<PAGE>
PaineWebber
National Tax-Free Income Fund
PaineWebber
Municipal High Income Fund
PaineWebber
California Tax-Free Income Fund
PaineWebber
New York Tax-Free Income Fund
----------------
PROSPECTUS
JUNE 30, 1999
------------------------------
This prospectus offers shares in PaineWebber's four municipal bond funds. Each
fund offers 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 shares. Class Y shares are available only to certain types of
investors.
The funds are not appropriate investments for tax-advantaged accounts.
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>
- --------------------------------------------------------------------------------
------------------------
National Tax-Free Income Fund Municipal High Income Fund
California Tax-Free Income Fund New York Tax-Free Income Fund
Contents
THE FUNDS
<TABLE>
<S> <C> <C>
----------------------------------------------------------------------------
What every investor 3 National Tax-Free Income Fund
should know about 6 Municipal High Income Fund
the funds 9 California Tax-Free Income Fund
12 New York Tax-Free Income Fund
15 More About Risks and Investment Strategies
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 25 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 National Tax-Free Income Fund
PaineWebber National Tax-Free Income Fund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
FUND OBJECTIVE
High current income exempt from federal income tax, consistent with the
preservation of capital and liquidity within the fund's quality standards.
PRINCIPAL INVESTMENT STRATEGIES
The fund normally invests substantially all its assets in municipal bonds. These
are bonds and similar securities that are exempt from federal income tax. The
fund may invest up to 20% of its total assets in municipal bonds that are
subject to the federal alternative minimum tax.
The fund invests primarily in municipal bonds that are investment grade, but it
also invests, to a lesser extent, in lower rated bonds. The fund may use
interest rate futures contracts and other derivatives to help manage its
portfolio duration. "Duration" is a measure of the fund's exposure to interest
rate risk.
The fund's investment adviser, Mitchell Hutchins Asset Management Inc., uses a
"top down" investment process to select bonds for the fund. Mitchell Hutchins
determines the appropriate duration for the fund's portfolio based on its
assessment of whether market interest rates are likely to rise or fall and on
whether rates are most attractive for longer, medium or shorter term bonds.
Mitchell Hutchins allocates the fund's investments among market sectors, such as
general obligation or revenue bonds and higher or lower credit quality, by
analyzing the relative attractiveness of rates and market opportunities in each
sector. Within the limits set by these allocation decisions, Mitchell Hutchins
selects specific bonds based on an analysis of their credit quality and terms.
PRINCIPAL RISKS
An investment in the fund is not guaranteed; investors may lose money by
investing in the fund.
The fund is subject to interest rate risk, which means that the value of its
investments generally will fall when interest rates rise. The fund also is
subject to credit risk, in that the issuers of its municipal bonds may not make
principal or interest payments when due. The market for municipal bonds can be
adversely affected by legislative proposals to eliminate or limit the tax-exempt
status of municipal bond interest or the fund's dividends.
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
- - Credit Risk
- - Political Risk
- - Related Securities Concentration Risk
- - Derivatives Risk
INFORMATION ON THE FUND'S RECENT INVESTMENT STRATEGIES AND 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 National Tax-Free 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
bar 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 bar 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.
NATIONAL TAX-FREE INCOME FUND--TOTAL RETURN ON CLASS A SHARES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CALENDAR YEAR PERCENTAGES
<S> <C>
1989 9.11%
1990 6.55%
1991 11.12%
1992 8.01%
1993 12.32%
1994 -7.14%
1995 16.01%
1996 2.29%
1997 9.37%
1998 5.67%
</TABLE>
Total return January 1 to March 31, 1999--0.41%
Best quarter during years shown: 1st quarter, 1995--6.34%
Worst quarter during years shown: 1st quarter, 1994--(6.10)%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
<TABLE>
<CAPTION>
LEHMAN
BROTHERS
CLASS CLASS A CLASS B* CLASS C CLASS Y MUNICIPAL
(INCEPTION DATE) (12/3/84) (7/1/91) (7/2/92) (11/3/95) BOND INDEX
- --------------------------------------------------------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
One Year....................................................... 1.42% (0.16)% 4.29% 5.94% 6.48%
Five Years..................................................... 4.10% 3.81% 4.40% N/A 6.22%
Ten Years...................................................... 6.72% N/A N/A N/A 8.22%
Life of Class.................................................. 8.16% 6.28% 5.60% 6.59% **
</TABLE>
- ---------
*Reflects conversion of Class B shares to Class A after six years.
**Average annual total returns for the Lehman Brothers Municipal Bond Index for
the life of each class were as follows: Class A--9.29%; Class B--7.94%; Class
C--7.37%; Class Y--7.19%.
- --------------------------------------------------------------------------------
Prospectus Page 4
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber National Tax-Free 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 investment)
<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............................................................. 0.50% 0.50% 0.50% 0.50%
Distribution and/or Service (12b-1) Fees.................................... 0.25 1.00 0.75 0.00
Other Expenses.............................................................. 0.19 0.22 0.22 0.21
----- ----- ----- -----
Total Annual Fund Operating Expenses........................................ 0.94% 1.72% 1.47% 0.71%
----- ----- ----- -----
----- ----- ----- -----
</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..................................................................... $ 492 $ 688 $ 899 $ 1,509
Class B (assuming sales of all shares at end of period)..................... 675 842 1,133 1,634
Class B (assuming no sales of shares)....................................... 175 542 933 1,634
Class C (assuming sales of all shares at end of period)..................... 225 465 803 1,757
Class C (assuming no sales of shares)....................................... 150 465 803 1,757
Class Y..................................................................... 73 227 395 883
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 5
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Municipal High Income Fund
PaineWebber Municipal High Income Fund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
FUND OBJECTIVE
High current income exempt from federal income tax.
PRINCIPAL INVESTMENT STRATEGIES
The fund normally invests substantially all of its assets in municipal bonds.
These are bonds and similar securities that are exempt from federal income tax.
The fund may invest without limit in municipal bonds that are subject to the
federal alternative minimum tax (AMT). The fund invests in these bonds when its
investment adviser, Mitchell Hutchins Asset Management Inc., believes they offer
attractive yields relative to municipal bonds that have similar investment
characteristics but are not subject to AMT.
The fund invests primarily in municipal bonds that are of medium or lower credit
quality. These include high yield bonds, which are not investment grade and are
sometimes called "junk bonds." The fund may use interest rate futures contracts
and other derivatives to help manage its portfolio duration. "Duration" is a
measure of the fund's exposure to interest rate risk.
Mitchell Hutchins uses a "top down" investment process to select bonds for the
fund. Mitchell Hutchins determines the appropriate duration for the fund's
portfolio based on its assessment of whether market interest rates are likely to
rise or fall and on whether rates are most attractive for longer, medium or
shorter term bonds. Mitchell Hutchins allocates the fund's investments among
market sectors, such as general obligation or revenue bonds and higher or lower
credit quality, by analyzing the relative attractiveness of rates and market
opportunities in each sector. Within the limits set by these allocation
decisions, Mitchell Hutchins selects specific bonds based on an analysis of
their credit quality and terms.
PRINCIPAL RISKS
An investment in the fund is not guaranteed; investors may lose money by
investing in the fund.
The fund invests a large portion of its assets in high yield or "junk" municipal
bonds and so is subject to high credit risk--the risk that the issuers of
municipal bonds will not make principal or interest payments when due. The fund
also is subject to interest rate risk, which means that the value of its
investments generally will fall when interest rates rise. The market for
municipal bonds can be adversely affected by legislative proposals to eliminate
or limit the tax-exempt status of municipal bond interest or the fund's
dividends. 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.
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:
- - Credit Risk
- - Interest Rate Risk
- - Political Risk
- - Non-Diversified Status Risk
- - Related Securities Concentration Risk
- - Derivatives Risk
INFORMATION ON THE FUND'S RECENT INVESTMENT STRATEGIES AND 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 Municipal High 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
bar 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 bar 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.
MUNICIPAL HIGH INCOME FUND--TOTAL RETURN ON CLASS A SHARES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Calendar Year Percentages
<S> <C>
1989 9.66%
1990 5.52%
1991 13.32%
1992 9.79%
1993 12.14%
1994 -7.77%
1995 15.55%
1996 5.94%
1997 10.73%
1998 5.07%
</TABLE>
Total return January 1 to March 31, 1999--0.82%
Best quarter during years shown: 1st quarter, 1995--6.06%
Worst quarter during years shown: 1st quarter, 1994--(6.53)%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
<TABLE>
<CAPTION>
LEHMAN
BROTHERS
CLASS CLASS A CLASS B* CLASS C CLASS Y MUNICIPAL
(INCEPTION DATE) (6/23/87) (7/1/91) (7/2/92) (2/5/98) BOND INDEX
- ---------------------------------------------------------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
One Year........................................................ 0.82% (0.72)% 3.70% N/A 6.48%
Five Years...................................................... 4.74% 4.47% 5.06% N/A 6.22%
Ten Years....................................................... 7.37% N/A N/A N/A 8.22%
Life of Class................................................... 7.74% 7.00% 6.13% 4.81%** ***
</TABLE>
- ---------
*Reflects conversion of Class B shares to Class A after six years.
**Represents return for less than a full year.
***Average annual total returns for the Lehman Brothers Municipal Bond Index for
the life of each class were as follows: Class A--8.19%; Class B--7.94%; Class
C--7.37%; Class Y--5.39%.
- --------------------------------------------------------------------------------
Prospectus Page 7
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Municipal High 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 investment)
<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............................................................. 0.60% 0.60% 0.60% 0.60%
Distribution and/or Service (12b-1) Fees.................................... 0.25 1.00 0.75 0.00
Other Expenses.............................................................. 0.27 0.28 0.27 0.27
----- ----- ----- -----
Total Annual Fund Operating Expenses........................................ 1.12% 1.88% 1.62% 0.87%
----- ----- ----- -----
----- ----- ----- -----
</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.
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..................................................................... $ 510 $ 742 $ 992 $ 1,709
Class B (assuming sales of all shares at end of period)..................... 691 891 1,216 1,821
Class B (assuming no sales of shares)....................................... 191 591 1,016 1,812
Class C (assuming sales of all shares at end of period)..................... 240 511 881 1,922
Class C (assuming no sales of shares)....................................... 165 511 881 1,922
Class Y..................................................................... 89 278 482 1,073
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 8
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber California Tax-Free Income Fund
PaineWebber California Tax-Free Income Fund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
FUND OBJECTIVE
High current income exempt from federal income tax and California personal
income tax, consistent with the preservation of capital and liquidity within the
fund's quality standards.
PRINCIPAL INVESTMENT STRATEGIES
The fund normally invests substantially all its assets in California municipal
bonds. These are bonds and similar securities that are exempt from federal
income tax and from California personal income tax. The fund may invest up to
20% of its total assets in California municipal bonds that are subject to the
federal alternative minimum tax.
The fund invests primarily in California municipal bonds that are investment
grade, but it also invests, to a lesser extent, in lower rated bonds. The fund
may use interest rate futures contracts and other derivatives to help manage its
portfolio duration. "Duration" is a measure of the fund's exposure to interest
rate risk.
The fund's investment adviser, Mitchell Hutchins Asset Management Inc., uses a
"top down" investment process to select bonds for the fund. Mitchell Hutchins
determines the appropriate duration for the fund's portfolio based on its
assessment of whether market interest rates are likely to rise or fall and on
whether rates are most attractive for longer, medium or shorter term bonds.
Mitchell Hutchins allocates the fund's investments among market sectors, such as
general obligation or revenue bonds and higher or lower credit quality, by
analyzing the relative attractiveness of rates and market opportunities in each
sector. Within the limits set by these allocation decisions, Mitchell Hutchins
selects specific bonds based on an analysis of their credit quality and terms.
PRINCIPAL RISKS
An investment in the fund is not guaranteed; investors may lose money by
investing in the fund.
The fund is subject to interest rate risk, which means that the value of its
investments generally will fall when interest rates rise. The fund also is
subject to credit risk in that the issuers of its municipal bonds may not make
principal or interest payments when due. Because the fund concentrates its
investments in California, it will be more severely affected by unfavorable
political or economic conditions in California than a more geographically
diverse fund. The market for municipal bonds can be adversely affected by
legislative proposals to eliminate or limit the tax-exempt status of municipal
bond interest or the fund's dividends.
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
- - Credit Risk
- - Single State Concentration Risk
- - Political Risk
- - Related Securities Concentration Risk
- - Derivatives Risk
INFORMATION ON THE FUND'S RECENT INVESTMENT STRATEGIES AND 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 California Tax-Free 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
bar 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 bar 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.
CALIFORNIA TAX-FREE INCOME FUND--TOTAL RETURN ON CLASS A SHARES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Calendar Year Percentages
<S> <C>
1989 9.11%
1990 6.68%
1991 10.84%
1992 7.49%
1993 11.96%
1994 -8.07%
1995 16.80%
1996 2.74%
1997 8.80%
1998 6.00%
</TABLE>
Total return January 1 to March 31, 1999--0.73%
Best quarter during years shown: 1st quarter, 1995--7.02%
Worst quarter during years shown: 1st quarter, 1994--(6.64)%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
<TABLE>
<CAPTION>
LEHMAN
BROTHERS
CLASS CLASS A CLASS B* CLASS C CLASS Y MUNICIPAL
(INCEPTION DATE) (9/16/85) (7/1/91) (7/2/92) (2/5/98) BOND INDEX
- ---------------------------------------------------------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
One Year........................................................ 1.79% 0.27% 4.64% N/A 6.48%
Five Years...................................................... 4.07% 3.83% 4.40% N/A 6.22%
Ten Years....................................................... 6.61% N/A N/A N/A 8.22%
Life of Class................................................... 7.73% 6.10% 5.52% 5.33%** ***
</TABLE>
- ---------
*Assumes conversion of Class B shares to Class A after six years.
**Represents return for less than a full year.
***Average annual total returns for the Lehman Brothers Municipal Bond Index for
the life of each class were as follows: Class A--9.11%; Class B--7.94%; Class
C--7.37%; Class Y--5.39%.
- --------------------------------------------------------------------------------
Prospectus Page 10
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber California Tax-Free 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 investment)
<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*............................................................ 0.50% 0.50% 0.50% 0.50%
Distribution and/or Service (12b-1) Fees.................................... 0.25 1.00 0.75 0.00
Other Expenses.............................................................. 0.21 0.22 0.22 0.21
----- ----- ----- -----
Total Annual Fund Operating Expenses........................................ 0.96% 1.72% 1.47% 0.71%
Management Fee Waiver*...................................................... 0.20 0.20 0.20 0.20
----- ----- ----- -----
Net Expenses*............................................................... 0.76% 1.52% 1.27% 0.51%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
- ---------
*Mitchell Hutchins has agreed to waive 0.20% of its 0.50% management fee through
the end of the fund's current fiscal year.
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, except for the
one year period when the fund's expenses are lower due to Mitchell Hutchins' fee
waiver. 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..................................................................... $ 475 $ 674 $ 891 $ 1,513
Class B (assuming sales of all shares at end of period)..................... 655 822 1,115 1,627
Class B (assuming no sales of shares)....................................... 155 522 915 1,627
Class C (assuming sales of all shares at end of period)..................... 204 445 784 1,740
Class C (assuming no sales of shares)....................................... 129 445 784 1,740
Class Y..................................................................... 52 207 375 864
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 11
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber New York Tax-Free Income Fund
PaineWebber New York Tax-Free Income Fund
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
FUND OBJECTIVE
High current income exempt from federal income tax and from New York State and
New York City personal income taxes.
PRINCIPAL INVESTMENT STRATEGIES
The fund normally invests substantially all its assets in New York municipal
bonds. These are bonds and similar securities that are exempt from federal
income tax and from New York State and New York City personal income taxes. The
fund may invest up to 20% of its total assets in New York municipal bonds that
are subject to the federal alternative minimum tax.
The fund invests primarily in New York municipal bonds that are investment
grade, but it also invests, to a lesser extent, in lower rated bonds. The fund
may use interest rate futures contracts and other derivatives to help manage its
portfolio duration. "Duration" is a measure of the fund's exposure to interest
rate risk.
The fund's investment adviser, Mitchell Hutchins Asset Management Inc., uses a
"top down" investment process to select bonds for the fund. Mitchell Hutchins
determines the appropriate duration for the fund's portfolio based on its
assessment of whether market interest rates are likely to rise or fall and on
whether rates are most attractive for longer, medium or shorter term bonds.
Mitchell Hutchins allocates the fund's investments among market sectors, such as
general obligation or revenue bonds and higher or lower credit quality, by
analyzing the relative attractiveness of rates and market opportunities in each
sector. Within the limits set by these allocation decisions, Mitchell Hutchins
selects specific bonds based on an analysis of their credit quality and terms.
PRINCIPAL RISKS
An investment in the fund is not guaranteed; investors may lose money by
investing in the fund.
The fund is subject to interest rate risk, which means that the value of its
investments generally will fall when interest rates rise. The fund also is
subject to credit risk in that the issuers of its municipal bonds may not make
principal or interest payments when due. Because the fund concentrates its
investments in New York, it will be more severely affected by unfavorable
political or economic conditions in New York than a more geographically diverse
fund. The market for municipal bonds can be adversely affected by legislative
proposals to eliminate or limit the tax-exempt status of municipal bond interest
or the fund's dividends. 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.
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
- - Credit Risk
- - Single State Concentration Risk
- - Political Risk
- - Non-Diversified Status Risk
- - Related Securities Concentration Risk
- - Derivatives Risk
INFORMATION ON THE FUND'S RECENT INVESTMENT STRATEGIES AND 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 New York Tax-Free 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
bar 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 bar 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.
NEW YORK TAX-FREE INCOME FUND--TOTAL RETURN ON CLASS A SHARES
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Calendar Year Percentages
<S> <C>
1989 9.90%
1990 5.53%
1991 12.85%
1992 9.85%
1993 12.72%
1994 -8.48%
1995 17.57%
1996 3.46%
1997 9.31%
1998 6.29%
</TABLE>
Total return January 1 to March 31, 1999--0.49%
Best quarter during years shown: 1st quarter, 1995--7.39%
Worst quarter during years shown: 1st quarter, 1994--(6.58)%
AVERAGE ANNUAL TOTAL RETURNS
as of December 31, 1998
<TABLE>
<CAPTION>
LEHMAN
BROTHERS
CLASS CLASS A CLASS B* CLASS C CLASS Y MUNICIPAL
(INCEPTION DATE) (9/23/88) (7/1/91) (7/2/92) (5/21/98) BOND INDEX
- --------------------------------------------------------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
One Year....................................................... 2.06% 0.52% 5.11% N/A 6.48%
Five Years..................................................... 4.42% 4.18% 4.78% N/A 6.22%
Ten Years...................................................... 7.24% N/A N/A N/A 8.22%
Life of Class.................................................. 7.23% 6.85% 6.07% 5.26** ***
</TABLE>
- ---------
*Assumes conversion of Class B shares to Class A after six years.
**Represents return for less than a full year.
***Average annual total returns for the Lehman Brothers Municipal Bond Index for
the life of each class were as follows: Class A--8.20%; Class B--7.94%; Class
C--7.37%; Class Y--4.10%.
- --------------------------------------------------------------------------------
Prospectus Page 13
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber New York Tax-Free 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 investment)
<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............................................................. 0.60% 0.60% 0.60% 0.60%
Distribution and/or Service (12b-1) Fees.................................... 0.25 1.00 0.75 0.00
Other Expenses.............................................................. 0.42 0.42 0.42 0.43
----- ----- ----- -----
Total Annual Fund Operating Expenses........................................ 1.27% 2.02% 1.77% 1.03%
Expense Reimbursement*...................................................... 0.25 0.25 0.25 0.26
----- ----- ----- -----
Net Expenses*............................................................... 1.02% 1.77% 1.52% 0.77%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
- ---------
*The fund and Mitchell Hutchins have entered into an expense reimbursement
agreement. Mitchell Hutchins has agreed to reimburse the fund to the extent
that the fund's expenses through the end of the current fiscal year 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..................................................................... $ 500 $ 763 $ 1,046 $ 1,851
Class B (assuming sales of all shares at end of period)..................... 680 909 1,265 1,957
Class B (assuming no sales of shares)....................................... 180 609 1,065 1,957
Class C (assuming sales of all shares at end of period)..................... 230 533 936 2,063
Class C (assuming no sales of shares)....................................... 155 533 936 2,063
Class Y..................................................................... 79 302 543 1,236
</TABLE>
- --------------------------------------------------------------------------------
Prospectus Page 14
<PAGE>
- --------------------------------------------------------------------------------
------------------------
National Tax-Free Income Fund Municipal High Income Fund
California Tax-Free Income Fund New York Tax-Free Income Fund
MORE ABOUT RISKS AND INVESTMENT
STRATEGIES
- --------------------------------------------------------------------------------
PRINCIPAL RISKS
The main risks of investing in one or more of the funds are described below. Not
all of these risks apply to each fund. You can find a list of the main risks
that apply to a particular fund by looking under the "Investment Objective,
Strategies and Risks" heading for that fund.
Other risks of investing in a fund, along with further detail about some of the
risks described below, are discussed in the funds' Statement of Additional
Information ("SAI"). Information on how you can obtain the SAI is on the back
cover of this prospectus.
CREDIT RISK. Credit risk is the risk that the issuer of a bond will not make
principal or interest payments when they are due. Even if an issuer does not
default on a payment, a municipal 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 municipal bonds are subject to some credit risk.
However, credit risk is higher for lower quality municipal bonds. High yield
municipal bonds involve high credit risk and are considered speculative. These
low 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.
Some municipal bonds are "insured bonds," which means that a private insurer
guarantees payment even if the issuer of the bond defaults. Insured bonds are
subject to credit risks relating to both the issuer and the insurer, since if
the market believes that either of them has become less able to make payments,
the value of the municipal bond may decline. Bond insurance does not protect
against interest rate or other non-credit risks.
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 and futures contracts are examples of 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. This may happen for various reasons,
including unexpected 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. In
addition, a fund's use of derivatives may cause it to have taxable income.
INTEREST RATE RISK. The value of municipal 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 municipal bonds will fall. In general, the value of
municipal bonds with longer durations fluctuates more in response to interest
rate changes than municipal bonds with shorter durations. Bonds that are subject
to "call" provisions may be prepaid at specified times prior to their scheduled
maturity dates, especially if prevailing interest rates are lower than they were
when the bond was issued. A fund may need to reinvest the proceeds of called
bonds in investments that pay lower rates, thus reducing the fund's income.
NON-DIVERSIFIED STATUS RISK. A non-diversified fund is not subject to certain
limitations on its ability to invest more than 5% of its total assets in
securities of a single issuer. 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 the fund's total return
and in the price of its shares than if the fund held only a smaller position.
POLITICAL RISK. The municipal bond market can be significantly affected by
political changes, including legislation or proposals at either the state or the
federal level to eliminate or limit the tax-exempt status of municipal bond
interest or the tax-exempt status of a municipal bond fund's dividends.
Similarly, reductions in tax rates may make municipal bonds less attractive in
comparison to taxable bonds. Legislatures also may fail to appropriate funds
needed to pay municipal bond obligations. These events could cause the value of
a fund's investments in municipal bonds to fall and might adversely affect the
tax-exempt status of the
- --------------------------------------------------------------------------------
Prospectus Page 15
<PAGE>
- --------------------------------------------------------------------------------
------------------------
National Tax-Free Income Fund Municipal High Income Fund
California Tax-Free Income Fund New York Tax-Free Income Fund
fund's investments or of the dividends that the fund pays. During periods of
uncertainty, the prices of municipal securities can become volatile.
RELATED SECURITIES CONCENTRATION RISK. Each fund may invest more than 25% of
its total assets in municipal bonds that are issued to finance similar projects,
such as those relating to education, health care, transportation or utilities.
Economic, business or political developments or changes that affect one
municipal bond also may affect other municipal bonds in the same sector. As a
result, the funds are subject to greater risk than funds that do not follow this
practice.
SINGLE STATE CONCENTRATION RISK. The performance of a fund that invests
primarily in the municipal bonds of a single state will be more severely
affected by unfavorable political or economic conditions within that state than
a more geographically diversified fund. As a result, an investment in the fund
could be more volatile and involve greater risk than an investment in a more
geographically diversified fund. Information on factors affecting investments in
California and New York municipal bonds is contained in the SAI.
ADDITIONAL RISKS
YEAR 2000 RISK. The funds could be adversely affected by problems relating to
the inability of computer systems used by Mitchell Hutchins and the funds' other
service providers to recognize the year 2000. While year 2000-related computer
problems could have a negative effect on the funds, Mitchell Hutchins is working
to avoid these problems with respect to its own computer systems and to obtain
assurances from other service providers that they are taking similar steps.
Similarly, the municipal issuers whose bonds are bought by the funds and the
trading systems used by the funds could be adversely affected by this issue. The
ability of a municipal issuer or trading system to respond successfully to the
issue requires both technological sophistication and diligence, and there can be
no assurance that any steps taken will be sufficient to avoid an adverse impact
on the funds.
ADDITIONAL INVESTMENT STRATEGIES
DEFENSIVE POSITIONS; CASH RESERVES. In order to protect itself from adverse
market conditions, a fund may take a temporary 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 that pay taxable interest. Since these investments
provide relatively low income that is taxable, a defensive position may not be
consistent with achieving a fund's investment objective. However, each fund also
may invest in money market instruments that pay tax-exempt interest on an
unlimited basis as part of its ordinary investment strategy.
PORTFOLIO TURNOVER. Each fund may engage in frequent trading when Mitchell
Hutchins believes portfolio changes are appropriate. Frequent trading may
increase a fund's capital gains that are realized for tax purposes in any given
year. A fund's capital gain dividends are taxable. Shareholders pay taxes on
dividends that represent short-term capital gains at the same rate as ordinary
income. Dividends representing long-term capital gains are taxed at a lower
rate.
Frequent trading also may result in higher fund expenses due to transaction
costs. The funds do not restrict the frequency of trading to limit expenses or
the tax effect that a fund's capital gain dividends may have on shareholders.
- --------------------------------------------------------------------------------
Prospectus Page 16
<PAGE>
- --------------------------------------------------------------------------------
------------------------
National Tax-Free Income Fund Municipal High Income Fund
California Tax-Free Income Fund New York Tax-Free Income Fund
Your Investment
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 in the funds
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 and (for Class B and Class C shares)
distribution fees for the sale of its shares and services provided to
shareholders. 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 table.
CLASS A SALES CHARGES
<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 $100,000.................................. 4.00% 4.17% 3.75%
$100,000 to $249,999................................ 3.00 3.09 2.75
$250,000 to $499,999................................ 2.25 2.30 2.00
$500,000 to $999,999................................ 1.75 1.78 1.50
$1,000,000 and over(1).............................. None None 1.00(2)
</TABLE>
- ---------
(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.
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.
- --------------------------------------------------------------------------------
Prospectus Page 17
<PAGE>
- --------------------------------------------------------------------------------
------------------------
National Tax-Free Income Fund Municipal High Income Fund
California Tax-Free Income Fund New York Tax-Free Income Fund
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; or
- - 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.
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
THE SHARES' NET
ASSET
IF YOU SELL VALUE IS
SHARES WITHIN: 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 your 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.
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;
or
- --------------------------------------------------------------------------------
Prospectus Page 18
<PAGE>
- --------------------------------------------------------------------------------
------------------------
National Tax-Free Income Fund Municipal High Income Fund
California Tax-Free Income Fund New York Tax-Free Income Fund
- - 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.
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 0.50% 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 0.75% 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.
NOTE: 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 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.
Class Y shares do not pay ongoing 12b-1 distribution or service fees or sales
charges. The ongoing expenses for Class Y shares are the lowest of 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.
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>
- --------------------------------------------------------------------------------
Prospectus Page 19
<PAGE>
- --------------------------------------------------------------------------------
------------------------
National Tax-Free Income Fund Municipal High Income Fund
California Tax-Free Income Fund New York Tax-Free Income Fund
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 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 financial institution, broker, dealer or clearing agency that
is a participant in one of the medallion programs recognized by the Securities
Transfer Agents Association. These are: Securities Transfer Agents Medallion
Program (STAMP), Stock Exchanges Medallion Program (SEMP) and the New York
Stock Exchange Medallion Signature Program (MSP). The funds 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.
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
- --------------------------------------------------------------------------------
Prospectus Page 20
<PAGE>
- --------------------------------------------------------------------------------
------------------------
National Tax-Free Income Fund Municipal High Income Fund
California Tax-Free Income Fund New York Tax-Free Income Fund
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 CLIENTS. If you bought your shares through PaineWebber or a
correspondent firm, you may exchange your shares by placing an order with your
PaineWebber Financial Advisor.
OTHER INVESTORS. If you are not a PaineWebber 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 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 municipal bonds, because there is less reliable, objective data
available.
- --------------------------------------------------------------------------------
Prospectus Page 21
<PAGE>
- --------------------------------------------------------------------------------
------------------------
National Tax-Free Income Fund Municipal High Income Fund
California Tax-Free Income Fund New York Tax-Free Income Fund
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Mitchell Hutchins Asset Management Inc. is the investment adviser and
administrator of the funds. Mitchell Hutchins is located at 1285 Avenue of the
Americas, New York, New York 10019, 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 May 31,
1999, Mitchell Hutchins was adviser or sub-adviser of 33 investment companies
with 75 separate portfolios and aggregate assets of approximately $47.7 billion.
PORTFOLIO MANAGERS
Dennis L. McCauley is responsible for overseeing all active fixed income
investments, including domestic and global taxable and tax-exempt mutual funds.
Mr. McCauley has been employed by Mitchell Hutchins since December 1994. Prior
to joining Mitchell Hutchins, Mr. McCauley worked for IBM Corporation, where he
was director of fixed income investments. He was responsible for developing and
managing investment strategy for all fixed income and cash management
investments of IBM's pension fund and self-insured medical funds. Mr. McCauley
also served as vice president of IBM Credit Corporation's mutual funds and as a
member of the retirement fund investment committee.
Elbridge (Ebby) T. Gerry III, a senior vice president of Mitchell Hutchins, is
the co-portfolio manager and has day-to-day responsibility for National Tax-Free
Income Fund, California Tax-Free Income Fund and New York Tax-Free Income Fund.
Mr. Gerry is also a portfolio manager for Municipal High Income Fund. Mr. Gerry
has portfolio management responsibilities for over $4 billion in municipal
assets at Mitchell Hutchins, including municipal bond and money funds and
private accounts. Mr. Gerry has been with Mitchell Hutchins since January 1996
and has held his fund responsibilities since that time. Prior to January 1996,
Mr. Gerry was associated with J. P. Morgan Private Banking, where he was
responsible for managing municipal assets, including several municipal bond
funds.
For National Tax-Free Income Fund and New York Tax-Free Income Fund, Richard S.
Murphy, a senior vice president of Mitchell Hutchins, is the co-portfolio
manager and also has day-to-day responsibility for the funds. Mr. Murphy has
been with Mitchell Hutchins since April 1994 and has held his fund
responsibilities since July 1994 for National Tax-Free Income Fund and January
1996 for New York Tax-Free Fund.
For Municipal High Income Fund, William W. Veronda, a senior vice president of
Mitchell Hutchins, is a portfolio manager and has day-to-day responsibility for
the fund. Mr. Veronda has been with Mitchell Hutchins since September 1995 and
has held his fund responsibilities since that date. From 1984 to August 1995, he
was a senior vice president and general manager at Invesco Funds Group, where he
managed municipal bond and high yield corporate bond portfolios.
For California Tax-Free Income Fund, Cynthia Bow is co-portfolio manager and
also has day-to-day responsibility for the fund. Ms. Bow is a vice president of
Mitchell Hutchins and has been with Mitchell Hutchins since 1982. Ms. Bow has
held her fund responsibilities since April 1993.
Other members of Mitchell Hutchins' municipal investments group provide input on
market outlook, invest rate forecasts and other considerations pertaining to
municipal investments.
ADVISORY FEES
The funds paid advisory fees to Mitchell Hutchins for the most recent fiscal
year at the following rates based on average daily net assets:
<TABLE>
<S> <C>
National Tax-Free Income Fund.......... 0.50%
Municipal High Income Fund............. 0.60%
California Tax-Free Income Fund........ 0.37%*
New York Tax-Free Income Fund.......... 0.60%
</TABLE>
- ---------
*This is the effective rate resulting from Mitchell Hutchins' waiver, beginning
July 1, 1998, of 0.20% of its 0.50% advisory fee.
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. As of the date of this prospectus, the
funds have not asked their shareholders to do so.
- --------------------------------------------------------------------------------
Prospectus Page 22
<PAGE>
- --------------------------------------------------------------------------------
------------------------
National Tax-Free Income Fund Municipal High Income Fund
California Tax-Free Income Fund New York Tax-Free Income Fund
DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS
Each fund normally declares dividends daily and pays them monthly. Each fund
distributes substantially all of its gains, if any, 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 correspondent firms if you prefer to receive dividends in cash.
TAXES
Each fund seeks to pay dividends that are exempt from federal income tax.
California Tax-Free Income Fund also seeks to pay dividends that are exempt from
California personal income tax, and New York Tax-Free Income Fund to pay
dividends that are exempt from New York State and New York City personal income
taxes.
A portion of each fund's dividends may be subject to federal and state income
taxes. Each fund also may pay dividends that are subject to the federal
alternative minimum tax.
Each fund's distributions of capital gains are taxable to you for federal income
tax purposes. Distributions 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 federal and state
income tax purposes.
Any taxable dividends you receive from a fund will be taxable to you regardless
of whether you receive them in additional fund shares or in cash.
When you sell fund shares, you generally will be subject to federal and state
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 taxed accordingly.
- --------------------------------------------------------------------------------
Prospectus Page 23
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
- --------------------------------------------------------------------------------
Prospectus Page 24
<PAGE>
- --------------------------------------------------------------------------------
------------------------
National Tax-Free Income Fund Municipal High Income Fund
California Tax-Free Income Fund New York Tax-Free Income 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 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).
This information in the financial highlights has been audited by Ernst & Young
LLP, independent auditors, whose reports, along with the funds' financial
statements, are included in the funds' annual report to shareholders. The annual
report may be obtained without charge by calling 1-800-647-1568.
- --------------------------------------------------------------------------------
Prospectus Page 25
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber National Tax-Free Income Fund
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONAL TAX-FREE INCOME FUND
--------------------------------------------------
CLASS A
--------------------------------------------------
FOR THE FOR THE
YEAR YEAR
FOR THE YEARS ENDED ENDED ENDED
FEBRUARY 28, FEBRUARY FEBRUARY
--------------------------- 29, 28,
1999 1998 1997 1996 1995
------- ------- ------- --------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............ $ 11.97 $ 11.55 $ 11.64 $ 11.26 $ 12.00
------- ------- ------- --------- --------
Net investment
income............ 0.56 0.56 0.55 0.58 0.63
Net realized and
unrealized gains
(losses) from
investments and
futures........... 0.05 0.50 (0.09) 0.39 (0.73)
------- ------- ------- --------- --------
Net increase
(decrease) from
investment
operations........ 0.61 1.06 0.46 0.97 (0.10)
------- ------- ------- --------- --------
Dividends from net
investment
income............ (0.56) (0.56) (0.55) (0.59) (0.63)
Distributions from
net realized gains
from investment
transactions...... (0.29) (0.08) -- -- (0.01)
------- ------- ------- --------- --------
Total dividends and
distributions to
shareholders...... (0.85) (0.64) (0.55) (0.59) (0.64)
------- ------- ------- --------- --------
Net asset value, end
of period......... $ 11.73 $ 11.97 $ 11.55 $ 11.64 $ 11.26
------- ------- ------- --------- --------
------- ------- ------- --------- --------
Total investment
return(1)......... 5.31% 9.48% 4.14% 8.75% (0.63)%
------- ------- ------- --------- --------
------- ------- ------- --------- --------
Ratios/Supplemental
data:
Net assets, end of
period (000's).... $227,151 $229,040 $263,425 $315,899 $346,579
Expenses to average
net assets........ 0.94% 0.95% 0.91% 0.93%(2) 0.88%
Net investment
income to average
net assets........ 4.72% 4.77% 4.85% 5.06%(2) 5.62%
Portfolio turnover
rate.............. 43% 79% 81% 74% 60%
</TABLE>
- -----------
+ Commencement of shares
* Annualized
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each year reported, reinvestment of all dividends and
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; results would be lower if sales charges were
included. Total investment return for periods of less than one year has not
been annualized.
(2) These ratios include non-recurring acquisition expenses of 0.03%.
- --------------------------------------------------------------------------------
Prospectus Page 26
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber National Tax-Free Income Fund
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONAL TAX-FREE INCOME FUND
--------------------------------------------------
CLASS B
--------------------------------------------------
FOR THE FOR THE
YEAR YEAR
FOR THE YEARS ENDED ENDED ENDED
FEBRUARY 28, FEBRUARY FEBRUARY
--------------------------- 29, 28,
1999 1998 1997 1996 1995
------- ------- ------- --------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............ $ 11.97 $ 11.55 $ 11.64 $ 11.26 $ 11.99
------- ------- ------- --------- --------
Net investment
income............ 0.47 0.47 0.46 0.49 0.54
Net realized and
unrealized gains
(losses) from
investments and
futures........... 0.05 0.50 (0.09) 0.39 (0.72)
------- ------- ------- --------- --------
Net increase
(decrease) from
investment
operations........ 0.52 0.97 0.37 0.88 (0.18)
------- ------- ------- --------- --------
Dividends from net
investment
income............ (0.47) (0.47) (0.46) (0.50) (0.54)
Distributions from
net realized gains
from investment
transactions...... (0.29) (0.08) -- -- (0.01)
------- ------- ------- --------- --------
Total dividends and
distributions to
shareholders...... (0.76) (0.55) (0.46) (0.50) (0.55)
------- ------- ------- --------- --------
Net asset value, end
of period......... $ 11.73 $ 11.97 $ 11.55 $ 11.64 $ 11.26
------- ------- ------- --------- --------
------- ------- ------- --------- --------
Total investment
return(1)......... 4.48% 8.62% 3.35% 7.94% (1.29)%
------- ------- ------- --------- --------
------- ------- ------- --------- --------
Ratios/Supplemental
data:
Net assets, end of
period (000's).... $24,085 $32,815 $40,949 $ 51,546 $58,958
Expenses to average
net assets........ 1.72% 1.73% 1.67% 1.68%(2) 1.64%
Net investment
income to average
net assets........ 3.93% 3.98% 4.09% 4.31%(2) 4.86%
Portfolio turnover
rate.............. 43% 79% 81% 74% 60%
<CAPTION>
CLASS Y
CLASS C --------------------------------------
-------------------------------------------------- FOR THE
PERIOD
NOVEMBER
FOR THE FOR THE 3,
YEAR YEAR 1995+
FOR THE YEARS ENDED ENDED ENDED FOR THE YEARS ENDED THROUGH
FEBRUARY 28, FEBRUARY FEBRUARY FEBRUARY 28, FEBRUARY
--------------------------- 29, 28, --------------------------- 29,
1999 1998 1997 1996 1995 1999 1998 1997 1996
------- ------- ------- --------- -------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............ $ 11.97 $ 11.55 $ 11.64 $ 11.26 $ 12.00 $ 11.98 $ 11.55 $ 11.65 $ 11.62
------- ------- ------- --------- -------- ------- ------- ------- ---------
Net investment
income............ 0.50 0.50 0.49 0.52 0.57 0.59 0.59 0.58 0.19
Net realized and
unrealized gains
(losses) from
investments and
futures........... 0.05 0.50 (0.09) 0.39 (0.73) 0.04 0.51 (0.10) 0.01
------- ------- ------- --------- -------- ------- ------- ------- ---------
Net increase
(decrease) from
investment
operations........ 0.55 1.00 0.40 0.91 (0.16) 0.63 1.10 0.48 0.20
------- ------- ------- --------- -------- ------- ------- ------- ---------
Dividends from net
investment
income............ (0.50) (0.50) (0.49) (0.53) (0.57) (0.59) (0.59) (0.58) (0.17)
Distributions from
net realized gains
from investment
transactions...... (0.29) (0.08) -- -- (0.01) (0.29) (0.08) -- --
------- ------- ------- --------- -------- ------- ------- ------- ---------
Total dividends and
distributions to
shareholders...... (0.79) (0.58) (0.49) (0.53) (0.58) (0.88) (0.67) (0.58) (0.17)
------- ------- ------- --------- -------- ------- ------- ------- ---------
Net asset value, end
of period......... $ 11.73 $ 11.97 $ 11.55 $ 11.64 $ 11.26 $ 11.73 $ 11.98 $ 11.55 $ 11.65
------- ------- ------- --------- -------- ------- ------- ------- ---------
------- ------- ------- --------- -------- ------- ------- ------- ---------
Total investment
return(1)......... 4.76% 8.92% 3.61% 8.19% (1.13)% 5.49% 9.87% 4.32% 1.70%
------- ------- ------- --------- -------- ------- ------- ------- ---------
------- ------- ------- --------- -------- ------- ------- ------- ---------
Ratios/Supplemental
data:
Net assets, end of
period (000's).... $47,722 $49,647 $59,652 $ 75,076 $101,642 $ 321 $ 241 $ 246 $ 341
Expenses to average
net assets........ 1.47% 1.47% 1.42% 1.45%(2) 1.40% 0.71% 0.68% 0.65% 0.64%(2)*
Net investment
income to average
net assets........ 4.20% 4.26% 4.34% 4.57%(2) 5.13% 4.95% 5.04% 5.13% 5.19%(2)*
Portfolio turnover
rate.............. 43% 79% 81% 74% 60% 43% 79% 81% 74%
</TABLE>
- -----------
- --------------------------------------------------------------------------------
Prospectus Page 27
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Municipal High Income Fund
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL HIGH INCOME FUND
--------------------------------------------------------
CLASS A
--------------------------------------------------------
FOR THE YEARS ENDED FOR THE FOR THE
FEBRUARY 28, YEAR ENDED YEAR ENDED
------------------------- FEBRUARY 29, FEBRUARY 28,
1999 1998 1997 1996 1995
------- ------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 10.96 $ 10.39 $ 10.29 $ 9.92 $ 10.77
------- ------- ------- ------------- -------------
Net investment income.... 0.55 0.55 0.56 0.62 0.59
Net realized and
unrealized gains
(losses) from
investments and
futures................ (0.07) 0.57 0.10 0.37 (0.82)
------- ------- ------- ------------- -------------
Net increase (decrease)
from investment
operations............. 0.48 1.12 0.66 0.99 (0.23)
------- ------- ------- ------------- -------------
Dividends from net
investment income...... (0.55) (0.55) (0.56) (0.62) (0.59)
Distributions from net
realized gains from
investment
transactions........... (0.01) -- -- -- (0.03)
------- ------- ------- ------------- -------------
Total dividends and
distributions to
shareholders........... (0.56) (0.55) (0.56) (0.62) (0.62)
------- ------- ------- ------------- -------------
Net asset value, end of
period................. $ 10.88 $ 10.96 $ 10.39 $ 10.29 $ 9.92
------- ------- ------- ------------- -------------
------- ------- ------- ------------- -------------
Total investment
return(1).............. 4.80% 11.06% 6.61% 10.18% (2.03)%
------- ------- ------- ------------- -------------
------- ------- ------- ------------- -------------
Ratios/Supplemental data:
Net assets, end of period
(000's)................ $66,771 $59,288 $52,593 $57,280 $63,287
Expenses to average net
assets................. 1.12% 1.22% 1.15% 1.10% 1.13%
Net investment income to
average net assets..... 5.02% 5.15% 5.49% 5.94% 5.96%
Portfolio turnover
rate................... 26% 22% 64% 48% 28%
</TABLE>
- -----------
+ Commencement of issuance of shares
* Annualized
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period, reinvestment of all dividends and distributions
at net asset value on the payable dates and a sale at net asset value on
the last day of each period reported. The figures do not include sales
charges; results would be lower if sales charges were included. Total
investment return for periods of less than one year has not been
annualized.
- --------------------------------------------------------------------------------
Prospectus Page 28
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber Municipal High Income Fund
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL HIGH INCOME FUND
---------------------------------------------------------
CLASS B CLASS Y
------------------------------------------ ------------
FOR THE YEARS ENDED FOR THE FOR THE
FEBRUARY 28, YEAR ENDED YEAR ENDED
--------------------------- FEBRUARY 29, FEBRUARY 28,
1999 1998 1997 1996 1995
------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 10.96 $ 10.39 $ 10.29 $ 9.92 $ 10.76
------- ------- ------- ------------ ------------
Net investment income.... 0.47 0.47 0.48 0.54 0.52
Net realized and
unrealized gains
(losses) from
investments and
futures................ (0.08) 0.57 0.10 0.37 (0.81)
------- ------- ------- ------------ ------------
Net increase (decrease)
from investment
operations............. 0.39 1.04 0.58 0.91 (0.29)
------- ------- ------- ------------ ------------
Dividends from net
investment income...... (0.47) (0.47) (0.48) (0.54) (0.52)
Distributions from net
realized gains from
investment
transactions........... (0.01) -- -- -- (0.03)
------- ------- ------- ------------ ------------
Total dividends and
distributions to
shareholders........... (0.48) (0.47) (0.48) (0.54) (0.55)
------- ------- ------- ------------ ------------
Net asset value, end of
period................. $ 10.87 $ 10.96 $ 10.39 $ 10.29 $ 9.92
------- ------- ------- ------------ ------------
------- ------- ------- ------------ ------------
Total investment
return(1).............. 3.87% 10.23% 5.82% 9.36% (2.67)%
------- ------- ------- ------------ ------------
------- ------- ------- ------------ ------------
Ratios/Supplemental data:
Net assets, end of period
(000's)................ $18,675 $18,097 $19,427 $ 23,868 $ 25,823
Expenses to average net
assets................. 1.88% 1.98% 1.90% 1.85% 1.87%
Net investment income to
average net assets..... 4.24% 4.39% 4.73% 5.19% 5.21%
Portfolio turnover
rate................... 26% 22% 64% 48% 28%
<CAPTION>
CLASS Y
CLASS C ---------------------------
--------------------------------------------------------- FOR THE
PERIOD
FEBRUARY 5,
FOR THE YEARS ENDED FOR THE FOR THE FOR THE 1998+
FEBRUARY 28, YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
--------------------------- FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
1999 1998 1997 1996 1995 1999 1998
------- ------- ------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 10.96 $ 10.39 $ 10.29 $ 9.92 $ 10.77 $ 10.97 $ 10.98
------- ------- ------- ------------ ------------ ------ ------
Net investment income.... 0.49 0.50 0.51 0.56 0.55 0.58 0.04
Net realized and
unrealized gains
(losses) from
investments and
futures................ (0.07) 0.57 0.10 0.37 (0.82) (0.08) (0.01)
------- ------- ------- ------------ ------------ ------ ------
Net increase (decrease)
from investment
operations............. 0.42 1.07 0.61 0.93 (0.27) 0.50 0.03
------- ------- ------- ------------ ------------ ------ ------
Dividends from net
investment income...... (0.49) (0.50) (0.51) (0.56) (0.55) (0.58) (0.04)
Distributions from net
realized gains from
investment
transactions........... (0.01) -- -- -- (0.03) (0.01) --
------- ------- ------- ------------ ------------ ------ ------
Total dividends and
distributions to
shareholders........... (0.50) (0.50) (0.51) (0.56) (0.58) (0.59) (0.04)
------- ------- ------- ------------ ------------ ------ ------
Net asset value, end of
period................. $ 10.88 $ 10.96 $ 10.39 $ 10.29 $ 9.92 $ 10.88 $ 10.97
------- ------- ------- ------------ ------------ ------ ------
------- ------- ------- ------------ ------------ ------ ------
Total investment
return(1).............. 4.25% 10.51% 6.08% 9.64% (2.51)% 4.96% (0.09)%
------- ------- ------- ------------ ------------ ------ ------
------- ------- ------- ------------ ------------ ------ ------
Ratios/Supplemental data:
Net assets, end of period
(000's)................ $24,355 $21,982 $16,967 $ 20,700 $ 23,158 $ 414 $ 56
Expenses to average net
assets................. 1.62% 1.72% 1.66% 1.60% 1.63% 0.87% 1.00%*
Net investment income to
average net assets..... 4.52% 4.64% 4.98% 5.45% 5.48% 5.28% 5.44%*
Portfolio turnover
rate................... 26% 22% 64% 48% 28% 26% 22%
</TABLE>
- -----------
- --------------------------------------------------------------------------------
Prospectus Page 29
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber California Tax-Free Income Fund
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE INCOME FUND
-----------------------------------------------------------
CLASS A
-----------------------------------------------------------
FOR THE YEARS ENDED FEBRUARY FOR THE FOR THE
28, YEAR ENDED YEAR ENDED
---------------------------- FEBRUARY 29, FEBRUARY 28,
1999 1998 1997 1996 1995
-------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.39 $ 10.91 $ 11.02 $ 10.68 $ 11.41
-------- -------- -------- ------------- -------------
Net investment income.... 0.52 0.51 0.52 0.57 0.58
Net realized and
unrealized gains
(losses) from
investments and
futures................ 0.11 0.48 (0.11) 0.34 (0.63)
-------- -------- -------- ------------- -------------
Net increase (decrease)
from investment
operations............. 0.63 0.99 0.41 0.91 (0.05)
-------- -------- -------- ------------- -------------
Dividends from net
investment income...... (0.52) (0.51) (0.52) (0.57) (0.58)
Distributions from net
realized gains from
investment
transactions........... (0.32) -- -- -- (0.10)
-------- -------- -------- ------------- -------------
Total dividends and
distributions to
shareholders........... (0.84) (0.51) (0.52) (0.57) (0.68)
-------- -------- -------- ------------- -------------
Net asset value, end of
period................. $ 11.18 $ 11.39 $ 10.91 $ 11.02 $ 10.68
-------- -------- -------- ------------- -------------
-------- -------- -------- ------------- -------------
Total investment
return(1).............. 5.90% 9.26% 3.92% 8.68% (0.18)%
-------- -------- -------- ------------- -------------
-------- -------- -------- ------------- -------------
Ratios/Supplemental data:
Net assets, end of period
(000's)................ $119,266 $120,804 $127,040 $151,684 $178,234
Expenses to average net
assets, net of waivers
from adviser........... 0.83% 0.98% 0.97% 0.94% 0.88%
Expenses to average net
assets, before waivers
from adviser........... 0.96% 0.98% 0.97% 0.94% 0.88%
Net investment income to
average net assets, net
of waivers from
adviser................ 4.59% 4.56% 4.85% 5.21% 5.55%
Net investment income to
average net assets,
before waivers from
adviser................ 4.46% 4.56% 4.85% 5.21% 5.55%
Portfolio turnover
rate................... 45% 107% 73% 32% 11%
</TABLE>
- -----------
+ Commencement of issuance of shares
* Annualized
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. The figures do not
include sales charges; results would be lower if sales charges were
included. Total investment return for periods of less than one year has not
been annualized.
- --------------------------------------------------------------------------------
Prospectus Page 30
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber California Tax-Free Income Fund
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALIFORNIA TAX-FREE INCOME FUND
-----------------------------------------------------------------
CLASS B
-----------------------------------------------------------------
FOR THE YEARS ENDED FEBRUARY 28, FOR THE FOR THE
YEAR ENDED YEAR ENDED
--------------------------------- FEBRUARY 29, FEBRUARY 28,
1999 1998 1997 1996 1995
--------- --------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.39 $ 10.92 $ 11.03 $ 10.69 $ 11.41
--------- --------- --------- ------------- -------------
Net investment income.... 0.43 0.42 0.44 0.48 0.50
Net realized and
unrealized gains
(losses) from
investments and
futures................ 0.11 0.47 (0.11) 0.34 (0.62)
--------- --------- --------- ------------- -------------
Net increase (decrease)
from investment
operations............. 0.54 0.89 0.33 0.82 (0.12)
--------- --------- --------- ------------- -------------
Dividends from net
investment income...... (0.43) (0.42) (0.44) (0.48) (0.50)
Distributions from net
realized gains from
investment
transactions........... (0.32) -- -- -- (0.10)
--------- --------- --------- ------------- -------------
Total dividends and
distributions to
shareholders........... (0.75) (0.42) (0.44) (0.48) (0.60)
--------- --------- --------- ------------- -------------
Net asset value, end of
period................. $ 11.18 $ 11.39 $ 10.92 $ 11.03 $ 10.69
--------- --------- --------- ------------- -------------
--------- --------- --------- ------------- -------------
Total investment
return(1).............. 5.06% 8.33% 3.14% 7.86% (0.85)%
--------- --------- --------- ------------- -------------
--------- --------- --------- ------------- -------------
Ratios/Supplemental data:
Net assets, end of period
(000's)................ $ 13,756 $ 16,783 $ 20,943 $27,175 $33,007
Expenses to average net
assets, net of waivers
from adviser........... 1.59% 1.75% 1.74% 1.70% 1.64%
Expenses to average net
assets, before waivers
from adviser........... 1.72% 1.75% 1.74% 1.70% 1.64%
Net investment income to
average net assets, net
of waivers from
adviser................ 3.81% 3.79% 4.08% 4.45% 4.78%
Net investment income to
average net assets,
before waivers from
adviser................ 3.68% 3.79% 4.08% 4.45% 4.78%
Portfolio turnover
rate................... 45% 107% 73% 32% 11%
<CAPTION>
CLASS C CLASS Y
-------------------------------------------------------------- ------------------------------
FOR THE
PERIOD
FOR THE YEARS ENDED FEBRUARY FOR THE FOR THE FOR THE FEBRUARY 5,
28, YEAR ENDED YEAR ENDED YEAR ENDED 1998+ THROUGH
------------------------------ FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
1999 1998 1997 1996 1995 1999 1998
-------- -------- -------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.38 $ 10.90 $ 11.02 $ 10.67 $ 11.40 $11.38 $11.42
-------- -------- -------- ------------- ------------- ------ ------
Net investment income.... 0.46 0.45 0.47 0.51 0.53 0.55 0.04
Net realized and
unrealized gains
(losses) from
investments and
futures................ 0.11 0.48 (0.12) 0.35 (0.63) 0.12 (0.04)
-------- -------- -------- ------------- ------------- ------ ------
Net increase (decrease)
from investment
operations............. 0.57 0.93 0.35 0.86 (0.10) 0.67 0.00
-------- -------- -------- ------------- ------------- ------ ------
Dividends from net
investment income...... (0.46) (0.45) (0.47) (0.51) (0.53) (0.55) (0.04)
Distributions from net
realized gains from
investment
transactions........... (0.32) -- -- -- (0.10) (0.32) --
-------- -------- -------- ------------- ------------- ------ ------
Total dividends and
distributions to
shareholders........... (0.78) (0.45) (0.47) (0.51) (0.63) (0.87) (0.04)
-------- -------- -------- ------------- ------------- ------ ------
Net asset value, end of
period................. $ 11.17 $ 11.38 $ 10.90 $ 11.02 $ 10.67 $11.18 $11.38
-------- -------- -------- ------------- ------------- ------ ------
-------- -------- -------- ------------- ------------- ------ ------
Total investment
return(1).............. 5.35% 8.71% 3.30% 8.22% (0.70)% 6.28% (0.34)%
-------- -------- -------- ------------- ------------- ------ ------
-------- -------- -------- ------------- ------------- ------ ------
Ratios/Supplemental data:
Net assets, end of period
(000's)................ $ 18,682 $ 16,522 $ 17,624 $22,155 $28,217 $ 312 $ 114
Expenses to average net
assets, net of waivers
from adviser........... 1.33% 1.50% 1.49% 1.46% 1.40% 0.55% 0.76%*
Expenses to average net
assets, before waivers
from adviser........... 1.47% 1.50% 1.49% 1.46% 1.40% 0.71% 0.76%*
Net investment income to
average net assets, net
of waivers from
adviser................ 4.08% 4.05% 4.34% 4.69% 5.05% 4.87% 5.07%*
Net investment income to
average net assets,
before waivers from
adviser................ 3.94% 4.05% 4.34% 4.69% 5.05% 4.71% 5.07%*
Portfolio turnover
rate................... 45% 107% 73% 32% 11% 45% 107%
</TABLE>
- -----------
- --------------------------------------------------------------------------------
Prospectus Page 31
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber New York Tax-Free Income Fund
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEW YORK TAX-FREE INCOME FUND
--------------------------------------------------------
CLASS A
--------------------------------------------------------
FOR THE YEARS ENDED FOR THE FOR THE
FEBRUARY 28, YEAR ENDED YEAR ENDED
------------------------- FEBRUARY 29, FEBRUARY 28,
1999 1998 1997 1996 1995
------- ------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.12 $ 10.66 $ 10.71 $ 10.27 $ 11.03
------- ------- ------- ------------- -------------
Net investment income.... 0.53 0.51 0.51 0.54 0.54
Net realized and
unrealized gains
(losses) from
investments and
futures................ 0.15 0.46 (0.05) 0.45 (0.66)
------- ------- ------- ------------- -------------
Net increase (decrease)
from investment
operations............. 0.68 0.97 0.46 0.99 (0.12)
------- ------- ------- ------------- -------------
Dividends from net
investment income...... (0.53) (0.51) (0.51) (0.55) (0.54)
Distributions from net
realized gains from
investment
transactions........... (0.24) -- -- -- (0.10)
------- ------- ------- ------------- -------------
Total dividends and
distributions to
shareholders........... (0.77) (0.51) (0.51) (0.55) (0.64)
------- ------- ------- ------------- -------------
Net asset value, end of
period................. $ 11.03 $ 11.12 $ 10.66 $ 10.71 $ 10.27
------- ------- ------- ------------- -------------
------- ------- ------- ------------- -------------
Total investment
return(1).............. 6.24% 9.36% 4.49% 9.83% (0.83)%
------- ------- ------- ------------- -------------
------- ------- ------- ------------- -------------
Ratios/Supplemental data:
Net assets, end of period
(000's)................ $27,171 $23,694 $23,160 $28,734 $32,475
Expenses to average net
assets, net of waivers
and reimbursements from
adviser................ 1.02% 1.02% 1.02% 1.02% 1.01%
Expenses to average net
assets, before waivers
and reimbursements from
adviser................ 1.27% 1.28% 1.50% 1.15% 1.26%
Net investment income to
average net assets, net
of waivers and
reimbursements from
adviser................ 4.46% 4.74% 4.91% 5.11% 5.38%
Net investment income to
average net assets,
before waivers and
reimbursements from
adviser................ 4.21% 4.48% 4.42% 4.98% 5.13%
Portfolio turnover
rate................... 44% 34% 40% 13% 6%
</TABLE>
- -----------
+ Commencement of issuance of shares
* Annualized
(1) Total investment return is calculated assuming a $1,000 investment on the
first day of each period reported, reinvestment of all dividends and
distributions at net asset value on the payable dates and a sale at net
asset value on the last day of each period reported. The figures do not
include sales charges; results would be lower if sales charges were
included. Total investment return for periods of less than one year has not
been annualized.
- --------------------------------------------------------------------------------
Prospectus Page 32
<PAGE>
- --------------------------------------------------------------------------------
------------------------
PaineWebber New York Tax-Free Income Fund
FINANCIAL HIGHLIGHTS
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEW YORK TAX-FREE INCOME FUND
----------------------------------------------------------
CLASS B
----------------------------------------------------------
FOR THE YEARS ENDED FEBRUARY FOR THE FOR THE
28, YEAR ENDED YEAR ENDED
---------------------------- FEBRUARY 29, FEBRUARY 28,
1999 1998 1997 1996 1995
-------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.12 $ 10.65 $ 10.71 $ 10.27 $ 11.03
-------- ------- ------- ------------ ------------
Net investment income.... 0.44 0.43 0.44 0.47 0.47
Net realized and
unrealized gains
(losses) from
investments and
futures................ 0.15 0.47 (0.06) 0.44 (0.66)
-------- ------- ------- ------------ ------------
Net increase (decrease)
from investment
operations............. 0.59 0.90 0.38 0.91 (0.19)
-------- ------- ------- ------------ ------------
Dividends from net
investment income...... (0.44) (0.43) (0.44) (0.47) (0.47)
Distributions from net
realized gains from
investment
transactions........... (0.24) -- -- -- (0.10)
-------- ------- ------- ------------ ------------
Total dividends and
distributions to
shareholders........... (0.68) (0.43) (0.44) (0.47) (0.57)
-------- ------- ------- ------------ ------------
Net asset value, end of
period................. $ 11.03 $ 11.12 $ 10.65 $ 10.71 $ 10.27
-------- ------- ------- ------------ ------------
-------- ------- ------- ------------ ------------
Total investment
return(1).............. 5.40% 8.65% 3.62% 9.01% (1.57)%
-------- ------- ------- ------------ ------------
-------- ------- ------- ------------ ------------
Ratios/Supplemental data:
Net assets, end of period
(000's)................ $ 6,013 $ 7,829 $ 9,462 $ 11,862 $ 14,660
Expenses to average net
assets, net of waivers
and reimbursements from
adviser................ 1.77% 1.77% 1.76% 1.77% 1.76%
Expenses to average net
assets, before waivers
and reimbursements from
adviser................ 2.02% 2.05% 2.27% 1.89% 2.01%
Net investment income to
average net assets, net
of waivers and
reimbursements from
adviser................ 3.70% 3.99% 4.16% 4.36% 4.63%
Net investment income to
average net assets,
before waivers and
reimbursements from
adviser................ 3.45% 3.70% 3.65% 4.24% 4.83%
Portfolio turnover
rate................... 44% 34% 40% 13% 6%
<CAPTION>
CLASS Y
CLASS C ------------
------------------------------------------------------------ FOR THE
PERIOD
MAY 21,
FOR THE YEARS ENDED FEBRUARY FOR THE FOR THE 1998+
28, YEAR ENDED YEAR ENDED THROUGH
------------------------------ FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1999 1998 1997 1996 1995 1999
-------- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.12 $ 10.66 $ 10.71 $ 10.28 $ 11.03 $ 11.08
-------- -------- -------- ------------ ------------ ------
Net investment income.... 0.47 0.46 0.46 0.49 0.49 0.40
Net realized and
unrealized gains
(losses) from
investments and
futures................ 0.16 0.46 (0.05) 0.43 (0.65) 0.19
-------- -------- -------- ------------ ------------ ------
Net increase (decrease)
from investment
operations............. 0.63 0.92 0.41 0.92 (0.16) 0.59
-------- -------- -------- ------------ ------------ ------
Dividends from net
investment income...... (0.47) (0.46) (0.46) (0.49) (0.49) (0.40)
Distributions from net
realized gains from
investment
transactions........... (0.24) -- -- -- (0.10) (0.24)
-------- -------- -------- ------------ ------------ ------
Total dividends and
distributions to
shareholders........... (0.71) (0.46) (0.46) (0.49) (0.59) (0.64)
-------- -------- -------- ------------ ------------ ------
Net asset value, end of
period................. $ 11.04 $ 11.12 $ 10.66 $ 10.71 $ 10.28 $ 11.03
-------- -------- -------- ------------ ------------ ------
-------- -------- -------- ------------ ------------ ------
Total investment
return(1).............. 5.78% 8.82% 3.98% 9.17% (1.20)% 5.39%
-------- -------- -------- ------------ ------------ ------
-------- -------- -------- ------------ ------------ ------
Ratios/Supplemental data:
Net assets, end of period
(000's)................ $ 11,802 $ 12,966 $ 13,786 $ 17,849 $ 21,095 $ 21
Expenses to average net
assets, net of waivers
and reimbursements from
adviser................ 1.52% 1.52% 1.52% 1.52% 1.52% 0.77%*
Expenses to average net
assets, before waivers
and reimbursements from
adviser................ 1.77% 1.78% 2.04% 1.64% 1.75% 1.03%*
Net investment income to
average net assets, net
of waivers and
reimbursements from
adviser................ 3.97% 4.24% 4.41% 4.61% 4.89% 4.71%*
Net investment income to
average net assets,
before waivers and
reimbursements from
adviser................ 3.72% 3.98% 3.89% 4.50% 4.65% 4.44%*
Portfolio turnover
rate................... 44% 34% 40% 13% 6% 44%
</TABLE>
- -----------
- --------------------------------------------------------------------------------
Prospectus Page 33
<PAGE>
- --------------------------------------------------------------------------------
------------------------
National Tax-Free Income Fund Municipal High Income Fund
California Tax-Free Income Fund New York Tax-Free Income Fund
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
TICKER SYMBOL: National Tax-Free Income Class: A: PTFAX.Q Municipal High Income Class: A: PMHAX.Q
B: PTFBX.Q B: PMHBX.Q
C: PWNDX.Q C: PMIDX.Q
Y: None Y: None
California Tax-Free Income Class: A: PCIAX.Q New York Tax-Free Income Class: A: PNYAX.Q
B: PCIBX.Q B: PNYBX.Q
C: PCIDX.Q C: PNYDX.Q
Y: None Y: None
</TABLE>
If you 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 can get text-only copies of reports and other information about
the funds:
- - For a fee, by writing to or calling the SEC's Public Reference Room,
Washington, D.C. 20549-6009
Telephone: 1-800-SEC-0330
- - Free, from the SEC's Internet website at: http://www.sec.gov
PaineWebber Mutual Fund Trust
--PaineWebber California Tax-Free Income Fund
--PaineWebber National Tax-Free Income Fund
Investment Company Act File No. 811-4312
PaineWebber Municipal Series
--PaineWebber Municipal High Income Fund
--PaineWebber New York Tax-Free Income Fund
Investment Company Act File No. 811-5014
- -C-1999 PaineWebber Incorporated
- --------------------------------------------------------------------------------
_______________
