
Fund. Class B shares are sold with no initial sales charge, but a contingent
deferred sales charge of up to 3% of the redemption proceeds applies to
redemptions made within four years of purchase. Class D shareholders pay no
initial or contingent deferred sales charges. Thus, the entire amount of a
Class B or Class D shareholder's purchase price is immediately invested in the
Fund.
WAIVERS AND REDUCTIONS OF CLASS A SALES CHARGES. Class A share purchases over
$100,000 and Class A share purchases made under the Fund's reduced sales charge
plan may be made at a reduced sales charge. In considering the combined cost of
sales charges and ongoing annual expenses, investors should take into account
any reduced sales charges on Class A shares for which they may be eligible.
The entire initial sales charge on Class A shares is waived for certain
eligible purchasers. Because Class A shares bear lower ongoing annual expenses
than Class B shares or Class D shares, investors eligible for complete waivers
should purchase Class A shares.
ONGOING ANNUAL EXPENSES. All three Classes of Fund shares pay an annual 12b-1
service fee of 0.25% of average daily net assets. Class B shares pay an annual
12b-1 distribution fee of 0.75% of average daily net assets. Class D shares pay
an annual 12b-1 distribution fee of 0.50% of average daily net assets. Annual
12b-1 distribution fees are a form of asset-based sales charge. An investor
should consider both ongoing annual expenses and initial or contingent deferred
sales charges in estimating the costs of investing in the respective Classes of
Fund shares over various time periods.
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Prospectus Page 8
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
For example, assuming a constant net asset value, the cumulative distribution
fees on the Fund's Class B or Class D shares and the 3% maximum initial sales
charge on the Fund's Class A shares would all be approximately equal if the
shares were held for approximately four years in the case of the Class B shares
and approximately six years in the case of the Class D shares. The cumulative
distribution fees on the Fund's Class D shares would approximate the cumulative
distribution fees on the Class B shares if the shares were held for nine years.
Class B shares convert to Class A shares (which do not bear the expense of
ongoing distribution fees) approximately six years after purchase. Thus, an
investor who would be subject to the maximum initial sales charge and who
expects to hold Fund shares for less than six years generally should expect to
pay the lowest cumulative expenses by purchasing Class D shares.
The foregoing examples do not reflect, among other variables, the cost or
benefit of bearing sales charges or distribution fees at the time of purchase,
upon redemption or over time, nor can they reflect fluctuations in the net
asset value of Fund shares, which will affect the actual amount of expenses
paid. Expenses borne by Classes will differ slightly because of the allocation
of other Class-specific expenses. The "Example of Effect of Fund Expenses"
under "Prospectus Summary" shows the cumulative expenses an investor would pay
over time on a hypothetical investment in each Class of Fund shares, assuming
an annual return of 5%.
OTHER INFORMATION
PaineWebber investment executives may receive different levels of compensation
for selling one particular Class of Fund shares rather than another. Investors
should understand that distribution fees and initial and contingent deferred
sales charges all are intended to compensate Mitchell Hutchins for distribution
services.
See "Purchases," "Redemptions" and "Management" for a more complete description
of the initial and contingent deferred sales charges, service fees and
distribution fees for the three Classes of shares of the Fund. See also
"Conversion of Class B Shares," "Dividends and Taxes," "Valuation of Shares"
and "General Information" for other differences among the three Classes.
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Investment Objective and Policies
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The Fund's investment objective is to achieve the highest level of income
consistent with the preservation of capital and low volatility of net asset
value. The Fund seeks to maximize income consistent with the preservation of
capital by investing, under normal conditions, at least 65% of its total assets
in U.S. government securities, including mortgage-backed securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities ("U.S.
government mortgage-backed securities"), other obligations issued or guaranteed
by the U.S. government, its agencies or instrumentalities and repurchase
agreements with respect to those securities. Up to 35% of the Fund's total
assets may be invested in mortgage- and asset-backed securities that are issued
by private issuers and that at the time of purchase have been rated AAA by S&P
or Aaa by Moody's, have an equivalent rating from another NRSRO or, if unrated,
have been determined by PIMCO to be of comparable quality. The Fund also may
invest in money market instruments. As a matter of fundamental policy, the Fund
normally concentrates at least 25% of its total assets in mortgage- and asset-
backed securities issued or guaranteed by private issuers or by agencies or
instrumentalities of the U.S. government.
The Fund seeks to limit the volatility of its net asset value per share by
maintaining a dollar-weighted average portfolio maturity not in excess of three
years. For this purpose, the maturity of a mortgage- or asset-backed security
is deemed to be its average life (i.e., the average time in which the principal
amount of the security is repaid), as estimated by PIMCO based upon scheduled
principal amortization and an anticipated rate of principal prepayments, which,
in turn, is based upon past prepayment patterns, prevailing interest rates and
other factors. The average life
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Prospectus Page 9
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
of a mortgage-backed security generally is substantially shorter than its
stated maturity. The Fund may invest in securities with adjustable or floating
interest rates. Unless PIMCO believes such treatment to be inappropriate due to
the effect of interest rate caps or other factors, such securities may be
deemed to have maturities equal to the time remaining until the next date on
which their respective interest rates are reset. The maturities of the other
securities held by the Fund generally are their stated maturities.
Mortgage-backed securities represent direct or indirect participations in, or
are secured by and payable from, mortgage loans secured by real property and
include single- and multi-class pass-through securities and collateralized
mortgage obligations. Multi-class pass-through securities and collateralized
mortgage obligations are collectively referred to herein as CMOs. The U.S.
government mortgage-backed securities in which the Fund may invest include
mortgage-backed securities issued or guaranteed as to the payment of principal
and interest (but not as to market value) by the Government National Mortgage
Association ("Ginnie Mae"), the Federal National Mortgage Association ("Fannie
Mae"), or the Federal Home Loan Mortgage Corporation ("Freddie Mac"). Other
mortgage-backed securities, in which the Fund may invest up to 35% of its total
assets, are issued by private issuers, generally originators of and investors
in mortgage loans, including savings associations, mortgage bankers, commercial
banks, investment bankers and special purpose entities (collectively, "Private
Mortgage Lenders"). Payments of principal and interest (but not the market
value) of such private mortgage-backed securities may be supported by pools of
mortgage loans or other mortgage-backed securities that are guaranteed,
directly or indirectly, by the U.S. government or one of its agencies or
instrumentalities, or they may be issued without any government guarantee of
the underlying mortgage assets but with some form of non-government credit
enhancement. For more information concerning the types of mortgage-backed
securities in which the Fund may invest, see Appendix A to this Prospectus.
Non-mortgage-related U.S. government securities in which the Fund may invest
include U.S. Treasury obligations and other obligations backed by the full
faith and credit of the U.S. government and securities that are supported
primarily or solely by the creditworthiness of the issuer, such as securities
issued by the Resolution Funding Corporation, the Student Loan Marketing
Association, the Federal Home Loan Banks and the Tennessee Valley Authority.
Asset-backed securities have structural characteristics similar to mortgage-
backed securities. However, the underlying assets are not first lien mortgage
loans or interests therein, but include assets such as motor vehicle
installment sales contracts, other installment loan contracts, home equity
loans, leases of various types of real and personal property and receivables
from revolving credit (credit card) agreements. Such assets are securitized
through the use of trusts or special purpose corporations. Payments or
distributions of principal and interest on asset-backed securities may be
guaranteed up to certain amounts and for a certain time period by a letter of
credit or a pool insurance policy issued by a financial institution
unaffiliated with the issuer or other credit enhancements may be present.
The Fund may invest in certain zero coupon securities that are U.S. Treasury
notes and bonds that have been stripped of their unmatured interest coupon re-
ceipts or interests in such U.S. Treasury securities or coupons. The SEC staff
currently takes the position that "stripped" U.S. government securities that
are not issued through the U.S. Treasury are not U.S. government securities. As
long as the SEC takes this position, Certificates of Accrual Treasury Securi-
ties ("CATS") and Treasury Income Growth Receipts ("TIGRs") that are not issued
through the U.S. Treasury will not be counted as U.S. government securities for
purposes of the 65% investment requirement.
There can be no assurance that the Fund will achieve its investment objective.
The Fund's net asset value will fluctuate based on changes in the value of its
portfolio securities. Neither the issuance by, nor the guarantee of, a U.S.
government agency nor even the highest rating by a NRSRO constitutes assurance
that the security will not fluctuate in value or that the Fund will receive the
originally anticipated yield on the security. An investment in the Fund also is
subject to the risks discussed below. See "Investment Policies and
Restrictions--Yield Factors and Ratings" in the Statement of Additional
Information.
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Prospectus Page 10
<PAGE>
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
RISK FACTORS AND OTHERINVESTMENT POLICIES
INTEREST RATE SENSITIVITY. The investment income of the Fund is based on the
income earned on the securities it holds, less expenses incurred; thus, the
Fund's investment income may be expected to fluctuate in response to changes in
such expenses or income. For example, the investment income of the Fund may be
affected if it experiences a net inflow of new money that is then invested in
securities whose yield is higher or lower than that earned on then-current
investments. Generally, the value of the securities held by the Fund, and thus
the net asset value per share of the Fund, will rise when interest rates
decline. Conversely, when interest rates rise, the value of fixed income
securities, and thus the net asset value per share of the Fund, may be expected
to decline.
RISKS OF MORTGAGE- AND ASSET-BACKED SECURITIES. The yield characteristics of
the mortgage- and asset-backed securities in which the Fund may invest differ
from those of traditional debt securities. Among the major differences are that
interest and principal payments are made more frequently on mortgage- and
asset-backed securities, usually monthly, and that principal may be prepaid at
any time because the underlying mortgage loans or other assets generally may be
prepaid at any time. As a result, if the Fund purchases these securities at a
premium, a prepayment rate that is faster than expected will reduce yield to
maturity, while a prepayment rate that is slower than expected will have the
opposite effect of increasing yield to maturity. Conversely, if the Fund
purchases these securities at a discount, faster than expected prepayments will
increase, while slower than expected prepayments will reduce, yield to
maturity. Amounts available for reinvestment by the Fund are likely to be
greater during a period of declining interest rates and, as a result, are
likely to be reinvested at lower interest rates than during a period of rising
interest rates. Accelerated prepayments on securities purchased by the Fund at
a premium also impose a risk of loss of principal because the premium may not
have been fully amortized at the time the principal is prepaid in full. The
market for privately issued mortgage- and asset-backed securities is smaller
and less liquid than the market for U.S. government mortgage-backed securities.
CMO classes may be specially structured in a manner that provides any of a wide
variety of investment characteristics, such as yield, average maturity and
interest rate sensitivity. As market conditions change, however, and
particularly during periods of rapid or unanticipated changes in market
interest rates, the attractiveness of the CMO classes and the ability of the
structure to provide the anticipated investment characteristics may be
significantly reduced. These changes can result in volatility in the market
value, and in some instances reduced liquidity, of the CMO class.
The rate of interest payable on CMO classes may be set at levels that are
either above or below market rates at the time of issuance, so that the
securities will be sold at a substantial premium to, or at a discount from, par
value. In the most extreme case, one class will be entitled to receive all or a
portion of the interest but none of the principal from the underlying mortgage
assets (the interest-only or "IO" class) and one class will be entitled to
receive all or a portion of the principal but none of the interest (the
principal-only or "PO" class). IOs and POs may also be created from mortgage-
backed securities that are not CMOs. The yields on IOs, POs and other mortgage-
backed securities that are purchased at a substantial premium or discount
generally are extremely sensitive to the rate of principal payments (including
prepayments) on the underlying mortgage assets. If the mortgage assets
underlying an IO experience greater than anticipated principal prepayments, an
investor may fail to recoup fully his or her initial investment even if the
security is government issued or guaranteed or is rated AAA or the equivalent.
Some CMO classes are structured to pay interest at rates that are adjusted in
accordance with a formula, such as a multiple or fraction of the change in a
specified interest rate index, so as to pay at a rate that will be attractive
in certain interest rate environments but not in others. For example, an
inverse floating rate CMO class pays interest at a rate that increases as a
specified interest rate index decreases but decreases as that index increases.
For other CMO classes, the yield may move in the same direction as market
interest rates--i.e. the yield may increase as rates increase and decrease as
rates decrease--but may do so more rapidly or to a greater degree. The market
value of such securities generally is more volatile than that of a fixed rate
obligation. Such interest
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Prospectus Page 11
<PAGE>
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
rate formulas may be combined with other CMO characteristics. For example, a
CMO class may be an "inverse IO," on which the holders are entitled to receive
no payments of principal and are entitled to receive interest at a rate that
will vary inversely with a specified index or a multiple thereof.
During 1994, the value and the liquidity of many mortgage-backed securities,
including securities held by the Fund, declined sharply due primarily to
increases in short-term interest rates. There can be no assurance that such
declines will not recur. The market value of certain mortgage-backed securities
in which the Fund may invest, including IO and PO classes of mortgage-backed
securities and inverse floating rate securities, can be extremely volatile, and
such securities may become illiquid. PIMCO will seek to manage the Fund so that
the volatility of the Fund's portfolio, taken as a whole, is consistent with
the Fund's investment objective. If PIMCO incorrectly forecasts interest rate
changes or other factors that may affect the volatility of securities held by
the Fund, the Fund's ability to meet its investment objective may be reduced.
In addition, the Fund will not invest more than 5% of its net assets in any
combination of IOs, POs and inverse floating rate securities.
The Fund's policy of investing at least 25% of its total assets in mortgage-
and asset-backed securities has the effect of increasing the Fund's exposure to
these and other risks related to such securities and might cause the Fund's net
asset value per share to fluctuate more than otherwise would be the case.
DOLLAR ROLLS AND REVERSE REPURCHASE AGREEMENTS. The Fund may enter into dollar
rolls, in which the Fund sells mortgage-backed or other securities for delivery
in the current month and simultaneously contracts to purchase substantially
similar securities on a specified future date. In the case of dollar rolls
involving mortgage-backed securities, the mortgage-backed securities that are
purchased will be of the same type and will have the same interest rate as
those sold, but will be supported by different pools of mortgages. The Fund
forgoes principal and interest paid during the roll period on the securities
sold in a dollar roll, but the Fund is compensated by the difference between
the current sales price and the lower price for the future purchase as well as
by any interest earned on the proceeds of the securities sold. The Fund also
could be compensated through the receipt of fee income equivalent to a lower
forward price.
The Fund may also enter into reverse repurchase agreements in which the Fund
sells securities to a bank or dealer and agrees to repurchase them at a
mutually agreed date and price. The market value of securities sold under
reverse repurchase agreements typically is greater than the proceeds of the
sale, and accordingly, the market value of the securities sold is likely to be
greater than the value of the securities in which the Fund invests those
proceeds. Thus, 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. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, such buyer or
its trustee or receiver may receive an extension of time to determine whether
to enforce the 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.
The dollar rolls and reverse repurchase agreements entered into by the Fund
normally will be arbitrage transactions in which the Fund will maintain an
offsetting position in securities or repurchase agreements that mature on or
before the settlement date of the related dollar roll or reverse repurchase
agreement. Since the Fund will receive interest on the securities or repurchase
agreements in which it invests the transaction proceeds, such transactions may
involve leverage. However, since such securities or repurchase agreements must
satisfy the quality requirements of the Fund, and will mature on or before the
settlement date of the related dollar roll or reverse repurchase agreement,
PIMCO believes that such arbitrage transactions do not present the risks to the
Fund that are associated with other types of leverage.
Dollar rolls and reverse repurchase agreements will be considered to be
borrowings and, accordingly, will be subject to the Fund's limitations on
borrowings, which will restrict the aggregate of such transactions (plus any
other borrowings) to 33 1/3% of the Fund's total assets. The Fund will not
enter into dollar rolls or reverse repurchase agreements, other than in
arbitrage transactions as described above, in an aggregate amount in excess of
5% of the Fund's total assets. The Fund has no present intention to enter into
dollar rolls other than in such arbitrage
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Prospectus Page 12
<PAGE>
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
transactions, and it has no present intention to enter into reverse repurchase
agreements other than in such arbitrage transactions or for temporary or
emergency purposes.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase debt
securities, including mortgage- and asset-backed securities, on a "when-issued"
basis or may purchase or sell securities for "delayed delivery." In when-issued
or delayed delivery transactions, delivery of the securities occurs beyond
normal settlement periods, but the Fund generally would not pay for such
securities or start earning interest on them until they are delivered. However,
when the Fund purchases securities on a when-issued or delayed delivery basis,
it immediately assumes the risks of ownership, including the risk of price
fluctuation. Failure by a counter party to deliver a security purchased on a
when-issued or delayed delivery basis may result in a loss or missed
opportunity to make an alternative investment. Depending on market conditions,
the Fund's when-issued and delayed delivery purchase commitments could cause
its net asset value per share to be more volatile, because such securities may
increase the amount by which its total assets, including the value of when-
issued and delayed delivery securities it holds, exceed its net assets.
HEDGING AND RELATED INCOME STRATEGIES. The Fund may use options (both exchange-
traded and over-the-counter ("OTC")) and futures contracts to attempt to
enhance income and to reduce the overall risk of its investments (hedge).
Hedging strategies may be used in an attempt to manage the Fund's average
duration and other risks of its investments, which can affect fluctuations in
the Fund's net asset value. The Fund's ability to use these strategies may be
limited by market conditions, regulatory limits and tax considerations.
Appendix B to the Prospectus describes the instruments that the Fund may use,
and the Statement of Additional Information contains further information on
these strategies.
The Fund may write (sell) covered call and put options, buy call and put
options, buy and sell interest rate futures contracts and debt security index
futures contracts and buy call or put options or write covered put and call
options on such futures contracts. The Fund may enter into options and futures
contracts that approximate (but do not exceed) the full value of its portfolio.
The Fund may also enter into interest rate protection transactions, including
interest rate swaps, caps, collars and floors, to preserve a return or spread
on a particular investment or portion of the portfolio or to protect against
any increase in the price of securities the Fund anticipates purchasing at a
later date. The Fund will enter into interest rate protection transactions only
with banks and recognized securities dealers believed to present minimal credit
risks in accordance with guidelines established by the Trust's board of
trustees. The Fund would use these transactions as a hedge and not as a
speculative investment.
The Fund might not employ any of the strategies described above, and no
assurance can be given that any strategy used will succeed. If PIMCO
incorrectly forecasts interest rates, market values or other economic factors
in utilizing a strategy for the Fund, the Fund would be in a better position if
it had not entered into the transaction at all. The use of these strategies
involves certain special risks, including (1) the fact that skills needed to
use hedging instruments are different from those needed to select the Fund's
securities, (2) possible imperfect correlation, or even no correlation, between
price movements of hedging instruments and price movements of the investments
being hedged, (3) the fact that, while hedging strategies can reduce the risk
of loss, they can also reduce the opportunity for gain, or even result in
losses, by offsetting favorable price movements in hedged investments and (4)
the possible inability of the Fund to purchase or sell a portfolio security at
a time that otherwise would be favorable for it to do so, or the possible need
for the Fund to sell a portfolio security at a disadvantageous time, due to the
need for the Fund to maintain "cover" or to segregate securities in connection
with hedging transactions and the possible inability of the Fund to close out
or to liquidate its hedged position.
New financial products and risk management techniques continue to be developed.
The Fund may use these instruments and techniques to the extent consistent with
its investment objective and regulatory and tax considerations.
REPURCHASE AGREEMENTS. The Fund may use repurchase agreements. Repurchase
agreements are transactions in which the Fund purchases securities from a bank
or recognized securities dealer and simultaneously commits to resell the
securities to the bank or dealer at an agreed-upon date and price reflecting a
market rate of interest
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Prospectus Page 13
<PAGE>
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
unrelated to the coupon rate or maturity of the purchased securities.
Repurchase agreements carry certain risks not associated with direct
investments in securities, including possible decline in the market value of
the underlying securities and delays and costs to the Fund if the other party
to the repurchase agreement becomes insolvent. The Fund intends to enter into
repurchase agreements only with banks and dealers in transactions believed by
PIMCO to present minimum credit risks in accordance with guidelines established
by the Trust's board of trustees.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
illiquid securities. The term "illiquid securities" for this purpose means
securities that cannot be disposed of within seven days in the ordinary course
of business at approximately the amount at which the Fund has valued the
securities. Under current guidelines of the staff of the SEC, IOs and POs are
considered illiquid. However, IO and PO classes of fixed-rate mortgage-backed
securities issued by the U.S. government or one of its agencies or
instrumentalities will not be considered illiquid if PIMCO has determined that
they are liquid pursuant to guidelines established by the Trust's board of
trustees. Illiquid securities also are considered to include, among other
things, written OTC options, certain cover for OTC options, repurchase
agreements with maturities in excess of seven days, securities whose
disposition is restricted under the federal securities laws (other than "Rule
144A" securities and certain commercial paper that PIMCO has determined to be
liquid under procedures approved by the Trust's board of trustees).
Rule 144A establishes a "safe harbor" from the registration requirements of the
Securities Act of 1933 ("1933 Act"). Institutional markets for restricted
securities have developed as a result of Rule 144A, providing both readily
ascertainable values for restricted securities and the ability to liquidate an
investment to satisfy share redemption orders. 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 these portfolio securities and the Fund might be unable to
dispose of the securities promptly or at favorable prices.
The Fund may not be able to sell illiquid securities when PIMCO considers it
desirable to do so or may have to sell such securities at a price lower than
could be obtained if they were more liquid. Also the sale of illiquid
securities may require more time and may result in higher dealer discounts and
other selling expenses than does the sale of securities that are not illiquid.
Illiquid securities may be more difficult to value due to the unavailability of
reliable market quotations for such securities, and investment in illiquid
securities may have an adverse impact on net asset value.
PORTFOLIO TURNOVER. The Fund's portfolio turnover rate may vary greatly from
year to year and will not be a limiting factor when Mitchell Hutchins or PIMCO
deem portfolio changes appropriate. A higher turnover rate (100% or more) will
involve correspondingly greater transaction costs, which will be borne directly
by the Fund, and may increase the potential for short-term capital gains.
OTHER INVESTMENT POLICIES. In addition to its investments in U.S. government
securities and related repurchase agreements, the Fund may hold up to 35% of
its total assets in cash or money market instruments for liquidity purposes or
pending investment in longer-term portfolio securities. In addition, when PIMCO
believes unusual circumstances warrant a defensive posture, the Fund
temporarily may commit all or any portion of its assets to cash or money market
instruments. Such instruments may include securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities, commercial paper rated
at least A-1 by S&P or P-1 by Moody's, bank certificates of deposit, bankers'
acceptances and repurchase agreements secured by any of the foregoing. The Fund
may also engage in short sales of securities "against the box" to defer
realization of gains or losses for tax or other purposes.
The Fund's investment objective, its policy of normally concentrating at least
25% of its total assets in mortgage- and asset-backed securities and certain
investment limitations as described in the Statement of Additional Information
are fundamental policies that may not be changed without shareholder approval.
All other investment policies may be changed by the Trust's trustees without
shareholder approval.
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Prospectus Page 14
<PAGE>
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
Purchases
- --------------------------------------------------------------------------------
GENERAL. Class A shares of the Fund are sold to investors subject to an initial
sales charge. Class B shares of the Fund are sold without an initial sales
charge but are subject to higher ongoing expenses than Class A shares and a
contingent deferred sales charge payable upon certain redemptions. Class B
shares automatically convert to Class A shares approximately six years after
issuance. Class D shares are sold without an initial or a contingent deferred
sales charge but are subject to higher ongoing expenses than Class A shares and
do not convert into another Class. See "Flexible Pricing System" and
"Conversion of Class B Shares."
Shares of the Fund are available through PaineWebber and its correspondent
firms or, for shareholders who are not PaineWebber clients, through the
Transfer Agent. Investors may contact a local PaineWebber office to open a
PaineWebber account. The minimum initial investment, as well as the minimum for
additional purchases, is $100. The Fund reserves the right to change these
minimums. These minimums may be waived or reduced for investments by employees
of PaineWebber or its affiliates, by certain pension plans and retirement
accounts, by participants in the Fund's automatic investment plan. Purchase
orders will be priced at the net asset value per share next determined (see
"Valuation of Shares") after the order is received by PaineWebber's New York
City offices or by the Transfer Agent, plus any applicable sales charge for the
Class A shares. The Fund and Mitchell Hutchins reserve the right to reject any
purchase order and to suspend the offering of the Fund's shares for a period of
time.
When placing purchase orders, investors should specify whether the order is for
Class A, Class B or Class D shares. All share purchase orders that fail to
specify a Class will automatically be invested in Class A shares.
PURCHASES THROUGH PAINEWEBBER OR CORRESPONDENT FIRMS. Purchases through
PaineWebber investment executives or correspondent firms may be made in person
or by mail, telephone or wire; the minimum wire purchase is $1 million.
Investment executives and correspondent firms are responsible for transmitting
purchase orders to PaineWebber's New York City offices promptly. Investors may
pay for a purchase with checks drawn on U.S. banks or with funds held in
brokerage accounts at PaineWebber or its correspondent firms. Payment is due on
the fifth Business Day after the order is received at PaineWebber's New York
City offices. A "Business Day" is any day, Monday through Friday, on which the
New York Stock Exchange, Inc. ("NYSE") is open for business.
PURCHASES THROUGH THE TRANSFER AGENT. Investors who are not PaineWebber clients
may purchase shares of the Fund through the Transfer Agent. Shares of the Fund
may be purchased, and an account with the Fund established, by completing and
signing the purchase application at the end of this Prospectus and mailing it,
together with a check to cover the purchase, to the Transfer Agent: PFPC Inc.,
Attn: PaineWebber Mutual Funds, P.O. Box 8950, Wilmington, Delaware 19899.
Subsequent investments need not be accompanied by an application.
INITIAL SALES CHARGE--CLASS A SHARES. The public offering price of Class A
shares is the next determined net asset value, plus any applicable sales
charge, which will vary with the size of the purchase as shown in the following
table:
INITIAL SALES CHARGE SCHEDULE--CLASS A SHARES
<TABLE>
<CAPTION>
SALES CHARGE AS A
PERCENTAGE OF DISCOUNT TO
---------------------------------------- SELECTED
NET AMOUNT DEALERS AS A
INVESTED PERCENTAGE
OFFERING (NET ASSET OF OFFERING
AMOUNT OF PURCHASE PRICE VALUE) PRICE
------------------ -------- ---------- ------------
<S> <C> <C> <C>
Less than$100,000 3.00% 3.09% 2.75%
$100,000 to$249,999 2.50 2.56 2.25
$250,000 to$499,999 2.00 2.04 1.75
$500,000 to$999,999 1.50 1.52 1.25
$1,000,000 and over(1) None None 1.00
</TABLE>
- -------
(1) Mitchell Hutchins pays compensation to PaineWebber out of its own
resources.
Mitchell Hutchins may at times agree to reallow a higher discount to
PaineWebber, as exclusive dealer for the Fund's shares, than those shown above.
To the extent PaineWebber or any dealer receives 90% or more of the sales
charge, it may be deemed an "underwriter" under the 1933 Act.
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Prospectus Page 15
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
SALES CHARGE WAIVERS--CLASS A SHARES. Class A shares of the Fund are available
without a sales charge through exchanges for Class A shares of most other
PaineWebber and MH/KP mutual funds. See "Exchanges." In addition, Class A
shares may be purchased without a sales charge, and exchanges of any Class of
shares may be made without the $5.00 exchange fee, by employees, directors and
officers of PaineWebber or its affiliates, directors or trustees and officers
of any PaineWebber or MH/KP fund, their spouses, parents and children and
advisory clients of Mitchell Hutchins.
Class A shares also may be purchased without a sales charge if the purchase is
made through a PaineWebber investment executive who formerly was employed as a
broker with another firm registered as a broker-dealer with the SEC, provided
(1) the purchaser was the investment executive's client at the competing
brokerage firm, (2) within 90 days of the purchase of Class A shares the
purchaser redeemed shares of one or more mutual funds for which that competing
firm or its affiliates was principal underwriter, provided the purchaser either
paid a sales charge to invest in those funds, paid a contingent deferred sales
charge upon redemption or held shares of those funds for the period required
not to pay the otherwise applicable contingent deferred sales charge and (3)
the total amount of shares of all PaineWebber and MH/KP funds purchased under
this sales charge waiver does not exceed the amount of the purchaser's
redemption proceeds from the competing firm's funds. To take advantage of this
waiver, an investor must provide satisfactory evidence that all the above-noted
conditions are met. Qualifying investors should contact their PaineWebber
investment executives for more information.
Certificate holders of unit investment trusts ("UITs") sponsored by PaineWebber
may acquire Class A shares of the Fund without regard to the minimum investment
requirements and without sales charges by electing to have dividends and
distributions from their UIT investment automatically invested in Class A
shares.
REDUCED SALES CHARGE PLANS--CLASS A SHARES. If an investor or eligible group of
related Fund investors purchases Class A shares of the Fund concurrently with
Class A shares of other PaineWebber or MH/KP mutual funds, the purchases may be
combined to take advantage of the reduced sales charge applicable to larger
purchases. In addition, the right of accumulation permits a Fund investor or
eligible group of related Fund investors to pay the lower sales charge
applicable to larger purchases by basing the sales charge on the dollar amount
of Class A shares currently being purchased, plus the net asset value of the
investor's or group's total existing Class A shareholdings in other PaineWebber
or MH/KP mutual funds.
An "eligible group of related Fund investors" includes an individual, the
individual's spouse, parents and children, the individual's individual
retirement account ("IRA"), certain companies controlled by the individual and
employee benefit plans of those companies, and trusts or Uniform Gifts to
Minors Act/Uniform Transfers to Minors Act accounts created by the individual
or eligible group of individuals for the benefit of the individual and/or the
individual's spouse, parents or children. The term also includes a group of
related employers and one or more qualified retirement plans of such employers.
For more information, an investor should consult the Statement of Additional
Information or contact a PaineWebber investment executive or correspondent firm
or the Transfer Agent.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES. The public offering price of
the Class B shares of the Fund is the next determined net asset value, and no
initial sales charge is imposed. A contingent deferred sales charge, however,
is imposed upon certain redemptions of Class B shares.
Class B shares that are redeemed will not be subject to a contingent deferred
sales charge to the extent that the value of such shares represents (1) capital
appreciation of Fund assets, (2) reinvestment of dividends or capital gain
distributions or (3) shares redeemed more than four years after their purchase.
Otherwise, redemptions of Class B shares of the Fund will be subject to a
contingent deferred sales charge. The amount of any applicable contingent
deferred sales charge will be calculated by multiplying the net asset value of
such shares at the time of redemption by the applicable percentage shown in the
table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF NET
REDEMPTION ASSET VALUE AT
DURING REDEMPTION
---------- -------------------
<S> <C>
1st Year Since Purchase.................................... 3%
2nd Year Since Purchase.................................... 2
3rd Year Since Purchase.................................... 2
4th Year Since Purchase.................................... 1
5th Year Since Purchase.................................... None
</TABLE>
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Prospectus Page 16
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
In determining the applicability and rate of any contingent deferred sales
charge, it will be assumed that a redemption is made first of Class B shares
representing capital appreciation, next of shares representing the reinvestment
of dividends and capital gain distributions and finally of other shares held by
the shareholder for the longest period of time. The holding period of Class B
shares acquired through an exchange with another PaineWebber mutual fund will
be calculated from the date that the Class B shares were initially acquired in
one of the other PaineWebber funds, and Class B shares being redeemed will be
considered to represent, as applicable, capital appreciation or dividend and
capital gain distribution reinvestments in such other funds. This will result
in any contingent deferred sales charge being imposed at the lowest possible
rate. Investors should be aware, however, that Class B shares of the Fund and
Class B shares of most other PaineWebber mutual funds have different contingent
deferred sales charge schedules. The higher schedule will apply to the
redemption if the shareholder has ever held Class B shares of another
PaineWebber mutual fund having a different contingent deferred sales charge
schedule, either acquired through an exchange for Class B shares of the Fund or
disposed of to acquire Class B shares of the Fund (see "Exchanges"). For
federal income tax purposes, the amount of the contingent deferred sales charge
will reduce the gain or increase the loss, as the case may be, on the amount
realized on redemption. The amount of any contingent deferred sales charge will
be paid to Mitchell Hutchins.
SALES CHARGE WAIVERS--CLASS B SHARES. The contingent deferred sales charge will
be waived for exchanges, as described below, and for redemptions in connection
with the Fund's systematic withdrawal plan. In addition, the contingent
deferred sales charge will be waived for a total or partial redemption made
within one year of the death of the shareholder. The contingent deferred sales
charge waiver is available where the decedent is either the sole shareholder or
owns the shares with his or her spouse as a joint tenant with right of
survivorship. This waiver applies only to redemption of shares held at the time
of death. The contingent deferred sales charge will also be waived in
connection with a lump-sum or other distribution in the case of an IRA, a self-
employed individual retirement plan (so-called "Keogh Plan") or a custodial
account under Section 403(b) of the Internal Revenue Code following attainment
of age 59 1/2; a total or partial redemption resulting from any distribution
following retirement in the case of a tax-qualified retirement plan; and a
redemption resulting from a tax-free return of an excess contribution to an
IRA.
Contingent deferred sales charge waivers will be granted subject to
confirmation (by PaineWebber in the case of shareholders who are PaineWebber
clients or by the Transfer Agent in the case of all other shareholders) of the
shareholder's status or holdings, as the case may be.
PURCHASE OF CLASS D SHARES. The public offering price of the Class D shares of
the Fund is the next determined net asset value. No initial or contingent
deferred sales charge is imposed.
- --------------------------------------------------------------------------------
Exchanges
- --------------------------------------------------------------------------------
Shares of the Fund may be exchanged for shares of the corresponding Class of
other PaineWebber and MH/KP mutual funds, or may be acquired through an
exchange of shares of the corresponding Class of those funds. No initial sales
charge is imposed on the shares being acquired, and no contingent deferred
sales charge is imposed on the shares being disposed of, through an exchange.
However, contingent deferred sales charges may apply to redemptions of Class B
shares of PaineWebber mutual funds acquired through an exchange. Class B shares
of MH/KP mutual funds differ from those of PaineWebber mutual funds. Class B
shares of MH/KP mutual funds are equivalent to Class D shares of PaineWebber
mutual funds. Thus, contingent deferred sales charges are not applicable to
redemptions of the Class B shares of MH/KP mutual funds. A $5.00 exchange fee
is charged for each exchange, and exchanges may be subject to minimum
investment requirements of the fund into which exchanges are made.
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Prospectus Page 17
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
Exchanges are permitted with other PaineWebber and MH/KP mutual funds,
including:
INCOME FUNDS
. MH/KP Adjustable Rate Government Fund
. MH/KP Global Fixed Income Fund
. MH/KP Government Income Fund
. MH/KP Intermediate Fixed Income Fund
. PW Global Income Fund
. PW High Income Fund
. PW Investment Grade Income Fund
. PW Short-Term U.S. Government Income Fund for Credit Unions
. PW Strategic Income Fund
. PW U.S. Government Income Fund
TAX-FREE INCOME FUNDS
. MH/KP Municipal Bond Fund
. PW California Tax-Free Income Fund
. PW Municipal High Income Fund
. PW National Tax-Free Income Fund
. PW New York Tax-Free Income Fund
GROWTH FUNDS
. MH/KP Emerging Markets Equity Fund
. MH/KP Global Equity Fund
. MH/KP Small Cap Growth Fund
. PW Atlas Global Growth Fund
. PW Blue Chip Growth Fund
. PW Capital Appreciation Fund
. PW Communications & Technology Growth Fund
. PW Europe Growth Fund
. PW Growth Fund
. PW Regional Financial Growth Fund
. PW Small Cap Value Fund
GROWTH AND INCOME FUNDS
. MH/KP Asset Allocation Fund
. MH/KP Equity Income Fund
. PW Asset Allocation Fund
. PW Global Energy Fund
. PW Global Growth and Income Fund
. PW Growth and Income Fund
. PW Utility Income Fund
PW MONEY MARKET FUND
The holding period of Class B shares of the Fund is included in the holding
period used to compute the contingent deferred sales charge applicable on a
redemption of Class B shares of the other PaineWebber mutual funds. The same
contingent deferred sales charge schedule applicable to the Fund's Class B
shares will apply to Class B shares of PaineWebber Money Market Fund that are
acquired directly through an exchange for the Fund's Class B shares. However,
Class B shares of the other PaineWebber mutual funds have higher contingent
deferred sales charges than Class B shares of the Fund and such charges are
imposed over a longer period. Class B shareholders exercising the exchange
privilege to acquire Class B shares of one of these other funds will be subject
to the higher contingent deferred sales charge schedule of the Class B shares
being acquired, and Class B shareholders of one of these other funds exercising
the exchange privilege to acquire Class B shares of the Fund will continue to
be subject to the higher contingent deferred sales charge. The Short-Term U.S.
Government Income Fund for Credit Unions does not offer Class B Shares.
PaineWebber clients must place exchange orders through their PaineWebber
investment executives or correspondent firms. Shareholders who are not
PaineWebber clients must place exchange orders in writing with the Transfer
Agent: PFPC Inc., Attn: PaineWebber Mutual Funds, P.O. Box 8950, Wilmington,
Delaware 19899. All exchanges will be effected based on the relative net asset
values per share next determined after the exchange order is received at
PaineWebber's New York City offices or by the Transfer Agent. See "Valuation of
Shares." Shares of the Fund purchased through PaineWebber or its correspondent
firms may be exchanged only after the settlement date has passed and payment
for such shares has been made.
OTHER EXCHANGE INFORMATION. This exchange privilege may be modified or
terminated at any time upon at least 60 days' notice when such notice is
required by SEC rules. This exchange privilege is available only in those
jurisdictions where the sale of the PaineWebber and MH/KP fund shares to be
acquired may be legally made. Before making any exchange, shareholders should
contact their PaineWebber investment executives or correspondent firms or the
Transfer Agent to obtain more information and prospectuses of the PaineWebber
and MH/KP funds to be acquired through the exchange.
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Prospectus Page 18
<PAGE>
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
Redemptions
- --------------------------------------------------------------------------------
As described below, Fund shares may be redeemed at their net asset value
(subject to any applicable contingent deferred sales charge) and redemption
proceeds will be paid within seven days of the receipt of a redemption request.
PaineWebber clients may redeem shares through PaineWebber or its correspondent
firms; all other shareholders must redeem through the Transfer Agent. If a
redeeming shareholder owns shares of more than one Class, the shares will be
redeemed in the following order unless the shareholder specifically requests
otherwise: Class D shares, then Class A shares, and finally Class B shares.
REDEMPTION THROUGH PAINEWEBBER OR CORRESPONDENT FIRMS. PaineWebber clients may
submit redemption requests to their investment executives or correspondent
firms in person or by telephone, mail or wire. As the Fund's agent, PaineWebber
may honor a redemption request by repurchasing Fund shares from a redeeming
shareholder at the shares' net asset value next determined after receipt of the
request by PaineWebber's New York City offices. Within seven days, repurchase
proceeds (less any applicable contingent deferred sales charge) will be paid by
check or credited to the shareholder's brokerage account at the election of the
shareholder. PaineWebber investment executives and correspondent firms are
responsible for promptly forwarding redemption requests to PaineWebber's New
York City offices.
PaineWebber reserves the right not to honor a redemption request, in which case
PaineWebber promptly will forward the request to the Transfer Agent for
treatment as described below.
REDEMPTION THROUGH THE TRANSFER AGENT. Fund shareholders who are not
PaineWebber clients must redeem their shares through the Transfer Agent by
mail; other shareholders also may redeem Fund shares through the Transfer
Agent. Shareholders should mail redemption requests directly to the Transfer
Agent: PFPC Inc., Attn: PaineWebber Mutual Funds, P.O. Box 8950, Wilmington,
Delaware 19899. A redemption request will be executed at the net asset value
next computed after it is received in "good order." "Good order" means that the
request must be accompanied by the following: (1) a letter of instruction or a
stock assignment specifying the number of shares or amount of investment to be
redeemed (or that all shares credited to a Fund account be redeemed), signed by
all registered owners of the shares in the exact names in which they are
registered, (2) a guarantee of the signature of each registered owner by an
eligible guarantor institution acceptable to the Transfer Agent and in
accordance with SEC rules, such as a commercial bank, trust company or member
of a recognized stock exchange, and (3) other supporting legal documents for
estates, trusts, guardianships, custodianships, partnerships and corporations.
Shareholders are responsible for ensuring that a request for redemption is
received in "good order."
ADDITIONAL INFORMATION ON REDEMPTIONS. Redemption proceeds of $1 million or
more may be wired to the shareholder's PaineWebber brokerage account or a
commercial bank account designated by the shareholder. Questions about this
option, or redemption requirements generally, should be referred to the
shareholder's PaineWebber investment executive or correspondent firm, or to the
Transfer Agent if the shares are not held in a PaineWebber brokerage account.
If a shareholder requests redemption of shares which were purchased recently,
the Fund may delay payment until it is assured that good payment has been
received. In the case of purchases by check, this can take up to 15 days.
Because the Fund incurs certain fixed costs in maintaining shareholder
accounts, the Fund reserves the right to redeem all Fund shares in any
shareholder account having a net asset value below the lesser of $500 or the
current minimum for initial purchases. If the Fund elects to do so, it will
notify the shareholder and provide the shareholder the opportunity to increase
the amount invested to the minimum required level or more within 60 days of the
notice. The Fund will not redeem accounts that fall below the minimum required
level solely as a result of a reduction in net asset value per share.
Shareholders who have redeemed Class A shares may reinstate their Fund account
without a sales charge up to the dollar amount redeemed by purchasing Class A
shares of the Fund within 365 days after the redemption. To take advantage of
this reinstatement privilege, shareholders must notify their PaineWebber
investment executive or correspondent firm at the time the privilege is
exercised.
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Prospectus Page 19
<PAGE>
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
Conversion of Class B Shares
- --------------------------------------------------------------------------------
A shareholder's Class B shares will automatically convert to Class A shares of
the Fund approximately six years after the date of issuance, together with a
pro rata portion of all Class B shares representing dividends and other
distributions paid in additional Class B shares. The Class B shares so
converted will no longer be subject to the higher expenses borne by Class B
shares. The conversion will be effected at the relative net asset values per
share of the two Classes on the first Business Day of the month in which the
sixth anniversary of the issuance of the Class B shares occurs. See "Valuation
of Shares." If a shareholder effects one or more exchanges among Class B shares
of the PaineWebber mutual funds during the six-year period, the holding periods
for the shares so exchanged will be counted toward the six-year period.
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Other Services and Information
- --------------------------------------------------------------------------------
Investors interested in the services described below should consult their
PaineWebber investment executives or correspondent firms or call the Transfer
Agent toll free at 1-800-647-1568.
AUTOMATIC INVESTMENT PLAN. Shareholders may purchase shares of the Fund through
an automatic investment plan, under which an amount specified by the
shareholder of $50 or more each month will be sent to the Transfer Agent from
the shareholder's bank for investment in the Fund. In addition to providing a
convenient and disciplined manner of investing, participation in the automatic
investment plan enables the investor to use the technique of "dollar cost
averaging." When under the plan a shareholder invests the same dollar amount
each month, the shareholder will purchase more shares when the Fund's net asset
value per share is low and fewer shares when the net asset value per share is
high. Using this technique, a shareholder's average purchase price per share
over any given period will be lower than if the shareholder purchased a fixed
number of shares on a monthly basis during the period.
SYSTEMATIC WITHDRAWAL PLAN. Shareholders who own Class A or Class D Fund shares
with a value of $5,000 or more or Class B Fund shares with a value of $20,000
or more may have PaineWebber redeem a portion of their Fund shares monthly,
quarterly or semi-annually under the Fund's systematic withdrawal plan. No
contingent deferred sales charge will be imposed on such withdrawals for Class
B shares. The minimum amount for all withdrawals of Class A or Class D shares
is $100, and minimum monthly, quarterly and semi-annual withdrawal amounts for
Class B shares are $200, $400 and $600, respectively. Quarterly withdrawals are
made in March, June, September and December, and semi-annual withdrawals are
made in June and December. A Class B shareholder of the Fund may not withdraw
an amount exceeding 12% annually of his or her "Initial Account Balance," a
term that means the value of the Fund account at the time the shareholder
elects to participate in the systematic withdrawal plan. A Class B
shareholder's participation in the systematic withdrawal plan will terminate
automatically if the Initial Account Balance (plus the net asset value on the
date of purchase of Fund shares acquired after the election to participate in
the systematic withdrawal plan), less aggregate redemptions made other than
pursuant to the systematic withdrawal plan, is less than $20,000. Shareholders
who receive dividends or other distributions in cash may not participate in the
Fund's systematic withdrawal plan. Purchases of additional shares concurrent
with withdrawals are ordinarily disadvantageous to shareholders because of tax
liabilities and, for Class A shares, sales charges.
INDIVIDUAL RETIREMENT ACCOUNTS. Fund shares may be purchased through IRAs
available through the Fund or PaineWebber. In addition, a Self-Directed IRA is
available through
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Prospectus Page 20
<PAGE>
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
PaineWebber under which investments may be made in the Fund as well as in other
investments available through PaineWebber. Investors considering establishing
an IRA should review applicable tax laws and should consult their tax advisers.
TRANSFER OF ACCOUNTS. If a shareholder holding Fund shares in a PaineWebber
brokerage account transfers his brokerage account to another firm, the Fund
shares normally will be transferred to an account with the Transfer Agent.
However, if the other firm has entered into a selected dealer agreement with
Mitchell Hutchins relating to the Fund, the shareholder may be able to hold
Fund shares in an account with the other firm.
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Dividends and Taxes
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DIVIDENDS. Dividends from the Fund's net investment income are declared daily
and paid monthly on or about the 15th day of each month. Net investment income
includes accrued interest and discount, less amortization of premium and
accrued expenses. The Fund distributes annually substantially all of its net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) and net short-term capital gain, if any. The Fund may make
additional distributions if necessary to avoid a 4% excise tax on certain
undistributed income and capital gain. Dividends and other distributions paid
on all Classes of Fund shares are calculated at the same time and in the same
manner. Dividends on Class B and Class D shares are expected to be lower than
those for its Class A shares because of the higher expenses resulting from
distribution fees borne by the Class B and Class D shares. For the same reason,
dividends on Class B shares are expected to be lower than those for Class D
shares. Dividends on each Class also might be affected differently by the
allocation of other Class-specific expenses. See "Valuation of Shares."
Shares purchased through PaineWebber investment executives and correspondent
firms begin earning dividends on the Business Day following the date payment
for such shares is due; shares purchased through the Transfer Agent begin
earning dividends on the Business Day following the Transfer Agent's receipt of
payment for such shares. Shares acquired through an exchange begin earning
dividends on the Business Day following the day on which the exchange is
effected.
Dividends and other distributions are paid in additional Fund shares of the
same Class at net asset value unless the shareholder has requested cash
payments. Shareholders who wish to receive dividends and/or capital gain
distributions in cash, either mailed to the shareholder by check or credited to
the shareholder's PaineWebber account, should contact their PaineWebber
investment executives or correspondent firms or complete the appropriate
section of the application form.
TAXES. The Fund intends to continue to qualify for treatment as a regulated
investment company under the Internal Revenue Code so that it will be relieved
of federal income tax on that part of its investment company taxable income
(consisting generally of net investment income and net short-term capital gain)
and net capital gain that is distributed to its shareholders.
Dividends from the Fund's investment company taxable income (whether paid in
cash or in additional shares) generally are taxable to its shareholders as
ordinary income. Distributions of the Fund's net capital gain (whether paid in
cash or in additional shares) are taxable to its shareholders as long-term
capital gain, regardless of how long they have held their Fund shares.
Shareholders not subject to tax on their income will not be required to pay tax
on amounts distributed to them.
The Fund notifies its shareholders following the end of each calendar year of
the amounts of dividends and capital gain distributions paid (or deemed paid)
that year.
The Fund is required to withhold 31% of all dividends, capital gain
distributions and redemption proceeds payable to any individuals and certain
other noncorporate shareholders who do not provide the Fund with a correct
taxpayer
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Prospectus Page 21
<PAGE>
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
identification number. Withholding at that rate also is required from dividends
and capital gain distributions payable to those shareholders who otherwise are
subject to backup withholding.
A redemption of Fund shares may result in taxable gain or loss to the redeeming
shareholder, depending upon whether the redemption proceeds are more or less
than the shareholder's adjusted basis for the redeemed shares (which normally
includes any initial sales charge paid on Class A shares). An exchange of Fund
shares for shares of another PaineWebber or MH/KP fund generally will have
similar tax consequences. However, special tax rules apply when a shareholder
(1) disposes of Class A shares through a redemption or exchange within 90 days
of purchase and (2) subsequently acquires Class A shares of a PaineWebber or
MH/KP fund (including the Fund) without paying a sales charge due to the
exchange privilege or 365-day reinstatement privilege. In these cases, any gain
on the disposition of the original Class A shares will be increased, or loss
decreased, by the amount of the sales charge paid when the shares were
acquired, and that amount will increase the basis of the PaineWebber fund
shares subsequently acquired. In addition, if shares of the Fund are purchased
within 30 days before or after redeeming Fund shares (regardless of Class) at a
loss, all or a portion of that loss will not be deductible and will increase
the basis of the newly purchased shares.
No gain or loss will be recognized by a shareholder as a result of a conversion
of Class B shares into Class A shares.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders; see the
Statement of Additional Information for a further discussion. There may be
other federal, state or local tax considerations applicable to a particular
investor. Prospective shareholders are therefore urged to consult their tax
advisers.
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Valuation of Shares
- --------------------------------------------------------------------------------
The net asset value of the Fund's shares fluctuates and is determined
separately for each Class as of the close of regular trading on the NYSE
(currently 4:00 p.m., eastern time) each Business Day. Net asset value per
share is determined by dividing the value of the securities held by the Fund
plus any cash or other assets minus all liabilities by the total number of Fund
shares outstanding.
The Fund values its assets based on their current market value where market
quotations are readily available. If such value cannot be established, assets
are valued at fair value as determined in good faith by or under the direction
of the Trust's board of trustees. The amortized cost method of valuation
generally is used to value debt obligations with 60 days or less remaining
until maturity, unless the board of trustees determines that this does not
represent fair value.
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Management
- --------------------------------------------------------------------------------
The Trust's board of trustees, as part of its overall management
responsibility, oversees various organizations responsible for the Fund's day-
to-day management. Mitchell Hutchins, the Fund's investment adviser and
administrator, supervises all aspects of the Fund's operations. Mitchell
Hutchins receives a monthly fee for its services, computed daily and payable
monthly, at an annual rate of 0.50% of the Fund's average daily net assets.
Mitchell Hutchins supervises the activities of PIMCO which, as sub-adviser for
the Fund makes and implements all investment decisions for the
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Prospectus Page 22
<PAGE>
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
Fund. Under the sub-advisory contract, Mitchell Hutchins (not the Fund) pays
PIMCO a fee for its services as sub-adviser for the Fund in the amount of 0.25%
of the Fund's average daily net assets.
The Fund also pays PaineWebber an annual fee of $4.00 per active shareholder
account held at PaineWebber for certain services not provided by the Transfer
Agent. The Fund incurs other expenses and, for the fiscal year ended November
30, 1994, the Fund's total expenses for its Class A, Class B and Class D
shares, stated as a percentage of average net assets were (net of fee waivers)
0.84%, 1.62% and 1.36%, respectively.
Mitchell Hutchins is located at 1285 Avenue of the Americas, New York, New York
10019. It is a wholly owned subsidiary of PaineWebber, which is in turn a
wholly owned subsidiary of Paine Webber Group Inc., a publicly owned financial
services holding company. As of February 28, 1995, Mitchell Hutchins was
adviser or sub-adviser of 42 investment companies with 77 separate portfolios
and aggregate assets of over $26.8 billion.
PIMCO is located at 840 Newport Center Drive, Suite 360, Newport Beach,
California 92660. PIMCO is a subsidiary of PIMCO Advisors L.P., a publicly held
investment advisory firm. As of February 28, 1995, PIMCO had approximately
$59.8 billion in assets under management and was adviser or sub-adviser of 12
investment companies with 33 portfolios and aggregate assets of approximately
$13.1 billion. PIMCO is one of the largest fixed income management firms in the
nation. Included among PIMCO's institutional clients are many "Fortune 500"
companies.
William C. Powers, a Managing Director of PIMCO, is responsible for the day-to-
day management of the Fund's portfolio. Mr. Powers has participated in the
management of the portfolio since PIMCO assumed sub-advisory responsibilities
for the Fund in October 1994. Since 1991, Mr. Powers has been a senior member
of the fixed income portfolio management group of PIMCO. He was previously
associated with Salomon Brothers and Bear Stearns as a Senior Managing
Director.
Mitchell Hutchins and PIMCO investment personnel may engage in securities
transactions for their own accounts pursuant to each firm's code of ethics that
establishes procedures for personal investing and restricts certain
transactions.
DISTRIBUTION ARRANGEMENTS. Mitchell Hutchins is the distributor of the Fund's
shares and has appointed PaineWebber as the exclusive dealer for the sale of
those shares. Under separate plans of distribution pertaining to the Class A
shares, Class B shares and Class D shares ("Class A Plan," "Class B Plan" and
"Class D Plan," collectively, "Plans"), the Fund pays Mitchell Hutchins a
monthly service fee at the annual rate of 0.25% of the average daily net assets
of each Class of Fund shares and a monthly distribution fee at the annual rate
of 0.75% of the average daily net assets of the Class B shares and 0.50% of the
average daily net assets of the Class D shares.
Under all three Plans, Mitchell Hutchins uses the service fee primarily to pay
PaineWebber for shareholder servicing, currently at the annual rate of 0.25% of
the aggregate investment amounts maintained in the Fund by PaineWebber clients.
PaineWebber passes on a portion of these fees to its investment executives to
compensate them for shareholder servicing that they perform, and it retains the
remainder to offset its own expenses in servicing and maintaining shareholder
accounts. These expenses may include costs of the PaineWebber branch office in
which the investment executive is based, such as rent, communications
equipment, employee salaries and other overhead costs.
Mitchell Hutchins uses the distribution fee under the Class B and Class D Plans
to offset the commissions it pays to PaineWebber for selling the Fund's Class B
and Class D shares. PaineWebber passes on to its investment executives a
portion of these commissions and retains the remainder to offset its expenses
in selling Class B and Class D shares. These expenses may include the branch
office costs noted above. In addition, Mitchell Hutchins uses the distribution
fees under the Class B and Class D Plans to offset the Fund's marketing costs
attributable to such Classes, such as preparation of sales literature,
advertising and printing and distributing prospectuses and other shareholder
materials to prospective investors. Mitchell Hutchins also may use the
distribution fees to pay other costs allocated to Mitchell Hutchins' and
PaineWebber's distribution activities, including employee salaries, bonuses and
other overhead expenses.
Mitchell Hutchins expects that, from time to time, PaineWebber will pay
shareholder servicing fees
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Prospectus Page 23
<PAGE>
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
and sales commissions to its investment executives at the time of sale of Class
D shares of the Fund. If PaineWebber makes such payments, it will retain the
service and distribution fees on Class D shares until it has been reimbursed
and thereafter will pass a portion of the service and distribution fees on
Class D shares on to its investment executives.
Mitchell Hutchins receives the proceeds of the initial sales charge paid upon
the purchase of Class A shares and the contingent deferred sales charge paid
upon certain redemptions of Class B shares, and may use these proceeds for any
of the distribution expenses described above. See "Purchases."
During the period they are in effect, the Plans and related distribution
contracts pertaining to each Class of Fund shares ("Distribution Contracts")
obligate the Fund to pay service and distribution fees to Mitchell Hutchins as
compensation for its service and distribution activities, not as reimbursement
for specific expenses incurred. Thus, even if Mitchell Hutchins' expenses
exceed its service or distribution fees, the Fund will not be obligated to pay
more than those fees, and, if Mitchell Hutchins' expenses are less than such
fees, it will retain its full fees and realize a profit. The Fund will pay the
service and distribution fees to Mitchell Hutchins until either the applicable
Plan or Distribution Contract is terminated or not renewed. In that event,
Mitchell Hutchins' expenses in excess of service and distribution fees received
or accrued through the termination date will be Mitchell Hutchins' sole
responsibility and not obligations of the Fund. In their annual consideration
of the continuation of each Plan, the trustees will review the Plan and
Mitchell Hutchins' corresponding expenses for each Class separately from the
Plans and corresponding expenses for the other two Classes.
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Performance Information
- --------------------------------------------------------------------------------
The Fund performs a standardized computation of annualized total return and may
show this return in advertisements or promotional materials. Standardized
return shows the change in value of an investment in the Fund as a steady
compound annual rate of return. Actual year-by-year returns fluctuate and may
be higher or lower than standardized return. Standardized return for the Class
A shares of the Fund reflects deduction of the Fund's maximum initial sales
charge at the time of purchase, and standardized return for the Class B shares
of the Fund reflects deduction of the applicable contingent deferred sales
charge imposed on a redemption of shares held for the period. One-, five- and
ten-year periods will be shown, unless the Class has been in existence for a
shorter period. Total return calculations assume reinvestment of dividends and
other distributions.
The Fund may use other total return presentations in conjunction with
standardized return. These may cover the same or different periods as those
used for standardized return and may include cumulative returns, average annual
rates, actual year-by-year rates or any combination thereof. Non-standardized
return does not reflect initial or contingent deferred sales charges and would
be lower if such charges were included.
The Fund also may advertise its yield. Yield reflects investment income net of
expenses over a 30-day (or one-month) period on a Fund share, expressed as an
annualized percentage of the maximum offering price per share for Class A
shares and net asset value per share for Class B shares and Class D shares at
the end of the period. Yield computations differ from other accounting methods
and therefore may differ from dividends actually paid or reported net income.
The Fund will include performance data for all three Classes of Fund shares in
any advertisements or promotional materials including Fund performance data.
Total return and yield information reflect past performance and do not
necessarily indicate future results. Investment return and principal values
will fluctuate, and proceeds upon redemption may be more or less than a
shareholder's cost.
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Prospectus Page 24
<PAGE>
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
General Information
- --------------------------------------------------------------------------------
ORGANIZATION. PaineWebber Managed Investments Trust is registered with the SEC
as an open-end management investment company and was organized as a
Massachusetts business trust under the laws of the Commonwealth of
Massachusetts by Declaration of Trust dated November 21, 1986. The trustees
have authority to issue an unlimited number of shares of beneficial interest of
separate series, par value $.001 per share. In addition to the Fund, shares of
five other series have been authorized.
The shares of beneficial interest of the Fund are divided into three Classes,
designated Class A shares, Class B shares and Class D shares. Each Class
represents interests in the same assets of the Fund. The Classes differ as
follows: (1) each Class of shares has exclusive voting rights on matters
pertaining to its plan of distribution, (2) Class A shares are subject to an
initial sales charge, (3) Class B shares bear ongoing distribution fees, are
subject to a contingent deferred sales charge upon certain redemptions and will
automatically convert to Class A shares approximately six years after issuance,
(4) Class D shares are subject to neither an initial nor a contingent deferred
sales charge, bear ongoing distribution fees and do not convert into another
Class and (5) each Class may bear differing amounts of certain Class-specific
expenses. The board of trustees of the Trust does not anticipate that there
will be any conflicts among the interests of the holders of the different
Classes of shares of the Fund. On an ongoing basis, the board of trustees will
consider whether any such conflict exists and, if so, take appropriate action.
The Trust does not hold annual shareholder meetings. There normally will be no
meetings of shareholders to elect trustees unless fewer than a majority of the
trustees holding office have been elected by shareholders. Shareholders of
record holding at least two-thirds of the outstanding shares of the Trust may
remove a trustee by votes cast in person or by proxy at a meeting called for
that purpose. The trustees are required to call a meeting of shareholders for
the purpose of voting upon the question of removal of any trustee when so
requested in writing by shareholders of record holding at least 10% of the
Trust's outstanding shares. Each share of the Fund has equal voting rights,
except as noted above. Each share of the Fund is entitled to participate
equally in dividends and other distributions and the proceeds of any
liquidation, except that, due to the differing expenses borne by the three
Classes, these dividends and proceeds for the Class B and Class D shares are
likely to be lower than for the Class A shares. The shares of the Fund and the
other series of the Trust will be voted separately except when an aggregate
vote of all series is required by the Investment Company Act of 1940 ("1940
Act").
To avoid additional operating costs and for investor convenience, the Fund does
not issue share certificates. Ownership of the Fund's shares is recorded on a
stock register by the Transfer Agent and shareholders have the same rights of
ownership with respect to such shares as if certificates had been issued.
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, One Heritage
Drive, North Quincy, Massachusetts 02171, is the custodian of the Fund's
assets. PFPC Inc., a subsidiary of PNC Bank, National Association, whose
principal business address is 400 Bellevue Parkway, Wilmington, Delaware 19809,
is the Fund's transfer and dividend disbursing agent.
CONFIRMATIONS AND STATEMENTS. Shareholders receive confirmations of purchases
and redemptions of Fund shares. PaineWebber clients receive statements at least
quarterly that report their Fund activity and consolidated year-end statements
that show all Fund transactions for that year. Shareholders who are not
PaineWebber clients receive quarterly statements from the Transfer Agent.
Shareholders also receive audited annual and unaudited semi-annual financial
statements of the Fund.
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Prospectus Page 25
<PAGE>
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
Appendix A
Types of Mortgage-Backed Securities
- --------------------------------------------------------------------------------
GINNIE MAE CERTIFICATES
Ginnie Mae guarantees certain mortgage pass-through certificates ("Ginnie Mae
certificates") that are issued by Private Mortgage Lenders and that represent
ownership interests in individual pools of residential mortgage loans. These
securities are designed to provide monthly payments of interest and principal
to the investor. Timely payment of interest and principal (but not the market
value of the security itself) is backed by the full faith and credit of the
U.S. government. Each mortgagor's monthly payments to his lending institution
on his residential mortgage are "passed through" to certificateholders such as
the Fund. Mortgage pools consist of whole mortgage loans or participations in
loans. The terms and characteristics of the mortgage instruments are generally
uniform within a pool but may vary among pools. Lending institutions that
originate mortgages for the pools are subject to certain standards, including
credit and other underwriting criteria for individual mortgages included in the
pools.
FANNIE MAE CERTIFICATES
Fannie Mae facilitates a national secondary market in residential mortgage
loans insured or guaranteed by U.S. government agencies and in privately
insured or uninsured residential mortgage loans (sometimes referred to as
"conventional mortgage loans" or "conventional loans") through its mortgage
purchase and mortgage-backed securities sales activities. Fannie Mae issues
guaranteed mortgage pass-through certificates ("Fannie Mae certificates"),
which represent pro rata shares of all interest and principal payments made and
owed on the underlying pools. Fannie Mae guarantees timely payment of interest
and principal (but not the market value of the security itself) on Fannie Mae
certificates. The Fannie Mae guarantee is not backed by the full faith and
credit of the U.S. government.
FREDDIE MAC CERTIFICATES
Freddie Mac also facilitates a national secondary market for conventional
residential and U.S. government-insured mortgage loans through its mortgage
purchase and mortgage-backed securities sales activities. Freddie Mac issues
two types of mortgage pass-through securities: mortgage participation
certificates ("PCs") and guaranteed mortgage certificates ("GMCs"). Each PC
represents a pro rata share of all interest and principal payments made and
owed on the underlying pool. Freddie Mac generally guarantees timely monthly
payment of interest (but not the market value of the security itself) on PCs
and the ultimate payment of principal, but it also has a PC program under which
it guarantees timely payment of both principal and interest. GMCs also
represent a pro rata interest in a pool of mortgages. These instruments,
however, pay interest semi-annually and return principal once a year in
guaranteed minimum payments. The Freddie Mac guarantee is not backed by the
full faith and credit of the U.S. government.
PRIVATE, RTC AND SIMILAR MORTGAGE-BACKED SECURITIES
Mortgage-backed securities issued by Private Mortgage Lenders are structured
similarly to the CMOs or single class mortgage-backed securities issued or
guaranteed by Ginnie Mae, Fannie Mae and Freddie Mac. Such mortgage-backed
securities may be supported by pools of U.S. government or agency insured or
guaranteed mortgage loans or by other mortgage-backed securities issued by a
government agency or instrumentality, but they generally are supported by pools
of conventional (i.e., non-government guaranteed or insured) mortgage loans.
Since such mortgage-backed securities normally are not guaranteed by an entity
having the credit standing of Ginnie Mae, Fannie Mae or Freddie Mac, they
normally are structured with one or more types of credit enhancement. See "--
Types of Credit Enhancement." Such credit enhancements do not protect investors
from changes in market value.
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Prospectus Page 26
<PAGE>
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
The Resolution Trust Corporation ("RTC"), which was organized by the U.S.
government in connection with the savings and loan crisis, holds assets of
failed savings associations as either a conservator or receiver for such
associations, or it acquires such assets in its corporate capacity. These
assets include, among other things, single family and multifamily mortgage
loans, as well as commercial mortgage loans. In order to dispose of such assets
in an orderly manner, RTC has established a vehicle registered with the SEC
through which it sells mortgage-backed securities. RTC mortgage-backed
securities represent pro rata interests in pools of mortgage loans that RTC
holds or has acquired, as described above, and are supported by one or more of
the types of private credit enhancements used by Private Mortgage Lenders.
COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTI-CLASS MORTGAGE PASS-THROUGHS
CMOs are debt obligations that are collateralized either by mortgage loans,
mortgage pass-through securities or other CMOs (such collateral collectively
being called "Mortgage Assets"). CMOs may be issued by Private Mortgage Lenders
or by government entities such as Fannie Mae or Freddie Mac. Multi-class
mortgage pass-through securities are interests in trusts that are comprised of
Mortgage Assets and that have multiple classes similar to those in CMOs. Unless
the context indicates otherwise, references herein to CMOs include multi-class
mortgage pass-through securities. Payments of principal and interest on the
Mortgage Assets (and, in the case of CMOs, any reinvestment income thereon)
provide the funds to pay debt service on the CMOs or to make scheduled
distributions on the multi-class mortgage pass-through securities.
In a CMO, a series of bonds or certificates is issued in multiple classes. Each
class of CMO, also referred to as a "tranche," is issued at a specific fixed or
floating coupon rate and has a stated maturity or final distribution date.
Principal prepayments on the Mortgage Assets may cause CMOs to be retired
substantially earlier than their stated maturities or final distribution dates.
Interest is paid or accrues on all classes of a CMO (other than any principal-
only or PO class) on a monthly, quarterly or semi-annual basis. The principal
and interest on the Mortgage Assets may be allocated among the several classes
of a CMO in many ways. In one structure, payments of principal, including any
principal prepayments, on the Mortgage Assets are applied to the classes of a
CMO in the order of their respective stated maturities or final distribution
dates so that no payment of principal will be made on any class of the CMO
until all other classes having an earlier stated maturity or final distribution
date have been paid in full. In some CMO structures, all or a portion of the
interest attributable to one or more of the CMO classes may be added to the
principal amounts attributable to such classes, rather than passed through to
certificateholders on a current basis, until other classes of the CMO are paid
in full.
Parallel pay CMOs are structured to provide payments of principal on each
payment date to more than one class. These simultaneous payments are taken into
account in calculating the stated maturity date or final distribution date of
each class, which, as with other CMO structures, must be retired by its stated
maturity date or final distribution date but may be retired earlier.
ARM AND FLOATING RATE MORTGAGE-BACKED SECURITIES
ARM mortgage-backed securities are mortgage-backed securities that represent a
right to receive interest payments at a rate that is adjusted to reflect the
interest earned on a pool of mortgage loans bearing variable or adjustable
rates of interest (such mortgage loans are referred to as "ARMs"). Floating
rate mortgage-backed securities are classes of mortgage-backed securities that
have been structured to represent the right to receive interest payments at
rates that fluctuate in accordance with an index but that generally are
supported by pools comprised of fixed-rate mortgage loans. Because the interest
rates on ARM and Floating Rate mortgage-backed securities are reset in response
to changes in a specified market index, the values of such securities tend to
be less sensitive to interest rate fluctuations than the values of fixed-rate
securities.
TYPES OF CREDIT ENHANCEMENT
To lessen the effect of failures by obligors on Mortgage Assets to make
payments, mortgage-backed securities may contain elements of credit
enhancement. Such credit enhancement falls into two categories: (1) liquidity
protection; and (2) protection against losses resulting after default by an
obligor on the underlying assets and collection of all amounts recoverable
directly from the obligor and through liquidation of the collateral.
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Prospectus Page 27
<PAGE>
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
Liquidity protection refers to the provisions of advances, generally by the
entity administering the pool of assets (usually the bank, savings association
or mortgage banker that transferred the underlying loans to the issuer of the
security), to ensure that the receipt of payments on the underlying pool occurs
in a timely fashion. Protection against losses resulting after default and
liquidation ensures ultimate payment of the obligations on at least a portion
of the assets in the pool. Such protection may be provided through guarantees,
insurance policies or letters of credit obtained by the issuer or sponsor from
third parties, through various means of structuring the transaction or through
a combination of such approaches. The Fund will not pay any additional fees for
such credit enhancement, although the existence of credit enhancement may
increase the price of a security. Credit enhancements do not provide protection
against changes in the market value of the security.
Examples of credit enhancement arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal
thereof and interest thereon, with the result that defaults on the underlying
assets are borne first by the holders of the subordinated class), creation of
"spread accounts" or "reserve funds" (where cash or investments, sometimes
funded from a portion of the payments on the underlying assets, are held in
reserve against future losses) and "over-collateralization" (where the sched-
uled payments on, or the principal amount of, the underlying assets exceeds
that required to make payment of the securities and pay any servicing or other
fees). The degree of credit enhancement provided for each issue generally is
based on historical information regarding the level of credit risk associated
with the underlying assets. Delinquency or loss in excess of that anticipated
could adversely affect the return on an investment in such a security.
SPECIALLY STRUCTURED CMOS AND NEW TYPES OF MORTGAGE-BACKED SECURITIES
The Fund may invest in IOs, POs, inverse floating rate CMOs and other specially
structured CMO classes. See "Risk Factors and Other Investment Policies--Risks
of Mortgage- and Asset-Backed Securities."
New types of mortgage-backed securities are developed and marketed from time to
time and, consistent with its investment limitations, the Fund expects to in-
vest in those new types of mortgage-backed securities that Mitchell Hutchins
believes may assist the Fund in achieving its investment objective. Similarly,
the Fund may invest in mortgage-backed securities issued by new or existing
governmental or private issuers other than those identified above. The Fund's
prospectus or statement of additional information will be supplemented to the
extent that new types of mortgage-backed securities or those issued by issuers
other than those identified above involve materially different risks than the
securities or issuers described herein.
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Prospectus Page 28
<PAGE>
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PAINEWEBBER SHORT-TERM U.S. GOVERNMENT INCOME FUND
Appendix B
- --------------------------------------------------------------------------------
THE FUND MAY USE THE FOLLOWING INSTRUMENTS:
Options on Debt Securities. A call option is a short-term contract pursuant to
which the purchaser of the option, in return for a premium, has the right to
buy the security underlying the option at a specified price at any time during
the term of the option. The writer of the call option, who receives the
premium, has the obligation, upon exercise of the option during the option
term, to deliver the underlying security against payment of the exercise price.
A put option is a similar contract which gives its purchaser, in return for a
premium, the right to sell the underlying security at a specified price during
the term of the option. The writer of the put option, who receives the premium,
has the obligation, upon exercise of the option during the option term, to buy
the underlying security at the exercise price.
Options on Indices of Debt Securities. An index assigns relative values to the
securities included in the index and fluctuates with changes in the market
values of such securities. Index options operate in the same way as more
traditional options except that exercises of index options are effected with
cash payment and do not involve delivery of securities. Thus, upon exercise of
an index option, the purchaser will realize, and the writer will pay, an amount
based on the difference between the exercise price and the closing price of the
index.
Debt Security Index Futures Contracts. An index futures contract is a bilateral
agreement pursuant to which one party agrees to accept, and the other party
agrees to make, delivery of an amount of cash equal to a specified dollar
amount times the difference between the index value at the close of trading of
the contract and the price at which the futures contract is originally struck.
No physical delivery of the securities comprising the index is made; generally,
contracts are closed out prior to the expiration date of the contract.
Interest Rate Futures Contracts. An interest rate futures contract is a
bilateral agreement pursuant to which one party agrees to make, and the other
party agrees to accept, delivery of the specified type of debt security called
for in the contract at a specified future time and at a specified price.
Although interest rate futures contracts by their terms call for actual
delivery or acceptance of debt securities, in most cases the contracts are
closed out before the settlement date without the making or taking of delivery.
Options on Futures Contracts. Options on futures contracts are similar to
options on securities, except that an option on a futures contract gives the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract (a long position if the option is a call and a short position
if the option is a put), rather than to purchase or sell a security, at a
specified price at any time during the option term. Upon exercise of the
option, the delivery of the futures position to the holder of the option will
be accompanied by delivery of the accumulated balance that represents the
amount by which the market price of the futures contract exceeds, in the case
of a call, or is less than, in the case of put, the exercise price of the
option on the future. The writer of an option, upon exercise, will assume a
short position in the case of a call and a long position in the case of a put.
- --------------------------------------------------------------------------------
Prospectus Page 29
<PAGE>
Application Form
THE PAINEWEBBER
MUTUAL FUNDS [_] [_] - [_] [_] [_] [_] [_] - [_] [_]
PaineWebber Account No.
- --------------------------------------------------------------------------------
INSTRUCTIONS DO NOT USE THIS FORM IF YOU WOULD LIKE YOUR ACCOUNT SERVICED
THROUGH PAINEWEBBER. INSTEAD, CALL YOUR PAINEWEBBER INVESTMENT
EXECUTIVE (OR YOUR LOCAL PAINEWEBBER OFFICE TO OPEN AN ACCOUNT).
ALSO, DO NOT USE THIS FORM TO OPEN A Return this completed
RETIREMENT PLAN ACCOUNT. FOR form to: PFPC Inc. P.O.
RETIREMENT PLAN FORMS OR FOR Box 8950 Wilmington,
ASSISTANCE IN COMPLETING THIS FORM Delaware 19899 ATTN:
CONTACT PFPC INC. AT 1-800-647-1568. PaineWebber Mutual Funds
PLEASE PRINT
- --------------------------------------------------------------------------------
--------------------------------------------------
1 INITIAL INVESTMENT ($100 MINIMUM)
--------------------------------------------------
ENCLOSED IS A CHECK FOR $____(payable to PaineWebber
Short-Term U.S. Government Income Fund) to purchase
Class A [_] Class B [_] or Class D [_] shares
(Check one; if no Class is specified Class A shares will be
purchased)
--------------------------------------------------
2 ACCOUNT REGISTRATION
--------------------------------------------------
Not valid
without
signature and
Soc. Sec. or
Tax ID # on
accompanying
Form W-9
- --As joint
tenants, use 1. Individual / /
Lines 1 and 2 ----------- --------------- --------------
First Name Last Name MI Soc. Sec. No.
- --As custodian
for a minor, 2. Joint Tenancy / /
use Lines 1 --------- --------------- --------------
and 3 First Name Last Name MI Soc. Sec. No.
- --In the name ("Joint Tenants with Rights of Survivorship"
of a unless otherwise specified)
corporation,
trust or other 3. Gifts to Minors / /
organization ------------------------- --------------
or any Minor's Name Soc. Sec. No.
fiduciary
capacity, use Under the ___________________ Uniform Gifts/Uniform
Line 4 State of Residence of Minor to Minors Act/Transfers
to Minors Act
4. Other Registrations____________________ __________________
Name Tax Ident. No.
5. If Trust, Date of Trust Instrument: _______
--------------------------------------------------
3 ADDRESS
--------------------------------------------------
____________________________ U.S. Citizen [_] YES [_] NO*
Street
____________________________ _________________
City State Zip Code *Country of Citizenship
--------------------------------------------------
4 DISTRIBUTION OPTIONS See Prospectus
--------------------------------------------------
Please select one of the following:
[_] Reinvest both dividends and capital gain distributions in
additional shares
[_] Pay dividends to my address above; reinvest capital gain
distributions
[_] Pay both dividends and capital gain distributions in cash
to my address above
[_] Reinvest dividends and pay capital gain distributions in
cash to my address above
NOTE: If a selection is not made, both dividends and cap-
ital gain distributions will be paid in additional Fund
shares of the same Class.
<PAGE>
--------------------------------------------------------------
5 SPECIAL OPTIONS (For More Information-Check Appropriate Box)
--------------------------------------------------------------
[_] Prototype IRA Application [_] Automatic Investment Plan
[_] Systematic Withdrawal Plan
--------------------------------------------------------------
6 RIGHTS OF ACCUMULATION--CLASS A SHARES See Prospectus
--------------------------------------------------------------
Indicate here any other account(s) in the group of funds that
qualify for the cumulative quantity discount as outlined in
the Prospectus.
_____________________ ___________ ____________________
Fund Name Account No. Registered Owner
_____________________ ___________ ____________________
Fund Name Account No. Registered Owner
_____________________ ___________ ____________________
Fund Name Account No. Registered Owner
--------------------------------------------------------------
7 PLEASE INDICATE BELOW IF YOU ARE AFFILIATED WITH PAINEWEBBER
--------------------------------------------------------------
"Affiliated" persons are defined as officers,
directors/trustees and employees of the PaineWebber funds,
PaineWebber or its affiliates, and their parents, spouses and
children.
_______________________________________________
Nature of Relationship
--------------------------------------------------------------
8 SIGNATURE (S) AND TAX CERTIFICATION
--------------------------------------------------------------
I warrant that I have full authority and am of legal age to
purchase shares of the Fund specified and have received and
read a current Prospectus of the Fund and agree to its
terms. The Fund and its Transfer Agent will not be liable
for acting upon instructions or inquiries believed genuine.
Under penalties of perjury, I certify that (1) my taxpayer
identification number provided in this application is
correct and (2) I am not subject to backup withholding
because (i) I have not been notified that I am subject to
backup withholding as a result of failure to report interest
or dividends or (ii) the IRS has notified me that I am no
longer subject to backup withholding (STRIKE OUT CLAUSE (2)
IF INCORRECT).
________________________ ________________________ _______
Individual (or Custodian) Joint Registrant (if any) Date
________________________ ________________________ _______
Corporate Officer, Title Date
Partner, Trustee, etc.
--------------------------------------------------------------
9 INVESTMENT EXECUTIVE IDENTIFICATION (To Be Completed By
Investment Executive Only)
--------------------------------------------------------------
__________________________ __________________________
Broker No./Name Branch Wire Code
( )
__________________________ __________________________
Branch Address Telephone
--------------------------------------------------------------
10 CORRESPONDENT FIRM IDENTIFICATION (To Be Completed By Cor-
respondent Firm Only)
--------------------------------------------------------------
__________________________ __________________________
Name Address
__________________________ __________________________
MAIL COMPLETED FORM TO YOUR PAINEWEBBER INVESTMENT EXECUTIVE
OR CORRESPONDENT FIRM OR TO: PFPC INC., P.O. BOX 8950,
WILMINGTON, DELAWARE 19899.
<PAGE>
GROWTH AND INCOME FUNDS
. MH/KP Asset Allocation Fund
. MH/KP Equity Income Fund
. PW Asset Allocation Fund
. PW Global Energy Fund
. PW Global Growth and Income Fund
. PW Growth and Income Fund
. PW Utility Income Fund
PW MONEY MARKET FUND
<PAGE>
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Shares of the Fund can be exchanged for shares of the following PaineWebber and
MH/KP mutual funds:
INCOME FUNDS
. MH/KP Adjustable Rate Government Fund
. MH/KP Global Fixed Income Fund
. MH/KP Government Income Fund
. MH/KP Intermediate Fixed Income Fund
. PW Global Income Fund
. PW High Income Fund
. PW Investment Grade Income Fund
. PW Short-Term U.S. Government Income Fund for Credit Unions
. PW Strategic Income Fund
. PW U.S. Government Income Fund
TAX-FREE INCOME FUNDS
. MH/KP Municipal Bond Fund
. PW California Tax-Free Income Fund
. PW Municipal High Income Fund
. PW National Tax-Free Income Fund
. PW New York Tax-Free Income Fund
GROWTH FUNDS
. MH/KP Emerging Markets Equity Fund
. MH/KP Global Equity Fund
. MH/KP Small Cap Growth Fund
. PW Atlas Global Growth Fund
. PW Blue Chip Growth Fund
. PW Capital Appreciation Fund
. PW Communications & Technology Growth Fund
. PW Europe Growth Fund
. PW Growth Fund
. PW Regional Financial Growth Fund
. PW Small Cap Value Fund
----------
(continued on the inside of back cover)
A prospectus containing more complete information for any of the above funds,
including charges and expenses, can be obtained from a PaineWebber investment
executive or correspondent firm. Read it carefully before investing.
(C) 1995 PaineWebber Incorporated
[LOGO OF RECYCLED PAPER APPEARS HERE]
PaineWebber
Short-Term
U.S. Government
Income Fund
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND
OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND
OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
PROSPECTUS
April 1, 1995
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