PAINEWEBBER MANAGED INVESTMENTS TRUST, 485BPOS, 2000-02-29

PAINEWEBBER MANAGED INVESTMENTS TRUST
485BPOS, 2000-02-29

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<PAGE>

As filed with the Securities and Exchange Commission on February 29, 2000

1933 Act Registration No. 2-91362
1940 Act Registration No. 811-4040

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-lA

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ]

Post-Effective Amendment No. 66 [ X ]

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

Amendment No. 59 [ X ]

(Check appropriate box or boxes.)

PAINEWEBBER MANAGED INVESTMENTS TRUST
(Exact name of registrant as specified in charter)
51 West 52nd Street
New York, New York 10019-6114
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 713-2000

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

Copies to:
ELINOR W. GAMMON, ESQ.

ROBERT A. WITTIE, ESQ.

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

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

It is proposed that this filing will become effective:
[ ] Immediately upon filing pursuant to Rule 485(b)

[X] On March 1, 2000 pursuant to Rule 485(b)

[ ] 60 days after filing pursuant to Rule 485(a)(1)
[ ] On ________________ pursuant to Rule 485(a)(1)
[ ] 75 days after filing pursuant to Rule 485(a)(2)
[ ] On ________________ pursuant to Rule 485(a)(2)

Title of Securities Being Registered: Class A, B, C and Y Shares of Beneficial
Interest of PaineWebber Asia Pacific Growth Fund.

<PAGE>
PaineWebber
Global Equity Fund

PaineWebber
Global Income Fund

PaineWebber
Asia Pacific
Growth Fund

PaineWebber
Emerging Markets
Equity Fund

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

PROSPECTUS
MARCH 1, 2000

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

This prospectus offers four classes of shares in PaineWebber's four Global
Funds -- Classes A, B, C and Y. Each class has different sales charges and
ongoing expenses. You can choose the class that is best for you based on how
much you plan to invest and how long you plan to hold your fund shares. Class Y
shares are available only to certain types of investors.

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

<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund

Contents
THE FUNDS

<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------
What every investor
should know about PaineWebber Global Equity Fund:
the funds 3 Investment Objective, Strategies and Risks
4 Performance
5 Expenses and Fee Tables
PaineWebber Global Income Fund:
6 Investment Objective, Strategies and Risks
7 Performance
8 Expenses and Fee Tables
Paine Webber Asia Pacific Growth Fund:
9 Investment Objective, Strategies and Risks
10 Performance
11 Expenses and Fee Tables
PaineWebber Emerging Markets Equity Fund:
12 Investment Objective, Strategies and Risks
13 Performance
14 Expenses and Fee Tables
YOUR INVESTMENT

- ----------------------------------------------------------------------------------------------
Information for 17 Managing Your Fund Account
managing your fund --Flexible Pricing
account --Buying Shares
--Selling Shares
--Exchanging Shares
--Pricing and Valuation
ADDITIONAL INFORMATION

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

Additional important 22 Management
information about 23 Dividends and Taxes
the funds 24 Financial Highlights

- ----------------------------------------------------------------------------------------------
Where to learn more Back Cover
about PaineWebber
mutual funds
</TABLE>

The funds are not complete or
balanced investment programs.

- --------------------------------------------------------------------------------
Prospectus Page 2
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Global Equity Fund

PaineWebber Global Equity Fund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS

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

FUND OBJECTIVE

Long-term growth of capital.

PRINCIPAL INVESTMENT STRATEGIES

The fund invests primarily in stocks of companies in the United States and in
foreign countries that are represented in the MSCI Europe, Australia and Far
East Index. The EAFE Index reflects stocks in most developed countries outside
North America. The fund also invests, to a lesser extent, in stocks of issuers
in other countries, including emerging markets, and in U.S. and foreign bonds.

The fund's investment adviser, Mitchell Hutchins Asset Management Inc.,
allocates the fund's assets between U.S. and foreign markets based on how it
expects U.S. stock markets to perform in comparison to stock markets in certain
of the EAFE countries. Mitchell Hutchins may increase the allocation of the
fund's assets to either the U.S. or foreign markets if it believes that one of
those markets has a greater potential for high returns, relative to the risk of
loss. The fund may (but is not required to) use options, futures contracts,
forward currency contracts and other derivatives as part of its investment
strategy or to help manage portfolio risks.

Mitchell Hutchins has appointed Invista Capital Management, LLC as the
sub-adviser for the fund's foreign investments. In buying and selling foreign
stocks for the fund, Invista analyzes the fundamental business prospects of
industries and of individual companies and assesses the relative risks presented
by the countries in which those companies operate.

In buying and selling U.S. stocks for the fund, Mitchell Hutchins uses its own
Factor Valuation Model to identify companies that appear undervalued. The model
ranks companies based on "value" factors, such as dividends, cash flows,
earnings and book values, as well as on "growth" factors, such as earnings
momentum and industry performance forecasts. Mitchell Hutchins then applies
fundamental analysis to select specific stocks from among those identified by
the model.

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund.

Common stocks, which are the fund's main investment, generally fluctuate in
value more than other investments. The fund could lose all of its investment in
a company's stock. Mitchell Hutchins may not be successful in making the best
allocation between U.S. and foreign investments. The value of the fund's foreign
investments may fall due to adverse political, social and economic developments
abroad and adverse changes in foreign currency values relative to the U.S.
dollar. This risk is greater for investments in emerging market issuers than for
issuers in more developed countries. The fund's investments in derivatives may
rise or fall more rapidly than other investments.

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

- - Equity Risk

- - Sector Allocation Risk

- - Foreign Investing Risk

- - Emerging Markets Risk

- - Derivatives Risk

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

- --------------------------------------------------------------------------------
Prospectus Page 3
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Global Equity Fund

PERFORMANCE

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

RISK/RETURN BAR CHART AND TABLE

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

The bar chart shows how the fund's performance has varied from year to year. The
chart shows Class A shares because they have the longest performance history of
any class of fund shares. The chart does not reflect the effect of sales
charges; if it did, the total returns shown would be lower.

The table that follows the chart shows the average annual returns over several
time periods for each class of the fund's shares. That table does reflect fund
sales charges. The table compares fund returns to returns on a broad-based
market index that is unmanaged and that, therefore, does not include any sales
charges or expenses.

The fund's past performance does not necessarily indicate how the fund will
perform in the future. This may be particularly true of the period prior to
October 1, 1998, when Mitchell Hutchins and Invista assumed the day-to-day
management of the fund's assets. Prior to that date, another sub-adviser was
responsible for managing all fund assets.

TOTAL RETURN ON CLASS A SHARES (1992 IS THE FUND'S FIRST FULL CALENDAR YEAR
OF OPERATIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
CALENDAR YEAR PERCENTAGES
<S> <C>
1990
1991
1992 3.26%
1993 30.77%
1994 -2.38%
1995 13.54%
1996 14.80%
1997 6.34%
1998 11.61%
1999 18.19%
</TABLE>

Best quarter during years shown: 1st quarter, 1998--19.22%

Worst quarter during years shown: 3rd quarter, 1998--(19.41%)

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1999

<TABLE>
<CAPTION>
MSCI
CLASS CLASS A CLASS B CLASS C CLASS Y WORLD
(INCEPTION DATE) (11/14/91) (8/25/95) (5/10/93) (5/10/93) INDEX
- ---------------- ---------- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
One Year........................................... 12.86% 12.15% 16.23% 18.57% 20.34%
Five Years......................................... 11.79% N/A 11.95% 13.20% 20.25%
Life of Class...................................... 11.11% 10.71% 10.99% 12.19% *
</TABLE>

- ---------

*Average annual total returns for the MSCI World Index for the life of each
class were as follows: Class A--15.29%; Class B--20.44%; Class C--17.14%; and
Class Y--17.14%.

- --------------------------------------------------------------------------------
Prospectus Page 4
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Global Equity Fund

EXPENSES AND FEE TABLES

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

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

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investments)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a % of offering price)................................ 4.5% None None None
Maximum Contingent Deferred Sales Charge (Load) (CDSC)
(as a % of offering price)................................ None 5% 1% None
Exchange Fee................................................ None None None None
</TABLE>

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

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Management Fees............................................. 0.85% 0.85% 0.85% 0.85%
Distribution and/or Service (12b-1) Fees.................... 0.25 1.00 1.00 None
Other Expenses.............................................. 0.46 0.57 0.49 0.38
---- ---- ---- ----
Total Annual Fund Operating Expenses........................ 1.56% 2.42% 2.34% 1.23%
==== ==== ==== ====
</TABLE>

EXAMPLE

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

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

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Class A..................................................... $602 $ 920 $1,262 $2,223
Class B (assuming sales of all shares at end of period)..... 745 1,055 1,491 2,348
Class B (assuming no sales of shares)....................... 245 755 1,291 2,348
Class C (assuming sales of all shares at end of period)..... 337 730 1,250 2,676
Class C (assuming no sales of shares)....................... 237 730 1,250 2,676
Class Y..................................................... 125 390 676 1,489
</TABLE>

- --------------------------------------------------------------------------------
Prospectus Page 5
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Global Income Fund

PaineWebber Global Income Fund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS

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

FUND OBJECTIVE

Primarily, high current income consistent with prudent investment risk;
secondarily, capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

The fund invests primarily in high quality bonds of governmental and private
issuers in the United States and in developed foreign countries. These high
quality bonds are rated in one of the two highest rating categories or are of
comparable quality. The fund also invests, to a lesser extent, in lower rated
bonds, including bonds of issuers in emerging markets. These may include bonds
that have very low credit ratings but that Mitchell Hutchins Asset Management
Inc., the fund's investment adviser, believes may provide a return that is high
enough to justify the additional risk. Some of the fund's bonds may be backed by
mortgages.

Mitchell Hutchins normally invests a portion of the fund's assets in bonds of
U.S. government and private issuers and allocates the balance of the fund's
portfolio among bonds of issuers in different foreign countries. Mitchell
Hutchins decides which bonds to buy or sell by determining the allocation to
different geographic areas, countries and industries based upon its assessment
of fundamental economic strengths, credit quality and currency and interest rate
trends. The fund may (but is not required to) use options, futures contracts,
forward currency contracts and other derivatives as part of its investment
strategy or to help manage portfolio risks.

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund.

The fund is subject to interest rate risk, which is the risk that the value of
its investments generally will fall when interest rates rise. The value of the
fund's foreign investments also may fall due to adverse political, social and
economical developments abroad and adverse changes in foreign currency values
relative to the U.S. dollar. This risk is greater for investments in emerging
market issuers than for issuers in more developed countries. The fund also is
subject to credit risk, which is the risk that issuers may fail, or become less
able to make principal or interest payments when due. This risk is greater for
bonds rated below investment grade. Investments in foreign government bonds
involve special risks because the fund may have limited legal recourse in the
event of default. The fund is subject to sector allocation risk, which means
that Mitchell Hutchins may not be successful in choosing the best allocation of
the fund's assets between U.S. and foreign issuers.

Because the fund is non-diversified, it can invest more of its assets in a
single issuer than a diversified fund can. As a result, changes in the market
value of a single issuer can have a greater effect on the fund's performance and
share price than if the fund held a smaller position. The fund's investments in
derivatives may rise or fall more rapidly than other investments.

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

- - Interest Rate Risk

- - Foreign Investing Risk

- - Credit Risk

- - Sovereign Risk

- - Sector Allocation Risk

- - Emerging Markets Risk

- - Non-Diversified Status Risk

- - Derivatives Risk

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

- --------------------------------------------------------------------------------
Prospectus Page 6
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Global Income Fund

PERFORMANCE

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

RISK/RETURN BAR CHART AND TABLE

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

The bar chart shows how the fund's performance has varied from year to year. The
chart shows Class B shares because they have the longest performance history of
any class of fund shares. The chart does not reflect the effect of sales
charges; if it did, the total returns shown would be lower.

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

TOTAL RETURN ON CLASS B SHARES

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
CALENDAR YEAR PERCENTAGES
<S> <C>
1990 17.72%
1991 10.75%
1992 0.38%
1993 13.36%
1994 -4.77%
1995 12.39%
1996 6.34%
1997 3.06%
1998 9.73%
1999 -4.89%
</TABLE>

Best quarter during years shown: 3rd quarter, 1991--7.17%

Worst quarter during years shown: 1st quarter, 1994--(3.92)%

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1999

<TABLE>
<CAPTION>
SALOMON SMITH
BARNEY WORLD
CLASS CLASS A CLASS B* CLASS C CLASS Y GOVERNMENT
(INCEPTION DATE) (7/1/91) (3/20/87) (7/2/92) (8/26/91) BOND INDEX
- ---------------- -------- --------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
One Year...................................... (7.77)% (9.43)% (5.09)% (3.60)% (4.27)%
Five Years.................................... 5.16% 4.83% 5.51% 6.36% 6.42%
Ten Years..................................... N/A 6.75% N/A N/A 8.03%
Life of Class................................. 5.58% 7.98% 4.80% 6.35% **
</TABLE>

- ---------

*Assumes conversion of Class B shares to Class A shares after six years.

**Average annual total returns for the Salomon Smith Barney World Government
Bond Index for the life of each class were as follows: Class A--8.15%;
Class B--7.94%; Class C--6.63%; and Class Y--7.82%.

- --------------------------------------------------------------------------------
Prospectus Page 7
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Global Income Fund

EXPENSES AND FEE TABLES

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

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

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investments)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a % of offering price)................................ 4% None None None
Maximum Contingent Deferred Sales Charge (Load) (CDSC)
(as a % of offering price)................................ None 5% 0.75% None
Exchange Fee................................................ None None None None
</TABLE>

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

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Management Fees............................................. 0.75% 0.75% 0.75% 0.75%
Distribution and/or Service (12b-1) Fees.................... 0.25 1.00 0.75 None
Other Expenses.............................................. 0.19 0.36 0.19 0.10
---- ---- ---- ----
Total Annual Fund Operating Expenses........................ 1.19% 2.11% 1.69% 0.85%
==== ==== ==== ====
</TABLE>

EXAMPLE

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

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

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Class A..................................................... $516 $763 $1,028 $1,785
Class B (assuming sales of all shares at end of period)..... 714 961 1,334 1,990
Class B (assuming no sales of shares)....................... 214 661 1,134 1,990
Class C (assuming sales of all shares at end of period)..... 247 533 918 1,998
Class C (assuming no sales of shares)....................... 172 533 918 1,998
Class Y..................................................... 87 271 471 1,049
</TABLE>

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Prospectus Page 8
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Asia Pacific Growth Fund

PaineWebber Asia Pacific Growth Fund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS

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

FUND OBJECTIVE

Long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

The fund invests primarily in stocks of companies in the Asia Pacific Region,
except Japan.

Mitchell Hutchins Asset Management Inc., the fund's investment adviser, has
appointed Schroder Investment Management North America Inc. (SIMNA) as the
fund's sub-adviser. An extensive network of locally based analysts maintained by
the Schroder Group, a large worldwide group of banks and financial services
companies under common ownership with SIMNA, emphasizes fundamental company
analysis, focusing on companies believed to have a sustainable competitive
advantage and whose growth potential is undervalued by other investors. SIMNA
allocates the fund's investments among Asia Pacific region countries based on
its assessment of the likelihood that those countries will have favorable
long-term business environments. In deciding which securities to buy or sell for
the fund, SIMNA analyzes historical growth rates and future growth prospects,
management capability and profit margins, as well as government regulation and
the long-term business environment in the respective country.

The fund may (but is not required to) use options, futures contracts, forward
currency contracts and other derivatives as part of its investment strategy or
to help manage portfolio risks.

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund.

Common stocks, which are the fund's main investment, generally fluctuate in
value more than other investments. The fund could lose all of its investment in
a company's stock. The value of the fund's foreign investments may fall due to
adverse political, social and economic developments abroad and adverse changes
in foreign currency values relative to the U.S. dollar. These risks are greater
for investments in emerging market issuers than for issuers in more developed
countries. The fund's concentration of a significant portion of its assets in
one geographic area, means that it will be more susceptible to factors adversely
affecting that area. The fund's investments in derivatives may rise or fall more
rapidly than other investments.

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

- - Equity Risk

- - Foreign Investing Risk

- - Emerging Markets Risk

- - Regional Concentration Risk

- - Derivatives Risk

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

- --------------------------------------------------------------------------------
Prospectus Page 9
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Asia Pacific Growth Fund

PERFORMANCE

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

RISK/RETURN BAR CHART AND TABLE

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

The bar chart shows how the fund's performance has varied from year to year. The
chart shows Class A shares because they have as long a performance history as
any class of fund shares. The chart does not reflect the effect of sales
charges; if it did, the total returns shown would be lower.

The table that follows the chart shows the average annual returns during the
last calendar year and for the life of the fund for each class of the fund's
shares. That table does reflect fund sales charges. The table compares fund
returns to returns on a broad-based market index that is unmanaged and that,
therefore, does not include any sales charges or expenses.

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

TOTAL RETURN ON CLASS A SHARES (1998 IS THE FUND'S FIRST FULL CALENDAR YEAR
OF OPERATIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
CALENDAR YEAR PERCENTAGES
<S> <C>
1990
1991
1992
1993
1994
1995
1996
1997
1998 -11.74%
1999 67.35%
</TABLE>

Best quarter during the year shown: 2nd quarter, 1999--29.55%

Worst quarter during the year shown: 2nd quarter, 1998--(25.95)%

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1999

<TABLE>
<CAPTION>
MSCI
CLASS CLASS A CLASS B CLASS C CLASS Y ALL COUNTRY ASIA PACIFIC
(INCEPTION DATE) (3/25/97) (3/25/97) (3/25/97) (3/13/98) FREE (EX-JAPAN) INDEX
- ---------------- --------- --------- --------- --------- ------------------------
<S> <C> <C> <C> <C> <C>
One Year.................................... 59.90% 60.97% 65.11% 67.72% 55.23%
Life of Class............................... (2.51)% (2.68)% (1.58)% 20.68% *
</TABLE>

- ---------

*Average annual total returns for the MSCI All Country Asia Pacific Free
(ex-Japan) Index for the life of each class were as follows: Class A--0.37%;
Class B--0.37%; Class C--0.37%; and Class Y--16.87%.

- --------------------------------------------------------------------------------
Prospectus Page 10
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Asia Pacific Growth Fund

EXPENSES AND FEE TABLES

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

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

SHAREHOLDER TRANSACTION EXPENSES (fees paid directly from your investments)

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

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Management Fees............................................. 1.20% 1.20% 1.20% 1.20%
Distribution and/or Service (12b-1) Fees.................... 0.25 1.00 1.00 None
Other Expenses.............................................. 1.28 1.32 1.25 1.14
---- ---- ---- ----
Total Annual Fund Operating Expenses........................ 2.73% 3.52% 3.45% 2.34%
==== ==== ==== ====
</TABLE>

EXAMPLE

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

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Class A..................................................... $714 $1,259 $1,830 $3,373
Class B (assuming sales of all shares at end of period)..... 855 1,380 2,026 3,456
Class B (assuming no sales of shares)....................... 355 1,080 1,826 3,456
Class C (assuming sales of all shares at end of period)..... 448 1,059 1,793 3,730
Class C (assuming no sales of shares)....................... 348 1,059 1,793 3,730
Class Y..................................................... 237 730 1,250 2,676
</TABLE>

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Prospectus Page 11
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Emerging Markets Equity Fund

PaineWebber Emerging Markets Equity Fund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS

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

FUND OBJECTIVE

Long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

The fund invests primarily in stocks of companies in emerging market countries.

Mitchell Hutchins Asset Management Inc., the fund's investment adviser, has
appointed Schroder Investment Management North America Inc. (SIMNA) as the
fund's sub-adviser. An extensive network of locally based analysts maintained by
the Schroder Group, a large worldwide group of banks and financial services
companies under common ownership with SIMNA, emphasizes fundamental company
analysis, focusing on companies believed to have a sustainable competitive
advantage and whose growth potential is undervalued by other investors. SIMNA
allocates the fund's investments among emerging market countries based on its
assessment of the likelihood that those countries will have favorable long-term
business environments. In deciding which securities to buy or sell for the fund,
SIMNA analyzes historical growth rates and future growth prospects, management
capability and profit margins, as well as government regulation and the
long-term business environment in the respective country.

The fund may (but is not required to) use options, futures contracts, forward
currency contracts and other derivatives as part of its investment strategy or
to help manage portfolio risks.

PRINCIPAL RISKS

An investment in the fund is not guaranteed; you may lose money by investing in
the fund.

Common stocks, which are the fund's main investment, generally fluctuate in
value more than other investments. The fund could lose all of its investment in
a company's stock. The value of the fund's foreign investments may fall due to
adverse political, social and economic developments abroad and adverse changes
in foreign currency values relative to the U.S. dollar. These risks are greater
for emerging market issuers than for issuers in more developed countries. The
fund's investments in derivatives may rise or fall more rapidly than other
investments.

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

- - Equity Risk

- - Foreign Investing Risk

- - Emerging Markets Risk

- - Derivatives Risk

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

- --------------------------------------------------------------------------------
Prospectus Page 12
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Emerging Markets Equity Fund

PERFORMANCE

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

RISK/RETURN BAR CHART AND TABLE

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

The fund's past performance does not necessarily indicate how the fund will
perform in the future. This may be particularly true of the period prior to
February 25, 1997, which is when Mitchell Hutchins appointed Schroder Investment
Management as the fund's sub-adviser. Prior to that date, another sub-adviser
was responsible for managing the fund's assets.

TOTAL RETURN ON CLASS A SHARES (1995 IS THE FUND'S FIRST FULL CALENDAR YEAR
OF OPERATIONS)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
CALENDAR YEAR PERCENTAGES
<S> <C>
1990
1991
1992
1993
1994
1995 -11.20%
1996 4.86%
1997 -4.53%
1998 -26.43%
1999 61.44%
</TABLE>

Best quarter during years shown: 4th quarter, 1999--27.28%

Worst quarter during years shown: 2nd quarter, 1998--(22.48)%

AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1999

<TABLE>
<CAPTION>
MSCI
EMERGING
CLASS CLASS A CLASS B CLASS C CLASS Y MARKETS
(INCEPTION DATE) (1/19/94) (12/5/95) (1/19/94) (1/19/94) FREE INDEX
- ---------------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
One Year......................................... 54.20% 55.06% 58.85% 61.92% 66.41%
Five Years....................................... 0.17% N/A 0.26% 1.31% 2.00%
Life of Class.................................... (2.10)% 3.43% (2.13)% (1.12)% *
</TABLE>

- ---------

* Average annual total returns for the MSCI Emerging Markets Free Index for the
life of each class were as follows: Class A--0.08%; Class B--4.92%;
Class C--0.08%; and Class Y--0.08%.

- --------------------------------------------------------------------------------
Prospectus Page 13
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Emerging Markets Equity Fund

EXPENSES AND FEE TABLES

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

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

SHAREHOLDER TRANSACTION EXPENSES(fees paid directly from your investments)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases(as a % of
offering price)........................................... 4.5% None None None
Maximum Contingent Deferred Sales Charge (Load) (CDSC)
(as a % of offering price)................................ None 5% 1% None
Exchange Fee................................................ None None None None
</TABLE>

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

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Management Fees............................................. 1.20% 1.20% 1.20% 1.20%
Distribution and/or Service (12b-1) Fees.................... 0.25 1.00 1.00 None
Other Expenses.............................................. 2.11 2.30 2.23 2.26
---- ---- ---- ----
Total Annual Fund Operating Expenses........................ 3.56% 4.50% 4.43% 3.46%
Expense Reimbursement*...................................... 1.12 1.31 1.24 1.27
---- ---- ---- ----
Net Expenses*............................................... 2.44% 3.19% 3.19% 2.19%
==== ==== ==== ====
</TABLE>

- ---------

*The fund and Mitchell Hutchins have entered into a written expense
reimbursement agreement. Mitchell Hutchins is contractually obligated to
reimburse the fund to the extent that the fund's expenses through March 1, 2001
otherwise would exceed the "Net Expenses" rates for each class as shown above.
The fund has agreed to repay Mitchell Hutchins for those reimbursed expenses if
it can do so over the following three years without causing the fund's expenses
in any of those years to exceed those "Net Expenses" rates.

EXAMPLE

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

The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods unless
otherwise stated. The example also assumes that your investment has a 5% return
each year and that the fund's operating expenses remain the same, except for the
one year period when the fund's expenses are lower due to its reimbursement
agreement with Mitchell Hutchins. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Class A..................................................... $686 $1,393 $2,121 $4,035
Class B (assuming sales of all shares at end of period)..... 822 1,543 2,373 4,171
Class B (assuming no sales of shares)....................... 322 1,243 2,173 4,171
Class C (assuming sales of all shares at end of period)..... 422 1,229 2,146 4,486
Class C (assuming no sales of shares)....................... 322 1,229 2,146 4,486
Class Y..................................................... 222 945 1,689 3,654
</TABLE>

- --------------------------------------------------------------------------------
Prospectus Page 14
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund

MORE ABOUT RISKS AND INVESTMENT
STRATEGIES

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

PRINCIPAL RISKS

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

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

CREDIT RISK. Credit risk is the risk that the issuer of a bond will not make
principal or interest payments when they are due. Even if an issuer does not
default on a payment, a bond's value may decline if the market believes that the
issuer has become less able, or less willing, to make payments on time. Even
high quality bonds are subject to some credit risk. However, credit risk is
greater for lower quality bonds. Bonds that are not investment grade involve
high credit risk and are considered speculative. Lower quality bonds may
fluctuate in value more than higher quality bonds and, during periods of market
volatility, may be more difficult to sell at the time and price a fund desires.

DERIVATIVES RISK. The value of "derivatives" - so-called because their value
"derives" from the value of an underlying asset, reference rate or index - may
rise or fall more rapidly than other investments. For some derivatives, it is
possible for a fund to lose more than the amount it invested in the derivative.
Options, futures contracts and forward currency contracts are examples of
derivatives. A fund's use of derivatives may not succeed for various reasons,
including unexpected changes in the values of the derivatives or the assets
underlying the derivatives. If a fund uses derivatives to adjust or "hedge" the
overall risk of its portfolio, it is possible that the hedge will not succeed.
If changes in the value of the derivatives that are not matched by opposite
changes in the value of the rest of the fund's portfolio.

EMERGING MARKETS RISK. Securities of issuers located in emerging market
countries are subject to all of the risks of other foreign securities (see
below). However, the level of those risks often is higher due to the fact that
social, political, legal and economic systems in emerging market countries may
be less fully developed and less stable than those in developed countries.
Emerging market securities also may be subject to additional risks, such as
lower liquidity and larger or more rapid changes in value.

EQUITY RISK. The prices of common stocks and other equity securities generally
fluctuate more than those of other investments. They reflect changes in the
issuing company's financial condition and changes in the overall market. A fund
may lose a substantial part, or even all, of its investment in a company's
stock.

FOREIGN INVESTING RISK. Foreign investing involves risks relating to political,
social and economic developments abroad to a greater extent than investing in
the securities of U.S. issuers. In addition, there are differences between U.S.
and foreign regulatory requirements and market practices, and foreign
investments denominated in foreign currencies are subject to the risk that the
value of a foreign currency will fall in relation to the U.S. dollar. Currency
exchange rates can be volatile and can be affected by, among other factors, the
general economics of a country, the actions of U.S. and foreign governments or
central banks, the imposition of currency controls and speculation.

INTEREST RATE RISK. The value of bonds generally can be expected to fall when
interest rates rise and to rise when interest rates fall. Interest rate risk is
the risk that interest rates will rise, so that the value of a fund's
investments in bonds will fall. Because interest rate risk is the primary risk
presented by U.S. government and other very high quality bonds, changes in
interest rates may actually have a larger effect on the value of those bonds
than on lower quality bonds.

NON-DIVERSIFIED STATUS RISK. Global Income Fund is non-diversified, which means
that it is not subject to certain limitations on its ability to invest more than
5% of its total assets in securities of a single issuer. When a fund holds a
large position in the securities of one issuer, changes in the financial
condition or in the market's assessment of that issuer may cause larger changes
in its total return and in the price of its shares than if the fund held only a
smaller position.

- --------------------------------------------------------------------------------
Prospectus Page 15
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund

PREPAYMENT RISK. Payments on bonds that are backed by mortgage loans or similar
assets may be received earlier or later than expected due to changes in the rate
at which the underlying loans are prepaid. Prepayments often happen when market
interest rates are falling. As a result, a fund may need to reinvest these early
payments at those lower interest rates, thus reducing its income.

Conversely, when interest rates rise, prepayments may happen more slowly,
causing the underlying loans to be outstanding for a longer time. This can cause
the market value of the security to fall because the market may view its
interest rate as too low for a longer term investment.

REGIONAL CONCENTRATION RISK. Asia Pacific Growth Fund invests primarily in
stocks of companies in the Asia Pacific Region (excluding Japan). As a result,
factors affecting this region will affect the value of the fund's investments
more than if the fund invested in several geographic areas. The Asia Pacific
Region countries in which the fund invests generally have less stable economies,
stock markets, currencies and political systems than countries in Europe or
North America. Also, countries in the Asia Pacific Region generally are heavily
dependent on international trade and on the availability of foreign capital.
This makes these countries more subject to external influences.

SECTOR ALLOCATION RISK. A fund's investment adviser or sub-adviser may not be
successful in choosing the best allocation among geographic or other market
sectors. A fund that allocates its assets among market sectors is more dependent
on its investment adviser's or sub-adviser's ability to successfully assess the
relative values in each sector than are funds that do not do so.

SOVEREIGN RISK. Investments in foreign government bonds involve special risks
because the investors may have limited legal recourse in the event of default.
Political conditions, especially a country's willingness to meet the terms of
its debt obligations, can be of considerable significance.

ADDITIONAL INVESTMENT STRATEGIES

DEFENSIVE POSITIONS; CASH RESERVES. To protect itself from adverse market
conditions, a fund may take a defensive position that is different from its
normal investment strategy. This means that the fund may temporarily invest a
larger-than-normal part, or even all, of its assets in cash or money market
instruments. Since these investments provide relatively low income, a defensive
position may not be consistent with achieving a fund's investment objective.
Each fund may invest up to 35% of its total assets in cash or money market
instruments as a cash reserve for liquidity or other purposes.

PORTFOLIO TURNOVER. Each fund may engage in frequent trading in order to
achieve its investment objective. Frequent trading may result in portfolio
turnover over 100% or more (high portfolio turnover).

Frequent trading may increase the portion of a fund's capital gains that are
realized for tax purposes in any given year. This may increase the fund's
taxable dividends in that year. Frequent trading also may increase the portion
of a fund's realized capital gains that are considered "short-term" for tax
purposes. Shareholders will pay higher taxes on dividends that represent short-
term gains than they would pay on dividends that represent long-term gains.
Frequent trading also may result in higher fund expenses due to transaction
costs.

The funds do not restrict the frequency of trading in order to limit expenses or
the tax effect that the fund's dividends may have on shareholders.

- --------------------------------------------------------------------------------
Prospectus Page 16
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund

MANAGING YOUR FUND ACCOUNT

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

FLEXIBLE PRICING

The funds offer four classes of shares - Class A, Class B, Class C and Class Y.
Each class has different sales charges and ongoing expenses. You can choose the
class that is best for you, based on how much you plan to invest and how long
you plan to hold your fund investment. Class Y shares are only available to
certain types of investors.

Each fund has adopted a plan under rule 12b-1 for its Class A, Class B and
Class C shares that allows it to pay service fees for providing services to
shareholders and (for Class B and Class C shares) distribution fees for the sale
of its shares. Because the 12b-1 distribution fees for Class B and Class C
shares are paid out of a fund's assets on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than if you paid a
front-end sales charge.

CLASS A SHARES

Class A shares have a front-end sales charge that is included in the offering
price of the Class A shares. This sales charge is not invested in the fund.
Class A shares pay an annual 12b-1 service fee of 0.25% of average net assets,
but they pay no 12b-1 distribution fees. The ongoing expenses for Class A shares
are lower than for Class B and Class C shares.

The Class A sales charges for each fund are described in the following tables.

CLASS A SALES CHARGES FOR: GLOBAL EQUITY FUND
ASIA PACIFIC GROWTH FUND
EMERGING MARKETS EQUITY FUND

<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF: DISCOUNT TO SELECTED DEALERS AS
AMOUNT OF INVESTMENT OFFERING PRICE NET AMOUNT INVESTED PERCENTAGE OF OFFERING PRICE
- -------------------- -------------- ------------------- -------------------------------
<S> <C> <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(2)
</TABLE>

CLASS A SALES CHARGES FOR: GLOBAL INCOME FUND

- ---------
(1) A contingent deferred sales charge of 1% of the shares' offering price or
the net asset value at the time of sale by the shareholder, whichever is
less, is charged on sales of shares made within one year of the purchase
date. Class A shares representing reinvestment of dividends are not subject
to this 1% charge. Withdrawals in the first year after purchase of up to 12%
of the value of the fund account under the funds' Systematic Withdrawal Plan
are not subject to this charge.

(2) Mitchell Hutchins pays 1% to PaineWebber.

SALES CHARGE REDUCTIONS AND WAIVERS. You may qualify for a lower sales charge
if you already own Class A shares of a PaineWebber mutual fund. You can combine
the value of Class A shares that you own in other PaineWebber funds and the
purchase amount of the Class A shares of the PaineWebber fund that you are
buying.

- --------------------------------------------------------------------------------
Prospectus Page 17
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund

You may also qualify for a lower sales charge if you combine your purchases with
those of:

- - your spouse, parents or children under age 21;

- - your Individual Retirement Accounts (IRAs);

- - certain employee benefit plans, including 401(k) plans;

- - a company that you control;

- - a trust that you created;

- - Uniform Gifts to Minors Act/Uniform Transfers to Minors Act accounts created
by you or by a group of investors for your children; or

- - accounts with the same adviser.

You may qualify for a complete waiver of the sales charge if you:

- - Are an employee of PaineWebber or its affiliates or the spouse, parent or
child under age 21 of a PaineWebber employee;

- - Buy these shares through a PaineWebber Financial Advisor who was formerly
employed as an investment executive with a competing brokerage firm that was
registered as a broker-dealer with the SEC, and

-- you were the Financial Advisor's client at the competing brokerage firm;

-- within 90 days of buying shares in a fund, you sell shares of one or more
mutual funds that were principally underwritten by the competing brokerage
firm or its affiliates, and you either paid a sales charge to buy those
shares, pay a contingent deferred sales charge when selling them or held
those shares until the contingent deferred sales charge was waived; and

-- you purchase an amount that does not exceed the total amount of money you
received from the sale of the other mutual fund;

- - Acquire these shares through the reinvestment of dividends of a PaineWebber
unit investment trust;

- - Are a 401(k) or 403(b) qualified employee benefit plan with 50 or more
eligible employees in the plan or at least $1 million in assets;

- - Are a participant in the PaineWebber Members Only-SM- Program. For investments
made pursuant to this waiver, Mitchell Hutchins may make payments out of its
own resources to PaineWebber and to participating membership organizations in
a total amount not to exceed 1% of the amount invested; or

- - Acquire these shares through a PaineWebber InsightOne-SM- Program brokerage
account.

NOTE: See the funds' SAI for some other sales charge waivers. If you think you
qualify for any sales charge reductions or waivers, you will need to provide
documentation to PaineWebber or the fund. For more information, you should
contact your PaineWebber Financial Advisor or correspondent firm or call
1-800-647-1568. If you want information on the funds' Systematic Withdrawal
Plan, see the SAI or contact your PaineWebber Financial Advisor or correspondent
firm.

CLASS B SHARES

Class B shares have a contingent deferred sales charge. When you purchase Class
B shares, we invest 100% of your purchase in fund shares. However, you may have
to pay the deferred sales charge when you sell your fund shares, depending on
how long you own the shares.

Class B shares pay an annual 12b-1 distribution fee of 0.75% of average net
assets, as well as an annual 12b-1 service fee of 0.25% of average net assets.
If you hold your Class B shares for six years, they will automatically convert
to Class A shares, which have lower ongoing expenses.

If you sell Class B shares before the end of six years, you will pay a deferred
sales charge. We calculate the deferred sales charge by multiplying the lesser
of the net asset value of the Class B shares at the time of purchase or the net
asset value at the time of sale by the percentage shown below:

<TABLE>
<CAPTION>
PERCENTAGE BY WHICH
IF YOU SELL THE SHARES' NET ASSET
SHARES WITHIN: VALUE IS MULTIPLIED:
- -------------- ---------------------
<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>

We will not impose the deferred sales charge on Class B shares representing
reinvestment of dividends or on withdrawals in any year of up to 12% of the
value of your Class B shares under the Systematic Withdrawal Plan.

To minimize the deferred sales charge, we will assume that you are selling:

- - First, Class B shares representing reinvested dividends and

- - Second, Class B shares that you have owned the longest.

- --------------------------------------------------------------------------------
Prospectus Page 18
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund

SALES CHARGE WAIVERS. You may qualify for a waiver of the deferred sales charge
on a sale of shares if:

- - You participate in the Systematic Withdrawal Plan;

- - You are older than 59 1/2 and are selling shares to take a distribution from
certain types of retirement plans;

- - You receive a tax-free return of an excess IRA contribution;

- - You receive a tax-qualified retirement plan distribution following retirement;

- - The shares are sold within one year of your death and you owned the shares
either (1) as the sole shareholder or (2) with your spouse as a joint tenant
with the right of survivorship; or

- - You are eligible to invest in certain offshore investment pools offered by
PaineWebber, your shares are sold before March 31, 2000, and the proceeds are
used to purchase interests in one or more of those pools.

NOTE: If you think you qualify for any of these sales charge waivers, you will
need to provide documentation to PaineWebber or the fund. For more information,
you should contact your PaineWebber Financial Advisor or correspondent firm or
call 1-800-647-1568. If you want information on the Systematic Withdrawal Plan,
see the SAI or contact your PaineWebber Financial Advisor or correspondent firm.

CLASS C SHARES

Class C shares have a level load sales charge in the form of ongoing 12b-1
distribution fees. When you purchase Class C shares, we will invest 100% of your
purchase in fund shares.

Class C shares pay an annual 12b-1 distribution fee of 0.75% (0.50% for Global
Income Fund) of average net assets, as well as an annual 12b-1 service fee of
0.25% of average net assets. Class C shares do not convert to another class of
shares. This means that you will pay the 12b-1 fees for as long as you own your
shares.

Class C shares also have a contingent deferred sales charge. You may have to pay
the deferred sales charge if you sell your shares within one year of the date
you purchased them. We calculate the deferred sales charge on sales of Class C
shares by multiplying 1.00% (0.75% for Global Income Fund) by the lesser of the
net asset value of the Class C shares at the time of purchase or the net asset
value at the time of sale. We will not impose the deferred sales charge on Class
C shares representing reinvestment of dividends or on withdrawals, in the first
year after purchase, of up to 12% of the value of your Class C shares under the
Systematic Withdrawal Plan.

You may be eligible to sell your shares without paying a contingent deferred
sales charge if you:

- - Are a 401(k) or 403(b) qualified employee benefit plan with fewer than 100
employees or less than $1 million in assets; or

- - Are eligible to invest in certain offshore investment pools offered by
PaineWebber, your shares are sold before March 31, 2000 and the proceeds are
used to purchase interests in one or more of these pools.

NOTE: If you think you qualify for any of these sales charge waivers, you may
need to provide documentation to PaineWebber or the funds. For more information,
you should contact your PaineWebber Financial Advisor or correspondent firm or
call 1-800-647-1568.

If you want information on the funds' Systematic Withdrawal Plan, see the SAI or
contact your PaineWebber Financial Advisor or correspondent firm.

CLASS Y SHARES

Class Y shares have no sales charge. Only specific types of investors can
purchase Class Y shares. You may be eligible to purchase Class Y shares if you:

- - Buy shares through PaineWebber's PACE-SM- Multi-Advisor Program;

- - Buy $10 million or more of PaineWebber fund shares at any one time;

- - Are a qualified retirement plan with 5,000 or more eligible employees or $50
million in assets; or

- - Are an investment company advised by PaineWebber or an affiliate of
PaineWebber.

The trustee of PaineWebber's 401(k) Plus Plan for its employees is also eligible
to purchase Class Y shares.

Class Y shares do not pay ongoing sales or distribution fees or sales charges.
The ongoing expenses for Class Y shares are the lowest for all the classes.

BUYING SHARES

If you are a PaineWebber client, or a client of a PaineWebber correspondent
firm, you can purchase fund shares through your Financial Advisor. Otherwise,
you can invest in the funds through the funds' transfer agent, PFPC Inc. You can
obtain an application by calling 1-800-647-1568. You must complete and sign the
application and mail it, along with a check, to:

PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.

- --------------------------------------------------------------------------------
Prospectus Page 19
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund

If you wish to invest in other PaineWebber Funds, you can do so by:

- - Contacting your Financial Advisor (if you have an account at PaineWebber or at
a PaineWebber correspondent firm);

- - Mailing an application with a check; or

- - Opening an account by exchanging shares from another PaineWebber fund.

You do not have to complete an application when you make additional investments
in the same fund.

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

<TABLE>
<CAPTION>
MINIMUM INVESTMENTS:
<S> <C>
To open an account........... $1,000
To add to an account......... $ 100
</TABLE>

Each fund may waive or reduce these amounts for:

- - Employees of PaineWebber or its affiliates; or

- - Participants in certain pension plans, retirement accounts, unaffiliated
investment programs or the funds' automatic investment plans.

FREQUENT TRADING. The interests of a fund's long-term shareholders and its
ability to manage its investments may be adversely affected when its shares are
repeatedly bought and sold in response to short-term market fluctuations -- also
known as "market timing." When large dollar amounts are involved, the fund may
have difficulty implementing long-term investment strategies because it cannot
predict how much cash it will have to invest. Market timing also may force the
fund to sell portfolio securities at disadvantageous times to raise the cash
needed to buy a market timer's fund shares. These factors may hurt the fund's
performance and its shareholders. When Mitchell Hutchins believes frequent
trading would have a disruptive effect on a fund's ability to manage its
investments, Mitchell Hutchins and the fund may reject purchase orders and
exchanges into the fund by any person, group or account that Mitchell Hutchins
believes to be a market timer. A fund may notify the market timer that a
purchase order or an exchange has been rejected after the day on which the order
is placed.

SELLING SHARES

You can sell your fund shares at any time. If you own more than one class of
shares, you should specify which class you want to sell. If you do not, the fund
will assume that you want to sell shares in the following order: Class A, then
Class C, then Class B and last, Class Y.

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

If you have an account with PaineWebber or a PaineWebber correspondent firm, you
can sell shares by contacting your Financial Advisor.

If you do not have an account at PaineWebber or a correspondent firm, and you
bought your shares through the transfer agent, you can sell your shares by
writing to the fund's transfer agent. Your letter must include:

- - Your name and address;

- - The fund's name;

- - The fund account number;

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

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

Mail the letter to:
PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.

If you sell Class A shares and then repurchase Class A shares of the same fund
within 365 days of the sale, you can reinstate your account without paying a
sales charge.

It costs each fund money to maintain shareholder accounts. Therefore, the funds
reserve the right to repurchase all shares in any account that has a net asset
value of less than $500. If a fund elects to do this with your account, it will
notify you that you can increase the amount invested to $500 or more within 60
days. A fund will not repurchase shares in accounts that fall below $500 solely
because of a decrease in the fund's net asset value.

EXCHANGING SHARES

You may exchange Class A, Class B or Class C shares of each fund for shares of
the same class of most other PaineWebber funds. You may not exchange Class Y
shares.

- --------------------------------------------------------------------------------
Prospectus Page 20
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund

You will not pay either a front-end sales charge or a deferred sales charge when
you exchange shares. However, you may have to pay a deferred sales charge if you
later sell the shares you acquired in the exchange. Each fund will use the date
that you purchased the shares in the first fund to determine whether you must
pay a deferred sales charge when you sell the shares in the acquired fund.

Other PaineWebber funds may have different minimum investment amounts. You may
not be able to exchange your shares if your exchange is not as large as the
minimum investment amount in that other fund.

You may exchange shares of one fund for shares of another fund only after the
first purchase has settled and the first fund has received your payment.

PAINEWEBBER AND CORRESPONDENT FIRM CLIENTS. If you bought your shares through
PaineWebber or a correspondent firm, you may exchange your shares by placing an
order with your Financial Advisor.

OTHER INVESTORS. If you are not a PaineWebber or correspondent firm client, you
may exchange your shares by writing to the fund's transfer agent. You must
include:

- - Your name and address;

- - The name of the fund whose shares you are selling and the name of the fund
whose shares you want to buy;

- - Your account number;

- - How much you are exchanging (by dollar amount or by number of shares to be
sold); and

- - A guarantee of your signature. (See "Buying Shares" for information on
obtaining a signature guarantee.)

Mail the letter to:
PFPC Inc.
Attn.: PaineWebber Mutual Funds
P.O. Box 8950
Wilmington, DE 19899.

A fund may modify or terminate the exchange privilege at any time.

PRICING AND VALUATION

The price at which you may buy, sell or exchange fund shares is based on net
asset value per share. Each fund calculates net asset value on days that the New
York Stock Exchange is open. Each fund calculates net asset value separately for
each class as of the close of regular trading on the NYSE (generally,
4:00 p.m., Eastern time). The NYSE normally is not open, and the funds do not
price their shares, on most national holidays and on Good Friday. If trading on
the NYSE is halted for the day before 4:00 p.m., Eastern time, the fund's net
asset value per share will be calculated as of the time trading was halted.

Your price for buying, selling or exchanging shares will be based on the net
asset value that is next calculated after the fund accepts your order. If you
place your order through PaineWebber, your PaineWebber Financial Advisor is
responsible for making sure that your order is promptly sent to the fund.

You should keep in mind that a front-end sales charge may be applied to your
purchase if you buy Class A shares. A deferred sales charge may be applied when
you sell Class B or Class C shares.

Each fund calculates its net asset value based on the current market value for
its portfolio securities. The funds normally obtain market values for their
securities from independent pricing services that use reported last sales
prices, current market quotations or valuations from computerized "matrix"
systems that derive values based on comparable securities. If a market value is
not available from an independent pricing source for a particular security, that
security is valued at a fair value determined by or under the direction of the
fund's board. The funds normally use the amortized cost method to value bonds
that will mature in 60 days or less.

Judgment plays a greater role in valuing thinly traded securities, including
many lower-rated bonds, because there is less reliable, objective data
available.

The funds calculate the U.S. dollar value of investments that are denominated in
foreign currencies daily, based on current exchange rates. A fund may own
securities, including some securities that trade primarily in foreign markets,
that trade on weekends or other days on which a fund does not calculate net
asset value. As a result, a fund's net asset value may change on days when you
will not be able to buy and sell fund shares. If a fund concludes that a
material change in the value of a foreign security has occurred after the close
of trading in its principal foreign market but before the close of regular
trading on the NYSE, the fund may use fair value methods to reflect those
changes. This policy is intended to assure that the fund's net asset value
fairly reflects security values as of the time of pricing.

- --------------------------------------------------------------------------------
Prospectus Page 21
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund

MANAGEMENT

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

INVESTMENT ADVISERS

Mitchell Hutchins Asset Management Inc. is the investment adviser and
administrator of the funds. Mitchell Hutchins is located at 51 West 52(nd)
Street, New York, New York 10019-6114, and is a wholly owned asset management
subsidiary of PaineWebber Incorporated, which is wholly owned by Paine Webber
Group Inc., a publicly owned financial services holding company. On January 31,
2000, Mitchell Hutchins was adviser or sub-adviser of 31 investment companies
with 75 separate portfolios and aggregate assets of approximately $52.7 billion.

Invista Capital Management, LLC is the sub-adviser for Global Equity Fund's
foreign investments. It is located at 1800 Hub Tower, 699 Walnut, Des Moines,
Iowa 50309. As of December 31, 1999, Invista managed approximately $35.3 billion
in client assets.

Schroder Investment Management North America Inc. is the sub-adviser to Asia
Pacific Growth Fund and Emerging Markets Equity Fund. SIMNA is located at 787
Avenue of the Americas, New York, New York 10019. As of June 30, 1999, SIMNA,
together with its United Kingdom affiliate, Schroder Capital Management
International Limited, had over $36 billion under management.

PORTFOLIO MANAGERS

GLOBAL EQUITY FUND. Mitchell Hutchins is responsible for allocating Global
Equity Fund's assets between U.S. and foreign markets and for managing its U.S.
investments. Since October 1, 1998, T. Kirkham Barneby has been responsible for
the fund's asset allocation decisions. Mr. Barneby is a managing director and
chief investment officer for quantitative investments of Mitchell Hutchins.

Mark A. Tincher has been primarily responsible for the day-to-day management of
the fund's U.S. investments since October 1, 1998. Mr. Tincher is a managing
director and chief investment officer for equities of Mitchell Hutchins. Prior
to joining Mitchell Hutchins in 1995, Mr. Tincher worked for Chase Manhattan
Private Bank, where he was a vice president and directed the U.S. funds
management and equity research area and oversaw the management of all Chase
equity funds.

Scott D. Opsal and Kurtis D. Spieler have been primarily responsible for the
day-to-day management of the fund's foreign investments since October 1, 1998,
when Invista was appointed as the fund's sub-adviser for foreign investments.
Mr. Opsal is an executive vice president and chief investment officer of
Invista, where he has been employed since 1986. Mr. Spieler is a portfolio
manager specializing in the management of international equity portfolios and
serves as the lead manager for Invista's dedicated emerging market portfolios.
He has employed by Invista since 1994.

GLOBAL INCOME FUND. Stuart Waugh and William King are primarily responsible for
the day-to-day management of Global Income Fund. Mr. Waugh has been involved
with the fund since its inception, first as an analyst and then as portfolio
manager since 1993. Mr. Waugh is a managing director of Mitchell Hutchins
responsible for global fixed income investments and currency trading. Mr. Waugh
has been with Mitchell Hutchins since 1983. Mr. King joined Mitchell Hutchins in
November 1995 and assumed his present responsibilities with the fund in 1997.
Prior to 1995, he was at IBM Corporation, where he was responsible for the
management of IBM Pension Fund's global bond portfolio. Both Mr. Waugh and
Mr. King are Chartered Financial Analysts.

Other members of Mitchell Hutchins' international fixed income group provide
information on market outlook, interest rate forecasts and other factors
affecting global fixed income investments.

ASIA PACIFIC GROWTH FUND. Louise Croset and Heather Crighton, with the
assistance of Schroder Investment Management's Asia Pacific Region investment
committee, have been primarily responsible for the day-to-day management of Asia
Pacific Growth Fund since its inception. Ms. Croset is a first vice president
and director of Schroder Investment Management and has been with the firm since
1993. She has managed Asia Pacific Region stocks for the past 15 years.
Ms. Crighton is a first vice president of Schroder Investment Management and has
also been with the firm since 1993. She has managed Asia Pacific Region stocks
for the past 11 years.

- --------------------------------------------------------------------------------
Prospectus Page 22
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund

EMERGING MARKETS EQUITY FUND. John A. Troiano, Ms. Crighton and Mark Bridgeman,
with the assistance of Schroder Investment Management's emerging markets
investment committee, have been primarily responsible for the day-to-day
management of Emerging Markets Equity Fund since Schroder Investment Management
was appointed sub-adviser on February 25, 1997. Mr. Troiano has been chief
executive of Schroder Investment Management since July 1997, and has been
employed by various Schroder Group companies in the portfolio management area
since 1988. He is currently chairman of Schroder Investment Management's
emerging markets investment committee. Ms. Crighton is a first vice president of
Schroder Investment Management and has also been with the firm since 1993. She
has managed Asia Pacific Region stocks for the past 11 years. Mr. Bridgeman
joined Schroder Investment Management in 1990 and has been a vice president and
international fund manager of the firm since 1995.

ADVISORY FEES

The funds paid advisory fees to Mitchell Hutchins for the most recent fiscal
year at the following annual contract rates of average daily net assets:

<TABLE>
<S> <C>
Global Equity Fund....................... 0.85%
Global Income Fund....................... 0.75%
Asia Pacific Growth Fund................. 1.20%
Emerging Markets Equity Fund............. 1.20%
</TABLE>

During the year ended October 31, 1999 Mitchell Hutchins waived a portion of its
advisory and administration fees for each fund. The above percentages excluding
the waiver would be the same since the fee waiver represents less than 0.005%.

OTHER INFORMATION

The funds have received an exemptive order from the SEC that permits their
boards to appoint and replace sub-advisers and to amend sub-advisory contracts
without obtaining shareholder approval. A fund's shareholders must approve this
policy before its board may implement it. The shareholders of Global Equity Fund
have approved this policy. As of March 1, 2000, the shareholders of the other
funds have not been asked to do so.

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

DIVIDENDS AND TAXES

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

DIVIDENDS
Global Income Fund normally declares and pays dividends monthly, and it
distributes substantially all of its gains, if any, annually. The other funds
normally declare and pay dividends and distribute any gains annually.

Classes with higher expenses are expected to have lower dividends. For example,
Class B shares are expected to have the lowest dividends of any class of a
fund's shares, while Class Y shares are expected to have the highest.

You will receive dividends in additional shares of the same class unless you
elect to receive them in cash. Contact your Financial Advisor at PaineWebber or
one of its corresponding firms if you prefer to receive dividends in cash.

TAXES
The dividends that you receive from a fund generally are subject to federal
income tax regardless of whether you receive them in additional fund shares or
in cash. If you hold fund shares through a tax-exempt account or plan, such as
an IRA or 401(k) plan, dividends on your shares generally will not be subject to
tax.

When you sell fund shares, you generally will be subject to federal income tax
on any gain you realize. If you exchange any fund's shares for shares of another
PaineWebber mutual fund, the transaction will be treated as a sale of the first
fund's shares, and any gain will be subject to federal income tax.

Global Income Fund expects that its dividends will be taxed primarily as
ordinary income. The other funds expect that their dividends will be comprised
primarily of capital gain distributions. The distribution of capital gains may
be taxed at a lower rate than ordinary income, depending on whether the fund
held the assets that generated the gains for more than 12 months. Your fund will
tell you how you should treat its dividends for tax purposes.

- --------------------------------------------------------------------------------
Prospectus Page 23
<PAGE>
- --------------------------------------------------------------------------------
--------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund

FINANCIAL HIGHLIGHTS

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

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

The information in the financial highlights has been audited for Global Equity
Fund, Asia Pacific Growth Fund and Emerging Markets Equity Fund by Ernst & Young
LLP, independent auditors and for Global Income Fund by PricewaterhouseCoopers
LLP, independent accountants. The reports of the funds' independent auditors or
independent accountants, along with the funds' financial statements, are
included in the funds' Annual Reports to Shareholders. Annual Reports may be
obtained without charge by calling 1-800-647-1568.

<TABLE>
<CAPTION>
GLOBAL EQUITY FUND
-----------------------------------------------------------------
CLASS A
-----------------------------------------------------------------
FOR THE
FOR THE YEARS ENDED TWO MONTHS FOR THE YEARS ENDED
OCTOBER 31, ENDED AUGUST 31,
------------------------------ OCTOBER 31, -------------------
1999 1998# 1997 1996 1996 1995**
-------- -------- -------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.......................... $ 16.27 $ 18.37 $ 17.43 $ 16.81 $ 16.12 $ 16.98
-------- -------- -------- -------- -------- --------
Net investment income (loss)...... 0.08@ 0.03@ 0.00 (0.02) 0.02 0.02
Net realized and unrealized gains
(losses) from investments and
foreign currency................ 2.38@ 0.35@ 1.52 0.64 1.24 0.37
-------- -------- -------- -------- -------- --------
Net increase (decrease) from
investment operations........... 2.46 0.38 1.52 0.62 1.26 0.39
-------- -------- -------- -------- -------- --------
Dividends from net investment
income.......................... (0.02) -- -- -- -- --
Distributions from net realized
gains from investment
transactions.................... (0.81) (2.48) (0.58) -- (0.57) (1.25)
-------- -------- -------- -------- -------- --------
Total dividends and distributions
to shareholders................. (0.83) (2.48) (0.58) -- (0.57) (1.25)
-------- -------- -------- -------- -------- --------
Net asset value, end of period.... $ 17.90 $ 16.27 $ 18.37 $ 17.43 $ 16.81 $ 16.12
======== ======== ======== ======== ======== ========
Total investment return (1)....... 15.56% 2.53% 8.87% 3.69% 8.06% 3.24%
======== ======== ======== ======== ======== ========
Ratios/Supplemental Data:
Net assets, end of period
(000's)......................... $235,341 $251,680 $294,878 $307,267 $305,218 $360,652
Expenses to average net assets,
net of waivers from adviser
(3)............................. 1.56% 1.55% 1.44% 1.53%* 1.48% 1.71%(2)
Net investment income (loss) to
average net assets, net of
waivers from adviser (3)........ 0.45% 0.17% 0.01% (0.80)%* 0.10% 0.09%(2)
Portfolio turnover rate........... 72% 151% 86% 3% 33% 40%

<CAPTION>
GLOBAL EQUITY FUND
------------------------------------------------------------------------
CLASS B
------------------------------------------------------------------------
FOR THE FOR THE FOR THE PERIOD
FOR THE YEARS ENDED TWO MONTHS YEAR AUGUST 25,
OCTOBER 31, ENDED ENDED 1995++
---------------------------- OCTOBER 31, AUGUST 31, TO AUGUST 31,
1999 1998# 1997 1996 1996 1995**
------- ------- --------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.......................... $ 15.43 $ 17.69 $ 16.93 $ 16.35 $ 15.82 $ 15.83
------- ------- -------- -------- -------- --------
Net investment income (loss)...... (0.06)@ (0.12)@ (0.21) (0.05) (0.12) 0.00
Net realized and unrealized gains
(losses) from investments and
foreign currency................ 2.25@ 0.34@ 1.55 0.63 1.22 (0.01)
------- ------- -------- -------- -------- --------
Net increase (decrease) from
investment operations........... 2.19 0.22 1.34 0.58 1.10 (0.01)
------- ------- -------- -------- -------- --------
Dividends from net investment
income.......................... -- -- -- -- -- --
Distributions from net realized
gains from investment
transactions.................... (0.81) (2.48) (0.58) -- (0.57) --
------- ------- -------- -------- -------- --------
Total dividends and distributions
to shareholders................. (0.81) (2.48) (0.58) -- (0.57) --
------- ------- -------- -------- -------- --------
Net asset value, end of period.... $ 16.81 $ 15.43 $ 17.69 $ 16.93 $ 16.35 $ 15.82
======= ======= ======== ======== ======== ========
Total investment return (1)....... 14.63% 1.62% 8.05% 3.55% 7.18% (0.06)%
======= ======= ======== ======== ======== ========
Ratios/Supplemental Data:
Net assets, end of period
(000's)......................... $27,435 $52,709 $ 87,104 $113,445 $113,235 $142,880
Expenses to average net assets,
net of waivers from adviser
(3)............................. 2.42% 2.38% 2.26% 2.34%* 2.25% 2.17%*(2)
Net investment income (loss) to
average net assets, net of
waivers from adviser (3)........ (0.40)% (0.74)% (0.80)% (1.61)%* (0.68)% (1.92)%*(2)
Portfolio turnover rate........... 72% 151% 86% 3% 33% 40%
</TABLE>

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

* Annualized
** Investment Advisory functions for the Fund were transferred from Kidder
Peabody Asset Management Inc. to Mitchell Hutchins on February 13, 1995.
# Effective October 1, 1998, Invista Capital Management, Inc. began
overseeing the day-to-day management of the foreign portion of the Fund's
assets and Mitchell Hutchins allocates the portfolio between domestic and
foreign investments and manages the domestic portion of the Fund's assets.
@ Calculated using the average monthly shares outstanding for the period.
++ Commencement of offering of shares.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and other
distributions, if any, at net asset value on the payable dates and a sale
at net asset value on the last day of each period reported. The figures do
not include sales charges or program fees; results would be lower if sales
charges or program fees were included. Total investment returns for periods
of less than a year has not been annualized.
(2) These ratios include non-recurring acquisition expenses of 0.06% for
Class A, C and Y shares and 0.00% for Class B shares.
(3) During the year ended October 31, 1999 Mitchell Hutchins waived a portion
of its advisory and administration fees. The ratios excluding the waiver
would be the same since the fee waiver represents less than 0.005%.

- --------------------------------------------------------------------------------
Prospectus Page 24
<PAGE>
- --------------------------------------------------------------------------------
------------------------

PaineWebber Global Equity Fund

<TABLE>
<CAPTION>
GLOBAL EQUITY FUND
------------------------------------------------------------------
CLASS C
------------------------------------------------------------------
FOR THE
FOR THE YEARS ENDED TWO MONTHS FOR THE YEARS ENDED
OCTOBER 31, ENDED AUGUST 31,
------------------------------ OCTOBER 31, --------------------
1999 1998# 1997 1996 1996 1995**
-------- -------- -------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 15.45 $ 17.69 $ 16.93 $ 16.35 $ 15.82 $ 16.81
-------- -------- -------- -------- -------- -------
Net investment income (loss)................. (0.05)@ (0.11)@ (0.23) (0.05) (0.13) (0.11)
Net realized and unrealized gains (losses)
from investments and foreign currency...... 2.25@ 0.35@ 1.57 0.63 1.23 0.37
-------- -------- -------- -------- -------- -------
Net increase (decrease) from investment
operations................................. 2.20 0.24 1.34 0.58 1.10 0.26
-------- -------- -------- -------- -------- -------
Dividends from net investment income......... -- -- -- -- -- --
Distributions from net realized gains from
investment transactions.................... (0.81) (2.48) (0.58) -- (0.57) (1.25)
-------- -------- -------- -------- -------- -------
Total dividends and distributions to
shareholders............................... (0.81) (2.48) (0.58) -- (0.57) (1.25)
-------- -------- -------- -------- -------- -------
Net asset value, end of period............... $ 16.84 $ 15.45 $ 17.69 $ 16.93 $ 16.35 $ 15.82
======== ======== ======== ======== ======== =======
Total investment return (1).................. 14.67% 1.74% 8.05% 3.55% 7.18% 2.46%
======== ======== ======== ======== ======== =======
Ratios/Supplemental Data:
Net assets, end of period (000's)............ $ 32,917 $ 41,103 $ 54,510 $ 67,530 $ 66,585 $83,485
Expenses to average net assets, net of
waivers from adviser (3)................... 2.34% 2.32% 2.20% 2.30%* 2.27% 2.48% (2)
Net investment income (loss) to average net
assets, net of waivers from adviser (3).... (0.33)% (0.65)% (0.75)% (1.57)%* (0.70)% (0.68)%(2)
Portfolio turnover rate...................... 72% 151% 86% 3% 33% 40%

<CAPTION>
GLOBAL EQUITY FUND
----------------------------------------------------------------
CLASS Y
----------------------------------------------------------------
FOR THE
FOR THE YEARS ENDED TWO MONTHS FOR THE YEARS ENDED
OCTOBER 31, ENDED AUGUST 31,
---------------------------- OCTOBER 31, -------------------
1999 1998# 1997 1996 1996 1995**
------- ------- --------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 16.59 $ 18.63 $ 17.60 $ 16.97 $ 16.22 $ 17.03
------- ------- -------- -------- -------- --------
Net investment income (loss)................. 0.14@ 0.09@ 0.10 (0.01) 0.07 0.07
Net realized and unrealized gains (losses)
from investments and foreign currency...... 2.43@ 0.35@ 1.51 0.64 1.25 0.37
------- ------- -------- -------- -------- --------
Net increase (decrease) from investment
operations................................. 2.57 0.44 1.61 0.63 1.32 0.44
------- ------- -------- -------- -------- --------
Dividends from net investment income......... (0.04) -- -- -- -- --
Distributions from net realized gains from
investment transactions.................... (0.81) (2.48) (0.58) -- (0.57) (1.25)
------- ------- -------- -------- -------- --------
Total dividends and distributions to
shareholders............................... (0.85) (2.48) (0.58) -- (0.57) (1.25)
------- ------- -------- -------- -------- --------
Net asset value, end of period............... $ 18.31 $ 16.59 $ 18.63 $ 17.60 $ 16.97 $ 16.22
======= ======= ======== ======== ======== ========
Total investment return (1).................. 15.97% 2.86% 9.31% 3.71% 8.39% 3.54%
======= ======= ======== ======== ======== ========
Ratios/Supplemental Data:
Net assets, end of period (000's)............ $53,334 $51,025 $ 57,683 $ 63,225 $ 61,736 $ 57,150
Expenses to average net assets, net of
waivers from adviser (3)................... 1.23% 1.21% 1.10% 1.18%* 1.17% 1.46%(2)
Net investment income (loss) to average net
assets, net of waivers from adviser (3).... 0.79% 0.50% 0.36% (0.45)%* 0.46% 0.36%(2)
Portfolio turnover rate...................... 72% 151% 86% 3% 33% 40%
</TABLE>

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

- --------------------------------------------------------------------------------
Prospectus Page 25
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Global Income Fund

FINANCIAL HIGHLIGHTS
(Continued)

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL INCOME FUND
----------------------------------------------------
CLASS A
----------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........... $ 10.58 $ 10.27 $ 10.46 $ 10.35 $ 9.99
-------- -------- -------- -------- --------
Net investment income@....................... 0.57 0.62 0.69 0.72 0.77
Net realized and unrealized gains (losses)
from investments and foreign currency@..... (0.82) 0.32 (0.19) 0.13 0.31
-------- -------- -------- -------- --------
Net increase (decrease) from investment
transactions............................... (0.25) 0.94 0.50 0.85 1.08
-------- -------- -------- -------- --------
Dividends from net investment income......... (0.33) (0.50) (0.54) (0.74) (0.72)
Distributions in excess of net investment
income..................................... (0.07) (0.05) (0.06) -- --
Distributions from paid-in capital........... (0.17) (0.08) (0.09) -- --
-------- -------- -------- -------- --------
Total dividends and distributions to
shareholders............................... (0.57) (0.63) (0.69) (0.74) (0.72)
-------- -------- -------- -------- --------
Net asset value, end of year................. $ 9.76 $ 10.58 $ 10.27 $ 10.46 $ 10.35
======== ======== ======== ======== ========
Total investment return(1)................... (2.44)% 9.51% 4.99% 8.60% 11.09%
======== ======== ======== ======== ========
Ratio/Supplemental data:
Net assets, end of year (000's).............. $314,475 $408,190 $486,718 $549,932 $663,022
Expenses to average net assets, net of
waivers from adviser(3).................... 1.19% 1.24% 1.21% 1.27% 1.24%(2)
Net investment income to average net assets,
net of waivers from adviser(3)............. 5.58% 6.07% 6.66% 6.88% 7.47%(2)
Portfolio turnover rate...................... 63% 93% 172% 126% 113%

<CAPTION>
GLOBAL INCOME FUND
--------------------------------------------------------
CLASS B
--------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
------- ------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........... $ 10.54 $ 10.24 $ 10.44 $ 10.31 $ 9.96
------- ------- -------- ---------- ----------
Net investment income@....................... 0.48 0.51 0.58 0.64 0.69
Net realized and unrealized gains (losses)
from investments and foreign currency@..... (0.82) 0.33 (0.17) 0.15 0.30
------- ------- -------- ---------- ----------
Net increase (decrease) from investment
transactions............................... (0.34) 0.84 0.41 0.79 0.99
------- ------- -------- ---------- ----------
Dividends from net investment income......... (0.28) (0.43) (0.48) (0.66) (0.64)
Distributions in excess of net investment
income..................................... (0.06) (0.04) (0.05) -- --
Distributions from paid-in capital........... (0.14) (0.07) (0.08) -- --
------- ------- -------- ---------- ----------
Total dividends and distributions to
shareholders............................... (0.48) (0.54) (0.61) (0.66) (0.64)
------- ------- -------- ---------- ----------
Net asset value, end of year................. $ 9.72 $ 10.54 $ 10.24 $ 10.44 $ 10.31
======= ======= ======== ========== ==========
Total investment return(1)................... (3.29)% 8.53% 4.11% 7.95% 10.24%
======= ======= ======== ========== ==========
Ratio/Supplemental data:
Net assets, end of year (000's).............. $12,187 $33,478 $103,312 $ 307,577 $ 484,534
Expenses to average net assets, net of
waivers from adviser(3).................... 2.11% 2.13% 1.99% 1.99% 2.00%(2)
Net investment income to average net assets,
net of waivers from adviser(3)............. 4.64% 5.16% 5.83% 6.14% 6.71%(2)
Portfolio turnover rate...................... 63% 93% 172% 126% 113%
</TABLE>

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

@ Calculated using the average monthly shares outstanding.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each year reported, reinvestment of all dividends and other
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each year reported. The figures do not
include sales charges or program fees; results would be lower if sales
charges or program fees were included.
(2) These ratios include non-recurring acquisition expenses of 0.04%.
(3) During the year ended October 31, 1999, Mitchell Hutchins waived a portion
of its advisory and administration fees. The ratios excluding the waiver
would be the same since the fee waiver represents less than 0.005%.

- --------------------------------------------------------------------------------
Prospectus Page 26
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Global Income Fund

FINANCIAL HIGHLIGHTS
(Continued)

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL INCOME FUND
-------------------------------------------------------
CLASS C CLASS Y
-------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31, FOR THE YEARS ENDED OCTOBER 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........... $ 10.58 $ 10.26 $ 10.45 $ 10.33 $ 9.98
------- ------- ------- ---------- ----------
Net investment income@....................... 0.52 0.56 0.63 0.67 0.71
Net realized and unrealized gains (losses)
from investments and foreign currency@..... (0.82) 0.33 (0.18) 0.14 0.31
------- ------- ------- ---------- ----------
Net increase (decrease) from investment
transactions............................... (0.30) 0.89 0.45 0.81 1.02
------- ------- ------- ---------- ----------
Dividends from net investment income......... (0.30) (0.46) (0.50) (0.69) (0.67)
Distributions in excess of net investment
income..................................... (0.06) (0.04) (0.06) -- --
Distributions from paid-in capital........... (0.16) (0.07) (0.08) -- --
------- ------- ------- ---------- ----------
Total dividends and distributions to
shareholders............................... (0.52) (0.57) (0.64) (0.69) (0.67)
------- ------- ------- ---------- ----------
Net asset value, end of year................. $ 9.76 $ 10.58 $ 10.26 $ 10.45 $ 10.33
======= ======= ======= ========== ==========
Total investment return(1)................... (2.93)% 9.01% 4.48% 8.12% 10.49%
======= ======= ======= ========== ==========
Ratio/Supplemental data:
Net assets, end of year (000's).............. $21,682 $28,633 $36,935 $ 50,928 $ 71,329
Expenses to average net assets, net of
waivers from adviser(3).................... 1.69% 1.77% 1.69% 1.73% 1.75%(2)
Net investment income to average net assets,
net of waivers from adviser(3)............. 5.08% 5.54% 6.17% 6.40% 6.96%(2)
Portfolio turnover rate...................... 63% 93% 172% 126% 113%

<CAPTION>
GLOBAL INCOME FUND
-------------------------------------------------------------------
CLASS C CLASS Y
-------------------------------------------------------------------
FOR THE YEARS ENDED OCTOBER 31, FOR THE YEARS ENDED OCTOBER 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........... $ 10.58 $ 10.27 $ 10.49 $ 10.35 $ 9.99
---------- ---------- ---------- ---------- ----------
Net investment income@....................... 0.60 0.65 0.71 0.75 0.78
Net realized and unrealized gains (losses)
from investments and foreign currency@..... (0.82) 0.32 (0.21) 0.17 0.32
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from investment
transactions............................... (0.22) 0.97 0.50 0.92 1.10
---------- ---------- ---------- ---------- ----------
Dividends from net investment income......... (0.35) (0.52) (0.56) (0.78) (0.74)
Distributions in excess of net investment
income..................................... (0.07) (0.05) (0.06) -- --
Distributions from paid-in capital........... (0.18) (0.09) (0.10) -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions to
shareholders............................... (0.60) (0.66) (0.72) (0.78) (0.74)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year................. $ 9.76 $ 10.58 $ 10.27 $ 10.49 $ 10.35
========== ========== ========== ========== ==========
Total investment return(1)................... (2.10)% 9.89% 5.20% 9.25% 11.39%
========== ========== ========== ========== ==========
Ratio/Supplemental data:
Net assets, end of year (000's).............. $ 9,735 $ 9,547 $ 10,096 $ 13,077 $ 16,613
Expenses to average net assets, net of
waivers from adviser(3).................... 0.85% 0.96% 0.94% 0.96% 0.95%(2)
Net investment income to average net assets,
net of waivers from adviser(3)............. 5.86% 6.35% 6.93% 7.19% 7.77%(2)
Portfolio turnover rate...................... 63% 93% 172% 126% 113%
</TABLE>

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

- --------------------------------------------------------------------------------
Prospectus Page 27
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Asia Pacific Growth Fund

FINANCIAL HIGHLIGHTS
(Continued)

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

<TABLE>
<CAPTION>
ASIA PACIFIC GROWTH FUND
------------------------------------
CLASS A
------------------------------------
FOR THE YEARS ENDED FOR THE PERIOD
OCTOBER 31, ENDED
-------------------- OCTOBER 31,
1999 1998 1997+
--------- --------- --------------
<S> <C> <C> <C>
Net asset value, beginning of period......... $ 6.82 $ 8.96 $ 12.50
------- ------- -------
Net investment income (loss)................. (0.05)@ 0.00@ 0.03
Net realized and unrealized gains (losses)
from investments and foreign currency...... 2.94@ (2.14)@ (3.57)
------- ------- -------
Net increase (decrease) from investment
operations................................. 2.89 (2.14) (3.54)
------- ------- -------
Net asset value, end of period............... $ 9.71 $ 6.82 $ 8.96
======= ======= =======
Total investment return(1)................... 42.38% (23.88)% (28.32)%
======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's)............ $14,229 $11,526 $21,466
Expenses to average net assets, net of
waivers from adviser(2).................... 2.73% 2.88% 2.33%*
Net investment income (loss) to average net
assets, net of waivers from adviser(2)..... (0.53)% (0.02)% 0.37%*
Portfolio turnover rate...................... 70% 59% 13%
</TABLE>

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

* Annualized
+ For the period March 25, 1997 (commencement of operations) to October 31,
1997.
++ For the period March 13, 1998 (commencement of offering) through October
31, 1998.
@ Calculated using the average monthly shares outstanding for the period.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and other
distributions if any, at net asset value on the payable dates, and a sale
at net asset value on the last day of each period reported. The figures do
not include sales charges or program fees; results would be lower if sales
charges or program fees were included. Total investment returns for periods
less than a year have not been annualized.
(2) During the year ended October 31, 1999 Mitchell Hutchins waived a portion
of its advisory and administration fees. The ratios excluding the waiver
would be the same since the fee waiver represents less than 0.005%.

- --------------------------------------------------------------------------------
Prospectus Page 28
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Asia Pacific Growth Fund

FINANCIAL HIGHLIGHTS
(Continued)

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASIA PACIFIC GROWTH FUND
----------------------------------------
CLASS B
----------------------------------------
FOR THE YEARS ENDED FOR THE PERIOD
OCTOBER 31, ENDED
----------------------- OCTOBER 31,
1999 1998 1997+
---------- ---------- --------------
<S> <C> <C> <C>
Net asset value, beginning of period......... $ 6.74 $ 8.92 $ 12.50
------- ------- -------
Net investment income (loss)................. (0.11)@ (0.06)@ (0.03)
Net realized and unrealized gains (losses)
from investments and foreign currency...... 2.89@ (2.12)@ (3.55)
------- ------- -------
Net increase (decrease) from investment
operations................................. 2.78 (2.18) (3.58)
------- ------- -------
Net asset value, end of period............... $ 9.52 $ 6.74 $ 8.92
======= ======= =======
Total investment return(1)................... 41.25% (24.44)% (28.64)%
======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's)............ $14,589 $12,746 $22,949
Expenses to average net assets, net of
waivers from adviser(2).................... 3.52% 3.63% 3.12%*
Net investment income (loss) to average net
assets, net of waivers from adviser(2)..... (1.34)% (0.78)% (0.43)%*
Portfolio turnover rate...................... 70% 59% 13%

<CAPTION>
ASIA PACIFIC GROWTH FUND
---------------------------------------------------------------------
CLASS C CLASS Y
------------------------------------- -----------------------------
FOR THE YEARS ENDED FOR THE PERIOD FOR THE YEAR FOR THE PERIOD
OCTOBER 31, ENDED ENDED ENDED
-------------------- OCTOBER 31, OCTOBER 31, OCTOBER 31,
1999 1998 1997+ 1999 1998++
---------- ------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 6.74 $ 8.92 $ 12.50 $ 6.79 $ 8.66
------- ------- ------- ------ -------
Net investment income (loss)................. (0.10)@ (0.06)@ (0.03) 0.00@ 0.06@
Net realized and unrealized gains (losses)
from investments and foreign currency...... 2.89@ (2.12)@ (3.55) 2.89@ (1.93)@
------- ------- ------- ------ -------
Net increase (decrease) from investment
operations................................. 2.79 (2.18) (3.58) 2.89 (1.87)
------- ------- ------- ------ -------
Net asset value, end of period............... $ 9.53 $ 6.74 $ 8.92 $ 9.68 $ 6.79
======= ======= ======= ====== =======
Total investment return(1)................... 41.39% (24.44)% (28.64)% 42.56% (21.59)%
======= ======= ======= ====== =======
Ratios/Supplemental Data:
Net assets, end of period (000's)............ $10,052 $ 6,220 $13,887 $ 192 $ 47
Expenses to average net assets, net of
waivers from adviser(2).................... 3.45%* 3.60% 3.10%* 2.34% 2.66%*
Net investment income (loss) to average net
assets, net of waivers from adviser(2)..... (1.23)%* (0.79)% (0.42)%* (0.06)% (1.46)%*
Portfolio turnover rate...................... 70% 59% 13% 70% 59%
</TABLE>

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

- --------------------------------------------------------------------------------
Prospectus Page 29
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Emerging Markets Equity Fund

FINANCIAL HIGHLIGHTS
(Continued)

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING MARKETS EQUITY FUND
--------------------------------------------------------------
CLASS A
--------------------------------------------------------------
FOR THE FOR THE YEARS
FOR THE YEARS ENDED FOUR MONTHS ENDED
OCTOBER 31, ENDED JUNE 30,
--------------------------- OCTOBER 31, ------------------
1999 1998 1997*** 1996 1996 1995**
------ -------- ------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 6.52 $ 9.39 $ 9.46 $ 10.06 $ 9.73 $ 10.79
------ -------- ------ ------- ------- -------
Net investment income (loss)................. (0.02)@ (0.01)@ (0.06) (0.13) (0.14) (0.04)
Net realized and unrealized gains (losses)
from investments and foreign currency...... 2.29@ (2.86)@ (0.01) (0.47) 0.47 (0.97)
------ -------- ------ ------- ------- -------
Net increase (decrease) from investment
operations................................. 2.27 (2.87) (0.07) (0.60) 0.33 (1.01)
------ -------- ------ ------- ------- -------
Dividends from net investment income......... -- -- -- -- -- (0.05)
------ -------- ------ ------- ------- -------
Net asset value, end of period............... $ 8.79 $ 6.52 $ 9.39 $ 9.46 $ 10.06 $ 9.73
====== ======== ====== ======= ======= =======
Total investment return (1).................. 34.82% (30.56)% (0.74)% (5.96)% 3.39% (9.29)%
====== ======== ====== ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's)............ $5,090 $ 4,237 $9,222 $14,992 $20,680 $33,043
Expenses, net of fee waivers, to average net
assets..................................... 2.44% 2.44% 2.44% 2.44%* 2.44% 2.44%
Expenses, before fee waivers, to average net
assets..................................... 3.56% 3.71% 3.01% 3.48%* 3.42% 2.54%
Net investment loss, net of fee waivers, to
average net assets......................... (0.31)% (0.16)% (0.40)% (1.42)%* (0.52)% (0.76)%
Net investment loss, before fee waivers, to
average net assets......................... (1.43)% (1.43)% (0.97)% (2.46)%* (1.50)% (0.86)%
Portfolio turnover rate...................... 80% 64% 87% 22% 69% 76%

<CAPTION>
EMERGING MARKETS EQUITY FUND
------------------------------------------------------------
CLASS B
------------------------------------------------------------
FOR THE
FOR THE YEARS ENDED FOUR MONTHS FOR THE
OCTOBER 31, ENDED PERIOD ENDED
------------------------------- OCTOBER 31, JUNE 30,
1999 1998 1997*** 1996 1996++
------- ------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 6.37 $ 9.19 $ 9.32 $ 9.94 $ 9.13
------- ------- ---------- ---------- ------
Net investment income (loss)................. (0.08)@ (0.08)@ (0.10) (0.07) (0.01)
Net realized and unrealized gains (losses)
from investments and foreign currency...... 2.23@ (2.74)@ (0.03) (0.55) 0.82
------- ------- ---------- ---------- ------
Net increase (decrease) from investment
operations................................. 2.15 (2.82) (0.13) (0.62) 0.81
------- ------- ---------- ---------- ------
Dividends from net investment income......... -- -- -- -- --
------- ------- ---------- ---------- ------
Net asset value, end of period............... $ 8.52 $ 6.37 $ 9.19 $ 9.32 $ 9.94
======= ======= ========== ========== ======
Total investment return (1).................. 33.75% (30.69)% (1.39)% (6.24)% 8.87%
======= ======= ========== ========== ======
Ratios/Supplemental Data:
Net assets, end of period (000's)............ $ 459 $ 461 $ 1,598 $ 879 $ 936
Expenses, net of fee waivers, to average net
assets..................................... 3.19% 3.19% 3.19% 3.19%* 3.19%*
Expenses, before fee waivers, to average net
assets..................................... 4.50% 4.92% 3.82% 4.23%* 4.97%*
Net investment loss, net of fee waivers, to
average net assets......................... (1.06)% (0.99)% (1.25)% (2.12)%* (0.21)%*
Net investment loss, before fee waivers, to
average net assets......................... (2.37)% (2.72)% (1.88)% (3.16)%* (1.99)%*
Portfolio turnover rate...................... 80% 64% 87% 22% 69%
</TABLE>

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

++ For the period December 5, 1995 (commencement of offering of shares) to
June 30, 1996.
@ Calculated using the average shares outstanding for the year.
* Annualized.
** Investment Advisory functions for the Fund were transferred from Kidder
Peabody Asset Management Inc. to Mitchell Hutchins on February 13, 1995.
*** Investment Sub-Advisory functions for the Fund were transferred from
Emerging Markets Management to Schroder Investment Management North America
Inc. effective February 25, 1997.
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends at net
asset value on the payable dates and a sale at net asset value on the last
day of each period reported. The figures do not include sales charges or
program fees; results would be lower if sales charges or program fees were
included. Total investment return for periods of less than one year has not
been annualized.

- --------------------------------------------------------------------------------
Prospectus Page 30
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Emerging Markets Equity Fund

FINANCIAL HIGHLIGHTS
(Continued)

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING MARKETS EQUITY FUND
-------------------------------------------------------------------------
CLASS C
-------------------------------------------------------------------------
FOR THE FOR THE YEARS
FOR THE YEARS ENDED FOUR MONTHS ENDED
OCTOBER 31, ENDED JUNE 30,
------------------------------- OCTOBER 31, -------------------------
1999 1998 1997*** 1996 1996 1995**
------- ------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 6.32 $ 9.17 $ 9.32 $ 9.94 $ 9.67 $ 10.75
------ ------ ---------- ---------- ---------- ----------
Net investment income (loss)................. (0.08)@ (0.08)@ (0.14) (0.22) (0.24) (0.17)
Net realized and unrealized gains (losses)
from investments and foreign currency...... 2.19@ (2.77)@ (0.01) (0.40) 0.51 (0.90)
------ ------ ---------- ---------- ---------- ----------
Net increase (decrease) from investment
operations................................. 2.11 (2.85) (0.15) (0.62) 0.27 (1.07)
------ ------ ---------- ---------- ---------- ----------
Dividends from net investment income......... -- -- -- -- -- (0.01)
------ ------ ---------- ---------- ---------- ----------
Net asset value, end of period............... $ 8.43 $ 6.32 $ 9.17 $ 9.32 $ 9.94 $ 9.67
====== ====== ========== ========== ========== ==========
Total investment return (1).................. 33.39% (31.08)% (1.61)% (6.24)% 2.79% (10.01)%
====== ====== ========== ========== ========== ==========
Ratios/Supplemental Data:
Net assets, end of period (000's)............ $2,126 $2,575 $ 5,345 $ 7,882 $ 11,561 $ 18,551
Expenses, net of fee waivers, to average net
assets..................................... 3.19% 3.19% 3.19% 3.19%* 3.19% 3.19%
Expenses, before fee waivers, to average net
assets..................................... 4.43% 4.42% 3.78% 4.23%* 4.17% 3.29%
Net investment loss, net of fee waivers, to
average net assets......................... (1.06)% (0.96)% (1.18)% (2.16)%* (1.28)% (1.50)%
Net investment loss, before fee waivers, to
average net assets......................... (2.30)% (2.19)% (1.77)% (3.20)%* (2.26)% (1.60)%
Portfolio turnover rate...................... 80% 64% 87% 22% 69% 76%

<CAPTION>
EMERGING MARKETS EQUITY FUND
-----------------------------------------------------------------
CLASS Y
-----------------------------------------------------------------
FOR THE FOR THE YEARS
FOR THE YEARS ENDED FOUR MONTHS ENDED
OCTOBER 31, ENDED JUNE 30,
----------------------------- OCTOBER 31, -------------------
1999 1998 1997*** 1996 1996 1995**
------- -------- -------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 6.58 $ 9.46 $ 9.51 $ 10.11 $ 9.75 $ 10.80
------ ------- ------- ------- ------- -------
Net investment income (loss)................. 0.00@ (0.01)@ (0.02) (0.05) (0.01) 0.01
Net realized and unrealized gains (losses)
from investments and foreign currency...... 2.31@ (2.87)@ (0.03) (0.55) 0.37 (0.99)
------ ------- ------- ------- ------- -------
Net increase (decrease) from investment
operations................................. 8.89 (2.88) (0.05) (0.60) 0.36 (0.98)
------ ------- ------- ------- ------- -------
Dividends from net investment income......... -- -- -- -- -- (0.07)
------ ------- ------- ------- ------- -------
Net asset value, end of period............... $ 8.89 $ 6.58 $ 9.46 $ 9.51 $ 10.11 $ 9.75
====== ======= ======= ======= ======= =======
Total investment return (1).................. 35.11% (30.44)% (0.53)% (5.93)% 3.69% (9.03)%
====== ======= ======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's)............ $ 804 $ 877 $10,053 $11,375 $12,979 $12,332
Expenses, net of fee waivers, to average net
assets..................................... 2.19% 2.19% 2.19% 2.19%* 2.19% 2.19%
Expenses, before fee waivers, to average net
assets..................................... 3.46% 3.36% 2.69% 3.23%* 3.29% 2.29%
Net investment loss, net of fee waivers, to
average net assets......................... (0.03)% (0.08)% (0.15)% (1.13)%* (0.15)% (0.51)%
Net investment loss, before fee waivers, to
average net assets......................... (1.31)% (1.25)% (0.65)% (2.17)%* (1.25)% (0.61)%
Portfolio turnover rate...................... 80% 64% 87% 22% 69% 76%
</TABLE>

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

- --------------------------------------------------------------------------------
Prospectus Page 31
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Global Equity Fund PaineWebber Asia Pacific Growth Fund
PaineWebber Global Income Fund PaineWebber Emerging Markets Equity Fund

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
TICKER SYMBOL: Global Equity Fund Class A: KPGEX.Q Asia Pacific Growth Fund Class A: PPGAX.Q
B: KPGLX.Q B: PPGBX.Q
C: KPGBX.Q C: PPGCX.Q
Y: KPGCX.Q Y: None
Global Income Fund Class A: PGBAX.Q Emerging Markets Equity Fund Class A: KPEAX.Q
B: PGBBX.Q B: None
C: PWIDX.Q C: KPEBX.Q
Y: None Y: None
</TABLE>

For investors who want more information about the funds, the following documents
are available free upon request:

ANNUAL/SEMI-ANNUAL REPORTS

Additional information about the funds' investments is available in the funds'
annual and semi-annual reports to shareholders. In the funds' annual reports,
you will find a discussion of the market conditions and investment strategies
that significantly affected the funds' performance during the last fiscal year.

STATEMENT OF ADDITIONAL INFORMATION (SAI)

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

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

You may review and copy information about the funds, including shareholder
reports and the SAI, at the Public Reference Room of the Securities and Exchange
Commission. You may obtain information about the operations of the SEC's Public
Reference Room by calling the SEC at 1-202-942-8090. You can get text-only
copies of reports and other information about the funds:

- - For a fee, by electronic request or by writing the SEC's Public Reference
Room, Washington, D.C. 20549-0102; or

- - Free from the EDGAR Database on the SEC's Internet website at:
http://www.sec.gov

PaineWebber Investment Trust
- --PaineWebber Global Equity Fund
Investment Company Act File No. 811-6292

PaineWebber Series Trust
- --PaineWebber Global Income Fund
Investment Company Act File No. 811-5259

PaineWebber Managed Investments Trust
- --PaineWebber Asia Pacific Growth Fund
Investment Company Act File No. 811-4040

PaineWebber Investment Trust II
- --PaineWebber Emerging Markets Equity Fund
Investment Company Act File No. 811-7104

- --------------------------------------------------------------------------------
_______________

<PAGE>

PAINEWEBBER GLOBAL EQUITY FUND
PAINEWEBBER GLOBAL INCOME FUND
PAINEWEBBER ASIA PACIFIC GROWTH FUND
PAINEWEBBER EMERGING MARKETS EQUITY FUND

51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6114

STATEMENT OF ADDITIONAL INFORMATION

The four funds named above are series of professionally managed
open-end management investment companies (each a "Trust"). PaineWebber Global
Equity Fund is a diversified series of PaineWebber Investment Trust
("Investment Trust"). PaineWebber Global Income Fund is a non-diversified
series of PaineWebber Investment Series ("Investment Series"). PaineWebber
Asia Pacific Growth Fund is a diversified series of PaineWebber Managed
Investments Trust ("Managed Trust"). PaineWebber Emerging Markets Equity Fund
is a diversified series of PaineWebber Investment Trust II ("Investment Trust
II").

The investment adviser, administrator and distributor for each fund
is Mitchell Hutchins Asset Management Inc. ("Mitchell Hutchins"), a wholly
owned asset management subsidiary of PaineWebber Incorporated
("PaineWebber"). As distributor for the funds, Mitchell Hutchins has
appointed PaineWebber to serve as the exclusive dealer for the sale of fund
shares. Invista Capital Management, LLC ("Invista") serves as sub-adviser for
the foreign investments of Global Equity Fund. Schroder Investment Management
North America Inc. ("SIMNA") serves as sub-adviser for Asia Pacific Growth
Fund and Emerging Markets Equity Fund.

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

This is not a prospectus and should be read only in conjunction with
the funds' current Prospectus, dated March 1, 2000. A copy of the Prospectus
may be obtained by calling any PaineWebber Financial Advisor or correspondent
firm or by calling toll-free 1-800-647-1568. This SAI is dated March 1, 2000.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
The Funds and Their Investment Policies........................................................... 2
The Funds' Investments, Related Risks and Limitations............................................. 5
Strategies Using Derivative Instruments........................................................... 27
Organization; Trustees and Officers; Principal Holders and Management Ownership of Securities..... 36
Investment Advisory, Administration and Distribution Arrangements................................. 45
Portfolio Transactions............................................................................ 53
Reduced Sales Charges, Additional Exchange and Redemption Information and Other Services.......... 55
Conversion of Class B Shares...................................................................... 61
Valuation of Shares............................................................................... 61
Performance Information........................................................................... 62
Taxes............................................................................................. 66
Other Information................................................................................. 70
Financial Statements.............................................................................. 72
Appendix.......................................................................................... A-1
</TABLE>

<PAGE>

THE FUNDS AND THEIR INVESTMENT POLICIES

No fund's investment objective may be changed without shareholder
approval. Except where noted, the other investment policies of each fund may
be changed by its board without shareholder approval. As with other mutual
funds, there is no assurance that a fund will achieve its investment
objective.

PAINEWEBBER GLOBAL EQUITY FUND'S investment objective is long-term
growth of capital. The fund invests primarily in equity securities issued by
companies in developed foreign countries, as well as in the United States.
Under normal circumstances, the fund invests at least 80% of its total assets
in securities of issuers in the United States and countries represented in
the Morgan Stanley Capital International ("MSCI") Europe, Australia and Far
East Index ("EAFE Index"). The EAFE Index is a well known index that reflects
most major equity markets outside the United States. The fund may invest up
to 20% of its total assets in securities of issuers located in other
countries (for example, Canada and emerging markets).

Global Equity Fund normally invests in at least three countries, one
of which is typically the United States. The fund considers an issuer to be
located in the country in which the issuer (a) is organized, (b) derives at
least 50% of its revenues or profits from goods produced or sold, investments
made or services performed, (c) has at least 50% of its assets situated or
(d) has the principal trading market for its securities. The fund normally
invests at least 65% of its total assets in equity securities of foreign and
U.S. companies. As part of the U.S. portion of its portfolio, the fund may
invest up to 10% of its total assets in U.S. dollar-denominated equity
securities or bonds of foreign issuers that are traded on recognized U.S.
exchanges or in the U.S. over-the-counter market.

When Mitchell Hutchins or Invista believes it is consistent with
Global Equity Fund's investment objective, the fund may invest up to 35% of
its total assets in investment grade bonds that are issued by corporate or
governmental entities and that have maturities no longer than seven years.
The fund may invest up to 10% of its net assets in convertible securities
rated below investment grade. When Mitchell Hutchins or Invista considers
market, economic, political or currency conditions abroad to be unstable, the
fund may assume a temporary defensive position by investing all or a
significant portion of its assets in securities of U.S. and Canadian issuers
or by holding cash or short-term money market instruments. The fund may
invest up to 35% of its total assets in cash or investment grade money market
instruments for liquidity purposes, pending investment in other securities or
to reinvest cash collateral from securities lending.

Mitchell Hutchins reevaluates the allocation of the fund's assets
between U.S. and foreign securities monthly and does not expect to reallocate
the fund's assets to reflect relatively minor changes (that is, less than 5%)
in the asset allocation model employed. When Mitchell Hutchins determines
that a reallocation of the fund's assets is appropriate, the fund may effect
the reallocation by using cash available from the purchase of fund shares or
by selectively selling securities in a region to meet share redemption
requests in addition to buying or selling portfolio securities specifically
to implement a reallocation. The fund also may use futures contracts and
forward currency contracts to adjust its exposure to U.S. and foreign stock
markets. Mitchell Hutchins determines the extent to which the fund uses
futures contracts and forward currency contracts for this purpose and is
responsible for implementing these transactions.

Mitchell Hutchins uses its proprietary Factor Valuation Model to
identify possible U.S. investments for the fund. While Mitchell Hutchins
tends to favor stocks that rank high in all categories considered by the
Factor Valuation Model, the fund may invest in companies that rank high in
only a few categories. Mitchell Hutchins or Invista may sell a portfolio
security for a number of reasons, such as the company's reporting lower
earnings than expected, the company's stock price reaching the target price
set by research analysts or a decline in the company's ranking by the Factor
Valuation Model.

Global Equity Fund may invest up to 10% of its net assets in
illiquid securities. The fund may purchase securities on a when-issued or
delayed delivery basis, but these securities may not exceed 10% of its net
assets. The fund may lend its portfolio securities to qualified
broker-dealers or institutional investors in an amount up to 33 1/3% of its
total assets. The fund may borrow money from banks or through reverse
repurchase agreements for

<PAGE>

temporary or emergency purposes but not in excess of 20% of its total assets.
The fund may invest in the securities of other investment companies and may
sell short "against the box."

PAINEWEBBER GLOBAL INCOME FUND'S primary investment objective is
high current income consistent with prudent investment risk; capital
appreciation is a secondary objective. The fund invests principally in
high-quality bonds issued or guaranteed by foreign governments, the U.S.
government, their respective agencies or instrumentalities or supranational
organizations or issued by U.S. or foreign companies.

Global Income Fund's portfolio consists primarily of bonds rated
within one of the two highest grades assigned by Standard & Poor's, a
division of The McGraw-Hill Companies, Inc. ("S&P"), Moody's Investors
Service, Inc. ("Moody's") or another nationally or internationally recognized
statistical rating organization ("rating agency") or, if unrated, determined
by Mitchell Hutchins to be of comparable quality. Normally, at least 65% of
the fund's total assets consists of high-quality bonds (and receivables from
the sale of such bonds) denominated in foreign currencies or U.S. dollars of
issuers located in at least three of the following countries: Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong,
Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal,
Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United
States. No more than 40% of the fund's total assets is normally invested in
securities of issuers located in any one country other than the United
States. At least 65% of the fund's total assets normally is invested in
income-producing securities, a term that may include zero coupon securities
and other bonds sold with a discount. Up to 5% of the fund's total assets may
be invested in bonds convertible to equity securities.

Global Income Fund may invest up to 35% of its total assets in bonds
rated below the two highest grades assigned by a rating agency. Except as
noted below, these securities must be investment grade (that is, rated at
least BBB by S&P, Baa by Moody's or comparably rated by another rating agency
or, if unrated, determined by Mitchell Hutchins to be of comparable quality).
Within this 35% limitation, the fund may invest up to 20% of its total assets
in bonds that are below investment grade. These bonds may be rated as low as
D by S&P, C by Moody's or comparably rated by another rating agency or, in
the case of bonds assigned a short-term debt rating, as low as D by S&P or
comparably rated by another rating agency or, if not so rated, determined by
Mitchell Hutchins to be of comparable quality. Bonds rated D by S&P are in
payment default or the rating is assigned upon the filing of a bankruptcy
petition or the taking of a similar action if payments on an obligation are
jeopardized. Bonds rated C by Moody's are in the lowest rated class and can
be regarded as having extremely poor prospects of attaining any real
investment standing. Mitchell Hutchins will purchase these securities for the
fund only when it concludes that the anticipated return to the fund on the
investment warrants exposure to the additional level of risk. Lower-rated
bonds are often issued by businesses and governments in emerging markets.
Because the fund may also invest in emerging market bonds that are investment
grade, the fund's total investment in emerging market bonds may exceed 20% of
its total assets.

If, due to a downgrade of one or more bonds, an amount in excess of
20% of Global Income Fund's total assets is held in securities rated below
investment grade and comparable unrated securities, Mitchell Hutchins will
engage in an orderly disposition of such securities to the extent necessary
to ensure that the fund's holdings of these securities do not exceed 20% of
its total assets.

Global Income Fund may invest up to 35% of its total assets in
mortgage-backed securities of U.S. or foreign issuers that are rated in one
of the two highest rating categories by S&P, Moody's or another rating agency
or, if unrated, determined by Mitchell Hutchins to be of comparable quality.
Up to 20% of the fund's total assets may be invested in bonds that are not
paying current income. The fund may purchase these bonds if Mitchell Hutchins
believes that they have a potential for capital appreciation. The fund also
may invest in secured and unsecured fixed or floating rate loans in the form
of participations and assignments.

Global Income Fund may invest up to 35% of its total assets in cash
or investment grade money market instruments as part of its ordinary
investment activities. The fund's investment of cash collateral from
securities lending in these money market instruments is not subject to this
35% limitation, and there is no limitation on the fund's investments in
short-term bonds denominated in foreign currencies.

<PAGE>

Global Income Fund may invest up to 10% of its net assets in
illiquid securities. The fund may purchase securities on a when-issued or
delayed delivery basis. The fund may lend its portfolio securities to
qualified broker-dealers or institutional investors in an amount up to
33 1/3% of its total assets. The fund may borrow money from banks or through
reverse repurchase agreements for temporary or emergency purposes but not in
excess of 10% of its total assets. The fund may invest in the securities of
other investment companies and may sell short "against the box."

PAINEWEBBER ASIA PACIFIC GROWTH FUND'S investment objective is
long-term capital appreciation. The fund seeks to achieve its objective by
investing primarily in equity securities of companies in the Asia Pacific
Region, except Japan. The fund considers the "Asia Pacific Region" to be the
region located south of the former Soviet Union, east of Afghanistan and Iran
and west of the International Date Line, but excluding Japan. The Asia
Pacific Region countries that currently have established securities markets
and that SIMNA normally considers for investments by the fund include
Australia, China, Hong Kong, India, Indonesia, Malaysia, New Zealand,
Pakistan, the Philippines, Singapore, South Korea, Sri Lanka, Taiwan and
Thailand. The fund may also invest in other Asia Pacific Region countries
whose markets become sufficiently established. Except under unusual
conditions, the fund invests in a minimum of three, and generally in more,
Asia Pacific Region countries. The fund invests across a broad spectrum of
industries, including trade, finance, real estate, transportation,
communications, energy, construction, manufacturing, services, food
processing and others. The mix of industries and countries changes over time
as investment opportunities change.

Asia Pacific Growth Fund defines Asia Pacific Region companies as
companies:

<TABLE>
<S> <C>
- that are organized under the laws of countries in the Asia Pacific
Region that now or in the future permit foreign investors to
participate in their stock markets,

- that regardless of where organized, and as determined by SIMNA,
either (1) derive at least 50% of their revenues from goods
produced or sold, investments made or services performed in Asia
Pacific Region countries or (2) maintain at least 50% of their
assets in Asia Pacific Region countries, or

- for which the principal trading market is an exchange or
over-the-counter market in the Asia Pacific Region.
</TABLE>

Each year, the Schroder Group (a large worldwide group of banks and
financial services companies under common ownership with SIMNA) researches
and conducts on-site visits with approximately 1,200 companies in Asia
Pacific Region countries. Of those companies, the Schroder Group's investment
professionals further develop extensive management contacts with, and produce
independent forecasts of earnings estimates for, approximately 550 companies.
SIMNA's analysis includes small and medium-size companies, as well as larger
capitalization companies.

Asia Pacific Growth Fund's investments have included securities
issued by Malaysian companies. As of the date of this SAI, restrictions
imposed by the Malaysian government may impose a significant exit levy on
repatriated investments.

Under normal market conditions, Asia Pacific Growth Fund invests at
least 65% of its total assets in equity securities of Asia Pacific Region
companies. Most of the equity securities purchased by the fund are expected
to be traded on a foreign stock exchange or in a foreign over-the-counter
market. When SIMNA believes it is consistent with the fund's investment
objective, the fund may invest up to 10% of its total assets in convertible
and non-convertible bonds (which may be below investment grade) that are
issued or guaranteed by Asia Pacific Region issuers, including obligations of
sovereign governmental issuers.

Asia Pacific Growth Fund may invest up to 35% of its total assets in
cash or investment grade money market instruments for liquidity purposes,
pending investment in other securities or to reinvest cash collateral from
securities lending. Asia Pacific Growth Fund may invest up to 15% of its net
assets in illiquid securities. The fund may lend its portfolio securities to
qualified broker-dealers or institutional investors in an amount up to
33 1/3% of

<PAGE>

its total assets. The fund may borrow money from banks or through reverse
repurchase agreements for temporary or emergency purposes but not in excess
of 33 1/3% of its total assets. The fund may invest in the securities of
other investment companies and may sell short "against the box."

PAINEWEBBER EMERGING MARKETS EQUITY FUND'S investment objective is
long-term capital appreciation. The fund invests in a diversified portfolio
consisting primarily of equity securities of issuers in emerging markets.
"Emerging markets" are the markets in all the countries not included in the
Morgan Stanley Capital International ("MSCI") World Index, an index of major
world economies. Under normal market conditions, the fund invests at least
65% of its total assets in equity securities of issuers located in emerging
market countries and maintains investments in at least three emerging market
countries. The fund considers issuers to be located in an emerging market
country if

<TABLE>
<S> <C>
- the principal securities trading market for the issuer is in an
emerging market country,

- the issuer derives 50% or more of its annual revenue or profit
from either goods produced, sales made, investments made or
services performed in emerging market countries, or

- the issuer is organized under the laws of an emerging market
country.
</TABLE>

Generally, SIMNA will invest no more than 35% of Emerging Markets
Equity Fund's total assets in any single country. The fund also does not
invest 25% or more of its total assets in any single industry. The fund
diversifies its investments within each emerging market by investing in a
number of local companies that SIMNA believes are characterized by attractive
valuation relative to expected growth. SIMNA attempts to spread the fund's
investments over geographic as well as economic sectors.

There are currently over 60 newly industrializing and developing
countries with equity markets. A number of these emerging markets are not yet
easily accessible to foreign investors and have unattractive tax barriers or
insufficient liquidity to make significant investments by the fund feasible
or attractive. However, many of the largest of the emerging market countries
have liberalized access in recent years, and more are expected to do so in
the future.

SIMNA believes that one of its key strengths is the Schroder Group's
worldwide network of local research offices, many long established, in
emerging market countries. Each year, the Schroder Group researches and
conducts on-site visits with approximately 1,400 companies in emerging market
countries. Of those companies, the Schroder Group's investment professionals
further develop extensive management contacts with, and produce independent
forecasts of earnings estimates for, approximately 800 companies. SIMNA's
analysis includes small and medium-sized companies, as well as larger
capitalization companies.

Emerging Markets Equity Fund may invest up to 35% of its total
assets in cash or investment grade money market instruments for liquidity
purposes, pending investment in other securities or to reinvest cash
collateral from securities lending. The fund may invest up to 15% of its net
assets in illiquid securities. The fund may lend its portfolio securities to
qualified broker-dealers or institutional investors in an amount up to
33 1/3% of its total assets. The fund may borrow money from banks or through
reverse repurchase agreements for temporary or emergency purposes but not in
excess of 33 1/3% of its total assets. The fund may invest in the securities
of other investment companies and may sell short "against the box."

THE FUNDS' INVESTMENTS, RELATED RISKS AND LIMITATIONS

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

<PAGE>

EQUITY SECURITIES. Equity securities include common stocks, most
preferred stocks and securities that are convertible into them, including
common stock purchase warrants and rights, equity interests in trusts,
partnerships, joint ventures or similar enterprises and depositary receipts.
Common stocks, the most familiar type, represent an equity (ownership)
interest in a corporation.

Preferred stock has certain fixed income features, like a bond, but
actually it is equity that is senior to a company's common stock. Convertible
bonds may be converted into or exchanged for a prescribed amount of common
stock of the same or a different issuer within a particular period of time at
a specified price or formula. Some preferred stock also may be converted into
or exchanged for common stock. Depositary receipts typically are issued by
banks or trust companies and evidence ownership of underlying equity
securities.

While past performance does not guarantee future results, equity
securities historically have provided the greatest long-term growth potential
in a company. However, their prices generally fluctuate more than other
securities and reflect changes in a company's financial condition and in
overall market and economic conditions. Common stocks generally represent the
riskiest investment in a company. It is possible that a fund may experience a
substantial or complete loss on an individual equity investment. While this
is possible with bonds, it is less likely.

BONDS. Bonds are fixed or variable rate debt obligations, including
bills, notes, debentures, money market instruments, and similar instruments
and securities. Mortgage- and asset-backed securities are types of bonds, and
certain types of income-producing, non-convertible preferred stocks may be
treated as bonds for investment purposes. Bonds generally are used by
corporations and governments to borrow money from investors. The issuer pays
the investor a fixed or variable rate of interest and normally must repay the
amount borrowed on or before maturity. Many preferred stocks and some bonds
are "perpetual" in that they have no maturity date.

Bonds are subject to interest rate risk and credit risk. Interest
rate risk is the risk that interest rates will rise and that, as a result,
bond prices will fall, lowering the value of a fund's investments in bonds.
In general, bonds having longer durations are more sensitive to interest rate
changes than are bonds with shorter durations. Credit risk is the risk that
an issuer may be unable or unwilling to pay interest and/or principal on the
bond. Credit risk can be affected by many factors, including adverse changes
in the issuer's own financial condition or in economic conditions.

CREDIT RATINGS; NON-INVESTMENT GRADE BONDS. Moody's, S&P and other
rating agencies are private services that provide ratings of the credit
quality of debt obligations and certain other securities. A description of
the ratings assigned to corporate bonds by Moody's and S&P is included in the
Appendix to this SAI. The process by which Moody's and S&P determine ratings
for mortgage-backed securities includes consideration of the likelihood of
the receipt by security holders of all distributions, the nature of the
underlying assets, the credit quality of the guarantor, if any, and the
structural, legal and tax aspects associated with these securities. Not even
the highest such rating represents an assessment of the likelihood that
principal prepayments will be made by obligors on the underlying assets or
the degree to which such prepayments may differ from that originally
anticipated, nor do such ratings address the possibility that investors may
suffer a lower than anticipated yield or that investors in such securities
may fail to recoup fully their initial investment due to prepayments.

Credit ratings attempt to evaluate the safety of principal and
interest payments, but they do not evaluate the volatility of a debt
security's value or its liquidity and do not guarantee the performance of the
issuer. Rating agencies 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. There is a risk
that rating agencies may downgrade the rating of a bond. The funds may use
these ratings in determining whether to purchase, sell or hold a security. It
should be emphasized, however, that ratings are general and are not absolute
standards of quality. Consequently, securities with the same maturity,
interest rate and rating may have different market prices.

In addition to ratings assigned to individual bond issues, Mitchell
Hutchins or a sub-adviser will analyze interest rate trends and developments
that may affect individual issuers, including factors such as liquidity,
profitability and asset quality. The yields on bonds are dependent on a
variety of factors, including general money market conditions, general
conditions in the bond market, the financial condition of the issuer, the
size of the

<PAGE>

offering, the maturity of the obligation and its rating. There is a wide
variation in the quality of bonds, both within a particular classification
and between classifications. An issuer's obligations under its bonds are
subject to the provisions of bankruptcy, insolvency and other laws affecting
the rights and remedies of bond holders or other creditors of an issuer;
litigation or other conditions may also adversely affect the power or ability
of issuers to meet their obligations for the payment of interest and
principal on their bonds.

Investment grade bonds are rated in one of the four highest rating
categories by Moody's or S&P, comparably rated by another rating agency or,
if unrated, determined by Mitchell Hutchins or a sub-adviser to be of
comparable quality. Moody's considers bonds rated Baa (its lowest investment
grade rating) to have speculative characteristics. This means that 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 bonds.

Non-investment grade bonds (commonly known as "junk bonds" and
sometimes referred to as "high yield" bonds) are rated Ba or lower by
Moody's, BB or lower by S&P, comparably rated by another rating agency or, if
unrated, determined by Mitchell Hutchins or a sub-adviser to be of comparable
quality. A fund's investments in non-investment grade bonds entail greater
risk than its investments in higher rated bonds. Non-investment grade bonds
are considered predominantly speculative with respect to the issuer's ability
to pay interest and repay principal and may involve significant risk exposure
to adverse conditions. Non-investment grade bonds generally offer a higher
current yield than that available for investment grade issues; however, they
involve greater risks, in that they are especially sensitive to adverse
changes in general economic conditions and in the industries in which the
issuers are engaged, to changes in the financial condition of the issuers and
to price fluctuations in response to changes in interest rates. During
periods of economic downturn or rising interest rates, highly leveraged
issuers may experience financial stress which could adversely affect their
ability to make payments of interest and principal and increase the
possibility of default. In addition, such issuers may not have more
traditional methods of financing available to them and may be unable to repay
debt at maturity by refinancing. The risk of loss due to default by such
issuers is significantly greater because such securities frequently are
unsecured by collateral and will not receive payment until more senior claims
are paid in full.

The market for non-investment grade bonds, especially those of
foreign issuers, has expanded rapidly in recent years, which has been a
period of generally expanding growth and lower inflation. These securities
will be susceptible to greater risk when economic growth slows or reverses
and when inflation increases or deflation occurs. This has been reflected in
recent years by volatility in emerging market securities, particularly in
Asia. In the past, many lower rated bonds experienced substantial price
declines reflecting an expectation that many issuers of such securities might
experience financial difficulties. As a result, the yields on lower rated
bonds rose dramatically. However, such higher yields did not reflect the
value of the income stream that holders of such securities expected, but
rather the risk that holders of such securities could lose a substantial
portion of their value as a result of the issuers' financial restructurings
or defaults. There can be no assurance that such declines will not recur.

The market for non-investment grade bonds generally is thinner and
less active than that for higher quality securities, which may limit a fund's
ability to sell such securities at fair value in response to changes in the
economy or financial markets. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may also decrease the values
and liquidity of non-investment grade securities, especially in a thinly
traded market.

INVESTING IN FOREIGN SECURITIES. Investing in foreign securities may
involve more risks than investing in U.S. securities. The value of foreign
securities is subject to economic and political developments in the countries
where the issuers operate and to changes in foreign currency values.
Investments in foreign securities involve risks relating to political, social
and economic developments abroad, as well as risks resulting from the
differences between the regulations to which U.S. and foreign issuers and
markets are subject. These risks may include expropriation, confiscatory
taxation, withholding taxes on interest and/or dividends, limitations on the
use of or transfer of fund assets and political or social instability or
diplomatic developments. Moreover, individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. In those European
countries that have begun using the Euro as a common currency unit,
individual national economies may be

<PAGE>

adversely affected by the inability of national governments to use monetary
policy to address their own economic or political concerns.

Securities of many foreign companies may be less liquid and their
prices more volatile than securities of comparable U.S. companies. From time
to time foreign securities may be difficult to liquidate rapidly without
significantly depressing the price of such securities. Foreign markets have
different clearance and settlement procedures, and in certain markets there
have been times when settlements have failed to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Delays in settlement could result in temporary periods when some of a fund's
assets are uninvested and no return is earned thereon. The inability of a
fund to make intended security purchases due to settlement problems could
cause the fund to miss attractive investment opportunities. Inability to
dispose of a portfolio security due to settlement problems could result
either in losses to the fund due to subsequent declines in the value of such
portfolio security or, if the fund has entered into a contract to sell the
security, could result in possible liability to the purchaser. Foreign
securities trading practices, including those involving securities settlement
where fund assets may be released prior to receipt of payment, may expose the
funds to increased risk in the event of a failed trade or the insolvency of a
foreign broker-dealer. Legal remedies for defaults and disputes may have to
be pursued in foreign courts, whose procedures differ substantially from
those of U.S. courts.

The costs of investing outside the United States frequently are
higher than those attributable to investing in the United States. This is
particularly true with respect to emerging capital markets. For example, the
cost of maintaining custody of foreign securities exceeds custodian costs for
domestic securities, and transaction and settlement costs of foreign
investing frequently are higher than those attributable to domestic
investing. Costs associated with the exchange of currencies also make foreign
investing more expensive than domestic investing.

Securities of foreign issuers may not be registered with the
Securities and Exchange Commission ("SEC"), and the issuers thereof may not
be subject to its reporting requirements. Accordingly, there may be less
publicly available information concerning foreign issuers of securities held
by the funds than is available concerning U.S. companies. Foreign companies
are not generally subject to uniform accounting, auditing and financial
reporting standards or to other regulatory requirements comparable to those
applicable to U.S. companies.

The funds may invest in foreign securities by purchasing depositary
receipts, including American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs"), or
other securities convertible into securities of issuers based in foreign
countries. These securities may not necessarily be denominated in the same
currency as the securities into which they may be converted. ADRs are
receipts typically issued by a U.S. bank or trust company evidencing
ownership of the underlying securities. They generally are in registered
form, are denominated in U.S. dollars and are designed for use in the U.S.
securities markets. EDRs are European receipts evidencing a similar
arrangement, may be denominated in other currencies and are designed for use
in European securities markets. GDRs are similar to EDRs and are designed for
use in several international financial markets. For purposes of each fund's
investment policies, depositary receipts generally are deemed to have the
same classification as the underlying securities they represent. Thus, a
depositary receipt representing ownership of common stock will be treated as
common stock.

ADRs are publicly traded on exchanges or over-the-counter in the
United States and are issued through "sponsored" or "unsponsored"
arrangements. In a sponsored ADR arrangement, the foreign issuer assumes the
obligation to pay some or all of the depositary's transaction fees, whereas
under an unsponsored arrangement, the foreign issuer assumes no obligations
and the depositary's transaction fees are paid directly by the ADR holders.
In addition, less information is available in the United States about an
unsponsored ADR than about a sponsored ADR.

The funds anticipate that their brokerage transactions involving
foreign securities of companies headquartered in countries other than the
United States will be conducted primarily on the principal exchanges of such
countries. Although each fund will endeavor to achieve the best net results
in effecting its portfolio transactions, transactions on foreign exchanges
are usually subject to fixed commissions that are generally higher than
negotiated commissions on U.S. transactions. There is generally less
government supervision and regulation of exchanges and brokers in foreign
countries than in the United States.

<PAGE>

Investment income on certain foreign securities in which the funds
may invest may be subject to foreign withholding or other taxes that could
reduce the return on these securities. Tax treaties between the United States
and foreign countries, however, may reduce or eliminate the amount of foreign
taxes to which the funds would be subject. In addition, substantial
limitations may exist in certain countries with respect to the funds' ability
to repatriate investment capital or the proceeds of sales of securities.

FOREIGN SOVEREIGN DEBT. Sovereign debt includes bonds that are
issued by foreign governments or their agencies, instrumentalities or
political subdivisions or by foreign central banks. Sovereign debt also may
be issued by quasi-governmental entities that are owned by foreign
governments but are not backed by their full faith and credit or general
taxing powers. Investment in sovereign debt involves special risks. The
issuer of the debt or the governmental authorities that control the repayment
of the debt may be unable or unwilling to repay principal and/or interest
when due in accordance with the terms of such debt, and the funds may have
limited legal recourse in the event of a default.

Sovereign debt differs from debt obligations issued by private
entities in that, generally, remedies for defaults must be pursued in the
courts of the defaulting party. Legal recourse is therefore somewhat
diminished. Political conditions, especially a sovereign entity's willingness
to meet the terms of its debt obligations, are of considerable significance.
Also, there can be no assurance that the holders of commercial bank debt
issued by the same sovereign entity may not contest payments to the holders
of Sovereign debt in the event of default under commercial bank loan
agreements.

A sovereign debtor's willingness or ability to repay principal and
interest due in a timely manner may be affected by, among other factors, its
cash flow situation, the extent of its foreign reserves, the availability of
sufficient foreign exchange on the date a payment is due, the relative size
of the debt service burden to the economy as a whole, the sovereign debtor's
policy toward principal international lenders and the political constraints
to which a sovereign debtor may be subject. Increased protectionism on the
part of a country's trading partners, or political changes in those
countries, could also adversely affect its exports. Such events could
diminish a country's trade account surplus, if any, or the credit standing of
a particular local government or agency.

The occurrence of political, social or diplomatic changes in one or
more of the countries issuing Sovereign debt could adversely affect the
funds' investments. Political changes or a deterioration of a country's
domestic economy or balance of trade may affect the willingness of countries
to service their sovereign debt. While Mitchell Hutchins and the sub-advisers
manage the funds' portfolios in a manner that is intended to minimize the
exposure to such risks, there can be no assurance that adverse political
changes will not cause the funds to suffer a loss of interest or principal on
any of its sovereign debt holdings.

BRADY BONDS -- Brady Bonds are sovereign bonds issued under the
framework of the Brady Plan, an initiative announced by former U.S. Treasury
Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to
restructure their outstanding external commercial bank indebtedness. In
restructuring its external debt under the Brady Plan framework, a debtor
nation negotiates with its existing bank lenders as well as multilateral
institutions such as the International Monetary Fund ("IMF"). The Brady Plan
framework, as it has developed, contemplates the exchange of commercial bank
debt for newly issued Brady Bonds. Brady Bonds may also be issued in respect
of new money being advanced by existing lenders in connection with the debt
restructuring. The World Bank and the IMF support the restructuring by
providing funds pursuant to loan agreements or other arrangements which
enable the debtor nation to collateralize the new Brady Bonds or to
repurchase outstanding bank debt at a discount.

Brady Bonds have been issued only in recent years, and accordingly
do not have a long payment history. Agreements implemented under the Brady
Plan to date are designed to achieve debt and debt-service reduction through
specific options negotiated by a debtor nation with its creditors. As a
result, the financial packages offered by each country differ. The types of
options have included the exchange of outstanding commercial bank debt for
bonds issued at 100% of face value of such debt, which carry a below-market
stated rate of interest (generally known as par bonds), bonds issued at a
discount from the face value of such debt (generally known as discount
bonds), bonds bearing an interest rate which increases over time and bonds
issued in exchange for the advancement

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of new money by existing lenders. Regardless of the stated face amount and
stated interest rate of the various types of Brady Bonds, a fund will
purchase Brady Bonds in which the price and yield to the investor reflect
market conditions at the time of purchase.

Certain Brady Bonds have been collateralized as to principal due at
maturity by U.S. Treasury zero coupon bonds with maturities equal to the
final maturity of such Brady Bonds. Collateral purchases are financed by the
IMF, the World Bank and the debtor nations' reserves. In the event of a
default with respect to collateralized Brady Bonds as a result of which the
payment obligations of the issuer are accelerated, the U.S. Treasury zero
coupon obligations held as collateral for the payment of principal will not
be distributed to investors, nor will such obligations be sold and the
proceeds distributed. The collateral will be held by the collateral agent
until the scheduled maturity of the defaulted Brady Bonds, which will
continue to be outstanding, at which time the face amount of the collateral
will equal the principal payments that would have then been due on the Brady
Bonds in the normal course. Interest payments on Brady Bonds may be wholly
uncollateralized or may be collateralized by cash or high grade securities in
amounts that typically represent between 12 and 18 months of interest
accruals on these instruments, with the balance of the interest accruals
being uncollateralized.

Brady Bonds are often viewed as having several valuation components:
(1) the collateralized repayment of principal, if any, at final maturity, (2)
the collateralized interest payments, if any, (3) the uncollateralized
interest payments and (4) any uncollateralized repayment of principal at
maturity (these uncollateralized amounts constitute the "residual risk"). In
light of the residual risk of Brady Bonds and, among other factors, the
history of defaults with respect to commercial bank loans by public and
private entities of countries issuing Brady Bonds, investments in Brady Bonds
are to be viewed as speculative. A fund may purchase Brady Bonds with no or
limited collateralization and will be relying for payment of interest and
(except in the case of principal collateralized Brady Bonds) repayment of
principal primarily on the willingness and ability of the foreign government
to make payment in accordance with the terms of the Brady Bonds.

STRUCTURED FOREIGN INVESTMENTS. This term refers to interests in
U.S. and foreign entities organized and operated solely for the purpose of
securitizing or restructuring the investment characteristics of foreign
securities. This type of securitization or restructuring involves the deposit
with or purchase by a U.S. or foreign entity, such as a corporation or trust,
of specified instruments (such as commercial bank loans or Brady Bonds) and
the issuance by that entity of one or more classes of securities backed by,
or representing interests in, the underlying instruments. The cash flow on
the underlying instruments may be apportioned among the newly issued
structured foreign investments to create securities with different investment
characteristics such as varying maturities, payment priorities and interest
rate provisions, and the extent of the payments made with respect to
structured foreign investments is dependent on the extent of the cash flow on
the underlying instruments.

Structured foreign investments frequently involve no credit
enhancement. Accordingly, their credit risk generally will be equivalent to
that of the underlying instruments. In addition, classes of structured
foreign investments may be subordinated to the right of payment of another
class. Subordinated structured foreign investments typically have higher
yields and present greater risks that unsubordinated structured foreign
investments. Structured foreign investments are typically sold in private
placement transactions, and there currently is no active trading market for
structured foreign investments.

SPECIAL CONSIDERATIONS RELATING TO EMERGING MARKET INVESTMENTS. The
special risks of investing in foreign securities are heightened in emerging
markets. For example, many of the currencies of Asia Pacific Region countries
have experienced significant devaluations relative to the U.S. dollar in
recent years, and major adjustments have been made periodically in various
emerging market currencies. Emerging market countries typically have economic
and political systems that are less fully developed and can be expected to be
less stable than those of developed countries. Emerging market countries may
have policies that restrict investment by foreigners, and there is a higher
risk of government expropriation or nationalization of private property. The
possibility of low or nonexistent trading volume in the securities of
companies in emerging markets also may result in a lack of liquidity and in
price volatility. Issuers in emerging markets typically are subject to a
greater degree of change in earnings and business prospects than are
companies in more developed markets.

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INVESTMENT AND REPATRIATION RESTRICTIONS. Foreign investment in the
securities markets of several emerging market countries is restricted or
controlled to varying degrees. These restrictions may limit a fund's
investment in these countries and may increase its expenses. For example,
certain countries may require governmental approval prior to investments by
foreign persons in a particular company or industry sector or limit
investment by foreign persons to only a specific class of securities of a
company, which may have less advantageous terms (including price) than
securities of the company available for purchase by nationals. Certain
countries may restrict or prohibit investment opportunities in issuers or
industries deemed important to national interests. In addition, the
repatriation of both investment income and capital from some emerging market
countries is subject to restrictions, such as the need for certain government
consents. Even where there is no outright restriction on repatriation of
capital, the mechanics of repatriation may affect certain aspects of a fund's
operations. These restrictions may in the future make it undesirable to
invest in the countries to which they apply. In addition, if there is a
deterioration in a country's balance of payments or for other reasons, a
country may impose restrictions on foreign capital remittances abroad. A fund
could be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation, as well as by the application to it
of other restrictions on investments.

Currency restrictions imposed by the Malaysian government may impose
a significant exit levy on repatriated investments.

If, because of restrictions on repatriation or conversion, a fund
were unable to distribute substantially all of its net investment income and
capital gains within applicable time periods, the fund could be subject to
federal income and excise taxes that would not otherwise be incurred and
could cease to qualify for the favorable tax treatment afforded to regulated
investment companies under the Internal Revenue Code. If it did cease to
qualify for that treatment, it would become subject to federal income tax on
all of its income and net gains. See "Taxes -- Qualification as a Regulated
Investment Company," below.

DIFFERENCES BETWEEN THE U.S. AND EMERGING MARKET SECURITIES MARKETS.
Most of the securities markets of emerging market countries have
substantially less volume than the New York Stock Exchange, and equity
securities of most companies in emerging market countries are less liquid and
more volatile than equity securities of U.S. companies of comparable size.
Some of the stock exchanges in emerging market countries are in the earliest
stages of their development. As a result, security settlements may in some
instances be subject to delays and related administrative uncertainties. Many
companies traded on securities markets in emerging market countries are
smaller, newer and less seasoned than companies whose securities are traded
on securities markets in the United States. Investments in smaller companies
involve greater risk than is customarily associated with investing in larger
companies. Smaller companies may have limited product lines, markets or
financial or managerial resources and may be more susceptible to losses and
risks of bankruptcy. Additionally, market-making and arbitrage activities are
generally less extensive in such markets, which may contribute to increased
volatility and reduced liquidity of such markets. Accordingly, each of these
markets may be subject to greater influence by adverse events generally
affecting the market, and by large investors trading significant blocks of
securities, than is usual in the United States. To the extent that an
emerging market country experiences rapid increases in its money supply and
investment in equity securities for speculative purposes, the equity
securities traded in that country may trade at price-earnings multiples
higher than those of comparable companies trading on securities markets in
the United States, which may not be sustainable.

GOVERNMENT SUPERVISION OF EMERGING MARKET SECURITIES MARKETS; LEGAL
SYSTEMS. There is also less government supervision and regulation of
securities exchanges, listed companies and brokers in emerging market
countries than exists in the United States. Therefore, less information may
be available to a fund than with respect to investments in the United States.
Further, in certain countries, less information may be available to a fund
than to local market participants. Brokers in other countries may not be as
well capitalized as those in the United States, so that they are more
susceptible to financial failure in times of market, political or economic
stress. In addition, existing laws and regulations are often inconsistently
applied. As legal systems in some of the emerging market countries develop,
foreign investors may be adversely affected by new laws and regulations,
changes to existing laws and regulations and preemption of local laws and
regulations by national laws. In circumstances where adequate laws exist, it
may not be possible to obtain swift and equitable enforcement of the law.

<PAGE>

FINANCIAL INFORMATION AND LEGAL STANDARDS. Issuers in emerging
market countries generally are subject to accounting, auditing and financial
standards and requirements that differ, in some cases significantly, from
those applicable to U.S. issuers. In particular, the assets and profits
appearing on the financial statements of an emerging market issuer may not
reflect its financial position or results of operations in the way they would
be reflected had the financial statements been prepared in accordance with
U.S. generally accepted accounting principles. In addition, for an issuer
that keeps accounting records in local currency, inflation accounting rules
may require, for both tax and accounting purposes, that certain assets and
liabilities be restated on the issuer's balance sheet in order to express
items in terms of currency of constant purchasing power. Inflation accounting
may indirectly generate losses or profits. Consequently, financial data may
be materially affected by restatements for inflation and may not accurately
reflect the real condition of those issuers and securities markets.

SOCIAL, POLITICAL AND ECONOMIC FACTORS. Many emerging market
countries may be subject to a greater degree of social, political and
economic instability than is the case in the United States. Any change in the
leadership or policies of these countries may halt the expansion of foreign
investment or reverse any liberalization of foreign investment policies now
occurring. Such instability may result from, among other things, the
following: (1) authoritarian governments or military involvement in political
and economic decision making, and changes in government through
extra-constitutional means; (2) popular unrest associated with demands for
improved political, economic and social conditions; (3) internal
insurgencies; (4) hostile relations with neighboring countries; and (5)
ethnic, religious and racial disaffection. Such social, political and
economic instability could significantly disrupt the financial markets in
those countries and elsewhere and could adversely affect the value of a
fund's assets. In addition, there could be asset expropriations or
confiscatory levels of taxation that could affect a fund.

The economies of many emerging markets are heavily dependent upon
international trade and are accordingly affected by protective trade barriers
and the economic conditions of their trading partners, principally the United
States, Japan, China and the European Union. The enactment by the United
States or other principal trading partners of protectionist trade
legislation, reduction of foreign investment in the local economies and
general declines in the international securities markets could have a
significant adverse effect upon the securities markets of these countries. In
addition, the economies of some countries are vulnerable to weakness in world
prices for their commodity exports, including crude oil. A country whose
exports are concentrated in a few commodities could be vulnerable to a
decline in the international price of such commodities.

Emerging markets include formerly communist countries of Eastern
Europe, Russia and the other countries that once formed the Soviet Union, and
China. Upon the accession to power of communist regimes approximately 50 to 80
years ago, the governments of a number of these countries seized a large amount
of property. The claims of many property owners against those governments were
never finally settled. There can be no guarantee that a fund's investments in
these countries, if any, would not also be seized or otherwise taken away,
in which case the fund could lose its entire investment in the
country involved.

Few of the Asia Pacific Region countries have Western-style or fully
democratic governments. Some governments in the region are authoritarian in
nature and influenced by security forces. For example, during the course of
the last 25 years, governments in the region have been installed or removed
as a result of military coups, while others have periodically demonstrated
repressive police state characteristics. In several Asia Pacific Region
countries, the leadership ability of the government has suffered as a result
of corruption scandals. Disparities of wealth, among other factors, have also
led to social unrest in some of the Asia Pacific Region countries,
accompanied, in certain cases, by violence and labor unrest. Ethnic,
religious and racial disaffection have created social, economic and political
problems. Such problems also have occurred in other emerging markets
throughout the world. As in some other regions, several Asia Pacific Region
countries have or in the past have had hostile relationships with neighboring
nations or have experienced internal insurgency.

The funds may invest in Hong Kong, which reverted to Chinese
administration on July 1, 1997. Although China has committed by treaty to
preserve the economic and social freedoms enjoyed in Hong Kong for 50 years
after regaining control, business confidence and market and business
performance in Hong Kong could be significantly affected by adverse political
developments. A fund's investments in Hong Kong may be subject to the same or
similar risks as an investment in China.

<PAGE>

The economies of most of the Asia Pacific Region countries and many
other emerging markets are heavily dependent upon international trade and are
accordingly affected by protective trade barriers and the economic conditions
of their trading partners, principally the United States, Japan, China and
the European Union. The enactment by the United States or other principal
trading partners of protectionist trade legislation, reduction of foreign
investment in the local economies and general declines in the international
securities markets could have a significant adverse effect upon the
securities markets of these countries. In addition, the economies of some
countries are vulnerable to weakness in world prices for their commodity
exports.

CURRENCY-LINKED INVESTMENTS. The principal amount of securities that
are indexed to specific foreign currency exchange rates may be adjusted up or
down (but not below zero) at maturity to reflect changes in the exchange rate
between two currencies. A fund may experience loss of principal due to these
adjustments.

FOREIGN CURRENCY RISKS. Currency risk is the risk that changes in
foreign exchange rates may reduce the U.S. dollar value of a fund's foreign
investments. If the value of a foreign currency rises against the value of
the U.S. dollar, the value of a fund's investments that are denominated in,
or linked to, that currency will increase. Conversely, if the value of a
foreign currency declines against the value of the U.S. dollar, the value of
those fund investments will decrease. These changes may have a significant
impact on the value of fund shares. In some instances, a fund may use
derivative strategies to hedge against changes in foreign currency value.
(See "Strategies Using Derivative Instruments," below.) However,
opportunities to hedge against currency risk may not exist in certain
markets, particularly with respect to emerging market currencies, and even
when appropriate hedging opportunities are available, a fund may choose not
to hedge against currency risk.

Generally, currency exchange rates are determined by supply and
demand in the foreign exchange markets and the relative merits of investments
in different countries. In the case of those European countries that use the
Euro as a common currency unit, the relative merits of investments in the
common market in which they participate, rather than the merits of
investments in the individual country, will be a determinant of currency
exchange rates. Currency exchange rates also can be affected by the
intervention of the U.S. and foreign governments or central banks, the
imposition of currency controls, speculation, devaluation or other political
or economic developments inside and outside the United States.

Each fund values its assets daily in U.S. dollars and does not
intend to convert its holdings of foreign currencies to U.S. dollars on a
daily basis. From time to time a fund's foreign currencies may be held as
"foreign currency call accounts" at foreign branches of foreign or domestic
banks. These accounts bear interest at negotiated rates and are payable upon
relatively short demand periods. If a bank became insolvent, a fund could
suffer a loss of some or all of the amounts deposited. Each fund may convert
foreign currency to U.S. dollars from time to time.

The value of the assets of a fund as measured in U.S. dollars may be
affected favorably or unfavorably by fluctuations in currency rates and
exchange control regulations. Further, a fund may incur costs in connection
with conversions between various currencies. Currency exchange dealers
realize a profit based on the difference between the prices at which they are
buying and selling various currencies. Thus, a dealer normally will offer to
sell a foreign currency to a fund at one rate, while offering a lesser rate
of exchange should a fund desire immediately to resell that currency to the
dealer. Each fund conducts its currency exchange transactions either on a
spot (I.E., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through entering into forward, futures or options
contracts to purchase or sell foreign currencies.

Starting in mid-1997, some Asia Pacific Region countries began to
experience currency devaluations that resulted in high interest rate levels
and sharp reductions in economic activity. Emerging markets outside the Asia
Pacific Region, such as Latin American countries or Russia and other former
members of the Soviet Union, also may be susceptible to diminished prospects
for corporate earnings growth and political, social or economic instability
as a result of currency crises or related events.

INVESTMENTS IN OTHER INVESTMENT COMPANIES. Each fund may invest in
securities of other investment companies, subject to limitations imposed by
the Investment Company Act of 1940, as amended ("Investment Company Act").
Among other things, these limitations currently restrict a fund's aggregate
investments in other

<PAGE>

investment companies that are registered under the Investment Company Act to
no more than 10% of its total assets. A fund's reinvestment of cash
collateral from securities lending in a private investment vehicle similar to
a money market fund managed by Mitchell Hutchins is not subject to this
restriction. The shares of other investment companies are subject to the
management fees and other expenses of those companies, and the purchase of
shares of some investment companies requires the payment of sales loads and
(in the case of closed-end investment companies) sometimes substantial
premiums above the value of such companies' portfolio securities. At the same
time, a fund would continue to pay its own management fees and expenses with
respect to all its investments, including shares of other investment
companies. Each fund may invest in the shares of other investment companies
when, in the judgment of its investment adviser, the potential benefits of
the investment outweigh the payment of any management fees and expenses and,
where applicable, premium or sales load.

From time to time, investments in other investment companies may be
the most effective available means for a fund to invest a portion of its
assets. In some cases, investment in another investment company may be the
most practical way for a fund to invest in securities of issuers in certain
countries. These investments may include World Equity Benchmark SharesSM
(commonly known as "WEBS"), which are exchange-traded shares of series of an
investment company that are designed to replicate the composition and
performance of publicly traded issuers in particular foreign countries. A
fund's investment in another investment company is subject to the risks of
that investment company's underlying portfolio securities. Shares of
exchange-traded investment companies also can trade at substantial discounts
below the value of the companies' portfolio securities. A fund that invests
in an exchange-traded investment company is also subject to the risk that the
shares of the closed-end investment company might trade at a discount to
their net asset value.

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

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

Treasury inflation-protected securities ("TIPS") (also known as
"inflation-indexed securities") are Treasury bonds on which the principal
value is adjusted daily in accordance with changes in the Consumer Price
Index. Interest on TIPS is payable semi-annually on the adjusted principal
value. The principal value of TIPS would decline during periods of deflation,
but the principal amount payable at maturity would not be less than the
original par amount. If inflation is lower than expected while a fund holds
TIPS, the fund may earn less on the TIPS than it would on conventional
Treasury bonds. Any increase in the principal value of TIPS is taxable in the
year the increase occurs, even though holders do not receive cash
representing the increase at that time. See "Taxes -- Other Information,"
below.

ZERO COUPON AND OTHER OID SECURITIES. Zero coupon securities are
securities on which no periodic interest payments are made and are sold at a
deep discount from their face value. The buyer of these securities receives a
rate of return by the gradual appreciation of the security, which results
from the fact that it will be paid at face value on a specified maturity
date. There are many types of zero coupon securities. Some are issued in zero
coupon form, including Treasury bills, notes and bonds that have been
stripped of (separated from) their unmatured interest coupons (unmatured
interest payments) and receipts or certificates representing interests in
such stripped debt obligations and coupons. Others are created by brokerage
firms that strip the coupons from interest-paying bonds and sell the
principal and the coupons separately.

<PAGE>

Other securities that are sold with original issue discount (I.E.,
the difference between the issue price and the stated redemption price at
maturity) ("OID") may provide for some interest to be paid prior to maturity.
These OID securities usually trade at a discount from their face value.

Zero coupon securities are generally more sensitive to changes in
interest rates than debt obligations of comparable maturities that make
current interest payments. This means that when interest rates fall, the
value of zero coupon securities rises more rapidly than securities paying
interest on a current basis. However, when interest rates rise, their value
falls more dramatically. Other OID securities also are subject to greater
fluctuations in market value in response to changing interest rates than
bonds of comparable maturities that make current distributions of interest in
cash.

Federal tax law requires that the holder of a zero coupon security
or other OID security include in gross income each year the OID that accrues
on the security for the year, even though the holder receives no interest
payment on the security during the year. Accordingly, to continue to qualify
as a regulated investment company and avoid imposition of federal income and
excise taxes (see "Taxes," below), a fund may be required to distribute as
dividends amounts that are greater than the total amount of cash it actually
receives. These distributions would have to be made from the fund's cash
assets or, if necessary, from the proceeds of sales of portfolio securities.
A fund would not be able to purchase additional securities with cash used to
make these distributions, and its current income and the value of its shares
may ultimately be reduced as a result.

CONVERTIBLE SECURITIES. A convertible security is a bond, preferred
stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. A convertible
security entitles the holder to receive interest or dividends until the
convertible security matures or is redeemed, converted or exchanged.
Convertible securities have unique investment characteristics in that they
generally (1) have higher yields than common stocks, but lower yields than
comparable non-convertible securities, (2) are less subject to fluctuation in
value than the underlying stock because they have fixed income
characteristics and (3) provide the potential for capital appreciation if the
market price of the underlying common stock increases. While no securities
investment is without some risk, investments in convertible securities
generally entail less risk than the issuer's common stock. However, the
extent to which such risk is reduced depends in large measure upon the degree
to which the convertible security sells above its value as a fixed income
security.

A convertible security may be subject to redemption at the option of
the issuer at a price established in the convertible security's governing
instrument. If a convertible security held by a fund is called for
redemption, the fund will be required to permit the issuer to redeem the
security, convert it into underlying common stock or sell it to a third party.

MORTGAGE-BACKED SECURITIES. Mortgage-backed securities represent
direct or indirect interests in pools of underlying mortgage loans that are
secured by real property. U.S. government mortgage-backed securities are
issued or guaranteed as to the payment of principal and interest (but not as
to market value) by Ginnie Mae (also known as the Government National
Mortgage Association), Fannie Mae (also known as the Federal National
Mortgage Association), Freddie Mac (also known as the Federal Home Loan
Mortgage Corporation) or other government sponsored enterprises. Other
domestic mortgage-backed securities are sponsored or issued by private
entities, generally originators of and investors in mortgage loans, including
savings associations, mortgage bankers, commercial banks, investment bankers
and special purpose entities (collectively, "Private Mortgage Lenders").
Payments of principal and interest (but not the market value) of such private
mortgage-backed securities may be supported by pools of mortgage loans or
other mortgage-backed securities that are guaranteed, directly or indirectly,
by the U.S. government or one of its agencies or instrumentalities, or they
may be issued without any government guarantee of the underlying mortgage
assets but with some form of non-government credit enhancement. Foreign
mortgage-backed securities may be issued by mortgage banks and other private
or governmental entities outside the United States and are supported by
interests in foreign real estate.

Mortgage-backed securities may be composed of one or more classes
and may be structured either as pass-through securities or collateralized
debt obligations. Multiple-class mortgage-backed securities are referred to

<PAGE>

herein as "CMOs." Some CMOs are directly supported by other CMOs, which in
turn are supported by mortgage pools. Investors typically receive payments
out of the interest and principal on the underlying mortgages. The portions
of these payments that investors receive, as well as the priority of their
rights to receive payments, are determined by the specific terms of the CMO
class. CMOs involve special risk and evaluating them requires special
knowledge. A major difference between mortgage-backed securities and
traditional bonds is that interest and principal payments are made more
frequently (usually monthly) and that principal may be repaid at any time.
When interest rates go down and homeowners refinance their mortgages,
mortgage-backed securities may be paid off more quickly than investors
expect. When interest rates rise, mortgage-backed securities may be paid off
more slowly than originally expected. Changes in the rate or "speed" of these
prepayments can cause the value of mortgage-backed securities to fluctuate
rapidly.

Mortgage-backed securities also may decrease in value as a result of
increases in interest rates and, because of prepayments, may benefit less
than other bonds from declining interest rates. Reinvestments of prepayments
may occur at lower interest rates than the original investment, thus
adversely affecting a fund's yield. Actual prepayment experience may cause
the yield of a mortgage-backed security to differ from what was assumed when
the fund purchased the security. Prepayments at a slower rate than expected
may lengthen the effective life and reduce the value of a mortgage-backed
security.

CMO classes may be specially structured in a manner that provides
any of a wide variety of investment characteristics, such as yield, effective
maturity and interest rate sensitivity. As market conditions change, however,
and particularly during periods of rapid or unanticipated changes in market
interest rates, the attractiveness of the CMO classes and the ability of the
structure to provide the anticipated investment characteristics may be
significantly reduced. These changes can result in volatility in the market
value, and in some instances reduced liquidity, of the CMO class.

Certain classes of CMOs and other mortgage-backed securities are
structured in a manner that makes them extremely sensitive to changes in
prepayment rates. Interest only ("IO") and principal only ("PO") classes are
examples of this. IOs are entitled to receive all or a portion of the
interest, but none (or only a nominal amount) of the principal payments, from
the underlying mortgage assets. If the mortgage assets underlying an IO
experience greater than anticipated principal prepayments, then the total
amount of interest payments allocable to the IO class, and therefore the
yield to investors, generally will be reduced. In some instances, an investor
in an IO may fail to recoup all of his or her initial investment, even if the
security is government issued or guaranteed or is rated AAA or the
equivalent. Conversely, PO classes are entitled to receive all or a portion
of the principal payments, but none of the interest, from the underlying
mortgage assets. PO classes are purchased at substantial discounts from par,
and the yield to investors will be reduced if principal payments are slower
than expected. Some IOs and POs, as well as other CMO classes, are structured
to have special protections against the effects of prepayments. These
structural protections, however, normally are effective only within certain
ranges of prepayment rates and thus will not protect investors in all
circumstances. Inverse floating rate CMO classes also may be extremely
volatile. These classes pay interest at a rate that decreases when a
specified index of market rates increases and vice versa.

The market for privately issued mortgage-backed securities is
smaller and less liquid than the market for U.S. government mortgage-backed
securities. Foreign mortgage-backed securities markets are substantially
smaller than U.S. markets but have been established in several countries,
including Germany, Denmark, Sweden, Canada and Australia, and may be
developed elsewhere. Foreign mortgage-backed securities generally are
structured differently than domestic mortgage-backed securities, but they
normally present substantially similar investment risks as well as the other
risks normally associated with foreign securities.

During 1994, the value and liquidity of many mortgage-backed
securities declined sharply due primarily to increases in interest rates.
There can be no assurance that such declines will not recur. The market value
of certain mortgage-backed securities in which a fund may invest, including
IO and PO classes of mortgage-backed securities, can be extremely volatile
and these securities may become illiquid. Mitchell Hutchins or a sub-adviser,
as applicable, seeks to manage the funds' investments in mortgage-backed
securities so that the volatility of the fund's

<PAGE>

portfolio, taken as a whole, is consistent with the fund's investment
objective. Management of portfolio duration is an important part of this.
However, computing the duration of mortgage-backed securities is complex.
See, "The Funds' Investments, Related Risks and Limitations -- Duration." If
a fund's investment adviser does not compute the duration of mortgage-backed
securities correctly, the value of its portfolio may be either more or less
sensitive to changes in market interest rates than intended. In addition, if
market interest rates or other factors that affect the volatility of
securities held by the fund change in ways that Mitchell Hutchins or a
sub-adviser does not anticipate, a fund's ability to meet its investment
objective may be reduced.

More information concerning these mortgage-backed securities and the
related risks of investments therein is set forth below. New types of
mortgage-backed securities are developed and marketed from time to time and,
consistent with their investment limitations, the funds expect to invest in
those new types of mortgage-backed securities that Mitchell Hutchins or the
sub-advisers believe may assist the funds in achieving their investment
objectives. Similarly, the funds may invest in mortgage-backed securities
issued by new or existing governmental or private issuers other than those
identified herein. The funds also may invest in foreign mortgage-backed
securities, which may be structured differently than domestic mortgage-backed
securities.

GINNIE MAE CERTIFICATES -- Ginnie Mae guarantees certain mortgage
pass-through certificates ("Ginnie Mae certificates") that are issued by
Private Mortgage Lenders and that represent ownership interests in individual
pools of residential mortgage loans. These securities are designed to provide
monthly payments of interest and principal to the investor. Timely payment of
interest and principal is backed by the full faith and credit of the U.S.
government. Each mortgagor's monthly payments to his lending institution on
his residential mortgage are "passed through" to certificateholders. Mortgage
pools consist of whole mortgage loans or participations in loans. The terms
and characteristics of the mortgage instruments are generally uniform within
a pool but may vary among pools. Lending institutions that originate
mortgages for the pools are subject to certain standards, including credit
and other underwriting criteria for individual mortgages included in the
pools.

FANNIE MAE CERTIFICATES -- Fannie Mae facilitates a national
secondary market in residential mortgage loans insured or guaranteed by U.S.
government agencies and in privately insured or uninsured residential
mortgage loans (sometimes referred to as "conventional mortgage loans" or
"conventional loans") through its mortgage purchase and mortgage-backed
securities sales activities. Fannie Mae issues guaranteed mortgage
pass-through certificates ("Fannie Mae certificates"), which represent pro
rata shares of all interest and principal payments made and owed on the
underlying pools. Fannie Mae guarantees timely payment of interest and
principal on Fannie Mae certificates. The Fannie Mae guarantee is not backed
by the full faith and credit of the U.S. government.

FREDDIE MAC CERTIFICATES -- Freddie Mac also facilitates a national
secondary market for conventional residential and U.S. government-insured
mortgage loans through its mortgage purchase and mortgage-backed securities
sales activities. Freddie Mac issues two types of mortgage pass-through
securities: mortgage participation certificates ("PCs") and guaranteed
mortgage certificates ("GMCs"). Each PC represents a pro rata share of all
interest and principal payments made and owed on the underlying pool. Freddie
Mac generally guarantees timely monthly payment of interest on PCs and the
ultimate payment of principal, but it also has a PC program under which it
guarantees timely payment of both principal and interest. GMCs also represent
a pro rata interest in a pool of mortgages. These instruments pay interest
semi-annually and return principal once a year in guaranteed minimum
payments. The Freddie Mac guarantee is not backed by the full faith and
credit of the U.S. government.

PRIVATE MORTGAGE-BACKED SECURITIES -- Mortgage-backed securities
issued by Private Mortgage Lenders are structured similarly to CMOs issued or
guaranteed by Ginnie Mae, Fannie Mae and Freddie Mac. Such mortgage-backed
securities may be supported by pools of U.S. government or agency insured or
guaranteed mortgage loans or by other mortgage-backed securities issued by a
government agency or instrumentality, but they generally are supported by
pools of conventional (I.E., non-government guaranteed or insured) mortgage
loans. Since such mortgage-backed securities normally are not guaranteed by
an entity having the credit standing of Ginnie Mae, Fannie Mae and Freddie
Mac, they normally are structured with one or more types of credit
enhancement. See "The Funds' Investments, Related Risks and Limitations --
Types of Credit Enhancement." These credit enhancements do not protect
investors from changes in market value.

<PAGE>

COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTI-CLASS MORTGAGE
PASS-THROUGHS -- CMOs are debt obligations that are collateralized by
mortgage loans or mortgage pass-through securities (collectively, "Mortgage
Assets"). CMOs may be issued by Private Mortgage Lenders or by government
entities such as Fannie Mae or Freddie Mac. Multi-class mortgage pass-through
securities are interests in trusts that are comprised of Mortgage Assets and
that have multiple classes similar to those in CMOs. Unless the context
indicates otherwise, references herein to CMOs include multi-class mortgage
pass-through securities. Payments of principal of, and interest on, the
Mortgage Assets (and in the case of CMOs, any reinvestment income thereon)
provide the funds to pay debt services on the CMOs or to make scheduled
distributions on the multi-class mortgage pass-through securities.

In a CMO, a series of bonds or certificates is issued in multiple
classes. Each class of CMO, also referred to as a "tranche," is issued at a
specific fixed or floating coupon rate and has a stated maturity or final
distribution date. Principal prepayments on the Mortgage Assets may cause
CMOs to be retired substantially earlier than their stated maturities or
final distribution dates. Interest is paid or accrued on all classes of a CMO
(other than any PO class) on a monthly, quarterly or semi-annual basis. The
principal and interest on the Mortgage Assets may be allocated among the
several classes of a CMO in many ways. In one structure, payments of
principal, including any principal prepayments, on the Mortgage Assets are
applied to the classes of a CMO in the order of their respective stated
maturities or final distribution dates so that no payment of principal will
be made on any class of the CMO until all other classes having an earlier
stated maturity or final distribution date have been paid in full. In some
CMO structures, all or a portion of the interest attributable to one or more
of the CMO classes may be added to the principal amounts attributable to such
classes, rather than passed through to certificateholders on a current basis,
until other classes of the CMO are paid in full.

Parallel pay CMOs are structured to provide payments of principal on
each payment date to more than one class. These simultaneous payments are
taken into account in calculating the stated maturity date or final
distribution date of each class, which, as with other CMO structures, must be
retired by its stated maturity date or final distribution date but may be
retired earlier.

Some CMO classes are structured to pay interest at rates that are
adjusted in accordance with a formula, such as a multiple or fraction of the
change in a specified interest rate index, so as to pay at a rate that will
be attractive in certain interest rate environments but not in others. For
example, an inverse floating rate CMO class pays interest at a rate that
increases as a specified interest rate index decreases but decreases as that
index increases. For other CMO classes, the yield may move in the same
direction as market interest rates--I.E., the yield may increase as rates
increase and decrease as rates decrease--but may do so more rapidly or to a
greater degree. The market value of such securities generally is more
volatile than that of a fixed rate obligation. Such interest rate formulas
may be combined with other CMO characteristics. For example, a CMO class may
be an inverse IO class, on which the holders are entitled to receive no
payments of principal and are entitled to receive interest at a rate that
will vary inversely with a specified index or a multiple thereof.

TYPES OF CREDIT ENHANCEMENT -- To lessen the effect of failures by
obligors on Mortgage Assets to make payments, mortgage-backed securities may
contain elements of credit enhancement. Such credit enhancement falls into
two categories: (1) liquidity protection and (2) loss protection. Loss
protection relates to losses resulting after default by an obligor on the
underlying assets and collection of all amounts recoverable directly from the
obligor and through liquidation of the collateral. Liquidity protection
refers to the provision of advances, generally by the entity administering
the pool of assets (usually the bank, savings association or mortgage banker
that transferred the underlying loans to the issuer of the security), to
ensure that the receipt of payments on the underlying pool occurs in a timely
fashion. Loss protection ensures ultimate payment of the obligations on at
least a portion of the assets in the pool. Such protection may be provided
through guarantees, insurance policies or letters of credit obtained by the
issuer or sponsor, from third parties, through various means of structuring
the transaction or through a combination of such approaches. A fund will not
pay any additional fees for such credit enhancement, although the existence
of credit enhancement may increase the price of a security. Credit
enhancements do not provide protection against changes in the market value of
the security. Examples of credit enhancement arising out of the structure of
the transaction include "senior-subordinated securities" (multiple class
securities with one or more classes subordinate to other classes as to the
payment of principal thereof and interest thereon, with the result that
defaults on the underlying assets are borne first by the holders of the
subordinated class), creation of "spread accounts" or

<PAGE>

"reserve funds" (where cash or investments, sometimes funded from a portion
of the payments on the underlying assets, are held in reserve against future
losses) and "over-collateralization" (where the scheduled payments on, or the
principal amount of, the underlying assets exceed that required to make
payment of the securities and pay any servicing or other fees). The degree of
credit enhancement provided for each issue generally is based on historical
information regarding the level of credit risk associated with the underlying
assets. Delinquency or loss in excess of that anticipated could adversely
affect the return on an investment in such a security.

SPECIAL CHARACTERISTICS OF MORTGAGE-BACKED SECURITIES -- The yield
characteristics of mortgage-backed securities differ from those of
traditional bonds. Among the major differences are that interest and
principal payments may be made more frequently, usually monthly, and that
principal may be prepaid at any time because the underlying mortgage loans
generally may be prepaid at any time. Prepayments on a pool of mortgage loans
are influenced by a variety of economic, geographic, social and other
factors, including changes in mortgagors' housing needs, job transfers,
unemployment, mortgagors' net equity in the mortgaged properties and
servicing decisions. Generally, however, prepayments on fixed-rate mortgage
loans will increase during a period of falling interest rates and decrease
during a period of rising interest rates. Mortgage-backed securities may
decrease in value as a result of increases in interest rates and may benefit
less than other fixed-income securities from declining interest rates because
of the risk of prepayment.

The rate of interest on mortgage-backed securities is lower than the
interest rates paid on the mortgages included in the underlying pool due to
the annual fees paid to the servicer of the mortgage pool for passing through
monthly payments to certificateholders and to any guarantor, and due to any
yield retained by the issuer. Actual yield to the holder may vary from the
coupon rate, even if adjustable, if the mortgage-backed securities are
purchased or traded in the secondary market at a premium or discount. In
addition, there is normally some delay between the time the issuer receives
mortgage payments from the servicer and the time the issuer makes the
payments on the mortgage-backed securities, and this delay reduces the
effective yield to the holder of such securities.

Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and
the associated average life assumption. The average life of pass-through
pools varies with the maturities of the underlying mortgage loans. A pool's
term may be shortened by unscheduled or early payments of principal on the
underlying mortgages. Because prepayment rates of individual pools vary
widely, it is not possible to predict accurately the average life of a
particular pool. In the past, a common industry practice was to assume that
prepayments on pools of fixed rate 30-year mortgages would result in a
12-year average life for the pool. At present, mortgage pools, particularly
those with loans with other maturities or different characteristics, are
priced on an assumption of average life determined for each pool. In periods
of declining interest rates, the rate of prepayment tends to increase,
thereby shortening the actual average life of a pool of mortgage-related
securities. Conversely, in periods of rising interest rates, the rate of
prepayment tends to decrease, thereby lengthening the actual average life of
the pool. However, these effects may not be present, or may differ in degree,
if the mortgage loans in the pools have adjustable interest rates or other
special payment terms, such as a prepayment charge. Actual prepayment
experience may cause the yield of mortgage-backed securities to differ from
the assumed average life yield. Reinvestment of prepayments may occur at
lower interest rates than the original investment, thus adversely affecting a
fund's yield.

ADJUSTABLE RATE MORTGAGE AND FLOATING RATE MORTGAGE-BACKED
SECURITIES -- Adjustable rate mortgage ("ARM") securities (sometimes referred
to as "ARMs") are mortgage-backed securities that represent a right to
receive interest payments at a rate that is adjusted to reflect the interest
earned on a pool of mortgage loans bearing variable or adjustable rates of
interest. Floating rate mortgage-backed securities are classes of
mortgage-backed securities that have been structured to represent the right
to receive interest payments at rates that fluctuate in accordance with an
index but that generally are supported by pools comprised of fixed-rate
mortgage loans. Because the interest rates on ARM and floating rate
mortgage-backed securities are reset in response to changes in a specified
market index, the values of such securities tend to be less sensitive to
interest rate fluctuations than the values of fixed-rate securities. As a
result, during periods of rising interest rates, ARMs generally do not
decrease in value as much as fixed rate securities. Conversely, during
periods of declining rates, ARMs generally do not increase in value as much
as fixed rate securities. ARMs represent a right to receive interest payments
at a rate

<PAGE>

that is adjusted to reflect the interest earned on a pool of ARM loans. These
mortgage loans generally specify that the borrower's mortgage interest rate
may not be adjusted above a specified lifetime maximum rate or, in some
cases, below a minimum lifetime rate. In addition, certain ARM loans specify
limitations on the maximum amount by which the mortgage interest rate may
adjust for any single adjustment period. These mortgage loans also may limit
changes in the maximum amount by which the borrower's monthly payment may
adjust for any single adjustment period. In the event that a monthly payment
is not sufficient to pay the interest accruing on the ARM, any such excess
interest is added to the mortgage loan ("negative amortization"), which is
repaid through future payments. If the monthly payment exceeds the sum of the
interest accrued at the applicable mortgage interest rate and the principal
payment that would have been necessary to amortize the outstanding principal
balance over the remaining term of the loan, the excess reduces the principal
balance of the ARM. Borrowers under these mortgage loans experiencing
negative amortization may take longer to build up their equity in the
underlying property and may be more likely to default.

ARM loans also may be subject to a greater rate of prepayments in a
declining interest rate environment. For example, during a period of
declining interest rates, prepayments on ARMs could increase because the
availability of fixed mortgage loans at competitive interest rates may
encourage mortgagors to "lock-in" at a lower interest rate. Conversely,
during a period of rising interest rates, prepayments on ARM loans might
decrease. The rate of prepayments with respect to ARM loans has fluctuated in
recent years.

The rates of interest payable on certain ARM loans, and therefore on
certain ARM securities, are based on indices, such as the one-year constant
maturity Treasury rate, that reflect changes in market interest rates. Others
are based on indices, such as the 11th District Federal Home Loan Bank Cost
of Funds Index ("COFI"), that tend to lag behind changes in market interest
rates. The values of ARM securities supported by ARM loans that adjust based
on lagging indices tend to be somewhat more sensitive to interest rate
fluctuations than those reflecting current interest rate levels, although the
values of such ARM securities still tend to be less sensitive to interest
rate fluctuations than fixed-rate securities.

Floating rate mortgage-backed securities are classes of
mortgage-backed securities that have been structured to represent the right
to receive interest payments at rates that fluctuate in accordance with an
index but that generally are supported by pools comprised of fixed-rate
mortgage loans. As with ARM securities, interest rate adjustments on floating
rate mortgage-backed securities may be based on indices that lag behind
market interest rates. Interest rates on floating rate mortgage-backed
securities generally are adjusted monthly. Floating rate mortgage-backed
securities are subject to lifetime interest rate caps, but they generally are
not subject to limitations on monthly or other periodic changes in interest
rates or monthly payments.

LOAN PARTICIPATIONS AND ASSIGNMENTS. Global Income Fund may invest
in secured or unsecured fixed or floating rate loans ("Loans") arranged
through private negotiations between a borrowing corporation, government or
other entity and one or more financial institutions ("Lenders"). The fund's
investments in Loans may be in the form of participations ("Participations")
in Loans or assignments ("Assignments") of all or a portion of Loans from
third parties. Participations typically result in the fund's having a
contractual relationship only with the Lender, not with the borrower. The
fund has the right to receive payments of principal, interest and any fees to
which it is entitled only from the Lender selling the Participation and only
upon receipt by the Lender of the payments from the borrower. In connection
with purchasing Participations, the fund generally has no direct right to
enforce compliance by the borrower with the terms of the loan agreement
relating to the Loan, nor any rights of set-off against the borrower, and the
fund may not directly benefit from any collateral supporting the Loan in
which it has purchased the Participation. As a result, the fund assumes the
credit risk of both the borrower and the Lender that is selling the
Participation. In the event of the insolvency of the selling Lender, the fund
may be treated as a general creditor of that Lender and may not benefit from
any set-off between the Lender and the borrower. The fund will acquire
Participations only if Mitchell Hutchins determines that the selling Lender
is creditworthy.

When Global Income Fund purchases Assignments from Lenders, it
acquires direct rights against the borrower on the Loan. In an Assignment,
the fund is entitled to receive payments directly from the borrower and,
therefore, does not depend on the selling bank to pass these payments onto
the fund. However, because Assignments are arranged through private
negotiations between potential assignees and assignors, the rights and

<PAGE>

obligations acquired by the fund as the purchaser of an Assignment may differ
from, and be more limited than, those held by the assigning Lender.

Assignments and Participations are generally not registered under
the Securities Act of 1933, as amended ("Securities Act"), and thus may be
subject to the fund's limitation on investment in illiquid securities.
Because there may be no liquid market for such securities, the fund
anticipates that such securities may be sold only to a limited number of
institutional investors. The lack of a liquid secondary market could have an
adverse impact on the value of such securities and on the fund's ability to
dispose of particular Assignments or Participations when necessary to meet
the fund's liquidity needs or in response to a specific economic event, such
as a deterioration in the creditworthiness of the borrower.

TEMPORARY AND DEFENSIVE INVESTMENTS; MONEY MARKET INVESTMENTS. Each
fund may invest in money market investments for temporary or defensive
purposes, to reinvest cash collateral from its securities lending activities
or as part of its normal investment program. Such investments include, among
other things, (1) securities issued or guaranteed by the U.S. government or
one of its agencies or instrumentalities, (2) debt obligations of banks,
savings and loan institutions, insurance companies and mortgage bankers, (3)
commercial paper and notes, including those with variable and floating rates
of interest, (4) debt obligations of foreign branches of U.S. banks, U.S.
branches of foreign banks and foreign branches of foreign banks, (5) debt
obligations issued or guaranteed by one or more foreign governments or any of
their political subdivisions, agencies or instrumentalities, including
obligations of supranational entities, (6) bonds issued by foreign issuers,
(7) repurchase agreements and (8) securities of other investment companies
that invest exclusively in money market instruments.

WARRANTS. Warrants are securities permitting, but not obligating,
holders to subscribe for other securities. Warrants do not carry with them
the right to dividends or voting rights with respect to the securities that
they entitle their holder to purchase, and they do not represent any rights
in the assets of the issuer. As a result, warrants may be considered more
speculative than certain other types of investments. In addition, the value
of a warrant does not necessarily change with the value of the underlying
securities, and a warrant ceases to have value if it is not exercised prior
to its expiration date.

ILLIQUID SECURITIES. The term "illiquid securities" for purposes of
the Prospectus and SAI means securities that cannot be disposed of within
seven days in the ordinary course of business at approximately the amount at
which a fund has valued the securities and includes, among other things,
purchased over-the-counter options, repurchase agreements maturing in more
than seven days and restricted securities other than those Mitchell Hutchins
or the applicable sub-adviser has determined are liquid pursuant to
guidelines established by each fund's board. The assets used as cover for
over-the-counter options written by a fund will be considered illiquid unless
the over-the-counter options are sold to qualified dealers that agree that
the fund may repurchase any over-the-counter options it writes at a maximum
price to be calculated by a formula set forth in the option agreements. The
cover for an over-the-counter option written subject to this procedure would
be considered illiquid only to the extent that the maximum repurchase price
under the formula exceeds the intrinsic value of the option. Under current
SEC guidelines, IO and PO classes of mortgage-backed securities generally are
considered illiquid. However, interest only and principal only classes of
fixed-rate mortgage-backed securities issued by the U.S. government or one of
its agencies or instrumentalities will not be considered illiquid if Mitchell
Hutchins or a sub-adviser has determined that they are liquid pursuant to
guidelines established by the applicable board. A fund may not be able to
readily liquidate its investments in illiquid securities and may have to sell
other investments if necessary to raise cash to meet its obligations. The
lack of a liquid secondary market for illiquid securities may make it more
difficult for a fund to assign a value to those securities for purposes of
valuing its portfolio and calculating its net asset value.

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

<PAGE>

Not all restricted securities are illiquid. To the extent that
foreign securities are freely tradeable in the country in which they are
principally traded, they generally are not considered illiquid, even if they
are restricted in the United States. A large institutional market has
developed for many U.S. and foreign securities that are not registered under
the Securities Act. Institutional investors generally will not seek to sell
these instruments to the general public, but instead will often depend either
on an efficient institutional market in which such unregistered securities
can be readily resold or on an issuer's ability to honor a demand for
repayment. Therefore, the fact that there are contractual or legal
restrictions on resale to the general public or certain institutions is not
dispositive of the liquidity of such investments.

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

Each board has delegated the function of making day-to-day
determinations of liquidity to Mitchell Hutchins or a sub-adviser pursuant to
guidelines approved by the board. Mitchell Hutchins or the sub-adviser takes
into account a number of factors in reaching liquidity decisions, including
(1) the frequency of trades for the security, (2) the number of dealers that
make quotes for the security, (3) the number of dealers that have undertaken
to make a market in the security, (4) the number of other potential
purchasers and (5) the nature of the security and how trading is effected
(E.G., the time needed to sell the security, how bids are solicited and the
mechanics of transfer). Mitchell Hutchins or the sub-adviser monitors the
liquidity of restricted securities in each fund's portfolio and reports
periodically on such decisions to the applicable board.

Mitchell Hutchins and (where applicable) the fund's sub-adviser
monitor each fund's overall holdings of illiquid securities. If a fund's
holdings of illiquid securities exceeds its limitation on investments in
illiquid securities for any reason (such as a particular security becoming
illiquid, changes in relative market values of liquid and illiquid portfolio
securities or shareholder redemptions), Mitchell Hutchins and the sub-adviser
will consider what action would be in the best interest of the fund and its
shareholders.

REPURCHASE AGREEMENTS. Repurchase agreements are transactions in
which a fund purchases securities or other obligations from a bank or
securities dealer (or its affiliate) and simultaneously commits to resell
them to the counterparty at an agreed-upon date or upon demand and at a price
reflecting a market rate of interest unrelated to the coupon rate or maturity
of the purchased obligations. A fund maintains custody of the underlying
obligations prior to their repurchase, either through its regular custodian
or through a special "tri-party" custodian or sub-custodian that maintains
separate accounts for both the fund and its counterparty. Thus, the
obligation of the counterparty to pay the repurchase price on the date agreed
to or upon demand is, in effect, secured by such obligations.

Repurchase agreements carry certain risks not associated with direct
investments in securities, including a possible decline in the market value
of the underlying obligations. If their value becomes less than the
repurchase price, plus any agreed-upon additional amount, the counterparty
must provide additional collateral so that at all times the collateral is at
least equal to the repurchase price plus any agreed-upon additional amount.
The difference between the total amount to be received upon repurchase of the
obligations and the price that was paid by a fund upon acquisition is accrued
as interest and included in its net investment income. Repurchase agreements
involving obligations other than U.S. government securities (such as
commercial paper and corporate bonds) may be subject to special risks and may
not have the benefit of certain protections in the event of the
counterparty's insolvency. If the seller or guarantor becomes insolvent, the
fund may suffer delays, costs and possible losses in connection with the
disposition of collateral. Each fund intends to enter into repurchase
agreements only with counterparties in transactions believed by Mitchell
Hutchins or a sub-adviser to present minimum credit risks.

<PAGE>

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

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

DURATION. Duration is a measure of the expected life of a bond on a
present value basis. Duration incorporates the bond's yield, coupon interest
payments, final maturity and call features into one measure and is one of the
fundamental tools used by Mitchell Hutchins or the applicable sub-adviser in
portfolio selection and yield curve positioning for a fund's bond
investments. Duration was developed as a more precise alternative to the
concept "term to maturity." Traditionally, a bond's "term to maturity" has
been used as a proxy for the sensitivity of the security's price to changes
in interest rates (which is the "interest rate risk" or "volatility" of the
security). However, "term to maturity" measures only until the time the
scheduled final payment on the bond, taking no account of the pattern of
payments prior to maturity.

Duration takes the length of the time intervals between the present
time and the time that the interest and principal payments are scheduled or,
in the case of a callable bond, expected to be made, and weights them by the
present values of the cash to be received at each future point in time. For
any bond with interest payments occurring prior to the payment of principal,
duration is always less than maturity. For example, depending on its coupon
and the level of market yields, a Treasury note with a remaining maturity of
five years might have a duration of 4.5 years. For mortgage-backed and other
securities that are subject to prepayments, put or call features or
adjustable coupons, the difference between the remaining stated maturity and
the duration is likely to be much greater.

Duration allows Mitchell Hutchins or the applicable sub-adviser to
make certain predictions as to the effect that changes in the level of
interest rates will have on the value of a fund's portfolio of bonds. For
example, when the level of interest rates increases by 1%, a bond having a
positive duration of three years generally will decrease by approximately 3%.
Thus, if Mitchell Hutchins calculates the duration of a fund's portfolio of
bonds as three years, it normally would expect the portfolio to change in
value by approximately 3% for every 1% change in the level of interest rates.
However, various factors, such as changes in anticipated prepayment rates,
qualitative considerations and market supply and demand, can cause particular
securities to respond somewhat differently to changes in interest rates than
indicated in the above example. Moreover, in the case of mortgage-backed and
other complex securities, duration calculations are estimates and are not
precise. This is particularly true during periods of market volatility.
Accordingly, the net asset value of a fund's portfolio of bonds may vary in
relation to interest rates by a greater or lesser percentage than indicated
by the above example.

Futures, options and options on futures have durations that, in
general, are closely related to the duration of the securities that underlie
them. Holding long futures or call option positions will lengthen portfolio
duration by approximately the same amount as would holding an equivalent
amount of the underlying securities. Short futures or put options have
durations roughly equal to the negative duration of the securities that
underlie these positions, and have the effect of reducing portfolio duration
by approximately the same amount as would selling an equivalent amount of the
underlying securities.

There are some situations in which the standard duration calculation
does not properly reflect the interest rate exposure of a bond. For example,
floating and variable rate bonds often have final maturities of ten or more
years; however, their interest rate exposure corresponds to the frequency of
the coupon reset. Another example

<PAGE>

where the interest rate exposure is not properly captured by the standard
duration calculation is the case of mortgage-backed securities. The stated
final maturity of such securities is generally 30 years, but current
prepayment rates are critical in determining the securities' interest rate
exposure. In these and other similar situations, Mitchell Hutchins or the
applicable sub-adviser will use more sophisticated analytical techniques that
incorporate the economic life of a security into the determination of its
duration and, therefore, its interest rate exposure.

LENDING OF PORTFOLIO SECURITIES. Each fund is authorized to lend its
portfolio securities to broker-dealers or institutional investors that
Mitchell Hutchins deems qualified. Lending securities enables a fund to earn
additional income, but could result in a loss or delay in recovering these
securities. The borrower of a fund's portfolio securities must maintain
acceptable collateral with the fund's custodian in an amount, marked to
market daily, at least equal to the market value of the securities loaned,
plus accrued interest and dividends. Acceptable collateral is limited to
cash, U.S. government securities and irrevocable letters of credit that meet
certain guidelines established by Mitchell Hutchins. Each fund may reinvest
any cash collateral in money market investments or other short-term liquid
investments, including other investment companies. A fund also may reinvest
cash collateral in private investment vehicles similar to money market funds,
including one managed by Mitchell Hutchins. In determining whether to lend
securities to a particular broker-dealer or institutional investor, Mitchell
Hutchins will consider, and during the period of the loan will monitor, all
relevant facts and circumstances, including the creditworthiness of the
borrower. Each fund will retain authority to terminate any of its loans at
any time. Each fund may pay reasonable fees in connection with a loan and may
pay the borrower or placing broker a negotiated portion of the interest
earned on the reinvestment of cash held as collateral. A fund will receive
amounts equivalent to any dividends, interest or other distributions on the
securities loaned. Each fund will regain record ownership of loaned
securities to exercise beneficial rights, such as voting and subscription
rights, when regaining such rights is considered to be in the fund's interest.

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

SHORT SALES "AGAINST THE BOX." Each fund may engage in short sales
of securities it owns or has the right to acquire at no added cost through
conversion or exchange of other securities it owns (short sales "against the
box"). To make delivery to the purchaser in a short sale, the executing
broker borrows the securities being sold short on behalf of a fund, and that
fund is obligated to replace the securities borrowed at a date in the future.
When a fund sells short, it establishes a margin account with the broker
effecting the short sale and deposits collateral with the broker. In
addition, the fund maintains, in a segregated account with its custodian, the
securities that could be used to cover the short sale. Each fund incurs
transaction costs, including interest expense, in connection with opening,
maintaining and closing short sales "against the box."

A fund might make a short sale "against the box" in order to hedge
against market risks when Mitchell Hutchins or a sub-adviser believes that
the price of a security may decline, thereby causing a decline in the value
of a security owned by the fund or a security convertible into or
exchangeable for a security owned by the fund. In such case, any loss in the
fund's long position after the short sale should be reduced by a
corresponding gain in the short position. Conversely, any gain in the long
position after the short sale should be reduced by a corresponding loss in
the short position. The extent to which gains or losses in the long position
are reduced will depend upon the amount of the securities sold short relative
to the amount of the securities a fund owns, either directly or indirectly,
and in the case where the fund owns convertible securities, changes in the
investment values or conversion premiums of such securities.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each fund may purchase
securities on a "when-issued" basis or may purchase or sell securities for
delayed delivery, I.E., for issuance or delivery to or by the fund later than
the normal settlement date for such securities at a stated price and yield.
When-issued securities include TBA ("to be announced") securities. TBA
securities are usually mortgage-backed securities that are purchased on a
forward

<PAGE>

commitment basis with an approximate principal amount and no defined maturity
date. The actual principal amount and maturity date are determined upon
settlement when the specific mortgage pools are assigned. A fund generally
would not pay for such securities or start earning interest on them until
they are received. However, when a fund undertakes a when-issued or
delayed-delivery obligation, it immediately assumes the risks of ownership,
including the risks of price fluctuation. Failure of the issuer to deliver a
security purchased by a fund on a when-issued or delayed-delivery basis may
result in the fund's incurring or missing an opportunity to make an
alternative investment. Depending on market conditions, a fund's when-issued
and delayed-delivery purchase commitments could cause its net asset value per
share to be more volatile, because such securities may increase the amount by
which the fund's total assets, including the value of when-issued and
delayed-delivery securities held by that fund, exceeds its net assets.

A security purchased on a when-issued or delayed delivery basis is
recorded as an asset on the commitment date and is subject to changes in
market value, generally based upon changes in the level of interest rates.
Thus, fluctuation in the value of the security from the time of the
commitment date will affect a fund's net asset value. When a fund commits to
purchase securities on a when-issued or delayed delivery basis, its custodian
segregates assets to cover the amount of the commitment. See "The Funds'
Investments, Related Risks and Limitations -- Segregated Accounts." A fund
purchases when-issued securities only with the intention of taking delivery
but may sell the right to acquire the security prior to delivery if Mitchell
Hutchins or the applicable sub-adviser deems it advantageous to do so, which
may result in a gain or loss to the fund.

SEGREGATED ACCOUNTS. When a fund enters into certain transactions
that involve obligations to make future payments to third parties, including
the purchase of securities on a when-issued or delayed delivery basis, and
reverse repurchase agreements, it will maintain with an approved custodian in
a segregated account cash or liquid securities, marked to market daily, in an
amount at least equal to the fund's obligation or commitment under such
transactions. As described below under "Strategies Using Derivative
Instruments," segregated accounts may also be required in connection with
certain transactions involving options, futures, forward currency contracts
or swaps.

INVESTMENT LIMITATIONS OF THE FUNDS

FUNDAMENTAL LIMITATIONS. The following fundamental investment
limitations cannot be changed for a fund without the affirmative vote of the
lesser of (a) more than 50% of the outstanding shares of the fund or (b) 67%
or more of the shares of the fund present at a shareholders' meeting if more
than 50% of the outstanding shares are represented at the meeting in person
or by proxy. If a percentage restriction is adhered to at the time of an
investment or transaction, later changes in percentage resulting from a
change in values of portfolio securities or amount of total assets will not
be considered a violation of any of the following limitations. With regard to
the borrowings limitation in fundamental limitation (2), each fund will
comply with the applicable restrictions of Section 18 of the Investment
Company Act.

Each fund will not:

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

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

(3) make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
restriction, the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments in
government obligations, commercial

<PAGE>

paper, certificates of deposit, bankers' acceptances or similar instruments
will not be considered the making of a loan.

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

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

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

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

In addition, Global Equity Fund, Asia Pacific Growth Fund and
Emerging Markets Equity Fund will not:

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

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

NON-FUNDAMENTAL LIMITATIONS. The following investment restrictions
are non-fundamental and may be changed by the vote of the appropriate board
without shareholder approval. If a percentage restriction is adhered to at
the time of an investment or transaction, later changes in percentage
resulting from a change in values of portfolio securities or amount of total
assets will not be considered a violation of any of the following limitations.

Each fund will not:

(1) invest more than 10% of its net assets (15% of net assets for
Asia Pacific Growth Fund and Emerging Markets Equity Fund) in illiquid
securities;

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

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

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

<PAGE>

(5) purchase securities of other investment companies, except to the
extent permitted by the Investment Company Act and except that this
limitation does not apply to securities received or acquired as dividends,
through offers of exchange, or as a result of reorganization, consolidation,
or merger (and except that a fund will not purchase securities of registered
open-end investment companies or registered unit investment trusts in
reliance on Sections 12(d)(1)(F) or 12(d)(1)(G) of the Investment Company
Act).

STRATEGIES USING DERIVATIVE INSTRUMENTS

GENERAL DESCRIPTION OF DERIVATIVE INSTRUMENTS. Mitchell Hutchins and
the sub-advisers may use a variety of financial instruments ("Derivative
Instruments"), including certain options, futures contracts (sometimes
referred to as "futures"), options on futures contracts, forward currency
contracts and swap. A fund may enter into transactions involving one or more
types of Derivative Instruments under which the full value of its portfolio
is at risk. Under normal circumstances, however, each fund's use of these
instruments will place at risk a much smaller portion of its assets. In
particular, each fund may use the Derivative Instruments described below.

A fund might not use any derivative instruments or strategies, and
there can be no assurance that using any strategy will succeed. If a
sub-adviser or Mitchell Hutchins, as applicable, is incorrect in its judgment
on market values, interest rates or other economic factors in using a
derivative instrument or strategy, a fund may have lower net income and a net
loss on the investment.

OPTIONS ON SECURITIES AND FOREIGN CURRENCIES -- A call option is a
short-term contract pursuant to which the purchaser of the option, in return
for a premium, has the right to buy the security or currency underlying the
option at a specified price at any time during the term of the option or at
specified times or at the expiration of the option, depending on the type of
option involved. The writer of the call option, who receives the premium, has
the obligation, upon exercise of the option during the option term, to
deliver the underlying security or currency against payment of the exercise
price. A put option is a similar 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 or at specified times or at the
expiration of the option, depending on the type of option involved. The
writer of the put option, who receives the premium, has the obligation, upon
exercise of the option during the option term, to buy the underlying security
or currency at the exercise price.

OPTIONS ON SECURITIES INDICES -- A securities index assigns relative
values to the securities included in the index and fluctuates with changes in
the market values of those securities. A securities index option operates in
the same way as a more traditional securities option, except that exercise of
a securities index option is effected with cash payment and does not involve
delivery of securities. Thus, upon exercise of a securities 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 securities
index.

SECURITIES INDEX FUTURES CONTRACTS -- A securities index futures
contract is a bilateral agreement pursuant to which one party agrees to
accept, and the other party agrees to make, delivery of an amount of cash
equal to a specified dollar amount times the difference between the
securities 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 foreign currency futures contracts are bilateral agreements pursuant
to which one party agrees to make, and the other party agrees to accept,
delivery of a specified 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 bonds or currency, in
most cases the contracts are closed out before the settlement date without
the making or taking of delivery.

OPTIONS ON FUTURES CONTRACTS -- Options on futures contracts are
similar to options on securities 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 position 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 term
of the

<PAGE>

option or at specified times or at the expiration of the option, depending on
the type of option involved. Upon exercise of the option, the delivery of the
futures position to the holder of the option will be accompanied by delivery
of the accumulated balance that represents the amount by which the market
price of the futures contract exceeds, in the case of a call, or is less
than, in the case of a put, the exercise price of the option on the future.
The writer of an option, upon exercise, will assume a short position in the
case of a call and a long position in the case of a put.

FORWARD CURRENCY CONTRACTS -- A forward currency contract involves
an obligation 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 parties, at a price set at the time the contract is entered into.

GENERAL DESCRIPTION OF STRATEGIES USING DERIVATIVE INSTRUMENTS. A
fund may use Derivative Instruments to attempt to hedge its portfolio and
also to attempt to enhance income or return or realize gains and to manage
the duration of its bond portfolio. A fund may use Derivative Instruments to
maintain exposure to stocks or bonds while maintaining a cash balance for
fund management purposes (such as to provide liquidity to meet anticipated
shareholder sales of fund shares and for fund operating expenses), to
facilitate trading or to adjust its exposure to different asset classes. For
example, Global Equity Fund may use Derivative Instruments to adjust its
exposure to U.S. and foreign equity markets in connection with a reallocation
or rebalancing of the fund's assets.

Hedging strategies can be broadly categorized as "short hedges" and
"long hedges." A short hedge is a purchase or sale of a Derivative Instrument
intended partially or fully to offset potential declines in the value of one
or more investments held in a fund's portfolio. Thus, in a short hedge a fund
takes a position in a Derivative Instrument whose price is expected to move
in the opposite direction of the price of the investment being hedged. For
example, a fund might purchase a put option on a security to hedge against a
potential decline in the value of that security. If the price of the security
declined below the exercise price of the put, a fund could exercise the put
and thus limit its loss below the exercise price to the premium paid plus
transaction costs. In the alternative, because the value of the put option
can be expected to increase as the value of the underlying security declines,
a fund might be able to close out the put option and realize a gain to offset
the decline in the value of the security.

Conversely, a long hedge is a purchase or sale of a Derivative
Instrument intended partially or fully to offset potential increases in the
acquisition cost of one or more investments that a fund intends to acquire.
Thus, in a long hedge, a fund takes a position in a Derivative Instrument
whose price is expected to move in the same direction as the price of the
prospective investment being hedged. For example, a fund might purchase a
call option on a security it intends to purchase in order to hedge against an
increase in the cost of the security. If the price of the security increased
above the exercise price of the call, a fund could exercise the call and thus
limit its acquisition cost to the exercise price plus the premium paid and
transaction costs. Alternatively, a fund might be able to offset the price
increase by closing out an appreciated call option and realizing a gain.

A fund may purchase and write (sell) straddles on securities or
indices of securities. A long straddle is a combination of a call and a put
option purchased on the same security or on the same futures contract, where
the exercise price of the put is equal to the exercise price of the call. A
fund might enter into a long straddle when Mitchell Hutchins or a sub-adviser
believes it likely that the prices of the securities will be more volatile
during the term of the option than the option pricing implies. A short
straddle is a combination of a call and a put written on the same security
where the exercise price of the put is equal to the exercise price of the
call. A fund might enter into a short straddle when Mitchell Hutchins or a
sub-adviser believes it unlikely that the prices of the securities will be as
volatile during the term of the option as the option pricing implies.

Derivative Instruments on securities generally are used to hedge
against price movements in one or more particular securities positions that a
fund owns or intends to acquire. Derivative Instruments on stock indices, in
contrast, generally are used to hedge against price movements in broad equity
market sectors in which a fund has invested or expects to invest. Derivative
Instruments on bonds may be used to hedge either individual securities or
broad fixed income market sectors.

<PAGE>

Income strategies using Derivative Instruments may include the
writing of covered options to obtain the related option premiums. Gain
strategies may include using Derivative Instruments to increase or decrease a
fund's exposure to different asset classes without buying or selling the
underlying instruments. A fund also may use derivatives to simulate full
investment by the fund while maintaining a cash balance for fund management
purposes (such as to provide liquidity to meet anticipated shareholder sales
of fund shares and for fund operating expenses).

The use of Derivative Instruments is subject to applicable
regulations of the SEC, the several options and futures exchanges upon which
they are traded and the Commodity Futures Trading Commission ("CFTC"). In
addition, a fund's ability to use Derivative Instruments may be limited by
tax considerations. See "Taxes."

In addition to the products, strategies and risks described below
and in the Prospectus, Mitchell Hutchins and the sub-advisers may discover
additional opportunities in connection with Derivative Instruments and with
hedging, income and gain strategies. These new opportunities may become
available as regulatory authorities broaden the range of permitted
transactions and as new Derivative Instruments and techniques are developed.
Mitchell Hutchins or a sub-adviser may use these opportunities for a fund to
the extent that they are consistent with the fund's investment objective and
permitted by its investment limitations and applicable regulatory
authorities. The Prospectus or SAI will be supplemented to the extent that
new products or techniques involve materially different risks than those
described below or in the Prospectus.

SPECIAL RISKS OF STRATEGIES USING DERIVATIVE INSTRUMENTS. The use of
Derivative Instruments involves special considerations and risks, as
described below. Risks pertaining to particular Derivative Instruments are
described in the sections that follow.

(1) Successful use of most Derivative Instruments depends upon the
ability of Mitchell Hutchins or a sub-adviser to predict movements of the
overall securities, interest rate or currency exchange markets, which
requires different skills than predicting changes in the prices of individual
securities. While Mitchell Hutchins and the sub-advisers are experienced in
the use of Derivative Instruments, there can be no assurance that any
particular strategy adopted will succeed.

(2) There might be imperfect correlation, or even no correlation,
between price movements of a Derivative Instrument and price movements of the
investments that are being hedged. For example, if the value of a Derivative
Instrument used in a short hedge increased by less than the decline in value
of the hedged investment, the hedge would not be fully successful. Such a
lack of correlation might occur due to factors affecting the markets in which
Derivative Instruments are traded, rather than the value of the investments
being hedged. The effectiveness of hedges using Derivative Instruments on
indices will depend on the degree of correlation between price movements in
the index and price movements in the securities being hedged.

(3) Hedging strategies, if successful, can reduce risk of loss by
wholly or partially offsetting the negative effect of unfavorable price
movements in the investments being hedged. However, hedging strategies can
also reduce opportunity for gain by offsetting the positive effect of
favorable price movements in the hedged investments. For example, if a fund
entered into a short hedge because Mitchell Hutchins or a sub-adviser
projected a decline in the price of a security in that fund's portfolio, and
the price of that security increased instead, the gain from that increase
might be wholly or partially offset by a decline in the price of the
Derivative Instrument. Moreover, if the price of the Derivative Instrument
declined by more than the increase in the price of the security, that fund
could suffer a loss. In either such case, the fund would have been in a
better position had it not hedged at all.

(4) As described below, a fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it
takes positions in Derivative Instruments involving obligations to third
parties (I.E., Derivative Instruments other than purchased options). If the
fund was unable to close out its positions in such Derivative Instruments, it
might be required to continue to maintain such assets or accounts or make
such payments until the positions expired or matured. These requirements
might impair a fund's ability to sell a portfolio security or make an
investment at a time when it would otherwise be favorable to do so, or
require that the fund sell a portfolio security at a disadvantageous time. A
fund's ability to close out a position in a Derivative Instrument

<PAGE>

prior to expiration or maturity depends on the existence of a liquid
secondary market or, in the absence of such a market, the ability and
willingness of a counterparty to enter into a transaction closing out the
position. Therefore, there is no assurance that any hedging position can be
closed out at a time and price that is favorable to a fund.

COVER FOR STRATEGIES USING DERIVATIVE INSTRUMENTS. Transactions
using Derivative Instruments, other than purchased options, expose the funds
to an obligation to another party. A fund will not enter into any such
transactions unless it owns either (1) an offsetting ("covered") position in
securities, currencies or other options or futures contracts or (2) cash or
liquid securities, with a value sufficient at all times to cover its
potential obligations to the extent not covered as provided in (1) above.
Each fund will comply with SEC guidelines regarding cover for such
transactions and will, if the guidelines so require, set aside cash or liquid
securities in a segregated account with its custodian in the prescribed
amount.

Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding Derivative Instrument is open, unless
they are replaced with similar assets. As a result, committing a large
portion of a fund's assets to cover positions or to segregated accounts could
impede portfolio management or the fund's ability to meet redemption requests
or other current obligations.

OPTIONS. The funds may purchase put and call options, and write
(sell) covered put or call options on securities in which they invest and
related indices and on foreign currencies. The purchase of call options may
serve as a long hedge, and the purchase of put options may serve as a short
hedge. In addition, a fund may also use options to attempt to realize gains
by increasing or reducing its exposure to an asset class without purchasing
or selling the underlying securities. Writing covered put or call options can
enable a fund to enhance income by reason of the premiums paid by the
purchasers of such options. Writing covered call options serves as a limited
short hedge, because declines in the value of the hedged investment would be
offset to the extent of the premium received for writing the option. However,
if the security appreciates to a price higher than the exercise price of the
call option, it can be expected that the option will be exercised and the
affected fund will be obligated to sell the security at less than its market
value. Writing covered put options serves as a limited long hedge because
increases in the value of the hedged investment would be offset to the extent
of the premium received for writing the option. However, if the security
depreciates to a price lower than the exercise price of the put option, it
can be expected that the put option will be exercised and the fund will be
obligated to purchase the security at more than its market value. The
securities or other assets used as cover for over-the-counter options written
by a fund would be considered illiquid to the extent described under "The
Funds' Investments, Related Risks and Limitations --Illiquid Securities."

The value of an option position will reflect, among other things,
the current market value of the underlying investment, the time remaining
until expiration, the relationship of the exercise price to the market price
of the underlying investment, the historical price volatility of the
underlying investment and general market conditions. Options normally have
expiration dates of up to nine months. Generally, the over-the-counter debt
options or foreign currency options used by the funds are European-style
options. This means that the option is only exercisable immediately prior to
its expiration. This is in contrast to American-style options, which are
exercisable at any time prior to the expiration date of the option. There are
also other types of options exercisable on certain specified dates before
expiration. Options that expire unexercised have no value.

A fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, a fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing
purchase transaction. Conversely, a fund may terminate a position in a put or
call option it had purchased by writing an identical put or call option; this
is known as a closing sale transaction. Closing transactions permit a fund to
realize profits or limit losses on an option position prior to its exercise
or expiration.

The funds may purchase and write both exchange-traded and
over-the-counter options. Currently, many options on equity securities are
exchange-traded. Exchange markets for options on bonds and foreign currencies
exist but are relatively new, and these instruments are primarily traded on
the over-the-counter market. Exchange-traded options in the United States are
issued by a clearing organization affiliated with the exchange on which the

<PAGE>

option is listed which, in effect, guarantees completion of every
exchange-traded option transaction. In contrast, over-the-counter options are
contracts between a fund and its counterparty (usually a securities dealer or
a bank) with no clearing organization guarantee. Thus, when a fund purchases
or writes an over-the-counter option, it relies on the counterparty to make
or take delivery of the underlying investment upon exercise of the option.
Failure by the counterparty to do so would result in the loss of any premium
paid by the fund as well as the loss of any expected benefit of the
transaction.

The funds' ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. The
funds intend to purchase or write only those exchange-traded options for
which there appears to be a liquid secondary market. However, there can be no
assurance that such a market will exist at any particular time. Closing
transactions can be made for over-the-counter options only by negotiating
directly with the counterparty, or by a transaction in the secondary market
if any such market exists. Although the funds will enter into
over-the-counter options only with counterparties that are expected to be
capable of entering into closing transactions with the funds, there is no
assurance that a fund will in fact be able to close out an over-the-counter
option position at a favorable price prior to expiration. In the event of
insolvency of the counterparty, a fund might be unable to close out an
over-the-counter option position at any time prior to its expiration.

If a fund were unable to effect a closing transaction for an option
it had purchased, it would have to exercise the option to realize any profit.
The inability to enter into a closing purchase transaction for a covered put
or call option written by the fund could cause material losses because the
fund would be unable to sell the investment used as cover for the written
option until the option expires or is exercised.

A fund may purchase and write put and call options on indices in
much the same manner as the more traditional options discussed above, except
the index options may serve as a hedge against overall fluctuations in a
securities market (or market sector) rather than anticipated increases or
decreases in the value of a particular security.

LIMITATIONS ON THE USE OF OPTIONS. The use of options is governed by
the following guidelines, which can be changed by each fund's board without
shareholder vote:

(1) A fund may purchase a put or call option, including any straddle
or spread, only if the value of its premium, when aggregated with the
premiums on all other options held by the fund, does not exceed 5% of its
total assets.

(2) The aggregate value of securities underlying put options written
by a fund, determined as of the date the put options are written, will not
exceed 50% of its net assets.

(3) The aggregate premiums paid on all options (including options on
securities, foreign currencies and securities indices and options on futures
contracts) purchased by a fund that are held at any time will not exceed 20%
of its net assets.

FUTURES. The funds may purchase and sell securities index futures
contracts, interest rate futures contracts and foreign currency futures
contracts. A fund may also purchase put and call options, and write covered
put and call options, on futures in which it is allowed to invest. The
purchase of futures or call options thereon can serve as a long hedge, and
the sale of futures or the purchase of put options thereon can serve as a
short hedge. Writing covered call options on futures contracts can serve as a
limited short hedge, and writing covered put options on futures contracts can
serve as a limited long hedge, using a strategy similar to that used for
writing covered options on securities or indices. In addition, Global Equity
Fund and Global Income Fund may purchase or sell futures contracts or
purchase options thereon to increase or reduce its exposure to an asset class
without purchasing or selling the underlying securities either as a hedge or
to enhance return or realize gains.

Futures strategies also can be used to manage the average duration
of Global Income Fund's portfolio. If Mitchell Hutchins wishes to shorten the
average duration of this fund's portfolio, the fund may sell a futures
contract or a call option thereon, or purchase a put option on that futures
contract. If Mitchell Hutchins wishes to

<PAGE>

lengthen the average duration of the fund's portfolio, the fund may buy a
futures contract or a call option thereon, or sell a put option thereon.

A fund may also write put options on futures contracts while at the
same time purchasing call options on the same futures contracts in order
synthetically to create a long futures contract position. Such options would
have the same strike prices and expiration dates. A fund will engage in this
strategy only when it is more advantageous to a fund than is purchasing the
futures contract.

No price is paid upon entering into a futures contract. Instead, at
the inception of a futures contract a fund is required to deposit in a
segregated account with its custodian, in the name of the futures broker
through whom the transaction was effected, "initial margin" consisting of
cash, obligations of the United States or obligations fully guaranteed as to
principal and interest by the United States, in an amount generally equal to
10% or less of the contract value. Margin must also be deposited when writing
a call option on a futures contract, in accordance with applicable exchange
rules. Unlike margin in securities transactions, initial margin on futures
contracts does not represent a borrowing, but rather is in the nature of a
performance bond or good-faith deposit that is returned to a fund at the
termination of the transaction if all contractual obligations have been
satisfied. Under certain circumstances, such as periods of high volatility, a
fund may be required by an exchange to increase the level of its initial
margin payment, and initial margin requirements might be increased generally
in the future by regulatory action.

Subsequent "variation margin" payments are made to and from the
futures broker daily as the value of the futures position varies, a process
known as "marking to market." Variation margin does not involve borrowing,
but rather represents a daily settlement of each fund's obligations to or
from a futures broker. When a fund purchases an option on a future, the
premium paid plus transaction costs is all that is at risk. In contrast, when
a fund purchases or sells a futures contract or writes a call option thereon,
it is subject to daily variation margin calls that could be substantial in
the event of adverse price movements. If a fund has insufficient cash to meet
daily variation margin requirements, it might need to sell securities at a
time when such sales are disadvantageous.

Holders and writers of futures positions and options on futures can
enter into offsetting closing transactions, similar to closing transactions
on options, by selling or purchasing, respectively, an instrument identical
to the instrument held or written. Positions in futures and options on
futures may be closed only on an exchange or board of trade that provides a
secondary market. The funds intend to enter into futures transactions only on
exchanges or boards of trade where there appears to be a liquid secondary
market. However, there can be no assurance that such a market will exist for
a particular contract at a particular time.

Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a future or related option can vary
from the previous day's settlement price; once that limit is reached, no
trades may be made that day at a price beyond the limit. Daily price limits
do not limit potential losses because prices could move to the daily limit
for several consecutive days with little or no trading, thereby preventing
liquidation of unfavorable positions.

If a fund were unable to liquidate a futures or related options
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses. A fund would continue to be
subject to market risk with respect to the position. In addition, except in
the case of purchased options, a fund would continue to be required to make
daily variation margin payments and might be required to maintain the
position being hedged by the future or option or to maintain cash or
securities in a segregated account.

Certain characteristics of the futures market might increase the
risk that movements in the prices of futures contracts or related options
might not correlate perfectly with movements in the prices of the investments
being hedged. For example, all participants in the futures and related
options markets are subject to daily variation margin calls and might be
compelled to liquidate futures or related options positions whose prices are
moving unfavorably to avoid being subject to further calls. These
liquidations could increase price volatility of the instruments and distort
the normal price relationship between the futures or options and the
investments being hedged. Also, because initial margin deposit requirements
in the futures market are less onerous than margin requirements in the
securities

<PAGE>

markets, there might be increased participation by speculators in the futures
markets. This participation also might cause temporary price distortions. In
addition, activities of large traders in both the futures and securities
markets involving arbitrage, "program trading" and other investment
strategies might result in temporary price distortions.

LIMITATIONS ON THE USE OF FUTURES AND RELATED OPTIONS. The use of
futures and related options is governed by the following guidelines, which
can be changed by a fund's board without shareholder vote:

(1) The aggregate initial margin and premiums on futures contracts
and options on futures positions that are not for bona fide hedging purposes
(as defined by the CFTC), excluding the amount by which options are
"in-the-money," may not exceed 5% of a fund's net assets.

(2) The aggregate premiums paid on all options (including options on
securities, foreign currencies and securities indices and options on futures
contracts) purchased by a fund that are held at any time will not exceed 20%
of its net assets.

(3) The aggregate margin deposits on all futures contracts and
options thereon held at any time by a fund will not exceed 5% of its total
assets.

FOREIGN CURRENCY HEDGING STRATEGIES--SPECIAL CONSIDERATIONS. Each
fund may use options and futures on foreign currencies, as described above,
and forward currency contracts, as described below, to hedge against
movements in the values of the foreign currencies in which the fund's
securities are denominated. Such currency hedges can protect against price
movements in a security a fund owns or intends to acquire that are
attributable to changes in the value of the currency in which it is
denominated. Such hedges do not, however, protect against price movements in
the securities that are attributable to other causes.

A fund might seek to hedge against changes in the value of a
particular currency when no Derivative Instruments on that currency are
available or such Derivative Instruments are considered expensive. In such
cases, the fund may hedge against price movements in that currency by
entering into transactions using Derivative Instruments on another currency
or a basket of currencies, the value of which Mitchell Hutchins or a
sub-adviser believes will have a positive correlation to the value of the
currency being hedged. In addition, a fund may use forward currency contracts
to shift exposure to foreign currency fluctuations from one country to
another. For example, if a fund owned securities denominated in a foreign
currency and Mitchell Hutchins or the sub-adviser believed that currency
would decline relative to another currency, it might enter into a forward
contract to sell an appropriate amount of the first foreign currency, with
payment to be made in the second foreign currency. Transactions that use two
foreign currencies are sometimes referred to as "cross hedging." Use of a
different foreign currency magnifies the risk that movements in the price of
the Derivative Instrument will not correlate or will correlate unfavorably
with the foreign currency being hedged.

The value of Derivative Instruments on foreign currencies depends on
the value of the underlying currency relative to the U.S. dollar. Because
foreign currency transactions occurring in the interbank market might involve
substantially larger amounts than those involved in the use of such
Derivative Instruments, a fund could be disadvantaged by having to deal in
the odd-lot market (generally consisting of transactions of less than $1
million) for the underlying foreign currencies at prices that are less
favorable than for round lots.

There is no systematic reporting of last sale information for
foreign currencies or any regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Quotation information generally is representative of very large transactions
in the interbank market and thus might not reflect odd-lot transactions where
rates might be less favorable. The interbank market in foreign currencies is
a global, round-the-clock market. To the extent the U.S. options or futures
markets are closed while the markets for the underlying currencies remain
open, significant price and rate movements might take place in the underlying
markets that cannot be reflected in the markets for the Derivative
Instruments until they reopen.

Settlement of Derivative Instruments involving foreign currencies
might be required to take place within the country issuing the underlying
currency. Thus, the funds might be required to accept or make delivery of the

<PAGE>

underlying foreign currency in accordance with any U.S. or foreign
regulations regarding the maintenance of foreign banking arrangements by U.S.
residents and might be required to pay any fees, taxes and charges associated
with such delivery assessed in the issuing country.

FORWARD CURRENCY CONTRACTS. A fund may enter into forward currency
contracts to purchase or sell foreign currencies for a fixed amount of U.S.
dollars or another foreign currency. Such transactions may serve as long
hedges -- for example, a fund may purchase a forward currency contract to
lock in the U.S. dollar price of a security denominated in a foreign currency
that the fund intends to acquire. Forward currency contract transactions may
also serve as short hedges -- for example, a fund may sell a forward currency
contract to lock in the U.S. dollar equivalent of the proceeds from the
anticipated sale of a security denominated in a foreign currency. Global
Income Fund may use forward currency contracts to realize gains from
favorable changes in exchange rates.

The cost to a fund of engaging in forward currency contracts varies
with factors such as the currency involved, the length of the contract period
and the market conditions then prevailing. Because forward currency contracts
are usually entered into on a principal basis, no fees or commissions are
involved. When a fund enters into a forward currency contract, it relies on
the contra party to make or take delivery of the underlying currency at the
maturity of the contract. Failure by the counterparty to do so would result
in the loss of any expected benefit of the transaction.

As is the case with futures contracts, holders and writers of
forward currency contracts can enter into offsetting closing transactions,
similar to closing transactions on futures, by selling or purchasing,
respectively, an instrument identical to the instrument purchased or sold.
Secondary markets generally do not exist for forward currency contracts, with
the result that closing transactions generally can be made for forward
currency contracts only by negotiating directly with the contra party. Thus,
there can be no assurance that a fund will in fact be able to close out a
forward currency contract at a favorable price prior to maturity. In
addition, in the event of insolvency of the contra party, a fund might be
unable to close out a forward currency contract at any time prior to
maturity. In either event, the fund would continue to be subject to market
risk with respect to the position, and would continue to be required to
maintain a position in the securities or currencies that are the subject of
the hedge or to maintain cash or securities in a segregated account.

The precise matching of forward currency contract amounts and the
value of the securities involved generally will not be possible because the
value of such securities, measured in the foreign currency, will change after
the foreign currency contract has been established. Thus, a fund might need
to purchase or sell foreign currencies in the spot (cash) market to the
extent such foreign currencies are not covered by forward contracts. The
projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain.

LIMITATIONS ON THE USE OF FORWARD CURRENCY CONTRACTS. Each fund may
enter into forward currency contracts or maintain a net exposure to such
contracts only if (1) the consummation of the contracts would not obligate
the fund to deliver an amount of foreign currency in excess of the value of
the position being hedged by such contracts or (2) the fund segregates with
its custodian cash or liquid securities in an amount not less than the value
of its total assets committed to the consummation of the contract and not
covered as provided in (1) above, as marked to market daily.

SWAP TRANSACTIONS. Swap transactions include swaps, caps, floors and
collars relating to interest rates, currencies, securities or other
instruments. Interest rate swaps involve an agreement between two parties to
exchange payments that are based, for example, on variable and fixed rates of
interest and that are calculated on the basis of a specified amount of
principal (the "notional principal amount") for a specified period of time.
Interest rate cap and floor transactions involve an agreement between two
parties in which the first party agrees to make payments to the counterparty
when a designated market interest rate goes above (in the case of a cap) or
below (in the case of a floor) a designated level on predetermined dates or
during a specified time period. Interest rate collar transactions involve an
agreement between two parties in which payments are made when a designated
market interest rate either goes above a designated ceiling level or goes
below a designated floor level on predetermined dates or during a specified
time period. Currency swaps, caps, floors and collars are similar to interest
rate swaps,

<PAGE>

caps, floors and collars but they are based on currency exchange rates rather
than interest rates. Equity swaps or other swaps relating to securities or
other instruments are also similar, but they are based on changes in the
value of the underlying securities or instruments. For example, an equity
swap might involve an exchange of the value of a particular security or
securities index in a certain notional amount for the value of another
security or index or for the value of interest on that notional amount at a
specified fixed or variable rate.

A fund may enter into interest rate swap transactions 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 it anticipates
purchasing at a later date. A fund may use interest rate swaps, caps, floors
and collars as a hedge on either an asset-based or liability-based basis,
depending on whether it is hedging its assets or liabilities. Interest rate
swap transactions are subject to risks comparable to those described above
with respect to other derivatives strategies.

A fund will usually enter into interest rate swaps on a net basis,
I.E., the two payment streams are netted out, with a fund receiving or
paying, as the case may be, only the net amount of the two payments. Because
segregated accounts will be established with respect to these transactions,
Mitchell Hutchins and the sub-adviser (if applicable) believe such
obligations do not constitute senior securities and, accordingly, will not
treat them as being subject to a fund's borrowing restrictions. The net
amount of the excess, if any, of a fund's obligations over its entitlements
with respect to each interest rate swap will be accrued on a daily basis, and
appropriate fund assets having an aggregate net asset value at least equal to
the accrued excess will be maintained in a segregated account as described
above in "The Funds' Investments, Related Risks and Limitations -- Segregated
Accounts." A fund also will establish and maintain such segregated accounts
with respect to its total obligations under any swaps that are not entered
into on a net basis and with respect to any caps, floors and collars that are
written by the fund.

A fund will enter into interest rate swap transactions only with
banks or recognized securities dealers or their affiliates believed by
Mitchell Hutchins or the sub-adviser to present minimal credit risk in
accordance with guidelines established by the fund's board. If there is a
default by the other party to such a transaction, a fund will have to rely on
its contractual remedies (which may be limited by bankruptcy, insolvency or
similar laws) pursuant to the agreements related to the transaction.

<PAGE>

ORGANIZATION; TRUSTEES AND OFFICERS; PRINCIPAL HOLDERS AND MANAGEMENT
OWNERSHIP OF SECURITIES

Each Trust was formed as a business trust under the laws of the
Commonwealth of Massachusetts. Investment Trust was formed on March 28, 1991
and has two operating series. Managed Investments Trust was formed on
November 21, 1986 and has eight operating series. Investment Series was
formed on December 22, 1986 and Investment Trust II was formed on August 10,
1992; each of these Trusts has one operating series.

Each Trust is governed by a board of trustees, which is authorized
to establish additional series and to issue an unlimited number of shares of
beneficial interest of each existing or future series, par value $0.001 per
share. The board of each Trust oversees its operations.

The trustees and executive officers of each Trust, their ages,
business addresses and principal occupations during the past five years are:

<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH EACH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------------ ----------------------------------------
<S> <C> <C>
Margo N. Alexander*+; 53 Trustee and President Mrs. Alexander is Chairman (since March 1999),
chief executive officer and a director of Mitchell
Hutchins (since January 1995), and an executive vice president
and director of PaineWebber (since March 1984). Mrs. Alexander
is president and director or trustee of 31 investment
companies for which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.

Richard Q. Armstrong; 64 Trustee Mr. Armstrong is chairman and principal of R.Q.A. Enterprises
R.Q.A. Enterprises (management consulting firm) (since April 1991 and principal
One Old Church Road occupation since March 1995). Mr. Armstrong was chairman
Unit #6 of the board, chief executive officer and co-owner of
Greenwich, CT 06830 Adirondack Beverages (producer and distributor of soft drinks
and sparkling/still waters) (October 1993-March 1995). He was
a partner of The New England Consulting Group (management
consulting firm) (December 1992-September 1993). He was
managing director of LVMH U.S. Corporation (U.S. subsidiary of
the French luxury goods conglomerate, Louis Vuitton Moet
Hennessey Corporation) (1987-1991) and chairman of its wine
and spirits subsidiary, Schieffelin & Somerset Company
(1987-1991). Mr. Armstrong is a director or trustee of 30
investment companies for which Mitchell Hutchins, PaineWebber
or one of their affiliates serves as investment adviser.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH EACH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------------ ----------------------------------------
<S> <C> <C>
E. Garrett Bewkes, Jr.**+; 73 Trustee and Chairman of the Mr. Bewkes is a director of Paine Webber Group Inc.
Board of Trustees ("PW Group") (holding company of PaineWebber and Mitchell
Hutchins). Prior to December 1995, he was a consultant to PW
Group. Prior to 1988, he was chairman of the board, president
and chief executive officer of American Bakeries Company. Mr.
Bewkes is a director of Interstate Bakeries Corporation. Mr.
Bewkes is a director or trustee of 34 investment companies for
which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.

Richard R. Burt; 53 Trustee Mr. Burt is chairman of IEP Advisors, LLP (international
1275 Pennsylvania Ave, N.W. investments and consulting firm) (since March 1994), a
Washington, DC 20004 partner of McKinsey & Company (management consulting firm)
(since 1991). He is also a director of Archer-Daniels-Midland
Co. (agricultural commodities), Hollinger International Co.
(publishing) and Homestake Mining Corp. (gold mining), vice
chairman of Anchor Gaming (provides technology to gaming and
wagering industry) (since July 1999) and chairman of Weirton
Steel Corp (makes and finishes steel products) (since April
1996). He was the chief negotiator in the Strategic Arms
Reduction Talks with the former Soviet Union (1989-1991) and
the U.S. Ambassador to the Federal Republic of Germany
(1985-1989). Mr. Burt is a director or trustee of 30
investment companies for which Mitchell Hutchins, PaineWebber
or one of their affiliates serves as investment adviser.

Mary C. Farrell**+; 50 Trustee Ms. Farrell is a managing director, senior investment
strategist and member of the Investment Policy Committee of
PaineWebber. Ms. Farrell joined PaineWebber in 1982. She is a
member of the Financial Women's Association and Women's
Economic Roundtable and appears as a regular panelist on Wall
$treet Week with Louis Rukeyser. She also serves on the Board
of Overseers of New York University's Stern School of
Business. Ms. Farrell is a director or trustee of 29
investment companies for which Mitchell Hutchins, PaineWebber
or one of their affiliates serves as investment adviser.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH EACH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------------ ----------------------------------------
<S> <C> <C>
Meyer Feldberg; 58 Trustee Mr. Feldberg is Dean and Professor of Management of the
Columbia University Graduate School of Business, Columbia University. Prior
101 Uris Hall to 1989, he was president of the Illinois Institute of
New York, NY 10027 Technology. Dean Feldberg is also a director of Primedia Inc.
(publishing), Federated Department Stores, Inc. (operator of
department stores) and Revlon, Inc. (cosmetics). Dean Feldberg
is a director or trustee of 33 investment companies for which
Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.

George W. Gowen; 70 Trustee Mr. Gowen is a partner in the law firm of Dunnington,
666 Third Avenue Bartholow & Miller. Prior to May 1994, he was a partner
New York, NY 10017 in the law firm of Fryer, Ross & Gowen. Mr. Gowen is a
director or trustee of 33 investment companies for which
Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.

Frederic V. Malek; 63 Trustee Mr. Malek is chairman of Thayer Capital Partners (merchant
1455 Pennsylvania Ave, N.W. bank) and chairman of Thayer Hotel Investors II and Lodging
Suite 350 Opportunities Fund (hotel investment partnerships). From
Washington, DC 20004 January 1992 to November 1992, he was campaign manager of
Bush-Quayle '92. From 1990 to 1992, he was vice chairman and,
from 1989 to 1990, he was president of Northwest Airlines Inc.
and NWA Inc. (holding company of Northwest Airlines Inc.).
Prior to 1989, he was employed by the Marriott Corporation
(hotels, restaurants, airline catering and contract feeding),
where he most recently was an executive vice president and
president of Marriott Hotels and Resorts. Mr. Malek is also a
director of Aegis Communications, Inc. (tele-services),
American Management Systems, Inc. (management consulting and
computer related services), Automatic Data Processing, Inc.,
(computing services), CB Richard Ellis, Inc. (real estate
services), FPL Group, Inc. (electric services), Global
Vacation Group (packaged vacations), HCR/Manor Care, Inc.
(health care), SAGA Systems, Inc. (software company) and
Northwest Airlines Inc. Mr. Malek is a director or trustee of
30 investment companies for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as investment
adviser.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH EACH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------------ ----------------------------------------
<S> <C> <C>
Carl W. Schafer; 64 Trustee Mr. Schafer is president of the Atlantic Foundation
66 Witherspoon Street, #1100 (charitable foundation supporting mainly oceanographic
Princeton, NJ 08542 exploration and research). He is a director of Labor Ready,
Inc. (temporary employment), Roadway Express, Inc. (trucking),
The Guardian Group of Mutual Funds, the Harding, Loevner
Funds, E.I.I. Realty Trust (investment company), Evans
Systems, Inc. (motor fuels, convenience store and diversified
company), Electronic Clearing House, Inc. (financial
transactions processing), Frontier Oil Corporation and
Nutraceutix, Inc. (biotechnology company). Prior to January
1993, he was chairman of the Investment Advisory Committee of
the Howard Hughes Medical Institute. Mr. Schafer is a director
or trustee of 30 investment companies for which Mitchell
Hutchins, PaineWebber or one of their affiliates serves as
investment adviser.

Brian M. Storms*+; 45 Trustee Mr. Storms is president and chief operating officer of
Mitchell Hutchins (since March 1999). Mr. Storms was
president of Prudential Investments (1996-1999). Prior to
joining Prudential he was a managing director at Fidelity
Investments. Mr. Storms is a director or trustee of 30
investment companies for which Mitchell Hutchins, PaineWebber
or one of their affiliates serves as investment adviser.

T. Kirkham Barneby*; 53 Vice President Mr. Barneby is a managing director and chief investment
(Investment Trust and officer--quantitative investments of
Managed Trust only) Mitchell Hutchins. Mr. Barneby is a vice
president of seven investment companies for
which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.

Julieanna Berry*; 36 Vice President Ms. Berry is a first vice president and a portfolio manager
(Managed Trust only) of Mitchell Hutchins. Ms. Berry is a vice president of two
investment companies for which Mitchell Hutchins, PaineWebber
or one of their affiliates serves as investment adviser.

Tom Disbrow**, Vice President and Mr. Disbrow is a first vice president and a senior manager of
Assistant Treasurer the mutual fund finance department of Mitchell Hutchins.
Prior to November 1999, he was a vice president of
Zweig/Glaser Advisers. Mr. Disbrow is a vice president and
assistant treasurer of 31 investment companies for which
Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH EACH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------------ ----------------------------------------
<S> <C> <C>
James F. Keegan*; 39 Vice President Mr. Keegan is a senior vice president and a portfolio manager
(Managed Trust only) of Mitchell Hutchins. Prior to March 1996, he was director
of fixed income strategy and research of Merrion Group, L.P.
Mr. Keegan is a vice president of six investment companies for
which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.

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

Kevin J. Mahoney**; 34 Vice President and Mr. Mahoney is a first vice president and a senior manager of
Assistant Treasurer the mutual fund finance department of Mitchell Hutchins. From
August 1996 through March 1999, he was the manager of the
mutual fund internal control group of Salomon Smith Barney.
Prior to August 1996, he was an associate and assistant
treasurer for BlackRock Financial Management L.P. Mr. Mahoney
is a vice president and assistant treasurer of 31 investment
companies for which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.

Dennis McCauley*; 53 Vice President Mr. McCauley is a managing director and chief investment
(Managed Trust and officer--fixed income of Mitchell Hutchins. Mr. McCauley is
Investment Series only) a vice president of 22 investment companies for which
Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.

Ann E. Moran**; 42 Vice President and Ms. Moran is a vice president and a manager of the mutual fund
Assistant Treasurer finance department of Mitchell Hutchins. Ms. Moran is a vice
president and assistant treasurer of 31 investment companies
for which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.

Dianne E. O'Donnell**; 47 Vice President and Secretary Ms. O'Donnell is a senior vice president and deputy general
counsel of Mitchell Hutchins. Ms. O'Donnell is a vice
president and secretary of 30 investment companies and a vice
president and assistant secretary of one investment company
for which Mitchell Hutchins, PaineWebber or one of their
affiliates serves as investment adviser.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH EACH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------------ ----------------------------------------
<S> <C> <C>
Emil Polito*; 39 Vice President Mr. Polito is a senior vice president and director of
operations and control for Mitchell Hutchins. Mr. Polito is a
vice president of 31 investment companies for which Mitchell
Hutchins, PaineWebber or one of their affiliates serves as
investment adviser.

Victoria E. Schonfeld**; 49 Vice President Ms. Schonfeld is a managing director and general counsel of
Mitchell Hutchins and (since July 1995) a senior vice
president of PaineWebber. Ms. Schonfeld is a vice president of
30 investment companies and a vice president and secretary of
one investment company for which Mitchell Hutchins,
PaineWebber or one of their affiliates serves as investment
adviser.

Paul H. Schubert**; 37 Vice President and Treasurer Mr. Schubert is a senior vice president and director of the
mutual fund finance department of Mitchell Hutchins. Mr.
Schubert is a vice president and treasurer of 31 investment
companies for which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.

Nirmal Singh*; 43 Vice President Mr. Singh is a senior vice president and a portfolio manager
(Managed Trust only) of Mitchell Hutchins. Mr. Singh is a vice president of four
investment companies for which Mitchell Hutchins, PaineWebber
or one of their affiliates serves as investment adviser.

Barney A. Taglialatela**; 39 Vice President and Mr. Taglialatela is a vice president and a manager of the
Assistant Treasurer mutual fund finance department of Mitchell Hutchins. Mr.
Taglialatela is a vice president and assistant treasurer of 31
investment companies for which Mitchell Hutchins, PaineWebber
or one of their affiliates serves as investment adviser.

Mark A. Tincher*; 44 Vice President Mr. Tincher is a managing director and chief investment
(Investment Trust, officer--equities of Mitchell Hutchins. Prior to March 1995,
Investment Trust II and he was a vice president and directed the U.S. funds
Managed Trust only) management and equity research areas of Chase Manhattan
Private Bank. Mr. Tincher is a vice president of 12 investment
companies for which Mitchell Hutchins, PaineWebber or one of
their affiliates serves as investment adviser.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NAME AND ADDRESS; AGE POSITION WITH EACH TRUST BUSINESS EXPERIENCE; OTHER DIRECTORSHIPS
--------------------- ------------------------ ----------------------------------------
<S> <C> <C>
Stuart Waugh*; 44 Vice President Mr. Waugh is a managing director and a portfolio manager
(Investment Series only) of Mitchell Hutchins responsible for global fixed income
investments and currency trading. Mr. Waugh is a vice
president of five investment companies for which Mitchell
Hutchins, PaineWebber or one of their affiliates serves as
investment adviser.

Keith A. Weller**; 38 Vice President and Mr. Weller is a first vice president and associate general
Assistant Secretary counsel of Mitchell Hutchins. Prior to May 1995, he was an
attorney in private practice. Mr. Weller is a vice president
and assistant secretary of 30 investment companies for which
Mitchell Hutchins, PaineWebber or one of their affiliates
serves as investment adviser.
</TABLE>

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

<TABLE>
<S> <C>
* This person's business address is 51 West 52nd Street, New York, New York
10019-6114.

** This person's business address is 1285 Avenue of the Americas, New York,
New York 10019.

+ Mrs. Alexander, Mr. Bewkes, Ms. Farrell and Mr. Storms are "interested
persons" of each fund as defined in the Investment Company Act by virtue
of their positions with Mitchell Hutchins, PaineWebber, and/or PW Group.
</TABLE>

Board members are compensated as follows:

<TABLE>
<S> <C>
- MANAGED TRUST has eight operating series and pays each board
member who is not an "interested person" of the Trust $1,000
annually for each series. Therefore, Managed Trust pays each such
board member $8,000 annually, plus any additional amounts due for
board or committee meetings.

- INVESTMENT TRUST II AND INVESTMENT SERIES each has only one series
and pays board members who are not "interested persons" of the
Trust $1,000 annually for that series, plus any additional amounts
due for board or committee meetings.

- INVESTMENT TRUST has two series and pays each board member who is
not an "interested person" of the Trust $1,000 annually for Global
Equity Fund and an additional $1,500 annually for its second
series. Therefore, Investment Trust pays each such board member
$2,500 annually, plus any additional amounts due for board or
committee meetings.
</TABLE>

Each Trust pays up to $150 per series for each board meeting and
each separate meeting of a board committee. Each chairman of the audit and
contract review committees of individual funds within the PaineWebber fund
complex receives additional compensation, aggregating $15,000 annually, from
the relevant funds. All board members are reimbursed for any expenses
incurred in attending meetings. Because PaineWebber, Mitchell Hutchins and,
as applicable, the sub-advisers perform substantially all the services
necessary for the operation of the Trusts and each fund, the Trusts require
no employees. No officer, director or employee of Mitchell Hutchins or
PaineWebber presently receives any compensation from a Trust for acting as a
board member or officer.

<PAGE>

The table below includes certain information relating to the
compensation by each Trust of its current board members and the compensation
of those board members from all PaineWebber funds during the periods
indicated:

<TABLE>
<CAPTION>
COMPENSATION TABLE+

AGGREGATE AGGREGATE AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION COMPENSATION COMPENSATION FROM THE TRUSTS
FROM MANAGED FROM INVESTMENT FROM INVESTMENT FROM INVESTMENT AND THE FUND
NAME OF PERSON, POSITION TRUST* SERIES* TRUST* TRUST II* COMPLEX**
------------------------ ------ ------- ------ --------- ---------
<S> <C> <C> <C> <C> <C>
Richard Q. Armstrong,
$ 12,030 $ 1,780 $ 4,060 $ 1,780 $104,650
Trustee......................
Richard R. Burt,
11,850 1,750 4,000 1,750 102,850
Trustee......................
Meyer Feldberg,
12,030 2,432 5,364 2,432 119,650
Trustee.....................
George W. Gowen,
14,711 1,780 4,060 1,780 119,650
Trustee.....................
Frederic V. Malek,
12.030 1,780 4,060 1,780 104,650
Trustee.....................
Carl W. Schafer,
12,030 1,780 4,060 1,780 104,650
Trustee.....................
</TABLE>

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

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

* Represents fees paid to each board member from the Trust indicated for the
fiscal year ended October 31, 1999.

** Represents total compensation paid during the calendar year ended December
31, 1999, to each board member by 31 investment companies (34 in the case of
Messrs. Feldberg and Gowen) for which Mitchell Hutchins, PaineWebber or one
of their affiliates served as investment adviser. No fund within the
PaineWebber fund complex has a bonus, pension, profit sharing or retirement
plan.

PRINCIPAL HOLDERS AND MANAGEMENT OWNERSHIP OF SECURITIES

As of February 1, 2000, trustees and officers owned in the aggregate
less than 1% of the outstanding shares of any class of each Trust.

As of February 1, 2000, the following shareholders were shown in the
funds' records as owning 5% or more of any class of a fund's shares:

<TABLE>
<CAPTION>
NAME AND ADDRESS* PERCENTAGE OF SHARES
----------------- BENEFICIALLY OWNED AS OF
FEBRUARY 1 2000
------------------------
<S> <C>
GLOBAL EQUITY FUND
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NAME AND ADDRESS* PERCENTAGE OF SHARES
----------------- BENEFICIALLY OWNED AS OF
FEBRUARY 1 2000
------------------------
<S> <C>
Northern Trust Company as Trustee 47.83% of
FBO PaineWebber 401K Plan #22-36033 Class Y shares
Subaru of New England
Global Account 33.92% of
Attn: Robert Wakely Class Y shares
Ernest J. Boch
Global Account 6.64% of
c/o Robert Wakely Class Y shares
GLOBAL INCOME FUND
------------------
John M. Freese, Administrator 11.24% of
Estate of Dorothy M. Freese Class C shares
John Markham Freese, Executor 55.22% of
Estate of M. Lloyd Freese Class C shares
Northern Trust Company as Trustee 64.64% of
FBO PaineWebber 401K Plan Class Y shares
ASIA PACIFIC GROWTH FUND
------------------------
The Fletcher Jones Foundation 12.47% of
Attn: John Smythe Class A shares
PaineWebber customer 15.32% of
Jerry M. Zeigler Class Y shares
PaineWebber CDN FBO 11.08%
Luis Alejandro Sanchez Class Y shares
PaineWebber CDN FBO 7.67%
Nathan Weigt Class Y shares
PaineWebber customer 6.12% of
William H. Morby Class Y shares
PaineWebber customer
Roi M. Thibault 6.11% of
(PACE) Class Y shares
Cathy B. Teague 5.61% of
Class Y shares
Vicki Thomas 5.11% of
Class Y shares
EMERGING MARKETS EQUITY FUND
Ramesh Singh 8.37% of
Class A shares
Barry Seeman
Ruth Seeman 39.46% of
Joint Owners Class B shares
Thomas A. Wertheim 5.93% of
Class C shares
PaineWebber customer
PaineWebber CDN FBO 5.67% of
Jack Wade Class C shares
PaineWebber customer
PaineWebber CDN FBO 7.11% of
J. Darwin King Class Y shares
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NAME AND ADDRESS* PERCENTAGE OF SHARES
----------------- BENEFICIALLY OWNED AS OF
FEBRUARY 1 2000
------------------------
<S> <C>
PaineWebber customer 6.20% of
Charles A hard Class Y shares

</TABLE>

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

* The shareholder listed may be contacted c/o Mitchell Hutchins
Asset Management Inc., 51 West 52nd Street, New York, NY
10019-6114.

INVESTMENT ADVISORY, ADMINISTRATION AND DISTRIBUTION ARRANGEMENTS

INVESTMENT ADVISORY AND ADMINISTRATION ARRANGEMENTS. Mitchell
Hutchins acts as the investment adviser and administrator to each fund
pursuant to separate contracts (each an "Advisory Contract") with each Trust.
Under the Advisory Contracts, each fund pays Mitchell Hutchins a fee
(expressed as a percentage of the fund's average daily net assets), computed
daily and paid monthly, at the annual rates indicated below.

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

Under each Advisory Contract, Mitchell Hutchins will not be liable
for any error of judgment or mistake of law or for any loss suffered by a
fund in connection with the performance of the Advisory Contract, except a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of Mitchell Hutchins in the performance of its duties or from reckless
disregard of its duties and obligations thereunder. Each Advisory Contract
terminates automatically upon assignment and is terminable at any time
without penalty by the fund's board or by vote of the holders of a majority
of the fund's outstanding voting securities on 60 days' written notice to
Mitchell Hutchins, or by Mitchell Hutchins on 60 days' written notice to the
fund.

GLOBAL EQUITY FUND. Under the current Advisory Contract, the fund
pays Mitchell Hutchins a fee, computed daily and paid monthly, at the annual
rate of 0.85% of the fund's average daily net assets up to and including $500
million, 0.83% of amounts over $500 million and up to and including $1
billion, and 0.805% of amounts over $1 billion. For the fiscal years ended
October 31, 1999, October 31, 1998, and October 31, 1997, the fund paid (or
accrued) to Mitchell Hutchins advisory and administrative fees of $3,254,321,
$3,918,629 and $4,689,662, respectively.

<PAGE>

The Advisory Contract authorizes Mitchell Hutchins to retain one or
more sub-advisers but does not require Mitchell Hutchins to do so. Mitchell
Hutchins has entered into a separate contract with Invista ("Sub-Advisory
Contract"), pursuant to which Invista serves as investment sub-adviser for
the foreign investments of Global Equity Fund. (Mitchell Hutchins allocates
the fund's investments between U.S. and foreign investments and is
responsible for the day-to-day management of the fund's U.S. investments.)
Under the Sub-Advisory Contract, Mitchell Hutchins (not the fund) is
obligated to pay Invista at the annual rate of 0.40% of the fund's average
daily net assets allocated to its management up to and including $100
million. This fee drops to 0.29% of the fund's average daily net assets
allocated to Invista's management in excess of $100 million up to and
including $300 million and to 0.26% of such assets in excess of $300 million.
For the fiscal year ended October 31, 1999 and for the period October 1
through October 31, 1998, Mitchell Hutchins paid or accrued sub-advisory fees
to Invista of $761,740 and $95,901, respectively. Invista is an indirect
wholly owned subsidiary of Principal Life Insurance Company. Prior to October
1, 1998, GE Investment Management Incorporated ("GEIM") (a wholly owned
subsidiary of General Electric Company) served as investment sub-adviser for
all the fund's assets pursuant to a sub-advisory contract with Mitchell
Hutchins. Under that sub-advisory contract, Mitchell Hutchins paid or accrued
sub-advisory fees to GEIM for the period November 1, 1997 to September 30,
1998 and the fiscal year ended October 31, 1997, of $1,332,538 and
$1,695,840, respectively.

Under the Sub-Advisory Contract, Invista will not be liable for any
error of judgment or mistake of law or for any loss suffered by Investment
Trust, Global Equity Fund, its shareholders or Mitchell Hutchins in
connection with the Sub-Advisory Contract, except any liability to Investment
Trust, the fund, its shareholders or Mitchell Hutchins to which Invista would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under the Sub-Advisory Contract.

The Sub-Advisory Contract terminates automatically upon its
assignment or the termination of the Advisory Contract and is terminable at
any time without penalty by Investment Trust's board or by vote of the
holders of a majority of the fund's outstanding voting securities on 60 days'
notice to Invista and Mitchell Hutchins, or by Invista or Mitchell Hutchins
on 120 days' written notice to Investment Trust.

GLOBAL INCOME FUND. Under the current Advisory Contract, the fund
pays Mitchell Hutchins a fee, computed daily and paid monthly, at the annual
rate of 0.75% of the value of its average daily net assets up to and
including $500 million, 0.725% of amounts in excess of $500 million and up to
$1 billion, 0.70% of amounts in excess of $1 billion and up to $1.5 billion,
0.675% of amounts in excess of $1.5 billion and up to $2.0 billion, and 0.65%
of amounts over $2 billion. For the fiscal years ended October 31, 1999,
October 31, 1998 and October 31, 1997, the fund paid (or accrued) to Mitchell
Hutchins advisory and administrative fees of $3,144,895, $4,031,933 and
$5,683,381, respectively.

ASIA PACIFIC GROWTH FUND. Under the current Advisory Contract, the
fund pays Mitchell Hutchins a fee, computed daily and paid monthly, at the
annual rate of 1.20% of the fund's average daily net assets up to and
including $100 million and at an annual rate of 1.10% of its average daily
net assets in excess of $100 million. For the fiscal years ended October 31,
1999 and October 31, 1998 and the period March 25, 1997 (commencement of
operations) through October 31, 1997, the fund paid (or accrued) to Mitchell
Hutchins advisory and administrative fees of $423,124, $477,960 and $533,412,
respectively.

The Advisory Contract authorizes Mitchell Hutchins to retain one or
more sub-advisers, but does not require Mitchell Hutchins to do so. Mitchell
Hutchins has entered into a separate contract with SIMNA, ("Sub-Advisory
Contract"), pursuant to which SIMNA determines what securities will be
purchased, sold or held by Asia Pacific Growth Fund. Under the current
Sub-Advisory Contract, Mitchell Hutchins (not the fund) pays SIMNA a fee,
computed daily and paid monthly, at an annual rate of 0.65% of the fund's
average daily net assets up to and including $100 million and at an annual
rate of 0.55% of the fund's average daily net assets in excess of $100
million. SIMNA bears all expenses incurred by it in connection with its
services under the Sub-Advisory Contract. For the fiscal years ended October
31, 1999 and October 31, 1998 and the period March 25, 1997 (commencement of
operations) through October 31, 1997, Mitchell Hutchins (not the fund) paid
(or accrued) to SIMNA sub-advisory fees of $229,371, $258,895 and $284,106,
respectively.

<PAGE>

SIMNA is a wholly owned subsidiary of Schroder U.S. Holdings Inc.
and was the surviving company in a merger with Schroder Capital International
Inc. (the investment adviser for Asia Pacific Growth Fund and Emerging
Markets Equity Fund prior to July 1, 1999 and another wholly owned subsidiary
of Schroder U.S. Holdings Inc.). Schroder U.S. Holdings Inc. is a wholly
owned subsidiary of Schroders plc., which is listed on the London Stock
Exchange and is the holding parent of a large worldwide group of banks and
financial services companies (referred to as the "Schroder Group") with
associated companies and branch and representative offices located in 24
countries worldwide.

Under the Sub-Advisory Contract, SIMNA will not be liable for any
error of judgment or mistake of law or for any loss suffered by Managed
Trust, Asia Pacific Growth Fund, its shareholders or Mitchell Hutchins in
connection with the Sub-Advisory Contract, except any liability to Managed
Trust, the fund, its shareholders or Mitchell Hutchins to which SIMNA would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under the Sub-Advisory Contract.

The Sub-Advisory Contract terminates automatically upon its
assignment or the termination of the Advisory Contract and is terminable at
any time without penalty by Managed Trust's board or by vote of the holders
of a majority of the fund's outstanding voting securities on 60 days' notice
to SIMNA, or by SIMNA on 120 days' written notice to Mitchell Hutchins. The
Sub-Advisory Contract may also be terminated by Mitchell Hutchins (1) upon
material breach by SIMNA of its representations and warranties, which breach
shall not have been cured within a 20-day period after notice of such breach;
(2) if the sub-adviser becomes unable to discharge its duties and obligations
under the Sub-Advisory Contract or (3) on 120 days' notice to SIMNA.

EMERGING MARKETS EQUITY FUND.. Under the current Advisory Contract,
the fund pays Mitchell Hutchins a fee, computed daily and paid monthly, at
the annual rate of 1.20% of the fund's average daily net assets. For the
fiscal years ended October 31, 1999, October 31, 1998 and October 31, 1997,
the fund paid (or accrued) to Mitchell Hutchins advisory and administrative
fees of $101,195, $161,312 and $438,676, respectively.

During the fiscal years ended October 31, 1998 and October 31, 1997,
Mitchell Hutchins waived part of its management fees and reimbursed Emerging
Markets Equity Fund in the aggregate amounts of$170,652 and $180,568,
respectively. During these periods, certain expense limitations were
applicable that are no longer in effect. During the 1999 fiscal year, the
fund and Mitchell Hutchins entered into an expense reimbursement agreement
under which Mitchell Hutchins agreed to reimburse the fund to the extent the
fund's expenses during that fiscal year otherwise would exceed specified
expense caps. Under that agreement, Mitchell Hutchins reimbursed the fund in
the aggregate amount of $99,354. The fund and Mitchell Hutchins have entered
into a new expense reimbursement agreement, under which Mitchell Hutchins has
agreed to reimburse the fund to the extent that the fund's expenses through
March 1, 2001 otherwise would exceed the expense caps described in the
Prospectus.

The Advisory Contract authorizes Mitchell Hutchins to retain one or
more sub-advisers, but does not require Mitchell Hutchins to do so. Mitchell
Hutchins has entered into a separate contract with SIMNA ("Sub-Advisory
Contract"), pursuant to which SIMNA determines what securities will be
purchased, sold or held by Emerging Markets Equity Fund. Under the
Sub-Advisory Contract, Mitchell Hutchins (not the fund) pays SIMNA a fee,
computed daily and paid monthly, at an annual rate of 0.70% of the fund's
average daily net assets. SIMNA bears all expenses incurred by it in
connection with its services under the Sub-Advisory Contract. For the fiscal
years ended October 31, 1999, October 31, 1998 and the period February 25,
1997 to October 31, 1997, Mitchell Hutchins (not the fund) paid (or accrued)
to SIMNA $59,031, $94,096 and $161,715, respectively, in sub-advisory fees.
Information about the ownership of SIMNA is provided above under "Investment
Advisory, Administration and Distribution Arrangements -- Investment Advisory
and Administration Arrangements -- Asia Pacific Growth Fund."

Under the Sub-Advisory Contract, SIMNA will not be liable for any
error of judgment or mistake of law or for any loss suffered by Investment
Trust II, Emerging Markets Equity Fund, its shareholders or Mitchell Hutchins
in connection with the Sub-Advisory Contract, except any liability to
Investment Trust II, the fund, its

<PAGE>

shareholders or Mitchell Hutchins to which SIMNA would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence on its part
in the performance of its duties or from reckless disregard by it of its
obligations and duties under the Sub-Advisory Contract.

The Sub-Advisory Contract terminates automatically upon the
assignment or the termination of the Advisory Contract and is terminable at
any time without penalty by Investment Trust II's board or by vote of the
holders of a majority of the fund's outstanding securities on 60 days' notice
to SIMNA, or by SIMNA on 60 days' written notice to Mitchell Hutchins. The
Sub-Advisory Contract may also be terminated by Mitchell Hutchins (1) upon
material breach by SIMNA of its representations and warranties, which breach
shall not have been cured within a 20-day period after notice of such breach;
(2) if the sub-adviser becomes unable to discharge its duties and obligations
under the Sub-Advisory Contract or (3) on 120 days' notice to SIMNA.

TRANSFER AGENCY-RELATED SERVICES. PFPC (not the funds) pays
PaineWebber for certain transfer agency-related services that PFPC has
delegated to PaineWebber. Prior to August 1, 1997, under an agreement between
the applicable Trust and PaineWebber, PaineWebber provided those services
directly to Global Income Fund and Asia Pacific Growth Fund. Under these
agreements, Global Income Fund paid (or accrued) $189,131 to PaineWebber
during the period November 1, 1996 to July 31, 1997, and Asia Pacific Growth
Fund paid (or accrued) $9,958 to PaineWebber during the period March 25, 1997
(commencement of operations) to July 31, 1997. There were no similar service
agreements in effect for Global Equity Fund or Emerging Markets Equity Fund.

SECURITIES LENDING. During the fiscal years ended October 31, 1999,
October 31, 1998 and October 31, 1997, the funds paid (or accrued) the
following fees to PaineWebber for its services as securities lending agent:

<TABLE>
<CAPTION>
FUND FISCAL YEAR ENDED OCTOBER 31,
---- -----------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Global Equity Fund............................. $50,792 $42,839 $14,324
Global Income Fund............................. 35,084 49,982 26,057
Asia Pacific Growth Fund....................... 6,955 25,777 14,324
Emerging Markets Equity Fund................... 301 2,235 6,225
</TABLE>

NET ASSETS. The following table shows the approximate net assets as
of January 31, 2000, sorted by category of investment objective, of the
investment companies as to which Mitchell Hutchins serves as adviser or
sub-adviser. An investment company may fall into more than one of the
categories below.

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

<PAGE>

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

DISTRIBUTION ARRANGEMENTS. Mitchell Hutchins acts as the distributor
of each class of shares of each fund under separate distribution contracts
with each Trust (collectively, "Distribution Contracts"). Each Distribution
Contract requires Mitchell Hutchins to use its best efforts, consistent with
its other businesses, to sell shares of the applicable fund. Shares of each
fund are offered continuously. Under separate exclusive dealer agreements
between Mitchell Hutchins and PaineWebber relating to each class of shares of
the funds (collectively, "Exclusive Dealer Agreements"), PaineWebber and its
correspondent firms sell each fund's shares. Mitchell Hutchins is located at
51 West 52nd Street, New York, New York 10019-6114 and PaineWebber is located
at 1285 Avenue of the Americas, New York, New York 10019.

Under separate plans of distribution pertaining to the Class A,
Class B and Class C shares of each fund adopted by each Trust in the manner
prescribed under Rule 12b-1 under the Investment Company Act (each,
respectively, a "Class A Plan," "Class B Plan" and "Class C Plan," and
collectively, "Plans"), each fund pays Mitchell Hutchins a service fee,
accrued daily and payable monthly, at the annual rate of 0.25% of the average
daily net assets of each class of shares. Under the Class B Plan, each fund
pays Mitchell Hutchins a distribution fee, accrued daily and payable monthly,
at the annual rate of 0.75% of the average daily net assets of the Class B
shares. Under the Class C Plan, each fund pays Mitchell Hutchins a
distribution fee, accrued daily and payable monthly, at the annual rate of
0.75% (0.50% in the case of Global Income Fund) of the average daily net
assets of the Class C shares. There is no distribution plan with respect to
the funds' Class Y shares and the funds pay no service or distribution fees
with respect to their Class Y shares.

Mitchell Hutchins uses the service fees under the Plans for Class A,
B and C shares primarily to pay PaineWebber for shareholder servicing,
currently at the annual rate of 0.25% of the aggregate investment amounts
maintained in each fund by PaineWebber clients. PaineWebber then compensates
its Financial Advisors for shareholder servicing that they perform and
offsets its own expenses in servicing and maintaining shareholder accounts.

Mitchell Hutchins uses the distribution fees under the Class B and
Class C Plans to:

<TABLE>
<S> <C>
- Offset the commissions it pays to PaineWebber for selling each
fund's Class B and Class C shares, respectively.

- Offset each fund's marketing costs attributable to such classes,
such as preparation, printing and distribution of sales
literature, advertising and prospectuses to prospective investors
and related overhead expenses, such as employee salaries and
bonuses.
</TABLE>

PaineWebber compensates Financial Advisors when Class B and Class C
shares are bought by investors, as well as on an ongoing basis. Mitchell
Hutchins receives no special compensation from any of the funds or investors
at the time Class B or C shares are bought.

<PAGE>

Mitchell Hutchins receives the proceeds of the initial sales charge
paid when Class A shares are bought and of the contingent deferred sales
charge paid upon sales of shares. These proceeds may be used to cover
distribution expenses.

The Plans and the related Distribution Contracts for Class A, Class
B and Class C shares specify that each fund must pay service and distribution
fees to Mitchell Hutchins for its service- and distribution-related
activities, not as reimbursement for specific expenses incurred. Therefore,
even if Mitchell Hutchins' expenses exceed the service or distribution fees
it receives, the funds will not be obligated to pay more than those fees. On
the other hand, if Mitchell Hutchins' expenses are less than such fees, it
will retain its full fees and realize a profit. Expenses in excess of service
and distribution fees received or accrued through the termination date of any
Plan will be Mitchell Hutchins' sole responsibility and not that of the
funds. Annually, the board of each fund reviews the Plans and Mitchell
Hutchins' corresponding expenses for each class separately from the Plans and
expenses of the other classes.

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

In reporting amounts expended under the Plans to the board members,
Mitchell Hutchins allocates expenses attributable to the sale of each class
of a fund's shares to such class based on the ratio of sales of shares of
such class to the sales of all three classes of shares. The fees paid by one
class of a fund's shares will not be used to subsidize the sale of any other
class of fund shares.

The funds paid (or accrued) the following service and/or
distribution fees to Mitchell Hutchins under the Plans during the fiscal year
ended October 31, 1999:

<TABLE>
<CAPTION>
GLOBAL EQUITY ASIA PACIFIC EMERGING MARKETS
FUND GLOBAL INCOME FUND GROWTH FUND EQUITY FUND*
---- ------------------ ----------- ------------
<S> <C> <C> <C> <C>
Class A $614,556 $905,780 $33,043 $11,746
Class B 432,119 221,111 138,262 4,765
Class C 387,973 186,104 80,943 23,923
</TABLE>

<PAGE>

Mitchell Hutchins estimates that it and its parent corporation,
PaineWebber, incurred the following shareholder service-related and
distribution-related expenses with respect to each fund during the fiscal
year ended October 31, 1999:

<TABLE>
<CAPTION>
GLOBAL GLOBAL ASIA PACIFIC EMERGING MARKETS
EQUITY FUND INCOME FUND GROWTH FUND EQUITY FUND
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CLASS A
Marketing and advertising............... $ 564,577 $ 377,154 $ 142,694 $ 77,043
Amortization of commissions............. 0 0 0 0
Printing of prospectuses and SAIs....... 1,147 1,431 82 42
Branch network costs allocated and
interest expense.................... 1,097,707 1,561,833 53,031 32,597
Service fees paid to PaineWebber
Financial Advisors.................. 180,210 350,725 12,887 3,663

CLASS B
Marketing and advertising............... $ 99,310 $ 21,483 $ 149,299 $ 7,819
Amortization of commissions............. 150,073 103,431 37,279 1,682
Printing of prospectuses and SAIs....... 134 81 84 4
Branch network costs allocated and
interest expense.................... 201,206 97,096 63,733 3,632
Service fees paid to PaineWebber
Financial Advisors.................. 34,247 21,365 13,481 358

CLASS C
Marketing and advertising............... $ 89,172 $ 25,752 $ 87,409 $ 39,225
Amortization of commissions............. 113,842 48,036 23,675 5,817
Printing of prospectuses and SAIs....... 160 98 57 18
Branch network costs allocated and
interest expense.................... 174,543 107,072 32,737 16,666
Service fees paid to PaineWebber
Financial Advisors.................. 29,114 24,018 7,892 1,776
</TABLE>

"Marketing and advertising" includes various internal costs
allocated by Mitchell Hutchins to its efforts at distributing the funds'
shares. These internal costs encompass office rent, salaries and other
overhead expenses of various departments and areas of operations of Mitchell
Hutchins. "Branch network costs allocated and interest expense" consist of an
allocated portion of the expenses of various PaineWebber departments involved
in the distribution of the funds' shares, including the PaineWebber retail
branch system.

In approving each fund's overall Flexible Pricing-SM- system of
distribution, the applicable board considered several factors, including that
implementation of Flexible Pricing would (1) enable investors to choose the
purchasing option best suited to their individual situation, thereby
encouraging current shareholders to make additional investments in the fund
and attracting new investors and assets to the fund to the benefit of the
fund and its shareholders, (2) facilitate distribution of the fund's shares
and (3) maintain the competitive position of the fund in relation to other
funds that have implemented or are seeking to implement similar distribution
arrangements.

<PAGE>

In approving the Class A Plan, each board considered all the
features of the distribution system, including (1) the conditions under which
initial sales charges would be imposed and the amount of such charges, (2)
Mitchell Hutchins' belief that the initial sales charge combined with a
service fee would be attractive to PaineWebber Financial Advisors and
correspondent firms, resulting in greater growth of the fund than might
otherwise be the case, (3) the advantages to the shareholders of economies of
scale resulting from growth in the fund's assets and potential continued
growth, (4) the services provided to the fund and its shareholders by
Mitchell Hutchins, (5) the services provided by PaineWebber pursuant to its
Exclusive Dealer Agreement with Mitchell Hutchins and (6) Mitchell Hutchins'
shareholder service-related expenses and costs.

In approving the Class B Plan, the board of each fund considered all
the features of the distribution system, including (1) the conditions under
which contingent deferred sales charges would be imposed and the amount of
such charges, (2) the advantage to investors in having no initial sales
charges deducted from fund purchase payments and instead having the entire
amount of their purchase payments immediately invested in fund shares, (3)
Mitchell Hutchins' belief that the ability of PaineWebber Financial Advisors
and correspondent firms to receive sales commissions when Class B shares are
sold and continuing service fees thereafter while their customers invest
their entire purchase payments immediately in Class B shares would prove
attractive to the Financial Advisors and correspondent firms, resulting in
greater growth of the fund than might otherwise be the case, (4) the
advantages to the shareholders of economies of scale resulting from growth in
the fund's assets and potential continued growth, (5) the services provided
to the fund and its shareholders by Mitchell Hutchins, (6) the services
provided by PaineWebber pursuant to its Exclusive Dealer Agreement with
Mitchell Hutchins and (7) Mitchell Hutchins' shareholder service- and
distribution-related expenses and costs. The board members also recognized
that Mitchell Hutchins' willingness to compensate PaineWebber and its
Financial Advisors, without the concomitant receipt by Mitchell Hutchins of
initial sales charges, was conditioned upon its expectation of being
compensated under the Class B Plan.

In approving the Class C Plan, each board considered all the
features of the distribution system, including (1) the advantage to investors
in having no initial sales charges deducted from fund purchase payments and
instead having the entire amount of their purchase payments immediately
invested in fund shares, (2) the advantage to investors in being free from
contingent deferred sales charges upon redemption for shares held more than
one year and paying for distribution on an ongoing basis, (3) Mitchell
Hutchins' belief that the ability of PaineWebber Financial Advisors and
correspondent firms to receive sales compensation for their sales of Class C
shares on an ongoing basis, along with continuing service fees, while their
customers invest their entire purchase payments immediately in Class C shares
and generally do not face contingent deferred sales charges, would prove
attractive to the Financial Advisors and correspondent firms, resulting in
greater growth to the fund than might otherwise be the case, (4) the
advantages to the shareholders of economies of scale resulting from growth in
the fund's assets and potential continued growth, (5) the services provided
to the fund and its shareholders by Mitchell Hutchins, (6) the services
provided by PaineWebber pursuant to its Exclusive Dealer Agreement with
Mitchell Hutchins and (7)Mitchell Hutchins' shareholder service-and
distribution-related expenses and costs. The board members also recognized
that Mitchell Hutchins' willingness to compensate PaineWebber and its
Financial Advisors, without the concomitant receipt by Mitchell Hutchins of
initial sales charges or contingent deferred sales charges upon redemption,
within one year after purchase was conditioned upon its expectation of being
compensated under the Class C Plan.

With respect to each Plan, the boards considered all compensation
that Mitchell Hutchins would receive under the Plan and the Distribution
Contract, including service fees and, as applicable, initial sales charges,
distribution fees and contingent deferred sales charges. The boards also
considered the benefits that would accrue to Mitchell Hutchins under each
Plan in that Mitchell Hutchins would receive service, distribution and
advisory fees that are calculated based upon a percentage of the average net
assets of each fund, which fees would increase if the Plan were successful
and the funds attained and maintained significant asset levels.

<PAGE>

Under the Distribution Contract between each Trust and Mitchell
Hutchins for the Class A shares for the fiscal years (or periods) set forth
below, Mitchell Hutchins earned the following approximate amounts of sales
charges and retained the following approximate amounts, net of concessions to
PaineWebber as exclusive dealer.

<TABLE>
<CAPTION>
FISCAL YEARS ENDED OCTOBER 31
-----------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
GLOBAL EQUITY FUND
Earned................................... $36,468 $60,698 $229,590
Retained................................. 3,334 4,130 10,949

GLOBAL INCOME FUND
Earned................................... 17,409 16,007 29,752
Retained................................. 1,949 2,396 2,950

ASIA PACIFIC GROWTH FUND *
Earned................................... 47,513 83,960 1,142,055
Retained................................. 3,138 5,521 67,143

EMERGING MARKETS EQUITY FUND
Earned................................... 4,138 3,958 10,692
Retained................................. 272 257 662
</TABLE>

- --------

* The 1997 fiscal period is from March 27, 1997 (commencement of operations)
to October 31, 1997.

Mitchell Hutchins earned and retained the following contingent
deferred sales charges paid upon certain redemptions of shares for the fiscal
year ended October 31, 1999:

<TABLE>
<CAPTION>
GLOBAL EQUITY GLOBAL INCOME ASIA PACIFIC EMERGING MARKETS
FUND FUND GROWTH FUND EQUITY FUND
---- ---- ----------- -----------
<S> <C> <C> <C> <C>
Class A $ 0 $ 0 $ 0 $ 0
Class B 85,748 33,705 84,742 2,192
Class C 2,425 329 9,399 308
</TABLE>

PORTFOLIO TRANSACTIONS

Subject to policies established by each board, Mitchell Hutchins or
the applicable sub-adviser is responsible for the execution of each fund's
portfolio transactions and the allocation of brokerage transactions. In
executing portfolio transactions, Mitchell Hutchins or the sub-adviser seeks
to obtain the best net results for a fund, taking into account such factors
as the price (including the applicable brokerage commission or dealer
spread), size of order, difficulty of execution and operational facilities of
the firm involved. While Mitchell Hutchins and the sub-advisers generally
seek reasonably competitive commission rates, payment of the lowest
commission is not necessarily consistent with obtaining the best net results.
Prices paid to dealers in principal transactions, through which most bonds
and some equity securities are traded, generally include a "spread," which is
the difference between the prices at which the dealer is willing to purchase
and sell a specific security at the time. The funds may invest in securities
traded in the over-the-counter market and will engage primarily in
transactions directly with the dealers who make markets in such securities,
unless a better price or execution could be obtained by using a broker.
During the fiscal years or periods indicated, the funds paid the brokerage
commissions set forth below:

<PAGE>

<TABLE>
<CAPTION>
FISCAL YEARS ENDED OCTOBER 31
-----------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
GLOBAL EQUITY FUND $1,158,049 $2,467,840 $384,903
GLOBAL INCOME FUND 0 0 3,330
ASIA PACIFIC GROWTH FUND * 207,382 246,684 454,243
EMERGING MARKETS EQUITY FUND 53,824 102,060 266,325
</TABLE>

- --------

* The 1997 fiscal period is from March 27, 1997 (commencement of operations)
to October 31, 1997.

The funds have no obligation to deal with any broker or group of
brokers in the execution of portfolio transactions. The funds contemplate
that, consistent with the policy of obtaining the best net results, brokerage
transactions may be conducted through Mitchell Hutchins or its affiliates,
including PaineWebber, or brokerage affiliates of SIMNA or Invista. Each
board has adopted procedures in conformity with Rule 17e-1 under the
Investment Company Act to ensure that all brokerage commissions paid to
PaineWebber or brokerage affiliates of a sub-adviser are reasonable and fair.
Specific provisions in the Advisory Contracts and the applicable Sub-Advisory
Contracts authorize Mitchell Hutchins and the sub-advisers and any of their
affiliates that is a member of a national securities exchange to effect
portfolio transactions for the applicable funds on such exchange and to
retain compensation in connection with such transactions. Any such
transactions will be effected and related compensation paid only in
accordance with applicable SEC regulations.

During the fiscal year ended October 31, 1999 Global Equity Fund
paid $15,409 in brokerage commissions to PaineWebber, which represented 1.3%
of the total brokerage commissions paid by the fund and 1.19% of the total
dollar amount of transactions involving the payment of brokerage commissions.
During that fiscal year, Global Equity Fund paid no brokerage commissions to
Mitchell Hutchins or to any of its other affiliates or to its sub-adviser or
any of its affiliates, and Global Income Fund, Asia Pacific Growth Fund and
Emerging Markets Equity Fund paid no brokerage commissions to Mitchell
Hutchins, a sub-adviser or any of their affiliates. During the fiscal years
or periods ended October 31, 1997 and October 31, 1998 no fund paid brokerage
commissions to PaineWebber, the fund's sub-adviser or any of their affiliates.

Transactions in futures contracts are executed through futures
commission merchants ("FCMs"), who receive brokerage commissions for their
services. The funds' procedures in selecting FCMs to execute their
transactions in futures contracts, including procedures permitting the use of
Mitchell Hutchins and its affiliates or affiliates of a sub-adviser, are
similar to those in effect with respect to brokerage transactions in
securities.

In selecting brokers, Mitchell Hutchins or a sub-adviser will
consider the full range and quality of a broker's services. Consistent with
the interests of the funds and subject to the review of each board, Mitchell
Hutchins or a sub-adviser may cause a fund to purchase and sell portfolio
securities through brokers who provide Mitchell Hutchins or the sub-adviser
with brokerage or research services. The funds may pay those brokers a higher
commission than may be charged by other brokers, provided that Mitchell
Hutchins or the sub-adviser determines in good faith that such commission is
reasonable in terms either of that particular transaction or of the overall
responsibility of Mitchell Hutchins or the sub-adviser, as applicable, to
that fund and its other clients.

Research services obtained from brokers may include written reports,
pricing and appraisal services, analysis of issues raised in proxy
statements, educational seminars, subscriptions, portfolio attribution and
monitoring services, and computer hardware, software and access charges which
are directly related to investment research. Research services may be
received in the form of written reports, online services, telephone contacts
and personal meetings with securities analysts, economists, corporate and
industry spokespersons and government representatives.

<PAGE>

For the fiscal year ended October 31, 1999, the funds directed the
portfolio transactions indicated below to brokers chosen because they provide
research, analysis, advice and similar services, for which the funds paid the
brokerage commissions indicated below:

<TABLE>
<CAPTION>
AMOUNT OF PORTFOLIO
FUND TRANSACTIONS BROKERAGE COMMISSIONS PAID
---- ------------ --------------------------
<S> <C> <C>
Global Equity Fund $ 70,571,861 $ 108,740
Global Income Fund 0 0
Asia Pacific Growth Fund 328,841 1,274
Emerging Markets Equity Fund 146,379 818
</TABLE>

For purchases or sales with broker-dealer firms that act as
principal, Mitchell Hutchins or the applicable sub-adviser seeks best
execution. Although Mitchell Hutchins or a sub-adviser may receive certain
research or execution services in connection with these transactions,
Mitchell Hutchins and the sub-adviser will not purchase securities at a
higher price or sell securities at a lower price than would otherwise be paid
if no weight was attributed to the services provided by the executing dealer.
Mitchell Hutchins or a sub-adviser may engage in agency transactions in
over-the-counter equity and debt securities in return for research and
execution services. These transactions are entered into only in compliance
with procedures ensuring that the transaction (including commissions) is at
least as favorable as it would have been if effected directly with a
market-maker that did not provide research or execution services.

Research services and information received from brokers or dealers
are supplemental to Mitchell Hutchins' or a sub-adviser's own research
efforts and, when utilized, are subject to internal analysis before being
incorporated into their investment processes. Information and research
services furnished by brokers or dealers through which or with which the
funds effect securities transactions may be used by Mitchell Hutchins or a
sub-adviser in advising other funds or accounts and, conversely, research
services furnished to Mitchell Hutchins or a sub-adviser by brokers or
dealers in connection with other funds or accounts that either of them
advises may be used in advising the funds.

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

The funds will not purchase securities that are offered in
underwritings in which PaineWebber or an affiliate of a sub-adviser is a
member of the underwriting or selling group, except pursuant to procedures
adopted by each board pursuant to Rule 10f-3 under the Investment Company
Act. Among other things, these procedures require that the spread or
commission paid in connection with such a purchase be reasonable and fair,
the purchase be at not more than the public offering price prior to the end
of the first business day after the date of the public offering and that
PaineWebber or any affiliate thereof or an affiliate of a sub-adviser not
participate in or benefit from the sale to the funds.

As of October 31, 1999, the funds owned securities issued by their
regular broker-dealers as follows:

Global Equity Fund: Repurchase agreements with State Street Bank and
Trust Company ($275,000) and Dresner Bank AG ($7,591,000); common stock of
Morgan Stanley Dean Witter & Co. ($1,853,250 ).

Asia Pacific Growth Fund: Repurchase agreements with State Street
Bank and Trust Company ($1,724,000).

<PAGE>

Emerging Markets Equity Fund. Repurchase agreements with State
Street Bank and Trust Company ($164,000); common stock of Daewoo Securities
$6,437.

PORTFOLIO TURNOVER. The funds' annual portfolio turnover rates may
vary greatly from year to year, but they will not be a limiting factor when
management deems portfolio changes appropriate. The portfolio turnover rate
is calculated by dividing the lesser of a fund's annual sales or purchases of
portfolio securities (exclusive of purchases or sales of securities whose
maturities at the time of acquisition were one year or less) by the monthly
average value of securities in the portfolio during the year.

The funds' respective portfolio turnover rates for the fiscal
periods shown were:

<TABLE>
<CAPTION>
PORTFOLIO TURNOVER RATES
------------------------------------------------
FISCAL YEAR ENDED FISCAL YEAR ENDED
FUND OCTOBER 31, 1999 OCTOBER 31, 1998
--------- ---------------- ----------------
<S> <C> <C>
Global Equity Fund................................. 72% 151%
Global Income Fund................................. 63% 93%
Asia Pacific Growth Fund........................... 70% 59%
Emerging Markets Equity Fund....................... 80% 64%
</TABLE>

REDUCED SALES CHARGES, ADDITIONAL EXCHANGE AND REDEMPTION
INFORMATION AND OTHER SERVICES

WAIVERS OF SALES CHARGES/CONTINGENT DEFERRED SALES CHARGES -- CLASS
A SHARES. The following additional sales charge waivers are available for
Class A shares if you:

<TABLE>
<S> <C>
- Purchase shares through a variable annuity offered only to
qualified plans. For investments made pursuant to this waiver,
Mitchell Hutchins may make payments out of its own resources to
PaineWebber and to the variable annuity's sponsor, adviser or
distributor in a total amount not to exceed l% of the amount
invested;

- Acquire shares through an investment program that is not sponsored
by PaineWebber or its affiliates and that charges participants a
fee for program services, provided that the program sponsor has
entered into a written agreement with PaineWebber permitting the
sale of shares at net asset value to that program. For investments
made pursuant to this waiver, Mitchell Hutchins may make a payment
to PaineWebber out of its own resources in an amount not to exceed
1% of the amount invested. For subsequent investments or exchanges
made to implement a rebalancing feature of such an investment
program, the minimum subsequent investment requirement is also
waived;

- Acquire shares in connection with a reorganization pursuant to
which a fund acquires substantially all of the assets and
liabilities of another fund in exchange solely for shares of the
acquiring fund; or

- Acquire shares in connection with the disposition of proceeds from
the sale of shares of Managed High Yield Plus Fund Inc. that were
acquired during that fund's initial public offering of shares and
that meet certain other conditions described in its prospectus
</TABLE>

In addition, reduced sales charges on Class A shares are available
through the combined purchase plan or through rights of accumulation
described below. Class A share purchases of $1 million or more are not
subject to an initial sales charge; however, if a shareholder sells these
shares within one year after purchase, a contingent deferred sales charge of
1% of the offering price or the net asset value of the shares at the time of
sale by the shareholder, whichever is less, is imposed. This contingent
deferred sales charge is waived if you are eligible to

<PAGE>

invest in certain offshore investment pools offered by PaineWebber, your
shares are sold before March 31, 2000 and the proceeds are used to purchase
interests in one or more of these pools (see below).

COMBINED PURCHASE PRIVILEGE -- CLASS A SHARES. Investors and
eligible groups of related fund investors may combine purchases of Class A
shares of the funds with concurrent purchases of Class A shares of any other
PaineWebber mutual fund and thus take advantage of the reduced sales charges
indicated in the tables of sales charges for Class A shares in the
Prospectus. The sales charge payable on the purchase of Class A shares of the
funds and Class A shares of such other funds will be at the rates applicable
to the total amount of the combined concurrent purchases.

An "eligible group of related fund investors" can consist of any
combination of the following:

(a) an individual, that individual's spouse, parents and children;

(b) an individual and his or her individual retirement account
("IRA");

(c) an individual (or eligible group of individuals) and any company
controlled by the individual(s) (a person, entity or group that holds 25% or
more of the outstanding voting securities of a corporation will be deemed to
control the corporation, and a partnership will be deemed to be controlled by
each of its general partners);

(d) an individual (or eligible group of individuals) and one or more
employee benefit plans of a company controlled by the individual(s);

(e) an individual (or eligible group of individuals) and a trust
created by the individual(s), the beneficiaries of which are the individual
and/or the individual's spouse, parents or children;

(f) an individual and a Uniform Gifts to Minors Act/Uniform
Transfers to Minors Act account created by the individual or the individual's
spouse;

(g) an employer (or group of related employers) and one or more
qualified retirement plans of such employer or employers (an employer
controlling, controlled by or under common control with another employer is
deemed related to that other employer); or

(h) individual accounts related together under one registered
investment adviser having full discretion and control over the accounts. The
registered investment adviser must communicate at least quarterly through a
newsletter or investment update establishing a relationship with all of the
accounts.

RIGHTS OF ACCUMULATION -- CLASS A SHARES. Reduced sales charges are
available through a right of accumulation, under which investors and eligible
groups of related fund investors (as defined above) are permitted to purchase
Class A shares of the funds among related accounts at the offering price
applicable to the total of (1) the dollar amount then being purchased plus
(2) an amount equal to the then-current net asset value of the purchaser's
combined holdings of Class A fund shares and Class A shares of any other
PaineWebber mutual fund. The purchaser must provide sufficient information to
permit confirmation of his or her holdings, and the acceptance of the
purchase order is subject to such confirmation. The right of accumulation may
be amended or terminated at any time.

REINSTATEMENT PRIVILEGE -- CLASS A SHARES. Shareholders who have
redeemed Class A shares of a fund may reinstate their account without a sales
charge by notifying the transfer agent of such desire and forwarding a check
for the amount to be purchased within 365 days after the date of redemption.
The reinstatement will be made at the net asset value per share next computed
after the notice of reinstatement and check are received. The amount of a
purchase under this reinstatement privilege cannot exceed the amount of the
redemption proceeds. Gain on a redemption is taxable regardless of whether
the reinstatement privilege is exercised, although a loss arising out of a
redemption will not be deductible to the extent the reinstatement privilege
is exercised within 30 days after redemption, in which event an adjustment
will be made to the shareholder's tax basis for shares acquired pursuant to

<PAGE>

the reinstatement privilege. Gain or loss on a redemption also will be
readjusted for federal income tax purposes by the amount of any sales charge
paid on Class A shares, under the circumstances and to the extent described
in "Taxes --Special Rules for Class A Shareholders," below.

WAIVERS OF CONTINGENT DEFERRED SALES CHARGES -- CLASS B SHARES. The
maximum 5% contingent deferred sales charge applies to sales of shares during
the first year after purchase. The charge generally declines by 1% annually,
reaching zero after six years. Among other circumstances, the contingent
deferred sales charge on Class B shares is waived where a total or partial
redemption is made within one year following the death of the shareholder.
The contingent deferred sales charge waiver is available where the decedent
is either the sole shareholder or owns the shares with his or her spouse as a
joint tenant with right of survivorship. This waiver applies only to
redemption of shares held at the time of death.

NON-RESIDENT ALIEN WAIVER OF CONTINGENT DEFERRED SALES CHARGE FOR
CLASS A, B AND C SHARES. Until March 31, 2000, 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 a 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, or any 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.

PURCHASES AND SALES OF CLASS Y SHARES THROUGH THE PACE-SM- MULTI
ADVISOR PROGRAM. An investor who participates in the PACE-SM- Multi Advisor
Program is eligible to purchase Class Y shares. The PACESM Multi Advisor
Program is an advisory program sponsored by PaineWebber that provides
comprehensive investment services, including investor profiling, a
personalized asset allocation strategy using an appropriate combination of
funds, and a quarterly investment performance review. Participation in the
PACE-SM- Multi Advisor Program is subject to payment of an advisory fee at the
effective maximum annual rate of 1.5% of assets. Employees of PaineWebber and
its affiliates are entitled to a waiver of this fee. Please contact your
PaineWebber Financial Advisor or PaineWebber's correspondent firms for more
information concerning mutual funds that are available through the PACE-SM-
Multi Advisor Program.

PURCHASES OF CLASS A SHARES THROUGH THE PAINEWEBBER INSIGHTONE-SM-
PROGRAM. Investors who purchase shares through the PaineWebber InsightOne-SM-
Program are eligible to purchase Class A shares without a sales load. The
PaineWebber InsightOne-SM- Program offers a nondiscretionary brokerage
account to investors for an asset-based fee at an annual rate of up to 1.50%
of the assets in the account. Account holders may purchase or sell certain
investment products without paying commissions or other markups/markdowns.

PURCHASES AND SALES OF CLASS Y SHARES FOR PARTICIPANTS IN PW 401(K)
PLUS PLAN. The trustee of the PW 401(k) Plus Plan, a defined contribution
plan sponsored by PW Group, buys and sells Class Y shares of the funds that
are included as investment options under the Plan to implement the investment
choices of individual participants with respect to their Plan contributions.
Individual Plan participants should consult the Summary Plan Description and
other plan material of the PW 401(k) Plus Plan (collectively, "Plan
Documents") for a description of the procedures and limitations applicable to
making and changing investment choices. Copies of the Plan Documents are
available from the Benefits Connection, 100 Halfday Road, Lincolnshire, IL
60069 or by calling 1-888-PWEBBER (1-888-793-2237). As described in the Plan
Documents, the price at which Class Y shares are bought and sold by the
trustee of PW 401(k) Plus Plan might be more or less than the price per share
at the time the participants made their investment choices.

ADDITIONAL EXCHANGE AND REDEMPTION INFORMATION. As discussed in the
Prospectus, eligible shares of the funds may be exchanged for shares of the
corresponding class of most other PaineWebber mutual funds. Class Y shares
are not eligible for exchange. Shareholders will receive at least 60 days'
notice of any termination or

<PAGE>

material modification of the exchange offer, except no notice need be given
if, under extraordinary circumstances, either redemptions are suspended under
the circumstances described below or a fund temporarily delays or ceases the
sales of its shares because it is unable to invest amounts effectively in
accordance with the fund's investment objective, policies and restrictions.

If conditions exist that make cash payments undesirable, each fund
reserves the right to honor any request for redemption by making payment in
whole or in part in securities chosen by the fund and valued in the same way
as they would be valued for purposes of computing the fund's net asset value.
Any such redemption in kind will be made with readily marketable securities,
to the extent available. If payment is made in securities, a shareholder may
incur brokerage expenses in converting these securities into cash. Each fund
has elected, however, to be governed by Rule 18f-1 under the Investment
Company Act, under which it is obligated to redeem shares solely in cash up
to the lesser of $250,000 or 1% of its net asset value during any 90-day
period for one shareholder. This election is irrevocable unless the SEC
permits its withdrawal.

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

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

AUTOMATIC INVESTMENT PLAN. PaineWebber offers an automatic
investment plan with a minimum initial investment of $1,000 through which a
fund will deduct $50 or more on a monthly, quarterly, semi-annual or annual
basis from the investor's bank account to invest directly in the fund.
Participation in the automatic investment plan enables an investor to use the
technique of "dollar cost averaging." When an investor invests the same
dollar amount each month under the plan, the investor will purchase more
shares when a fund's net asset value per share is low and fewer shares when
the net asset value per share is high. Using this technique, an investor's
average purchase price per share over any given period will be lower than if
the investor purchased a fixed number of shares on a monthly basis during the
period. Of course, investing through the automatic investment plan does not
assure a profit or protect against loss in declining markets. Additionally,
because the automatic investment plan involves continuous investing
regardless of price levels, an investor should consider his or her financial
ability to continue purchases through periods of both low and high price
levels.

SYSTEMATIC WITHDRAWAL PLAN. The systematic withdrawal plan allows
investors to set up monthly, quarterly (March, June, September and December),
semi-annual (June and December) or annual (December) withdrawals from their
PaineWebber Mutual Fund accounts. Minimum balances and withdrawals vary
according to the class of shares:

<TABLE>
<S> <C>
- Class A and Class C shares. Minimum value of fund shares is
$5,000; minimum withdrawals of $100.

- Class B shares. Minimum value of fund shares is $10,000; minimum
monthly, quarterly, and semi-annual and annual withdrawals of
$100, $200, $300 and $400, respectively.
</TABLE>

Withdrawals under the systematic withdrawal plan will not be subject
to a contingent deferred sales charge if the investor withdraws no more than
12% of the value of the fund account when the investor signed up for the

<PAGE>

plan (for Class B shares, annually; for Class A and Class C shares, during
the first year under the plan). Shareholders who elect to receive dividends
or other distributions in cash may not participate in this plan.

An investor's participation in the systematic withdrawal plan will
terminate automatically if the "Initial Account Balance" (a term that means
the value of the fund account at the time the investor elects to participate
in the systematic withdrawal plan), less aggregate redemptions made other
than pursuant to the systematic withdrawal plan, is less than the minimum
values specified above. Purchases of additional shares of a fund concurrent
with withdrawals are ordinarily disadvantageous to shareholders because of
tax liabilities and, for Class A shares, initial sales charges. On or about
the 20th of a month for monthly, quarterly, semi-annual and annual plans,
PaineWebber will arrange for redemption by the funds of sufficient fund
shares to provide the withdrawal payments specified by participants in the
funds' systematic withdrawal plan. The payments generally are mailed
approximately five Business Days (defined under "Valuation of Shares") after
the redemption date. Withdrawal payments should not be considered dividends,
but redemption proceeds. If periodic withdrawals continually exceed
reinvested dividends and other distributions, a shareholder's investment may
be correspondingly reduced. A shareholder may change the amount of the
systematic withdrawal or terminate participation in the systematic withdrawal
plan at any time without charge or penalty by written instructions with
signatures guaranteed to PaineWebber or PFPC Inc. Instructions to participate
in the plan, change the withdrawal amount or terminate participation in the
plan will not be effective until five days after written instructions with
signatures guaranteed are received by PFPC. Shareholders may request the
forms needed to establish a systematic withdrawal plan from their PaineWebber
Financial Advisors, correspondent firms or PFPC at 1-800-647-1568.

INDIVIDUAL RETIREMENT ACCOUNTS. Self-directed IRAs are available
through PaineWebber in which purchases of shares of PaineWebber mutual funds
and other investments may be made. Investors considering establishing an IRA
should review applicable tax laws and should consult their tax advisers.

TRANSFER OF ACCOUNTS. If investors holding shares of a fund in a
PaineWebber brokerage account transfer their brokerage accounts to another
firm, the fund shares will be moved to an account with PFPC. However, if the
other firm has entered into a selected dealer agreement with Mitchell
Hutchins relating to the fund, the shareholder may be able to hold fund
shares in an account with the other firm.

PAINEWEBBER RMA RESOURCE ACCUMULATION PLAN-SM-;
PAINEWEBBER RESOURCE MANAGEMENT ACCOUNT-Registered Trademark-
(RMA)-Registered Trademark-

Shares of PaineWebber mutual funds (each a "PW Fund" and,
collectively, the "PW Funds") are available for purchase through the RMA
Resource Accumulation Plan ("Plan") by customers of PaineWebber and its
correspondent firms who maintain Resource Management Accounts ("RMA
accountholders"). The Plan allows an RMA accountholder to continually invest
in one or more of the PW Funds at regular intervals, with payment for shares
purchased automatically deducted from the client's RMA account. The client
may elect to invest at monthly or quarterly intervals and may elect either to
invest a fixed dollar amount (minimum $100 per period) or to purchase a fixed
number of shares. A client can elect to have Plan purchases executed on the
first or fifteenth day of the month. Settlement occurs three Business Days
(defined under "Valuation of Shares") after the trade date, and the purchase
price of the shares is withdrawn from the investor's RMA account on the
settlement date from the following sources and in the following order:
uninvested cash balances, balances in RMA money market funds, or margin
borrowing power, if applicable to the account.

To participate in the Plan, an investor must be an RMA
accountholder, must have made an initial purchase of the shares of each PW
Fund selected for investment under the Plan (meeting applicable minimum
investment requirements) and must complete and submit the RMA Resource
Accumulation Plan Client Agreement and Instruction Form available from
PaineWebber. The investor must have received a current prospectus for each PW
Fund selected prior to enrolling in the Plan. Information about mutual fund
positions and outstanding instructions under the Plan are noted on the RMA
accountholder's account statement. Instructions under the Plan may be changed
at any time, but may take up to two weeks to become effective.

<PAGE>

The terms of the Plan, or an RMA accountholder's participation in
the Plan, may be modified or terminated at any time. It is anticipated that,
in the future, shares of other PW Funds and/or mutual funds other than the PW
Funds may be offered through the Plan.

PERIODIC INVESTING AND DOLLAR COST AVERAGING. Periodic investing in
the PW Funds or other mutual funds, whether through the Plan or otherwise,
helps investors establish and maintain a disciplined approach to accumulating
assets over time, de-emphasizing the importance of timing the market's highs
and lows. Periodic investing also permits an investor to take advantage of
"dollar cost averaging." By investing a fixed amount in mutual fund shares at
established intervals, an investor purchases more shares when the price is
lower and fewer shares when the price is higher, thereby increasing his or
her earning potential. Of course, dollar cost averaging does not guarantee a
profit or protect against a loss in a declining market, and an investor
should consider his or her financial ability to continue investing through
periods of both low and high share prices. However, over time, dollar cost
averaging generally results in a lower average original investment cost than
if an investor invested a larger dollar amount in a mutual fund at one time.

PAINEWEBBER'S RESOURCE MANAGEMENT ACCOUNT. In order to enroll in the
Plan, an investor must have opened an RMA account with PaineWebber or one of
its correspondent firms. The RMA account is PaineWebber's comprehensive asset
management account and offers investors a number of features, including the
following:

<TABLE>
<S> <C>
- monthly Premier account statements that itemize all account
activity, including investment transactions, checking activity and
Gold MasterCard(R) transactions during the period, and provide
unrealized and realized gain and loss estimates for most
securities held in the account;

- comprehensive year-end summary statements that provide information
on account activity for use in tax planning and tax return
preparation;

- automatic "sweep" of uninvested cash into the RMA accountholder's
choice of one of the six RMA money market funds-RMA Money Market
Portfolio, RMA U.S. Government Portfolio, RMA Tax-Free Fund, RMA
California Municipal Money Fund, RMA New Jersey Municipal Money
Fund and RMA New York Municipal Money Fund. AN INVESTMENT IN A
MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
ALTHOUGH A MONEY MARKET FUND SEEKS TO PRESERVE THE VALUE OF YOUR
INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY
INVESTING IN A MONEY MARKET FUND;

- check writing, with no per-check usage charge, no minimum amount
on checks and no maximum number of checks that can be written. RMA
accountholders can code their checks to classify expenditures. All
canceled checks are returned each month;

- Gold MasterCard, with or without a line of credit, which provides
RMA accountholders with direct access to their accounts and can be
used with automatic teller machines worldwide. Purchases on the
Gold MasterCard are debited to the RMA account once monthly,
permitting accountholders to remain invested for a longer period
of time;

- unlimited electronic funds transfers and a bill payment service
for an additional fee;

- 24-hour access to account information through toll-free numbers,
and more detailed personal assistance during business hours from
the RMA Service Center;

- expanded account protection for the net equity securities balance
in the event of the liquidation of PaineWebber. This protection
does not apply to shares of funds that are held at PFPC and not
through PaineWebber; and

- automatic direct deposit of checks into your RMA account and
automatic withdrawals from the account.
</TABLE>

<PAGE>

The annual account fee for an RMA account is $85, which includes the
Gold MasterCard, with an additional fee of $40 if the investor selects an
optional line of credit with the Gold MasterCard.

CONVERSION OF CLASS B SHARES

Class B shares of a fund will automatically convert to Class A
shares of that fund, based on the relative net asset values per share of the
two classes, as of the close of business on the first Business Day (as
defined under "Valuation of Shares") of the month in which the sixth
anniversary of the initial issuance of such Class B shares occurs. For the
purpose of calculating the holding period required for conversion of Class B
shares, the date of initial issuance shall mean (1) the date on which such
Class B shares were issued or (2) for Class B shares obtained through an
exchange, or a series of exchanges, the date on which the original Class B
shares were issued. For purposes of conversion to Class A shares, Class B
shares purchased through the reinvestment of dividends and other
distributions paid in respect of Class B shares will be held in a separate
sub-account. Each time any Class B shares in the shareholder's regular
account (other than those in the sub-account) convert to Class A shares, a
pro rata portion of the Class B shares in the sub-account will also convert
to Class A shares. The portion will be determined by the ratio that the
shareholder's Class B shares converting to Class A shares bears to the
shareholder's total Class B shares not acquired through dividends and other
distributions.

The conversion feature is subject to the continuing availability of
an opinion of counsel to the effect that the dividends and other
distributions paid on Class A and Class B shares will not result in
"preferential dividends" under the Internal Revenue Code and that the
conversion of shares does not constitute a taxable event. If the conversion
feature ceased to be available, the Class B shares would not be converted and
would continue to be subject to their higher ongoing expenses beyond six
years from the date of purchase. Mitchell Hutchins has no reason to believe
that this condition will not continue to be met.

VALUATION OF SHARES

Each fund determines its net asset value per share separately for
each class of shares, normally as of the close of regular trading (usually
4:00 p.m., Eastern time) on the New York Stock Exchange on each Business Day,
which is defined as each Monday through Friday when the New York Stock
Exchange is open. Prices will be calculated earlier when the New York Stock
Exchange closes early because trading has been halted for the day. Currently
the New York Stock Exchange is closed on the observance of the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.

Securities that are listed on U.S. and foreign stock exchanges are
valued at the last sale price on the day the securities are valued or,
lacking any sales on such day, at the last available bid price. In cases
where securities are traded on more than one exchange, the securities are
generally valued based on sales on the exchange considered by Mitchell
Hutchins or the sub-adviser as the primary market. Securities traded in the
over-the-counter market and listed on the Nasdaq Stock Market ("Nasdaq") are
valued at the last trade price on Nasdaq prior to valuation; other
over-the-counter securities normally are valued at the last bid price
available prior to valuation. Securities and assets for which market
quotations are not readily available are valued at fair value as determined
in good faith by or under the direction of the applicable board. It should be
recognized that judgment often plays a greater role in valuing thinly traded
securities, including many lower rated bonds, than is the case with respect
to securities for which a broader range of dealer quotations and last-sale
information is available. The amortized cost method of valuation generally is
used to value debt obligations with 60 days or less remaining until maturity,
unless the applicable board determines that this does not represent fair
value.

All investments quoted in foreign currency will be valued daily in
U.S. dollars on the basis of the current foreign currency exchange rate.
Foreign currency exchange rates are generally determined prior to the close
of regular trading on the New York Stock Exchange. Occasionally events
affecting the value of foreign investments and such exchange rates occur
between the time at which they are determined and the close of trading on the
New York Stock Exchange, which events would not be reflected in the
computation of a fund's net asset value on that day. If events materially
affecting the value of such investments or currency exchange rates occur
during such time

62
<PAGE>
period, the investments will be valued at their fair value as determined in
good faith by or under the direction of the applicable board. The foreign
currency exchange transactions of the funds conducted on a spot (that is,
cash) basis are valued at the spot rate for purchasing or selling currency
prevailing on the foreign exchange market. Under normal market conditions
this rate differs from the prevailing exchange rate by less than one-tenth of
one percent due to the costs of converting from one currency to another.

PERFORMANCE INFORMATION
The funds' performance data quoted in advertising and other
promotional materials ("Performance Advertisements") represent past
performance and are not intended to indicate future performance. The
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.

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

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

Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the
last day of the most recent quarter prior to submission of the advertisement
for publication. Total return, or "T" in the formula above, is computed by
finding the average annual change in the value of an initial $1,000
investment over the period. In calculating the ending redeemable value, for
Class A shares, the maximum 4.5% sales charge (4.0% for Global Income Fund)
is deducted from the initial $1,000 payment and, for Class B and Class C
shares, the applicable contingent deferred sales charge imposed on a
redemption of Class B or Class C shares held for the period is deducted. All
dividends and other distributions are assumed to have been reinvested at net
asset value.

The funds also may refer in Performance Advertisements to total
return performance data that are not calculated according to the formula set
forth above ("Non-Standardized Return"). The funds calculate Non-Standardized
Return for specified periods of time by assuming an investment of $1,000 in
fund shares and assuming the reinvestment of all dividends and other
distributions. The rate of return is determined by subtracting the initial
value of the investment from the ending value and by dividing the remainder
by the initial value. Neither initial nor contingent deferred sales charges
are taken into account in calculating Non-Standardized Return; the inclusion
of those charges would reduce the return.

Both Standardized Return and Non-Standardized Return for Class B
shares for periods of over six years reflect conversion of the Class B shares
to Class A shares at the end of the sixth year.

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

<TABLE>
<CAPTION>
GLOBAL EQUITY FUND
CLASS CLASS A CLASS B CLASS C CLASS Y
(INCEPTION DATE) (11/14/91) (8/25/95) (5/10/93) (5/10/93)
- ---------------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Year ended October 31, 1999:
Standardized Return* 10.34% 9.63% 13.67% 15.97%
Non-Standardized Return 15.565 14.63% 14.67% 15.97%
</TABLE>

63
<PAGE>

<TABLE>
<S> <C> <C> <C> <C>
Five Years ended October 31, 1999:
Standardized Return* 7.42% N/A 7.60% 8.78%
Non-Standardized Return 8.42% N/A 7.60% 8.78%
Inception to October 31, 1999
Standardized Return* 9.63% 7.92% 9.20% 10.39%
Non-Standardized Return 10.27% 8.29% 9.20% 10.39%
</TABLE>

<TABLE>
<CAPTION>
GLOBAL INCOME FUND

CLASS CLASS A CLASS B CLASS C CLASS Y
(INCEPTION DATE) (7/1/91) (3/20/87) (7/2/92) (8/26/91)
- ---------------- -------- --------- -------- ---------
<S> <C> <C> <C> <C>
Year ended October 31, 1999:
Standardized Return* (6.34)% (7.90)% (3.62)% (2.10)%
Non-Standardized Return (2.44)% (3.29)% (2.93)% (2.10)%
Five Years ended October 31, 1999:
Standardized Return* 5.37% 5.08% 5.72% 6.57%
Non-Standardized Return 6.24% 5.39% 5.72% 6.57%
Ten Years Ended October 31, 1999
Standardized Return* N/A 7.24% N/A N/A
Non-Standardized Return N/A 7.24% N/A N/A
Inception to October 31, 1999
Standardized Return* 5.77% 8.15% 5.01% 6.56%
Non-Standardized Return 6.29% 8.15% 5.01% 6.56%
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
ASIA PACIFIC GROWTH FUND

CLASS CLASS A CLASS B CLASS C CLASS Y
(INCEPTION DATE) (3/25/97) (3/25/97) (3/25/97) (3//13/98)
- ---------------- --------- --------- --------- ----------
<S> <C> <C> <C> <C>
Year ended October 31, 1999:
Standardized Return* 35.99% 36.25% 40.39% 42.56%
Non-Standardized Return 42.38% 41.25% 41.39% 42.56%
Inception to October 31, 1999
Standardized Return* (10.83)% (10.97)% (9.89)% 7.03%
Non-Standardized Return (9.24)% (9.92)% (9.89)% 7.03%
</TABLE>

<TABLE>
<CAPTION>
EMERGING MARKETS EQUITY FUND

CLASS CLASS A CLASS B CLASS C CLASS Y
(INCEPTION DATE) (1/19/94) (12/05/95) (1/19/94) (1/19/94)
- ---------------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Year ended October 31, 1999:
Standardized Return* 28.70% 28.75% 32.39% 35.11%
Non-Standardized Return 34.82% 33.75% 33.39% 35.11%
Five Years ended October 31, 1999:
Standardized Return* (6.75)% N/A (6.67)% (5.68)%
Non-Standardized Return (5.89)% N/A (6.67)% (5.68)%
Inception to October 31, 1999
Standardized Return* (5.90)% (2.26)% (5.91)% (4.93)%
Non-Standardized Return (5.14)% (2.26)% (5.91)% (4.93)%
</TABLE>

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

* All Standardized Return figures for Class A shares reflect deduction of the
current maximum sales charge of 4.5% (4.0% for Global Income Fund). All
Standardized Return figures for Class B and Class C shares reflect deduction
of the applicable contingent deferred sales charges imposed on a redemption
of shares held for the period. Class Y shares do not impose an initial or
contingent deferred sales charge; therefore, the performance information is
the same for both standardized return and non-standardized return for the
periods indicated.

YIELD. Yields used in Global Income Fund's Performance
Advertisements are calculated by dividing the fund's interest income
attributable to a class of shares for a 30-day period ("Period"), net of
expenses attributable to such class, by the average number of shares of such
class entitled to receive dividends during the Period and expressing the
result as an annualized percentage (assuming semi-annual compounding) of the
maximum offering price per share (in the case of Class A shares) or the net
asset value per share (in the case of Class B and Class C shares) at the end
of the Period. Yield quotations are calculated according to the following
formula:

<TABLE>
<S> <C> <C>
YIELD = a-b
2[(--- + 1)to the power of 6 -1]
cd

where: a = interest earned during the Period attributable to a
class of shares
b = expenses accrued for the Period attributable to a
class of shares (net of reimbursements)
c = the average daily number of shares of a class
outstanding during the Period that were entitled
to receive dividends
d = the maximum offering price per share (in the case
of Class A shares) or the net asset value per share
(in the case of Class B and Class C shares) on the
last day of the
</TABLE>
65

<PAGE>

Period.

Except as noted below, in determining interest income earned during
the Period (variable "a" in the above formula), Global Income Fund calculates
interest earned on each debt obligation held by it during the Period by (1)
computing the obligation's yield to maturity, based on the market value of
the obligation (including actual accrued interest) on the last business day
of the Period or, if the obligation was purchased during the Period, the
purchase price plus accrued interest and (2) dividing the yield to maturity
by 360, and multiplying the resulting quotient by the market value of the
obligation (including actual accrued interest) to determine the interest
income on the obligation for each day of the period that the obligation is in
the portfolio. Once interest earned is calculated in this fashion for each
debt obligation held by the fund, interest earned during the Period is then
determined by totaling the interest earned on all debt obligations. For
purposes of these calculations, the maturity of an obligation with one or
more call provisions is assumed to be the next date on which the obligation
reasonably can be expected to be called or, if none, the maturity date. With
respect to Class A shares, in calculating the maximum offering price per
share at the end of the Period (variable "d" in the above formula) the fund's
current maximum 4% initial sales charge on Class A shares is included. For
the 30-day period ended October 31, 1999 the yields for its Class A shares,
Class B shares, Class C shares and Class Y shares were 4.63%, 3.69%, 4.32%,
and 5.16%, respectively.

OTHER INFORMATION. In Performance Advertisements, the funds may
compare their Standardized Return and/or their Non-Standardized Return with
data published by Lipper Inc. ("Lipper"), CDA Investment Technologies, Inc.
("CDA"), Wiesenberger Investment Companies Service ("Wiesenberger"),
Investment Company Data, Inc. ("ICD") or Morningstar Mutual Funds
("Morningstar"), with the performance of recognized stock and other indices,
including (but not limited to) the Standard & Poor's 500 Composite Stock
Index ("S&P 500"), the Dow Jones Industrial Average, the International
Finance Corporation Global Total Return Index, the Nasdaq Composite Index,
the Russell 2000 Index, the Wilshire 5000 Index, the Lehman Bond Index, the
Lehman Brothers 20+ Year Treasury Bond Index, the Lehman Brothers
Government/Corporate Bond Index, other similar Lehman Brothers indices or
components thereof, 30-year and 10-year U.S. Treasury bonds, the Standard &
Poor's Oil Composite Index, the Morgan Stanley Capital International World
Index (including Asia Pacific regional indices), the Salomon Brothers
Non-U.S. Dollar Index, the Salomon Smith Barney Non-U.S. World Government
Bond Index, the Salomon Smith Barney World Government Index, other similar
Salomon Smith Barney indices or components thereof and changes in the
Consumer Price Index as published by the U.S. Department of Commerce. The
funds also may refer in such materials to mutual fund performance rankings
and other data, such as comparative asset, expense and fee levels, published
by Lipper, CDA, Wiesenberger, ICD or Morningstar. Performance Advertisements
also may refer to discussions of the funds and comparative mutual fund data
and ratings reported in independent periodicals, including (but not limited
to) THE WALL STREET JOURNAL, MONEY MAGAZINE, SMART MONEY, MUTUAL FUNDS,
FORBES, BUSINESS WEEK, FINANCIAL WORLD, BARRON'S, FORTUNE, THE NEW YORK
TIMES, THE CHICAGO TRIBUNE, THE WASHINGTON POST and THE KIPLINGER LETTERS.
Comparisons in Performance Advertisements may be in graphic form.

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

The funds may also compare their performance with the performance of
bank certificates of deposit (CDs) as measured by the CDA Certificate of
Deposit Index, the Bank Rate Monitor National Index and the averages of
yields of CDs of major banks published by Banxquote(R) Money Markets. In
comparing the funds' performance to CD performance, investors should keep in
mind that bank CDs are insured in whole or in part by an agency of the U.S.
government and offer fixed principal and fixed or variable rates of interest,
and that bank CD yields may vary depending on the financial institution
offering the CD and prevailing interest rates. Shares of the funds are not
insured or guaranteed by the U.S. government and returns and net asset values
will fluctuate. The bonds held by the

<PAGE>

funds generally have longer maturities than most CDs and may reflect interest
rate fluctuations for longer term bonds. An investment in any fund involves
greater risks than an investment in either a money market fund or a CD.

Each fund may also compare its performance to general trends in the
stock and bond markets, as illustrated by the following graph prepared by
Ibbotson Associates, Chicago.

[EDGAR REPRESENTATION OF DATA USED IN GRAPHIC]

YEAR Common Stocks Long-Term Inflation/CPI Treasury Bills
Gov't Bonds

1925 $10,000 $10,000 $10,000 $10,000
1926 $11,162 $10,777 $9,851 $10,327
1927 $15,347 $11,739 $9,646 $10,649
1928 $22,040 $11,751 $9,553 $11,028
1929 $20,185 $12,153 $9,572 $11,552
1930 $15,159 $12,719 $8,994 $11,830
1931 $8,590 $12,044 $8,138 $11,957
1932 $7,886 $14,073 $7,300 $12,072
1933 $12,144 $14,062 $7,337 $12,108
1934 $11,969 $15,472 $7,486 $12,128
1935 $17,674 $16,243 $7,710 $12,148
1936 $23,669 $17,464 $7,803 $12,170
1937 $15,379 $17,504 $8,045 $12,207
1938 $20,165 $18,473 $7,821 $12,205
1939 $20,082 $19,570 $7,784 $12,208
1940 $18,117 $20,761 $7,859 $12,208
1941 $16,017 $20,955 $8,622 $12,216
1942 $19,275 $21,629 $9,423 $12,248
1943 $24,267 $22,080 $9,721 $12,291
1944 $29,060 $22,702 $9,926 $12,332
1945 $39,649 $25,139 $10,149 $12,372
1946 $36,449 $25,113 $11,993 $12,416
1947 $38,529 $24,454 $13,073 $12,478
1948 $40,649 $25,285 $13,426 $12,580
1949 $48,287 $26,916 $13,184 $12,718
1950 $63,601 $26,932 $13,948 $12,870
1951 $78,875 $25,873 $14,767 $13,063
1952 $93,363 $26,173 $14,898 $13,279
1953 $92,439 $27,125 $14,991 $13,521
1954 $141,084 $29,075 $14,916 $13,638
1955 $185,614 $28,699 $14,972 $13,852
1956 $197,783 $27,096 $15,400 $14,193
1957 $176,457 $29,117 $15,866 $14,639
1958 $252,975 $27,342 $16,145 $14,864
1959 $283,219 $26,725 $16,387 $15,303
1960 $284,549 $30,407 $16,629 $15,711
1961 $361,060 $30,703 $16,741 $16,045
1962 $329,545 $32,818 $16,946 $16,483
1963 $404,685 $33,216 $17,225 $16,997
1964 $471,388 $34,381 $17,430 $17,598
1965 $530,081 $34,625 $17,765 $18,289
1966 $476,737 $35,889 $18,361 $19,159
1967 $591,038 $32,594 $18,920 $19,966
1968 $656,415 $32,509 $19,814 $21,005
1969 $600,590 $30,860 $21,024 $22,388
1970 $624,653 $34,596 $22,179 $23,849
1971 $714,058 $39,173 $22,924 $24,895
1972 $849,559 $41,400 $23,706 $25,851
1973 $725,003 $40,942 $25,792 $27,643
1974 $533,110 $42,725 $28,939 $29,855
1975 $731,443 $46,653 $30,969 $31,588
1976 $905,842 $54,470 $32,458 $33,193
1977 $840,766 $54,095 $34,656 $34,893
1978 $895,922 $53,458 $37,784 $37,398
1979 $1,060,126 $52,799 $42,812 $41,279
1980 $1,405,137 $50,715 $48,120 $45,917
1981 $1,336,161 $51,657 $52,421 $52,671
1982 $1,622,226 $72,507 $54,451 $58,224
1983 $1,987,451 $72,979 $56,518 $63,347
1984 $2,111,991 $84,274 $58,753 $69,586
1985 $2,791,166 $110,371 $60,968 $74,960
1986 $3,306,709 $137,446 $61,657 $79,580
1987 $3,479,675 $133,716 $64,376 $83,929
1988 $4,064,583 $146,650 $67,221 $89,257
1989 $5,344,555 $173,215 $70,345 $96,728
1990 $5,174,990 $183,924 $74,640 $104,286
1991 $6,755,922 $219,420 $76,927 $110,121
1992 $7,274,115 $237,092 $79,159 $113,982
1993 $8,000,785 $280,339 $81,334 $117,284
1994 $8,105,379 $258,556 $83,510 $121,862
1995 $11,139,184 $340,435 $85,630 $126,680
1996 $13,709,459 $337,265 $88,475 $135,381
1997 $18,272,762 $390,735 $89,897 $142,496
1998 $23,495,420 $441,777 $91,513 $149,416
1999 $28,456,286 $402,177 $93,998 $156,414
2000

Source: STOCKS, BONDS, BILLS AND INFLATION 1998 YEARBOOKTM, Ibbotson Assoc.,
Chi., (annual updates work by Roger G. Ibbotson & Rex A. Sinquefield).

The chart is shown for illustrative purposes only and does not
represent any fund's performance. These returns consist of income and capital
appreciation (or depreciation) and should not be considered an indication or
guarantee of future investment results. Year-to-year fluctuations in certain
markets have been significant and negative returns have been experienced in
certain markets from time to time. Stocks are measured by the S&P 500, an
unmanaged weighted index comprising 500 widely held common stocks and varying
in composition. Unlike investors in bonds and U.S. Treasury bills, common
stock investors do not receive fixed income payments and are not entitled to
repayment of principal. These differences contribute to investment risk.
Returns shown for long-term government bonds are based on U.S. Treasury bonds
with 20-year maturities. Inflation is measured by the Consumer Price Index.
The indexes are unmanaged and are not available for investment.

Over time, stocks have outperformed all other investments by a wide
margin, offering a solid hedge against inflation. From January 1, 1926 to
December 31, 1999, stocks beat all other traditional asset classes. A $10,000
investment in the S&P 500 grew to $28,456,286, significantly more than any
other investment.

TAXES

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

<PAGE>

SALE OR EXCHANGE OF FUND SHARES. A shareholder's sale (redemption)
of fund shares may result in a taxable gain or loss, depending on whether the
shareholder receives more or less than his or her adjusted basis for the
shares (which normally includes any initial sales charge paid on Class A
shares). An exchange of any fund's shares for shares of another PaineWebber
mutual fund generally will have similar tax consequences. In addition, if a
fund's shares are bought within 30 days before or after selling other shares
of the fund (regardless of class) at a loss, all or a portion of that loss
will not be deductible and will increase the basis of the newly purchased
shares.

SPECIAL RULE FOR CLASS A SHAREHOLDERS. A special tax rule applies
when a shareholder sells or exchanges Class A shares of a fund within 90 days
of purchase and subsequently acquires Class A shares of the same or another
PaineWebber mutual fund without paying a sales charge due to the 365-day
reinstatement privilege or the exchange privilege. In these cases, any gain
on the sale or exchange of the original Class A shares would be increased, or
any loss would be decreased, by the amount of the sales charge paid when
those shares were bought, and that amount would increase the basis of the
PaineWebber mutual fund shares subsequently acquired.

CONVERSION OF CLASS B SHARES. A shareholder will recognize no gain
or loss as a result of a conversion of Class B shares to Class A shares.

QUALIFICATION AS A REGULATED INVESTMENT COMPANY. To continue to
qualify for treatment as a regulated investment company ("RIC") under the
Internal Revenue Code, a fund must distribute to its shareholders for each
taxable year at least 90% of its investment company taxable income
(consisting generally of net investment income, net short-term capital gains
and net gains from certain foreign currency transactions) ("Distribution
Requirement") and must meet several additional requirements. For each fund,
these requirements include the following: (1) the fund must derive at least
90% of its gross income each taxable year from dividends, interest, payments
with respect to securities loans and gains from the sale or other disposition
of securities or foreign currencies, or other income (including gains from
options, futures or forward contracts) derived with respect to its business
of investing in securities or those currencies ("Income Requirement"); (2) at
the close of each quarter of the fund's taxable year, at least 50% of the
value of its total assets must be represented by cash and cash items, U.S.
government securities, securities of other RICs and other securities, with
these other securities limited, in respect of any one issuer, to an amount
that does not exceed 5% of the value of the fund's total assets and that does
not represent more than 10% of the issuer's outstanding voting securities;
and (3) at the close of each quarter of the fund's taxable year, not more
than 25% of the value of its total assets may be invested in securities
(other than U.S. government securities or the securities of other RICs) of
any one issuer. By qualifying as a RIC, a fund (but not its shareholders)
will be relieved of federal income tax on the part of its investment company
taxable income and net capital gain (I.E., the excess of net long-term
capital gain over net short-term capital loss) that it distributes to its
shareholders). If any fund failed to qualify for that treatment for any
taxable year, (1) it would be taxed as an ordinary corporation on the full
amount of its taxable income for that year without being able to deduct the
distributions it makes to its shareholders and (2) the shareholders would
treat all those distributions, including distributions of net capital gain,
as taxable dividends (that is, ordinary income) to the extent of the fund's
earnings and profits. In addition, the fund could be required to recognize
unrealized gains, pay substantial taxes and interest and make substantial
distributions before requalifying for RIC treatment.

OTHER INFORMATION. Dividends and other distributions declared by a
fund in October, November or December of any year and payable to shareholders
of record on a date in any of those months will be deemed to have been paid
by the fund and received by the shareholders on December 31 of that year if
the distributions are paid by the fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the year
in which that December 31 falls.

A portion of the dividends (whether paid in cash or additional
shares) from each fund's investment company taxable income may be eligible
for the dividends-received deduction allowed to corporations. The eligible
portion for a fund may not exceed the aggregate dividends received by the
fund from U.S. corporations. However, dividends received by a corporate
shareholder and deducted by it pursuant to the dividends-received deduction
are subject indirectly to the federal alternative minimum tax.

<PAGE>

If shares of a fund are sold at a loss after being held for six
months or less, the loss will be treated as long-term, instead of short-term,
capital loss to the extent of any capital gain distributions received on
those shares. Investors also should be aware that if shares are purchased
shortly before the record date for any dividend or capital gain distribution,
the shareholder will pay full price for the shares and receive some portion
of the price back as a taxable distribution.

Dividends and interest received, and gains realized, by a fund on
foreign securities may be subject to income, withholding or other taxes
imposed by foreign countries and U.S. possessions (collectively "foreign
taxes") that would reduce the return on its securities. Tax conventions
between certain countries and the United States, however, may reduce or
eliminate foreign taxes, and many foreign countries do not impose taxes on
capital gains in respect of investments by foreign investors. If more than
50% of the value of a fund's total assets at the close of its taxable year
consists of securities of foreign corporations, it will be eligible to, and
may, file an election with the Internal Revenue Service that will enable its
shareholders, in effect, to receive the benefit of the foreign tax credit
with respect to any foreign taxes paid by it. Pursuant to the election, the
fund would treat those taxes as dividends paid to its shareholders and each
shareholder (1) would be required to include in gross income, and treat as
paid by him or her, his or her proportionate share of those taxes, (2) would
be required to treat his or her share of those taxes and of any dividend paid
by the fund that represents income from foreign or U.S. possessions sources
as his or her own income from those sources, and (3) could either deduct the
foreign taxes deemed paid by him or her in computing his or her taxable
income or, alternatively, use the foregoing information in calculating the
foreign tax credit against his or her federal income tax. A fund will report
to its shareholders shortly after each taxable year their respective shares
of foreign taxes paid and the income from sources within, and taxes paid to,
foreign countries and U.S. possessions if it makes this election. Individuals
who have no more than $300 ($600 for married persons filing jointly) of
creditable foreign taxes included on Forms 1099 and all of whose foreign
source income is "qualified passive income" may elect each year to be exempt
from the extremely complicated foreign tax credit limitation, in which event
they would be able to claim a foreign tax credit without having to file the
detailed Form 1116 that otherwise is required.

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

Each fund may invest in the stock of "passive foreign investment
companies" ("PFICs") if that stock is a permissible investment. A PFIC is any
foreign corporation (with certain exceptions) that, in general, meets either
of the following tests: (1) at least 75% of its gross income is passive or
(2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, a fund will be
subject to federal income tax on a portion of any "excess distribution"
received on the stock of a PFIC or of any gain from disposition of that stock
(collectively "PFIC income"), plus interest thereon, even if the fund
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the fund's investment company
taxable income and, accordingly, will not be taxable to it to the extent it
distributes that income to its shareholders.

If a fund invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the foregoing tax and
interest obligation, the fund will be required to include in income each year
its pro rata share of the QEF's annual ordinary earnings and net capital
gain--which it may have to distribute to satisfy the Distribution Requirement
and avoid imposition of the Excise Tax--even if the QEF does not distribute
those earnings and gain to the fund. In most instances it will be very
difficult, if not impossible, to make this election because of certain of its
requirements.

Each fund may elect to "mark to market" its stock in any PFIC.
"Marking-to-market," in this context, means including in ordinary income each
taxable year the excess, if any, of the fair market value of a PFIC's stock
over a fund's adjusted basis therein as of the end of that year. Pursuant to
the election, a fund also would be allowed to deduct (as an ordinary, not
capital, loss) the excess, if any, of its adjusted basis in PFIC stock over
the fair market value thereof as of the taxable year-end, but only to the
extent of any net mark-to-market gains with respect to that stock included by
the fund for prior taxable years under the election (and under regulations
proposed in 1992 that

<PAGE>

provided a similar election with respect to the stock of certain PFICs). A
fund's adjusted basis in each PFIC's stock with respect to which it has made
this election will be adjusted to reflect the amounts of income included and
deductions taken thereunder.

The use of hedging strategies, such as writing (selling) and
purchasing options and futures contracts and entering into forward currency
contracts, involves complex rules that will determine for income tax purposes
the amount, character and timing of recognition of the gains and losses a
fund realizes in connection therewith. Gains from the disposition of foreign
currencies (except certain gains that may be excluded by future regulations),
and gains from options, futures and forward currency contracts derived by a
fund with respect to its business of investing in securities or foreign
currencies, will be treated as qualifying income under the Income Requirement.

Certain futures and forward currency contracts contracts in which a
fund may invest may be subject to section 1256 of the Internal Revenue Code
("section 1256 contracts"). Any section 1256 contracts a fund holds at the
end of each taxable year generally must be "marked-to-market" (that is,
treated as having been sold at that time for their fair market value) for
federal income tax purposes, which the result that unrealized gains or losses
will be treated as though they were realized. Sixty percent of any net gain
or loss recognized on these deemed sales, and 60% of any net realized gain or
loss from any actual sales of section 1256 contracts, will be treated as
long-term capital gain or loss, and the balance will be treated as short-term
capital gain or loss. These rules may operate to increase the amount that a
fund must distribute to satisfy the Distribution Requirement (I.E., with
respect to the portion treated as short-term capital gain), which will be
taxable to its shareholders as ordinary income, and to increase the net
capital gain a fund recognizes, without in either case increasing the cash
available to the fund. A fund may elect not to have the foregoing rules apply
to any "mixed straddle" (that is, a straddle, clearly identified by the fund
in accordance with the regulations, at least one (but not all) the positions
of which are section 1256 contracts), although doing so may have the effect
of increasing the relative proportion of net short-term capital gain (taxable
as ordinary income) and thus increasing the amount of dividends that must be
distributed.

Offsetting positions in any actively traded security, option,
futures or forward currency contract entered into or held by a fund may
constitute a "straddle" for federal income tax purposes. Straddles are
subject to certain rules that may affect the amount, character and timing of
a fund's gains and losses with respect to positions of the straddle by
requiring, among other things, that (1) loss realized on disposition of one
position of a straddle be deferred to the extent of any unrealized gain in an
offsetting position until the latter position is disposed of, (2) the fund's
holding period in certain straddle positions not begin until the straddle is
terminated (possibly resulting in gain being treated as short-term rather
than long-term capital gain) and (3) losses recognized with respect to
certain straddle positions, that otherwise would constitute short-term
capital losses, be treated as long-term capital losses. Applicable
regulations also provide certain "wash sale" rules, which apply to
transactions where a position is sold at a loss and a new offsetting position
is acquired within a prescribed period, and "short sale" rules applicable to
straddles. Different elections are available to the funds, which may mitigate
the effects of the straddle rules, particularly with respect to mixed
straddles.

When a covered call option written (sold) by a fund expires, it will
realize a short-term capital gain equal to the amount of the premium it
received for writing the option. When a fund terminates its obligations under
such an option by entering into a closing transaction, it will realize a
short-term capital gain (or loss), depending on whether the cost of the
closing transaction is less (or more) than the premium it received when it
wrote the option. When a covered call option written by a fund is exercised,
the fund will be treated as having sold the underlying security, producing
long-term or short-term capital gain or loss, depending on the holding period
of the underlying security and whether the sum of the option price received
on the exercise plus the premium received when it wrote the option is more or
less than the basis of the underlying security.

If a fund has an "appreciated financial position"--generally, an
interest (including an interest through an option, futures or forward
currency contract or short sale) with respect to any stock, debt instrument
(other than "straight debt") or partnership interest the fair market value of
which exceeds its adjusted basis--and enters into a "constructive sale" of
the position, the fund will be treated as having made an actual sale thereof,
with the result that gain will be recognized at that time. A constructive
sale generally consists of a short sale, an offsetting notional principal
contract or a futures or forward currency contract entered into by a fund or
a related person with respect to

<PAGE>

the same or substantially identical property. In addition, if the appreciated
financial position is itself a short sale or such a contract, acquisition of
the underlying property or substantially identical property will be deemed a
constructive sale. The foregoing will not apply, however, to a fund's
transaction during any taxable year that otherwise would be treated as a
constructive sale if the transaction is closed within 30 days after the end
of that year and the fund holds the appreciated financial position unhedged
for 60 days after that closing (I.E., at no time during that 60-day period is
the fund's risk of loss regarding that position reduced by reason of certain
specified transactions with respect to substantially identical or related
property, such as having an option to sell, being contractually obligated to
sell, making a short sale or granting an option to buy substantially
identical stock or securities).

A fund may acquire zero coupon or other securities issued with
original issue discount ("OID") or Treasury inflation-protected securities
("TIPS"), on which principal is adjusted based on changes in the Consumer
Price Index. A fund must include in its gross income the portion of the OID
that accrues on those securities, and the amount of any principal increases
on TIPS, during the taxable year, even if the fund receives no corresponding
payment on them during the year. Because a fund annually must distribute
substantially all of its investment company taxable income, including any
accrued OID and other non-cash income, to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax, it may be required in a
particular year to distribute as a dividend an amount that is greater than
the total amount of cash it actually receives. Those distributions will be
made from a fund's cash assets or from the proceeds of sales of portfolio
securities, if necessary. A fund may realize capital gains or losses from
those sales, which would increase or decrease its investment company taxable
income and/or net capital gain.

The foregoing is only a general summary of some of the important
federal tax considerations generally affecting the funds and their
shareholders. No attempt is made to present a complete explanation of the
federal tax treatment of the funds' activities, and this discussion is not
intended as a substitute for careful tax planning. Accordingly, potential
investors are urged to consult their own tax advisers for more detailed
information and for information regarding any state, local or foreign taxes
applicable to the funds and to dividends and other distributions therefrom.

OTHER INFORMATION

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

CLASSES OF SHARES. A share of each class of a fund represents an
identical interest in that fund's investment portfolio and has the same
rights, privileges and preferences. However, each class may differ with
respect to sales charges, if any, distribution and/or service fees, if any,
other expenses allocable exclusively to each class, voting rights on matters
exclusively affecting that class, and its exchange privilege, if any. The
different sales charges and other expenses applicable to the different
classes of shares of the funds will affect the performance of those classes.
Each share of a fund is entitled to participate equally in dividends, other
distributions and the proceeds of any liquidation of that fund. However, due
to the differing expenses of the classes, dividends and liquidation proceeds
on Class A, B, C and Y shares will differ.

71
<PAGE>

VOTING RIGHTS. Shareholders of each fund are entitled to one vote
for each full share held and fractional votes for fractional shares held.
Voting rights are not cumulative and, as a result, the holders of more than
50% of all the shares of a Trust may elect all of the board members of that
Trust. The shares of a fund will be voted together, except that only the
shareholders of a particular class of a fund may vote on matters affecting
only that class, such as the terms of a Rule 12b-1 Plan as it relates to the
class. The shares of each series of Investment Trust and Managed Trust will
be voted separately, except when an aggregate vote of all the series is
required by law.

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

CLASS-SPECIFIC EXPENSES. Each fund may determine to allocate certain
of its expenses (in addition to service and distribution fees) to the
specific classes of its shares to which those expenses are attributable. For
example, Class B and Class C shares bear higher transfer agency fees per
shareholder account than those borne by Class A or Class Y shares. The higher
fee is imposed due to the higher costs incurred by PFPC in tracking shares
subject to a contingent deferred sales charge because, upon redemption, the
duration of the shareholder's investment must be determined in order to
determine the applicable charge. Although the transfer agency fee will differ
on a per account basis as stated above, the specific extent to which the
transfer agency fees will differ between the classes as a percentage of net
assets is not certain, because the fee as a percentage of net assets will be
affected by the number of shareholder accounts in each class and the relative
amounts of net assets in each class.

PRIOR NAMES. Prior to August 25, 1995, the name of Global Equity
Fund was "Mitchell Hutchins/Kidder, Peabody Global Equity Fund." Prior to
November 10, 1995, the fund's Class B shares were known as "Class E" shares
and its Class C shares were known as "Class B" shares, and the fund's Class Y
shares were known as "Class C" shares.

Prior to November 10, 1995, Global Income Fund's Class C shares were
known as "Class D" shares, and the fund's Class Y shares were known as "Class
C" shares.

Prior to November 1, 1995, the name of Emerging Markets Equity Fund
was "Mitchell Hutchins/Kidder, Peabody Emerging Markets Equity Fund." Prior
to November 10, 1995, the fund's Class C shares were called "Class B" shares,
and the fund's Class Y shares were called "Class C" shares. New Class B
shares were not offered prior to December 5, 1995.

CUSTODIAN AND RECORDKEEPING AGENT; TRANSFER AND DIVIDEND AGENT.
State Street Bank and Trust Company, located at One Heritage Drive, North
Quincy, Massachusetts 02171, serves as custodian and recordkeeping agent for
Asia Pacific Growth Fund, Emerging Markets Equity Fund and Global Equity Fund
and employs foreign sub-custodians approved by the respective boards in
accordance with applicable requirements under the Investment Company Act to
provide custody of the funds' foreign assets. Brown Brothers Harriman & Co.,
40 Water Street, Boston, Massachusetts 02109, serves as custodian for Global
Income Fund and employs foreign sub-custodians approved by the fund's board
in accordance with those same requirements to provide custody of the fund's
foreign assets. PFPC Inc., a subsidiary of PNC Bank, N.A., serves as each
fund's transfer and dividend disbursing agent. It is located at 400 Bellevue
Parkway, Wilmington, DE 19809.

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

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

<PAGE>

AUDITORS. Ernst & Young LLP, 787 Seventh Avenue, New York, New York
10019, serves as independent auditors for Asia Pacific Growth Fund, Emerging
Markets Equity Fund and Global Equity Fund. PricewaterhouseCoopers LLP, 1177
Avenue of the Americas, New York, New York 10036, serves as independent
accountants for Global Income Fund.

FINANCIAL STATEMENTS

Each fund's Annual Report to Shareholders for its last fiscal year
ended October 31, 1999 is a separate document supplied with this SAI, and the
financial statements, accompanying notes and report of independent auditors
or independent accountants appearing therein are incorporated herein by this
reference.

<PAGE>

APPENDIX

RATINGS INFORMATION

DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS

Aaa. Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues;
Aa. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long term risk appear somewhat larger than in
Aaa securities; A. Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future; Baa. Bonds which are rated Baa are considered as
medium-grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payment and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well; Ba. Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may be very moderate
and thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class; B. Bonds
which are rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms
of the contract over any long period of time may be small; Caa. Bonds which
are rated Caa are of poor standing. Such issues may be in default or there
may be present elements of danger with respect to principal or interest; Ca.
Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings; C. Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.

Note: Moody's applies numerical modifiers, 1, 2 and 3 in each
generic rating classification from Aa through Caa. The modifier 1 indicates
that the obligation ranks in the higher end of its generic rating category,
the modifier 2 indicates a mid-range ranking, and the modifier 3 indicates a
ranking in the lower end of that generic rating category.

DESCRIPTION OF S&P CORPORATE DEBT RATINGS

AAA. An obligation rated AAA has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong; AA. An obligation rated AA differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong; A. An obligation rated
A is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher rated
categories. However, the obligor's capacity to meet its financial commitment
on the obligation is still strong; BBB. An obligation rated BBB exhibits
adequate protection parameters. However, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation; BB, B, CCC, CC,
C. Obligations rated BB, B, CCC, CC and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and
C the highest. While such obligations will likely have some quality and
protective characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions; BB. An obligation rated BB is less
vulnerable to nonpayment than other speculative issues. However, it faces
major ongoing uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to the obligor's inadequate capacity to
meet its financial commitment on the obligation; B. An obligation rated B is
more vulnerable to nonpayment than obligations rated BB, but the obligor
currently has the capacity to meet its financial commitment on the
obligation. Adverse business, financial, or economic conditions will likely
impair the obligor's capacity or willingness to meet its financial commitment
on the obligation; CCC. An obligation rated CCC is currently vulnerable to
nonpayment and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or economic
conditions, the obligor is not likely to have the capacity to meet its
financial commitment on the obligation; CC. An obligation rated CC is
currently highly vulnerable to nonpayment; C. The C rating may be used to
cover a situation where a bankruptcy petition has been filed or similar
action has been taken, but payments on this obligation are being continued;
D. An obligation rated D is in payment default. The D rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar
action if payments on an obligation are jeopardized.

A-1

<PAGE>

Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.

R. This symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility
of expected returns which are not addressed in the credit rating. Examples
include: obligations linked or indexed to equities, currencies, or
commodities; obligations exposed to severe prepayment risk--such as
interest-only or principal-only mortgage securities; and obligations with
unusually risky interest terms, such as inverse floaters.

A-2

<PAGE>

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

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

PaineWebber
Global Equity Fund

PaineWebber
Global Income Fund

PaineWebber
Asia Pacific Growth Fund

PaineWebber
Emerging Markets
Equity Fund

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

Statement of Additional Information
March 1, 2000

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

PAINEWEBBER

<PAGE>

PART C. OTHER INFORMATION

Item 23. EXHIBITS

(1) (a) Amended and Restated Declaration of Trust (1)/
(b) Amendment to Declaration of Trust effective April 8, 1998 (2)/
(c) Amendment to Declaration of Trust effective July 9, 1998 (2)/
(d) Amendment to Declaration of Trust effective August 19, 1998 (3)/
(e) Amendment to Declaration of Trust effective June 22, 1999 (4)/
(f) Amendment to Declaration of Trust effective July 28, 1999 (5)/
(2) Restated By-Laws (1)/
(3) Instruments defining the rights of holders of the Registrant's shares of
beneficial interest (6)/
(4) (a) Investment Advisory and Administration Contract (1)/
(b) Investment Advisory and Administration Contract with respect to
PaineWebber Tax-Managed Equity Fund and PaineWebber Strategy Fund (3)/
(c) Investment Advisory Fee Agreement with respect to PaineWebber Utility
Income Fund (1)/
(d) Investment Advisory Fee Agreement with respect to PaineWebber Low
Duration U.S. Government Income Fund (1)/
(e) Investment Advisory Fee Agreement with respect to PaineWebber Asia
Pacific Growth Fund (7)/
(f) Investment Advisory Fee Agreement with respect to PaineWebber Strategy
Fund (5)/
(g) Sub-Investment Advisory Contract with respect to PaineWebber Low
Duration U.S. Government Income Fund (8)/
(h) Sub-Advisory Contract with respect to PaineWebber Asia Pacific Growth
Fund (6)/
(5) (a) Distribution Contract with respect to Class A Shares (1)/
(b) Distribution Contract with respect to Class B Shares (1)/
(c) Distribution Contract with respect to Class C Shares (9)/
(d) Distribution Contract with respect to Class Y Shares (9)/
(e) Exclusive Dealer Agreement with respect to Class A Shares (1)/
(f) Exclusive Dealer Agreement with respect to Class B Shares (1)/
(g) Exclusive Dealer Agreement with respect to Class C Shares (9)/
(h) Exclusive Dealer Agreement with respect to Class Y Shares (9)/
(6) Bonus, profit sharing or pension plans - none
(7) Custodian Agreement (1)/
(8) Transfer Agency Agreement (10)/
(9) Opinion and consent of counsel (filed herewith)
(10) Other opinions, appraisals, rulings and consents: Auditor's consent (filed
herewith)
(11) Financial statements omitted from prospectus - none

C-1
<PAGE>

(12) Letter of investment intent (1)/
(13) (a) Plan of Distribution pursuant to Rule 12b-1 with respect to Class A
Shares (3)/
(b) Plan of Distribution pursuant to Rule 12b-1 with respect to Class B
Shares (3)/
(c) Plan of Distribution pursuant to Rule 12b-1 with respect to Class C
Shares (3)/
(d) Addendum to Class C Plan for PaineWebber Strategy Fund (5)/
(14) and
(27) Financial Data Schedule (not applicable)
(15) Plan pursuant to Rule 18f-3 (11)/

- -----------------
(1)/ Incorporated by reference from Post-Effective Amendment No. 52 to the
registration statement, SEC File No. 2-91362, filed February 27, 1998.

(2)/ Incorporated by reference from Post-Effective Amendment No. 54 to the
registration statement, SEC File No. 2-91362, filed July 21, 1998.

(3)/ Incorporated by reference from Post-Effective Amendment No. 59 to the
registration statement, SEC File No. 2-91362, filed February 26, 1999.

(4)/ Incorporated by reference from Post-Effective Amendment No. 63 to the
registration statement, SEC File No. 2-91362, filed July 29, 1999.

(5)/ Incorporated by reference from Post-Effective Amendment No. 65 to the
registration statement, SEC File No. 2-91362, filed December 3, 1999.

(6)/ Incorporated by reference from Articles III, VIII, IX, X and XI of
Registrant's Amended and Restated Declaration of Trust and from Articles
II, VII and X of Registrant's Restated By-Laws.

(7)/ Incorporated by reference from Post Effective Amendment No. 50 to the
registration statement, SEC File No. 2-91362, filed July 7, 1997.

(8)/ Incorporated by reference from Post-Effective Amendment No. 37 to the
registration statement, SEC File No. 2-91362, filed March 31, 1995.

(9)/ Incorporated by reference from Post-Effective Amendment No. 39 to the
registration statement, SEC File No. 2-91362, filed February 14, 1996.

(10)/ Incorporated by reference from Post-Effective Amendment No. 53 to the
registration statement, SEC File No. 2-91362, filed March 31, 1998.

(11)/ Incorporated by reference from Post-Effective Amendment No. 43 to the
registration statement, SEC File No. 2-91362, filed July 31, 1996.

C-2
<PAGE>

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

None.

Item 25. INDEMNIFICATION

Section 2 of "Indemnification" in Article X of the Declaration of Trust
provides that the Registrant will indemnify its trustees and officers to the
fullest extent permitted by law against claims and expenses asserted against or
incurred by them by virtue of being or having been a trustee or officer;
provided that no such person shall be indemnified where there has been an
adjudication or other determination, as described in Article X, that such person
is liable to the Registrant or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office or did not act in good faith in the
reasonable belief that his or her action was in the best interest of the
Registrant. Section 2 of "Indemnification" in Article X also provides that the
Registrant may maintain insurance policies covering such rights of
indemnification.

Additionally, "Limitation of Liability" in Article X of the Declaration
of Trust provides that the trustees or officers of the Registrant shall not be
personally liable to any person extending credit to, contracting with, or having
a claim against, the Trust; and that, provided they have exercised reasonable
care and have acted under the reasonable belief that their actions are in the
best interest of the Registrant, the trustees and officers shall not be liable
for neglect or wrongdoing by them or any officer, agent, employee or investment
adviser of the Registrant.

Section 2 of Article XI of the Declaration of Trust additionally
provides that, subject to the provisions of Section 1 of Article XI and to
Article X, the trustees shall not be liable for errors of judgment or mistakes
of fact or law, or for any act or omission in accordance with advice of counsel
or other experts, or failing to follow such advice, with respect to the meaning
and operation of the Declaration of Trust.

Article XI of the By-Laws provides that the Registrant may purchase and
maintain insurance on behalf of any person who is or was a trustee, officer or
employee of the Trust, or is or was serving at the request of the Trust as a
trustee, officer or employee of a corporation, partnership, joint venture, trust
or other enterprise against any liability asserted against him or her and
incurred by him or her in any such capacity or arising out of his or her status
as such, whether or not the Registrant would have the power to indemnify him or
her against such liability, provided that the Registrant may not acquire
insurance protecting any trustee or officer against liability to the Registrant
or its shareholders to which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of his or her office.

Section 9 of each Investment Advisory and Administration Contract
("Advisory Contract") between Mitchell Hutchins Asset Management Inc. ("Mitchell
Hutchins") and the Trust provides that Mitchell Hutchins shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the
Registrant in connection with the matters to which the Advisory Contract
relates, except for a loss resulting from willful misfeasance, bad faith, or
gross negligence of Mitchell Hutchins in the performance of its duties or from
its reckless disregard of its obligations and duties under the Advisory
Contract. The sub-advisory contracts with respect to PaineWebber Low Duration
U.S. Government Income Fund and PaineWebber Asia Pacific Growth Fund contain
similar provisions with respect to those sub-advisers. Section 10 of each
Advisory Contract provides that the trustees shall not be liable for any
obligations of the Trust under the Advisory Contract and that Mitchell Hutchins
shall look only to the assets and property of the Trust in settlement of such
right or claim and not to the assets and property of the trustees.

Section 9 of each Distribution Contract provides that the Trust will
indemnify Mitchell Hutchins and its officers, directors or controlling persons
against all liabilities arising from any alleged untrue statement of material
fact in the Registration Statement or from any alleged omission to state in the
Registration Statement a material fact required to be stated in it or necessary
to make the statements in it, in light of the circumstances under which they
were made, not misleading, except insofar as liability arises from untrue
statements or omissions made in reliance upon and in conformity with information
furnished by Mitchell Hutchins to the Trust for use in the Registration
Statement; and provided that this indemnity agreement shall not protect any such
persons against liabilities arising by reason of their bad faith, gross
negligence or willful misfeasance; and shall not inure to the benefit of any
such

C-3
<PAGE>

persons unless a court of competent jurisdiction or controlling precedent
determines that such result is not against public policy as expressed in the
Securities Act of 1933. Section 9 of each Distribution Contract also provides
that Mitchell Hutchins agrees to indemnify, defend and hold the Trust, its
officers and trustees free and harmless of any claims arising out of any alleged
untrue statement or any alleged omission of material fact contained in
information furnished by Mitchell Hutchins for use in the Registration Statement
or arising out of an agreement between Mitchell Hutchins and any retail dealer,
or arising out of supplementary literature or advertising used by Mitchell
Hutchins in connection with each Distribution Contract.

Section 9 of each Exclusive Dealer Agreement contains provisions
similar to Section 9 of each Distribution Contract, with respect to PaineWebber
Incorporated ("PaineWebber").

Section 10 of each Distribution Contract contains provisions similar to
that of the section of the Investment Advisory and Administration Contracts
limiting the liability of the Trust's trustees.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be provided to trustees, officers and controlling
persons of the Trust, pursuant to the foregoing provisions or otherwise, the
Trust has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Trust of expenses
incurred or paid by a trustee, officer or controlling person of the Trust in
connection with the successful defense of any action, suit or proceeding or
payment pursuant to any insurance policy) is asserted against the Trust by such
trustee, officer or controlling person in connection with the securities being
registered, the Trust will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Mitchell Hutchins, a Delaware corporation, is a registered investment
advisor and is a wholly owned subsidiary of PaineWebber which is, in turn, a
wholly owned subsidiary of Paine Webber Group Inc. Mitchell Hutchins is
primarily engaged in the investment advisory business. Information as to the
officers and directors of Mitchell Hutchins is included in its Form ADV, as
filed with the Securities and Exchange Commission (registration number
801-13219), and is incorporated herein by reference.

Pacific Investment Management Company ("PIMCO") serves as sub-adviser
for PaineWebber Low Duration U.S. Government Income Fund. PIMCO, a Delaware
general partnership, is a registered investment adviser and a subsidiary
partnership of PIMCO Advisors L.P. ("PIMCO Advisors"). The general partners of
PIMCO Advisors are PIMCO Advisors Holding L.P., a publicly traded company listed
on the New York Stock Exchange under the symbol "PA" and PIMCO Partners, G.P., a
a general partnership between Pacific Life Insurance Company and PIMCO Partners,
LLC., a limited liability company controlled by the PIMCO managing directors.
PIMCO is primarily engaged in the investment advisory business. Information as
to the officers and managing directors and partners of PIMCO is included in its
Form ADV, as filed with the Securities and Exchange Commission (registration
number 801-48187) and is incorporated herein by reference.

Schroder Investment Management North America Inc., a New York
corporation, is the investment sub-adviser for PaineWebber Asia Pacific Growth
Fund. Schroder Investment Management is a registered investment adviser and is
primarily engaged in the investment advisory business. Schroder Investment
Management is a wholly owned indirect subsidiary of Schroders plc, the London
Stock Exchange listed holding company parent of a large worldwide group of banks
and financial services companies (referred to as the "Schroder Group") with
associated companies and branch and representative offices located worldwide.
Information regarding the officers and directors of Schroder Investment
Management is included in its Form ADV, as filed with the Securities and
Exchange Commission (registration number 801-15834) and is incorporated herein
by reference.

C-4
<PAGE>

Item 27. PRINCIPAL UNDERWRITERS

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

ALL-AMERICAN TERM TRUST INC.
GLOBAL HIGH INCOME DOLLAR FUND INC.
INSURED MUNICIPAL INCOME FUND INC.
INVESTMENT GRADE MUNICIPAL INCOME FUND INC.
MANAGED HIGH YIELD FUND INC.
MANAGED HIGH YIELD PLUS FUND INC.
MITCHELL HUTCHINS LIR MONEY SERIES
MITCHELL HUTCHINS PORTFOLIOS
MITCHELL HUTCHINS SECURITIES TRUST
MITCHELL HUTCHINS SERIES TRUST
PAINEWEBBER AMERICA FUND
PAINEWEBBER FINANCIAL SERVICES GROWTH FUND INC.
PAINEWEBBER INDEX TRUST
PAINEWEBBER INVESTMENT SERIES
PAINEWEBBER INVESTMENT TRUST
PAINEWEBBER INVESTMENT TRUST II
PAINEWEBBER MANAGED ASSETS TRUST
PAINEWEBBER MANAGED INVESTMENTS TRUST
PAINEWEBBER MASTER SERIES, INC.
PAINEWEBBER MUNICIPAL SERIES
PAINEWEBBER MUTUAL FUND TRUST
PAINEWEBBER OLYMPUS FUND
PAINEWEBBER SECURITIES TRUST
STRATEGIC GLOBAL INCOME FUND, INC.
2002 TARGET TERM TRUST INC.

(b) Mitchell Hutchins is the principal underwriter for the Registrant.
PaineWebber acts as exclusive dealer for the shares of the Registrant. The
directors and officers of Mitchell Hutchins, their principal business addresses
and their positions and offices with Mitchell Hutchins are identified in its
Form ADV, as filed with the Securities and Exchange Commission (registration
number 801-13219). The directors and officers of PaineWebber, their principal
business addresses and their positions and offices with PaineWebber are
identified in its Form ADV, as filed with the Securities and Exchange Commission
(registration number 801-7163). The foregoing information is hereby incorporated
by reference. The information set forth below is furnished for those directors
and officers of Mitchell Hutchins or PaineWebber who also serve as trustees or
officers of the Registrant.

Position and Offices with
Name Position With Registrant Underwriter or Exclusive Dealer
- ---- ------------------------ -------------------------------
<S> <C> <C>
Margo N. Alexander* Trustee and President Chairman, Chief Executive Officer and a
Director of Mitchell Hutchins and an
Executive Vice President and Director of
PaineWebber
Brian M. Storms* Trustee President and Chief Operating Officer of
Mitchell Hutchins
T. Kirkham Barneby* Vice President Managing Director and Chief Investment
Officer - Quantitative Investments of
Mitchell Hutchins

C-5
<PAGE>

Julieanna Berry* Vice President First Vice President and a Portfolio
Manager of Mitchell Hutchins
Tom Disbrow** Vice President and Assistant First Vice President and a Senior
Treasurer Manager of the Mutual Fund Finance
Department of Mitchell Hutchins
James F. Keegan* Vice President Senior Vice President and a Portfolio
Manager of Mitchell Hutchins
John J. Lee** Vice President and Assistant Vice President and a Manager of the
Treasurer Mutual Fund Finance Department of
Mitchell Hutchins
Kevin J. Mahoney** Vice President and Assistant First Vice President and a Senior
Treasurer Manager of the Mutual Fund Finance
Department of Mitchell Hutchins
Dennis McCauley* Vice President Managing Director and Chief Investment
Officer - Fixed Income of Mitchell
Hutchins
Ann E. Moran** Vice President and Assistant Vice President and a Manager of the
Treasurer Mutual Fund Finance Department of
Mitchell Hutchins
Dianne E. O'Donnell** Vice President and Secretary Senior Vice President and Deputy General
Counsel of Mitchell Hutchins
Emil Polito* Vice President Senior Vice President and Director of
Operations and Control for Mitchell
Hutchins
Victoria E. Schonfeld** Vice President Managing Director and General Counsel of
Mitchell Hutchins and a Senior Vice
President of PaineWebber
Paul H. Schubert** Vice President and Treasurer Senior Vice President and Director of
the Mutual Fund Finance Department of
Mitchell Hutchins
Nirmal Singh* Vice President Senior Vice President and a Portfolio
Manager of Mitchell Hutchins
Barney A. Taglialatela** Vice President and Assistant Vice President and a Manager of the
Treasurer Mutual Fund Finance Department of
Mitchell Hutchins
Mark A. Tincher* Vice President Managing Director and Chief Investment
Officer - Equities of Mitchell Hutchins
Keith A. Weller** Vice President and Assistant First Vice President and Associate
Secretary General Counsel of Mitchell Hutchins
- ---------
</TABLE>

* The business address of this person is 51 West 52nd Street, New York, New
York 10019-6114.
** The business address of this person is 1285 Avenue of the Americas, New
York, New York 10019.

C-6
<PAGE>

Item 28. LOCATION OF ACCOUNTS AND RECORDS

The books and other documents required by paragraphs (b)(4), (c) and
(d) of Rule 31a-1 under the Investment Company Act of 1940 are maintained in the
physical possession of Mitchell Hutchins, 1285 Avenue of the Americas, New York,
New York 10019 and Mitchell Hutchins, 51 West 52nd Street, New York, New York
10019-6114. All other accounts, books and documents required by Rule 31a-1 are
maintained in the physical possession of Registrant's transfer agent and
custodian.

Item 29. MANAGEMENT SERVICES

Not applicable.

Item 30. UNDERTAKINGS

None.

C-7

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectiveness of this Post-Effective Amendment to its Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Post-Effective Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York, on the
28th day of February, 2000.

PAINEWEBBER MANAGED INVESTMENTS TRUST

By: /s/ Dianne E. O'Donnell
-------------------------------
Dianne E. O'Donnell
Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment has been signed below by the following persons in the capacities and
on the dates indicated:

Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Margo N. Alexander President and Trustee February 28, 2000
- ------------------------------------
Margo N. Alexander * (Chief Executive Officer)

/s/ E. Garrett Bewkes, Jr. Trustee and Chairman February 28, 2000
- ---------------------------
E. Garrett Bewkes, Jr. * of the Board of Trustees

/s/ Richard Q. Armstrong Trustee February 28, 2000
- ---------------------------
Richard Q. Armstrong *

/s/ Richard R. Burt Trustee February 28, 2000
- ------------------------------------
Richard R. Burt *

/s/Meyer Feldberg Trustee February 28, 2000
- ---------------------------
Meyer Feldberg *

/s/ George W. Gowen Trustee February 28, 2000
- ------------------------------------
George W. Gowen *

/s/ Frederic V. Malek Trustee February 28, 2000
- ------------------------------------
Frederic V. Malek *

/s/ Carl W. Schafer Trustee February 28, 2000
- ------------------------------------
Carl W. Schafer *

/s/ Brian M. Storms Trustee February 28, 2000
- ------------------------------------
Brian M. Storms **

/s/ Paul H. Schubert Vice President and Treasurer (Chief February 28, 2000
- ------------------------------------ Financial and Accounting Officer)
Paul H. Schubert

</TABLE>

<PAGE>

SIGNATURES (CONTINUED)

* Signature affixed by Elinor W. Gammon pursuant to powers of attorney dated
May 21, 1996 and incorporated by reference from Post-Effective Amendment
No. 30 to the registration statement of PaineWebber Managed Municipal
Trust, SEC File 2-89016, filed June 27, 1996.

** Signature affixed by Elinor W. Gammon pursuant to power of attorney dated
May 14, 1999 and incorporated by reference from Post-Effective Amendment
No. 61 to the registration statement of PaineWebber Managed Investments
Trust, SEC File 2-91362, filed June 1, 1999.

<PAGE>

PAINEWEBBER MANAGED INVESTMENTS TRUST

EXHIBIT INDEX

Exhibit
Number
- ------
(1) (a) Amended and Restated Declaration of Trust (1)/
(b) Amendment to Declaration of Trust effective April 8, 1998 (2)/
(c) Amendment to Declaration of Trust effective July 9, 1998 (2)/
(d) Amendment to Declaration of Trust effective August 19, 1998 (3)/
(e) Amendment to Declaration of Trust effective June 22, 1999 (4)/
(f) Amendment to Declaration of Trust effective July 28, 1999 (5)/
(2) Restated By-Laws (1)/
(3) Instruments defining the rights of holders of the Registrant's shares of
beneficial interest (6)/
(4) (a) Investment Advisory and Administration Contract (1)/
(b) Investment Advisory and Administration Contract with respect to
PaineWebber Tax-Managed Equity Fund and PaineWebber Strategy Fund (3)/
(c) Investment Advisory Fee Agreement with respect to PaineWebber Utility
Income Fund (1)/
(d) Investment Advisory Fee Agreement with respect to PaineWebber Low
Duration U.S. Government Income Fund (1)/
(e) Investment Advisory Fee Agreement with respect to PaineWebber Asia
Pacific Growth Fund (7)/
(f) Investment Advisory Fee Agreement with respect to PaineWebber Strategy
Fund (5)/
(g) Sub-Investment Advisory Contract with respect to PaineWebber Low
Duration U.S. Government Income Fund (8)/
(h) Sub-Advisory Contract with respect to PaineWebber Asia Pacific Growth
Fund (6)/
(5) (a) Distribution Contract with respect to Class A Shares (1)/
(b) Distribution Contract with respect to Class B Shares (1)/
(c) Distribution Contract with respect to Class C Shares (9)/
(d) Distribution Contract with respect to Class Y Shares (9)/
(e) Exclusive Dealer Agreement with respect to Class A Shares (1)/
(f) Exclusive Dealer Agreement with respect to Class B Shares (1)/
(g) Exclusive Dealer Agreement with respect to Class C Shares (9)/
(h) Exclusive Dealer Agreement with respect to Class Y Shares (9)/
(6) Bonus, profit sharing or pension plans - none
(7) Custodian Agreement (1)/
(8) Transfer Agency Agreement (10)/
(9) Opinion and consent of counsel (filed herewith)

<PAGE>

(10) Other opinions, appraisals, rulings and consents: Auditor's consent (filed
herewith)
(11) Financial statements omitted from prospectus - none
(12) Letter of investment intent (1)/
(13) (a) Plan of Distribution pursuant to Rule 12b-1 with respect to Class A
Shares (3)/
(b) Plan of Distribution pursuant to Rule 12b-1 with respect to Class B
Shares (3)/
(c) Plan of Distribution pursuant to Rule 12b-1 with respect to Class C
Shares (3)/
(d) Addendum to Class C Plan for PaineWebber Strategy Fund (5)/
(14) and
(27) Financial Data Schedule (not applicable)
(15) Plan pursuant to Rule 18f-3 (11)/
- -----------------
(1)/ Incorporated by reference from Post-Effective Amendment No. 52 to the
registration statement, SEC File No. 2-91362, filed February 27, 1998.