<PAGE>
PAINEWEBBER MUTUAL FUNDS
PROSPECTUS SUPPLEMENT
July 12, 1999
Dear Investor,
This is a supplement to the prospectuses of the PaineWebber Mutual Funds
listed on the reverse side. The purpose of the supplement is to notify you of a
special waiver of the contingent deferred sales charge that usually is charged
when investors sell their Fund shares.
Effective immediately and until September 30, 1999, investors who are non-
resident aliens will be able to sell their Fund shares without incurring a
contingent deferred sales charge, if they use the sales proceeds to immediately
purchase shares of certain offshore investment pools available through
PaineWebber. The Fund will waive the contingent deferred sales charge that
would otherwise apply to a sale of Class A, Class B or Class C shares of the
Fund. Fund shareholders who want to take advantage of this waiver should review
the offering documents of the offshore investment pools for further information,
including investment minimums, and fees and expenses. Shares of the offshore
investment pools are available only in those jurisdictions where the sale is
authorized and are not available to any U.S. person, including, but not limited
to, any citizen or resident of the United States, and U.S. partnership or U.S.
trust, and are not available to residents of certain other countries.
For more information on how to take advantage of the deferred sales charge
waiver, investors should contact their PaineWebber Financial Advisors.
<PAGE>
. PaineWebber Bond Funds
High Income Fund
Investment Grade Income Fund
Low Duration U.S. Government Income Fund
Strategic Income Fund
U.S. Government Income Fund
. PaineWebber Tax-Free Bond Funds
California Tax-Free Income Fund
Municipal High Income Fund
National Tax-Free Income Fund
New York Tax-Free Income Fund
. PaineWebber Asset Allocation Funds
Balanced Fund
Tactical Allocation Fund
. PaineWebber Stock Funds
Financial Services Growth Fund
Growth Fund
Growth and Income Fund
Mid Cap Fund
Small Cap Fund
S&P 500 Index Fund
Tax-Managed Equity Fund
Utility Income Fund
. PaineWebber Global Funds
Asia Pacific Growth Fund
Emerging Markets Equity Fund
Global Equity Fund
Global Income Fund
. PaineWebber Money Market Fund
. PaineWebber Funds of Funds
Aggressive Portfolio
Moderate Portfolio
Conservative Portfolio
