<PAGE>
The Fund is a series of PaineWebber Managed Investments Trust ("Trust"). This
Prospectus concisely sets forth information about the Fund a prospective in-
vestor 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 Ex-
change 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.
- --------------------------------------------------------------------------------
Prospective Wisconsin investors should note that the Fund may invest up to 10%
of its net assets in restricted securities (other than Rule 144A securities de-
termined to be liquid by the Trust's board of trustees). Investment in re-
stricted securities (other than such Rule 144A securities) in excess of 5% of
the Fund's total assets may be considered a speculative activity and may result
in greater risk and increased Fund expenses.
- --------------------------------------------------------------------------------
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.
PaineWebber
Utility Income Fund
1285 Avenue of the Americas New York, New York 10019
PROSPECTUS
April 1, 1995
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................................................... 2
Financial Highlights....................................................... 6
Flexible Pricing System.................................................... 7
Investment Objective and Policies.......................................... 8
Purchases.................................................................. 15
Exchanges.................................................................. 18
Redemptions................................................................ 19
Conversion of Class B Shares............................................... 21
Other Services and Information............................................. 21
Dividends and Taxes........................................................ 22
Valuation of Shares........................................................ 23
Management................................................................. 24
Performance Information.................................................... 26
General Information........................................................ 26
Appendix................................................................... 28
</TABLE>
- --------------------------------------------------------------------------------
A PAINEWEBBER MUTUAL FUND
A professionally managed mutual fund seeking current income and capital
appreciation. The Fund invests primarily in income- producing equity and debt
securities of domestic and foreign companies in the utility industries.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTA-
TIONS 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 ITS DISTRIBUTOR
IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
--------------
PAINEWEBBER UTILITY INCOME FUND
PROSPECTUS SUMMARY
See the body of the Prospectus for more information on the topics discussed
in this summary.
The Fund: PaineWebber Utility Income Fund ("Fund") is a diversi-
fied series of an open-end management investment compa-
ny.
Investment Objec- To provide current income and capital appreciation;
tive and Policies: seeks to achieve this objective by investing primarily
in income-producing equity and debt securities of domes-
tic and foreign companies in the electric, telecommuni-
cations, gas and water utility industries. Under normal
circumstances, the Fund invests at least 65% of its to-
tal assets in such securities.
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."
Total Net Assets: $66.4 million at February 28, 1995.
Purchases: Shares of beneficial interest are available exclusively
through PaineWebber and its correspondent firms for in-
vestors who are clients of PaineWebber or those firms
("PaineWebber clients") and, for other investors,
through PFPC Inc., the Fund's transfer agent ("Transfer
Agent").
Flexible Pricing Investors may select Class A, Class B or Class D shares,
System: each with a public offering price that reflects differ-
ent sales charges and expense levels. See "Flexible
Pricing System," "Purchases," "Redemptions" and "Conver-
sion of Class B Shares."
Class A Shares Offered at net asset value plus any applicable sales
charge (maximum is 4.5% of public offering price).
Class B Shares Offered at net asset value (a maximum contingent de-
ferred sales charge of 5% of redemption proceeds is im-
posed on certain redemptions made within six years of
date of purchase). Class B shares automatically convert
into Class A shares (which pay lower ongoing expenses)
approximately six years after purchase.
2
<PAGE>
Class D Shares Offered at net asset value without an initial or contin-
gent 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 corresponding
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.
Dividends: Declared and paid monthly; net capital gain is distrib-
uted 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: $1,000 for first purchase; $100 for subsequent pur-
chases.
Other Features:
Class A Shares Automatic investment Quantity discounts on initial
plan sales
Systematic with- charge
drawal plan 365-day reinstatement privilege
Rights of accumula-
tion
Class B Shares Automatic investment Systematic withdrawal plan
plan
Class D Shares Automatic investment Systematic withdrawal plan
plan
WHO SHOULD INVEST. The Fund provides investors with all the benefits of in-
vesting in utilities
through a conservatively managed, quality portfolio. Utility stocks and bonds
have long been the choice for income-oriented, conservative investors. The Fund
is designed for investors pursuing current income and capital appreciation
through investing in income-producing equity and debt securities of domestic
and foreign companies in the electric, telecommunications, gas and water util-
ity industries.
While the Fund is not intended to provide a complete or balanced investment
program, it can serve as one component of an investor's long-term program to
accumulate assets for retirement, college tuition or other major goals.
RISK FACTORS. There can be no assurance that the Fund will achieve its in-
vestment objective and the Fund's net asset value per share will fluctuate
based upon changes in the value of its portfolio securities. The Fund's policy
of concentrating its investments in the utility industries may cause the value
of its shares to fluctuate more than if it invested in a greater number of in-
dustries.
3
<PAGE>
In particular, Fund shares will be affected by economic, competitive and regu-
latory developments in those industries, including, among other things, the
possible adverse effects of an evolving regulatory climate, difficulties in ob-
taining adequate returns on capital investments, increased competition in the
telecommunications industry and adverse effects of changes in fuel and energy
costs in the electric and gas utilities industries. Investors in the Fund
should be able to assume the special risks of investing in foreign securities,
which include possible adverse political, social and economic developments
abroad and differing characteristics of foreign economies and markets. These
risks are greater with respect to securities located in emerging markets, in
which the Fund is authorized to invest. There is often less information pub-
licly available about foreign issuers. Foreign securities held by the Fund may
be denominated in foreign currencies, and the value of these investments thus
can be adversely affected by fluctuations in foreign currency values. Some for-
eign currencies can be volatile and may be subject to governmental controls or
intervention. Certain investment grade debt securities in which the Fund may
invest have speculative characteristics. The use of options, futures contracts,
forward currency contracts and interest rate protection transactions also en-
tails special risks. Prospective investors are urged to read "Investment Objec-
tive and Policies" for more complete information about risk factors.
EXPENSES OF INVESTING IN THE FUND. The following tables are intended to as-
sist investors in understanding the expenses associated with investing in the
Fund.
SHAREHOLDER TRANSACTION EXPENSES(1)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
------- ------- -------
<S> <C> <C> <C>
Maximum sales charge on purchases of shares
(as a percentage of public offering price)............. 4.5% 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 5% None
</TABLE>
ANNUAL FUND OPERATING EXPENSES(2)
(as a percentage of average net assets)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
------- ------- -------
<S> <C> <C> <C>
Management fees......................................... 0.70% 0.70% 0.70%
12b-1 fees(3)........................................... 0.25 1.00 1.00
Other expenses.......................................... 0.63 0.63 0.62
---- ---- ----
Total operating expenses................................ 1.58% 2.33% 2.32%
==== ==== ====
</TABLE>
- -------
(1) Sales charge waivers are available for Class A and Class B shares, re-
duced sales charge purchase plans are available for Class A shares and ex-
change fee waivers are available for all three Classes. The maximum 5%
contingent deferred sales charge on Class B shares applies to redemptions
during the first year after purchase; the charge generally declines by 1%
annually thereafter, reaching zero after six years. See "Purchases."
4
<PAGE>
(2) See "Management" for additional information. All expenses are those actu-
ally incurred for the fiscal year ended November 30, 1994.
(3) 12b-1 fees have two components, as follows:
<TABLE>
<CAPTION>
CLASS CLASS CLASS
A B D
----- ----- -----
<S> <C> <C> <C>
12b-1 service fees................................... 0.25% 0.25% 0.25%
12b-1 distribution fees.............................. 0.00 0.75 0.75
</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.
EXAMPLE OF EFFECT OF FUND EXPENSES
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(1).................... $60 $ 93 $127 $224
Class B Shares:
Assuming a complete redemption at
end of period(2)(3)............... $74 $103 $145 $231
Assuming no redemption(3).......... $24 $ 73 $125 $231
Class D Shares....................... $24 $ 72 $124 $266
</TABLE>
- -------
(1) Assumes deduction at the time of purchase of the maximum 4.5% initial
sales charge.
(2) Assumes deduction at the time of redemption of the maximum applicable
contingent deferred sales charge.
(3) Ten-year figures assume conversion of Class B Shares to Class A shares at
end of sixth year.
This Example assumes that all dividends and other distributions are rein-
vested and that the percentage amounts listed under Annual Fund Operating Ex-
penses 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 Securi-
ties and Exchange Commission ("SEC") applicable to all mutual funds; the as-
sumed 5% annual return is not a prediction of, and does not represent, the pro-
jected or actual performance of any Class of the Fund's shares.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES, AND THE FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
The actual expenses attributable to each Class of Fund shares will depend upon,
among other things, the level of average net assets, the extent to which the
Fund incurs variable expenses, such as transfer agency costs and whether Mitch-
ell Hutchins reimburses all or a portion of the Fund's expenses and/or waives
all or a portion of its advisory and other fees.
5
<PAGE>
FINANCIAL HIGHLIGHTS
The table below provides selected per share data and ratios for one Class A
share, one Class B share and one Class D share of the Fund for the periods
shown. This information is supplemented by the financial statements and accom-
panying 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 performance of
the Fund is also included in the Annual Report to Shareholders, which may be
obtained without charge.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
---------------------------- ---------------------------- ----------------------------
FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD
ENDED JULY 2, 1993# ENDED JULY 2, 1993# ENDED JULY 2, 1993#
NOVEMBER 30, TO NOVEMBER 30, NOVEMBER 30, TO NOVEMBER 30, NOVEMBER 30, TO NOVEMBER 30,
1994 1993 1994 1993 1994 1993
------------ --------------- ------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 9.66 $ 10.00 $ 9.65 $ 10.00 $ 9.65 $ 10.00
------- ------- ------- ------- ------- -------
Net decrease from
investment operations:
Net investment income... 0.48 0.20 0.42 0.17 0.42 0.16
Net realized and
unrealized losses from
investment
transactions........... (1.31) (0.39) (1.31) (0.39) (1.31) (0.38)
------- ------- ------- ------- ------- -------
Net decrease in net
asset value from
operations............. (0.83) (0.19) (0.89) (0.22) (0.89) (0.22)
------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income...... (0.52) (0.15) (0.45) (0.13) (0.45) (0.13)
------- ------- ------- ------- ------- -------
Net asset value, end of
period................. $ 8.31 $ 9.66 $ 8.31 $ 9.65 $ 8.31 $ 9.65
======= ======= ======= ======= ======= =======
Total investment
return(1).............. (8.76)% (1.95)% (9.35)% (2.29)% (9.36)% (2.28)%
======= ======= ======= ======= ======= =======
Ratios/Supplemental
Data:
Net assets, end of
period (000's omitted). $12,532 $16,224 $37,156 $45,382 $13,922 $17,866
Ratio of expenses to
average net assets..... 1.58% 1.55%* 2.33% 2.29%* 2.32% 2.29%*
Ratio of net investment
income to average net
assets................. 5.49% 5.38%* 4.72% 4.67%* 4.69% 4.67%*
Portfolio turnover rate. 91.60% 13.11% 91.60% 13.11% 91.60% 13.11%
- ------------
</TABLE>
# Commencement of operations.
* Annualized.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of the period reported, reinvestment of all dividends and other
distributions at net asset value on the payable dates, and a sale at net
asset value on the last day of the period reported. The figures do not
include sales charges; results for Class A and Class B shares would be
lower if sales charges were included. Total investment returns have not
been annualized for periods of less than one year.
6
<PAGE>
FLEXIBLE PRICING SYSTEM
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
------------------------- ------------------------- -------------------------
<S> <C> <C> <C>
CLASS A Maximum initial sales Service fee of 0.25% Initial sales charge
charge of 4.5% of the waived or reduced for
public offering price certain purchases
CLASS B Maximum contingent Service fee of 0.25%; Shares convert to Class A
deferred sales charge of distribution fee of 0.75% shares approximately six
5% of redemption years after issuance
proceeds; declines to
zero after six years
CLASS D None Service fee of 0.25%; --
distribution fee of 0.75%
</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 ongoing annual expenses de-
scribed 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 4.5% of the public offering price. Because of this ini-
tial sales charge, not all of a Class A shareholder's purchase price is in-
vested in the Fund. Class B shares are sold with no initial sales charge, but a
contingent deferred sales charge of up to 5% of the redemption proceeds applies
to redemptions made within six 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
$50,000 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 eli-
gible 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 and Class D shares pay an annual 12b-1 distribution fee of 0.75% 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
7
<PAGE>
in estimating the costs of investing in the respective Classes of Fund shares
over various time periods.
For example, assuming a constant net asset value, the cumulative distribution
fees on the Fund's Class B or Class D shares and the 4.5% maximum initial sales
charge on the Fund's Class A shares would all be approximately equal if the
shares were held for six years. Because Class B shares convert to Class A
shares (which do not bear the expense of ongoing distribution fees) approxi-
mately six years after purchase, an investor expecting to hold Fund shares for
longer than six years would generally pay lower cumulative expenses by purchas-
ing Class A or Class B shares than by purchasing Class D shares. An investor
expecting to hold Fund shares for less than six years would generally pay lower
cumulative expenses by purchasing Class D shares than by purchasing Class A
shares, and due to the contingent deferred sales charges that would become pay-
able on redemption of Class B shares, such an investor would generally pay
lower cumulative expenses by purchasing Class D shares than Class B 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 as-
set value of Fund shares, which will affect the actual amount of expenses paid.
Expenses borne by Classes may 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 an-
nual return of 5%.
OTHER INFORMATION
PaineWebber investment executives may receive different levels of compensa-
tion for selling one particular Class of Fund shares rather than another. In-
vestors should understand that distribution fees and initial and contingent de-
ferred sales charges all are intended to compensate Mitchell Hutchins for dis-
tribution services.
See "Purchases," "Redemptions" and "Management" for a more complete descrip-
tion of the initial and contingent deferred sales charges, service fees and
distribution fees for the three Classes of shares of the Fund. See also "Con-
version of Class B Shares," "Dividends and Taxes," "Valuation of Shares" and
"General Information" for other differences among the three Classes.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide current income and capital ap-
preciation. The Fund seeks to achieve this objective by investing primarily in
a diversified portfolio of income-producing equity securities (common stocks,
preferred stocks and convertible securities) and debt securities issued by do-
mestic and foreign companies primarily engaged in the ownership or operation of
facilities used in the generation, transmission or distribution of electricity,
telecommunications, gas or water. Under normal circumstances, the Fund will in-
vest at least 65% of its total assets in such securities.
Mitchell Hutchins invests the Fund's assets in securities that, in Mitchell
Hutchins' judgment, provide current income and potential for growth of income
or long-term capital appreciation. In selecting portfolio securities for the
Fund, Mitchell Hutchins considers the issuer and its business environment, man-
agement, financial condition, anticipated earnings and dividends and other re-
lated measures of value. The relative proportions of common stocks, preferred
stocks, convertible securities and
8
<PAGE>
debt securities will vary from time to time based upon Mitchell Hutchins' judg-
ment of the extent to which investments in each category will contribute to
meeting the Fund's investment objective. The Fund will not invest more than 5%
of its total assets in debt securities rated lower than investment grade.
Changes in interest rates may affect the Fund's net asset value per share be-
cause prices of both debt and equity securities of utility companies tend to
increase when interest rates decline and decrease when interest rates rise.
OTHER INVESTMENT POLICIES AND RISK FACTORS
UTILITY INDUSTRIES. The Fund invests primarily in the equity and debt securi-
ties of companies primarily engaged in the ownership or operation of facilities
used to provide electricity, telecommunications, gas or water. For these pur-
poses, "primarily engaged" means that (1) more than 50% of the company's assets
are devoted to the ownership or operation of one or more facilities as de-
scribed above, or (2) more than 50% of the company's operating revenues are de-
rived from the business or combination of businesses described above.
Due to the Fund's investment policy of concentrating in the utility indus-
tries, the Fund has greater exposure to the risk factors that are characteris-
tic of such investments. In particular, the value of and investment return on
the Fund's shares is affected by economic or regulatory developments in or re-
lated to the utility industries. Utility companies in the United States and in
foreign countries are generally subject to substantial regulation. Such regula-
tion is intended to ensure appropriate standards of review and adequate capac-
ity to meet public demand. The nature of regulation of utility industries is
evolving both in the United States and in foreign countries. Although certain
companies may develop more profitable opportunities, others may be forced to
defend their core businesses and may be less profitable. Electric utility com-
panies have historically been subject to the risks associated with increases in
fuel and other operating costs, high interest costs on borrowings, costs asso-
ciated with compliance with environmental, nuclear facility and other safety
regulations and changes in the regulatory climate. Increased scrutiny of elec-
tric utilities might result in higher costs and higher capital expenditures,
with the risk that regulators may disallow inclusion of these costs in rate au-
thorizations. Increasing competition due to past regulatory changes in the tel-
ephone communications industry continues and, whereas certain companies have
benefitted, many companies may be adversely affected in the future. Gas trans-
mission companies and gas distribution companies continue to undergo signifi-
cant changes as well. Many companies have diversified into oil and gas explora-
tion and development, making returns more sensitive to energy prices. Water
supply utilities are in an industry that is highly fragmented due to local own-
ership and generally the companies are more mature and are experiencing little
or no per capita volume growth. There is no assurance that favorable develop-
ments will occur in the utility industries generally or that business opportu-
nities will continue to undergo significant changes or growth. See "Investment
Policies and Restrictions--Utility Industries--Description and Risk Factors" in
the Statement of Additional Information.
INVESTMENT OUTSIDE THE UTILITY INDUSTRIES. The Fund may invest up to 35% of
its assets in securities of companies that are outside the utility industries.
Such investments may include common stocks, preferred stocks, convertible secu-
rities, debt securities and money market instruments, including repurchase
agreements, and are selected to meet the Fund's investment objective of current
income
9
<PAGE>
and capital appreciation. Securities outside the utility industries in which
the Fund may invest may be issued by either U.S. or foreign companies and gov-
ernments. Some of these issuers may be in industries related to utility indus-
tries and, therefore, may be subject to similar risks.
FOREIGN SECURITIES. Investments in foreign securities involve risks relating
to political, social and economic developments abroad as well as risks result-
ing from the differences between the regulations to which U.S. and foreign is-
suers and markets are subject. These risks may include expropriation, withhold-
ing taxes on dividends and interest, confiscatory taxation, limitations on the
use or transfer of the Fund's assets, difficulty in obtaining or enforcing a
court judgment abroad, restrictions on the exchange of currencies and political
or social instability or diplomatic developments. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such re-
spects as growth of gross national product, rate of inflation, capital rein-
vestment, resource self-sufficiency and balance of payments position. Securi-
ties of many foreign companies may be less liquid and their prices more vola-
tile than securities of comparable U.S. companies. While the Fund generally in-
vests only in securities that are traded on recognized exchanges or in over-
the-counter ("OTC") markets, from time to time foreign securities may be diffi-
cult to liquidate rapidly without significantly depressing the price of such
securities. There may be less publicly available information concerning foreign
issuers of securities held by the Fund than is available concerning U.S. compa-
nies. Foreign securities trading practices, including those involving securi-
ties settlement where the Fund's assets may be released prior to receipt of
payment, may expose the Fund to increased risk in the event of a failed trade
or the insolvency of a foreign broker-dealer. Transactions in foreign securi-
ties may be subject to less efficient settlement practices. Legal remedies for
defaults and disputes may have to be pursued in foreign courts, whose proce-
dures may differ substantially from those of U.S. courts.
Because foreign securities ordinarily are denominated in currencies other
than the U.S. dollar (as are some securities of U.S. issuers), changes in for-
eign currency exchange rates will affect the Fund's net asset value, the value
of interest earned and dividends received, gains and losses realized on the
sale of securities and net investment income and capital gain, if any, to be
distributed to shareholders by the Fund. If the value of a foreign currency
rises against the U.S. dollar, the value of the Fund's assets denominated in
that currency will increase; correspondingly, if the value of a foreign cur-
rency declines against the U.S. dollar, the value of the Fund's assets denomi-
nated in that currency will decrease. The exchange rates between the U.S. dol-
lar and other currencies are determined by supply and demand in the currency
exchange markets, international balances of payments, speculation and other
economic and political conditions. In addition, some foreign currency values
may be volatile and there is the possibility of governmental controls on cur-
rency exchange or governmental intervention in the currency markets. Any of
these factors could adversely affect the Fund.
The costs attributable to foreign investing that the Fund must bear fre-
quently are higher than those attributable to domestic investing. For example,
the costs of maintaining custody of securities in foreign countries exceed cus-
todian costs related to domestic securities. Currently, the Fund does not in-
tend to invest more than 15% of its total assets in foreign securities.
EMERGING MARKET SECURITIES. The Fund may invest in securities of issuers lo-
cated in emerging market countries. The risks of investing in foreign securi-
ties may be greater with
10
<PAGE>
respect to securities of issuers in, or denominated in the currencies of,
emerging market countries. The economies of emerging market countries generally
are heavily dependent upon international trade and, accordingly, have been and
may continue to be adversely affected by trade barriers, exchange controls,
managed adjustments in relative currency values and other protectionist mea-
sures imposed or negotiated by the countries with which they trade. These econ-
omies also have been, and may continue to be, adversely affected by economic
conditions in the countries with which emerging market countries trade. Many
emerging market countries have experienced substantial, and in some periods ex-
tremely high, rates of inflation for many years. Inflation and rapid fluctua-
tions in inflation rates have had, and may continue to have, very negative ef-
fects on the economies and securities markets of certain emerging market coun-
tries. The securities markets of emerging market countries are substantially
smaller, less developed, less liquid and more volatile than the securities mar-
kets of the United States and other developed countries. Disclosure and regula-
tory standards in many respects are less stringent in emerging market countries
than in the United States and other major markets. There also may be a lower
level of monitoring and regulation of emerging markets and the activities of
investors in such markets, and enforcement of existing regulations may be ex-
tremely limited. Investing in local markets, particularly in emerging market
countries, may require the Fund to adopt special procedures, seek local govern-
ment approvals or take other actions, each of which may involve additional
costs to the Fund. Certain emerging market countries may also restrict invest-
ment opportunities in industries deemed important to national interests.
DEBT SECURITIES. The investment grade debt securities in which the Fund may
invest include securities rated BBB by Standard & Poor's Ratings Group ("S&P"),
Baa by Moody's Investors Service, Inc. ("Moody's") or comparably rated by an-
other nationally recognized or foreign statistical rating organization ("SRO").
Moody's considers securities rated Baa to have speculative characteristics.
Changes in economic conditions or other circumstances are more likely to lead
to a weakened capacity to make principal and interest payments than is the case
for higher-rated debt securities. Securities rated lower than BBB by S&P, Baa
by Moody's or comparably rated by another SRO, in which the Fund may invest up
to 5% of its total assets, are considered predominantly speculative with re-
spect to the issuer's capacity to pay interest and repay principal and may in-
volve major risk exposure to adverse conditions. The Fund is also permitted to
purchase debt securities that are not rated by S&P, Moody's or another SRO but
that Mitchell Hutchins determines to be of comparable quality to that of rated
securities in which the Fund may invest. See the Statement of Additional Infor-
mation for more information about S&P and Moody's ratings.
The market value of debt securities generally varies inversely with interest
rate changes. Ratings of debt securities represent the SROs' opinions regarding
their quality, are not a guarantee of quality and may be reduced after the Fund
has acquired the security. Mitchell Hutchins will consider such an event in de-
termining whether the Fund should continue to hold the security but is not re-
quired to dispose of it. However, in the event that, due to a downgrade of one
or more debt securities, an amount in excess of 5% of the Fund's net assets is
held in securities rated below investment grade and comparable unrated securi-
ties, Mitchell Hutchins will engage in an orderly disposition of these securi-
ties to the extent necessary to ensure that the Fund's holdings of these secu-
rities do not exceed 5% of the Fund's net assets. Credit ratings attempt to
evaluate the safety of principal and interest payments and do not re-
11
<PAGE>
flect an assessment of the volatility of the security's market value or the li-
quidity of an investment in the security. Also, SROs may fail to make timely
changes in credit ratings in response to subsequent events, so that an issuer's
current financial condition may be better or worse than the rating indicates.
HEDGING AND RELATED INCOME STRATEGIES. The Fund may use options (both ex-
change-traded and OTC) and futures contracts to attempt to enhance income and
may reduce the overall risk of its investments (hedge) by using options,
futures contracts and forward currency contracts. Hedging strategies may be
used in an attempt to manage foreign currency exposure and other risks of the
Fund's investments that can cause fluctuations in its net asset value. The
Fund's ability to use these strategies may be limited by market conditions,
regulatory limits and tax considerations. The Appendix to this Prospectus de-
scribes the instruments that the Fund may use, and the Statement of Additional
Information contains further information on these strategies.
The Fund may enter into forward currency contracts for the purchase or sale
of a specified currency at a specified future date either with respect to spe-
cific transactions or with respect to portfolio positions. For example, when
Mitchell Hutchins anticipates making a currency exchange transaction in connec-
tion with the purchase or sale of a security, the Fund may enter into a forward
currency contract in order to set the exchange rate at which the transaction
will be made. The Fund also may enter into a forward contract to sell an amount
of a foreign currency approximating the value of some or all of its securities
positions denominated in that currency. The Fund may use forward contracts in
one currency or a basket of currencies to hedge against fluctuations in the
value of another currency when Mitchell Hutchins anticipates that there will be
a correlation between the two and may use forward currency contracts to shift
the Fund's exposure to foreign currency fluctuations from one country to anoth-
er. The purpose of entering into these contracts is to minimize the risk to the
Fund from adverse changes in the relationship between the U.S. dollar and for-
eign currencies. The Fund may also purchase and sell foreign currency futures
contracts, options thereon and options on foreign currencies.
The Fund may purchase and write (sell) call and put options on securities in
which the Fund is authorized to invest and on stock and debt security indices.
The Fund also may purchase and sell stock index, debt security index and inter-
est rate futures contracts and options thereon and may purchase and sell cov-
ered straddles on securities, stock and debt security indices or currencies or
options on futures contracts on securities indices, or currencies. 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 its 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 by Mitchell Hutchins 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 as-
surance can be given that any strategy used will succeed. If Mitchell Hutchins
incorrectly forecasts
12
<PAGE>
interest rates, market values or other economic factors in utilizing a strategy
for the Fund, the Fund would be in a better position had it not hedged 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 dis-
advantageous time, due to the need for the Fund to maintain "cover" or to seg-
regate securities in connection with hedging transactions and the possible in-
ability of the Fund to close out or to liquidate its hedged position.
New financial products and risk management techniques continue to be devel-
oped. The Fund may use these instruments and techniques to the extent consis-
tent with its investment objective and regulatory and tax considerations.
U.S. GOVERNMENT SECURITIES. The Fund may invest in U.S. government securi-
ties, including direct obligations of the U.S. government (such as Treasury
bills, notes and bonds) and obligations issued by U.S. government agencies and
instrumentalities, including securities that are supported by the full faith
and credit of the United States (such as Government National Mortgage Associa-
tion certificates) and securities that are supported primarily or solely by the
creditworthiness of the issuer (such as securities of the Federal National
Mortgage Association, Federal Home Loan Mortgage Corporation and the Tennessee
Valley Authority).
FOREIGN GOVERNMENT SECURITIES. The Fund may invest in foreign government se-
curities, which generally consist of obligations supported by national, state
or provincial governments or similar political subdivisions. Foreign government
securities also include debt obligations of supranational entities, which in-
clude international organizations designated or supported by governmental enti-
ties to promote economic reconstruction or development, international banking
institutions and related government agencies. Examples include the Inter-na-
tional Bank for Reconstruction and Develop- ment (the World Bank), the European
Coal and Steel Community, the Asian Development Bank and the Inter-American De-
velopment Bank.
Foreign government securities also include debt securities of quasi-govern-
mental agencies and debt securities denominated in multinational currency
units. An example of a multinational currency unit is the European Currency
Unit ("ECU"). An ECU represents specified amounts of the currencies of certain
member states of the European Union. Debt securities of quasi-governmental
agencies are issued by entities owned by either a national, state or equivalent
government or are obligations of a political unit that is not backed by the na-
tional government's full faith and credit and general taxing powers. Foreign
government securities also include mortgage-related securities issued or guar-
anteed by national, state or provincial governmental instrumentalities, includ-
ing quasi-governmental agencies.
Investments in foreign government debt securities involve special risks. The
issuer of the debt or the governmental authorities that control the repayment
of the debt may be unable
13
<PAGE>
or unwilling to pay interest or repay principal when due in accordance with the
terms of such debt, and the Fund may have limited legal recourse in the event
of default. Political condi-tions, especially a sovereign entity's willingness
to meet the terms of its debt obligations, are of considerable significance.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase debt secu-
rities on a "when-issued" basis or may purchase or sell securities for delayed
delivery. In when-issued or delayed delivery transactions, delivery of the se-
curities 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 de-
layed 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 con-
ditions, the Fund's when-issued and delayed delivery purchase commitments could
cause its net asset value per share to be more volatile, because such securi-
ties may increase the amount by which the Fund's total assets, including the
value of when-issued and delayed delivery securities held by the Fund, exceed
its net assets.
ILLIQUID SECURITIES. The Fund may invest up to 10% of its net assets in il-
liquid securities, including certain cover for OTC options and securities whose
disposition is restricted under the federal securities laws (other than "Rule
144A" securities Mitchell Hutchins has determined to be liquid under procedures
approved by the Trust's trustees). Rule 144A establishes a "safe harbor" from
the registration requirements of the Securities Act of 1933 ("1933 Act"). In-
stitutional markets for restricted securities have developed as a result of
Rule 144A, pro- viding both readily ascertainable values for restricted securi-
ties and the ability to liquidate an investment to satisfy share redemption or-
ders. An insufficient number of qualified institutional buyers interested in
purchasing Rule 144A-eligible restricted securities held by the Fund, however,
could affect adversely the marketability of such portfolio securities and the
Fund might be unable to dispose of such securities promptly or at favorable
prices.
OTHER INFORMATION. There can be no assurance that the Fund will achieve its
investment objective. When Mitchell Hutchins believes unusual circumstances
warrant a defensive position, the Fund temporarily may commit all or any por-
tion of its assets to cash (U.S. dollars or foreign currencies) or money market
instruments of U.S. or foreign issuers, including repurchase agreements. The
Fund may hold up to 35% of its total assets in such instruments for liquidity
purposes or pending investment. 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 unrelated to
the coupon rate or maturity of the purchased securities. Although repurchase
agreements carry certain risks not associated with direct investments in secu-
rities, including possible decline in the market value of the underlying secu-
rities and delays and costs to the Fund if the other party to the repurchase
agreement becomes insolvent, the Fund intends to enter into repurchase agree-
ments only with banks and dealers in transactions believed by Mitchell Hutchins
to present minimal credit risks in accordance with guidelines established by
the Trust's board of trustees. The Fund may engage in short sales of securities
"against the box" to defer realization of gains and losses for tax or other
purposes. The Fund may borrow
14
<PAGE>
money for temporary or emergency purposes, but not in excess of 10% of its to-
tal assets.
The Fund's investment objective may not be changed without the affirmative
vote of its shareholders. Certain other investment limitations, as described
in the Statement of Additional Information, also may not be changed without
shareholder approval. All other investment policies may be changed by the
Trust's board of trustees without shareholder approval.
PURCHASES
GENERAL. Class A shares are sold to investors subject to an initial sales
charge.
Class B shares 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 an account. The
minimum initial investment is $1,000, and the minimum for additional purchases
is $100. These minimums may be waived or reduced for investments by employees
of PaineWebber or its affiliates, certain pension plans and retirement accounts
and participants in the Fund's automatic investment plan. Purchase orders will
be priced at the net asset value per share next computed (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 Class A shares. The
Fund and Mitchell Hutchins reserve the right to reject any purchase order and to
suspend the offering of Fund 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 purchases 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.
15
<PAGE>
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
OFFERING NET AMOUNT INVESTED DEALERS AS A PERCENTAGE
AMOUNT OF PURCHASE PRICE (NET ASSET VALUE) OF OFFERING PRICE
---------------------- ------------------------------------- -----------------------
<C> <S> <C> <C>
Less than $50,000 4.50% 4.71% 4.25%
$50,000 to $99,999 4.00 4.17 3.75
$100,000 to $249,999 3.50 3.63 3.25
$250,000 to $499,999 2.50 2.56 2.25
$500,000 to $999,999 1.75 1.78 1.50
$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 Fund 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.
SALES CHARGE WAIVERS--CLASS A SHARES. Class A shares are available without a
sales charge through exchanges for Class A shares of most other PaineWebber or
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 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 minimum
investment requirements and without sales charges by electing to have dividends
and other distributions from their UIT investment automatically invested in
Class A shares.
16
<PAGE>
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 in-
vestor 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 in-
dividual'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 eli-
gible group of individuals for the benefit of the individual and/or the indi-
vidual'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 Infor-
mation 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, howev-
er, 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 repre-
sents (1) capital appreciation of Fund assets, (2) reinvestment of dividends or
capital gain distributions or (3) shares redeemed more than six years after
their purchase. Otherwise, redemptions of Class B shares will be subject to a
contingent deferred sales charge. The amount of any applicable contingent de-
ferred 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
REDEMPTION NET ASSET VALUE
DURING AT REDEMPTION
---------- ---------------
<S> <C>
1st Year Since Purchase......................................... 5%
2nd Year Since Purchase......................................... 4
3rd Year Since Purchase......................................... 3
4th Year Since Purchase......................................... 2
5th Year Since Purchase......................................... 2
6th Year Since Purchase......................................... 1
7th Year Since Purchase......................................... None
</TABLE>
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. 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, re-
alized on the redemption. The amount of any contingent deferred sales charge
will be paid to Mitchell Hutchins.
17
<PAGE>
SALES CHARGE WAIVERS--CLASS B SHARES. The contingent deferred sales charge
will be waived for exchanges, as described below, and for redemptions in con-
nection 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 survi-
vorship. 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 un-
der 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 re-
sulting from a tax-free return of an excess contribution to an IRA.
Contingent deferred sales charge waivers will be granted subject to confirma-
tion (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 sharehold-
er'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 ex-
change 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 re-
demptions 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.
Exchanges are permitted with other PaineWebber and MH/KP mutual funds, in-
cluding:
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
. PW SHORT-TERM U.S. GOVERNMENT INCOME FUND FOR CREDIT UNIONS
. PW STRATEGIC INCOME FUND
. PW U.S. GOVERNMENT INCOME FUND
18
<PAGE>
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 Money Market Fund
PaineWebber clients must place exchange orders through their PaineWebber in-
vestment 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,
Del-aware 19899. All exchanges with the funds listed above will be effected
based on the relative net asset values per share next computed after the ex-
change order is received at PaineWebber's New York City offices or by the
Transfer Agent. See "Valuation of Shares." Fund shares purchased through
PaineWebber or its correspondent firms may be exchanged only after the settle-
ment date has passed and payment for such shares has been made.
OTHER EXCHANGE INFORMATION. This exchange privilege may be modified or termi-
nated at any time, upon at least 60 days' notice when required by SEC rules.
See the Statement of Additional Information for further details. This ex-change
privilege is available only in those jurisdictions where the sale of the
PaineWebber and MH/KP fund shares to be acquired through such exchange 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.
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 re-
deeming shareholder owns shares of more than one Class, the shares will be re-
deemed in the following order unless the shareholder specifically requests oth-
erwise: Class D shares, then Class A shares, and finally Class B shares.
19
<PAGE>
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 computed 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 re-
sponsible for promptly forwarding redemption requests to PaineWebber's New York
City offices.
PaineWebber reserves the right to reject any 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 regis-
tered, (2) a guarantee of the signature of each registered owner by an eligible
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 ex-
change, and (3) other supporting legal documents for estates, trusts, guardian-
ships, custodianships, partnerships and corporations. Shareholders are respon-
sible 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 com-
mercial bank account designated by the shareholder. Questions about this op-
tion, or redemption requirements generally, should be referred to the share-
holder'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 re-
ceived. In the case of purchases by check, this can take up to 15 days.
Because the Fund incurs certain fixed costs in maintaining shareholder ac-
counts, the Fund reserves the right to redeem all Fund shares in any share-
holder account of less than $500 net asset value. If the Fund elects to do so,
it will notify the shareholder and provide the shareholder the opportunity to
increase the amount invested to $500 or more within 60 days of the notice. The
Fund will not redeem accounts that fall below $500 solely as a result of a re-
duction in net asset value per share.
Shareholders who have redeemed Class A shares may reinstate their Fund ac-
count without a sales charge up to the dollar amount redeemed by purchasing
Class A Fund shares within 365 days of the redemption. To take advantage of
this reinstatement privilege, share
20
<PAGE>
holders must notify their PaineWebber investment executive or correspondent
firm at the time the privilege is exercised.
CONVERSION OF CLASS B SHARES
A shareholder's Class B shares will automatically convert to Class A shares
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 conver-
sion 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. 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.
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 Fund shares 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 share-
holder'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 pe-
riod 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 shares
with a value of $5,000 or more or Class B shares with a value of $20,000 or
more may have PaineWebber redeem a portion of their shares monthly, quarterly
or semi-annually under the systematic withdrawal plan. No contingent deferred
sales charge will be imposed on such withdrawals for Class B shares. The mini-
mum amount for all withdrawals of Class A or Class D shares is $100, and mini-
mum 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 may not withdraw an amount exceeding 12% annu-
ally 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 sys-
tematic withdrawal plan. A Class B shareholder's participation in the system-
atic withdrawal plan will terminate automatically if the Initial Account Bal-
ance (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 ag-
gregate 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 Fund shares concurrent with withdrawals are ordinarily disadvan-
tageous to
21
<PAGE>
shareholders because of tax liabilities and, for Class A shares, sales charges.
INDIVIDUAL RETIREMENT ACCOUNTS. Shares of the Fund may be purchased through
IRAs available through the Fund. In addition, a Self-Directed IRA is available
through PaineWebber under which investments may be made in the Fund as well as
in other investments available through PaineWebber. Investors considering es-
tablishing 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. How-
ever, 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.
DIVIDENDS AND TAXES
DIVIDENDS. The Fund pays monthly dividends from its net investment income. In
addition, the Fund may (but is not required to) distribute with any dividend
all or a portion of any net realized gains from foreign currency transactions.
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, together with any undistributed net realized
gains from foreign currency transactions. The Fund may make additional distri-
butions if necessary to avoid a 4% excise tax on certain undistributed income
and capital gain. While the Fund will not declare any distribution in excess of
the amount of net investment income and net realized gains from foreign cur-
rency transactions available for distribution at the time of declaration, it is
possible that net losses from foreign currency transactions after that time
could convert a portion of such a distribution to a non-taxable return of capi-
tal. 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 on Class A shares because of
the higher expenses resulting from distribution fees borne by the Class B and
Class D shares. Dividends on each Class also might be affected differently by
the allocation of other Class-specific expenses. See "Valuation of Shares."
Dividends and other distributions are paid in additional Fund shares of the
same Class at net asset value unless the shareholder has requested cash pay-
ments. Shareholders who wish to receive dividends and/or capital gain distribu-
tions 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, net gains from certain foreign
currency transactions 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 Fund 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 Fund shares) are taxable to its shareholders as long-term
capital gain, regardless of how long they
22
<PAGE>
have held their Fund shares. Shareholders not subject to tax on their income
generally will not be required to pay taxes 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 and of any portion of those dividends that qualifies for the
corporate dividends-received deduction. Under certain circumstances, the no-
tice also will specify the shareholder's share of any foreign taxes paid by
the Fund, in which event the shareholder would be required to include in his
gross income his pro rata share of those taxes, but might be entitled to claim
a credit or deduction for those taxes.
The Fund is required to withhold 31% of all dividends, capital gain distri-
butions and redemption proceeds payable to any individuals and certain other
noncorporate shareholders who do not provide the Fund with a correct taxpayer
identification number. Withholding at that rate also is required from divi-
dends and capital gain distributions payable to those shareholders who other-
wise are subject to backup withholding.
A redemption of Fund shares may result in taxable gain or loss to the re-
deeming shareholder, depending upon whether the redemption proceeds payable to
the shareholder 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 ac-
quires Class A shares of a PaineWebber or MH/KP fund (including the Fund)
without paying a sales charge due to the 365-day reinstatement privilege or
the exchange 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 those shares were acquired, and that amount will
increase the basis of the PaineWebber fund shares subsequently acquired. In
addition, if Fund shares are purchased within 30 days before or after redeem-
ing Fund shares (regardless of Class) at a loss, all or a portion of the loss
will not be deductible and will increase the basis of the newly purchased
shares.
No gain or loss will be recognized to a shareholder as a result of a conver-
sion of Class B shares into Class A shares.
The foregoing is only a summary of some of the important federal tax consid-
erations generally affecting the Fund and its shareholders; see the Statement
of Additional Information for a further discussion. There may be other feder-
al, state or local tax considerations applicable to a particular investor.
Prospective shareholders are therefore urged to consult their tax advisers.
VALUATION OF SHARES
The net asset value of the Fund's shares fluctuates and is determined sepa-
rately for each Class as of the close of regular trading on the NYSE (cur-
rently 4:00 p.m., eastern time) each Business Day. Net asset value per share
is computed 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 when 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 amor-
23
<PAGE>
tized cost method of valuation generally is used to value debt obligations with
60 days or less remaining to maturity, unless the board of trustees determines
that this does not represent fair value. All investments denominated in a for-
eign currency are valued daily in U.S. dollars based on the then-prevailing ex-
change rate.
MANAGEMENT
The Trust's board of trustees, as part of its overall management responsibil-
ity, oversees various organizations responsible for the Fund's day-to-day man-
agement. Mitchell Hutchins, the Fund's investment adviser and administrator,
makes and implements all investment decisions and supervises all aspects of the
Fund's operations. Mitchell Hutchins receives a monthly fee for these services
at the annual rate of 0.70% of the Fund's average daily net assets. Brokerage
transactions for the Fund may be conducted through PaineWebber or its affili-
ates in accordance with procedures adopted by the Trust's board of trustees.
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 1.58%, 2.33% and
2.32%, 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 ad-
viser or sub-adviser of 42 investment companies with 77 separate portfolios and
aggregate assets of over $26.8 billion.
Ellen R. Harris and Karen L. Finkel are primarily responsible for the day-to-
day management of the Fund's equity securities and jointly determine the allo-
cation of Fund assets between equity and debt securities. Ms. Harris has been a
portfolio manager of the Fund since December 1994 and is a vice president of
the Trust and chief domestic equity strategist and a managing director of
Mitchell Hutchins. She has been employed by Mitchell Hutchins as a portfolio
manager since 1983. Mrs. Finkel has been a portfolio manager of the Fund since
March 1995 and is a first vice president of Mitchell Hutchins. She has been em-
ployed by Mitchell Hutchins as a portfolio manager since 1988.
Mary B. King has been primarily responsible for the day-to-day management of
the Fund's debt securities since March 1995 and is a vice president of the
Trust. Mrs. King is a first vice president of Mitchell Hutchins. She has been
employed by Mitchell Hutchins since 1985.
Other members of Mitchell Hutchins' international equities and fixed income
groups provide input on market outlook, interest rate forecasts and other con-
siderations pertaining to global equity and fixed income investments.
Mitchell Hutchins investment personnel may engage in securities transactions
for their own accounts pursuant to a code of ethics which establishes proce-
dures for personal investing and restricts certain transactions.
DISTRIBUTION ARRANGEMENTS. Mitchell Hutchins is the distributor of Fund
shares and has appointed PaineWebber as the exclusive dealer for the sale of
Fund shares. Under sepa- rate distribution plans 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
24
<PAGE>
annual rate of 0.25% of the average daily net assets of each Class of shares
and a monthly distribution fee at the annual rate of 0.75% of the average daily
net assets of the Class B and Class D shares.
Under all three Plans, Mitchell Hutchins uses the service fees 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 execu-
tives to compensate them for shareholder servicing that they perform, and re-
tains 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, commu-
nications equipment, employee salaries and other overhead costs.
Mitchell Hutchins uses the distribution fees under the Class B and Class D
Plans to offset the commissions it pays to PaineWebber for selling 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, respectively, 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 distri-
bution fees to pay additional com- pensation to PaineWebber and other costs al-
located to Mitchell Hutchins' and PaineWebber's distribution activities, in-
cluding employee salaries, bonuses and other overhead expenses.
Mitchell Hutchins expects that, from time to time, PaineWebber will pay
shareholder servicing fees 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 the proceeds for any of
the distribution expenses described above. See "Purchases."
During the period they are in effect, the Plans and related distribution con-
tracts pertaining to each Class of shares ("Distribution Contracts") obligate
the Fund to pay service and distribution fees to Mitchell Hutchins as compensa-
tion for its service and distribution activities, not as reimbursement for spe-
cific expenses incurred. Thus, even if Mitchell Hutchins' expenses exceed its
service and 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 ac-
crued through the termination date will be Mitchell Hutchins' sole responsibil-
ity and not obligations of the Fund. In their annual consideration of the con-
tinuance of each Plan, the trustees will review the Plan and Mitchell Hutchins'
corresponding expenses for each Class separately from the Plans and correspond-
ing expenses for the two other Classes.
25
<PAGE>
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 com-
pound 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 reflects deduction of the maximum initial sales charge at the time of
purchase, and standardized return for the Class B shares 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, un-
less the Class has been in existence for a shorter period. Total return calcu-
lations assume reinvestment of dividends and other distributions.
The Fund may use other total return presentations in conjunction with stan-
dardized 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 the net asset value per share for Class B 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 shares in any
advertisements or promotional materials including Fund performance data. Total
return and yield information reflects past performance and does 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.
GENERAL INFORMATION
ORGANIZATION. PaineWebber Managed Investments Trust is registered with the
SEC as an open-end management investment company and was organized as a Massa-
chusetts 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 repre-
sents interests in the same assets of the Fund. The Classes differ in that (1)
each Class 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 de-
ferred 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 on-
going distribution fees and do not convert into another Class and (5) each
Class may bear differing amounts of certain Class-specific expenses. The
Trust's board of trustees does not anticipate that there will be any conflicts
among the interests of the holders of the different Classes of Fund shares. On
an ongoing basis, the board
26
<PAGE>
of trustees will consider whether any such conflict exists and, if so, take ap-
propriate 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 re-
quested in writing by the shareholders of record holding at least 10% of the
Trust's outstanding shares. Each share of the Fund has equal voting rights, ex-
cept 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 each series of the Trust will be voted sepa-
rately except when an aggregate vote of all series is required by the Invest-
ment Company Act of 1940 ("1940 Act").
To avoid additional operating costs and for investor convenience, the Fund
does not issue share certificates. Ownership of Fund shares is recorded on a
stock register by the Transfer Agent and shareholders have the same rights of
ownership with respect to such shares as if certificates had been issued.
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, One Heri-
tage Drive, North Quincy, Massachusetts 02171 is custodian of the Fund's assets
and employs foreign sub-custodians, approved by the Trust's board of trustees
in accordance with applicable requirements under the 1940 Act, to provide cus-
tody of the Fund's foreign assets. PFPC Inc., a subsidiary of PNC Bank, Na-
tional 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.
27
<PAGE>
APPENDIX
The Fund may use the following hedging instruments:
OPTIONS ON EQUITY AND DEBT SECURITIES AND FOREIGN CURRENCIES--A call option
is a short-term contract pursuant to which the purchaser of the option, in re-
turn for a premium, has the right to buy the security or currency 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 secu-
rity or currency against payment of the exercise price. A put option is a simi-
lar contract that gives its purchaser, in return for a premium, the right to
sell the underlying security or currency at a specified price during the option
term. The writer of the put option, who receives the premium, has the obliga-
tion, upon exercise of the option during the option term, to buy the underlying
security or currency at the exercise price.
OPTIONS ON STOCK AND DEBT SECURITY INDICES--A stock or debt security index
assigns relative values to the securities included in the index and fluctuates
with changes in the market values of those securities. A stock or debt security
index option operates in the same way as a more traditional option on a securi-
ty, except that exercise of a stock or debt security index option is effected
with cash payment and does not involve delivery of securities. Thus, upon exer-
cise of a stock or debt security 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.
STOCK AND DEBT SECURITY INDEX FUTURES CONTRACTS--A stock or debt security in-
dex 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 AND FOREIGN CURRENCY FUTURES CONTRACTS--Interest rate and for-
eign currency futures contracts are bilateral agreements pursuant to which one
party agrees to make, and the other party agrees to accept, delivery of a spec-
ified type of debt security or currency at a specified future time and at a
specified price. Although such futures contracts by their terms call for actual
delivery or acceptance of debt securities or currency, in most cases the con-
tracts 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 op-
tions on securities or currency, except that an option on a futures contract
gives the purchaser the right, in return for the premium, to assume a position
in a futures contract (a long position if the option is a call and a short po-
sition if the option is a put), rather than to purchase or sell a security or
currency, at a specified price at any time during the option term. Upon exer-
cise 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 repre-
sents 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 a put, the exercise price
of the option on the future. The writer of an option, upon exercise, will as-
sume a short position in the case of a call and a long position in the case of
a put.
FORWARD CURRENCY CONTRACTS--A forward currency contract involves an obliga-
tion to purchase or sell a specific currency at a specified future date, which
may be any fixed number of days from the contract date agreed upon by the par-
ties, at a price set at the time the contract is entered into.
28
<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 ($1,000 MINIMUM)
ENCLOSED IS A CHECK FOR $____(payable to PaineWebber
Utility 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 1. Individual / /
Tax ID # ----------- --------------- --------------
- --As joint First Name Last Name MI Soc. Sec. No.
tenants, use
Lines 1 and 2
2. Joint Tenancy / /
---------- ------------- --------------
First Name Last Name MI Soc. Sec. No.
- --As custodian ("Joint Tenants with Rights of Survivorship"
for a minor, unless otherwise specified)
use Lines 1
and 3
3. Gifts to Minors / /
---------------------- --------------
- --In the name Minor's Name Soc. Sec. No.
of a
corporation,
trust or other Uniform Gifts
organization Under the to Minors Act/
or any ----------------------------
fiduciary Uniform Transfers
capacity, use State of Residence of Minor to Minors Act
Line 4
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 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
capital gain distributions will be paid in additional
Fund shares of the same Class.
[5] SPECIAL OPTIONS (For More Information--Check Appropriate Box)
[_] Automatic Investment Plan [_] Prototype IRA Application
[_] Systematic Withdrawal Plan
<PAGE>
[6] RIGHTS OF ACCUMULATION--CLASS A SHARES See Prospectus
Indicate here any other account(s) in the group of
funds that would 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, Partner, Trustee, etc. Date
Title
[9] INVESTMENT EXECUTIVE IDENTIFICATION (To Be Completed By In-
vestment Executive Only)
--------------------------- ---------------------------
Broker No./Name Branch Wire Code
( )
--------------------------- ---------------------------
Branch Address Telephone
[10] CORRESPONDENT FIRM IDENTIFICATION (To Be Completed By Corre-
spondent 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 MONEY MARKET FUND
<PAGE>
Shares of the Fund can be exchanged for shares of the following other
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
.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 UTILITY INCOME FUND
[_] Current Income and Capital Appreciation
[_] Professional Management
[_] Dividend and Capital Gain Reinvestment
[_] Flexible Pricing /SM/
[_] Low Minimum Investment
[_] Automatic Investment Plan
[_] Systematic Withdrawal Plan
[_] Exchange Privileges
[_] Suitable For Retirement Plans
PROSPECTUS
APRIL 1, 1995
